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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: September 10, 1998
Date of earliest event reported: August 26, 1998
FVC.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-23305 77-0357037
(Commission File No.) (IRS Employer Identification No.)
3393 OCTAVIUS DRIVE
SUITE 102
SANTA CLARA, CA 95054
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (408) 567-7200
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 26, 1998, FVC.COM, Inc. (the "Registrant") completed the
acquisition of ICAST Corporation, a California corporation ("ICAST"). ICAST
was acquired pursuant to an Agreement and Plan of Merger and Reorganization,
dated as of July 30, 1998, among the Registrant, ICAST, FVC Acquisition Corp.
and certain shareholders of ICAST, pursuant to which a wholly-owned
subsidiary of the Registrant was merged with and into ICAST (the "Merger").
Concurrently with the Merger, (i) the former ICAST shareholders obtained the
right to receive, in total, approximately 408,806 shares of the Registrant's
Common Stock, (ii) 22,261 shares of the Registrant's Common Stock were
reserved for issuance upon exercise of ICAST options assumed by the
Registrant and (iii) 3,644 shares of the Registrant's Common Stock were
reserved for issuance upon exercise of ICAST warrants assumed by the
Registrant.
Enzo Torresi, a director and stockholder of the Registrant was, prior to
the Merger, Chairman of the Board of Directors, Chief Executive Officer and a
significant shareholder of ICAST. James R. Swartz, a director of the
Registrant was, prior to the Merger, a director of ICAST and is a general
partner of partnerships that are the general partners of various entities
that, collectively, were significant shareholders of ICAST prior to the
Merger. Entities affiliated with Mr. Swartz are also significant stockholders
of the Registrant.
The Merger is intended to qualify as a tax free reorganization and to be
accounted for as a purchase. ICAST is a developer of Internet Protocol (IP)
voice and video broadcast solutions. The Registrant intends to continue to
use the assets acquired to conduct such business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
a. It is impracticable to provide the required financial statements
for the acquisition of ICAST Corporation at the time this Form 8-K
is filed. The required financial statements will be filed by
amendment as soon as practicable.
b. It is impracticable to provide the required pro forma financial
information for the acquisition of ICAST Corporation at the time
this Form 8-K is filed. The required pro forma financial
information will be filed by amendment as soon as practicable.
c. EXHIBITS
2.1 Agreement and Plan of Merger and Reorganization among First
Virtual Corporation (now known as FVC.COM, Inc.), FVC
Acquisition Corp., ICAST Corporation and Certain Shareholders
of ICAST Corporation, dated as of July 30, 1998.
2.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FVC.COM, INC.
Dated: September 9, 1998 By: /s/ James O. Mitchell
-------------------------------------
James O. Mitchell
Vice President, Operations
and Chief Financial Officer
3.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
FIRST VIRTUAL CORPORATION,
a Delaware corporation;
FVC ACQUISITION CORP.,
a California corporation;
ICAST CORPORATION,
a California corporation;
and
CERTAIN SHAREHOLDERS OF ICAST CORPORATION
___________________________
Dated as of July 30, 1998
___________________________
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . 2
1.1 Merger of Merger Sub into the Company. . . . . . . . . . . . . 2
1.2 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time. . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation and Bylaws; Directors and
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . 3
1.6 Stock Options; Warrants. . . . . . . . . . . . . . . . . . . . 4
1.7 Closing of the Company's Transfer Books. . . . . . . . . . . . 6
1.8 Exchange of Certificates . . . . . . . . . . . . . . . . . . . 6
1.9 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Exchange of Common Stock . . . . . . . . . . . . . . . . . . . 8
1.11 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . 8
1.12 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 8
1.13 Further Action . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
DESIGNATED SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . 8
2.1 Due Organization; No Subsidiaries; Etc.. . . . . . . . . . . . 8
2.2 Articles of Incorporation and Bylaws; Records. . . . . . . . . 9
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . 9
2.4 Financial Statements.. . . . . . . . . . . . . . . . . . . . . 11
2.5 Absence of Changes.. . . . . . . . . . . . . . . . . . . . . . 11
2.6 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . 13
2.7 Bank Accounts; Receivables; Inventory. . . . . . . . . . . . . 13
2.8 Equipment; Leasehold.. . . . . . . . . . . . . . . . . . . . . 14
2.9 Proprietary Assets.. . . . . . . . . . . . . . . . . . . . . . 14
2.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 Compliance with Legal Requirements . . . . . . . . . . . . . . 18
2.13 Governmental Authorizations. . . . . . . . . . . . . . . . . . 18
2.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 19
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2.15 Employee and Labor Matters; Benefit Plans. . . . . . . . . . . 20
2.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 22
2.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.18 Related Party Transactions . . . . . . . . . . . . . . . . . . 23
2.19 Legal Proceedings; Orders. . . . . . . . . . . . . . . . . . . 23
2.20 Authority; Binding Nature of Agreement . . . . . . . . . . . . 24
2.21 Non-Contravention; Consents. . . . . . . . . . . . . . . . . . 24
2.22 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 25
2.23 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.24 Authority of Designated Shareholders; Binding Nature
of Agreements. . . . . . . . . . . . . . . . . . . . . . . . 26
2.25 Non-Contravention; Consents. . . . . . . . . . . . . . . . . . 26
2.26 Ability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.27 Investment Representations . . . . . . . . . . . . . . . . . . 27
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. . . . 28
3.1 SEC Filings; Financial Statements. . . . . . . . . . . . . . . 28
3.2 Authority; Binding Nature of Agreement . . . . . . . . . . . . 29
3.3 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . 29
3.4 Due Organization . . . . . . . . . . . . . . . . . . . . . . . 29
3.5 Non-Contravention; Consents. . . . . . . . . . . . . . . . . . 29
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND THE DESIGNATED
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1 Access and Investigation . . . . . . . . . . . . . . . . . . . 30
4.2 Operation of the Company's Business. . . . . . . . . . . . . . 30
4.3 Notification; Updates to Disclosure Schedule . . . . . . . . . 32
4.4 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . 33
5.1 Filings and Consents . . . . . . . . . . . . . . . . . . . . . 33
5.2 Company Shareholders' Meeting. . . . . . . . . . . . . . . . . 33
5.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . 33
5.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 33
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5.5 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . 33
5.6 Termination of Agreements. . . . . . . . . . . . . . . . . . . 34
5.7 FIRPTA Matters.. . . . . . . . . . . . . . . . . . . . . . . . 34
5.8 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.9 Promissory Notes.. . . . . . . . . . . . . . . . . . . . . . . 34
5.10 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . 34
5.11 Amendment to Articles of Incorporation . . . . . . . . . . . . 34
5.12 Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . 35
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND
MERGER SUB . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . 35
6.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . 35
6.3 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . 35
6.4 Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.5 Agreements and Documents.. . . . . . . . . . . . . . . . . . . 36
6.6 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . . . . . 37
6.7 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . . 37
6.8 No Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . 37
6.9 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.10 Amendment of the Notes . . . . . . . . . . . . . . . . . . . . 37
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY . . . . . . 37
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . 37
7.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . 37
7.3 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Termination Procedures . . . . . . . . . . . . . . . . . . . . 38
8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 39
SECTION 9. INDEMNIFICATION, ETC.. . . . . . . . . . . . . . . . . . . . . 39
9.1 Survival of Representations, Etc.. . . . . . . . . . . . . . . 39
9.2 Indemnification by Designated Shareholders . . . . . . . . . . 39
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9.3 Threshold; Ceiling . . . . . . . . . . . . . . . . . . . . . . 40
9.4 Satisfaction of Indemnification Claim. . . . . . . . . . . . . 40
9.5 No Contribution. . . . . . . . . . . . . . . . . . . . . . . . 40
9.6 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.7 Defense of Third Party Claims. . . . . . . . . . . . . . . . . 41
9.8 Exercise of Remedies by Indemnitees Other Than
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 42
10.1 Designated Shareholders' Agent . . . . . . . . . . . . . . . . 42
10.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 43
10.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 43
10.4 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 44
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 45
10.7 Time of the Essence. . . . . . . . . . . . . . . . . . . . . . 45
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 45
10.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 45
10.12 Remedies Cumulative; Specific Performance. . . . . . . . . . . 45
10.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.16 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . 46
10.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 46
10.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 46
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iv.
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Exhibit A - Designated Shareholders
Exhibit B - Certain definitions
Exhibit C - Form of Amended and Restated Articles of Incorporation
of Surviving Corporation
Exhibit D - Form of Noncompetition Agreement (Enzo Torresi)
Exhibit E - Form of Release
Exhibit F - Form of legal opinion of Fenwick & West
Exhibit G - Form of Escrow Agreement
Exhibit H - Form of Offer Letter (Vinay Kumar)
<PAGE>
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of July 30, 1998, by and among: FIRST VIRTUAL
CORPORATION, a Delaware corporation ("Parent"); FVC ACQUISITION CORP., a
California corporation and a wholly owned subsidiary of Parent ("Merger
Sub"); ICAST CORPORATION, a California corporation (the "Company"); and the
parties identified on EXHIBIT A (the "Designated Shareholders"). Certain
other capitalized terms used in this Agreement are defined in EXHIBIT B.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the California
General Corporation Law (the "Merger"). Upon consummation of the Merger, Merger
Sub will cease to exist, and the Company will become a wholly owned subsidiary
of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a purchase.
C. This Agreement has been approved by the respective boards of directors
of Parent, Merger Sub and the Company.
D. The Designated Shareholders own a total of 2,120,000 shares of the
Common Stock (with no par value) of the Company ("Company Common Stock"); a
total of 2,400,000 shares of the Series A Preferred Stock of the Company
("Series A Preferred Stock"), constituting all of the outstanding shares of
Series A Preferred Stock of the Company; and a total of 1,946,482 shares of the
Series B Preferred Stock of the Company, constituting all of the outstanding
shares of Series B Preferred Stock of the Company (the "Series B Preferred
Stock," together with the Series A Preferred Stock, the "Company Preferred
Stock"), in the respective amounts set forth on EXHIBIT A. Contemporaneously
with the execution and delivery of this Agreement, each Designated Shareholder
is executing and delivering to Parent a Shareholder Agreement of even date
herewith.
E. This recital E is an acknowledgement of the parties based upon the
assumptions set forth herein and the terms of this Agreement and is not a
covenant by any party hereto. Assuming: (i) the representations and
warranties set forth in Section 2.3 are true and correct in all respects as
of the Effective Time as if made at the Effective Time; (ii) each shareholder
of the Company is the beneficial and record holder of the number of shares of
Company Common Stock and Company Preferred Stock set forth opposite such
shareholder's name on EXHIBIT A-1 at the Effective Time; and (iii) the
Effective Time occurs on August 14, 1998, and subject to Section 1.9, Section
6 and Section 8, at the Effective Time each shareholder of the Company would
be entitled to receive the number of shares of Parent Common Stock set
1.
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forth opposite such shareholder's name on EXHIBIT A-1. The accuracy of the
foregoing assumptions is within the knowledge of the Company and is not
within the knowledge of Parent. If the foregoing assumptions are not all
accurate in all respects, then the information on EXHIBIT A-1 may not be
accurate.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the California General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, Five Palo Alto Square, Palo Alto, California 94306 at
10:00 a.m. on August 14, 1998, or at such other time and date on the period from
July 30, 1998 through September 30, 1998 as Parent may designate upon not less
than five days' prior notice to the Company (the "Scheduled Closing Time").
(The date on which the Closing actually takes place is referred to in this
Agreement as the "Closing Date.") Contemporaneously with or as promptly as
practicable after the Closing, a properly executed agreement of merger
conforming to the requirements of Chapter 11 of the California General
Corporation Law shall be filed with the Secretary of State of the State of
California. The Merger shall become effective at the time such agreement of
merger is filed with and accepted by the Secretary of State of the State of
California (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated immediately after the Effective Time to conform to
EXHIBIT C;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated immediately after the Effective Time to conform to the Bylaws of Merger
Sub as in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be Ralph Ungermann (who shall be the
Chief Executive Officer and a director of the Surviving Corporation) and James
Mitchell (who shall be the Chief Financial Officer, Secretary and a director of
the Surviving Corporation).
2.
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1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(c), 1.8(c) and 1.9, at the Effective
Time, by virtue of the Merger and without any further action on the part of
Parent, Merger Sub, the Company or any shareholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive
the "Applicable Fraction" (as defined in Section 1.5(b)(i)) of a share of
the common stock (par value $.01 per share) of Parent ("Parent Common
Stock");
(ii) each share of Series A Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be converted into
the right to receive the sum of (A) the fraction of a share of Parent
Common Stock (1) having a numerator equal to $0.25 (representing the
"Liquidation Preference" of each share of Series A Preferred Stock under
the Company's Articles of Incorporation), and (2) having a denominator
equal to the Designated Parent Stock Price (as defined in Section
1.5(b)(iv)) and (B) the Applicable Fraction of a share of Parent Common
Stock; and
(iii) each share of Series B Preferred Stock (if any)
outstanding immediately prior to the Effective Time shall be converted into
the right to receive the sum of (A) the fraction of a share of Parent
Common Stock (1) having a numerator equal to the sum of (A) $1.404 PLUS (B)
$0.0001539 for each day from (and excluding) April 4, 1998 to (and
including) the date on which the Effective Time occurs (representing the
"Liquidation Preference" of each share of Series B Preferred Stock under
the Company's Articles of Incorporation), and (2) having a denominator
equal to the Designated Parent Stock Price; and (B) the Applicable Fraction
of a share of Parent Common Stock;
(iv) each share of the common stock (with no par value) of
Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
(b) For purposes of this Agreement:
(i) The "Applicable Fraction" shall be the fraction: (A)
having a numerator equal to the amount by which (1) the result of the
multiplication of 408,806 by the Designated Parent Stock Price (as defined
in Section 1.5(b)(iv)) exceeds (2) the Aggregate Preferred Stock
Liquidation Preference (as defined in Section 1.5(b)(ii)); and (B) having a
denominator equal to the amount determined by multiplying (1) the Company
Share Amount (as defined in Section 1.5(b)(iii)) BY (2) the Designated
Parent Stock Price.
(ii) The "Aggregate Preferred Stock Liquidation Preference"
shall be the sum of (1) the amount determined by multiplying (A) $0.25
(representing the "Liquidation Preference" of each share of Series A
Preferred Stock under the Company's Articles of Incorporation) BY (B) the
aggregate number of shares of Series A Preferred Stock outstanding
immediately prior to the Effective Time (excluding any shares of Series A
Preferred Stock held by Parent) and (2) the amount determined by
multiplying
3.
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(A) the sum of (1) $1.404 PLUS (2) $0.0001539 for each day from (and
excluding) April 4, 1998 to (and including) the date on which the
Effective Time occurs (representing the "Liquidation Preference" of each
share of Series B Preferred Stock under the Company's Articles of
Incorporation) BY (B) the aggregate number of shares of Series B
Preferred Stock outstanding immediately prior to the Effective Time.
(iii) The "Company Share Amount" shall be the difference of:
(A) the sum of the aggregate number of shares of Company Common Stock and
Company Preferred Stock outstanding immediately prior to the Effective Time
(including any such shares that are subject to a repurchase option or risk
of forfeiture under any restricted stock purchase agreement or other
agreement); LESS (B) 348,228 shares of Series A Preferred Stock.
(iv) The "Designated Parent Stock Price" shall be $14.175
(which number represents the average of the closing sale prices of a share
of Parent Common Stock as reported on the Nasdaq National Market System for
each of the five consecutive trading days immediately preceding the date of
this Agreement).
(c) At the Effective Time, by virtue of the Merger and without any
further action on the part of Parent, Merger Sub, the Company or any shareholder
of the Company:
(i) any shares of Company Common Stock and Company Preferred
Stock then held by the Company or any subsidiary of the Company (or held in
the Company's treasury) shall be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor; and
(ii) any shares of Company Common Stock and Company Preferred
Stock then held by Parent or Merger Sub, or any other subsidiary of Parent,
shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(d) Prior to the Effective Time, the Company shall, in accordance
with Section 5.13, repurchase any shares of Company Common Stock or Company
Preferred Stock outstanding immediately prior to the Effective Time which are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition ("Unvested Shares") under any applicable restricted stock purchase
agreement or other agreement with the Company (each, a "Repurchase Agreement").
1.6 STOCK OPTIONS; WARRANTS.
(a) At the Effective Time, all rights with respect to Company Common
Stock under each option to purchase Company Common Stock then outstanding (the
"Company Options") under the 1996 Stock Option Plan (the "Company Plan") shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such Company Option in accordance with the terms (as in
effect as of the date of this Agreement) of the Company Plan and the stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Company Option assumed by Parent may be exercised solely for shares of
Parent Common Stock, (ii) the number of shares of Parent Common Stock subject to
each
4.
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such Company Option shall be equal to the number of shares of Company Common
Stock subject to such Company Option immediately prior to the Effective Time
multiplied by the Applicable Fraction, rounding down to the nearest whole
share, (iii) the per share exercise price under each such Company Option
shall be adjusted by dividing the per share exercise price under such Company
Option by the Applicable Fraction, rounding up to the nearest cent and (iv)
any restriction on the exercise of any such Company Option shall continue in
full force and effect and the term, exercisability, vesting schedule and
other provisions of such Company Option shall otherwise remain unchanged;
PROVIDED, HOWEVER, that each Company Option assumed by Parent in accordance
with this Section 1.6 shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock dividend,
reverse stock split, reclassification, recapitalization or other similar
transaction subsequent to the Effective Time.
(b) Prior to the Effective Time, the Company shall cause all rights
with respect to warrants to purchase Company Common Stock and Company Preferred
Stock then outstanding (the "Company Warrants") to be fully exercised or
terminated, such that the warrants shall be without further legal force or
effect, except for the Company Warrant held by Mr. Seedman (the "Seedman
Warrant") and the Company Warrant held by Comdisco, Inc. (the "Comdisco
Warrant"). At the Effective Time:
(i) the Seedman Warrant shall be converted into and become
rights with respect to Parent Common Stock, and Parent shall assume the Seedman
Warrant in accordance with its terms (as in effect as of the date of this
Agreement). From and after the Effective Time, (i) the Seedman Warrant may be
exercised solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to the Seedman Warrant shall be equal to the number
of shares of Company Common Stock subject to the Seedman Warrant immediately
prior to the Effective Time multiplied by the Applicable Fraction, rounding down
to the nearest whole share, and (iii) the per share exercise price under the
Seedman Warrant shall be adjusted by dividing the per share exercise price under
the Seedman Warrant by the Applicable Fraction and rounding up to the nearest
cent; PROVIDED, HOWEVER, that the Seedman Warrant shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, reverse stock split, reclassification, recapitalization
or other similar transaction subsequent to the Effective Time; and
(ii) the Comdisco Warrant shall be converted into and become
rights with respect to Parent Common Stock, and Parent shall assume the Comdisco
Warrant in accordance with its terms (as in effect as of the date of this
Agreement). From and after the Effective Time, (i) the Comdisco Warrant may be
exercised solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to the Comdisco Warrant shall be equal to the number
of shares of Parent Common Stock that a Person, holding a number of shares of
Series B Preferred Stock equal to the number of shares of Series B Preferred
Stock subject to the Comdisco Warrant would have been entitled to receive in the
Merger, and (iii) the per share exercise price under the Comdisco Warrant shall
be adjusted by dividing the per share exercise price under the Comdisco Warrant
by the sum of (1) the quotient obtained by dividing (A) the sum of (x) $1.404
PLUS (y) $0.0001539 for each day from (and excluding) April 4, 1998 to (and
including) the date on which the Effective Time occurs, by (B) the Designated
Parent Stock Price; PLUS (2) the Applicable Fraction; PROVIDED, HOWEVER, that
the Comdisco Warrant
5.
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shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction subsequent to
the Effective Time.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(a) As soon as practicable after the Effective Time, Parent will send
to the holders of Company Stock Certificates (i) a letter of transmittal in
customary form and containing such provisions as Parent may reasonably specify,
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for certificates representing Parent Common Stock.
Upon surrender of a Company Stock Certificate to Parent for exchange, together
with a duly executed letter of transmittal and such other documents as may be
reasonably required by Parent, the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of this Section 1 (and cash in lieu of any
fractional share of Parent Common Stock), and the Company Stock Certificate so
surrendered shall be canceled. Until surrendered as contemplated by this
Section 1.8, each Company Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive upon such surrender a
certificate representing shares of Parent Common Stock (and cash in lieu of any
fractional share of Parent Common Stock) as contemplated by this Section 1. If
any Company Stock Certificate shall have been lost, stolen or destroyed, Parent
may, in its discretion and as a condition precedent to the issuance of any
certificate representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional share shall be paid to any such holder, until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.8
(at which time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
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(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
Designated Parent Stock Price.
(d) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "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 Parent Common Stock in accordance with Section
1.5 (or cash in lieu of fractional shares in accordance with Section 1.8(c)),
and the holder or holders of such shares shall be entitled only to such rights
as may be granted to such holder or holders in Chapter 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
shall lose their status as "dissenting shares," then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss of
such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in accordance with
Section 1.5 (and cash in lieu of fractional shares in accordance with Section
1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Chapter
13 of the California General Corporation Law and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to the
California General Corporation Law, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand unless Parent shall have
consented in writing to such payment or settlement offer.
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1.10 EXCHANGE OF COMMON STOCK. Subject to Section 1.5(d) hereof, any
employee of the Company employed by Parent immediately following the Effective
Time and not retained by Parent for thirty days following the Effective Time may
exchange such employee's shares of Parent Common Stock issued in the Merger for
cash, at a price per share equal to the Designated Parent Stock Price; provided
that (a) such employee must receive a written notice of termination by Parent
within such 30-day period; (b) such employee must notify Parent, in a writing
received by Parent within five (5) days of such employee's receipt of the
involuntary termination notice referenced to in Section 1.10(a) hereof, of such
employee's desire to receive cash for such employee's shares of Parent Common
Stock; and (c) such employee must deliver the valid certificate representing the
shares of Parent Common Stock received in the Merger and must execute and
deliver such instruments as are reasonably requested by Parent in connection
with this Section 1.10.
1.11 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.12 ACCOUNTING TREATMENT. For accounting purposes, the Merger is intended
to be treated as a purchase.
1.13 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE DESIGNATED
SHAREHOLDERS
The Company and the Designated Shareholders represent and warrant, to
and for the benefit of the Indemnitees, as follows:
A. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY.
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) to perform
its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the name "ICAST Corporation."
8.
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(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company. The Company is in good standing as a foreign corporation in
each of the jurisdictions identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of the Company's board of directors, (ii) the names of the
members of each committee of the Company's board of directors, and (iii) the
names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1 of the Disclosure
Schedule, the Company has never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity interest in, any Entity.
The Company has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. The Company has not guaranteed and is
not responsible or liable for any obligation of any of the Entities in which it
owns or has owned any equity interest.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (a) the Company's articles
of incorporation and bylaws, including all amendments thereto; (b) the stock
records of the Company; and (c) except as set forth in Part 2.2 of the
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There have
been no formal meetings or other proceedings of the shareholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not fully reflected in such minutes or other records.
There has not been any violation of any of the provisions of the Company's
articles of incorporation or bylaws, and the Company has not taken any action
that is inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
20,000,000 shares of Common Stock (with no par value), of which 2,421,250 shares
have been issued and are outstanding as of the date of this Agreement; and (ii)
6,000,000 shares of Preferred Stock (with no par value), 2,400,000 of which have
been designated "Series A Preferred Stock," of which 2,400,000 shares have been
issued and are outstanding as of the date of this Agreement and 1,965,001 of
which have been designated "Series B Preferred Stock," of which 1,946,482 shares
have been issued and are outstanding as of the date of this Agreement. Each
outstanding share of Series A Preferred Stock and Series B Preferred Stock is
convertible into one share of
9.
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Company Common Stock. All of the outstanding shares of Company Common Stock,
Series A Preferred Stock and Series B Preferred Stock have been duly
authorized and validly issued, and are fully paid and non-assessable. Part
2.3 of the Disclosure Schedule provides an accurate and complete description
of the terms of each repurchase option which is held by the Company and to
which any of such shares is subject.
(b) The Company has reserved 2,690,000 shares of Company Common Stock
for issuance under its 1996 Stock Option Plan, of which options to purchase
1,159,333 shares are outstanding as of the date of this Agreement, and 150,000
shares of Company Common Stock for issuance under its 1997 Directors Stock
Option Plan, of which options to purchase 70,000 shares are outstanding as of
the date of this Agreement. Part 2.3 of the Disclosure Schedule accurately sets
forth, with respect to each Company Option that is outstanding as of the date of
this Agreement: (i) the name of the holder of such Company Option; (ii) the
total number of shares of Company Common Stock that are subject to such Company
Option and the number of shares of Company Common Stock with respect to which
such Company Option is immediately exercisable; (iii) the date on which such
Company Option was granted and the term of such Company Option; (iv) the vesting
schedule for such Company Option; (v) the exercise price per share of Company
Common Stock purchasable under such Company Option; and (vi) whether such
Company Option has been designated an "incentive stock option" as defined in
Section 422 of the Code. Except as set forth in Part 2.3 of the Disclosure
Schedule, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to the
best of the knowledge of the Company and the Designated Shareholders, condition
or circumstance that may give rise to or provide a basis for the assertion of a
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of the Company. Each
outstanding share of Company Preferred Stock is convertible into one share of
Company Common Stock.
(c) As of the date of this Agreement, 161,000 shares and 18,519
shares of Company Common Stock and Series B Preferred Stock, respectively, are
reserved for future issuance pursuant to outstanding Company Warrants to
purchase Company Common Stock and Series B Preferred Stock, respectively. The
Company has delivered to Parent an accurate and complete copy of the forms of
all such warrants. Part 2.3 of the Disclosure Schedule accurately sets forth,
with respect to each Company Warrant that is outstanding as of the date of this
Agreement: (i) the name of the holder of such Company Warrant; (ii) the total
number of shares of Common Stock or Series B Preferred Stock that are subject to
such Company Warrant and the number of shares of Common Stock or Series B
Preferred Stock with respect to which such Company Warrant is immediately
exercisable; (iii) the date on which such Company Warrant was granted and the
term of such Company Warrant, and (iv) the exercise price per share of Common
Stock or Series B Preferred Stock purchasable under such Company Warrant. No
other warrants to purchase Company Common Stock or Company Preferred Stock are
outstanding.
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(d) All outstanding shares of Company Common Stock and Series A
Preferred Stock, and all outstanding Company Options and Company Warrants, have
been issued and granted in compliance with (i) all applicable securities laws
and applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(e) Except as set forth in Part 2.3 of the Disclosure Schedule, the
Company has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities of the Company. All securities so reacquired
by the Company were reacquired in compliance with (i) the applicable provisions
of the California General Corporation Law and all other applicable Legal
Requirements, and (ii) all requirements set forth in applicable restricted stock
purchase agreements and other applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(iii) The audited balance sheets of the Company as of
December 31, 1996 and 1997, and the related audited income statements,
statements of shareholders' equity and statements of cash flows of the
Company for the years then ended, together with the notes thereto and the
unqualified report and opinion of Ernst & Young LLP relating thereto; and
(iv) the unaudited balance sheet of the Company as of June 30,
1998 (the "Unaudited Interim Balance Sheet"), and the related unaudited
income statement of the Company for the six months then ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations and (in the case of
the financial statements referred to in Section 2.4(a)(i)) cash flows of the
Company for the periods covered thereby. The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except that the
financial statements referred to in Section 2.4(a)(ii) do not contain footnotes
and are subject to normal and recurring year-end audit adjustments, which will
not, individually or in the aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Disclosure
Schedule, since June 30, 1998:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the best of the knowledge of the Company and the Designated
Shareholders, no event has occurred that will, or could reasonably be expected
to, have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets (whether
or not covered by insurance);
11.
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(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security (except for Company Common Stock issued
upon the exercise of outstanding Company Options), (ii) any option or right to
acquire any capital stock or any other security (except for Company Options
described in Part 2.3 of the Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of its 1996 Stock
Option Plan or 1997 Directors Stock Option Plan, (ii) any provision of any
agreement evidencing any outstanding Company Option, or (iii) any restricted
stock purchase agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since June
30, 1998, exceeds $10,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
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(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all assets reflected on
the Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.1,
2.7(b) of the Disclosure Schedule, all assets referred to in Part 2.9 of the
Disclosure Schedule and identified thereon as being owned by the Company and all
of the Company's rights under the Contracts identified in Part 2.10 of the
Disclosure Schedule; and (iii) all other assets reflected in the Company's books
and records as being owned by the Company. Except as set forth in Part 2.6 of
the Disclosure Schedule, all of said assets are owned by the Company free and
clear of any liens or other Encumbrances, except for (x) any lien for current
taxes not yet due and payable, and (y) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets that
are material to the business of the Company and that are being leased or
licensed to the Company.
2.7 BANK ACCOUNTS; RECEIVABLES; INVENTORY.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of June 30, 1998. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of the
Company (including those accounts receivable reflected on the Unaudited Interim
Balance Sheet that have not yet been collected and those accounts
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receivable that have arisen since June 30, 1998 and have not yet been
collected) (i) represent valid obligations of customers of the Company
arising from bona fide transactions entered into in the ordinary course of
business, (ii) are current and will be collected in full when due, without
any counterclaim or set off (net of an allowance for doubtful accounts not to
exceed $100,000 in the aggregate).
(c) All inventory of the Company, whether or not reflected in the
Unaudited Interim Balance Sheet, consists of a quality and quantity usable and
salable in the ordinary course of business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Unaudited Interim Balance Sheet. All inventories
not written off have been priced at the lower of cost or market on a first in,
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company.
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental Body
or for which an application has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application.
Part 2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets which are owned by the
Company and which are material to its business or operations. Part 2.9(a)(iii)
of the Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to the Company by any Person (except for any
Proprietary Asset that is licensed to the Company under any third party software
license generally available to the public at a cost of less than $10,000), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the Company. Except as set forth in Part 2.9(a)(iv) of the
Disclosure Schedule, the Company has good, valid and marketable title to all of
the Company Proprietary Assets identified in Parts 2.9(a)(i) and 2.9(a)(ii) of
the Disclosure Schedule which are identified as owned by the Company on such
parts of the Disclosure Schedule, free and clear of all liens and other
Encumbrances, and has a valid right to use all Proprietary Assets identified in
Part 2.9(a)(iii) of the Disclosure Schedule. Except as set forth in Part
2.9(a)(v) of the Disclosure Schedule, the Company is not obligated to make any
payment to any Person for the use of any Company Proprietary Asset. Except as
set forth in
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Part 2.9(a)(vi) of the Disclosure Schedule, the Company has not developed
jointly with any other Person any Company Proprietary Asset with respect to
which such other Person has any rights.
(b) The Company has taken all reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.9(b) of the
Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.10 of the Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any Person
of, (i) the source code, or any portion or aspect of the source code, of any
Company Proprietary Asset, or (ii) the object code, or any portion or aspect of
the object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. The Company is
not infringing, misappropriating or making any unlawful use of, and the Company
has not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
best of the knowledge of the Company and the Designated Shareholders, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts with,
any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure Schedule:
(i) each Company Proprietary Asset conforms in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of the
Company; and (ii) there has not been any claim by any customer or other
Person alleging that any Company Proprietary Asset (including each version
thereof that has ever been licensed or otherwise made available by the
Company to any Person) does not conform in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided by or on behalf of the Company, and, to the best
of the knowledge of the Company and the Designated Shareholders, there is no
basis for any such claim. The Company has established adequate reserves on
the Unaudited Interim Balance Sheet to cover all costs associated with any
obligations that the Company may have with respect to the correction or
repair of programming errors or other defects in the Company Proprietary
Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in
Part 2.9(e) of the Disclosure Schedule, (i) the Company has not licensed any of
the Company Proprietary Assets to any Person on an exclusive basis, and (ii) the
Company has not entered into any covenant not to compete or Contract limiting
its ability to exploit fully any of its Proprietary Assets or to transact
business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule,
(i) all current and former employees of the Company have executed and delivered
to the Company an agreement (containing no exceptions to or exclusions from the
scope of its coverage) that is
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substantially identical to the form of Confidential Information and Invention
Assignment Agreement previously delivered to Parent, and (ii) all current and
former consultants and independent contractors to the Company have executed
and delivered to the Company an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is substantially identical to
the form of Consultant Confidential Information and Invention Assignment
Agreement previously delivered to Parent.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset (except for Company Contracts for off the shelf software
which is available to the public at a cost of less than $500.00 ("Off the
Shelf Software Contracts"));
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person,
to sell any product or other asset to or perform any services for any other
Person or to transact business or deal in any other manner with any other
Person, or (C) develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or
any surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.18);
(x) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices;
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(xi) any other Company Contract that has a term of more than 60
days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company; and
(xii) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $10,000 in the aggregate, or (B) the
performance of services having a value in excess of $10,000 in the
aggregate (other than software maintenance contracts with terms of one year
or less entered into in the ordinary course of business consistent with the
Company's past practice).
(Contracts in the respective categories described in clauses "(i)" through
"(xii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Disclosure Schedule,
including all amendments thereto. Part 2.10 of the Disclosure Schedule provides
an accurate description of the terms of each Company Contract that is not in
written form. Each Contract identified in Part 2.10 of the Disclosure Schedule
is valid and in full force and effect, and, to the best of the knowledge of the
Company and the Designated Shareholders, is enforceable by the Company in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Company Contract, and, to the best of the knowledge of
the Company and the Designated Shareholders, no other Person has violated
or breached, or committed any default under, any Company Contract;
(ii) to the best of the knowledge of the Company and the
Designated Shareholders, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any Company Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Company Contract,
(C) give any Person the right to accelerate the maturity or performance of
any Company Contract, or (D) give any Person the right to cancel, terminate
or modify any Company Contract;
(iii) the Company has not received any notice or other
communication regarding any actual or possible violation or breach of, or
default under, any Company Contract; and
(iv) the Company has not waived any of its material rights
under any Material Contract.
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(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure Schedule
and the Off the Shelf Software Contracts collectively constitute all of the
Contracts necessary to enable the Company to conduct its business in the manner
in which its business is currently being conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and provides a
brief description of each proposed Contract as to which any bid, offer award,
written proposal, term sheet or similar document has been submitted or received
by the Company since January 1, 1998.
(g) Part 2.10 of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; (b) accounts payable or accrued salaries that have been
incurred by the Company since June 30, 1998 in the ordinary course of business
and consistent with the Company's past practices; (c) liabilities under the
Company Contracts identified in Part 2.10 of the Disclosure Schedule, to the
extent the nature and magnitude of such liabilities can be specifically
ascertained by reference to the text of such Company Contracts; and (d) the
liabilities identified in Part 2.11 of the Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since its inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company. Except
as set forth in Part 2.12 of the Disclosure Schedule, the Company has not
received any notice or other communication from any Governmental Body regarding
any actual or possible violation of, or failure to comply with, any Legal
Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times since inception has been, in substantial compliance
with the terms and requirements of the respective Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. Since inception, the Company
has not received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible
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revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date. The
Company has delivered to Parent accurate and complete copies of all Company
Returns filed since inception which have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The
Company will establish, in the ordinary course of business and consistent with
its past practices, reserves adequate for the payment of all Taxes for the
period from June 30, 1998 through the Closing Date, and the Company will
disclose the dollar amount of such reserves to Parent on or prior to the Closing
Date.
(c) No Company Return relating to income Taxes has ever been examined
or audited by any Governmental Body. Except as set forth in Part 2.14 of the
Disclosure Schedule, there have been no examinations or audits of any Company
Return. The Company has delivered to Parent accurate and complete copies of all
audit reports and similar documents (to which the Company has access) relating
to the Company Returns. Except as set forth in Part 2.14 of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Company Returns has been granted (by the Company or any other Person), and
no such extension or waiver has been requested from the Company.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule, no
claim or Proceeding is pending or has been threatened against or with respect to
the Company in respect of any Tax. There are no unsatisfied liabilities for
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by the Company with respect to any Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Company and with respect
to which adequate reserves for payment have been established). There are no
liens for Taxes upon any of the assets of the Company except liens for current
Taxes not yet due and payable. The Company has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code. The Company
has not been, and the Company will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
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(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure Schedule,
the Company does not maintain, sponsor or contribute to, and, to the best of the
knowledge of the Company and the Designated Shareholders, has not at any time
in the past maintained, sponsored or contributed to, any employee pension
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not excluded from
coverage under specific Titles or Merger Subtitles of ERISA) for the benefit of
Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Disclosure Schedule (the "Welfare Plans"), none of which is a
multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including
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all amendments thereto) and accurate and complete copies of the most recent
financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under
Section 401(a) of the Code).
(e) The Company is not required to be, and, to the best of the
knowledge of the Company and the Designated Shareholders, has never been
required to be, treated as a single employer with any other Person under
Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. The
Company has never been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. To the best of the knowledge of the
Company and the Designated Shareholders, the Company has never made a complete
or partial withdrawal from a multiemployer plan, as such term is defined in
Section 3(37) of ERISA, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Disclosure Schedule,
no Welfare Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, and neither the Company nor any of the Designated Shareholders is aware
of any reason why any such determination letter should be revoked.
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(k) Except as set forth in Part 2.15(k) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will result in any payment (including any bonus, golden parachute or
severance payment) to any current or former Employee or director of the Company
(whether or not under any Plan), or materially increase the benefits payable
under any Plan, or result in any acceleration of the time of payment or vesting
of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Disclosure Schedule identifies each Employee
who is not fully available to perform work because of disability or other leave
and sets forth the basis of such leave and the anticipated date of return to
full service.
(n) The Company is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Disclosure Schedule,
the Company has good labor relations, and none of the Designated Shareholders
has any reason to believe that (i) the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material adverse
effect on the Company's labor relations, or (ii) any of the Company's employees
intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all material
respects with all applicable Environmental Laws (as defined below), which
compliance includes the possession by the Company of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. The Company has not received
any notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that the
Company is not in compliance with any Environmental Law, and, to the best of the
knowledge of the Company and Designated Shareholders, there are no circumstances
that may prevent or interfere with the Company's compliance with any
Environmental Law in the future. To the best of the knowledge of the Company
and the Designated Shareholders, no current or prior owner of any property
leased or controlled by the Company has received any notice or other
communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or the Company is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company pursuant
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to Environmental Laws are identified in Part 2.16 of the Disclosure Schedule.
(For purposes of this Section 2.16: (i) "Environmental Law" means any federal,
state, local or foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
2.17 INSURANCE. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company has
delivered to Parent accurate and complete copies of the insurance policies
identified on Part 2.17 of the Disclosure Schedule. Each of the insurance
policies identified in Part 2.17 of the Disclosure Schedule is in full force and
effect. The Company has not received any notice or other communication regarding
any actual or possible (a) cancellation or invalidation of any insurance policy,
(b) refusal of any coverage or rejection of any claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy.
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.18 of the
Disclosure Schedule: (a) no Related Party (as defined below) has, and no
Related Party has at any time since inception had, any direct or indirect
interest in any material asset used in or otherwise relating to the business of
the Company; (b) no Related Party is, or has at any time since inception been,
indebted to the Company; (c) since inception, no Related Party has entered into,
or has had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving the Company; (d) no Related Party is
competing, or has at any time since inception competed, directly or indirectly,
with the Company; and (e) no Related Party has any claim or right against the
Company (other than rights under Company Options and rights to receive
compensation for services performed as an employee of the Company). (For
purposes of this Section 2.18 each of the following shall be deemed to be a
"Related Party": (i) each individual who is, or who has at any time since
inception been, an officer or director of the Company; (ii) each member of the
immediate family of each of the individuals referred to in clause "(i)" above;
and (iii) any trust or other Entity (other than the Company) in which any one of
the individuals referred to in clauses "(i)"and "(ii)" above holds (or in which
more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.)
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the knowledge of the
Company and the Designated Shareholders) no Person has threatened to commence
any Legal Proceeding: (i) that involves the Company or any of the assets owned
or used by the Company or any Person whose liability the Company has or may have
retained or assumed, either contractually or by operation of law; or
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(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the knowledge of
the Company and the Designated Shareholders, except as set forth in Part 2.19
of the Disclosure Schedule, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that will, or that could reasonably
be expected to, give rise to or serve as a basis for the commencement of any
such Legal Proceeding.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against the
Company.
(c) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject.
None of the Designated Shareholders is subject to any order, writ, injunction,
judgment or decree that relates to the Company's business or to any of the
assets owned or used by the Company. To the best of the knowledge of the
Company and the Designated Shareholders, no officer or other employee of the
Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
the Company of this Agreement have been duly authorized by all necessary action
on the part of the Company and its board of directors (except for approval of
the Company's shareholders which will be obtained prior to the Closing). The
board of directors of the Company has complied with Section 310 of the
California Corporations Code in approving and authorizing the execution,
delivery and performance by the Company of this Agreement. This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
the Disclosure Schedule, neither (1) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement
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or any order, writ, injunction, judgment or decree to which the Company, or
any of the assets owned or used by the Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Company Contract,
(ii) accelerate the maturity or performance of any such Company Contract, or
(iii) cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule, the Company is not
and will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.22 FULL DISCLOSURE.
(a) This Agreement (including the Disclosure Schedule) does not, and
the Designated Shareholders' Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
(b) The information supplied by the Company for inclusion in the
Proxy Statement (as defined in Section 5.2) will not, as of the date of the
Proxy Statement or as of the date of the Company Shareholders' Meeting (as
defined in Section 5.2), (i) contain any statement that is inaccurate or
misleading with respect to any material fact, or (ii) omit to state any material
fact necessary in order to make such information (in the light of the
circumstances under which it is provided) not false or misleading.
B. REPRESENTATIONS AND WARRANTIES RELATING TO THE DESIGNATED
SHAREHOLDERS.
As of the date of this Agreement, each Designated Shareholder represents
and warrants to and for the benefit of the Indemnitees as follows:
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2.23 SHARES. Such Designated Shareholder has delivered to Parent an
accurate and complete copy of the stock certificate representing such Designated
Shareholder's Shares.
2.24 AUTHORITY OF DESIGNATED SHAREHOLDERS; BINDING NATURE OF AGREEMENTS.
(a) Each Designated Shareholder has the absolute and unrestricted
right, power and authority to enter into and to perform its obligations under
this Agreement; and the execution, delivery and performance by each Designated
Shareholder of this Agreement have been duly authorized by all necessary action
on the part of each of the Designated Shareholders. This Agreement constitutes
the legal, valid and binding obligation of each Designated Shareholder,
enforceable against each Designated Shareholder in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(b) The spouse of each such Designated Shareholder if applicable, has
consented to the transactions contemplated by this Agreement and will not assert
any claim or commence any action objecting to the transactions contemplated by
this Agreement or claiming ownership of any of such Designated Shareholder's
Shares.
2.25 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.25 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge this Agreement or
to exercise any remedy or obtain any relief under, any material Legal
Requirement or order of any Governmental Body to which such Designated
Shareholder is subject; or
(b) contravene, conflict with or result in a violation or breach of
or a default under any provision of, or give any Person the right to declare a
default under, any material Contract to which such Designated Shareholder is a
party or by which such Designated Shareholder is bound.
Except as set forth in Part 2.25 of the Disclosure Schedule, such Designated
Shareholder was not, is not and will not be required to make any filing with or
give any notice to, or to obtain any material Consent from, any Person in
connection with the execution and delivery of this Agreement or any of the
agreements contemplated by this Agreement or the consummation or performance of
any of the transactions contemplated by this Agreement.
2.26 ABILITY.
(a) Except as set forth in Part 2.26 of the Disclosure Schedule, each
Designated Shareholder:
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(i) has not (A) at any time made a general assignment for the
benefit of creditors, (B) at any time filed, or had filed against such
Designated Shareholder, any bankruptcy petition or similar filing, (C) at
any time suffered the attachment or other judicial seizure of all or a
substantial portion of such Designated Shareholder's assets, (D) at any
time admitted in writing such Designated Shareholder's inability to pay
such Designated Shareholder's debts as they become due, or (E) taken or
been the subject of any action that may have an adverse effect on such
Designated Shareholder's ability to comply with or perform any of such
Designated Shareholder's covenants or obligations under this Agreement or
any of the agreements contemplated by this Agreement; and
(ii) is not subject to any Order that would have a material
adverse effect on such Designated Shareholder's ability to comply with or
perform any of such Designated Shareholder's covenants or obligations under
this Agreement or any of the transactions contemplated by this Agreement.
(b) (i) There is no Proceeding pending, and to the knowledge of such
Designated Shareholder, no Person has threatened to commence any Proceeding
against such Designated Shareholder, that would reasonably be expected to have a
Material Adverse Effect on the ability of such Designated Shareholder to comply
with or perform any of such Designated Shareholder's covenants or obligations
under this Agreement or any of the agreements contemplated by this Agreement;
and (ii) to the knowledge of such Designated Shareholder, no event has occurred,
and no claim, dispute or other condition or circumstance exists, that would
reasonably be expected to give rise to or serve as a basis for the commencement
of any such proceeding.
2.27 INVESTMENT REPRESENTATIONS.
(a) Such Designated Shareholder is aware (i) that the Parent Common
Stock to be issued to such Designated Shareholder in the Merger will not be
registered and will not be issued pursuant to a registration statement under the
Securities Act, but will instead be issued in reliance on the exemption from
registration set forth in Section 4(2) of the Act and in Rule 506 under the
Securities Act and (ii) that neither the Merger nor the issuance of such Parent
Common Stock has been approved or reviewed by the SEC or by any other
Governmental Body.
(b) Such Designated Shareholder is aware that (i) because the Parent
Common Stock to be issued in the Merger will not be registered under the
Securities Act, such Parent Common Stock cannot be resold unless such Parent
Common Stock is registered under the Securities Act or unless an exemption from
registration is available; and (ii) (A) Parent will be under no obligation to
file a registration statement with respect to the Parent Common Stock to be
issued to such Designated Shareholder in the Merger; and (B) the provisions of
Rule 144 under the Securities Act, if applicable, will permit resale of the
Parent Common Stock to be issued to such Designated Shareholder in the Merger
only under limited circumstances, and (C) such Parent Common Stock must be held
by such Designated Shareholder for at least one year before it can be sold
pursuant to Rule 144.
(c) The Parent Common Stock to be issued to such Designated
Shareholder in the Merger will be acquired by such Designated Shareholder for
investment and for his, her or its
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own account, and not with a view to, or for resale in connection with, any
unregistered distribution thereof.
(d) Such Designated Shareholder will have received, reviewed and
considered the Proxy Statement (as defined in Section 5.2 hereof) with respect
to the Merger and the transactions contemplated by this Agreement (the
"Disclosure Document") prior to voting on the Merger.
(e) Such Designated Shareholder has been given the opportunity: (i)
to ask questions of, and to receive answers from, persons acting on behalf of
the Company and Parent concerning the terms and conditions of the Merger and the
contemplated issuance of Parent Common Stock in the Merger, and the business,
properties, prospects and financial condition of the Company and Parent; and
(ii) to obtain any additional information (to the extent the Company or Parent
possesses such information or is able to acquire it without unreasonable effort
or expense and without breach of confidentiality obligations) requested to
verify the accuracy of the information set forth in the Disclosure Document.
(f) (i) Such Designated Shareholder is knowledgeable, sophisticated
and experienced in making, and is qualified to make, decisions with respect to
investments in securities presenting investment decisions like that involved in
such Designated Shareholder's contemplated investment in the Parent Common Stock
to be issued in the Merger; (ii) such Designated Shareholder understands and has
fully considered the risks of acquiring and owning Parent Common Stock and
further understands that: (A) an investment in Parent Common Stock is a
speculative investment which involves a high degree of risk; and (B) there are
substantial restrictions on the transferability of the Parent Common Stock to be
issued in the Merger, and, accordingly, it may not be possible for such
Designated Shareholder to liquidate his, her or its investment in such Parent
Common Stock (in whole or in part) in the case of emergency; and (iii) such
Designated Shareholder is able to hold the Parent Common Stock that he, she or
it is to receive in the Merger for a substantial period of time.
(g) Parent will rely on his, her or its representations and
warranties set forth in this Section 2.27 for purposes of determining his, her
or its suitability as an investor in Parent Common Stock and for purposes of
confirming the availability of an exemption from the registration requirements
of the Securities Act.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company and the Designated Shareholders as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Parent with the SEC
between April 27, 1998 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with
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the applicable requirements of the Securities Act or the Exchange Act (as the
case may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and
(iii) fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
respective obligations under this Agreement; and the execution, delivery and
performance by Parent and Merger Sub of this Agreement (including the
contemplated issuance of Parent Common Stock in the Merger in accordance with
this Agreement) have been duly authorized by all necessary action on the part of
Parent and Merger Sub and their respective boards of directors. No vote of
Parent's stockholders is needed to approve the Merger. This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.3 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock to
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.
3.4 DUE ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; and (ii) to own and use its
assets in the manner in which its assets are currently owned and used.
3.5 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time) contravene, conflict with or result in a
violation of (i) any of the provisions of Parent's certificate of incorporation
or bylaws, or (ii) any resolution adopted by the Parent's stockholders, Parent's
board of directors or any committee of the Parent's board of directors.
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SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND THE DESIGNATED SHAREHOLDERS
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and
(b) provide Parent and Parent's Representatives with copies of such existing
books, records, Tax Returns, work papers and other documents and information
relating to the Company, and with such additional financial, operating and other
data and information regarding the Company, as Parent may reasonably request.
4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period,
without the prior written consent of Parent:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but in
no event less frequently than weekly) to Parent concerning the status of the
Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities (except that the Company shall repurchase
Company Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);
(f) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted (x) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options, and (y) to issue shares of Company
Common Stock upon the conversion of shares of Series A or Series B Preferred
Stock or exercise of outstanding warrants);
(g) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of its 1996 Stock
Option Plan or 1997
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Directors Stock Option Plan, (ii) any provision of any agreement evidencing
any outstanding Company Option, or (iii) any provision of any restricted
stock purchase agreement;
(h) neither the Company nor any of the Designated Shareholders shall
amend or permit the adoption of any amendment to the Company's articles of
incorporation or bylaws, or effect or permit the Company to become a party to
any Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $15,000;
(k) the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Contract that is or would constitute
a Material Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any such Contract;
(l) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by the Company pursuant to Contracts that are not Material Contracts;
(m) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business), or (ii) incur or guarantee any indebtedness for borrowed money
(except that the Company may incur indebtedness to Parent);
(n) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, or (iii) hire any new
employee;
(o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
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4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company or any of the Designated
Shareholders in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty
made by the Company or, to its knowledge, any of the Designated
Shareholders in this Agreement if (A) such representation or warranty had
been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact
or circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(iii) any breach of any covenant or obligation of the Company
or, to its knowledge, any of the Designated Shareholders; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. No such update (except to the
extent consented to in writing by Parent) shall be deemed to supplement or amend
the Disclosure Schedule for the purpose of (i) determining the accuracy of any
of the representations and warranties made by the Company or any of the
Designated Shareholders in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 6 has been satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, neither the Company
nor any of the Designated Shareholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
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The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company or any of the Designated Shareholders during the
Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period.
5.2 COMPANY SHAREHOLDERS' MEETING. The Company shall, in accordance with
its articles of incorporation and bylaws and the applicable requirements of the
California General Corporation Law, call and hold a special meeting of its
shareholders as promptly as practicable for the purpose of permitting them to
consider and to vote upon and approve the Merger and this Agreement (the
"Company Shareholders' Meeting"). The Company shall cause a copy of the proxy
statement providing disclosure regarding the merger and the other transactions
contemplated by this Agreement and copies of all Parent SEC Documents (the
"Proxy Statement") to be delivered to each shareholder of the Company who is
entitled to vote at the Company Shareholders' Meeting. Without limiting the
generality or the effect of anything contained in the Shareholder Agreements
being executed and delivered by the Designated Shareholders to Parent
contemporaneously with the execution and delivery of this Agreement, each
Designated Shareholder shall cause all shares of the capital stock of the
Company that are owned, beneficially or of record, by such Designated
Shareholder on the record date for the Company Shareholders' Meeting to be voted
in favor of the Merger and this Agreement at such meeting.
5.3 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) neither the
Company nor any of the Designated Shareholders shall (and the Company shall not
permit any of its Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Parent's prior written
consent, and (b) Parent will use reasonable efforts to consult with the Company
prior to issuing any press release or making any public statement regarding the
Merger.
5.4 BEST EFFORTS. During the Pre-Closing Period, (a) the Company and the
Designated Shareholders shall use their best efforts to cause the conditions set
forth in Section 6 to be satisfied on a timely basis, and (b) Parent and Merger
Sub shall use their best efforts to cause the conditions set forth in Section 7
to be satisfied on a timely basis.
5.5 CERTAIN AGREEMENTS. At or prior to the Closing, Enzo Torresi shall
execute and deliver to the Company and Parent a Noncompetition Agreement in the
form of EXHIBIT D. The
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Company shall use all commercially reasonable efforts to cause Enzo Torresi
to execute and deliver to the Company and Parent, at or prior to the Closing,
a Noncompetition Agreement in the form of EXHIBIT D. At or prior to the
Closing, Vinay Kumar shall execute and deliver to Parent an Offer Letter in
the form of EXHIBIT H. The Company shall use all commercially reasonable
efforts to cause Vinay Kumar to execute and deliver to Parent, at or prior to
the Closing, an Offer Letter in the form of EXHIBIT H.
5.6 TERMINATION OF AGREEMENTS. Prior to the Closing, the Company and each
holder of the Company's outstanding shares of Series B Preferred Stock (the
"Investors") shall enter into an Agreement, reasonably satisfactory in form and
content to Parent (and conditioned and effective upon the Closing), terminating
all of the Investors' rights under the Investor's Rights Agreement dated as of
March 27, 1997 between the Company and the Investors.
5.7 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
5.8 RELEASE. At the Closing, each of the Designated Shareholders shall
execute and deliver to the Company and Parent a Release in the form of EXHIBIT
E.
5.9 PROMISSORY NOTES. The Company and each of the Designated Shareholders
shall cause the seventeen (17) outstanding promissory notes in the aggregate
principal amount of $1,300,000 issued to holders of the Company's Series B
Preferred Stock on February 24, 1998, June 26, 1998, and June 30, 1998 (the
"Notes") to be amended such that Sections 2 and 4 of the Notes shall be deleted
and the term of the Notes shall be extended to September 24, 1999. The Company
and the Designated Shareholders shall not cause the Notes to be amended except
as set forth in this Section 5.9 and shall provide the Parent a reasonable
opportunity to review such amendments prior to their execution.
5.10 ESCROW AGREEMENT. At the Closing, each of the Designated Shareholders
and the Designated Shareholder's Agent shall execute and deliver to Parent an
Escrow Agreement in the form of EXHIBIT G.
5.11 AMENDMENT TO ARTICLES OF INCORPORATION. Prior to the Closing Date,
the Company shall duly and properly file with the California Secretary of State
an amendment to paragraph (c) of Section 2 of Article Fourth of the Company's
Articles of Incorporation, which shall add the following sentence to the end of
such paragraph (c):
""Notwithstanding the prior sentence or anything else in
this Section 2 to the contrary, any merger of the Company
with FVC Acquisition Corp., a California corporation ("FVC
Sub"), and a subsidiary of First Virtual Corporation, a
Delaware corporation ("FVC"), shall not be treated as a
Liquidation Event for purposes of this Section 2 and this
Section 2 shall be inapplicable to any such merger and the
amounts payable in connection with any such
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merger shall be distributed in accordance with the Agreement and
Plan of Merger and Reorganization dated July 30, 1998 between the
Company, FVC Sub, FVC and certain of the Company's shareholders."
Prior to such filing, such amendment shall be approved by the Board of Directors
and by the shareholders of the Company as required by California law.
5.12 STOCK PURCHASE AGREEMENT. Vinay Kumar shall deliver a stock purchase
agreement to Parent providing for the sale to Parent, subject to the
transactions contemplated by this Agreement, of 348,228 shares of Series A
Preferred Stock from Mr. Kumar for an aggregate purchase price of $249,996.65,
in form and substance reasonably satisfactory to Parent and Mr. Kumar (the
"Stock Purchase Agreement").
5.13 REPURCHASE AGREEMENT. The Company shall amend each Repurchase
Agreement so that any Unvested Shares will be repurchased by the Company prior
to the Effective Time at the price stated in the applicable Repurchase
Agreement. The Company shall cause each Person who is a party to a Repurchase
Agreement to execute and deliver to the Company the amended Repurchase Agreement
referred to in the preceding sentence, and the Company shall repurchase all
Unvested Shares prior to the Effective Time at the price stated in the
applicable Repurchase Agreement.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company and the Designated Shareholders in this Agreement
and in each of the other agreements and instruments delivered to Parent in
connection with the transactions contemplated by this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties), and shall be
accurate in all material respects as of the Scheduled Closing Time as if made at
the Scheduled Closing Time (without giving effect to any update to the
Disclosure Schedule, and without giving effect to any "Material Adverse Effect"
or other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Designated Shareholders are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
6.3 SHAREHOLDER APPROVAL. The principal terms of the Merger (including
the amendment to the Company's articles of incorporation as contemplated by
Section 5.11) shall have been duly approved by the affirmative vote of (a) all
of the shares of Company Common
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Stock entitled to vote with respect thereto, and (b) all of the shares of
Series A Preferred Stock and Series B Preferred Stock entitled to vote with
respect thereto.
6.4 CONSENTS. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.5 AGREEMENTS AND DOCUMENTS. Parent and Merger Sub shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Noncompetition Agreement in the form of EXHIBIT D, executed by
Enzo Torresi;
(b) a Release in the form of EXHIBIT E, executed by the Designated
Shareholders;
(c) the agreement referred to in Section 5.6, executed by the Company
and each Investor;
(d) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees and former
employees of the Company and by all consultants and independent contractors and
former consultants and former independent contractors to the Company who have
not already signed such agreements (including the individuals identified in Part
2.9(f) of the Disclosure Schedule);
(e) the statement referred to in Section 5.7, executed by the
Company;
(f) the Stock Purchase Agreement entered into by Vinay Kumar and
Parent;
(g) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to Parent,
executed by the landlord under the real property lease for the real property
located at 15951 Los Gatos Boulevard, Suite 1, Los Gatos, California;
(h) a legal opinion of Fenwick & West, dated as of the Closing Date,
in the form of EXHIBIT F;
(i) a certificate executed by the Designated Shareholders and
containing the representation and warranty of each Designated Shareholder that
each of the representations and warranties set forth in Section 2 is accurate in
all respects as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4 have been duly satisfied
(the "Designated Shareholders' Closing Certificate");
(j) written resignations of all officers and directors of the
Company, effective as of the Effective Time;
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(k) an Escrow Agreement, in the form of EXHIBIT G, executed by all of
the Designated Shareholders.
6.6 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.7(b).
6.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Parent of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6.9 EMPLOYEES. Vinay Kumar shall not have ceased to be employed by, or
expressed an intention to terminate his employment with, the Company and shall
have executed and delivered to Parent an Offer Letter in the form of EXHIBIT H.
6.10 AMENDMENT OF THE NOTES. The Notes shall have been amended in the
manner set forth in Section 5.9.
6.12 REPURCHASE OF UNVESTED SHARES. All Unvested Shares shall have been
repurchased by the Company in the manner set forth in Section 5.13.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material
respects as of the Scheduled Closing Time as if made at the Scheduled Closing
Time (without giving effect to any materiality or similar qualifications
contained in such representations and warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and
obligations that Parent and Merger Sub are required to comply with or to
perform at or prior to the Closing shall have been complied with and
performed in all respects.
7.3 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal
37.
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Requirement enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to
the Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company or
any of the Designated Shareholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent);
(c) by Parent at or after the Scheduled Closing Time if any condition
set forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(d) by the Company at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;
(e) by Parent if the Closing has not taken place on or before
September 30, 1998 (other than as a result of any failure on the part of Parent
to comply with or perform any covenant or obligation of Parent set forth in this
Agreement);
(f) by the Company if the Closing has not taken place on or before
September 30, 1998 (other than as a result of the failure on the part of the
Company or any of the Designated Shareholders to comply with or perform any
covenant or obligation set forth in this Agreement or in any other agreement
or instrument delivered to Parent);
(g) by Parent if all the Designated Shareholders shall not have
delivered their executed signature pages to the Agreement by the close of
business on August 7, 1998;
(h) by the mutual written consent of Parent and the Company.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c), Section 8.1(e), or
Section 8.1(g), Parent shall deliver to the Company a written notice stating
that Parent is terminating this Agreement and setting forth a brief
description of the basis on which Parent is terminating this Agreement. If
the Company wishes to terminate this Agreement pursuant to Section 8.1(b),
Section 8.1(d) or Section 8.1(f), the Company shall deliver to Parent a
written notice stating that the Company is terminating this Agreement and
setting forth a brief description of the basis on which the Company is
terminating this Agreement.
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8.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties under this
Agreement shall terminate; PROVIDED, HOWEVER, that: (a) neither the Company
nor Parent shall be relieved of any obligation or liability arising from any
prior breach by such party of any provision of this Agreement; and (b) the
parties shall, in all events, remain bound by and continue to be subject to
the provisions set forth in Section 10.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Designated
Shareholders (including the representations and warranties set forth in Section
2 and the representations and warranties set forth in the Designated
Shareholders' Closing Certificate) shall survive the Closing and shall expire on
the first anniversary of the Closing Date; PROVIDED, HOWEVER, that if, at any
time prior to the first anniversary of the Closing Date, any Indemnitee (acting
in good faith) delivers to any of the Designated Shareholders a written notice
alleging the existence of an inaccuracy in or a breach of any of the
representations and warranties made by the Designated Shareholders (and setting
forth in reasonable detail the basis for such Indemnitee's belief that such an
inaccuracy or breach may exist) and asserting a claim for recovery under Section
9.2 based on such alleged inaccuracy or breach, then the claim asserted in such
notice shall survive the first anniversary of the Closing until such time as
such claim is fully and finally resolved. All representations and warranties
made by Parent and Merger Sub shall terminate and expire as of the Effective
Time, and any liability of Parent or Merger Sub with respect to such
representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of the
Company and the Designated Shareholders, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives, except as
consented to in writing with respect to events occurring after the date of this
Agreement.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company and the Designated Shareholders in this Agreement.
9.2 INDEMNIFICATION BY DESIGNATED SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section
9.1(a)), the Designated Shareholders, jointly and severally, shall hold harmless
and indemnify each of the Indemnitees from and against, and shall compensate and
reimburse each of the Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and which arise from or as a result of,
or are directly or indirectly connected with: (i) any inaccuracy in or breach
of any representation or warranty set
39.
<PAGE>
forth in Section 2 or in the Designated Shareholders' Closing Certificate
(without giving effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or incorporated directly
or indirectly in such representation or warranty, but giving effect to any
update to the Disclosure Schedule delivered by the Company to Parent prior to
the Closing); (ii) any breach of any covenant or obligation of the Company or
any of the Designated Shareholders (including the covenants set forth in
Sections 4 and 5); or (iii) any Legal Proceeding relating to any inaccuracy
or breach of the type referred to in clause "(i)" or "(ii)" above (including
any Legal Proceeding commenced by any Indemnitee for the purpose of enforcing
any of its rights under this Section 9).
(b) The Designated Shareholders acknowledge and agree that, if the
Surviving Corporation suffers, incurs or otherwise becomes subject to any
Damages as a result of or in connection with any inaccuracy in or breach of
any representation, warranty, covenant or obligation, then (without limiting
any of the rights of the Surviving Corporation as an Indemnitee) Parent shall
also be deemed, by virtue of its ownership of the stock of the Surviving
Corporation, to have incurred Damages as a result of and in connection with
such inaccuracy or breach.
9.3 THRESHOLD; CEILING. The Designated Shareholders shall not be
required to make any indemnification payment pursuant to Section 9.2(a) for
any inaccuracy in or breach of any of their representations and warranties
set forth in Section 2 until such time as the total amount of all Damages
(including the Damages arising from such inaccuracy or breach and all other
Damages arising from any other inaccuracies in or breaches of any
representations or warranties) that have been directly or indirectly suffered
or incurred by any one or more of the Indemnitees, or to which any one or
more of the Indemnitees has or have otherwise become subject, exceeds
$150,000 in the aggregate. If the total amount of such Damages exceeds
$150,000 then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed for all Damages.
9.4 SATISFACTION OF INDEMNIFICATION CLAIM. Twenty percent of the
aggregate number of shares of Parent Common Stock to be issued to the
Designated Shareholders in the Merger shall be placed in escrow in accordance
with the Escrow Agreement. In the event that any Indemnitee shall be
entitled to any indemnification as provided in this Section 9, except in the
case of fraud or willful misconduct, satisfaction of such claim shall occur
solely from the shares escrowed pursuant to the Escrow Agreement.
9.5 NO CONTRIBUTION. Each Designated Shareholder waives, and
acknowledges and agrees that such Designated Shareholder shall not have and
shall not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the
Surviving Corporation in connection with any indemnification obligation or
any other liability to which such Designated Shareholder may become subject
under or in connection with this Agreement or the Designated Shareholders'
Closing Certificate.
40.
<PAGE>
9.6 INTEREST. Any Designated Shareholder who is required to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9 with respect to any Damages shall also be liable to such Indemnitee
for interest on the amount of such Damages (for the period commencing as of the
date on which such Designated Shareholder first received notice of a claim for
recovery by such Indemnitee and ending on the date on which the liability of
such Designated Shareholder to such Indemnitee is fully satisfied by such
Designated Shareholder) at a floating rate equal to the rate of interest
publicly announced by Bank of America, N.T. & S.A. from time to time as its
prime, base or reference rate.
9.7 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against Parent or against any other Person) with respect
to which any of the Designated Shareholders may become obligated to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Section 9, Parent shall have the right, at its election, to either (i) offer to
the Designated Shareholders' Agent the right to proceed with any such defense
(the "Defense Offer") or (ii) proceed with the defense of such claim or Legal
Proceeding on its own.
(a) If Parent offers the Designated Shareholders' Agent the
right to proceed with the defense of any such claim or Legal Proceeding, and
the Designated Shareholders' Agent irrevocably agrees within five (5)
calendar days of such Defense Offer with Parent in writing (the "Agent's
Commitment") that (1) Parent is entitled to indemnification under this
Section 9 for any Damages relating to such claim or Legal Proceeding and (2)
the Designated Shareholders' Agent will defend such claim or Legal
Proceeding, then:
(i) the Designated Shareholders' Agent shall have the right to
proceed with the defense of such claim or Legal Proceeding;
(ii) the Designated Shareholders' Agent shall proceed to defend
such claim or Legal Proceeding in a diligent manner with counsel reasonably
satisfactory to Parent;
(iii) the Designated Shareholders' Agent shall keep Parent
informed of all material developments and events relating to such claim or
Legal Proceeding;
(iv) Parent shall have the right to participate in the defense
of such claim or Legal Proceeding;
(v) the Designated Shareholders' Agent shall not have the
right to settle, adjust or compromise such claim or Legal Proceeding
without the prior written consent of Parent, which consent shall not
unreasonably withheld; and
(vi) in the event that Parent determines that: (1) the
Designated Shareholders' Agent is not diligently and zealously pursuing the
defense of any such claim or Legal Proceeding; (2) such claim or Legal
Proceeding is likely to result in equitable or injunctive relief or in
Damages that (together with all other damages that are subject to a claim
for indemnification) are likely to exceed the value of the shares of Parent
Common Stock remaining subject to the Escrow Agreement; or (3) that a
conflict exists between the interests of the Designated Shareholders and
Parent, then,
41.
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notwithstanding the foregoing, Parent shall have the right to assume the
defense of such claim or Legal Proceeding with counsel of its own choosing.
(b) If Parent proceeds with the defense of any such claim or Legal
Proceeding or the Designated Shareholders' Agent does not timely deliver the
Agent's Commitment or if Parent has the right to assume the defense of any claim
or Legal Proceeding in accordance with Section 9.7(a)(vi):
(vii) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by the
Designated Shareholders; PROVIDED, HOWEVER, that if Parent did not make the
Defense Offer, the expenses relating to the defense of such claim or Legal
Proceeding shall be borne and paid exclusively by the Designated
Shareholders only in the event that such Legal Proceeding relates to any
inaccuracy or breach of a representation, warranty covenant or obligation
of the Company or of a Designated Shareholder referred to in Section
9.2(a)(i) or Section 9.2(a)(ii);
(viii)each Designated Shareholder shall make available to Parent
any documents and materials in his possession or control that may be
necessary to the defense of such claim or Legal Proceeding; and
(ix) Parent shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of the
Designated Shareholders' Agent (as defined in Section 10.1); PROVIDED,
HOWEVER, that such consent shall not be unreasonably withheld.
Parent shall give the Designated Shareholders' Agent prompt notice of the
commencement of any such Legal Proceeding against Parent or the Surviving
Corporation; PROVIDED, HOWEVER, that any failure on the part of Parent to so
notify the Designated Shareholders' Agent shall not limit any of the obligations
of the Designed Shareholders under this Section 9 (except to the extent such
failure materially prejudices the defense of such Legal Proceeding).
9.8 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 DESIGNATED SHAREHOLDERS' AGENT. The Designated Shareholders hereby
irrevocably appoint G. Carter Sednaoui as their agent for purposes of Section 9
(the "Designated Shareholders' Agent"), and G. Carter Sednaoui hereby accepts
his appointment as the Designated Shareholders' Agent. Parent shall be entitled
to deal exclusively with the Designated Shareholders' Agent on all matters
relating to Section 9, and shall be entitled to rely conclusively (without
further evidence of any kind whatsoever) on any document executed or purported
to be executed on behalf of any Designated Shareholder by
42.
<PAGE>
the Designated Shareholders' Agent, and on any other action taken or
purported to be taken on behalf of any Designated Shareholder by the
Designated Shareholders' Agent, as fully binding upon such Designated
Shareholder. If the Designated Shareholders' Agent shall die, become
disabled or otherwise be unable to fulfill his responsibilities as agent of
the Designated Shareholders, then the Designated Shareholders shall, within
ten days after such death or disability, appoint a successor agent and,
promptly thereafter, shall notify Parent of the identity of such successor.
Any such successor shall become the "Designated Shareholders' Agent" for
purposes of Section 9 and this Section 10.1. If for any reason there is no
Designated Shareholders' Agent at any time, all references herein to the
Designated Shareholders' Agent shall be deemed to refer to the Designated
Shareholders. The Designated Shareholders' Agent shall act for the
Designated Shareholders on all matters set forth in this Agreement in a
manner the Designated Shareholders' Agent believes to be in the best
interests of the Designated Shareholders and consistent with his obligations
under this Agreement, but the Designated Shareholders' Agent shall not be
responsible to the Designated Shareholder for any loss or damages the
Designated Shareholders may suffer by reason of the performance by the
Designated Shareholders' Agent of his duties under the Agreement, other than
loss or damage arising from willful violation of the law or gross negligence
in the performance of his duties under this Agreement. The Designated
Shareholders agree, jointly and severally, to indemnify and hold harmless the
Designated Shareholders' Agent for any loss or damage arising from the
performance of his duties as Designated Shareholders' Agent hereunder,
including, without limitation, the cost of any accounting firm or legal
counsel retained by the Designated Shareholders' Agent on behalf of the
Designated Shareholders, but excluding any loss or damage arising from
willful violation of the law or gross negligence in the performance of his
duties under this Agreement.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger; PROVIDED, HOWEVER, that, to the extent the
total amount of all such fees, costs and expenses incurred by or for the benefit
of the Company (including all such fees, costs and expenses incurred prior to
the date of this Agreement) exceeds $40,000 in the aggregate, such fees, costs
and expenses shall be borne and paid by the Designated Shareholders and not by
the Company.
43.
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10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT:
First Virtual Corporation
3393 Octavius Drive
Suite 102
Santa Clara, CA 95054
Attention: Chief Financial Officer
WITH A COPY TO:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Lee F. Benton
IF TO THE COMPANY:
ICAST Corporation
101 C Albright Way
Los Gatos, CA 95030
Attention: Vinay Kumar
WITH A COPY TO:
Fenwick & West LLP
Two Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Matthew Quilter
IF TO ANY OF THE DESIGNATED SHAREHOLDERS:
G. Carter Sednaoui
One Palmer Square
Princeton, NJ 08542
44.
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10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, each
Designated Shareholder shall keep confidential, and shall not use or disclose to
any other Person, any non-public document or other non-public information in
such Designated Shareholder's possession that relates to the business of the
Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.10 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Designated Shareholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Parent and its successors and assigns
(if any); and Merger Sub and its successors and assigns (if any). This
Agreement shall inure to the benefit of: the Company; the Company's shareholders
(to the extent set forth in Section 1.5); Parent; Merger Sub; the other
Indemnitees (subject to Section 9.8); and the respective successors and assigns
(if any) of the foregoing. Parent may freely assign any or all of its rights
under this Agreement (including its indemnification rights under Section 9), in
whole or in part, to any other Person without obtaining the consent or approval
of any other party hereto or of any other Person.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or
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remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
10.14 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections 1.5 and
9, none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof; PROVIDED, HOWEVER, that the Mutual
Agreement for Non-Disclosure of Proprietary Information executed on behalf of
Parent on and the Company on June 3, 1998 shall not be superseded by this
Agreement and shall remain in effect in accordance with its terms until the
earlier of (a) the Effective Time, or (b) the date on which such Mutual
Non-Disclosure Agreement is terminated in accordance with its terms.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
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(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
47.
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The parties hereto have caused this Agreement to be executed and
delivered as of July 30, 1998.
FIRST VIRTUAL CORPORATION,
a Delaware corporation
By: /s/ J.O. Mitchell
-------------------------------------
Print Name: J.O. Mitchell
-----------------------------
Title: CFO
----------------------------------
FVC ACQUISITION CORP.,
a California corporation
By: /s/ J.O. Mitchell
-------------------------------------
Print Name: J.O. Mitchell
-----------------------------
Title: CFO
----------------------------------
ICAST CORPORATION,
a California corporation
By: /s/ Enzo Torresi
-------------------------------------
Print Name: Enzo Torresi
-----------------------------
Title: CEO
----------------------------------
DESIGNATED SHAREHOLDERS
/s/ Vinay Kumar
-----------------------------------------
Vinay Kumar
/s/ Enzo Torresi
-----------------------------------------
Enzo Torresi
<PAGE>
K-H INVESTORS (1997-B), L.P.
By: /s/ David W. Hanna
-------------------------------------
Print Name: David W. Hanna
-----------------------------
Title: Managing Partner
----------------------------------
C.E. UNTERBERG TOWBIN, LLC
By: /s/ Mel S. Lavitt
-------------------------------------
Print Name: Mel S. Lavitt
-----------------------------
Title: Managing Director
----------------------------------
HEWM INVESTORS, LLC
By: /s/ August J. Moretti
-------------------------------------
Print Name: August J. Moretti
-----------------------------
Title: Manager
----------------------------------
ACCEL V L.P.
By: Accel V Associates L.L.C.
Its General Partner
By: /s/ G. Carter Sednaoui
-------------------------------------
Managing Member
ACCEL INTERNET/STRATEGIC
TECHNOLOGY FUND L.P.
By: Accel Internet/Strategic Technology
Fund Associates L.L.C.
Its General Partner
By: /s/ G. Carter Sednaoui
------------------------------------
Managing Member
<PAGE>
ACCEL KEIRETSU V L.P.
By: Accel Keiretsu V Associates L.L.C.
Its General Partner
By: /s/ G. Carter Sednaoui
------------------------------------
Managing Member
ACCEL INVESTORS '96 L.P.
By: /s/ G. Carter Sednaoui
------------------------------------
General Partner
ELLMORE C. PATTERSON PARTNERS
By: /s/ E. Patterson
------------------------------------
General Partner
FORVAL CREATIVE, INC.
By: /s/ Kiyoshi Hayamizu
------------------------------------
Print Name: /s/ Kiyoshi Hayamizu
----------------------------
Title: President & CEO
---------------------------------
KAIRDOS, L.L.C.
By:
------------------------------------
Print Name:
-----------------------------
Title:
---------------------------------
<PAGE>
BLUMBERG CAPITAL
By: /s/ David J. Blumberg
------------------------------------
Print Name: David J. Blumberg
----------------------------
Title: Managing Director
---------------------------------
<PAGE>
Solely for the purpose set forth in
Section 10.1
DESIGNATED SHAREHOLDER'S AGENT
/s/ G. Carter Sednaoui
--------------------------------
G. Carter Sednaoui
<PAGE>
EXHIBIT A
DESIGNATED SHAREHOLDERS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NUMBER OF
NO. OF SHARES NO. OF SHARES SHARES OF
OF COMPANY OF SERIES A SERIES B
NAME COMMON HELD PREFERRED HELD PREFERRED HELD
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Vinay Kumar 800,000* 2,000,000 0
- -----------------------------------------------------------------------------------------
Enzo Torresi 1,320,000* 400,000 0
- -----------------------------------------------------------------------------------------
Accel V L.P. 0 0 1,194,074
- -----------------------------------------------------------------------------------------
Accel Internet/Strategic Technology 0 0 160,000
Fund L.P.
- -----------------------------------------------------------------------------------------
Accel Keiretsu V L.P. 0 0 23,704
- -----------------------------------------------------------------------------------------
Accel Investors '96 L.P. 0 0 71,111
- -----------------------------------------------------------------------------------------
Ellmore C. Patterson Partners 0 0 32,593
- -----------------------------------------------------------------------------------------
K-H Investors (1997-B), L.P. 0 0 200,000
- -----------------------------------------------------------------------------------------
C.E. Unterberg Towbin, LLC. 0 0 100,000
- -----------------------------------------------------------------------------------------
HEWM Investors, LLC 0 0 15,000
- -----------------------------------------------------------------------------------------
Forval Creative, Inc. 0 0 68,489
- -----------------------------------------------------------------------------------------
Kairdos, L.L.C. 0 0 57,037
- -----------------------------------------------------------------------------------------
Blumberg Capital 0 0 24,474
- -----------------------------------------------------------------------------------------
TOTAL 2,120,000 2,400,000 1,946,482
- -----------------------------------------------------------------------------------------
</TABLE>
- ------------------
* 375,000 of which are subject to a repurchase option in favor of the Company
(subject to 50% acceleration on the Closing of the Merger).
A-1.
<PAGE>
EXHIBIT A-1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NO. OF SHARES OF NO. OF SHARES OF NO. OF SHARES NO. OF SHARES
OF COMPANY SERIES A OF SERIES B OF PARENT
NAME COMMON HELD PREFERRED HELD PREFERRED HELD COMMON STOCK
TO BE RECEIVED
AT EFFECTIVE
TIME (1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vinay Kumar 618,750 1,651,660 0
- --------------------------------------------------------------------------------------------------------------------------------
Enzo Torresi 1,138,750 400,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Accel V L.P. 35,000 0 1,194,074
- --------------------------------------------------------------------------------------------------------------------------------
Accel Internet/Strategic Technology Fund L.P. 0 0 160,000
- --------------------------------------------------------------------------------------------------------------------------------
Accel Keiretsu V L.P. 0 0 23,704
- --------------------------------------------------------------------------------------------------------------------------------
Accel Investors '96 L.P. 0 0 71,111
- --------------------------------------------------------------------------------------------------------------------------------
Ellmore C. Patterson Partners 0 0 32,593
- --------------------------------------------------------------------------------------------------------------------------------
K-H Investors (1997-B), L.P. 0 0 200,000
- --------------------------------------------------------------------------------------------------------------------------------
C.E. Unterberg Towbin, LLC. 0 0 100,000
- --------------------------------------------------------------------------------------------------------------------------------
HEWM Investors, LLC 0 0 15,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
(1) This Exhibit A-1 is an acknowledgment of the parties based upon the
assumptions set forth herein and the terms of this Agreement and is not a
covenant by any party hereto. The Exhibit A-1 assumes (i) that the
representations and warranties set forth in Section 2.3 of the Agreement are
true and correct in all respects as of the Effective Time as if made at the
Effective Time; (ii) that each shareholder of the Company is the beneficial
and record holder of the number of share of Company Common Stock and Company
Preferred Stock set forth opposite such shareholder's name on this Exhibit
A-1 at the Effective Time; and (iii) that the Effective Time occurs August
14, 1998. This Exhibit A-1 is also subject to Section 1.9, Section 6 and
Section 8 of the Agreement.
* Excludes 348,228 shares of Series A Preferred to be purchased by
Parent prior to the Effective Time.
A-2.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NO. OF SHARES OF NO. OF SHARES OF NO. OF SHARES NO. OF SHARES
OF COMPANY SERIES A OF SERIES B OF PARENT
NAME COMMON HELD PREFERRED HELD PREFERRED HELD COMMON STOCK
TO BE RECEIVED
AT EFFECTIVE
TIME (1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forval Creative, Inc. 0 0 68,489
- -------------------------------------------------------------------------------------------------------------------------------
Kairdos, L.L.C. 0 0 57,037
- -------------------------------------------------------------------------------------------------------------------------------
Blumberg Capital 0 0 24,474
- -------------------------------------------------------------------------------------------------------------------------------
Martin Haberle 35,000 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Brian Smithson 113,333 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Zhefeng Du 5,000 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Michelle Fenner 1,250 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Karin Strametz 8,125 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Vivian Golub 10,000 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Marcus Torresi 15,000 0 0
- -------------------------------------------------------------------------------------------------------------------------------
Cristiano Torresi 15,000 0 0
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,995,208 2,051,660 1,946,482 408,806
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-3.
<PAGE>
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this EXHIBIT B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, liability,
claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of investigation) or
expense of any nature.
B-1.
<PAGE>
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent on behalf of the Company
and the Designated Shareholders.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective Designated Shareholders' Agents of the Persons
referred to in clauses "(a)" and "(b)" above; and (d) the respective successors
and assigns of the Persons referred to in clauses "(a)", "(b)" and "(c)" above;
PROVIDED, HOWEVER, that the Designated Shareholders shall not be deemed to be
"Indemnitees."
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution,
B-2.
<PAGE>
ordinance, code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into
effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Designated Shareholders' Closing Certificate but for the presence of
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the Company's business, condition, assets, liabilities,
operations, financial performance or prospects.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
B-3.
