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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): SEPTEMBER 30, 1999
MACROMEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-22688 94-3155026
(State of other jurisdiction (Commission File (I.R.S. Employer
or incorporation) Number) Identification No.)
600 TOWNSEND ST., SAN FRANCISCO, CA 94103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(415) 252-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On July 8, 1999, Macromedia, Inc., a Delaware corporation
("Macromedia"), ESI Software, Inc., a California corporation ("ESI"), and Dynamo
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Macromedia ("Sub"), entered into an Agreement and Plan of Reorganization, under
which Macromedia acquired ESI (the "Merger") by acquiring all of the outstanding
capital stock, options and warrants of ESI from the securityholders of ESI in
exchange for approximately $25 million of common stock, options and warrants of
Macromedia (as valued on July 8, 1999). The Merger was closed on September 30,
1999. As a result of the acquisition of ESI, Sub was merged with and into ESI
and ESI remains as the surviving corporation and a wholly-owned subsidiary of
Macromedia. Macromedia will account for the Merger as a
"pooling-of-interests." The merger is intended to be a tax-free
reorganization. ESI develops and markets software that enables users to build
advanced, interactive, business-oriented Web applications. Macromedia intends
to continue to conduct ESIs business following the acquisition.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
It is impracticable for Macromedia to currently provide the required
financial statements for ESI called for by Item 7(a). Pursuant to paragraph
(a)(4) of Item 7 of Form 8-K, the financial statements of ESI required to be
filed under paragraph (a) of this Item 7 will be filed as soon as
practicable, but no later than required by paragraph (a)(4) of Item 7 of Form
8-K.
(b) PRO FORMA FINANCIAL INFORMATION
It is impracticable for Macromedia to currently provide the pro
forma financial information with respect to the acquisition of ESI by
Macromedia called for by this Item 7(b). Pursuant to paragraphs (b)(2) and
(a)(4) of Item 7, the pro forma financial statements required to be filed
under paragraph (b) of this Item 7 will be filed as soon as practicable, but
no later than required by paragraphs (b)(2) and (a)(4) of Item 7 of Form 8-K.
(c) EXHIBITS
The following exhibits are filed herewith:
2.01 Agreement and Plan of Reorganization by and among Macromedia,
Inc. and ESI Software, Inc. dated July 8, 1999, as amended August 30, 1999.
Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules have been
omitted but will be furnished supplementally to the Securities and Exchange
Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this amendment to be signed on its behalf by
the undersigned thereunto duly authorized.
MACROMEDIA, INC.
DATE: October 15, 1999 By: /s/ Elizabeth Nelson
-------------------------------------
Elizabeth Nelson
Senior Vice President
and Chief Financial Officer
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
MACROMEDIA, INC.,
ESI SOFTWARE, INC.
AND
DYNAMO ACQUISITION CORP.
JULY 8, 1999
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TABLE OF CONTENTS
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1. PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . 3
1.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . 4
1.7 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . 4
2. REPRESENTATIONS AND WARRANTIES OF ESI. . . . . . . . . . . . . . . . 4
2.1 Organization and Good Standing . . . . . . . . . . . . . . . . 4
2.2 Power, Authorization and Validity. . . . . . . . . . . . . . . 5
2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Subsidiaries and Guaranties. . . . . . . . . . . . . . . . . . 6
2.5 No Violation of Existing Agreements. . . . . . . . . . . . . . 6
2.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 ESI Financial Statements . . . . . . . . . . . . . . . . . . . 6
2.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Title to Properties. . . . . . . . . . . . . . . . . . . . . . 7
2.10 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 8
2.11 Agreements and Commitments . . . . . . . . . . . . . . . . . . 9
2.12 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 10
2.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 11
2.14 Certain Transactions and Agreements. . . . . . . . . . . . . . 11
2.15 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.16 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . 13
2.17 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.19 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 14
2.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.21 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 14
2.22 Government Contracts . . . . . . . . . . . . . . . . . . . . . 15
2.23 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . 16
2.24 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.25 Title to ESI Common Stock. . . . . . . . . . . . . . . . . . . 16
2.26 Information Supplied . . . . . . . . . . . . . . . . . . . . . 16
3. REPRESENTATIONS AND WARRANTIES OF MACROMEDIA . . . . . . . . . . . . 17
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . 17
3.2 Power, Authorization and Validity. . . . . . . . . . . . . . . 17
3.3 No Violation of Certificate or Laws. . . . . . . . . . . . . . 17
3.4 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . 18
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4. ESI PRECLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Advice of Changes. . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Maintenance of Business. . . . . . . . . . . . . . . . . . . . 18
4.3 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 18
4.4 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . 20
4.6 Information Statement. . . . . . . . . . . . . . . . . . . . . 20
4.7 Preparation of Permit Application, Hearing Request
and Hearing Notice . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 21
4.9 Necessary Consents . . . . . . . . . . . . . . . . . . . . . . 21
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.11 No Other Negotiations. . . . . . . . . . . . . . . . . . . . . 21
4.12 Access to Information. . . . . . . . . . . . . . . . . . . . . 21
4.13 Satisfaction of Conditions Precedent . . . . . . . . . . . . . 21
4.14 Blue Sky Laws. . . . . . . . . . . . . . . . . . . . . . . . . 22
4.15 Notification of Employee Problems. . . . . . . . . . . . . . . 22
4.16 Termination of Employee Plans. . . . . . . . . . . . . . . . . 22
4.17 ESI Affiliates Agreements. . . . . . . . . . . . . . . . . . . 22
4.18 ESI Dissenting Shares. . . . . . . . . . . . . . . . . . . . . 23
4.19 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . 23
4.20 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 23
4.21 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . 23
5. MACROMEDIA PRECLOSING COVENANTS. . . . . . . . . . . . . . . . . . . 23
5.1 Access to Information. . . . . . . . . . . . . . . . . . . . . 23
5.2 Satisfaction of Conditions Precedent.... . . . . . . . . . . . 23
5.3 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 24
5.4 Macromedia Affiliates Agreements . . . . . . . . . . . . . . . 24
5.5 Preparation of Permit Application, Hearing Request
and Hearing Notice . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Interim Loan for Payroll and Employee Benefit Expenses . . . . 24
6. CLOSING MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . 25
6.3 Assumption of Warrants and Options . . . . . . . . . . . . . . 25
6.4 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 26
7. CONDITIONS TO OBLIGATIONS OF ESI . . . . . . . . . . . . . . . . . . 26
7.1 Accuracy of Representations and Warranties . . . . . . . . . . 26
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7.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . 26
7.4 Government Consents. . . . . . . . . . . . . . . . . . . . . . 26
7.5 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.6 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 27
7.7 Opinion of Macromedia's Counsel. . . . . . . . . . . . . . . . 27
7.8 Permit...... . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.9 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 27
7.10 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . 27
8. CONDITIONS TO OBLIGATIONS OF MACROMEDIA. . . . . . . . . . . . . . . 27
8.1 Accuracy of Representations and Warranties . . . . . . . . . . 27
8.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . 27
8.4 Government Consents. . . . . . . . . . . . . . . . . . . . . . 27
8.5 Opinion of ESI's Counsel . . . . . . . . . . . . . . . . . . . 28
8.6 Requisite Approvals. . . . . . . . . . . . . . . . . . . . . . 28
8.7 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 28
8.8 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.9 Pooling Letter . . . . . . . . . . . . . . . . . . . . . . . . 28
8.10 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.11 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 28
8.12 ESI Affiliates Agreement . . . . . . . . . . . . . . . . . . . 28
8.13 Absence of Material Adverse Change . . . . . . . . . . . . . . 28
8.14 Termination of Rights. . . . . . . . . . . . . . . . . . . . . 28
8.15 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.16 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 29
8.17 Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.18 Termination of Agreements. . . . . . . . . . . . . . . . . . . 29
8A. MACROMEDIA POST-CLOSING COVENANTS. . . . . . . . . . . . . . . . . . 29
8A.1 ESI Employees. . . . . . . . . . . . . . . . . . . . . . . . . 29
8A.2 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8A.3 Payment of Broker's Fee. . . . . . . . . . . . . . . . . . . . 29
9. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Certain Continuing Obligations . . . . . . . . . . . . . . . . 30
9.3 Non-Solicitation of Employees. . . . . . . . . . . . . . . . . 30
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10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS . . . . . . . . . . . . . . . . . . . 30
10.1 Survival of Representations. . . . . . . . . . . . . . . . . . 30
10.2 ESI Shareholders Agreement to Indemnify. . . . . . . . . . . . 31
11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.1 Governing Law; Dispute Resolution. . . . . . . . . . . . . . . 32
11.2 Assignment; Binding Upon Successors and Assigns. . . . . . . . 33
11.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.5 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 34
11.6 Amendment and Waivers. . . . . . . . . . . . . . . . . . . . . 34
11.7 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.10 Construction of Agreement. . . . . . . . . . . . . . . . . . . 35
11.11 No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 35
11.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 36
11.13 Absence of Third Party Beneficiary Rights. . . . . . . . . . . 36
11.14 Public Announcement. . . . . . . . . . . . . . . . . . . . . . 36
11.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 36
11.16 Time is of the Essence . . . . . . . . . . . . . . . . . . . . 37
11.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 37
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SCHEDULES:
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Schedule 1 List of Options and Warrants for ESI Common Stock
EXHIBITS:
Exhibit A-1 Form of Agreement of Merger
Exhibit A-2 Form of Certificate of Merger
Exhibit 1.3 Form of Escrow Agreement
Exhibit 1.4 Form of Articles of Incorporation
Exhibit 1.6A and B Form of Officer Certificates
Exhibit 4.4 Form of ESI Intellectual Property Agreement
Exhibit 4.5 Form of Voting Agreement
Exhibit 4.17 Form of ESI Affiliate Agreement
Exhibit 4.20 Form of Employment Agreement
Exhibit 5.4 Form of Macromedia Affiliate Agreement
Exhibit 7.7 Form of Fenwick & West LLP Opinion
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Exhibit 8.5 Form of Cooley Godward LLP Opinion
Exhibit 8A.1 List of Action for Current ESI Employees
Exhibit 8A.3 Broker's Fee
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is entered
into as of July 8, 1999, by and among Macromedia, Inc., a Delaware corporation
("MACROMEDIA"), ESI Software, Inc., a California corporation ("ESI"), and Dynamo
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Macromedia ("NEWCO").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Newco will merge with and into ESI in a reverse
triangular merger (the "MERGER"), with ESI to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of this Agreement, an
Agreement of Merger substantially in the form of EXHIBIT A-1 (the "AGREEMENT OF
MERGER"), and a Certificate of Merger substantially in the form of EXHIBIT A-2
(the "CERTIFICATE OF MERGER") and the applicable provisions of the laws of
California and Delaware. Upon the effectiveness of the Merger, (i) all the
outstanding Common Stock of ESI will be converted into Common Stock of
Macromedia and (ii) all warrants and options to purchase Common Stock or
Preferred Stock of ESI will be assumed and converted into warrants and options
to purchase Common Stock of Macromedia, in the manner and on the basis
determined herein and as provided in the Agreement of Merger and Certificate of
Merger.
B. The Merger is intended to be treated as a "pooling of interests"
for accounting purposes and a tax-free reorganization pursuant to the provisions
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"CODE"), by virtue of the provisions of Section 368(a)(2)(E) of the Code.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION
1.1 THE MERGER. The Agreement of Merger will be filed with the
Secretary of State of the State of California and the Certificate of Merger will
be filed with the Secretary of State of the State of Delaware as soon as
practicable after the Closing (as defined in Section 6.1 below). The effective
time of the Merger as specified in the Agreement of Merger (the
"EFFECTIVE TIME") will occur on or before August 31, 1999, or on such other date
as the parties hereto may mutually agree upon. Subject to the terms and
conditions of this Agreement, the Agreement of Merger and the Certificate of
Merger, Newco will be merged with and into ESI (or, with the consent of ESI,
which consent shall not be unreasonably withheld, ESI will be merged with and
into Newco in a forward triangular merger or into Macromedia in a straight in
merger) in a statutory merger pursuant to the Agreement of Merger and the
Certificate of Merger and in accordance with applicable provisions of Delaware
and California laws as follows:
1.1.1 CONVERSION OF ESI SHARES. Each share of ESI Common
Stock, $0.001 par value per share (the "ESI COMMON STOCK"), that is issued and
outstanding immediately prior to the Effective Time, other than shares, if any,
for which dissenters rights
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have been or are eligible to be perfected in compliance with applicable law,
will, by virtue of the Merger and at the Effective Time, and without further
action on the part of any holder thereof, be converted into the Applicable
Number (determined in accordance with Section 1.1.3 hereof) of fully paid and
nonassessable shares of Macromedia Common Stock, $0.001 par value per share
("MACROMEDIA COMMON STOCK"). Each share of ESI Preferred Stock, $0.001 par
value per share (the "ESI PREFERRED STOCK"), that is issued and outstanding
immediately prior to the Effective Time will be converted into shares of ESI
Common Stock immediately prior to the Effective Time.
1.1.2 CONVERSION OF ESI OPTIONS AND WARRANTS. Effective
at the Effective Time, Macromedia will assume the outstanding options and
warrants to purchase ESI Common Stock listed on SCHEDULE 1 (the "ESI OPTIONS"),
and each of the ESI Options shall by its terms be converted into an option or
warrant, as applicable (a "MACROMEDIA OPTION"), to purchase that number of
shares of Macromedia Common Stock which equals the number of shares of ESI
Common Stock that could be purchased pursuant to the ESI Option immediately
prior to the Effective Time multiplied by the Applicable Number (determined in
accordance with Section 1.1.3 hereof), such number of shares being rounded down
to the nearest whole share. The exercise price per share of Macromedia Common
Stock purchasable under each Macromedia Option shall be equal to the exercise
price per share of ESI Common Stock under the corresponding ESI Options divided
by the Applicable Number, such exercise price being rounded up to the nearest
whole cent. All of the other terms and conditions of each Macromedia Option
will be the same in all material respects as the corresponding ESI Option. No
cash will be paid in lieu of fractional shares which are rounded down pursuant
to this section.
1.1.3 DEFINITIONS. Unless there is an adjustment to the
shares to be issued in the Merger pursuant to Section 1.1.4 below, the
"APPLICABLE NUMBER" shall equal (a) the Total Macromedia Shares to be Issued (as
defined below) divided by (b) the sum of the total number of shares of ESI
Common Stock issued and outstanding at the Effective Time, plus the total number
of shares of ESI Common Stock issuable upon exercise of all ESI Options
outstanding that are vested at the Effective Time. "TOTAL MACROMEDIA SHARES TO
BE ISSUED" will equal (A) $24,125,000 divided by (B) the average closing price
as quoted on the Nasdaq National Market and as reported in the Wall Street
Journal of one share of Macromedia Common Stock for the ten trading days prior
to and including the trading day ending one day prior to the date of this
Agreement (the "AVERAGE PRICE").
1.1.4 ADJUSTMENTS FOR CAPITAL CHANGES. If prior to the
Merger, Macromedia recapitalizes either through a split-up of its outstanding
shares into a greater number, or through a combination of its outstanding shares
into a lesser number, or reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes (other than through a split-up or combination of shares provided for in
the previous clause), or declares a dividend on its outstanding shares payable
in shares or securities convertible into shares, the calculation of the
Applicable Number governing the conversion of ESI Common Stock will be adjusted
appropriately.
1.1.5 CONVERSION OF NEWCO SHARES. Each share of Newco
Common Stock, $0.01 par value per share ("NEWCO COMMON STOCK"), that is issued
and outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without further action on the part of the sole stockholder of Newco,
be converted into and become one (1) share of ESI
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Common Stock that is issued and outstanding immediately after the Effective
Time, and the shares of ESI Common Stock into which the shares of Newco
Common Stock are so converted shall be the only shares of ESI Common Stock
that are issued and outstanding immediately after the Effective Time.
1.1.6 FORWARD TRIANGULAR OR STRAIGHT IN MERGER. The
parties agree that, with the consent of ESI, which consent shall not be
unreasonably withheld, upon Macromedia's request, they will amend these
documents to cause ESI to merge with and into Newco or Macromedia.
1.2 FRACTIONAL SHARES. No fractional shares of Macromedia
Common Stock will be issued in connection with the Merger, but in lieu thereof,
the holder of any shares of ESI Common Stock who would otherwise be entitled to
receive a fraction of a share of Macromedia Common Stock will receive from
Macromedia, promptly after the Effective Time, an amount of cash equal to the
Average Price multiplied by the fraction of a share of Macromedia Common Stock
to which such holder would otherwise be entitled.
1.3 ESCROW AGREEMENT. Pursuant to an escrow agreement
substantially in the form of EXHIBIT 1.3 attached hereto (the "ESCROW
AGREEMENT"), on the Closing Date, Macromedia will (i) withhold, pro rata, from
the shares of Macromedia Common Stock that would otherwise be delivered to each
of the shareholders of ESI (the "ESI SHAREHOLDERS"), 10% of the total number of
shares of Macromedia Common Stock issued to them in the Merger and (ii) deposit
or cause to be deposited in escrow certificates representing the shares thus
withheld. The shares of Macromedia Common Stock withheld pursuant to this
Section 1.3 at the Closing (the "ESCROW SHARES") will be held as collateral for
the indemnification obligations of the ESI Shareholders under Section 10.2 below
and pursuant to the Escrow Agreement, pending their release from escrow pursuant
to the Escrow Agreement.
1.4 EFFECTS OF THE MERGER. At the Effective Time: (a) the
separate existence of Newco will cease and Newco will be merged with and into
ESI and ESI will be the surviving corporation pursuant to the terms of the
Agreement of Merger; (b) the Articles of Incorporation and Bylaws of ESI will
continue unchanged to be the Articles of Incorporation and Bylaws of the
surviving corporation; (c) each share of ESI Common Stock outstanding
immediately prior to the Effective Time will be converted as provided in this
Section 1; (d) each share of Newco Common Stock outstanding immediately prior to
the Effective Time will be converted into one (1) outstanding share of ESI
Common Stock; (e) the Board of Directors and executive officers of Macromedia
will remain unchanged and the sole director of Newco immediately prior to the
Effective Time will become the sole director of the surviving corporation and
the officers of Newco will become the officers of the surviving corporation; and
(f) the Merger will, at and after the Effective Time, have all of the effects
provided by applicable law. Immediately following the Effective Time, the
surviving corporation shall cause to be filed with the Secretary of State of
California Articles of Incorporation substantially in the form of EXHIBIT 1.4.
1.5 FURTHER ASSURANCES. ESI agrees that if, at any time after
the Effective Time, Macromedia considers or is advised that any further deeds,
assignments or assurances are reasonably necessary or desirable to vest, perfect
or confirm in Macromedia title to any property or rights of ESI as provided
herein, Macromedia and any of its officers are hereby authorized by ESI
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to execute and deliver all such proper deeds, assignments and assurances and
do all other things necessary or desirable to vest, perfect or confirm title
to such property or rights in Macromedia and otherwise to carry out the
purposes of this Agreement, in the name of ESI or otherwise.
1.6 TAX-FREE REORGANIZATION. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue of
the provisions of Section 368(a)(2)(E) of the Code. The shares of Macromedia
Common Stock issued in the Merger will be issued solely in exchange for the
issued and outstanding shares of ESI Common Stock pursuant to this Agreement and
the Macromedia Options issued in the Merger and will be issued solely in
exchange for the outstanding ESI Options, and no other transaction other than
the Merger represents, provides for or is intended to be an adjustment to the
consideration paid for the ESI Common Stock or ESI Options. Except for cash
paid in lieu of fractional shares, no consideration that could constitute "other
property" within the meaning of Section 356 of the Code will be paid by
Macromedia for shares of ESI Common Stock or ESI Options in the Merger. In
addition, Macromedia represents that it presently intends, and that at the
Effective Time it will intend, to continue ESI's historic business or use a
significant portion of ESI's business assets in a business. Prior to the filing
of the Permit Application with the California Commissioner of Corporations
pursuant to Section 4.7, and at the Closing (as defined in Section 6.1 hereof),
officers of Macromedia and officers of ESI will execute and deliver officers'
certificates in the forms of EXHIBIT 1.6A and EXHIBIT 1.6B, and the
representations and other statements set forth therein are incorporated in this
Agreement by this reference to the same extent as if Macromedia or ESI,
respectively, had made such statements herein.
1.7 POOLING OF INTERESTS. The parties intend that the Merger
be treated as a "pooling of interests" for accounting purposes.
2. REPRESENTATIONS AND WARRANTIES OF ESI
ESI hereby represents and warrants that, except as set forth in
the ESI disclosure letter (the "ESI DISCLOSURE LETTER") delivered by ESI to
Macromedia herewith, including items in the ESI Disclosure Letter referred to as
"ITEMS" below:
2.1 ORGANIZATION AND GOOD STANDING. ESI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and is qualified as a
foreign corporation in each jurisdiction (listed on ITEM 2.1) in which a failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect (as defined below) on ESI. ESI does not own or lease any real property,
has no employees and does not maintain a place of business in any foreign
country or in any state of the United States other than California. For
purposes of this Agreement, with respect to ESI, a violation or other matter
will be deemed to have a "Material Adverse Effect" on ESI if such violation or
other matter would have a material adverse effect on the business, financial
condition, assets, liabilities or results of operations of ESI.
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2.2 POWER, AUTHORIZATION AND VALIDITY.
2.2.1 ESI has the corporate right, power, legal capacity
and authority to enter into and, subject to shareholder approval, perform its
obligations under this Agreement and all agreements to which ESI is or will be a
party that are required to be executed pursuant to this Agreement (the "ESI
ANCILLARY AGREEMENTS"). This Agreement and the ESI Ancillary Agreements have
been duly and validly approved by the ESI Board of Directors and, as of the
Closing, the ESI Shareholders, as required by applicable law.
2.2.2 No filing, authorization or approval, governmental
or otherwise, is necessary to enable ESI to enter into and, subject to
shareholder approval, to perform its obligations under this Agreement and the
ESI Ancillary Agreements, except for (a) the filing of the Agreement of Merger
and the Certificate of Merger with the Secretaries of State of the States of
California and Delaware, respectively, the filing of such officers' certificates
and other documents as are required to effectuate the Merger under Delaware and
California law and the filing of appropriate documents with the relevant
authorities of the states other than California in which ESI is qualified to do
business, if any, (b) such filings as may be required to comply with federal and
state securities laws and (c) consents required under contracts disclosed in
ITEM 2.5 as exceptions to the representation made in the last sentence of
Section 2.5 below.
2.2.3 This Agreement and the ESI Ancillary Agreements are,
or when executed and delivered by ESI and the other parties thereto will be,
valid and binding obligations of ESI enforceable against ESI in accordance with
their respective terms, except as to the effect, if any, of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(b) rules of law governing specific performance, injunctive relief and other
equitable remedies and (c) the enforceability of provisions requiring
indemnification; provided, however, that the Agreement of Merger, the
Certificate of Merger and the ESI Ancillary Agreements will not be effective
until the earlier of the Effective Time or the date provided for therein.
2.3 CAPITALIZATION.
(a) AUTHORIZED/OUTSTANDING CAPITAL STOCK. The
authorized capital stock of ESI consists of 220,000,000 shares of ESI Common
Stock, $0.001 par value per share, and 122,859,991 shares of Preferred Stock,
$0.001 par value per share, of which 13,092,109 shares are designated as Series
A Preferred Stock, 2,744,878 shares are designated as Series B Preferred Stock,
73,173,239 shares are designated as Series C Preferred Stock and 33,849,825
shares are designated as Series D Preferred Stock. 6,951,454 shares of ESI
Common Stock are issued and outstanding. 13,092,109 shares of Series A
Preferred Stock, 2,744,078 shares of Series B Preferred Stock, 73,173,239 shares
of Series C Preferred Stock and 33,849,812 shares of Series D Preferred Stock
are issued and outstanding. All issued and outstanding shares of ESI Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission and have been offered,
issued, sold and delivered by ESI in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws. Listed on Item 2.3(a) are the names and
number and type of shares held by each of the ESI Shareholders as of the date
hereof, to be updated as of the Closing Date.
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(b) OPTIONS/RIGHTS. Except as listed on SCHEDULE 1,
there are no stock appreciation rights, options, warrants, calls, commitments,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any of ESI's authorized but unissued capital
stock; there are no options, warrants, calls, commitments, conversion privileges
or preemptive or other rights or agreements to which ESI is a party involving
the purchase or other acquisition of any shares of ESI Common Stock; there is no
liability for dividends accrued but unpaid; and there are no voting agreements,
registration rights, rights of first refusal or other restrictions (other than
normal restrictions on transfer under applicable federal and state securities
laws) applicable to any of ESI's outstanding securities.
2.4 SUBSIDIARIES AND GUARANTIES. ESI does not have any
subsidiaries or any equity interest, direct or indirect, in any corporation,
partnership, joint venture or other business entity. ESI is not a guarantor of
any obligation of a third party, whether or not such third party is related to
or affiliated with ESI.
2.5 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution
and delivery of this Agreement or any ESI Ancillary Agreement, nor the
consummation of the transactions provided for herein or therein, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, material impairment or violation of, (a) any provision of
the Articles of Incorporation or Bylaws of ESI, as currently in effect, (b) any
material instrument or contract to which ESI is a party or by which ESI is bound
or (c) any federal, state, local or foreign judgment, writ, decree, order,
statute, rule or regulation applicable to ESI or its assets or properties. The
consummation of the Merger and succession by Macromedia to all rights, licenses,
franchises, leases and agreements of ESI in and of themselves will not require
the consent of any third party (except as set forth in ITEM 2.5) and will not
have a material adverse effect upon any such rights, licenses, franchises,
leases or agreements pursuant to the terms of those agreements.
2.6 LITIGATION. Except as set forth on ITEM 2.6, there is no
action, proceeding or investigation pending or, to ESI's knowledge, threatened
against ESI before any court or administrative agency that, if determined
adversely to ESI, may reasonably be expected to have a Material Adverse Effect
or in which the adverse party or parties seek to recover in excess of $10,000
against ESI. To the best knowledge of ESI, there is no basis for any person,
firm, corporation or entity to assert a claim against ESI or Macromedia as
successor in interest to ESI based upon: (a) ownership or rights to ownership
of any shares of ESI Common Stock or other securities, (b) any rights as an ESI
securities holder, including, without limitation, any option, warrant or other
right to acquire any ESI securities, any preemptive rights or any rights to
notice or to vote, or (c) any rights under any agreement between ESI and any ESI
securities holder or former ESI securities holder in such holder's capacity as
such. There is no action, suit, proceeding, claim, arbitration or investigation
pending as to which ESI has received notice of assertion against ESI, which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay any
of the transactions contemplated by this Agreement.
2.7 ESI FINANCIAL STATEMENTS. ESI has delivered to Macromedia
in ITEM 2.7 ESI's audited balance sheet as of June 30, 1998 and its unaudited
balance sheet as of May 31, 1999 (the "BALANCE SHEET DATE") and ESI's audited
income statements and cash flows for the years ended June 30, 1997 and 1998 and
its unaudited income statement and cash flow for the period
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from July 1, 1998 through May 31, 1999 (collectively, the "ESI FINANCIAL
STATEMENTS"). The ESI Financial Statements (a) are in accordance with the
books and records of ESI, (b) fairly and accurately represent the financial
condition of ESI at the respective dates specified therein and the results of
operations for the respective periods specified therein and (c) have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis. The financial information as of May 31, 1999 and for
the nine month period ended May 31, 1999, does not contain footnotes and is
subject to normal and recurring adjustments which shall not be, individually,
or in the aggregate, material in magnitude. ESI has no material debt,
liability or obligation of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, that is not reflected,
reserved against or disclosed in the ESI Financial Statements or on ITEM 2.7,
except for those that may have been incurred after the Balance Sheet Date in
the ordinary course of ESI's business, consistent with past practice and that
are in an aggregate amount not to exceed $25,000.
2.8 TAXES. ESI has filed all federal, state, local and foreign
tax and material information returns required to be filed prior to the date
hereof, has paid all taxes required to be paid in respect of all periods prior
to the date hereof for which returns have been filed, has made all necessary
estimated tax payments, and has no liability for taxes in excess of the amount
so paid, except to the extent adequate reserves have been established in the ESI
Financial Statements. True, correct and complete copies of all such tax and
information returns have been provided or made available by ESI to Macromedia.
ESI is not delinquent in the payment of any tax or in the filing of any tax
returns, and no deficiencies for any tax have been threatened, claimed, proposed
or assessed in writing which have not been settled or paid. No tax return of
ESI has ever been audited by the Internal Revenue Service or any state taxing
agency or authority. For the purposes of this Section 2.8, the terms "TAX" and
"TAXES" include all federal, state, local and foreign income, gains, franchise,
excise, property, sales, use, employment, license, payroll, occupation,
recording, value added or transfer taxes, governmental charges, fees, levies or
assessments (whether payable directly or by withholding), and, with respect to
such taxes, any estimated tax, interest and penalties or additions to tax and
interest on such penalties and additions to tax. ESI has no current or deferred
federal income tax liabilities and will not as a result of the merger become
liable for any income tax not adequately reserved against on the Financial
Statements. ESI has not filed a consent pursuant to Section 341(f) of the Code.
2.9 TITLE TO PROPERTIES. ESI has good and marketable title to
all of its assets as shown on the balance sheet as of the Balance Sheet Date
included in the ESI Financial Statements, free and clear of all liens, charges
or encumbrances (other than for taxes not yet due and payable and Permitted
Liens as defined below), other than such assets, set forth on ITEM 2.9, as were
sold by ESI in the ordinary course of business since the Balance Sheet Date or
which are subject to capitalized leases. "PERMITTED LIENS" means any lien,
mortgage, encumbrance or restriction which is reflected in the ESI Financial
Statements and is not in excess of $25,000 and which does not materially detract
from the value or materially interfere with the use, as currently utilized, of
the properties subject thereto or affected thereby or otherwise materially
impair the business operations being conducted thereon. Except as set forth in
ITEM 2.9, there are no UCC financing statements of record with the State of
California naming ESI as debtor and ESI owns no property in any other state.
The machinery and equipment included in such assets are in all material respects
in good condition and repair, normal wear and tear excepted, and all leases of
real or personal property to which ESI is a party are fully effective and afford
ESI peaceful and
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undisturbed possession of the subject matter of the lease. To its knowledge,
ESI is not in violation of any zoning, building, safety or environmental
ordinance, regulation or requirement or other law or regulation applicable to
the operation of owned or leased properties, and ESI has not received any
notice of such violation with which it has not complied or had waived.
2.10 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date,
ESI has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and except as set forth in ITEM 2.10, since the Balance Sheet Date there
has not been with respect to ESI:
(a) any change in the financial condition, properties,
assets, liabilities, business or results of operations of ESI, which change by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has had or can reasonably be expected to have a
Material Adverse Effect on ESI or its ability to develop or market the Drumbeat
2000 and eStore Builder line of products;
(b) any contingent liability incurred by ESI as
guarantor or surety with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of
the properties of ESI;
(d) any obligation or liability incurred by ESI other
than in the ordinary course of business, which obligations or liabilities do not
exceed in the aggregate $10,000;
(e) any purchase, license, sale or other disposition, or
any agreement or other arrangement for the purchase, license, sale or other
disposition, of any of the properties, assets or goodwill of ESI other than in
the ordinary course of business and consistent with past practice;
(f) any damage, destruction or loss, whether or not
covered by insurance that would have or is reasonably likely to have a Material
Adverse Effect on ESI;
(g) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock of ESI, any split, stock dividend, combination or recapitalization of the
capital stock of ESI or any direct or indirect redemption, purchase or other
acquisition by ESI of the capital stock of ESI;
(h) any labor dispute or claim of unfair labor
practices, any change in the compensation payable or to become payable to any of
ESI's officers, employees or agents earning compensation at an anticipated
annual rate in excess of $10,000, or any bonus payment or arrangement made to or
with any of such officers, employees or agents; or any change in the
compensation payable or to become payable to any of ESI's other officers,
employees or agents other than normal annual raises in accordance with past
practice or any bonus payment or arrangement made to or with any of such
officers, employees or agents other than normal bonuses or compensation
increases noted on ITEM 2.10(h) hereof or other arrangements made in accordance
with past practices;
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(i) any change with respect to the management,
supervisory, development or other key personnel of ESI (the management,
supervisory, development and other key personnel of ESI are listed on ITEM
2.10(i) hereof);
(j) any payment or discharge of a lien or liability
thereof, which lien or liability was not either (i) shown on the balance sheet
as of the Balance Sheet Date included in the ESI Financial Statements or (ii)
incurred in the ordinary course of business after the Balance Sheet Date;
(k) any obligation or liability incurred by ESI to any
of its officers, directors or shareholders, or any loans or advances made to any
of its officers, directors, shareholders or affiliates, except normal
compensation and expense allowances payable to officers;
(l) any loss of one or more material ESI customers or
such number of ESI customer which together represent a material amount of
business which, in either case, could have a Material Adverse Effect on ESI;
(m) any amendment or change in the Articles of
Incorporation or Bylaws of ESI;
(n) any issuance or sale of any debt or equity
securities (including but not limited to stock) of ESI or of any options or
other rights to acquire from ESI, directly or indirectly, any debt or equity
securities (including but not limited to stock) of ESI other than the issuance
of ESI Common Stock pursuant to the exercise of options and warrants outstanding
as of the date of this Agreement; or
(o) except as contemplated by this Agreement, any
execution, amendment, relinquishment, termination or non-renewal by ESI of, any
contract, lease, transaction, commitment or other right or obligation other than
in the ordinary course of ESI's business or, to ESI's knowledge, any written or
oral indication or assertion by the other party thereto of problems with ESI's
products or services or performance under such contract, lease, transaction,
commitment or other right or obligation or its desire to so amend, relinquish,
terminate or not renew any such contract, lease transaction, commitment or other
right or obligation.
2.11 AGREEMENTS AND COMMITMENTS. Except as set forth in ITEM
2.11 delivered by ESI to Macromedia herewith, or as listed in ITEM 2.12, ITEM
2.15.3 or ITEM 2.15.6 as required by Section 2.12, Section 2.15.3 or Section
2.15.6, as the case may be, ESI is not a party or subject to any oral or written
executory agreement, obligation or commitment that is material to ESI, its
financial condition or business or which is described below and is not
terminable within 60 days without cost or penalty to ESI, including but not
limited to the following:
(a) Any contract, commitment, letter agreement,
quotation or purchase order providing for payments by or to ESI in an aggregate
amount of (i) $25,000 or more in the ordinary course of business or (ii) $10,000
or more not in the ordinary course of business;
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(b) Any license agreement under which ESI is licensor
(except for any nonexclusive software license granted by ESI to end-user
customers where the form of the license, excluding standard immaterial
deviations, has been provided or made available to Macromedia's counsel); or
under which ESI is licensee (except for standard "shrink wrap" licenses for
off-the-shelf software products);
(c) Any agreement by ESI to encumber, transfer or sell
rights in or with respect to any ESI Intellectual Property (as defined in
Section 2.12 hereof);
(d) Any agreement for the sale or lease of real or
personal property involving more than $25,000 per year;
(e) Any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the distribution of ESI's products;
(f) Any franchise agreement or financing statement;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture contract or arrangement or any
other agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person;
(i) Any instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness or any
advance to any employee of ESI incurred or made in the ordinary course of
business, and except as disclosed in the ESI Financial Statements;
(j) Any contract containing covenants purporting to
limit ESI's freedom to compete in any line of business in any geographic area;
or
(k) Any contract or commitment for the employment of any
officer, employee or consultant of ESI or any other type of contract or
understanding with any officer, employee or consultant of ESI that is not
immediately terminable by ESI without cost or liability.
All agreements, obligations and commitments listed in ITEM
2.11, ITEM 2.12, ITEM 2.15.3 or ITEM 2.15.6 as required by Section 2.11, Section
2.12, Section 2.15.3 or Section 2.15.6, as the case may be, are valid and in
full force and effect, and except as expressly noted, a true and complete copy
of each has been delivered or made available to Macromedia. Except as noted on
ITEM 2.11, neither ESI nor, to the knowledge of ESI, any other party is in
breach of or default under any material term of any such agreement, obligation
or commitment. ESI has no liability for renegotiation of government contracts
or subcontracts which are material to ESI, its financial condition or business.
2.12 INTELLECTUAL PROPERTY. ESI owns all right, title and
interest in, or has the right to use, all patent applications, patents,
trademark applications, trademarks, service marks, trade names, copyright
applications, copyrights, trade secrets, know-how, technology and other
intellectual property and proprietary rights used in or reasonably necessary to
the conduct of its business as presently
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conducted and the business of the development, production, marketing,
licensing and sale of commercial products, including, but not limited to, the
Drumbeat 2000 and eStore Builder line of products, using such intellectual
property and proprietary rights ("ESI INTELLECTUAL PROPERTY"). ESI has taken
all reasonable measures to protect all ESI Intellectual Property, and, except
as set forth on ITEM 2.12, to the best knowledge of ESI, ESI is not aware of
any infringement of any ESI Intellectual Property by any third party. Set
forth on ITEM 2.12 delivered to Macromedia herewith is a true and complete
list of all copyright, mask work and trademark registrations and applications
and all patents and patent applications for ESI Intellectual Property owned
by ESI. ESI is not aware of any loss, cancellation, termination or
expiration of any such registration or patent except as set forth on ITEM
2.12. Except as set forth on ITEM 2.12, the business of ESI as conducted as
of the date hereof and as of the Closing Date does not infringe or violate
any of the patents, trademarks, service marks, trade names, mask works,
copyrights, trade secrets, proprietary rights or other intellectual property
of any other person, and ESI has not received any written or oral claim or
notice of infringement or potential infringement of the intellectual property
of any other person which could be expected to have a Material Adverse Effect
on ESI. ESI has the unrestricted, worldwide right to reproduce, manufacture,
sell, license and distribute all of its products (such products being set
forth in ITEM 2.12) and the right to use all of its registered user lists,
and, to its knowledge, is not using any confidential information or trade
secrets of any former employer of any past or present employees.
2.13 COMPLIANCE WITH LAWS. ESI has complied, or prior to the
Closing Date (as defined in Section 6.1 hereof) will have complied, and is or
will be at the Closing Date (as defined in Section 6.1 hereof) in compliance, in
all respects material to ESI, with all applicable laws, ordinances, regulations
and rules, and all orders, writs, injunctions, awards, judgments and decrees,
applicable to ESI or to the assets, properties and business of ESI, including,
without limitation: (a) all applicable federal and state securities laws and
regulations, (b) all applicable federal, state and local laws, ordinances and
regulations, and all orders, writs, injunctions, awards, judgments and decrees,
pertaining to (i) the sale, licensing, leasing, ownership or management of ESI's
owned, leased or licensed real or personal property, products or technical data,
(ii) employment or employment practices, terms and conditions of employment, or
wages and hours or (iii) safety, health, fire prevention, environmental
protection (including toxic waste disposal and related matters described in
Section 2.21 hereof), building standards, zoning or other similar matters, (c)
the Export Administration Act and regulations promulgated thereunder or other
laws, regulations, rules, orders, writs, injunctions, judgments or decrees
applicable to the export or re-export of controlled commodities or technical
data, (d) the Immigration Reform and Control Act and (e) all governmental and
nongovernmental regulations related to the operation and use of the Internet.
ESI has received all permits and approvals from, and has made all filings with,
third parties, including government agencies and authorities, that are necessary
to the conduct of its business as presently conducted.
2.14 CERTAIN TRANSACTIONS AND AGREEMENTS. No person who is an
officer or director of ESI, or a member of any officer's or director's immediate
family, has any direct or indirect ownership interest in or any employment or
consulting agreement with any firm or corporation that competes with ESI or
Macromedia (except with respect to any interest in less than 1% of the
outstanding voting shares of any corporation whose stock is publicly traded).
No person who is an officer or director of ESI, or any member of any officer's
or director's immediate family, is directly or indirectly interested in any
contract or informal arrangement with ESI, including, but not limited to, any
loan arrangements, except for compensation for services as an officer (listed in
Item 2.15.3), director or employee of ESI and except for the normal rights of a
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shareholder, warrantholder or optionholder. None of such officers or directors
or family members has any interest in any (a) ESI Intellectual Property or (b)
property (other than ESI Intellectual Property) used in the business of ESI
whether such property is real or personal, tangible or intangible.
2.15 EMPLOYEES.
2.15.1 Except as set forth in ITEM 2.15.1, (i) ESI has no
employment contract or consulting agreement currently in effect that is not
terminable at will without penalty or payment of compensation by ESI (other than
agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions) and (ii) all employees and
consultants of ESI have executed ESI's standard form of assignments of copyright
and other intellectual property rights to ESI.
2.15.2 ESI (a) has never been and is not now subject to a
union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, and (d) has no current labor dispute. ESI has good
labor relations, and ESI has no knowledge of any facts indicating that the
consummation of the transactions provided for herein (other than the
contemplated reductions in force associated therewith) will have a material
adverse effect on its labor relations, and has no knowledge that any of its key
development or other employees (each of whom is listed on ITEM 2.15.2) intends
to leave its employ.
2.15.3 ITEM 2.15.3 delivered by ESI to Macromedia herewith
contains a list of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans, life insurance or
other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by ESI or any trade or business which is treated as a single employer
with ESI within the meaning of Code Section 414(b), (c), (m) or (o) (each an
"ERISA AFFILIATE") (the "EMPLOYEE PLANS"), including without limitation all
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). ESI has delivered or made
available to Macromedia a true and complete copy of, to the extent applicable,
(a) all Employee Plans, (b) the most recent annual report (Form 5500), (c) each
trust agreement related to such Employee Plans, (d) the most recent summary plan
description for each Employee Plan for which a summary plan description is
required under ERISA and (e) the most recent Internal Revenue Service
determination letter issued with respect to any Employee Plan. Except as set
forth in ITEM 2.15.3, each of the Employee Plans, and its operation and
administration, is in compliance with each of the respective Employee Plans'
terms and all applicable, federal, state, local and other governmental laws and
ordinances, orders, rules and regulations, including the requirements of ERISA
and the Code. Except as set forth in ITEM 2.15.3, all such Employee Plans that
are "employee pension benefit plans" (as defined in Section 3(2) of ERISA) which
are intended to qualify under Section 401(a) of the Code have received favorable
determination, opinion, notification or advisory letters with respect to such
plans that such plans comply in form with the Tax Reform Act of 1986 or have
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
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necessary to obtain a favorable determination as to the qualified status of
each such Employee Plan. In addition, ESI has never been a participant in
any "prohibited transaction," within the meaning of Section 406 of ERISA with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) which ESI sponsors as employer or in which ESI participates as an
employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including, but not limited to, any individual exemption granted under
Section 408(a) of ERISA), or which could result in an excise tax under
Section 4975 of the Code. All Employee Plans, to the extent applicable, are
in compliance with (a) the continuation coverage requirements of Section
4980B of the Code and Sections 601 through 608 of ERISA, (b) the Americans
with Disabilities Act of 1990, as amended, and (c) the Family Medical Leave
Act of 1993, as amended, and the regulations thereunder. Except as set forth
in Item 2.15.3 no employee of ESI and no person subject to any ESI health
plan has made medical claims through such health plan during the twelve
months preceding the date hereof for more than $10,000 or more, in the
aggregate, or has any catastrophic illness.
2.15.4 No employee of ESI is in violation of any term of
any employment contract, patent disclosure agreement or noncompetition agreement
or any other contract or agreement, or any restrictive covenant, relating to the
right of any such employee to be employed by ESI or to use trade secrets or
proprietary information of others, and the employment of any employee of ESI
does not subject ESI to any liability to any third party.
2.15.5 Except as set forth in ITEM 2.15.5, ESI is not a
party to any (a) agreement with any employee of ESI (i) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving ESI in the nature of any of the
transactions contemplated by this Agreement, the Agreement of Merger or the
Certificate of Merger, (ii) providing any term of employment or compensation
guarantee or (iii) providing severance benefits or other benefits after the
termination of employment of such employee regardless of the reason for such
termination of employment, or (b) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the occurrence
of any of the transactions contemplated by this Agreement, the Agreement of
Merger or the Certificate of Merger or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement and the Agreement of Merger. ESI is not obligated to make any
parachute payment, as defined in Section 280G(b)(2) of the Code, nor will any
parachute payment be deemed to have occurred as a result of the transactions
contemplated by this Agreement, the Articles of Merger or the Certificate of
Merger.
2.15.6 A list of all employees, officers and consultants
of ESI and their current base compensation as of the date of this Agreement is
set forth on ITEM 2.15.6.
2.15.7 All contributions by ESI required to have been made
or accrued as of the date hereof under the terms of any of the Employee Plans
have been made or have been accrued on ESI's financial statements.
2.16 CORPORATE DOCUMENTS. ESI has made available to Macromedia
for examination all documents and information listed in ITEMS 2.1 through 2.26
or other exhibits
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called for by this Agreement which have been requested by Macromedia's legal
counsel, including, without limitation, the following: (a) copies of ESI's
Articles of Incorporation and Bylaws as currently in effect; (b) ESI's minute
book containing all records of all proceedings, consents, actions and
meetings of ESI's directors and shareholders; (c) ESI's stock ledger, journal
and other records reflecting all stock issuances and transfers; and (d) all
permits, orders and consents issued by any regulatory agency with respect to
ESI, or any securities of ESI, and all applications for such permits, orders
and consents.
2.17 NO BROKERS. Except as set forth on ITEM 2.17, ESI is not
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement, the Agreement of Merger or the Certificate of Merger or in connection
with any transaction provided for herein or therein.
2.18 DISCLOSURE. This Agreement, its exhibits and schedules,
any of the certificates or documents to be delivered by ESI to Macromedia under
this Agreement taken together, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which such
statements were made, not misleading.
2.19 BOOKS AND RECORDS. The books, records and accounts of ESI
(a) are in all material respects true and complete, (b) have been maintained in
accordance with reasonable business practices on a basis consistent with prior
years, (c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of ESI and (d) accurately and fairly
reflect the basis for the ESI Financial Statements.
2.20 INSURANCE. ESI maintains, and at all times during the
prior three years, maintained, fire and casualty, workers compensation, general
liability, business interruption and product liability insurance (as listed on
ITEM 2.20) which it believes to be reasonably prudent for similarly sized and
similarly situated businesses. ITEM 2.20 sets forth all claims made under such
insurance policies since January 1, 1997 and the premiums that apply with
respect to such insurance policies as of the date of this Agreement. Except as
set forth on ITEM 2.20, ESI has not changed insurance carriers since January 1,
1997.
2.21 ENVIRONMENTAL MATTERS.
2.21.1 During the period that ESI has leased the premises
currently occupied by it and those premises occupied by it since the date of its
incorporation, to ESI's best knowledge, there have been no disposals, releases
or threatened releases of Hazardous Materials (as defined below) on any such
premises. ESI has no knowledge of any presence, disposals, releases or
threatened releases of Hazardous Materials on or from any of such premises,
which may have occurred prior to ESI having taken possession of any of such
premises. For purposes of this Agreement, the terms "DISPOSAL," "RELEASE," and
"THREATENED RELEASE" have the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA"). For the purposes of this Section
2.22, "HAZARDOUS MATERIALS" mean any hazardous or toxic substance, material or
waste which is or becomes prior to the Closing Date (as defined in Section 6.1
hereof) regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous material,"
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"toxic substance" or "hazardous chemical" under (i) CERCLA; (ii) the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001
ET SEQ.; (iii) the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, ET SEQ.; (iv) the Toxic Substances Control Act, 15 U.S.C. Section 2601
ET SEQ.; (v) the Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 ET SEQ.; (vi) regulations promulgated under any of the above
statutes; or (vii) any other applicable federal, state or local statute,
ordinance, rule or regulation that has a scope or purpose similar to those
identified above.
2.21.2 During the time that ESI has leased the premises,
none of the premises currently leased by ESI or any premises previously occupied
by ESI is in violation of any federal, state or local law, ordinance, regulation
or order relating to industrial hygiene or to the environmental conditions in
such premises, except as would not be reasonably likely to have a Material
Adverse Effect.
2.21.3 During the time that ESI has leased the premises
currently occupied by it or any premises previously occupied by ESI, neither ESI
nor, to ESI's knowledge, any third party, has used, generated, manufactured or
stored in such premises or transported to or from such premises any Hazardous
Materials, except as would not be reasonably likely to have a Material Adverse
Effect.
2.21.4 During the time that ESI has leased the premises
currently occupied by it or any premises previously occupied by ESI, there has
been no litigation, proceeding or administrative action brought or threatened in
writing against ESI, or any settlement reached by ESI with, any party or parties
alleging the presence, disposal, release or threatened release of any Hazardous
Materials on, from or under any of such premises.
2.21.5 During the period that ESI has leased the premises
currently occupied by it or any premises previously occupied by ESI, no
Hazardous Materials have been transported from such premises to any site or
facility now listed or proposed for listing on the National Priorities List, at
40 C.F.R. Part 300, or any list with a similar scope or purpose published by any
state authority.
2.22 GOVERNMENT CONTRACTS. All representations, certifications
and disclosures made by ESI to any Government Contract Party (as defined below)
have been in all material respects current, complete and accurate at the times
they were made. There have been no acts, omissions or noncompliance with regard
to any applicable public contracting statute, regulation or contract requirement
(whether express or incorporated by reference) relating to any of ESI's
contracts with any Government Contract Party (as defined below) in either case
that have led to or could reasonably be expected to lead to, either before or
after the Closing Date (as defined in Section 6.1 hereof), (a) any claim or
dispute involving ESI and/or Macromedia as successor in interest to ESI and any
Government Contract Party or (b) any suspension, debarment or contract
termination, or proceeding related thereto. There has been no act or omission
that relates to the marketing, licensing or selling to any Government Contract
Party (as defined below) of any of ESI technical data and computer software and
that has led to or could reasonably be expected to lead to, either before or
after the Closing Date (as defined in Section 6.1 hereof), any cloud on any of
ESI's rights in and to its technical data and computer software. All of ESI's
development of technical data and computer software was developed exclusively at
private expense. For purposes
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of this Section 2.22, the term "GOVERNMENT CONTRACT PARTY" means any
independent or executive agency, division, subdivision, audit group or
procuring office of the federal government, including any prime contractor of
the federal government and any higher level subcontractor of a prime
contractor of the federal government, and including any employees or agents
thereof, in each case acting in such capacity.
2.23 YEAR 2000 COMPLIANCE. ESI has conducted a reasonable
review of all of its software products and all material operating codes,
programs, utilities and other software, as well as all hardware and systems,
utilized by it (collectively, "SYSTEMS") to determine whether such software
products and Systems are designed to record, store, process and present
millennial dates in the same manner, and with the same functionality, as
provided on or before December 31, 1999, and are designed to not lose
functionality or degrade in performance as a consequence of such software
operating at a millennial date (such design and performance being referred to as
"Y-2000 COMPLIANT"). To the extent such review identified software products or
Systems that are not Y-2000 Compliant, (a) ESI has taken, or is planning to
take, appropriate corrective action with respect to such software products and
Systems, and the costs of such corrective action will not exceed, in the
aggregate, $50,000, and (b) such software products and Systems and the related
appropriate corrective action is described in ITEM 2.23. Except as set forth in
ITEM 2.23, to the best knowledge of ESI, all products or services supplied by
third parties to ESI are Y-2000 Compliant.
2.24 WARRANTIES. Except as set forth in ITEM 2.24, ESI has not
provided to its customers (i) any express warranties, including any warranties
related to Y-2000 Compliant issues, regarding the software products and services
it provides to such customers or (ii) rights to obtain refunds with respect to
such services.
2.25 TITLE TO ESI COMMON STOCK. To ESI's best knowledge
(i) each ESI Shareholder has valid title to the shares of ESI Common Stock to be
sold by such shareholder as set forth on ITEM 2.3(a) hereto, and the legal right
and power, and all authorizations and approvals required by law, to enter into
this Agreement, and to sell, transfer and deliver the shares to be sold by such
shareholder; (ii) no ESI Shareholder has sold, assigned or otherwise transferred
to any third party any of his or her right, title or interest in or to any of
the shares of ESI Common Stock set forth as owned by such shareholder on
ITEM 2.3(a) hereto; and (iii) there exists no pledge, lien, security interest,
claim or encumbrance whatsoever on or relating to any of the shares of ESI
Common Stock set forth as owned by such shareholder on ITEM 2.3(a) hereto. To
ESI's Knowledge, no ESI Shareholder has claimed any interest in any additional
shares of ESI Stock, or any options, warrants or other securities of ESI, except
for the number of shares of ESI Common Stock which such person is shown to be
the owner of on ITEM 2.3(a), and (b) no third party who is not listed on
ITEM 2.3(a) has made, or has, any claim of entitlement to receive any shares of
the capital stock of ESI, any warrants or other rights to acquire any capital
stock of ESI or any other securities of ESI.
2.26 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by ESI for inclusion in the documents required to be filed with
the California Commissioner of Corporations pursuant to Sections 25121 and 25142
of the CCSL (as defined below) and any necessary Information Statement (as
defined below) (collectively, "NOTICE MATERIALS"), at the date such information
is supplied and at the time of the meeting of the ESI Shareholders to be held to
approve the Merger, contains or will contain any untrue statement of a material
fact or omits or
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will omit 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 are made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF MACROMEDIA
Each of Macromedia and Newco, where applicable, hereby represents
and warrants, that, except as set forth on the Macromedia disclosure letter
delivered to ESI herewith:
3.1 ORGANIZATION AND GOOD STANDING. Each of Macromedia and
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and as proposed to be conducted.
3.2 POWER, AUTHORIZATION AND VALIDITY.
3.2.1 Each of Macromedia and Newco has the corporate
right, power, legal capacity and authority to enter into and perform its
obligations under this Agreement, and all agreements to which Macromedia or
Newco is or will be a party that are required to be executed pursuant to this
Agreement (the "MACROMEDIA ANCILLARY AGREEMENTS"). The execution, delivery and
performance of this Agreement and the Macromedia Ancillary Agreements have been
duly and validly approved and authorized by Macromedia's Board of Directors and
Newco's Board of Directors, as applicable.
3.2.2 No filing, authorization or approval, governmental
or otherwise, is necessary to enable Macromedia to enter into, and to perform
its obligations under, this Agreement and the Macromedia Ancillary Agreements,
except for (a) the filing of the Agreement of Merger and the Certificate of
Merger with the California Secretary of State and the Delaware Secretary of
State, respectively, and the filing of appropriate documents with the relevant
authorities of other states in which Macromedia is qualified to do business, if
any, and (b) such post-closing filings as may be required to comply with federal
and state securities laws.
3.2.3 This Agreement and the Macromedia Ancillary
Agreements are, or when executed by Macromedia and Newco (as applicable) and the
other parties thereto will be, valid and binding obligations of Macromedia and
Newco, enforceable against Macromedia and Newco in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies and (c) the enforceability of provisions requiring indemnification;
provided, however, that the Agreement of Merger, the Certificate of Merger and
the Macromedia Ancillary Agreements will not be effective until the earlier of
the Effective Time or the date provided for therein.
3.3 NO VIOLATION OF CERTIFICATE OR LAWS. Neither the execution
nor delivery of this Agreement or any Macromedia Ancillary Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of (a) any provision of the
Certificate of Incorporation or Bylaws of Macromedia or Newco, as currently in
effect, or (b) any federal, state, local or foreign judgment, writ, decree,
order, statute or regulation applicable to and that would have a material
adverse effect on Macromedia or its assets or properties.
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3.4 DISCLOSURE. Macromedia has furnished ESI with its annual
report on Form 10-K for its fiscal year ended March 31, 1999, its proxy
statement for its annual stockholders meeting to be held on July 28, 1999 and
all other reports or documents required to be filed by Macromedia pursuant to
Section 13(a) or 15(d) of the 1934 Act since the filing of the most recent
annual report on Form 10-K (the "MACROMEDIA DISCLOSURE PACKAGE"). The
Macromedia Disclosure Package, this Agreement, the exhibits and schedules
hereto, and any certificates or documents to be delivered to ESI pursuant to
this Agreement, when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
3.5 VALID ISSUANCE. The Macromedia Common Stock to be issued
in the Merger will, when issued in accordance with the provisions of this
Agreement, the Agreement of Merger and the Certificate of Merger, be validly
issued, fully paid and nonassessable.
4. ESI PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, ESI covenants to and agrees with Macromedia as follows:
4.1 ADVICE OF CHANGES. ESI will promptly advise Macromedia in
writing, (a) of any event occurring subsequent to the date of this Agreement
that would render any representation or warranty of ESI contained in this
Agreement, if made on or as of the date of such event or the Closing Date (as
defined in Section 6.1 hereof), untrue or inaccurate in any material respect and
(b) of any Material Adverse Effect on ESI.
4.2 MAINTENANCE OF BUSINESS. If ESI becomes aware of a
material deterioration in the relationship with any customer, supplier or key
employee, it will promptly bring such information to the attention of Macromedia
in writing and, if requested by Macromedia, will exert all reasonable efforts to
restore the relationship.
4.3 CONDUCT OF BUSINESS. Except as provided otherwise herein
or as approved or recommended by Macromedia, ESI will not, without the prior
written consent of the Chief Executive Officer or Chief Financial Officer of
Macromedia, not to be unreasonably withheld:
(a) incur any indebtedness individually or in the
aggregate in excess of $25,000;
(b) enter into any transaction or make any commitment
involving an expense of ESI or capital expenditure by ESI in excess of $25,000
or accrue any liability in excess of the $425,000 that has been accrued as of
the date of this Agreement under the bonus agreements listed on Item 2.15.3;
(c) encumber or permit to be encumbered any of its
assets except in the ordinary course of its business consistent with past
practice and to an extent which is not material;
(d) dispose of any of its assets except in the ordinary
course of business consistent with past practice;
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(e) enter into any material lease or contract for the
purchase or sale of any property, real or personal, tangible or intangible,
except in the ordinary course of business consistent with past practice or enter
into any agreement of the types described in Section 2.11;
(f) fail to maintain its equipment and other assets in
good working condition and repair according to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) except as set forth on ITEM 4.3(g), and except for
the right of ESI to adjust the allocation of the Payments among ESI's employees,
officers, consultant and other parties, pay any bonus, royalty, increased salary
(except for increases in the ordinary course of business consistent with past
practice) or special remuneration to any officer, employee or consultant (except
pursuant to existing arrangements heretofore disclosed in writing to Macromedia)
or enter into any new employment or consulting agreement with any such person,
or enter into any new agreement or plan of the type described in Section 2.15.3;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend
or other distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock;
(j) amend or terminate any contract, agreement or
license to which it is a party except those amended or terminated in the
ordinary course of business, consistent with past practice, and which are not
material in amount or effect;
(k) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary course of
business consistent with past practice, not material in amount, which travel and
expenses shall be documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any obligation
except for the endorsement of checks and other negotiable instruments in the
ordinary course of business, consistent with past practice;
(m) waive or release any material right or claim except
in the ordinary course of business, consistent with past practice;
(n) issue or sell any shares of its capital stock of any
class or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities, stock appreciation
rights or other commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;
(o) split or combine the outstanding shares of its
capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) except for the Merger, merge, consolidate or
reorganize with, or acquire any entity;
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(q) amend its Articles of Incorporation or Bylaws;
(r) agree to any audit assessment by any tax authority
or file any federal or state income or franchise tax return unless copies of
such returns have been delivered to Macromedia for its review prior to filing;
(s) license any of ESI's technology or any of ESI's
Intellectual Property, except in the ordinary course of business consistent with
past practice;
(t) change any insurance coverage or issue any
certificates of insurance;
(u) terminate the employment of any key employee listed
in Item 2.10(i); or
(v) agree to do any of the things described in the
preceding clauses 4.3(a) through 4.3(u).
4.4 CERTAIN AGREEMENTS. ESI will cause all present employees
and consultants of ESI who have not previously executed ESI's forms of
assignments of copyright and other intellectual property rights to ESI to
execute such forms, copies of which are attached hereto as EXHIBIT 4.4.
4.5 SHAREHOLDER APPROVAL. Subject to Section 4.7, ESI will
distribute an information statement (the "INFORMATION STATEMENT") at the
earliest practicable date to submit this Agreement, the Escrow Agreement, the
Merger and related matters for the consideration and approval of the ESI
Shareholders, which approval will be recommended by ESI's Board of Directors and
management. Such Information Statement will contain information, and will be
solicited, in compliance with applicable law. ESI will use its reasonable best
efforts to cause, as soon as practicable after the date of this Agreement,
certain shareholders of ESI, who, together with the affiliates executing
affiliates agreements pursuant to Section 4.17, hold an aggregate amount of
greater than a majority of ESI's capital stock, to execute agreements in the
form of Exhibit 4.5 agreeing to vote in favor of the Merger.
4.6 INFORMATION STATEMENT. Subject to Section 4.7, ESI will
send to its shareholders in a timely manner, for the purpose of considering and
voting upon the Merger, the Notice Materials. ESI will promptly provide all
information relating to its business and operations reasonably necessary for
inclusion in the Notice Materials to satisfy all requirements of applicable
state and federal securities laws. ESI shall be solely responsible for any
statement, information or omission in the Notice Materials relating to it or its
affiliates based upon written information furnished by it.
4.7 PREPARATION OF PERMIT APPLICATION, HEARING REQUEST AND
HEARING NOTICE. As promptly as practicable after the date hereof, Macromedia
and ESI shall prepare and file with the California Commissioner of Corporations
the documents required by the California Corporate Securities Law of 1968, as
amended (the "CCSL"), pursuant to Sections 25121 and 25142 of the CCSL, in
connection with the Merger. Each of Macromedia and ESI shall use its best
efforts to have the Permit Application, Hearing Request and Hearing Notice
declared effective under the CCSL as promptly as practicable after such filing.
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4.8 REGULATORY APPROVALS. ESI will execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Macromedia may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. ESI will use
all reasonable efforts to obtain or assist Macromedia in obtaining all such
authorizations, approvals and consents.
4.9 NECESSARY CONSENTS. ESI will use its reasonable best
efforts to obtain such written consents and take such other actions as may be
necessary or appropriate for ESI, in addition to those set forth in Section 4.5,
to facilitate and allow the consummation of the transactions provided for herein
and to facilitate and allow Macromedia to carry on ESI's business after the
Closing Date (as defined in Section 6.1 hereof).
4.10 LITIGATION. ESI will notify Macromedia in writing promptly
after learning of any action, suit, proceeding or investigation by or before any
court, board or governmental agency, initiated by or against ESI or threatened
against it.
4.11 NO OTHER NEGOTIATIONS. From the date hereof until the
termination of this Agreement (provided such termination is not in breach of
this Agreement) or the consummation of the Merger, ESI will not, and will not
authorize any officer, director, employee or affiliate of ESI, or any other
person, on its behalf, directly or indirectly, to (a) solicit, facilitate,
discuss or encourage any offer, inquiry or proposal received from any party
other than Macromedia, concerning the possible disposition of all or any
substantial portion of ESI's business, assets or capital stock by merger, sale
or any other means or to otherwise solicit, facilitate, discuss or encourage any
such disposition (other than the Merger), or (b) provide any confidential
information to or negotiate with any third party other than Macromedia in
connection with any offer, inquiry or proposal concerning any such disposition.
ESI will immediately notify Macromedia of any such offer, inquiry or proposal.
4.12 ACCESS TO INFORMATION. Until the Closing Date (as defined
in Section 6.1 hereof) and subject to the terms and conditions hereof relating
to the confidentiality and use of confidential and proprietary information, ESI
will provide Macromedia and its agents with reasonable access, during regular
business hours, to the files, books, records and offices of ESI, including,
without limitation, any and all information relating to ESI taxes, commitments,
contracts, leases, licenses, real, personal and intangible property, and
financial condition, and specifically including, without limitation, access to
ESI source code reasonably necessary for Macromedia to complete its diligence
review of the ESI products and technology. ESI will cause its accountants to
cooperate with Macromedia and its agents in making available all financial
information reasonably requested, including without limitation the right to
examine all working papers pertaining to all financial statements prepared or
audited by such accountants.
4.13 SATISFACTION OF CONDITIONS PRECEDENT. ESI will use all
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and ESI will use all reasonable
efforts to cause the transactions provided for in this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that
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may be necessary or reasonably required on its part in order to effect the
transactions provided for herein.
4.14 BLUE SKY LAWS. ESI shall use its best efforts to assist
Macromedia to the extent necessary to comply with the securities and Blue Sky
laws of all jurisdictions applicable in connection with the Merger.
4.15 NOTIFICATION OF EMPLOYEE PROBLEMS. ESI will promptly
notify Macromedia if any of ESI's officers becomes aware that any of the key
employees listed in ITEM 2.15.2 intends to leave its employ.
4.16 TERMINATION OF EMPLOYEE PLANS. The Employee Plans shall,
to the extent practicable, be maintained in effect by Macromedia or Newco until
the Continuing Employees (as defined below) are allowed to participate in such
similar benefit plans or benefit arrangements of Macromedia; provided, however,
that ESI shall take all corporate actions necessary to terminate on the
Effective Time all Employee Plans maintained by it, unless otherwise
specifically agreed to by Macromedia, and that Macromedia shall provide to
employees of ESI on the Effective Time, similar benefit plans and benefit
arrangements that are maintained and in effect by Macromedia or Newco.
Macromedia shall use reasonable efforts to attempt to ensure that: (a) to the
extent practicable, any pre-existing condition limitations contained in such
health plans and health benefit arrangements for any Continuing Employee who
would be deemed under such health plans and health benefit arrangements to have
a disqualifying pre-existing condition are waived, to the extent such condition
was covered by a plan immediately prior to the Effective Time (provided that, in
the case of disability and life insurance plans, such Continuing Employee is
actively at work and is not hospitalized or on disability leave as of the
Effective Time), and (b) to the extent practicable, such benefit plans and
benefit arrangements give full credit to each Continuing Employee for such
Continuing Employee's period of service with ESI prior to the Effective Time for
all purposes for which such service was recognized under any of the Employee
Plans prior to the Effective Time. For purposes of this 4.16, "Continuing
Employee" shall mean any employee of ESI prior to the Effective Time who
continues as an employee of Macromedia or Newco (or, if Newco merges into ESI,
ESI) after the Effective Time.
4.17 ESI AFFILIATES AGREEMENTS. To help ensure that the
issuance of Macromedia Common Stock in the Merger complies with the Securities
Act and that the Merger will be accounted for as a "pooling of interests,"
concurrently with the execution of this Agreement ESI will deliver to Macromedia
a letter identifying all persons who are, in ESI's reasonable judgment,
"affiliates" of ESI at the time this Agreement is executed (the "ESI
AFFILIATES"), including, but not limited to, Joe Schoendorf, Michael Bergeron,
Kirk Cunningham, Jean Dunn, Keith Fox, Peter Hirshberg, John Kernan, Robert
Jaffe and Eileen Richardson. ESI will provide Macromedia with all information
and documents needed to evaluate this list for compliance with securities laws.
ESI will cause each of its affiliates to deliver to Macromedia, a written
agreement (the "ESI AFFILIATES AGREEMENT"), in the form of EXHIBIT 4.17,
providing (a) that such person (i) has not made and will not make any
disposition of ESI Common Stock in the 30-day period prior to the Effective
Time, (ii) will not offer to sell, sell or otherwise dispose of any of the
Macromedia Common Stock issued to such person in the Merger in violation of the
Securities Act and Rule 145 promulgated thereunder, as they may be amended from
time to time, and (iii) will make no disposition of Macromedia Common Stock
after the Effective Time until Macromedia shall have
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publicly released a report including the combined financial results of
Macromedia and ESI for a period of at least 30 days of combined operations of
Macromedia and ESI; and (b) such other representations as may be reasonably
requested by Macromedia, its accountants or its attorneys for the purpose of
ensuring "pooling of interests" accounting.
4.18 ESI DISSENTING SHARES. As promptly as practicable after
the date the Information Statement is distributed to the ESI Shareholders and
prior to the Closing Date, ESI shall furnish Macromedia with the name and
address of each ESI Shareholder who has up to such time dissented and the number
of shares owned by such ESI Shareholders (the "DISSENTING SHARES").
4.19 POOLING ACCOUNTING. ESI shall use its best efforts to
cause the business combination to be effected by the Merger to be accounted for
as a pooling of interests. ESI shall use its best efforts to cause the ESI
Affiliates not to take any action that would adversely affect the ability of
Macromedia to account for the business combination to be effected by the Merger
as a pooling of interests.
4.20 EMPLOYMENT AGREEMENTS. Jorge Taylor, John Albano, David
Halbakken, Russ Helfand and Amit Kishnani shall each execute and deliver to
Macromedia employment agreements substantially in the form of EXHIBIT 4.20
attached hereto (the "EMPLOYMENT AGREEMENTS"), which agreements shall become
effective at the Effective Time.
4.21 ESCROW AGREEMENT. ESI and Peter Hirshberg, as
representative of the ESI Shareholders (the "REPRESENTATIVE") shall have
executed and delivered the Escrow Agreement, which agreement shall become
effective at the Effective Time.
5. MACROMEDIA PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Macromedia covenants to and agrees with ESI as follows:
5.1 ACCESS TO INFORMATION. Until the Closing Date (as defined
in Section 6.1 hereof) and subject to the terms and conditions hereof relating
to confidentiality and use of confidential and proprietary information,
Macromedia will provide ESI and its agents with reasonable access to its
management and officers and material information regarding Macromedia,
including, without limitation, material information relating to Macromedia's
business, intellectual property and financial condition. Macromedia will cause
its accountants to cooperate with ESI's accountants in making available all
financial information reasonably requested to evaluate Macromedia's financial
package.
5.2 SATISFACTION OF CONDITIONS PRECEDENT. Macromedia will use
all reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 7, and Macromedia will use all
reasonable efforts to cause the transactions provided for in this Agreement to
be consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions provided for herein.
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5.3 REGULATORY APPROVALS. Macromedia will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which ESI may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Macromedia
will use all reasonable efforts to obtain all such authorizations, approvals and
consents.
5.4 MACROMEDIA AFFILIATES AGREEMENTS. To facilitate the
treatment of the Merger for accounting purposes as a "pooling of interests,"
Macromedia will use all reasonable efforts to cause each of its affiliates
("MACROMEDIA AFFILIATES") to execute and deliver to Macromedia, on or prior to
Closing, a written agreement (the "MACROMEDIA AFFILIATE AGREEMENT") in
substantially the form of EXHIBIT 5.4 providing that such person has not made
and will not make any disposition (subject to certain exceptions) of Macromedia
Common Stock (a) in the 30-day period prior to the Effective Time or (b) after
the Effective Time until Macromedia shall have publicly released its first
report of financial statements that include the combined financial results of
Macromedia and ESI for a period of at least 30 days of combined operations.
5.5 PREPARATION OF PERMIT APPLICATION, HEARING REQUEST AND
HEARING NOTICE. As promptly as practicable after the date hereof, Macromedia,
with ESI's assistance, shall prepare and file with the California Commissioner
of Corporations the documents required by the CCSL, pursuant to Sections 25121
and 25142 of the CCSL, in connection with the Merger. Macromedia, with ESI's
assistance, shall use its best efforts to have the Permit Application, Hearing
Request and Hearing Notice declared effective under the CCSL as promptly as
practicable after such filing.
5.6 INTERIM LOAN FOR PAYROLL AND EMPLOYEE BENEFIT EXPENSES. In
the event that (i) the Merger does not close by August 15, 1999, (ii) ESI has
not breached any covenant contained in Section 4.1, 4.2 or 4.3 of the Agreement
and (iii) ESI is unable to pay its payroll and employee benefit expenses with
available cash, Macromedia will loan to ESI, on a weekly basis, until the
earlier of (x) the Closing Date or (y) the termination of the Merger pursuant to
Section 9 hereof, an amount of cash sufficient to meet ESI's outstanding payroll
and employee benefit expenses (as determined jointly by Macromedia and ESI) at
prevailing market interest rates and terms. Upon the Closing of the Merger, any
amounts owed under such loans by ESI to Macromedia shall be forgiven.
6. CLOSING MATTERS
6.1 THE CLOSING. Subject to termination of this Agreement as
provided in Section 9 below, the closing of the transactions provided for herein
(the "CLOSING") will take place at the offices of Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306 at 10:00 a.m., Pacific Time on or
before August 31, 1999, or, if all conditions to Closing have not been satisfied
or waived by such date, such other place, time and date as ESI and Macromedia
may mutually select (the "CLOSING DATE"). Prior to or concurrently with the
Closing, the Agreement of Merger and such officers' certificates or other
documents as may be required to effectuate the Merger will be filed in the
office of the California Secretary of State and the Certificate of Merger and
such certificates of approval or other documents as may be required to
effectuate the Merger will be filed in the office of the Delaware Secretary of
State. Accordingly, the Merger will become effective at the Effective Time.
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6.2 EXCHANGE OF CERTIFICATES.
6.2.1 As of the Effective Time, all shares of ESI Common
Stock that are outstanding immediately prior thereto will, by virtue of the
Merger and without further action, cease to exist, and all such shares (other
than dissenters' shares) will be converted into the right to receive from
Macromedia the number of shares of Macromedia Common Stock determined as set
forth in Section 1.1, subject to Section 1.2 and 1.3 hereof.
6.2.2 At and after the Effective Time, each certificate
representing outstanding shares of ESI Common Stock will represent the number of
shares of Macromedia Common Stock into which such shares of ESI Common Stock
have been converted, and such shares of Macromedia Common Stock will be deemed
registered in the name of the holder of such certificate. As soon as
practicable after the Effective Time, Macromedia will prepare and mail a letter
of transmittal in a form reasonably acceptable to ESI requesting each holder of
shares of ESI Common Stock to surrender (a) the certificates for such shares
(the "ESI CERTIFICATES") to Macromedia for cancellation or (b) an affidavit of
lost certificate (or nonissued) and a bond in form reasonably satisfactory to
Macromedia (a "BOND") and to execute and deliver representations as to such ESI
Shareholders' valid and marketable title to such holder's shares of ESI Common
Stock (the "ESI SHAREHOLDER REPRESENTATIONS"). Promptly following the Effective
Time and receipt of the ESI Certificates and/or the Bonds and the ESI
Shareholder Representations, Macromedia will cause its transfer agent to issue
to such surrendering holder certificate(s) for the number of shares of
Macromedia Common Stock to which such holder is entitled pursuant to Section
1.1, subject to Section 1.2 hereof, less the shares of Macromedia Common Stock
deposited into escrow pursuant to Section 1.3 hereof, and Macromedia will
distribute any cash payable under Section 1.2.
6.2.3 All shares of Macromedia Common Stock (and, if
applicable, cash in lieu of fractional shares) delivered upon the surrender of
ESI Certificates in accordance with the terms hereof will be delivered to the
registered holder or placed in escrow with the Escrow Agent, as applicable.
After the Effective Time, there will be no further registration of transfers of
the shares of ESI Common Stock on the stock transfer books of ESI. If, after
the Effective Time, ESI Certificates are presented for transfer or for any other
reason, they will be canceled and exchanged and certificates therefor will be
delivered or placed in escrow as provided in this Section 6.2. Notwithstanding
anything herein to the contrary, except to the extent waived by Macromedia, any
ESI Certificate that is not properly submitted to Macromedia for exchange and
cancellation within three years after the Effective Time shall no longer
evidence ownership of or any right to receive shares of Macromedia Common Stock
and all rights of the holder of such ESI Certificate, with respect to the shares
previously evidenced by such ESI Certificate, shall cease.
6.2.4 Until ESI Certificates representing ESI Common Stock
outstanding prior to the Merger are surrendered pursuant to Section 6.2.2 above,
such certificates will be deemed, for all purposes, to evidence ownership of (a)
the number of shares of Macromedia Common Stock into which the shares of ESI
Common Stock will have been converted, subject to the obligation to place a
portion thereof in escrow as required hereby, and (b) if applicable, cash in
lieu of fractional shares.
6.3 ASSUMPTION OF WARRANTS AND OPTIONS. Within a reasonable
time period after the Effective Time, Macromedia will notify in writing each
holder of an ESI Option of: (i) the
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assumption of such ESI Options by Macromedia, (ii) the conversion of such ESI
Options into Macromedia Options, (iii) the number of shares of Macromedia
Common Stock that are subject to such Macromedia Options and (iv) the
exercise price of such Macromedia Options as determined pursuant to Section
1.1.2 hereof.
6.4 DISSENTING SHARES. Notwithstanding anything to the
contrary contained in this Agreement, any shares of ESI Common Stock that, as of
the Effective Time, are or may become "dissenting shares" within the meaning of
Section 1300(b) of the California Corporations Code shall not be converted into
or represent the right to receive Macromedia Common Stock in accordance with
Section 1.1.1 (or cash in lieu of fractional shares in accordance with
Section 1.2), and the holder or holders of such shares shall be entitled only to
such rights as may be granted to such holder or holders in Chapter 13 of the
California General Corporation Law; provided, however, that if the status of any
such shares as "dissenting shares," shall not be perfected, or if any such
shares lose their status as "dissenting shares," then, as of the latter of the
Effective Time or the time of the failure to perfect such status or the loss of
such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon surrender of the certificate or
certificates representing such shares) Macromedia Common Stock in accordance
with Section 1.1.1 (and cash in lieu of fractional shares in accordance with
Section 1.2).
7. CONDITIONS TO OBLIGATIONS OF ESI
ESI's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by ESI, but only in a writing signed on
behalf of ESI by its Chief Executive Officer or Chief Financial Officer):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Macromedia set forth in Section 3 shall be
true and accurate in every material respect on and as of the Closing Date with
the same force and effect as if they had been made at the Closing, and ESI shall
have received a certificate to such effect executed on behalf of Macromedia by
its Chief Executive Officer or Chief Financial Officer.
7.2 COVENANTS. Macromedia shall have performed and complied in
all material respects with all of its covenants contained in Section 5 on or
before the Closing Date, and ESI shall have received a certificate to such
effect executed on behalf of Macromedia by its Chief Executive Officer or Chief
Financial Officer.
7.3 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
7.4 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the Merger by
any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
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7.5 DOCUMENTS. ESI shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by ESI's legal counsel to consummate the transactions provided for
herein.
7.6 NO LITIGATION. No litigation or proceeding shall be
pending which will have the probable effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement.
7.7 OPINION OF MACROMEDIA'S COUNSEL. ESI shall have received
from Fenwick & West LLP, counsel to Macromedia, an opinion substantially in the
form of EXHIBIT 7.7.
7.8 PERMIT. The California Commissioner of Corporations shall
have issued a permit declaring the Permit Application, Hearing Request and
Hearing Notice with respect to the Merger effective.
7.9 EMPLOYMENT AGREEMENTS. Macromedia shall have executed and
delivered the Employment Agreements.
7.10 ESCROW AGREEMENT. Macromedia shall have executed and
delivered the Escrow Agreement.
8. CONDITIONS TO OBLIGATIONS OF MACROMEDIA
The obligations of Macromedia hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Macromedia, but only in a
writing signed on behalf of Macromedia by its Chief Executive Officer or Chief
Financial Officer):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of ESI set forth in Section 2 shall be true and
complete in all material respects as of the Closing with the same force and
effect as if they had been made at the Closing, and Macromedia shall have
received a certificate to such effect executed on behalf of ESI by its Chief
Executive Officer or Chief Financial Officer.
8.2 COVENANTS. ESI shall have performed and complied in all
material respects with all of its covenants contained in Section 4 on or before
the Closing and Macromedia shall have received a certificate to such effect
signed on behalf of ESI by its Chief Executive Officer or Chief Financial
Officer.
8.3 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
provided for in this Agreement.
8.4 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
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8.5 OPINION OF ESI'S COUNSEL. Macromedia shall have received
from Cooley Godward LLP, counsel to ESI, an opinion substantially in the form of
EXHIBIT 8.5, including, among other things, an opinion on the capitalization of
ESI.
8.6 REQUISITE APPROVALS. The principal terms of this
Agreement, the Agreement of Merger and the Certificate of Merger shall have been
approved and adopted by the written consent or vote of all the ESI Shareholders,
as required by applicable law and ESI's Articles of Incorporation and Bylaws and
by ESI's Board of Directors.
8.7 NO LITIGATION. No litigation or proceeding shall be
pending which will have the probable effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a Material Adverse Effect on ESI that has not been previously disclosed to
Macromedia herein.
8.8 DOCUMENTS. Macromedia shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Macromedia's legal counsel to provide for the continuation
in full force and effect of any and all material contracts and leases of ESI,
and for Macromedia to consummate the transactions contemplated hereby.
8.9 POOLING LETTER. Each of Macromedia and ESI shall have
received a letter from KPMG LLP and Ernst & Young LLP, respectively, regarding
that firm's concurrence with Macromedia's managements' and ESI's managements'
conclusions as to the appropriateness of pooling-of-interest accounting for the
Merger under Accounting Principles Board Opinion No. 16, if the Merger is
consummated in accordance with this Agreement; provided that the failure of KPMG
LLP to deliver such letter shall not constitute a failure of this condition if
KPMG LLP shall refuse to issue such letter because of actions taken by
Macromedia (unless with ESI's consent) between the signing of this Agreement and
the Closing Date.
8.10 ESCROW. Macromedia shall have received the Escrow
Agreement executed by ESI, the Representative and Chase Manhattan Bank and Trust
Company, N.A., as escrow agent.
8.11 EMPLOYMENT AGREEMENTS. Jorge Taylor, John Albano, David
Halbakken, Russ Helfand and Amit Kishnani will have executed and delivered to
Macromedia the Employment Agreements. In addition, at least five of the
following individuals will have accepted employment with Macromedia: Randy
Edmunds, Lawrence Teschmacher, Jarek Kloda, Charles Newman, Sam Mathews,
Justin Palm, John Darwell and Jim Ruehlin.
8.12 ESI AFFILIATES AGREEMENT. The ESI Affiliates named in
Section 4.17 hereof will have executed and delivered to Macromedia the ESI
Affiliates Agreements.
8.13 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have
been any Material Adverse Effect on ESI.
8.14 TERMINATION OF RIGHTS. Any registration rights, rights of
first refusal, rights to any liquidation preference, or redemption rights of any
ESI Shareholder shall have been terminated or waived as of the Closing.
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8.15 RESIGNATIONS. The directors of ESI in office immediately
prior to the Effective Time of the Merger shall have resigned as directors of
ESI effective as of the Effective Time of the Merger.
8.16 DISSENTING SHARES. The number of shares of ESI Common
Stock eligible to become Dissenting Shares shall not constitute more than 9% of
the total number of shares of ESI Common Stock outstanding immediately prior to
the Effective Time.
8.17 PERMIT. The California Commissioner of Corporations shall
have issued a permit declaring the Permit Application, Hearing Request and
Hearing Notice with respect to the Merger effective.
8.18 TERMINATION OF AGREEMENTS. All rights of the parties under
ESI's Amended and Restated Investors' Rights Agreement dated as of January 12,
1999 and ESI's Amended and Restated Co-Sale and Right of First Refusal Agreement
dated as of January 12, 1999 shall have terminated.
8A. MACROMEDIA POST-CLOSING COVENANTS
8A.1 ESI EMPLOYEES. Macromedia will use all reasonable efforts
to implement actions with respect to current ESI employees as set forth on
EXHIBIT 8A.1; provided, however, that Macromedia may make reasonable changes to
the parameters of the actions listed, not materially inconsistent therewith,
before the Closing Date.
8A.2 FORM S-8. Promptly after the Effective Time, to the extent
Macromedia Common Stock underlying Macromedia Options is not already registered
on a Form S-8 filed with the Securities and Exchange Commission, Macromedia will
cause a Form S-8 to be filed with the Securities and Exchange Commission to
register such Macromedia Common Stock (other than Macromedia Common Stock
underlying warrants).
8A.3 PAYMENT OF BROKER'S FEE. Macromedia will pay (or will
cause the surviving corporation to pay) the broker's fee of $450,000 listed on
EXHIBIT 8A.3 at the Closing Date or as soon as practicable thereafter.
9. TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger by
the shareholders of ESI:
(a) by the mutual written consent of Macromedia and ESI;
(b) Unless otherwise specifically provided herein or
agreed in writing by Macromedia and ESI, upon notice by either party, this
Agreement will be terminated if all the conditions to Closing have not been
satisfied or waived on or before August 31, 1999 (the "FINAL
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DATE") other than as a result of a breach of this Agreement by the terminating
party, or a breach by any of the affiliates of the terminating party of the
Affiliate Agreements.
(c) by ESI, if there has been a breach by Macromedia of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Macromedia, or if any representation of Macromedia will have
become untrue, in either case which has or can reasonably be expected to have a
material adverse effect on Macromedia and which Macromedia fails to cure within
a reasonable time, not to exceed thirty (30) days, after written notice thereof
(except that no cure period will be provided for a breach by Macromedia which by
its nature cannot be cured);
(d) by Macromedia, if there has been a breach by ESI of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of ESI, or if any representation of ESI will have become untrue, in
either case which has or can reasonably be expected to have a Material Adverse
Effect on ESI and which ESI fails to cure within a reasonable time not to exceed
thirty (30) days after written notice thereof (except that no cure period will
be provided for a breach by ESI which by its nature cannot be cured); or
(e) by either party, if a permanent injunction or other
order by any Federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable.
Any termination of this Agreement under this Section 9.1 will be
effective by the delivery of written notice of the terminating party to the
other party hereto.
9.2 CERTAIN CONTINUING OBLIGATIONS. Following any termination
of this Agreement pursuant to this Section 9, the parties hereto will continue
to perform their respective obligations under Section 11 but will not be
required to continue to perform their other covenants under this Agreement.
9.3 NON-SOLICITATION OF EMPLOYEES. For a period of six (6)
months following the termination of this Agreement pursuant to this Section 9
Macromedia will not directly or indirectly solicit away employees of ESI for its
own benefit or for the benefit of any other person or entity, and shall not in
any event hire or agree to hire any of such employees prior to the date that is
six (6) months following the termination of this Agreement pursuant to this
Section 9.
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
10.1 SURVIVAL OF REPRESENTATIONS.
10.1.1 REPRESENTATIONS OF ESI. All representations,
warranties and covenants of ESI contained in this Agreement will remain
operative and in full force and effect (but only as of the date they were made
and as of the date of Closing) after the Closing, regardless of any
investigation made by or on behalf of the parties to this Agreement; PROVIDED,
HOWEVER, that
(a) no claim for violations of representations
and warranties contained in Section 2.7 shall be made unless Macromedia gives
written notice to ESI no later than
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five business days after the issuance of Macromedia's press release regarding
its audited financial results for the fiscal year ending March 31, 2000.
(b) no claim for violations of representations
and warranties other than those contained in Section 2.7 shall be made unless
Macromedia gives written notice to ESI on or prior to twelve months after the
Closing; and
The applicable date after which claims are barred under
Section 10.1.1(a) or (b) shall be referred to as the "APPLICABLE EXPIRATION
DATE."
Except for the obligations of ESI under Section 11 below,
the representations, warranties and covenants of ESI contained in this Agreement
will terminate as of the termination of this Agreement in accordance with its
terms.
10.1.2 REPRESENTATIONS OF MACROMEDIA. Except for
Macromedia's obligations pursuant to Section 11 below, Macromedia's
representations, warranties and covenants contained in this Agreement will
terminate as of the termination of this Agreement in accordance with its terms
or, if the Closing occurs, such representations, warranties and covenants will
remain operative and in full force and effect after the Closing until the
termination of the Escrow as provided below.
10.2 ESI SHAREHOLDERS AGREEMENT TO INDEMNIFY.
10.2.1 INDEMNIFICATION BY ESI SHAREHOLDERS. Subject to
the limitations set forth in this Section 10.2, the ESI Shareholders, jointly
and severally (with respect to the Escrow Shares and any other assets held in
Escrow pursuant to the Escrow Agreement), will indemnify and hold harmless
Macromedia and its respective officers, directors, agents and employees, and
each person, if any, who controls or may control Macromedia within the meaning
of the Securities Act (hereinafter in this Section 10.2 referred to individually
as an "INDEMNIFIED PERSON" and collectively as "INDEMNIFIED PERSONS") from and
against any and all claims, demands, actions, causes of action, losses, costs,
damages, liabilities and expenses including, without limitation, reasonable
legal fees (collectively, "DAMAGES"):
(a) Arising out of any misrepresentation or breach of or
default in connection with any of the representations, warranties or covenants
given or made by ESI in this Agreement or any certificate, document or
instrument delivered by or on behalf of ESI pursuant hereto; or
(b) Resulting from any failure of any ESI Shareholder to
have good, valid and marketable title to the issued and outstanding ESI Common
Stock held by such shareholders, free and clear of all liens, claims, pledges,
options, adverse claims, assessments or charges of any nature whatsoever, or to
have full right, capacity and authority to vote such ESI Common Stock in favor
of the Merger and the other transactions contemplated by the Agreement of Merger
or Certificate of Merger.
10.2.2 LIMITATIONS. Except as provided under Section
10.2.3, this Section 10.2 sets forth the sole and exclusive remedies of the
Indemnified Persons under this Agreement following the Closing. The ESI
Shareholders shall not incur liability under Section 10.2.1, beyond the Escrow
Shares and any other assets deposited in escrow pursuant to the Escrow Agreement
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and the Indemnified Persons shall exercise their remedies only with respect to
the Escrow Shares and any other assets deposited in escrow pursuant to the
Escrow Agreement. The ESI Shareholders shall not have any liability under this
Section 10 until and except to the extent that the aggregate amount of Damages
exceeds $50,000. If the total amount of Damages exceeds $50,000, then the
Indemnified Persons shall be entitled to be indemnified against the full amount
of such Damages and not merely the portion of such Damages exceeding $50,000.
10.2.3 EXCEPTIONS TO LIMITATIONS. None of the provisions
of this Section 10 or of the Escrow Agreement shall in any manner limit the
liability or indemnification obligations of the ESI Shareholders with respect to
(i) claims of intentional misrepresentation or fraud, (ii) any criminal matters
or (iii) any claim concerning the title of any ESI Shareholder to the shares of
the ESI Common Stock or ESI Preferred Stock that are acquired by Macromedia
hereunder; provided, however, that with respect to clause (iii) above, the
Indemnified Persons may only make a claim against the particular ESI Shareholder
whose title is in question, and the Indemnified Persons must first exercise
their remedies with respect to such ESI Shareholder's pro rata portion of the
Escrow Shares before seeking additional damages from such ESI Shareholder.
10.2.4 SURVIVAL OF CLAIMS. Notwithstanding anything to
the contrary, if, prior to the expiration of a particular representation or
warranty, an Indemnified Person makes a claim for indemnification under either
this Agreement or the Escrow Agreement with respect to a misrepresentation or
breach of such representation or warranty, then the Indemnified Person's rights
to indemnification under this Section 10.2 for such claim shall survive any
expiration of such representation or warranty; provided such Indemnified Person
diligently pursues resolution of such claims.
10.2.5 INDEMNIFICATION PROCEDURES. Peter Hirshberg shall
act as the representative of the ESI Shareholders (the "REPRESENTATIVE") for
purposes of the Escrow Agreement and the indemnification provisions of this
Section 10.2, is duly authorized to be such Representative and may bind the ESI
Shareholders. Promptly after the receipt by Macromedia of notice or discovery
of any claim, damage or legal action or proceeding giving rise to
indemnification rights under this Agreement, Macromedia will give the
Representative and the Escrow Agent written notice of such claim, damage, legal
action or proceeding (a "CLAIM") in accordance with Section 3 of the Escrow
Agreement. Other procedures with respect to indemnification rights and
obligations hereunder shall be as set forth in the Escrow Agreement. Macromedia
may assert a claim at any time prior to the Applicable Expiration Date.
11. MISCELLANEOUS
11.1 GOVERNING LAW; DISPUTE RESOLUTION. The internal laws of
the State of California (irrespective of its choice of law principles) will
govern the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
Any dispute hereunder ("DISPUTE") shall be settled by arbitration in San
Francisco, California, and, except as herein specifically stated, in accordance
with the commercial arbitration rules of the American Arbitration Association
("AAA RULES") then in effect. However, in all events, these arbitration
provisions shall govern over any conflicting rules which may now or hereafter be
contained in the AAA Rules. Any judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction over the subject
matter thereof. The arbitrator
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shall have the authority to grant any equitable and legal remedies that would
be available in any judicial proceeding instituted to resolve a Dispute.
11.1.1 COMPENSATION OF ARBITRATOR. Any such arbitration
will be conducted before a single arbitrator who will be compensated for his or
her services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
11.1.2 SELECTION OF ARBITRATOR. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with California contract law; provided,
however, that such lawyers cannot work for a firm then performing services for
either party, that each party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may wish and that the
American Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. In the event
that the foregoing procedure is not followed, each party will choose one person
from the list of arbitrators provided by the American Arbitration Association
(provided that such person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the American
Arbitration Association the person who will act as the arbitrator.
11.1.3 PAYMENT OF COSTS. Macromedia and ESI or the ESI
Shareholders (to the extent of the Escrow Shares) after the Closing will bear
the expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator will award to the prevailing
party, as determined by the arbitrator, all costs, fees and expenses related to
the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party.
11.1.4 BURDEN OF PROOF. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
11.1.5 AWARD. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award.
11.1.6 TERMS OF ARBITRATION. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
11.1.7 EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any Dispute arising out of this Agreement.
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other
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party hereto. This Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of both parties
reflected hereon as signatories.
11.5 OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
11.6 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time before or after approval of the ESI shareholders.
11.7 NO WAIVER. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
11.8 EXPENSES. Each party will bear its respective expenses and
fees of its own accountants, attorneys, investment bankers and other
professionals incurred with respect to this Agreement and the transactions
contemplated hereby.
11.9 NOTICES. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as follows:
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(i) If to Macromedia:
Macromedia, Inc.
600 Townsend Street
San Francisco, CA 94103
Attention: Loren Hillberg, General Counsel
Phone: (415) 252-2000
Fax: (415) 626-0274
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Gordon K. Davidson
Phone: (650) 494-0600
Fax: (650) 494-1417
(ii) If to ESI:
ESI Software, Inc.
5927 Priestly Drive, Suite 101
Carlsbad, CA 92008
Attention: Peter Hirshberg
Phone: (760) 931-7171
Fax: (760) 431-5752
with a copy to:
Cooley Godward LLP
4365 Executive Drive
San Diego, CA 92121
Attention: M. Wainwright Fishburn
Phone: (619) 550-6000
Fax: (619) 453-3555
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.9.
11.10 CONSTRUCTION OF AGREEMENT. The language hereof will not be
construed for or against either party. A reference to an article, section or
exhibit will mean an article or section in, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this
Agreement are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
11.11 NO JOINT VENTURE. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between the
parties hereto. No party is by
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virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party will have the power to control
the activities and operations of any other, and the parties' status is, and
at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
11.12 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, partner or employee of any party hereto or any
other person or entity, unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
11.14 PUBLIC ANNOUNCEMENT. Macromedia and ESI will issue a press
release approved by both parties announcing the Merger as soon as practicable
following the execution of this Agreement. Macromedia may issue such press
releases, and make such other disclosures regarding the Merger, as it determines
to be required or appropriate under applicable securities laws or Nasdaq Stock
Market rules after reasonable consultation, where possible, with ESI. ESI will
not make any other public announcement or disclosure of the transactions
contemplated by this Agreement. ESI will take all reasonable precautions to
prevent any trading in the securities of Macromedia by officers, directors,
employees and agents of ESI, (a) having knowledge of any material information
regarding Macromedia provided hereunder, including, without limitation, the
existence of the transactions contemplated by this Agreement (the "MACROMEDIA
MATERIAL INFORMATION") until the information in question has been publicly
disclosed or (b) to the extent that such trading would adversely affect the
treatment of the Merger as a "pooling of interests" for accounting purposes.
11.15 CONFIDENTIALITY. Except as expressly authorized by
Macromedia in writing, ESI will not directly or indirectly divulge to any
person or entity or use any Macromedia Confidential Information, except as
required for the performance of its duties under this Agreement. Except as
expressly authorized by ESI in writing, Macromedia will not directly or
indirectly divulge to any person or entity or use any ESI Confidential
Information, except as required for the performance of its duties under this
Agreement. As used herein, "MACROMEDIA CONFIDENTIAL INFORMATION" consists of
(a) any information designated by Macromedia as confidential whether
developed by Macromedia or disclosed to Macromedia by a third party, (b) the
source code to any Macromedia software and any trade secrets relating to any
of the foregoing, and (c) any information relating to Macromedia's product
plans, product designs, product costs, product prices, product names,
finances, marketing plans, business opportunities, personnel, research
development or know-how. As used herein, "ESI CONFIDENTIAL INFORMATION"
consists of (x) any information designated by ESI as confidential whether
developed by ESI or disclosed to ESI by a third party, (y) the source code to
any ESI software, and any trade secrets related to any of the foregoing, and
(z) any information relating to ESI product plans, product designs, product
costs, product prices, product names, finances, marketing plan, business
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opportunities, personnel, research, development or know-how. "Macromedia
Confidential Information" and "ESI Confidential Information" also include the
terms and conditions of this Agreement, except as disclosed in accordance
with Section 11.14 above. The foregoing restriction will apply to
information about a party whether or not it was obtained from such party's
employees, acquired or developed by the other party during such other party's
performance under this Agreement, or otherwise learned. The foregoing
restrictions will not apply to information that (i) has become publicly known
through no wrongful act of the receiving party, (ii) has been rightfully
received from a third party authorized by the party which is the owner,
creator or compiler to make such disclosure without restriction, (iii) has
been approved or released by written authorization of the party which is the
owner, creator or compiler, or (iv) is being or has therefore been disclosed
pursuant to a valid court order after a reasonable attempt has been made to
notify the party which is the owner, creator or compiler.
11.16 TIME IS OF THE ESSENCE. The parties hereto acknowledge and
agree that time is of the essence in connection with the execution, delivery and
performance of this Agreement, and that they will each utilize their best
efforts to satisfy all the conditions to Closing on or before August 31, 1999.
11.17 ENTIRE AGREEMENT. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of trade inconsistent with any of the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MACROMEDIA, INC. ESI SOFTWARE, INC.
By: /s/ Betsey Nelson By: /s/ Peter Hirshberg
---------------------------------- --------------------------------
Betsey Nelson, Chief Financial Officer Peter Hirshberg, Chief Executive
Officer
DYNAMO ACQUISITION CORP. By: /s/ Joe Schoendorf
---------------------------------
Joe Schoendorf, Chairman of the
Board of Directors
By: /s/ Betsey Nelson
-----------------------------------
Betsey Nelson, President
[SIGNATURE PAGE TO AGREEMENT AND
PLAN OF REORGANIZATION]
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AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
This AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this
"AMENDMENT") is dated as of August 30, 1999, by and among Macromedia, Inc., a
Delaware corporation ("MACROMEDIA"), ESI Software, Inc., a California
corporation ("ESI"), and Dynamo Acquisition Corp., a Delaware corporation that
is a wholly-owned subsidiary of Macromedia ("NEWCO").
WHEREAS, Macromedia, ESI and Newco are parties to that certain
Agreement and Plan of Reorganization dated as of July 8, 1999 (the
"REORGANIZATION AGREEMENT") and desire to amend the Reorganization Agreement as
set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. AMENDMENTS TO REORGANIZATION AGREEMENT
A. Section 1.1 of the Reorganization Agreement is hereby amended by
deleting reference to the date August 31, 1999 appearing therein and inserting
the date September 30, 1999 in lieu thereof.
B. Section 6.1 of the Reorganization Agreement is hereby amended by
deleting reference to the date August 31, 1999 appearing therein and inserting
the date September 30, 1999 in lieu thereof.
C. Section 9.1(b) of the Reorganization Agreement is hereby amended by
deleting reference to the date August 31, 1999 appearing therein and inserting
the date September 30, 1999 in lieu thereof.
D. Section 11.16 of the Reorganization Agreement is hereby amended by
deleting reference to the date August 31, 1999 appearing therein and inserting
the date September 30, 1999 in lieu thereof.
2. GENERAL
A. GOVERNING LAW. This Amendment will be governed by and
interpreted according to the substantive laws of the State of California,
excluding that body of laws pertaining to conflict of laws.
B. ENTIRE AGREEMENT. This Amendment constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to the subject matter hereof.
C. COUNTERPARTS. This Amendment may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
MACROMEDIA, INC. ESI SOFTWARE, INC.
By: /s/ Betsey Nelson By: /s/ Peter Hirshberg
------------------------------- --------------------------------
Betsey Nelson, Chief Financial Officer Peter Hirshberg, Chief Executive
Officer
DYNAMO ACQUISITION CORP. By: /s/ Joe Schoendorf
--------------------------------
Joe Schoendorf, Chairman of the
Board of Directors
By: /s/ Betsey Nelson
--------------------------------
Betsey Nelson, President
[SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND
PLAN OF REORGANIZATION]
