<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 25, 2000
(January 10, 2000)
CYBERSOURCE CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
77-0472961
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(Commission File Number) (I.R.S. Employer Identification Number)
550 South Winchester Blvd., Suite 301, San Jose, California 95128
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(Address of Principal Executive Offices) (Zip Code)
(408) 556-9100
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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INFORMATION TO BE INCLUDED IN REPORT
Item 2. Acquisition or Disposition of Assets
On January 10, 2000, pursuant to the Agreement and Plan of Merger, dated as
of January 10, 2000, by and among CyberSource Corporation, a Delaware
corporation (the "Registrant"), Aurum Acquisition Corporation, a Delaware
corporation ("Merger Sub"), and ExpressGold.com, Inc., a privately held South
Dakota corporation ("ExpressGold") (the "Agreement"), the Registrant completed
the merger of Merger Sub, a wholly-owned subsidiary of the Registrant, with and
into ExpressGold, with ExpressGold being the surviving corporation of the merger
and becoming a wholly-owned subsidiary of the Registrant. The transaction was
closed on January 10, 2000 and is being accounted for as a pooling of interests
transaction.
As consideration for the transaction, the Registrant issued an aggregate of
1,554,431 shares of the Registrant's common stock, $0.001 par value, in exchange
for the outstanding shares of capital stock of ExpressGold, subject to the
withholding of 10% of such shares in escrow in accordance with the terms of the
Agreement. At the effective time of the merger, all outstanding options to
purchase shares of ExpessGold common stock were automatically converted into
options to purchase 12,067 shares of the Registrant's common stock based upon
the conversion factor set forth in the Agreement with corresponding adjustment
to their respective exercise prices. In addition, the Registrant has assumed
ExpressGold's obligation to issue up to 58,710 shares of its common stock from
time to time to an employee of ExpressGold.
The Registrant currently intends that ExpressGold's business will continue
to be operated in its current manner. Certain of the assets of ExpressGold were
used in the development and support of ExpressGold's Internet-based store-value
applications for use by online merchants, and the Registrant currently intends
to use such assets in substantially the same manner.
The total value of consideration paid for the purchase transaction was
determined based on arm's length negotiations between the Registrant and
ExpessGold, which took into account ExpressGold's financial position, operating
history, products, intellectual property and other factors relating to
ExpressGold's business and certain income tax aspects of the transaction. There
are no material relationships between ExpressGold and either the Registrant or
Merger Sub or any of their respective affiliates or any director or officer of
the Registrant or Merger Sub or any associate of such director or officer.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
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It is impractical for Registrant to file the required financial statements
at this time. Registrant intends to file with the Securities and Exchange
Commission such financial statements within 60 days of the filing date of
this report.
(b) Pro Forma Financial Information
-------------------------------
See response to Item 7(a).
(c) Exhibits
--------
The Exhibit Index appearing on page 4 is incorporated herein by reference.
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.
CYBERSOURCE CORPORATION
(the Registrant)
By: /s/ Charles E. Noreen, Jr.
----------------------------
Charles E. Noreen, Jr.
Vice President of Finance and
Administration, and Chief
Financial Officer
Dated: January 25, 2000
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
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<S> <C> <C>
2.1 Agreement and Plan of Merger by and 6
among CyberSource Corporation, Aurum
Acquisition Corporation, and
ExpressGold.com, Inc.
</TABLE>
<PAGE>
Pursuant to Item 601(b)(2) of Regulation S-K, the following exhibits to this
Agreement and Plan of Merger have been omitted. Such exhibits will be submitted
to the Securities and Exchange Commission upon request.
Exhibit Name
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Exhibit B Confidentiality and Assignment Agreement
Exhibit C Opinion from Company Counsel
Exhibit D Opinion from Acquiror's Counsel
Exhibit E Affiliates Agreement
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CYBERSOURCE CORPORATION,
MERGER SUB,
EXPRESSGOLD.COM, INC.,
AND
DONALD L. ENDRES
January 10, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1 THE MERGER................................................................................ 1
1.1 The Merger................................................................................ 1
1.2 Effective Time of the Merger.............................................................. 1
ARTICLE 2 THE SURVIVING CORPORATION................................................................. 2
2.1 Articles of Incorporation................................................................. 2
2.2 Bylaws.................................................................................... 2
2.3 Directors and Officers of Surviving Corporation........................................... 2
ARTICLE 3 CONVERSION OF SECURITIES................................................................... 2
3.1 Conversion of Shares...................................................................... 2
3.2 Options and Rights........................................................................ 2
3.3 [Intentionally left blank]................................................................ 3
3.4 Exchange of Certificates.................................................................. 3
3.5 Escrow.................................................................................... 3
3.6 Dividends; Transfer Taxes................................................................. 3
3.7 No Fractional Shares...................................................................... 4
3.8 Closing of Company Transfer Books......................................................... 4
3.9 Closing................................................................................... 4
3.10 Supplementary Action...................................................................... 4
3.11 Dissenting Shares......................................................................... 4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................. 5
4.1 Due Organization; Good Standing; Authority; Binding Nature of Agreements.................. 5
4.2 Articles of Incorporation and Bylaws; Records............................................. 6
4.3 Capitalization; Ownership of Stock........................................................ 6
4.4 Financial Statements...................................................................... 7
4.5 Absence of Changes........................................................................ 7
4.6 Title to Assets; Equipment; Real Property, Leases; Inventory.............................. 9
4.7 Bank Accounts............................................................................. 10
4.8 Receivables; Major Customers.............................................................. 10
4.9 Assets of Ultimate Parent Entity.......................................................... 11
4.10 Proprietary Assets........................................................................ 11
4.11 Contracts................................................................................. 12
4.12 Compliance With Legal Requirements........................................................ 15
4.13 Governmental Authorizations............................................................... 15
4.14 Tax Matters............................................................................... 16
4.15 Employee and Labor Matters................................................................ 17
4.16 Benefit Plans; ERISA...................................................................... 18
4.17 Environmental Matters..................................................................... 20
4.18 Sale of Products; Performance of Services................................................. 20
4.19 Insurance................................................................................. 21
4.20 Related Party Transactions................................................................ 22
4.21 Proceedings; Orders....................................................................... 22
4.22 Non-Contravention; Consents............................................................... 23
4.23 Brokers................................................................................... 24
4.24 Pooling of Interests...................................................................... 24
4.25 Year 2000 Compliance...................................................................... 24
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
4.26 Tax Treatment............................................................................. 24
4.27 Full Disclosure........................................................................... 24
4.28 Powers of Attorney........................................................................ 25
4.29 Voting Arrangements....................................................................... 25
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB................................. 25
5.1 Due Organization; Good Standing; Authority; Binding Nature of Agreements.................. 25
5.2 Capitalization; Ownership of Stock........................................................ 25
5.3 Brokers................................................................................... 26
5.4 Pooling of Interests...................................................................... 26
5.5 Non-Contravention; Consents............................................................... 26
5.6 Tax Treatment............................................................................. 26
5.7 SEC Filings; Financial Statements......................................................... 26
ARTICLE 6 ADDITIONAL AGREEMENTS..................................................................... 27
6.1 Stock Options and Rights.................................................................. 27
6.2 Certain Employee Benefit Matters.......................................................... 27
6.3 Expenses.................................................................................. 27
6.4 Pooling Accounting........................................................................ 27
6.5 Rule 144.................................................................................. 28
6.6 Additional Agreements..................................................................... 28
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER.................................................. 28
7.1 Conditions to Each Party's Obligation to Effect the Merger................................ 28
7.2 Additional Conditions to Acquiror's and Merger Sub's Obligation to Consummate the Merger.. 29
7.3 Additional Conditions to the Company's Obligation to Consummate the Merger................ 29
ARTICLE 8 ESCROW AND INDEMNIFICATION................................................................ 30
8.1 Indemnification........................................................................... 30
8.2 Escrow Fund............................................................................... 31
8.3 Damage Threshold.......................................................................... 31
8.4 Escrow Periods............................................................................ 31
8.5 Claims Upon Escrow Fund................................................................... 32
8.6 Valuation................................................................................. 32
8.7 Objections to Claims...................................................................... 33
8.8 Resolution of Conflicts................................................................... 33
8.9 Shareholders' Agent....................................................................... 33
8.10 Actions of the Shareholders' Agent........................................................ 34
8.11 Claims.................................................................................... 34
ARTICLE 9 MISCELLANEOUS PROVISIONS.................................................................. 35
9.1 Survival of Representations and Covenants................................................. 35
9.2 Transfer Taxes............................................................................ 35
9.3 Notices................................................................................... 35
9.4 Time of the Essence....................................................................... 36
9.5 Headings.................................................................................. 36
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
9.6 Counterparts.............................................................................. 36
9.7 Governing Law............................................................................. 36
9.8 Waiver.................................................................................... 36
9.9 Amendments................................................................................ 36
9.10 Severability.............................................................................. 36
9.11 Parties in Interest....................................................................... 36
9.12 Entire Agreement.......................................................................... 37
9.13 Construction.............................................................................. 37
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of January 10, 2000 (the
"Agreement"),by and among CyberSource Corporation ("Acquiror"), a Delaware
--------- --------
corporation, Aurum Acquisition Corporation ("Merger Sub"), a Delaware
----------
corporation, ExpressGold.com, Inc. (the "Company"), a South Dakota corporation,
-------
and with respect to Section 7.3(c), Donald L. Endres (the "Principal
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Shareholder"). Certain capitalized terms used in this Agreement are defined in
- -----------
Exhibit A.
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WHEREAS, the Boards of Directors of Acquiror, Merger Sub and the Company
each have determined that the acquisition of the Company (including, without
limitation, its goodwill) by Acquiror is in the best interests of their
respective companies and stockholders and presents an opportunity for their
respective companies to achieve long-term strategic and financial benefits, and
accordingly have agreed to effect the merger provided for herein upon the terms
and subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the merger
contemplated herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
----
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests transaction;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
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THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
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the Effective Time Merger Sub shall be merged with and into the Company, the
Company shall be the surviving corporation (the "Surviving Corporation") and the
---------------------
separate existence of Merger Sub shall thereupon cease (the "Merger"). Without
------
limiting the generality of the foregoing, at the Effective Time all property,
rights, powers, privileges and franchises of Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
Immediately following the Effective Time, the Surviving Corporation shall be a
wholly-owned subsidiary of Acquiror.
1.2 Effective Time of the Merger. The Merger shall become effective when
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properly executed articles of merger (the "Articles of Merger"), in such form as
------------------
may be agreed by the parties hereto and as required by the relevant provisions
of the South Dakota Business Corporation Act (the "SDBCA"), has been duly filed
with both the Secretary of State of the State of South Dakota and the Secretary
of State of the State of Delaware, which filings shall be made as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article 7. When used in this Agreement, the term "Effective Time" shall mean
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the date and time at which the Secretary of State of the State of South Dakota
issues a certificate of merger with respect to the Merger.
1
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ARTICLE 2
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THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of the
-------------------------
Company, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended.
2.2 Bylaws. The Bylaws of the Company, as in effect immediately prior to
------
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
2.3 Directors and Officers of Surviving Corporation. The directors of the
-----------------------------------------------
Company shall resign effective as of the Effective Time. The directors of Merger
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial and only
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed.
ARTICLE 3
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CONVERSION OF SECURITIES
3.1 Conversion of Shares.
--------------------
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, and subject to Section 3.4, each
share of common stock, $0.05 par value per share, of the Company ("Company
-------
Stock") that is issued and outstanding immediately prior to the Effective Time
- -----
shall be converted into the right to receive, upon surrender of the certificate
formerly representing such share of Company Stock (the "Certificate"), that
-----------
number of shares of the Common Stock of Acquiror, $0.001 par value per share
("Acquiror Stock"), as equals the Exchange Ratio; provided, however, that each
-------------- -------- -------
share of Company Stock that is held in the treasury of the Company or by any
subsidiary of the Company immediately prior to the Effective Time shall not be
so converted but shall be canceled and retired, and no consideration shall be
delivered in exchange therefor. The "Exchange Ratio" shall be equal to ($75
--------------
million minus the Transaction Costs incurred by the Company) divided by the
average closing stock price of the Acquiror Stock as reported on the Nasdaq
National Market on the ten (10) trading days ending on and including the
Effective Date (the "Closing Stock Price") divided by the number of shares of
-------------------
Company Stock outstanding calculated on a fully diluted basis.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of the common stock, $0.001
par value per share, of Merger Sub that is issued and outstanding immediately
prior to the Effective Time shall be converted into and continue as one share of
the common stock of the Surviving Corporation.
3.2 Options and Rights. All outstanding stock options to purchase Company
------------------
Stock, whether vested or unvested ("Company Stock Options"), and rights to
---------------------
receive Company Stock, whether vested or unvested ("Company Stock Rights"),
--------------------
shall be assumed by Acquiror in accordance with Section 6.1.
3.3 [Intentionally left blank].
3.4 Exchange of Certificates.
------------------------
(a) Within a reasonable period of time after the Effective Time,
Acquiror shall make available, and each holder of shares of Company Stock will
be entitled to receive upon surrender
2
<PAGE>
to American Stock Transfer and Trust Company, acting as exchange agent (the
"Exchange Agent"), certificates representing the number of whole shares of
--------------
Acquiror Stock into which such shares of Company Stock are converted in the
Merger (excluding the Escrow Shares), subject to this Section 3.4. The shares of
Acquiror Stock into which the shares of the Company Stock shall be converted in
the Merger shall be deemed to have been issued at the Effective Time.
(b) As soon as reasonably practicable, but not more than ten (10)
business days after the Effective Time, the Exchange Agent shall mail to each
holder of record of Company Stock (i) a letter of transmittal (which shall
specify that delivery shall be effected only upon delivery of the Certificates
to the Exchange Agent and shall be in such form and have such other provisions
as Acquiror may reasonably specify that are not inconsistent with the terms of
this Agreement) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Acquiror Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor (i) a certificate representing
that number of whole shares of Acquiror Stock and (ii) a check representing the
amount of cash which such holder has the right to receive in respect of the
Certificate so surrendered pursuant to Section 3.7.
3.5 Escrow. As security for part of the Shareholders' indemnification
------
obligations set forth herein, Acquiror will deliver to the Escrow Agent under an
Escrow Agreement dated as of the date hereof by and among Acquiror, the
Shareholders' Agent and the Escrow Agent (the "Escrow Agreement"), ten percent
----------------
(10%) of the aggregate number of shares of Acquiror Stock to be issued pursuant
to Section 3.1 in respect of Company Stock (the "Escrow Fund"). Such shares
-----------
shall be held in escrow on behalf of the Shareholders, on a pro rata basis, in
accordance with each such Shareholder's percentage ownership ("Pro Rata
--------
Portion") of Company Stock immediately prior to the Merger. Such shares ("Escrow
- ------- ------
Shares") shall be held as security for the Shareholders' indemnification
- ------
obligations under Article 8.
3.6 Dividends; Transfer Taxes.
-------------------------
(a) No dividends that are declared on shares of Acquiror Stock after
the Effective Time (if any) will be paid to persons entitled to receive
certificates representing shares of Acquiror Stock until such persons surrender
their Certificates. Upon such surrender, there shall be paid to the person in
whose name the certificates representing such shares of Acquiror Stock shall be
issued any dividends which shall have become payable with respect to such shares
of Acquiror Stock between the Effective Time and the time of such surrender. In
no event shall the person entitled to receive such dividends be entitled to
receive interest on such dividends.
(b) If any certificates for any shares of Acquiror Stock are to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the Person requesting such exchange shall (i) pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for
such shares of Acquiror Stock in a name other than that of the registered holder
of the Certificate surrendered or (ii) establish to the reasonable satisfaction
of the Exchange Agent that such tax has been paid or is not applicable.
(c) Notwithstanding anything in this Agreement to the contrary,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
shares of Company Stock for any shares of Acquiror Stock or dividends thereon or
the cash payments otherwise due hereunder delivered to a public official
pursuant to applicable escheat laws following the passage of time specified
therein.
3.7 No Fractional Shares. Notwithstanding anything herein to the contrary,
--------------------
no fractional shares of Acquiror Stock shall be issued pursuant to the Merger.
In lieu of the issuance of any such
3
<PAGE>
fractional share of Acquiror Stock, cash adjustments will be paid in respect of
any fractional share of Acquiror Stock that would otherwise be issuable. The
amount of such adjustment shall be the product of (i) such fraction of a share
of Acquiror Stock multiplied by (ii) the Closing Stock Price.
3.8 Closing of Company Transfer Books. As of the date hereof, the stock
---------------------------------
transfer books of the Company shall be closed and no Transfer Books transfer of
shares of Company Stock shall thereafter be made. If Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing shares of Acquiror Stock or cash in accordance with
the terms hereof. The holders of shares of Company Stock to be exchanged for
shares of Acquiror Stock pursuant to this Agreement shall cease to have any
rights as shareholders of the Company, except for the right to surrender such
Certificates in exchange for shares of Acquiror Stock as provided hereunder or
such dissenters' rights as are provided under applicable law.
3.9 Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Morrison & Foerster
LLP, 755 Page Mill Road, Palo Alto, California 94304, concurrently with the
execution of this Agreement .
3.10 Supplementary Action. If, at any time after the Effective Time, any
--------------------
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of the Company, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
Company in the name of and on behalf of the Company to execute and deliver any
and all things necessary or proper to vest or to perfect or confirm title to
such property or rights in the Surviving Corporation, and otherwise to carry out
the purposes and provisions of this Agreement.
3.11 Dissenting Shares.
-----------------
(a) Notwithstanding any provisions of this Agreement to the contrary,
any shares of Company Stock held by a holder who has exercised such holder's
dissenters' rights in accordance with the SDBCA and who, as of the Effective
Time, has not effectively withdrawn or lost such dissenter's rights ("Dissenting
----------
Shares"), shall not be converted into or represent a right to receive the
- ------
consideration described in Section 3.1, but the holder of the Dissenting Shares
shall only be entitled to such rights as are granted by the SDBCA.
(b) Notwithstanding the provisions of subsection (a) above, if any
holder of shares of Company Stock who demands dissenters' rights with respect to
such shares shall effectively withdraw or lose (through the failure to perfect
or otherwise) such holder's dissenters' rights under the SDBCA, then, as of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
consideration described in Section 3.1, subject in any event to Section 3.5.
(c) The Company shall give Acquiror (i) prompt written notice of any
written demands for payment with respect to any shares of Company Stock pursuant
to dissenters' rights, and any withdrawals of such demands or losses of such
rights, and any other instruments served pursuant to the SDBCA, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for dissenters' rights. The Company shall not, except with the prior
written consent of Acquiror, voluntarily make any payment with respect to
demands for dissenters' rights or offer to settle or settle any such demands.
4
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ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the disclosure schedule delivered by
the Company to Acquiror at or prior to the execution of this Agreement (the
"Disclosure Schedule"), the parts of which are numbered to correspond to the
- --------------------
Section numbers of this Agreement, the Company hereby represents and warrants to
Acquiror and Merger Sub as follows:
4.1 Due Organization; Good Standing; Authority; Binding Nature of
-------------------------------------------------------------
Agreements.
- ----------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of South Dakota, and has all
necessary corporate power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted and in the manner in
which its business is proposed to be conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used and in the manner
in which its assets are proposed to be owned and used; (iii) to perform its
obligations under all Company Contracts; and (iv) to enter into and perform all
of its obligations under the Transactional Agreements.
(b) The Company has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or name other than the name set forth in its articles of
incorporation, as amended.
(c) The Company is duly qualified and in good standing as a foreign
corporation in each of the jurisdictions in which the nature of its business or
the ownership or leasing of its properties requires such qualification. Section
4.1(c) of the Disclosure Schedule sets forth a true and complete list of each
jurisdiction in which the Company has an officer or a paid representative
(employee or consultant) or owns or leases property and of each jurisdiction in
which the Company is qualified to do business.
(d) Section 4.1(d) of the Disclosure Schedule accurately sets forth
(i) the names of the members of the Company's board of directors and (ii) the
names and titles of the Company's officers. The Company has no committee of the
Company's board of directors.
(e) Neither the Company nor any of its shareholders has ever
approved, or commenced any proceeding or made any election contemplating, the
dissolution or liquidation of the Company or the winding up or cessation of the
Company's business or affairs.
(f) The Company has no subsidiaries, and the Company has never owned,
beneficially or otherwise, any shares or other securities of, or any direct or
indirect interest of any nature in, any Entity.
(g) The execution, delivery and performance of the Transactional
Agreements to which the Company is a party have been duly authorized by all
necessary action on the part of Company, its officers, its board of directors,
and its shareholders.
(h) Each of the Transactional Agreements to which the Company is a
party constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms and conditions.
5
<PAGE>
4.2 Articles of Incorporation and Bylaws; Records.
---------------------------------------------
(a) The Company has delivered to Acquiror accurate and complete
copies of: (i) The Company's articles of incorporation and bylaws, including all
amendments thereto; (ii) the stock records of the Company; and (iii) 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 and the board of directors of the Company. There have been no
meetings or other proceedings of the shareholders of the Company or the board of
directors of the Company that are not reflected in such minutes or other
records.
(b) There has not been any violation of any of the provisions of the
Company's articles of incorporation or bylaws or of any resolution adopted by
the Company's shareholders or the Company's board of directors, and to the
Knowledge of the Company no event has occurred, and no condition or circumstance
exists, that likely would (with or without notice or lapse of time) constitute
or result directly or indirectly in such a violation.
(c) The books of account, stock records, minute books and other
records of the Company are accurate, up to date and complete, and have been
maintained in accordance with sound and prudent business practices. All of the
records of the Company are in the actual possession and direct control of the
Company.
4.3 Capitalization; Ownership of Stock. As of the date of this Agreement
----------------------------------
and as of the Closing:
(a) The authorized capital stock of the Company consists of forty
million (40,000,000) shares of Common Stock, $0.05 par value per share. As of
the date of this Agreement, the outstanding capital of the Company consists of
(i) one million one hundred seventy-nine thousand two hundred (1,179,200) shares
of Common Stock, (ii) options to purchase nine thousand two hundred fifty
(9,250) shares of Common Stock, and (iii) rights to receive forty-five thousand
(45,000) shares of Common Stock. All of such Common Stock, options and rights
are owned of record by the shareholders, optionholders and rightholders,
respectively. Section 4.3 of the Disclosure Schedule includes a list of all
Company Stock Options and Company Stock Rights as of the date hereof, including
the name of each holder of Company Stock Options and Company Stock Rights, the
date of grant, the number of shares of Company Stock subject to such options and
rights, the vesting commencement date and the vesting schedule.
(b) All of the shares of Company Stock currently outstanding (i) have
been duly authorized and validly issued, (ii) are fully paid and nonassessable,
and (iii) have been issued in full compliance with all applicable securities
laws and other applicable Legal Requirements. The Company has delivered to
Acquiror accurate and complete copies of the stock certificates evidencing the
currently outstanding shares of Common Stock.
(c) There is no (i) outstanding preemptive right, 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) condition or circumstance that likely would directly or
indirectly 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.
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(d) The Company has neither repurchased, redeemed or otherwise
reacquired, and has not agreed, committed or offered (in writing or otherwise)
to reacquire, any shares of capital stock or other securities. Any securities
reacquired by the Company were (or will have been) reacquired in full compliance
with the applicable provisions of all applicable Legal Requirements.
4.4 Financial Statements.
--------------------
(a) The Company has delivered to Acquiror the unaudited balance sheet
of the Company as of December 31, 1999 (the "Unaudited Interim Balance Sheet")
-------------------------------
and related unaudited statements of operations for the twelve months then ended
(collectively, the "Financial Statements").
--------------------
(b) All of the Financial Statements are accurate and complete in all
material respects. The Financial Statements are in accordance with the books and
records of the Company, present fairly the financial position of the Company as
of the respective dates thereof and the results of operations of the Company for
the period covered thereby, and have been prepared in conformity with GAAP,
subject to normal recurring year-end adjustments, the effect of which will not
be material, and the absence of notes and statements of cash flows and changes
in shareholders' equity.
(c) At the date of the Unaudited Interim Balance Sheet, (i) the
Company had no Liabilities of any nature (matured or unmatured, fixed or
contingent) required by GAAP to be provided for in such Unaudited Interim
Balance Sheet which were not provided for, (ii) the Company had no material
Liabilities of any nature (matured or unmatured, fixed or contingent) which were
not required by GAAP to be provided for in the Unaudited Interim Balance Sheet
and (iii) all reserves established by the Company and set forth in the Unaudited
Interim Balance Sheet were adequate for the purposes for which they were
established.
(d) As of the date of this Agreement, the Company has no Liabilities
in excess of $25,000 individually or in the aggregate, except for (i)
Liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; and (ii) accounts payable and Liabilities (of the type
required to be reflected as current liabilities in the "liabilities" column of a
balance sheet prepared in accordance with GAAP) incurred and accrued by the
Company in the Ordinary Course of Business since the date of the Unaudited
Interim Balance Sheet.
4.5 Absence of Changes. Since December 31, 1999:
------------------
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance,
results of operations or prospects, and, to the Company's Knowledge, no event
has occurred that likely would have a materially adverse effect on the Company's
business, condition, assets, liabilities, operations, financial performance,
results of operations or prospects;
(b) there has not been any material loss, damage or destruction to,
or any interruption in the use of, any of the Company's assets (whether or not
covered by insurance);
(c) the Company has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold or otherwise issued any shares of
capital stock or any other securities;
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(e) the Company has not amended its articles of incorporation or
bylaws and has not effected or been a party to any recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(f) the Company has not purchased or otherwise acquired any asset
from any other Person, except for assets acquired by the Company in the Ordinary
Course of Business;
(g) the Company has not leased or licensed any asset from any other
Person except for assets leased or licensed in the Ordinary Course of Business;
(h) the Company has not made any individual capital expenditure,
measured by invoice amount, in excess of $10,000;
(i) the Company has not sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
the Company from its inventory or licenses granted in the Ordinary Course of
Business;
(j) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness, except in the Ordinary Course of Business;
(k) the Company has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except in the Ordinary Course of Business;
(l) the Company has not made any loan or advance to any other Person,
including without limitation, any shareholder of the Company;
(m) the Company has not (i) established or adopted any Employee
Benefit Plan or (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 other than increases for non-officer employees consistent
with the Company's review and compensation policies in force prior to the date
of this Agreement;
(n) the Company has not entered into, and neither the Company nor any
of the assets owned or used by the Company has become bound by, any Contract,
except in the Ordinary Course of Business;
(o) no Contract by which the Company or any of the assets owned or
used by the Company is or was bound, or under which the Company has or had any
rights or interest, has been amended or terminated, except in the Ordinary
Course of Business;
(p) there has been no borrowing or agreement to borrow by the Company
or change in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise or grant of a mortgage or security
interest in any property of the Company, and the Company has not incurred,
assumed or otherwise become subject to any Liabilities, other than accounts
payable (of the type required to be reflected as current liabilities on a
balance sheet prepared in accordance with GAAP) incurred by the Company in the
Ordinary Course of Business;
(q) the Company has not discharged any Encumbrance or discharged or
paid any indebtedness or other Liability, except any that (i) are reflected as
current liabilities in the Unaudited
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<PAGE>
Interim Balance Sheet or have been incurred by the Company since the date
thereof in the Ordinary Course of Business, and (ii) have been discharged or
paid in the Ordinary Course of Business;
(r) the Company has not forgiven any debt or otherwise released or
waived any right or claim;
(s) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(t) the Company has not entered into any transaction or taken any
other action outside the Ordinary Course of Business; and
(u) the Company has not agreed or committed (in writing or otherwise)
to take any of the actions referred to in clauses (c) through (t) above.
4.6 Title to Assets; Equipment; Real Property, Leases; Inventory.
------------------------------------------------------------
(a) The Company owns, and has good, valid and marketable title to,
all assets (other than Proprietary Assets) it purports to own, including (i) all
assets reflected on the Unaudited Interim Balance Sheet except for inventory
sold by the Company since the date thereof in the Ordinary Course of Business;
(ii) all assets acquired by the Company since the date of the Unaudited Interim
Balance Sheet except for inventory sold by the Company since the date of the
Unaudited Interim Balance Sheet in the Ordinary Course of Business; (iii) all
assets referred to in Section 4.6(b) of the Disclosure Schedule and all of the
Company's rights under Company Contracts; and (iv) all other assets reflected in
the Company's books and records as being owned by the Company. All of said
assets are owned by the Company free and clear of any Encumbrances, except liens
for current taxes and assessments not delinquent.
(b) Section 4.6(b) of the Disclosure Schedule identifies all
equipment, furniture, fixtures, improvements and other tangible and intangible
assets owned by or leased to the Company with a value greater than $10,000, and
sets forth the original cost and book value of each of said assets.
(c) To the Knowledge of the Company, each asset identified in Section
4.6(b) of the Disclosure Schedule (i) is free of defects and deficiencies and in
good condition and repair, consistent with its age and intended use (ordinary
wear and tear excepted); (ii) complies in all material respects, and is being
operated and otherwise used in material compliance, with all applicable Legal
Requirements; and (iii) is adequate for the uses to which it is being put.
(d) The Company does not own any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Section 4.6(d) of the Disclosure Schedule (the "Leased Premises").
---------------
Section 4.6(d) of the Disclosure Schedule provides an accurate and complete
description of the premises covered by said leases and the facilities located on
such premises. The Company enjoys peaceful and undisturbed possession of such
premises. The Company has delivered to Acquiror complete copies of all such
leases. The Company holds a valid leasehold interest in such leases, in each
case free and clear of all title defects, Encumbrances and restrictions of any
kind, except: (i) mechanics', carriers', workers' and other similar liens
arising in the Ordinary Course of Business and (ii) liens for current taxes not
yet due and payable.
(e) The Company has not leased or licensed any personal property
assets.
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<PAGE>
(f) All leases pursuant to which the Company leases real or personal
property are valid and effective in accordance with their respective terms and,
to the Company's Knowledge, there exists no default thereunder or occurrence or
condition which could result in a default thereunder or termination thereof.
(g) The Company's Leased Premises are in a condition adequate for the
conduct of the business in the Ordinary Course of Business.
4.7 Bank Accounts. Section 4.7 of the Disclosure Schedule accurately sets
-------------
forth, with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution:
(a) the name and location of the institution at which such account is
maintained;
(b) the name in which such account is maintained and the account
number of such account;
(c) a description of such account and the purpose for which such
account is used;
(d) the current balance in such account;
(e) the rate of interest being earned on the funds in such account;
and
(f) the names of all individuals authorized to draw on or make
withdrawals from such account.
There are no safe deposit boxes or similar arrangements maintained by or for the
benefit of the Company.
4.8 Receivables; Major Customers.
----------------------------
(a) Section 4.8 of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts and notes receivable and a list of
all other receivables of the Company as of December 31, 1999.
(b) 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 receivable that have arisen since such
date and have not yet been collected) (i) represent valid obligations of
customers of the Company arising from bona fide transactions entered into in the
Ordinary Course of Business; and (ii) are current. The Company does not have any
knowledge of any fact which causes it to believe that such accounts receivable,
in the aggregate, will not be collected in full (without any counterclaim or
setoff), net of reserves, on or before the later of 90 days from the date of
invoice or 60 days from the date hereof.
(c) Section 4.8(c) of the Disclosure Schedule accurately identifies,
and provides an accurate and complete list of the revenues received from, each
customer or other Person that accounted for more than $10,000 of the gross
revenues of the Company during fiscal year 1999. The Company has not received
any notice or other communication (in writing or otherwise), or received any
other information, indicating that any customer or other Person identified in
Section 4.8(c) of the Disclosure Schedule may cease dealing with the Company or
may otherwise reduce the volume of business transacted by such Person with the
Company below historical levels.
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<PAGE>
(d) The Company has provided to Acquiror a copy of the Company's
standard form of customer contract for each product or service it offers to
customers, and all the Company's customer relationships are governed by such
standard contracts. The Company has no oral contracts or agreements to deliver
products or provide services.
4.9 Assets of Ultimate Parent Entity.
--------------------------------
The Principal Shareholder is the "ultimate parent entity" (as such term is
defined in 16 C.F.R. Section 801.1(a)(3)) of the Company. The Principal
Shareholder, together with any entity controlled by the Principal Shareholder,
does not have assets having an aggregate book value of $10 million or more
(determined in accordance with 16 C.F.R. Section 801.11). Neither the Principal
Shareholder nor any company controlled by the Principal Shareholder is "engaged
in manufacturing" as such term is defined in 16 C.F.R. Section 801.1(j). The
term "controlled by" as used in this Section 4.9 shall have the meaning set
forth in 16 C.F.R. 801.1(b). This representation and warranty is made solely for
the purpose of determining the applicability to the transactions contemplated by
this Agreement of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
4.10 Proprietary Assets.
------------------
(a) Schedule 4.10 of the Disclosure Schedule sets forth each of the
following Proprietary Assets owned by or licensed to the Company or otherwise
used in connection with the Company's business: all United States and foreign
(i) patent and patent applications; (ii) registered trademarks and trademark
applications; (iii) registered copyrights and applications for copyright
registration; (iv) mask work registrations and applications to register mask
works; and (v) any other such Proprietary Asset that is the subject of an
application to, or certificate or registration issued by, any state, government
or other public legal authority.
(b) All material designs, drawings, specifications, schematics,
designs, source code, object code, scripts, documentation, flow charts,
diagrams, data lists, databases, compilations and information incorporating,
embodying or reflecting any of the Proprietary Assets of the Company at any
stage of their development were written, developed and created solely and
exclusively by employees of the Company without the assistance of any third
party or entity, or were created by third parties who entered into
work-made-for-hire agreements, who in each case assigned ownership of their
rights to the Company by means of valid and enforceable assignment agreements in
the form of the agreement made available to Acquiror or whose rights vested
directly in the Company. The Company has taken reasonable measures and
precautions necessary to protect the Company's rights in each Proprietary Asset
that is owned by or licensed to the Company or that is otherwise used in
connection with the Company's business.
(c) The Company has not granted any third party any right to
manufacture, reproduce, license, use, distribute, market or exploit any of its
Proprietary Assets or any adaptations, translations, or derivative works based
on the Proprietary Assets or any portion thereof. No Proprietary Asset is a
"derivative work" of any original work currently owned by a third party as the
term "derivative work" is defined in the United States Copyright Act, Title 17,
U.S.C. Section 101.
(d) All current and former employees of the Company have executed a
Confidentiality and Assignment Agreement substantially in the form attached as
Exhibit B. Such agreements constitute valid and binding obligations of the
- ---------
Company and such person, enforceable in accordance with their respective terms.
To the Knowledge of the Company, no such employee is in violation thereof. The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any Company employees made prior to
their employment by the
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<PAGE>
Company, except for inventions, trade secrets or proprietary information
identified in Schedule 4.10(d) of the Disclosure Schedule, which have been
assigned to the Company. The Company has never engaged any consultants.
(e) To the actual Knowledge of the Company, none of the Proprietary
Assets owned or used by the Company violate or infringe or, if used in the
Company's business as currently proposed to be conducted by the Company, would
violate or infringe, any license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of others. To the
actual Knowledge of the Company, the Company is not infringing and has not at
any time infringed or received any notice or other communication (in writing or
otherwise) of any actual, alleged, possible or potential infringement of any
Proprietary Asset owned or used by any other Person. To the Company's actual
Knowledge, no Person is infringing, and no Proprietary Asset owned or used by
any other Person infringes or conflicts with, any Proprietary Asset owned or
used by the Company. The Company has not entered into any agreement to indemnify
any other Person against any charge of infringement, misappropriation or other
conflict with respect to any Proprietary Asset.
(f) There are no royalties, honoraria, fees or other payments payable
by the Company to any person by reason of the ownership, use, license, sale or
disposition of any Proprietary Asset of the Company.
(g) The Proprietary Assets owned by or licensed to the Company
include all Proprietary Assets necessary to conduct the Company's business to
the same extent and in the same manner as currently conducted. To the actual
Knowledge of the Company, such ownership or right to use, and to license others
to use, are free and clear of, and without liability under, all claims and right
of third parties (other than the licensor).
(h) All proprietary software developed by the Company and currently
sold, licensed or otherwise used by the Company in its business is free from
significant programming errors, operates in substantial conformity with its user
documentation and other descriptions and standards applicable thereto provided
by the Company, and does not contain any virus, timer, clock, counter, or other
limiting design, instruction or routine, that would, without the user's
knowledge and consent, erase data or programming code or cause such software to
become inoperable or otherwise incapable of being used in the full manner for
which it was designed and created, except, in each case, to the extent such
errors, nonconformity or other matter is immaterial.
4.11 Contracts.
---------
(a) Section 4.11 of the Disclosure Schedule lists each of the
following Company Contracts:
(i) any Company Contract or series of related Company Contracts
requiring in the aggregate payments after the date hereof
by or to the Company of more than $10,000;
(ii) any Company Contract with or for the benefit of any current
or former officer, director, stockholder, employee or
consultant of the Company;
(iii) any Company Contract with any labor union or association
representing any employee of the Company;
12
<PAGE>
(iv) any Company Contract for the purchase of materials,
supplies, equipment, merchandise or services that contain
an escalation, renegotiation or redetermination clause or
that obligate the Company to purchase all or substantially
all of its requirements of a particular product from a
supplier, or for periodic minimum purchases of a
particular product from a supplier;
(v) any Company Contract for sale of any of the assets or
properties of the Company other than in the Ordinary
Course of Business or for the grant to any Person of any
options, rights of first refusal, or preferential or
similar rights to purchase any such assets or properties;
(vi) any agreement of surety, guarantee or indemnification,
other than agreements in the Ordinary Course of Business
with respect to obligations in an aggregate amount not in
excess of $25,000;
(vii) any Company Contract containing covenants of the Company
not to compete in any line of business, in any geographic
area or with any Person or covenants of any other Person
not to compete with the Company or in any line of business
of the Company;
(viii) any Company Contract granting or restricting the right of
the Company to use any Proprietary Assets;
(ix) any Company Contract with customers or suppliers for the
sharing of fees, the rebating of charges or other similar
arrangements;
(x) any Company Contract with any holder of securities of the
Company as such (including, without limitation, any
Company Contract containing an obligation to register any
of such securities under any federal or state securities
laws);
(xi) any Company Contract obligating the Company to deliver
services or product enhancements or containing a "most
favored nation" pricing clause;
(xii) any Company Contract relating to the acquisition by the
Company of any operating business or the capital stock of
any other person;
(xiii) any Company Contract requiring the payment to any Person
of a brokerage or sales commission or a finder's or
referral fee (other than arrangements to pay commission or
fees to employees in the Ordinary Course of Business);
(xiv) any Company Contract or note relating to or evidencing
outstanding indebtedness for borrowed money;
(xv) any lease, sublease or other Company Contract under which
the Company is lessor or lessee of any real property or
equipment or other tangible property with respect to
obligations in excess of $50,000; and
13
<PAGE>
(xvi) any other material Company Contract whether or not made in
the Ordinary Course of Business.
(b) Each Company Contract is valid and in full force and effect, and
is enforceable by the Company in accordance with its material terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity.
(c) Neither the Company nor, to the Knowledge of the Company, any
party to a Company Contract is in default under any Company Contract. To the
Company's Knowledge, no event has occurred, and no circumstance or condition
exists, that likely would (with or without notice or lapse of time) (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 or hinder
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. The Company has not waived any
of its rights under any Company Contract, except in the Ordinary Course of
Business.
(d) To the Company's Knowledge, each Person against which the Company
has or may acquire any rights under any Company Contract is solvent and is able
to satisfy all of such Person's current and future monetary obligations and
other obligations and Liabilities to the Company.
(e) (i) The Company has never guaranteed or otherwise agreed to
cause, insure or become liable for, and has never pledged any of its assets to
secure, the performance or payment of any obligation or other Liability of any
other Person except in the Ordinary Course of Business; and (ii) the Company has
never been a party to or bound by (A) any joint venture agreement, partnership
agreement, profit sharing agreement, cost sharing agreement, loss sharing
agreement or similar Contract, or (B) any Contract that creates or grants to any
Person, or provides for the creation or grant of, any stock appreciation right,
phantom stock right or similar right or interest.
(f) To the Knowledge of the Company, the performance of the Company
Contracts will not result in any violation of or failure to comply with any
Legal Requirement.
(g) No Person is materially renegotiating, nor has the contractual
right to materially renegotiate, any amount paid or payable to the Company under
any Company Contract or any other material term or provision of any Company
Contract.
(h) Schedule 4.11(h) of the Disclosure Schedule identifies and
provides an accurate and brief description of each proposed Contract as to which
any bid, offer, written proposal, term sheet or similar document has been
submitted or received by the Company that would commit the Company to deliver
goods or provide services with a value in excess of $10,000 and is outstanding.
(i) No party to any Company Contract has notified the Company or made
a claim to the effect that the Company has failed to perform an obligation
thereunder. In addition, to the Knowledge of the Company, there is no plan,
intention or indication of any contracting party to any Company Contract to
cause the termination, cancellation or modification of such Contract or to
reduce or otherwise change its activity thereunder so as to adversely affect the
benefits derived or expected to be derived therefrom by the Company.
4.12 Compliance With Legal Requirements.
----------------------------------
(a) The Company is in compliance with each material Legal Requirement
that is applicable to it or to the conduct of its business or the ownership or
use of any of its assets.
14
<PAGE>
(b) To the Knowledge of the Company, no event has occurred, and no
condition or circumstance exists, that likely would (with or without notice or
lapse of time) constitute or result directly or indirectly in a violation by the
Company of, or a failure on the part of the Company to comply with, any material
Legal Requirement.
(c) The Company has not received at any time any notice or other
communication (in writing or otherwise) from any Governmental Body, or any other
Person, regarding (i) any actual, alleged, possible or potential violation of,
or failure to comply with, any Legal Requirement, or (ii) any actual, alleged,
possible or potential obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any cleanup or any remedial, corrective
or response action of any nature.
(d) To the actual Knowledge of the Company, no Governmental Body has
proposed or is considering any Legal Requirement (other than any Legal
Requirement that would be applicable generally to the Internet stored value
industry) that, if adopted or otherwise put into effect, would specifically
affect the Company and (i) may have a materially adverse effect on the Company's
business, condition, assets, liabilities, operations, financial performance,
results of operations or prospects or on the ability of the Company to comply
with or perform any covenant or obligation under this Agreement or any of the
other Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
4.13 Governmental Authorizations.
---------------------------
(a) There is no (i) Governmental Authorization that is held by the
Company; or (ii) other Governmental Authorization that, to the Knowledge of the
Company, is held by any of the Company's employees and is used in connection
with the Company's business. The Company has delivered to Acquiror accurate and
complete copies of all of the Governmental Authorizations identified in Section
4.13 of the Disclosure Schedule, if any, including all renewals thereof and all
amendments thereto. To the Company's Knowledge, each Governmental Authorization
identified or required to be identified in Section 4.13 of the Disclosure
Schedule, if any, is valid and in full force and effect.
(b) The Governmental Authorizations identified in Section 4.13 of the
Disclosure Schedule, if any, constitute all of the Governmental Authorizations
necessary (i) to enable the Company to conduct its business in the manner in
which its business is currently being conducted and (ii) to permit the Company
to own and use its assets in the manner in which they are currently owned and
used.
4.14 Tax Matters.
-----------
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by the Company (whether pursuant to any Tax
Return or otherwise) has been duly paid in full on a timely basis. Any Tax
required to have been withheld or collected by the Company has been duly
withheld and collected, and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body.
(b) Section 4.14(b) of the Disclosure Schedule accurately identifies
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
date hereof ("Company Returns"). All Company Returns (i) have been or will be
---------------
filed when due, and (ii) have been, or will be when filed, accurately and
completely prepared in material compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the date hereof, and all amounts otherwise payable in connection with the
Company Returns on or before the date hereof, have been paid. The Company has
delivered to Acquiror accurate and complete copies of Company Returns filed by
the Company.
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<PAGE>
(c) The Company's liability for unpaid Taxes for all periods ending
on or before the date of the Financial Statements does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred taxes) reported in the Financial Statements. The Company
has established in the Ordinary Course of Business reserves for the payment of
all Taxes for the period from the date of the Financial Statements through the
date hereof and has disclosed the dollar amount of such reserves to the
Acquiror.
(d) Section 4.14(d) of the Disclosure Schedule accurately identifies
each examination or audit of any Company Return that has been conducted by any
Governmental Body. The Company has delivered to Acquiror accurate and complete
copies of all audit reports and similar documents relating to Company Returns.
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.
(e) No claim or other Proceeding is pending or to the Company's
Knowledge 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. 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 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. The Company is in compliance with the terms and conditions of any
applicable Tax exemptions, Tax agreements or Tax orders of any Governmental Body
to which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse effect on such
compliance.
(f) 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, individually or collectively, could
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.
(g) All stock options that the Company has treated as incentive stock
options under Section 421 of the Code meet the requirements of Section 422 of
the Code.
(h) The Company has no net operating losses or other tax attributes
presently subject to limitation under Code Sections 382, 383, or 384.
(i) The Company is not liable for Taxes incurred by any individual,
trust, corporation, partnership or other entity other than Company, either as a
transferee or pursuant to Treasury Regulations Section 1.1502-6, or pursuant to
any other provision of federal, state or local law or regulation. 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.
(j) The Company is not a party to any joint venture, partnership or
other arrangement or contract which could be treated as a partnership for United
States federal income tax purposes.
(k) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and has not been
a United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
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(l) The Company has qualified as an S corporation (within the meaning
of Section 1361 of the Code and similar provisions of South Dakota law) since
its inception and has duly elected to be an S corporation (under the provisions
of Section 1362 of the Code and similar provisions of South Dakota law) for all
taxable periods since inception. Such elections have not been revoked or
terminated at any time and are in full force and effect as of the date hereof.
4.15 Employee and Labor Matters.
--------------------------
(a) Section 4.15(a) of the Disclosure Schedule accurately sets forth,
with respect to each employee of the Company (including any employee of the
Company who is on a leave of absence or on layoff status) (i) the name of such
employee and the date as of which such employee was originally hired by the
Company; (ii) such employee's title; (iii) such employee's annualized
compensation as of the date of this Agreement; (iv) each Current Benefit Plan in
which such employee participates or is eligible to participate; and (v) any
Governmental Authorization that is held by such employee and that is used in
connection with the Company's business.
(b) Section 4.15(b) of the Disclosure Schedule contains a list of
individuals who are currently performing services exclusively for the Company
and are classified as "consultants" or "independent contractors," and the
respective compensation of each such "consultant" or "independent contractor."
(c) There is no former employee of the Company who is receiving or is
scheduled to receive (or whose spouse or other dependent is receiving or is
scheduled to receive) any benefits (whether from the Company or otherwise)
relating to such former employee's employment with the Company, other than
health benefits as required under Section 4980B of the Code and Sections 601
through 608 of ERISA, in each case to be paid at such former employee's expense,
and governmental benefits attributable to payroll taxes which benefits are to be
paid directly from governmental sources and not by the employer.
(d) The Company is not a party to or bound by any employment
agreement or any union contract, collective bargaining agreement or similar
Contract.
(e) The employment of each of the Company's employees is terminable
by the Company at will. The Company has delivered to Acquiror accurate and
complete copies of all employee manuals and handbooks, disclosure materials,
policy statements, employment agreements and other materials relating to the
employment of the current employees of the Company.
(f) To the Knowledge of the Company (i) no employee of the Company
intends to terminate his or her employment with the Company and the Company does
not have a present intention to terminate the employment of any employee; (ii)
no employee of the Company has received since June 30, 1999, nor is currently
considering, an offer to join a business that likely would be competitive with
the Company's business; and (iii) no employee of the Company is a party to or is
bound by any confidentiality agreement, noncompetition agreement or other
Contract (with any Person) that likely would have an adverse effect on (A) the
performance by such employee of any of his or her duties or responsibilities as
an employee of the Company, or (B) the Company's business or operations.
(g) To the Company's Knowledge, the Company is not engaged, and has
never been engaged, in any unfair labor practice of any nature. There has never
been any slowdown, work stoppage, labor dispute or union organizing activity, or
any similar activity or dispute, affecting the Company or any of its employees.
There is not now pending, and to the Knowledge of the Company no Person has
threatened to commence, any such slowdown, work stoppage, labor dispute or union
organizing activity
17
<PAGE>
or any similar activity or dispute, nor has any event occurred, nor does any
condition or circumstance exist, that likely would directly or indirectly give
rise to or provide a basis for the commencement of any such slowdown, work
stoppage, labor dispute or union organizing activity or any similar activity or
dispute.
(h) To the Company's Knowledge, each employee of the Company is in
compliance with all applicable visa and work permit requirements, and no visa or
work permit held by an employee of the Company will expire during the six (6)
month period beginning at the date of this Agreement.
4.16 Benefit Plans; ERISA.
--------------------
(a) Section 4.16 of the Disclosure Schedule lists (i) all Employee
Benefit Plans maintained by the Company or any ERISA Affiliate, (ii) all
employment agreements, including, but not limited to, any individual benefit
arrangement, policy or practice with respect to any current or former employee
or director of the Company or any ERISA Affiliate, and (iii) all other employee
benefit, bonus or other incentive compensation, stock option, stock purchase,
stock appreciation, severance pay, lay-off or reduction in force, change in
control, sick pay, vacation pay, salary continuation, retainer, leave of
absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, which the Company or any ERISA Affiliate maintains, contributes to or has
any obligation to or liability for (collectively, the "Plans").
(b) None of the Plans is a Defined Benefit Plan, and neither the
Company nor any ERISA Affiliate has ever sponsored, maintained or contributed
to, or ever been obligated to contribute to, a Defined Benefit Plan.
(c) None of the Plans is a Multiemployer Plan, and neither the
Company nor any ERISA Affiliate has ever contributed to, or ever been obligated
to contribute to, a Multiemployer Plan.
(d) The Company does not maintain or contribute to any welfare
benefit plan that provides health benefits to an employee after the employee's
termination of employment or retirement except as required under Section 4980B
of the Code and Sections 601 through 608 of ERISA.
(e) Each Plan that is an Employee Benefit Plan complies by its terms
and in operation in all material respects with the requirements provided by any
and all statutes, orders or governmental rules or regulations currently in
effect and applicable to the Plan, including but not limited to ERISA and the
Code.
(f) All reports, forms and other documents required to be filed with
any Governmental Body with respect to any Plan (including without limitation,
summary plan descriptions, Forms 5500 and summary annual reports) have been
timely filed and are accurate in all material respects.
(g) Each Plan intended to qualify under Section 401(a) of the Code is
the subject of a favorable determination letter issued by the Internal Revenue
Service that provides that it so qualifies through the last day of the "TRA 86
Remedial Amendment Period," as such term is defined in Section 3.02 of Revenue
Procedure 96-55 issued by the Internal Revenue Service and that its related
trust is exempt from taxation under Section 501 of the Code. To the Company's
Knowledge, nothing has occurred since the date of the Internal Revenue Service's
favorable determination letter that could adversely affect the qualification of
such Plan or the tax exempt status of its related trust.
(h) All contributions for all periods ending prior to the Closing
(including periods from the first day of the current plan year to the Closing)
have been made prior to the Closing by the
18
<PAGE>
Company in accordance with past practice and the recommended contribution in any
applicable actuarial report.
(i) All insurance premiums have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to the
Plans for plan years ending on or before the Closing.
(j) With respect to each Plan:
(i) no prohibited transactions (as defined in Section 406 or
407 of ERISA or Section 4975 of the Code) have occurred for
which an exemption is not available;
(ii) no action or claims (other than routine claims for benefits
made in the ordinary course of Plan administration for
which Plan administrative review procedures have not been
exhausted) are pending, threatened or imminent against or
with respect to the Plan, any employer who is participating
(or who has participated) in any Plan or any fiduciary (as
defined in Section 3(21) of ERISA) of the Plan;
(iii) neither the Company nor any fiduciary has any Knowledge of
any facts which could give rise to any such action or
claim; and
(iv) it provides that it may be amended or terminated at any
time and, except for benefits protected under Section 411(d) of the Code or
otherwise vested, all benefits payable to current, terminated employees or any
beneficiary may be amended or terminated by the Company at any time without
liability.
(k) Neither the Company nor any ERISA Affiliate has any liability or
is threatened with any liability (whether joint or several) (i) for any excise
tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code, or (ii) to a
fine under Section 502 of ERISA.
(l) All of the Plans listed in the Disclosure Schedule, to the extent
applicable, are in material compliance with the continuation of group health
coverage provisions contained in Section 4980B of the Code and Sections 601
through 608 of ERISA.
(m) True, correct and complete copies of all documents creating or
evidencing any Plan listed in the Disclosure Schedule have been delivered to
Acquiror, and true, correct and complete copies of all reports, forms and other
documents required to be filed with any governmental entity (including, without
limitation, summary plan descriptions, Forms 5500 and summary annual reports for
all plans subject to ERISA) have been delivered to Acquiror. There are no
negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by the type of agreements
listed in the Disclosure Schedule.
(n) All expenses and liabilities relating to all of the Plans
described in the Disclosure Schedule have been, and will on the Closing be fully
and properly accrued on the Company's books and records and disclosed in
accordance with generally accepted accounting principles and in Plan financial
statements.
19
<PAGE>
4.17 Environmental Matters. The Company is and, to the Knowledge of the
---------------------
Company, has been at all times in compliance in all material respects with all
Environmental Laws. The Company has now and at all times has had all the
necessary permits required under Environmental Laws for the operation of its
business, and is not and has not been in violation of any of the terms and
conditions of any of its permits in any material respect. The Company has not
received any notice or other communication (in writing or otherwise) that
alleges that the Company is not in compliance with any Environmental Law. The
Company has not generated, manufactured, produced, transported, imported, used,
treated, refined, processed, handled, stored, discharged, released, or disposed
of any Hazardous Materials (whether lawfully or unlawfully) at any of the Leased
Premises occupied or controlled by the Company on or at any time prior to the
date hereof other than common household and office products in de minimis
quantities. To the actual Knowledge of the Company: (a) there are not and have
not been any releases or threatened releases of any Hazardous Materials in any
quantity (other than common household and office products in de minimis
quantities) at, on, or from the Leased Premises, (b) there are no circumstances
that may prevent or interfere with the Company's compliance with any
Environmental Law, and (c) no former owner or user of the Leased Premises
engaged in any type of manufacturing or commercial activity which might be
reasonably expected to generate, manufacture, produce, transport, import, use,
treat, refine, process, handle, store, discharge, release, or dispose of any
Hazardous Materials (whether lawfully or unlawfully) on the Leased Premises.
4.18 Sale of Products; Performance of Services. Except as provided in its
-----------------------------------------
merchant agreements, copies of which have been provided to Acquiror, the Company
has not made any express warranties or guarantees relating to its products that
are in effect as of the date hereof. No customer or other Person has ever
asserted or threatened to assert any material claim against the Company (i)
under or based upon any warranty provided by or on behalf of the Company, or
(ii) under or based upon any other warranty relating to any product sold by the
Company or any services performed by the Company. To the Knowledge of the
Company, no event has occurred, and no condition or circumstance exists, that
likely would (with or without notice or lapse of time) directly or indirectly
give rise to or serve as a basis for the assertion of any such claim. The
Company has received no customer complaints pursuant to which the Company gave a
credit or accepted a product return for a refund in either case in excess of
$1,000.
4.19 Insurance.
---------
(a) Section 4.19 of the Disclosure Schedule accurately sets forth,
with respect to each insurance policy maintained by or at the expense of, or for
the direct or indirect benefit of, the Company:
(i) the name of the insurance carrier that issued such policy
and the policy number of such policy;
(ii) whether such policy is a "claims made" or an "occurrences"
policy;
(iii) a description of the coverage provided by such policy and
the material terms and provisions of such policy (including
all applicable coverage limits, deductible amounts and co-
insurance arrangements);
(iv) the annual premium payable with respect to such policy, and
the cash value (if any) of such policy; and
(v) a description of any claims pending, and any claims that
have been asserted in the past, with respect to such
policy.
20
<PAGE>
Section 4.19 of the Disclosure Schedule also identifies (1) each pending
application for insurance that has been submitted by or on behalf of the Company
and (2) each self-insurance or risk-sharing arrangement affecting the Company or
any of its assets. The Company has delivered to Acquiror accurate and complete
copies of all of the insurance policies identified in Section 4.19 of the
Disclosure Schedule (including all renewals thereof and endorsements thereto)
and binders relating thereto indicating that such policies are in full force and
effect as of the date hereof, and all of the pending applications identified in
Section 4.19 of the Disclosure Schedule.
(b) Each of the policies identified in Section 4.19 of the Disclosure
Schedule is valid, enforceable and in full force and effect, and has been issued
by an insurance carrier that, to the Knowledge of the Company, is solvent,
financially sound and reputable. All of the information contained in the
applications submitted in connection with said policies was (at the times said
applications were submitted) accurate and complete in all material respects, and
all premiums and other amounts owing with respect to said policies have been
paid in full on a timely basis. The nature, scope and dollar amounts of the
insurance coverage provided by said policies are sufficient to adequately insure
the Company's business, assets, operations, and potential liabilities and comply
with all insurance coverage requirements of Company Contracts.
(c) There is no pending claim under or based upon any of the policies
identified in Section 4.19 of the Disclosure Schedule, and to the Company's
Knowledge, no event has occurred, and no condition or circumstance exists, that
likely would (with or without notice or lapse of time) directly or indirectly
give rise to or serve as a basis for any such claim.
(d) The Company has not received:
(i) any notice or other communication (in writing or otherwise)
regarding the actual or possible cancellation or
invalidation of any of the policies identified in Section
4.19 of the Disclosure Schedule or regarding any actual or
possible adjustment in the amount of the premiums payable
with respect to any of said policies;
(ii) any notice or other communication (in writing or otherwise)
regarding any actual or possible refusal of coverage under,
or any actual or possible rejection of any claim under, any
of the policies identified in Section 4.19 of the
Disclosure Schedule; or
(iii) any indication that the issuer of any of the policies
identified in Section 4.19 of the Disclosure Schedule may
be unwilling or unable to perform any of its obligations
thereunder.
4.20 Related Party Transactions.
--------------------------
(a) No Related Party has, and no Related Party has at any time since
January 1, 1999, had, any direct or indirect interest of any nature in any asset
used in or otherwise relating to the business of the Company;
(b) no Related Party is, or has been, indebted to the Company;
(c) no Related Party has entered into, or has had any direct or
indirect financial interest in, any Contract, transaction or business dealing of
any nature involving the Company and no
21
<PAGE>
such Contract, transaction or business dealing of any nature is necessary to
operate the business of the Company as it is currently conducted;
(d) to the Company's Knowledge, no Related Party is competing, or has
at any time competed, directly or indirectly, with the Company in any market
served by the Company;
(e) no Related Party has any claim or right against the Company; and
(f) to the Knowledge of the Company, no event has occurred, and no
condition or circumstance exists, that likely would (with or without notice or
lapse of time) directly or indirectly give rise to or serve as a basis for any
claim or right in favor of any Related Party against the Company.
4.21 Proceedings; Orders.
-------------------
(a) There is no pending Proceeding, and to the Knowledge of the
Company, no Person has threatened to commence any Proceeding (i) that involves
the Company or that, to the Company's Knowledge, otherwise relates to or likely
would affect the Company's business or any of the assets (not including the
Company's Proprietary Assets) owned or used by the Company in any materially
adverse respect (whether or not the Company is named as a party thereto); or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, any of the Transactions. To the
Knowledge of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that likely would directly or indirectly give
rise to or serve as a basis for the commencement of any such Proceeding.
(b) No Proceeding has ever been commenced by or against the Company,
and no Proceeding otherwise involving or relating to the Company has been
pending or threatened at any time.
(c) The Company has delivered to Acquiror accurate and complete
copies of all pleadings, correspondence and other written materials to which the
Company has access that relate to the Proceedings identified in Section 4.21 of
the Disclosure Schedule.
(d) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject.
(e) To the Knowledge of the Company, no officer or employee of the
Company is subject to any Order that prohibits such officer or employee from
engaging in or continuing any conduct, activity or practice relating to the
Company's business.
(f) There is no Order that, or to the actual Knowledge of the
Company, proposed Order (other than any proposed Order that would be applicable
generally to the Internet stored value industry) that, if issued or otherwise
put into effect, (i) likely would have a materially adverse effect on the
Company's business, condition, assets, liabilities, operations, financial
performance, net income or prospects (or on any aspect or portion thereof) or on
the ability of the Company to comply with or perform any covenant or obligation
under this Agreement or any of the other Transactional Agreements, or (ii) may
have the effect of preventing, delaying, making legal or otherwise interfering
with any of the Transactions.
4.22 Non-Contravention; Consents. Neither the execution and delivery of
---------------------------
this Agreement or the other Transactional Agreements, nor the consummation or
performance of any of the Transactions, will directly or indirectly (with or
without notice or lapse of time):
22
<PAGE>
(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, if any;
(b) to the Knowledge of the Company, 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 or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(c) cause the Company to become subject to, or to become liable for
the payment of, any Tax;
(d) cause any of the assets owned or used by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(e) to the Knowledge of the Company, 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 any of its
employees or that otherwise relates to the Company's business or to any of the
assets owned or used by the Company;
(f) contravene, conflict with or result in a violation or breach of,
or result in a default under, any material provision of any of the Company
Contracts; give any Person the right to (i) declare a default or exercise any
remedy under any Company Contract, (ii) accelerate the maturity or performance
of any Company Contract, or (iii) cancel, terminate or modify any Company
Contract;
(h) give any Person the right to any payment by the Company or give
rise to any acceleration or change in the award, grant, vesting or determination
of options, warrants, rights, severance payments or other contingent obligations
of any nature whatsoever of the Company in favor of any Person, in any such case
as a result of the change in control of the Company or otherwise resulting from
the Transactions; or
(i) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by the Company.
Except as set forth in Section 4.22 of the Disclosure Schedule, the Company will
not be required to make any filing with or give any notice to, or obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement and the other Transactional Agreements or the consummation or
performance of any of the Transactions. As of the date hereof, all such
filings, notices and Consents have been duly made, given or obtained and are in
full force and effect, other than those which by their nature are required to be
made, given or obtained after the execution of this Agreement, all of which
shall be made, given or obtained within the time required therefor.
4.23 Brokers. The Company has not agreed or become obligated to pay, or
-------
taken any action that likely would result in any Person claiming to be entitled
to receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
23
<PAGE>
4.24 Pooling of Interests. To the Company's Knowledge, neither the
--------------------
Company nor any of its Affiliates has, through the date of this Agreement, taken
or agreed to take any action which would prevent Acquiror from accounting for
the business combination to be effected by the Merger as a pooling of interests.
4.25 Year 2000 Compliance. To the Company's Knowledge, all of the
--------------------
Company's products (including products currently under development) record,
store, process and calculate and present calendar dates falling on and after
January 1, 2000, calculate any information dependent on or relating to such
dates in the same manner and with the same functionality, data integrity and
performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively "Year 2000 Compliant"). To
the Company's Knowledge, all of the Company's material products lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000. All of the Company's internal computer
systems, including without limitation, its accounting systems, are Year 2000
Compliant.
4.26 Tax Treatment. Neither the Company nor any of its affiliates has
-------------
taken any action or knows of any fact, agreement, plan or other circumstance
that could pose a material risk to the status of the Merger as a reorganization
under the provisions of Section 368(a) of the Code.
4.27 Full Disclosure.
---------------
(a) Neither this Agreement (including all Schedules and Exhibits
hereto), nor any of the Transactional Agreements, contains any untrue statement
of material fact or omits to state any fact necessary to make any of the
representations, warranties or statements contained therein on behalf of the
Company or any of the Shareholders not misleading. To the extent any
representation or warranty permits omission of items otherwise required to be
discussed because they are not material or do not or would not have a material
adverse effect on the Company, such omissions in the aggregate will not and do
not have a material adverse effect on the Company.
(b) As of the date of this Agreement, the Company has provided
Acquiror and Acquiror's Representatives with full and complete access to all of
the Company's records and other documents and data requested by them.
(c) All of the information set forth in the Disclosure Schedule, and
all other information regarding the Company and its business, condition, assets,
liabilities, operation, financial performance, net income and prospects that has
been furnished to Acquiror or any of its Representatives by or on behalf of
Company or any of the Company's Representatives, is accurate and complete in all
material respects.
4.28 Powers of Attorney. The Company has not given a power of attorney
------------------
to any Person.
4.29 Voting Arrangements. There are no outstanding shareholder agreements,
-------------------
voting trusts, proxies or other arrangements or understandings relating to the
voting of any shares of the capital stock of the
Company.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to the Company and to the
Shareholders as follows:
24
<PAGE>
5.1 Due Organization; Good Standing; Authority; Binding Nature of
-------------------------------------------------------------
Agreements.
- ----------
(a) Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all necessary
corporate power and authority to enter into and perform its obligations under
the Transactional Agreements to which it is a party. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all necessary corporate power and authority to enter
into and perform its obligations under the Transactional Agreements to which it
is a party.
(b) The execution, delivery and performance of each of the
Transactional Agreements to which it is a party have been duly authorized by all
necessary action on the part of each of Acquiror and Merger Sub and their
respective boards of directors and the sole stockholder of Merger Sub.
(c) Each of the Transactional Agreements to which it is a party
constitutes the legal, valid and binding obligation of Acquiror and Merger Sub,
enforceable against Acquiror and Merger Sub in accordance with its terms.
5.2 Capitalization; Ownership of Stock. As of December 31, 1999:
----------------------------------
(a) The authorized capital stock of the Acquiror consisted of fifty
million (50,000,000) shares of Common Stock, $0.001 par value per share, and
four million nine hundred eighty-eight thousand eight hundred forty-two
(4,988,842) shares of Preferred Stock, $0.001 par value per share. The
outstanding capital of the Acquiror consisted of (i) twenty-four million fifty-
six thousand three hundred fourteen (24,056,314) shares of Common Stock, (ii)
options to purchase three million two hundred eighty-six thousand six hundred
ninety-five (3,286,695) shares of Common Stock, and (iii) no shares of Preferred
Stock.
5.3 Brokers. The Acquiror has not agreed or become obligated to pay, or
-------
taken any action that likely would result in any Person claiming to be entitled
to receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
5.4 Pooling of Interests. To the Acquiror's Knowledge, neither the
---------------------
Acquiror nor any of its Affiliates has, through the date of this Agreement,
taken or agreed to take any action which would prevent Acquiror from accounting
for the business combination to be effected by the Merger as a pooling of
interests.
5.5 Non-Contravention; Consents. Neither the execution and delivery of
---------------------------
this Agreement or the Transactional Agreements to which Acquiror or Merger Sub,
as the case may be, is a party, nor the consummation or performance of any of
the Transactions, 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 Acquiror's or Merger Sub's respective certificate of incorporation
or bylaws, or (ii) any resolution adopted by Acquiror's or Merger Sub's
stockholders, Acquiror's or Merger Sub's board of directors or any committee of
Acquiror's or Merger Sub's board of directors. With the exception of the filing
of the Articles of Merger in the State of Delaware and the State of South Dakota
and any necessary filings pursuant to federal and state securities laws or the
rules of other regulatory bodies, Acquiror and Merger Sub 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 the execution and delivery of this Agreement or
the consummation or performance of any of the Transactions.
25
<PAGE>
5.6 Tax Treatment. Neither Acquiror nor any of its affiliates has taken
-------------
any action or knows of any fact, agreement, plan or other circumstance that
could pose a material risk to the status of the Merger as a reorganization under
the provisions of Section 368(a) of the Code.
5.7 SEC Filings; Financial Statements. Acquiror has delivered to the
---------------------------------
Company accurate and complete copies of any report and registration statement
filed by Acquiror with the SEC (the "SEC Documents"). All statements, reports,
schedules, forms and other documents required to have been filed with the SEC
have been so filed. 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): (x) each of the SEC Documents complied in all material respects
with the applicable requirements of the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended (as the case may be); and (y)
none of the 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. The consolidated financial statements
contained in the SEC Documents: (x) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (y) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end audit adjustments which will not, individually or in the aggregate, be
material in amount); and (z) fairly present, in all material respects, the
consolidated financial position, in all material respects, of Acquiror and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Acquiror and its subsidiaries for the periods covered thereby.
ARTICLE 6
---------
ADDITIONAL AGREEMENTS
6.1 Stock Options and Rights.
------------------------
(a) As of the Effective Time, any Company Stock Options or Company
Stock Rights exercisable for Company Stock, which are outstanding as of the date
hereof and have not expired as of the Effective Time, shall be assumed by
Acquiror and converted into options or rights, as the case may be, such that
each Company Stock Option and Company Stock Right shall be converted into an
option to purchase or right to be granted, as applicable, such shares of
Acquiror Stock as the holder thereof would have received in the Merger had such
option or right been exercised prior to the Effective Time, at an aggregate
purchase price equal to the aggregate purchase price applicable prior to such
conversion; provided, however, that in the case of any Company Stock Option to
-------- -------
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code, the conversion formula shall be adjusted, if necessary,
to comply with Section 424(a) of the Code to the effect that the number of
shares shall be rounded down to the nearest whole share and the exercise price
shall be rounded up to the nearest cent. Except as provided above, the converted
Company Stock Options or Company Stock Rights, as the case may be, shall be
subject to the same terms and conditions (including, without limitation,
expiration date, vesting and exercise provisions) as were applicable to the
Company Stock Options or Company Stock Rights, as the case may be, immediately
prior to the Effective Time, after giving effect to any acceleration rights
therein attributable to the Transactions.
(b) No such option or right shall be converted into a stock option or
right to purchase a partial share of Acquiror Stock.
26
<PAGE>
(c) The consummation of the Merger shall not be treated as a
termination of employment for purposes of such stock options or rights.
(d) Acquiror shall reserve a number of shares of Acquiror Stock
sufficient to cover the issuance of Acquiror Stock pursuant to the exercise of
Company Stock Options or Company Stock Rights assumed pursuant to this Section
6.1.
6.2 Certain Employee Benefit Matters. Each employee of the Company at the
--------------------------------
Effective Time will be provided with employee benefits by the Surviving
Corporation or Acquiror which in the aggregate are no less favorable to such
employee than those provided from time to time by Acquiror to similarly situated
employees.
6.3 Expenses. All costs and expenses incurred in connection with the
--------
Transactional Agreements and the transactions contemplated hereby and thereby
(the "Transaction Costs") shall be paid by the party incurring such expenses,
-----------------
provided that the Transaction Costs incurred by the Company shall be accounted
for pursuant to Section 3.1(a).
6.4 Pooling Accounting. Each of the Company and Acquiror shall each use
------------------
respective Best Efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests. Neither Company nor
Acquiror shall take any action that would adversely affect the ability of
Acquiror to account for the business combination to be effected by the Merger as
a pooling of interests.
6.5 Rule 144. The Acquiror shall take all actions reasonably necessary to
--------
enable the Shareholders to sell the Acquiror Stock received in the Merger
without registration under the Securities Act of 1933 within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act of 1933, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC including, without limiting the
generality of the foregoing, filing on a timely basis all reports required to be
filed by the Securities Exchange Act of 1934. Upon the request of any
Shareholder who holds Acquiror Stock at such time, the Acquiror will deliver to
such Shareholder a written statement as to whether it has complied with such
requirements.
6.6 Additional Agreements. In case at any time after the Effective Time
---------------------
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and/or directors of Acquiror and the Company (or
of the Surviving Corporation on behalf of the Company) shall take all such
necessary action.
ARTICLE 7
---------
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to consummate the Merger and to take the
other actions required to be taken by it at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by both the Company and Acquiror, in whole or in
part):
(a) All necessary approvals under federal and state securities laws
and other authorizations relating to the issuance of the Acquiror Stock to be
issued to the Shareholders in connection with the Merger shall have been
received.
(b) This Agreement, the Merger and the other actions contemplated
hereby shall have been approved by the requisite vote of the Shareholders of the
Company under applicable law.
27
<PAGE>
(c) Acquiror shall have received a letter from Ernst & Young, LLP
dated as of the date hereof and addressed to Acquiror regarding such firm's
unqualified concurrence with Acquiror's management's and Company's management's
conclusion that the business combination to be effected by the Merger will
qualify as a pooling of interests transaction under GAAP if consummated in
accordance with this Agreement.
(d) The Company and Acquiror shall have delivered a certificate
regarding the calculation of the Exchange Ratio and the number of shares of
Acquiror Stock to be received by each Shareholder.
(e) Acquiror and Company shall each have received written opinions
from their respective tax counsel (Morrison & Foerster LLP and Stoel Rives LLP,
respectively), in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either Acquiror or Company does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to such party if counsel to the other party renders such opinion to
such party. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
7.2 Additional Conditions to Acquiror's and Merger Sub's Obligation to
------------------------------------------------------------------
Consummate the Merger. Acquiror's and Merger Sub's obligations to consummate
- ---------------------
the Merger and to take the other actions required to be taken by Acquiror and
Merger Sub at the Closing is subject to the satisfaction of each of the
following conditions (any of which may be waived by Acquiror, in whole or in
part):
(a) In addition to the documents required to be received under this
Section 7.2, Acquiror shall also have received the following documents:
(i) the opinion letter from Stoel Rives LLP, counsel to the
Company, dated the date hereof, in the form attached as
Exhibit C;
---------
(ii) a certificate, duly executed by the Company certifying that
(A) each of the representations and warranties made by the
Company in this Agreement and in the other Transactional
Agreements is accurate in all respects as of the date
hereof, (B) each of the covenants and obligations that the
Company is required to have complied with or performed
pursuant to this Agreement or any of the other
Transactional Agreements at or prior to the Closing has
been duly complied with and performed in all respects, and
(C) each of the conditions set forth in Section 7.2 has
been satisfied in all respects;
(iii) copies of resolutions of the Company, certified by the
Secretary of the Company, authorizing the execution,
delivery and performance of the Transactional Agreements
and the Transactions, and copies of resolutions of the
meeting of shareholders of the Company (or written consent
in lieu thereof), certified by the Secretary of the
Company, authorizing the execution, delivery and
performance of the Transactional Agreements and the
Transactions; and
(iv) such other documents as Acquiror may request in good faith
for the purpose of (i) evidencing the accuracy of any
representation or warranty made by the Company, (ii)
evidencing the compliance by the Company,
28
<PAGE>
or the performance by the Company of, any covenant or
obligation set forth in this Agreement, (iii) evidencing
the satisfaction of any condition set forth in Section 7.1
or this Section 7.2, or (iv) otherwise facilitating the
consummation or performance of any of the Transactions.
(b) Each Person (other than Acquiror and Merger Sub) shall have
executed and delivered all Transactional Agreements to which it is a party.
(c) Each of Donald L. Endres and William L Honnef shall have executed
and delivered a non-competition agreement with the Company and Acquiror in a
form acceptable to Acquiror.
(d) The holders of no more than one percent (1%) of the outstanding
shares of Company Stock shall have demanded and not lost or withdrawn, or shall
be eligible to demand, dissenters' rights.
7.3 Additional Conditions to the Company's Obligation to Consummate the
-------------------------------------------------------------------
Merger. The Company's obligation to consummate the Merger and to take the other
- ------
actions required to be taken by the Company at the Closing shall be subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Company, in whole or in part):
(a) The Company shall have received the following documents:
(i) the opinion letter from Morrison & Foerster LLP, counsel to
Acquiror and Merger Sub, dated the date hereof, in the form
attached as Exhibit D;
---------
(ii) a certificate, duly executed by Acquiror, certifying that
(A) each of the representations and warranties made by
Acquiror in this Agreement and in the other Transactional
Agreements is accurate in all respects as of the date
hereof, (B) each of the covenants and obligations that
Acquiror is required to have complied with or performed
pursuant to this Agreement or any of the other
Transactional Agreements at or prior to the Closing has
been duly complied with and performed in all respects, and
(C) each of the conditions set forth in Section 7.3 has
been satisfied in all respects; and
(iii) such other documents as the Company may request in good
faith for the purpose of (A) evidencing the accuracy of any
representation or warranty made by Acquiror and Merger Sub,
(B) evidencing the compliance by Acquiror and Merger Sub
with, or the performance by Acquiror and Merger Sub of, any
covenant or obligation set forth in this Agreement or any
of the other Transactional Agreements, (C) evidencing the
satisfaction of any condition set forth in Section 7.1 or
this Section 7.3, or (D) otherwise facilitating the
consummation or performance of any of the Transactions.
(b) Subject to the terms and conditions of this Agreement, each of
Acquiror and Merger Sub shall have executed and delivered all Transactional
Agreements to which it is a party.
(c) The Promissory Note dated October 15, 1999 issued by the Company
to the Principal Shareholder in the principal amount of $710,000 shall have been
repaid in full and cancelled. The parties agree that Acquiror shall issue, and
the Principal Shareholder shall accept as payment in full,
29
<PAGE>
shares of Acquiror Stock with an aggregate value equal to the total amount
outstanding under such Promissory Note, valued at the Closing Stock Price. Such
shares of Acquiror Stock shall be issued in addition to any shares issuable in
accordance with Section 3.1 above.
ARTICLE 8
---------
ESCROW AND INDEMNIFICATION
8.1 Indemnification.
---------------
(a) By the Shareholders. From and after the Effective Time and
-------------------
subject to the limitations contained in Sections 8.2 and 8.3, the Shareholders
will, jointly and severally, indemnify and hold Acquiror harmless against any
loss, expense, liability or other damage, including reasonable attorneys' fees,
to the extent of the amount of such loss, expense, liability or other damage
(collectively, "Damages") that Acquiror has incurred by reason of the breach
-------
or alleged breach by the Company of any representation, warranty, covenant or
agreement of the Company contained in this Agreement. Such indemnification shall
be Acquiror's sole and exclusive contractual remedy for any such breach by the
Company.
(b) By Acquiror. From and after the Effective Time and subject to
-----------
the limitations contained in Section 8.2, Acquiror will indemnify and hold the
Shareholders harmless against any Damage that the Shareholders have incurred by
reason of the breach or alleged breach by Acquiror or Merger Sub of any
representation, warranty, covenant or agreement of Acquiror or Merger Sub
contained in this Agreement. Such indemnification shall be the Shareholders'
sole and exclusive contractual remedy for any such breach by Acquiror or Merger
Sub.
8.2 Escrow Fund. As partial security for the indemnities in Section 8.1,
-----------
the Escrow Shares shall be deposited with the Escrow Agent within ten (10) days
of the Closing, such deposit to be governed by the terms set forth in this
Article 8 and in the Escrow Agreement.
8.3 Limitations on Indemnification.
------------------------------
(a) Acquiror's Damages. Notwithstanding the foregoing, no
------------------
indemnification shall be payable pursuant to Section 8.1(a) unless and until an
Officer's Certificate or Certificates for an aggregate amount of Damages in
excess of $100,000 has been delivered to the Shareholders' Agent and to the
Escrow Agent; provided, however, that after an Officer's Certificate or
-------- -------
Certificates for an aggregate of $100,000 in Damages has been delivered,
Acquiror shall be entitled to indemnification for the full amount of Damages
identified in such Officer's Certificate or Certificates up to the total amount
of the consideration to the Shareholders set forth in Section 3.1.
(b) Shareholders' Damages. Notwithstanding the foregoing, Acquiror
---------------------
shall have no liability under Section 8.1(b) unless and until a Shareholders'
Agent Certificate or Certificates for an aggregate amount of Damages in excess
of $100,000 has been delivered to the Acquiror and to the Escrow Agent;
provided, however, that after a Shareholders' Agent Certificate or Certificates
- -------- -------
for an aggregate of $100,000 in Damages has been delivered, the Shareholders
shall be entitled to indemnification for the full amount of Damages identified
in such Shareholders' Agent Certificate or Certificates up to the total amount
of the consideration to the Shareholders set forth in Section 3.1.
(c) No indemnification shall be payable pursuant to Section 8.1(a) or
(b) after the second anniversary of the Effective Date (the "Expiration Date"),
---------------
except with respect to (i) claims made prior to the Expiration Date, but not
resolved by the Expiration Date, (ii) claims based on a breach of Section 4.14
in which case the indemnification obligation of the Shareholders shall survive
until the date
30
<PAGE>
on which the statute of limitation applicable to the relevant tax liability
expires, or (iii) claims based on breach of Section 6.5 in which case the
indemnification obligation of the Acquiror shall survive until the second
anniversary of the Expiration Date.
(d) The limitations of Section 8.1 and this Section 8.3 shall not
apply in the case of a fraudulent or intentional misrepresentation by any party,
but no person shall be liable for any such misrepresentation or breach by any
other person (except to the extent of its share of the consideration received
pursuant to Section 3.1 above if such misrepresentation or breach is by the
Company).
8.4 Escrow Periods. The Escrow Fund shall commence on the date hereof
--------------
and terminate (a) as to items reasonably expected to be encountered in the audit
process, on the earlier to occur of (i) the first anniversary of the date of the
Closing and (ii) the date of issuance of the first independent audit report on
Acquiror's financial statements after the Closing, which financial statements
include the financial results of Company, or (b) as to all other items, on the
first anniversary of the Closing (the "Escrow Period"), provided, however, that
------------- -------- -------
the number of Escrow Shares, which, in the reasonable judgment of Acquiror,
subject to the objection of the Shareholders' Agent and the subsequent
resolution of the matter in the manner provided in Section 8.8, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate
theretofore delivered to the Escrow Agent and the Shareholders' Agent prior to
termination of the Escrow Period with respect to Damages incurred or litigation
pending prior to expiration of the Escrow Period, shall remain in the Escrow
Fund until such claims have been finally resolved, or, if earlier, until
released in accordance with this Article 8.
8.5 Claims Upon Escrow Fund.
-----------------------
(a) Claims by Acquiror. Upon receipt by the Escrow Agent on or
------------------
before the last day of the Escrow Period of a certificate signed by any
appropriately authorized officer of Acquiror (an "Officer's Certificate"):
---------------------
(i) Stating the aggregate amount of Acquiror's Damages or an
estimate thereof, in each case to the extent known or
determinable at such time, and
(ii) Specifying in reasonable detail the individual items of such
Damages included in the amount so stated, the date each such
item was paid or properly accrued or arose, and the nature
of the misrepresentation, breach or claim to which such item
is related,
the Escrow Agent shall, subject to the provisions of Sections 8.3, 8.7 and 8.8
hereof, deliver to Acquiror out of the Escrow Fund, as promptly as practicable,
Escrow Shares having a value equal to such Damages all in accordance with the
Escrow Agreement and Section 8.6 below. Amounts paid or distributed from the
Escrow Fund shall be allocated pro rata among the Shareholders based upon their
respective percentage interests therein at the time.
(b) Claims by Shareholders. Upon receipt by the Escrow Agent on or
----------------------
before the last day of the Escrow Period of a certificate signed by the
Shareholders' Agent (a "Shareholders' Agent Certificate"):
-------------------------------
(i) Stating the aggregate amount of the Shareholders' Damages or
an estimate thereof, in each case to the extent known or
determinable at such time,
31
<PAGE>
(ii) Specifying in reasonable detail the individual items of such
Damages included in the amount so stated, the date each such
item was paid or properly accrued or arose, and the nature
of the misrepresentation, breach or claim to which such item
is related,
the Escrow Agent shall, subject to the provisions of Sections 8.3, 8.7 and 8.8
hereof, deliver to the Shareholders' Agent for distribution to the Shareholders
out of the Escrow Fund, as promptly as practicable, Escrow Shares having a value
equal to such Damages all in accordance with the Escrow Agreement and Section
8.6 below. The amount by which the Escrow Fund is reduced shall be distributed
pro rata among the Shareholders based upon their respective percentage interests
therein at the time.
8.6 Valuation. For the purpose of compensating Acquiror or the
---------
Shareholders for their respective Damages pursuant to this Agreement, the value
per share of the Acquiror Stock, including the Escrow Shares, and the total
consideration received pursuant to Section 3.1 above shall be the Closing Stock
Price. In determining the amount of any indemnity, there shall be taken into
account any insurance proceeds or other similar recovery or offset realized,
directly or indirectly.
8.7 Objections to Claims to Escrow Fund. At the time of delivery of any
-----------------------------------
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Shareholders' Agent by registered mail or
courier or express delivery and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery of Escrow Shares pursuant to
Section 8.5 unless the Escrow Agent shall have received written authorization
from the Shareholders' Agent to make such delivery. After the expiration of
such thirty (30) day period, the Escrow Agent shall make delivery of the Escrow
Shares in the Escrow Fund in accordance with Section 8.5, provided that no such
--------
delivery may be made if the Shareholders' Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent and to Acquiror prior to the
expiration of such thirty (30) day period.
8.8 Resolution of Conflicts.
-----------------------
(a) In case the Shareholders' Agent or Acquiror, as applicable, shall
so object in writing to any claim or claims made in any Acquiror's Officer's
Certificate or Shareholders' Agent Certificate, the non-objecting party shall
have thirty (30) days to respond in a written statement to the objection. If
after such thirty (30) day period there remains a dispute as to any claims, the
Shareholders' Agent and Acquiror shall attempt in good faith for thirty (30)
days to agree upon the rights of the respective parties with respect to each of
such claims. If the Shareholders' Agent and Acquiror should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and, if Acquiror has requested delivery of Escrow Shares, shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and shall distribute the Escrow Shares from the Escrow Fund in
accordance with the terms of the memorandum.
(b) If no such agreement can be reached after good faith negotiation,
either Acquiror or the Shareholders' Agent may, by written notice to the other,
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by three (3) arbitrators. Within fifteen (15) days after such written
notice is sent, Acquiror (on the one hand) and the Shareholders' Agent (on the
other hand) shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as to
the validity and amount of any claim in such Officer's Certificate or
Shareholders' Agent Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Sections 8.1 through 8.5, the
Escrow Agent shall be entitled
32
<PAGE>
to act in accordance with such decision and make or withhold payments out of the
Escrow Fund in accordance with such decision.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Santa Clara County, California under the commercial rules then in effect of the
American Arbitration Association. Each party to an arbitration shall pay its own
expenses and one-half of the fees of each arbitrator and the administrative fee
of the American Arbitration Association.
8.9 Shareholders' Agent.
-------------------
(a) Donald L. Endres shall be constituted and appointed as agent (the
"Shareholders' Agent") for and on behalf of the Shareholders to give and
--------------------
receive notices and communications, to authorize delivery to Acquiror of the
Escrow Shares or other property from the Escrow Fund in satisfaction of claims
by Acquiror, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of the Shareholders' Agent for
the accomplishment of the foregoing. Such agency may be changed by the holders
of a majority in interest of the Escrow Shares from time to time upon not less
than ten (10) days' prior written notice to Acquiror. No bond shall be required
of the Shareholders' Agent, and the Shareholders' Agent shall receive no
compensation for services. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Shareholders.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The
Shareholders shall jointly and severally indemnify the Shareholders' Agent and
hold him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties under
this Agreement or the Escrow Agreement, provided, that the Shareholders' Agent
--------
shall be reimbursed for counsel fees and other out-of-pocket expenses incurred
by such Shareholders' Agent in connection with the administration of his duties
under this Agreement or the Escrow Agreement or the Escrow Agreement from the
proceeds of the sale of Escrow Shares by the Shareholders' Agent. For such
purpose, the Shareholders' Agent shall be authorized to direct the Escrow Agent
to deliver or cause to be delivered to the Shareholders' Agent such number of
Escrow Shares the sale of which by the Shareholders' Agent in ordinary open-
market brokers transactions is sufficient to cover such out-of-pocket costs.
(c) The Shareholders' Agent shall have reasonable access to
information about Company and Acquiror and the reasonable assistance of
Company's and Acquiror's officers and employees for purposes of performing its
duties and exercising its rights under this Article 8, provided that the
--------
Shareholders' Agent shall treat confidentially and not disclose any nonpublic
information from or about Company or Acquiror to anyone (except on a need to
know basis to individuals who agree to treat such information confidentially).
8.10 Actions of the Shareholders' Agent. A decision, act, consent or
----------------------------------
instruction of the Shareholders' Agent shall constitute a decision of all of the
Shareholders and shall be final, binding and conclusive upon each such
Shareholder, and the Escrow Agent and Acquiror may rely upon any decision, act,
consent or instruction of the Shareholders' Agent as being the decision, act,
consent or instruction of each and every such Shareholder. The Escrow Agent and
Acquiror are hereby relieved from any liability
33
<PAGE>
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Shareholders' Agent.
8.11 Claims. In the event Acquiror becomes aware of a third-party claim
------
which Acquiror believes may result in a demand against the Shareholders,
Acquiror shall notify the Shareholders' Agent of such claim, and the
Shareholders' Agent and the Shareholders shall be entitled, at their expense, to
participate in any defense of such claim. Acquiror shall have the right in its
sole discretion to settle any such claim; provided, however, that Acquiror may
-------- -------
not effect the settlement of any such claim without the consent of the
Shareholders' Agent, which consent shall not be unreasonably withheld. In the
event that the Shareholders' Agent has consented to any such settlement, the
Shareholders' Agent shall have no power or authority to object to the amount of
any claim by Acquiror against the Shareholders for indemnity with respect to
such settlement, unless such claim is in an amount in excess of any amount
consented to by the Shareholders' Agent.
ARTICLE 9
---------
MISCELLANEOUS PROVISIONS
9.1 Survival of Representations and Covenants. All representations,
-----------------------------------------
warranties, covenants and agreements of the Company contained in this Agreement
shall survive the Closing and any investigation at any time made by or on behalf
of Acquiror until the Expiration Date, except with respect to claims based on a
breach of Section 4.14 in which case the indemnification obligation of the
Shareholders shall survive until the date on which the statute of limitation
applicable to the relevant tax liabilities expires. All representations,
warranties, covenants and agreements of Acquiror contained in this Agreement
shall survive the Closing and any investigation at any time made by or on behalf
of the Company until the Expiration Date, except that the covenants in Section
6.5 shall survive until the second anniversary of the Expiration Date.
9.2 Transfer Taxes. Each Shareholder shall be individually responsible
--------------
for his, her or its respective sales, use and transfer taxes, including but not
limited to any value added, stock transfer, gross receipts, stamp duty and real,
personal or intangible property transfer taxes, due by reason of the
consummation of the Transactions, including but not limited to any interest or
penalties in respect thereof.
9.3 Notices. Except as provided in Section 8.7, 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 telecopier) to the address or telecopier number set forth
beneath the name of such party below (or to such other address or telecopier
number as such party shall have specified in a written notice given to the other
parties hereto):
if to the Company, the Principal Shareholder or the Shareholders' Agent:
ExpressGold.com, Inc.
100 22/nd/ Avenue, Suite 101
Brookings, SD 57006
Attention: Donald L. Endres
Telefax: (605) 696-7250
34
<PAGE>
with a copy to:
Stoel Rives LLP
900 S.W. Fifth Avenue, Suite 2600
Portland, Oregon 97204-1268
Attention: John M. Schweitzer
Telefax: (503) 220-2480
if to Acquiror or Merger Sub:
CyberSource Corporation
550 South Winchester Blvd., Suite 301
San Jose, CA 95128
Attention: President
Telefax: (408) 241-7959
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
Attention: Richard Scudellari
Telefax: (650) 494-0792
9.4 Time of the Essence. Time is of the essence in the performance of
-------------------
each of the terms hereof with respect to the obligations and rights of each
party hereto.
9.5 Headings. The headings contained in this Agreement are for
--------
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
9.6 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.
9.7 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).
9.8 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 or waiver of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
35
<PAGE>
9.9 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 Acquiror, Merger Sub, the Company and the Principal
Shareholder.
9.10 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.
9.11 Parties in Interest. Except for the provisions of Section 6.5 and
-------------------
Article 8 hereof applicable to the Shareholders, 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).
9.12 Entire Agreement. The Transactional Agreements (including Schedules
---------------- understanding of the parties relating to the
and Exhibits thereto) set forth the entire subject matter thereof and supersede
all prior agreements and understandings among or between any of the parties
relating to the subject matter thereof.
9.13 Construction.
------------
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections," "Exhibits" and "Schedules" are intended to refer to Sections of
this Agreement and Exhibits and Schedules to this Agreement.
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IN WITNESS WHEREOF, each of Acquiror, Merger Sub, the Company and, with
respect to Section 7.3(c), the Principal Shareholder has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all as
of the date first above written.
ACQUIROR
CyberSource Corporation
By: /s/ L. Evan Ellis
-----------------
Name: L. Evan Ellis
Title: President
MERGER SUB
Aurum Acquisition Corporation
By: /s/ L. Evan Ellis
-----------------
Name: L. Evan Ellis
Title: President
COMPANY
ExpressGold.com, Inc.
By: /s/ Donald J. Endres
--------------------
Name: Donald J. Endres
Title: CEO
PRINCIPAL SHAREHOLDER
/s/ Donald J. Endres
--------------------
Donald L. Endres
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INDEX OF SCHEDULES AND EXHIBITS
A. Certain Definitions
B. Confidentiality and Assignment Agreement
C. Opinion from Company Counsel
D. Opinion from Acquiror's Counsel
E. Affiliates Agreement
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
---------
Acquiror. "Acquiror" shall have the meaning specified in the first
paragraph of the Agreement.
Acquiror Stock. "Acquiror Stock" shall have the meaning specified in
Section 3.1(a) of the Agreement.
Affiliate. "Affiliate" shall have the meaning specified in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
Affiliates Agreement. "Affiliates Agreement" shall mean the Affiliates
Agreement attached hereto as Exhibit E.
---------
Agreement. "Agreement" shall mean the Agreement and Plan of Merger to
which this Exhibit A is attached (including the Disclosure Schedule and all
---------
Exhibits), as it may be amended from time to time.
Articles of Merger. "Articles of Merger" shall have the meaning specified
in Section 1.2 of the Agreement.
Best Efforts. "Best Efforts" shall mean the efforts that a prudent Person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible. An obligation to use "Best
Efforts" under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement, the other Transactional
Agreements and the Transactions.
Certificate. "Certificate" shall have the meaning specified in Section
3.1(a) of the Agreement.
SDBCA. "SDBCA" shall have the meaning specified in Section 1.2 of the
Agreement.
Closing. "Closing" shall have the meaning specified in Section 3.9 of the
Agreement.
Closing Stock Price. "Closing Stock Price" shall have the meaning
specified in Section 3.1(a) of the Agreement.
Code. "Code" shall have the meaning specified in the Recitals of the
Agreement.
Company. The "Company" shall mean ExpressGold.com, Inc., a South Dakota
corporation.
Company Stock. "Company Stock" shall have the meaning specified in Section
3.1(a) of the Agreement.
Company Contract. "Company Contract" shall mean any Contract:
(a) to which Company is a party;
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(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 Plan. "Company Plan" shall mean any Current Benefit Plan or Past
Benefit Plan.
Company Returns. "Company Returns" shall have the meaning specified in
Section 4.14(b) of the Agreement.
Company Stock. "Company Stock" shall have the meaning specified in Section
3.1(a) of the Agreement.
Company Stock Options. "Company Stock Options" shall have the meaning
specified in Section 3.2 of the Agreement.
Company Stock Rights. "Company Stock Rights" shall have the meaning
specified in Section 3.2 of the Agreement.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean, with respect to any Person, any legally
binding written, oral, implied or other agreement, contract, understanding,
arrangement, instrument, note, guaranty, indemnity, representation, warranty,
deed, assignment, power of attorney, certificate, purchase order, work order,
insurance policy, benefit plan, commitment, covenant, assurance, obligation,
promise or undertaking of any nature to which such Person is a party or by which
its properties or assets maybe bound or affected or under which it or its
business, properties or assets receive benefits.
Current Benefit Plan. "Current Benefit Plan" shall mean any Employee
Benefit Plan that is currently in effect and:
(a) that was established or adopted by the Company or any ERISA Affiliate
or is maintained or sponsored by the Company;
(b) in which the Company participates;
(c) with respect to which the Company or any ERISA Affiliate is or may be
required or permitted to make any contribution; or
(d) with respect to which the Company or any ERISA Affiliate is or may
become subject to any Liability.
Damages. "Damages" shall have the meaning specified in Section 8.1.
Defined Benefit Plan. "Defined Benefit Plan" shall mean either a plan
described in Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code.
Disclosure Schedule. "Disclosure Schedule" shall have the meaning
specified in Article 4 of the Agreement.
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Dissenting Shares. "Dissenting Shares" shall have the meaning specified in
Section 3.11(a) of the Agreement.
Effective Date. "Effective Date" shall be the date on which the Effective
Time occurs.
Effective Time. "Effective Time" shall have the meaning specified in
Section 1.2 of the Agreement.
Employee Benefit Plan. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, licensee,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition 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, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
Environmental Law. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
ERISA Affiliate. "ERISA Affiliate" shall mean any Person that is, was or
would be treated as a single employer with the Company under Section 414 of the
Code.
Escrow Agent. "Escrow Agent" shall mean U.S. Bank Trust National
Association, and its successors and assigns.
Escrow Agreement. "Escrow Agreement" shall have the meaning specified in
Section 3.5 of the Agreement.
Escrow Fund. "Escrow Fund" shall have the meaning specified in Section 3.5
of the Agreement.
Escrow Shares. "Escrow Shares" shall have the meaning specified in Section
3.5 of the Agreement.
Escrow Period. "Escrow Period" shall have the meaning specified in Section
8.4 of the Agreement.
Exchange Agent. "Exchange Agent" shall have the meaning specified in
Section 3.4 of the Agreement.
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Exchange Ratio. "Exchange Ratio" shall have the meaning specified in
Section 3.1(a) of the Agreement.
Expiration Date. "Expiration Date" shall have the meaning specified in
Section 8.3 of the Agreement.
Financial Statements. "Financial Statements" shall have the meaning
specified in Section 4.4 of the Agreement.
GAAP. "GAAP" shall mean Generally Accepted Accounting Principles, applied
on a basis consistent with the basis on which the Financial Statements were
prepared.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is 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, principality, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi governmental authority of any nature (including
any governmental division, subdivision, department, agency, bureau, branch,
office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(d) multinational organization or body; or
(e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, Judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
Hazardous Material. "Hazardous Material" shall mean any substance,
chemical, waste or other material which is listed, defined or otherwise
identified as hazardous, toxic or dangerous under any applicable law; as well as
any petroleum, petroleum product or by-product, crude oil, natural gas, natural
gas liquids, liquefied natural gas, or synthetic gas useable for fuel, and
"source," "special nuclear," and "by-product" material as defined in the Atomic
Energy Act of 1954, 42 U.S.C. (S)(S) 2011 et seq.
-- ---
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could reasonably be expected to discover or
otherwise become aware of such fact or other matter in the Ordinary Course of
Business after reasonable inquiry.
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A corporation shall be deemed to have "Knowledge" of a particular fact or
matter only if a director or officer of such corporation has or had Knowledge of
such fact or matter.
Leased Premises. "Leased Premises" shall have the meaning specified in
Section 4.6(d) of the Agreement.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation that is or has been issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Body.
Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability, regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
Merger. "Merger" shall have the meaning specified in Section 1.1 of the
Agreement.
Merger Sub. "Merger Sub" shall have the meaning specified in the first
paragraph of the Agreement.
Multiemployer Plan. "Multiemployer Plan" shall mean a plan described in
Section 3(37) of ERISA.
Officer's Certificate. "Officer's Certificate" shall have the meaning
specified in Section 8.5 of the Agreement.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling, pronouncement,
determination, decision, opinion, verdict, sentence, subpoena, writ or award
that is issued, made, entered, rendered or otherwise put into effect by or under
the authority of any court, administrative agency or other Governmental Body or
any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is entered into in connection
with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of the
Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is recurring in nature, consistent with the Company's past
practices and taken in the ordinary course of the Company's normal day to day
operations;
(b) such action is not required to be authorized by the Company's
shareholders, the Company's board of directors or any committee of the Company's
board of directors and does not require any other separate or special
authorization of any nature; and
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(c) such action is similar in nature and magnitude to actions customarily
taken, without any special or separate authorization, in the ordinary course of
the normal day to day operations of other Entities that are employed in
businesses similar to Company's business.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Principal Shareholder. "Principal Shareholder" shall have the meaning
specified in the first paragraph of the Agreement.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation,
commenced, brought, conducted or heard by or before, or otherwise has involved,
any Governmental Body or any arbitrator or arbitration panel.
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), 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, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right, except for
third party off-the-shelf software property licensed by the Company.
Proprietary Information and Inventions Agreement. "Proprietary Information
and Inventions Agreement" shall mean an agreement between the Company and its
employees and consultants, substantially in the form of Exhibit B.
---------
Pro Rata Portion. "Pro Rata Portion" shall have the meaning specified in
Section 3.5 of the Agreement.
Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) each individual who is, or who has at any time been, an officer of the
Company;
(b) each member of the family of each of the individuals referred to in
clause "(a)" above;
(c) any Entity (other than the Company) in which any one of the Persons
referred to in clauses "(a)" or "(b)" above holds (or in which more than one of
such individuals collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.
Representatives. "Representatives" of a specified party shall mean
officers, directors, employees, attorneys, accountants, advisors and
representatives of such party, including, without limitation, in the case of
Company, all subsidiaries of Company and all such Persons with respect to such
subsidiaries. The Related Parties shall be deemed to be "Representatives" of
Company.
SEC. "SEC" shall mean the Securities and Exchange Commission.
Shareholder. "Shareholder" shall mean a shareholder of the Company
immediately prior to the Effective Time.
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Shareholders' Agent. "Shareholders' Agent" shall have the meaning
specified in Section 8.9 of the Agreement.
Shareholders' Agent Certificate. "Shareholders' Agent Certificate" shall
have the meaning specified in Section 8.5 of the Agreement.
Surviving Corporation. "Surviving Corporation" shall have the meaning
specified in Section 1.1 of the Agreement.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated 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, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax sharing agreement or similar Contract.
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 that
is, has been or may in the future be 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.
Transactional Agreements. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the Escrow Agreement;
(c) the Affiliates Agreement; and
(d) the Articles of Merger.
Transaction Costs. "Transaction Costs" shall have the meaning specified in
Section 6.3 of the Agreement.
Transactions. "Transactions" shall mean (a) the execution and delivery of
the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including, without
limitation, the Merger, and the performance by Company, Acquiror, the
Shareholders, and the other parties to the Transactional Agreements of their
respective obligations under the Transactional Agreements.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
have the meaning specified in Section 4.4(a) of the Agreement.
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