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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JULY 31, 1997
(Date of earliest event reported)
INTERACTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 0-26026 95-2925769
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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5095 MURPHY CANYON ROAD, SAN DIEGO, CALIFORNIA 92123
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 560-8525
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ITEM 5. OTHER EVENTS.
On July 31, 1997, Interactive Group, Inc., a Delaware corporation
("Interactive"), announced that it had entered into a definitive agreement (the
"Merger Agreement") with DataWorks Corporation, a California corporation
("DataWorks"), pursuant to which Interactive will become a wholly-owned
subsidiary of DataWorks in a stock-for-stock merger (the "Merger") intended to
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and accounted for as a
pooling-of-interests for financial reporting purposes. Under the terms of the
Merger Agreement, stockholders of Interactive will receive 0.8054 shares of
DataWorks common stock for each share of Interactive common stock they own at
the time the Merger is consummated. In addition, options and warrants to acquire
Interactive common stock will be converted as a result of the Merger into
equivalent options and warrants for DataWorks common stock, based upon the
exchange ratio.
In connection with the execution of the Merger Agreement, Interactive
has granted to DataWorks an option to purchase up to 344,531 shares of
Interactive common stock (approximately 7.5% of the number of shares currently
outstanding), exercisable upon the occurrence of certain events involving a
termination of the Merger Agreement. The option is set forth in an "Option
Agreement" dated July 31, 1997.
The Merger is expected to be completed this fall, subject to approval
of the Merger Agreement and the Merger by the stockholders of Interactive and
the shareholders of DataWorks as well as the satisfaction or waiver of customary
closing conditions. In connection with the execution of the Merger Agreement,
certain stockholders of Interactive owning approximately 39% of the outstanding
shares of Interactive common stock (Robert C. Vernon, Mark Hellinger and
Randolph S. Naylor) and certain shareholders of DataWorks owning approximately
20% of the outstanding shares of DataWorks common stock have entered into forms
of "Voting Agreements" pursuant to which they have agreed to vote their shares
in favor of approval of the Merger Agreement and the Merger.
The foregoing description of the transactions involving Interactive and
DataWorks and the various agreements entered into in connection therewith is
qualified in its entirety by reference to the Merger Agreement, the Option
Agreement and the forms of Voting Agreements entered into by the stockholders of
Interactive and the shareholders of DataWorks, copies of which are filed as
exhibits to this Form 8-K and are incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
2.1 Agreement and Plan of Merger and Reorganization dated as
of July 31, 1997 among DataWorks Corporation, DataWorks
Acquisition Sub, Inc. and Interactive Group, Inc.
Disclosure Schedules of DataWorks Corporation and
Interactive Group, Inc., as well as certain exhibits to
this Agreement, have been omitted as inmaterial;
however, copies of these documents will be provided to
the Securities and Exchange Commission upon request.
2.2 Option Agreement dated as of July 31, 1997 between
DataWorks Corporation and Interactive Group, Inc.
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99.1 Form of Voting Agreement between DataWorks Corporation
and certain stockholders of Interactive Group, Inc.
99.2 Form of Voting Agreement between Interactive Group, Inc.
and certain shareholders of DataWorks Corporation.
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SIGNATURE
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.
Dated: August 8, 1997
INTERACTIVE GROUP, INC.
By /s/ Mark Hellinger
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Mark Hellinger
President and Chief Operating Officer
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Exhibit Index
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Exhibit Page
Number Description Number
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2.1 Agreement and Plan of Merger and Reorganization dated as of July
31, 1997 among DataWorks Corporation, DataWorks Acquisition Sub,
Inc. and Interactive Group, Inc. Disclosure Schedules of
DataWorks Corporation and Interactive Group, Inc., as well as
certain exhibits to this Agreement, have been omitted as
inmaterial; however, copies of these documents will be provided
to the Securities and Exchange Commission upon request.
2.2 Option Agreement dated as of July 31, 1997 between DataWorks
Corporation and Interactive Group, Inc.
99.1 Form of Voting Agreement between DataWorks Corporation and
certain stockholders of Interactive Group, Inc.
99.2 Form of Voting Agreement between Interactive Group, Inc. and
certain shareholders of DataWorks Corporation.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG:
DATAWORKS CORPORATION,
A CALIFORNIA CORPORATION;
DATAWORKS ACQUISITION SUB, INC.,
A DELAWARE CORPORATION; AND
INTERACTIVE GROUP, INC.,
A DELAWARE CORPORATION
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DATED AS OF JULY 31, 1997
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION................................................1
1.1 Merger of Merger Sub into the Company.....................................1
1.2 Effect of the Merger......................................................1
1.3 Closing; Effective Time...................................................1
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers..................................................................2
1.5 Conversion of Shares......................................................2
1.6 Closing of the Company's Transfer Books...................................3
1.7 Exchange of Company Stock Certificates....................................4
1.8 Tax Consequences..........................................................5
1.9 Accounting Consequences...................................................5
1.10 Further Action............................................................5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................6
2.1 Organization, Standing and Power..........................................6
2.2 SEC Filings; Financial Statements.........................................6
2.3 Disclosure................................................................7
2.4 Absence of Certain Changes or Events......................................7
2.5 Authority; Binding Nature of Agreement....................................7
2.6 Non-Contravention; Consents...............................................8
2.7 Accounting Matters........................................................8
2.8 Vote Required.............................................................8
2.9 Capitalization, Etc.......................................................8
2.10 Fairness Opinion.........................................................10
2.11 Approval of Voting Agreements and Option Agreement.......................10
2.12 No Existing Discussions..................................................10
2.13 Financial Advisor........................................................10
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB...............................................................11
3.1 Organization, Standing and Power.........................................11
3.2 SEC Filings; Financial Statements........................................11
3.3 Disclosure...............................................................12
3.4 Absence of Certain Changes or Events.....................................12
3.5 Authority; Binding Nature of Agreement...................................12
3.6 Non-Contravention; Consents..............................................13
3.7 Accounting Matters.......................................................13
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i.
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TABLE OF CONTENTS
(CONTINUED)
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PAGE
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3.8 Vote Required............................................................13
3.9 Capitalization, Etc......................................................13
3.10 Fairness Opinion.........................................................15
3.11 Valid Issuance...........................................................15
SECTION 4. CERTAIN COVENANTS OF THE PARTIES.........................................15
4.1 Parent Access and Investigation..........................................15
4.2 Company Access and Investigation.........................................15
4.3 Operation of the Company's Business......................................16
4.4 Operation of Parent's Business; Merger Sub...............................18
4.5 No Solicitation..........................................................20
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES......................................21
5.1 Registration Statement; Joint Proxy Statement............................21
5.2 Company Stockholders' Meeting............................................22
5.3 Parent Shareholders' Meeting.............................................23
5.4 Regulatory Approvals.....................................................23
5.5 Stock Options; Warrants..................................................24
5.6 Indemnification of Officers and Directors Prior and Following
the Effective Time.......................................................25
5.7 Pooling of Interests.....................................................26
5.8 Additional Agreements....................................................27
5.9 Disclosure...............................................................27
5.10 Affiliate Agreements.....................................................27
5.11 Tax Matters..............................................................28
5.12 Letters From Accountants.................................................28
5.13 Resignation of Company Officers and Directors; Management
Structure of Parent......................................................28
5.14 Parent Plans and Benefit Arrangements....................................28
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND
MERGER SUB...............................................................29
6.1 Accuracy of Representations..............................................29
6.2 Performance of Covenants.................................................30
6.3 Effectiveness of Registration Statement..................................30
6.4 Stockholder Approval.....................................................30
6.5 Agreements and Documents.................................................30
6.6 HSR Act..................................................................31
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ii.
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TABLE OF CONTENTS
(CONTINUED)
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PAGE
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6.7 Nasdaq National Market...................................................32
6.8 No Restraints............................................................32
6.9 Consents.................................................................32
6.10 Employees................................................................32
6.11 No Governmental Litigation...............................................32
6.12 No Other Litigation......................................................32
6.13 No Burdensome Condition..................................................33
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY........................33
7.1 Accuracy of Representations..............................................33
7.2 Performance of Covenants.................................................34
7.3 Effectiveness of Registration Statement..................................34
7.4 Stockholder Approval.....................................................34
7.5 Agreements and Documents.................................................34
7.6 HSR Act..................................................................35
7.7 Nasdaq National Market...................................................35
7.8 No Restraints............................................................35
7.9 Consents.................................................................35
7.10 No Governmental Litigation...............................................35
7.11 No Other Litigation......................................................35
7.12 No Burdensome Condition..................................................35
SECTION 8. TERMINATION..............................................................36
8.1 Termination..............................................................36
8.2 Effect of Termination....................................................38
8.3 Expenses; Termination Fees...............................................38
SECTION 9. MISCELLANEOUS PROVISIONS.................................................39
9.1 Amendment................................................................39
9.2 Waiver...................................................................39
9.3 No Survival of Representations and Warranties............................39
9.4 Entire Agreement; Counterparts; Applicable Law...........................39
9.5 Attorneys' Fees..........................................................40
9.6 Assignability............................................................40
9.7 Notices..................................................................40
9.8 Construction.............................................................41
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iii.
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Certificate of Incorporation of Surviving
Corporation
Exhibit C - Form of Affiliate Agreement for Company Affiliates
Exhibit D - Form of Affiliate Agreement for Parent Affiliates
Exhibit E - Form of Continuity of Interest Certificate
Exhibit F - Tax Representation Letter for Company
Exhibit G - Tax Representation Letter for Parent
Exhibit H - Management Structure of Parent
Exhibit I - Form of Employment Agreement
Exhibit J - Individuals to execute Employment Agreements and
Noncompetition Agreements
Exhibit K - Form of Noncompetition Agreement
Exhibit L - Form of legal opinion of Pillsbury Madison & Sutro llp
Exhibit M - Form of legal opinion of Cooley Godward llp
1.
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of July 31, 1997, by and among: DATAWORKS CORPORATION, a
California corporation ("Parent"); DATAWORKS ACQUISITION SUB, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
INTERACTIVE GROUP, INC., a Delaware corporation (the "Company"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub will
cease to exist, and the Company will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. The respective boards of directors of Parent, Merger Sub and the Company
have approved this Agreement and the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley
1.
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Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California, at a time
and on a date which shall be promptly following the satisfaction or waiver of
the conditions set forth in Sections 6 and 7 (the "Closing Date").
Contemporaneously with or as promptly as practicable after the Closing, a
properly executed certificate of merger conforming to the requirements of the
DGCL (the "Certificate of Merger") shall be filed with the Secretary of State of
the State of Delaware. The Merger shall take effect at the time the Certificate
of Merger is filed with the Secretary of State of the State of Delaware (the
"Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated immediately after the Effective Time to conform to
Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated immediately after the Effective Time to conform to the Bylaws of Merger
Sub as in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals who are
directors and officers of Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF SHARES.
(a) Subject to Section 1.5(d), at the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Merger Sub, the
Company or any stockholder of the Company:
(i) any shares of Company Common Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor;
(ii) any shares of Company Common Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor;
(iii) except as provided in clauses "(i)" and "(ii)" above and
subject to Section 1.5(b), each share of Company Common Stock then outstanding
shall be converted into the right to receive 0.8054 of a share of Parent Common
Stock; and
2.
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(iv) each share of the common stock, par value $0.001 per share,
of Merger Sub then outstanding shall be converted into one share of common stock
of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock into which each
outstanding share of Company Common Stock is to be converted pursuant to Section
1.5(a)(iii) (as such fraction may be adjusted in accordance with this Section
1.5(b)) is referred to as the "Exchange Ratio." If, between the date of this
Agreement and the Effective Time, the outstanding shares of Company Common Stock
or Parent Common Stock are changed into a different number or class of shares by
reason of any stock split, stock, cash or property dividend or distribution,
reverse stock split, reclassification, recapitalization or other similar
transaction, or if there shall be any record date with respect thereto, then the
Exchange Ratio shall be appropriately adjusted.
(c) [Reserved.]
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company Common
Stock who would otherwise be entitled to receive a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock
issuable to such holder) shall, upon surrender of such holder's Company Stock
Certificate(s) (as defined in Section 1.6), be paid in cash the dollar amount
(rounded to the nearest whole cent), without interest, determined by multiplying
such fraction by the closing sales price of a share of Parent Common Stock on
the Nasdaq National Market on the date the Merger becomes effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time: (a) all
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist, and
all holders of certificates representing shares of Company Common Stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company; and (b) the stock transfer books of the
Company shall be closed with respect to all shares of Company Common Stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Common Stock shall be made on such stock transfer books
after the Effective Time. If, after the Effective Time, a valid certificate
previously representing any of such shares of Company Common Stock (a "Company
Stock Certificate") is presented to the Exchange Agent (as defined in Section
1.7) or to the Surviving Corporation or Parent, such Company Stock Certificate
shall be canceled and shall be exchanged as provided in Section 1.7.
3.
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1.7 EXCHANGE OF COMPANY STOCK CERTIFICATES.
(a) Prior to the Closing Date, Parent shall select a reputable bank or
trust company (reasonably satisfactory to the Company) to act as exchange agent
in the Merger (the "Exchange Agent"). Promptly after the Effective Time, Parent
shall deposit with the Exchange Agent (i) certificates representing the shares
of Parent Common Stock issuable pursuant to this Section 1 and (ii) cash
sufficient to make payments in lieu of fractional shares in accordance with
Section 1.5(d). The shares of Parent Common Stock and cash amounts so deposited
with the Exchange Agent, together with any dividends or distributions received
by the Exchange Agent with respect to such shares, are referred to collectively
as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the Exchange
Agent will mail to the registered holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Subject to Section 1.5(d), upon surrender of a
Company Stock Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (1) the holder of such
Company Stock Certificate shall be entitled to receive immediately in exchange
therefor a certificate representing the number of shares of Parent Common Stock
that such holder has the right to receive pursuant to the provisions of Section
1.5(a)(iii), and (2) the Company Stock Certificate so surrendered shall be
marked "canceled." Until surrendered as contemplated by this Section 1.7, each
Company Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated by Section
1.6. If any Company Stock Certificate shall have been lost, stolen or destroyed,
Parent may, in its discretion and as a condition precedent to the issuance of
any certificate representing Parent Common Stock, require the owner of such
lost, stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against the Exchange Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate.
(c) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, until such holder surrenders
such Company
4.
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Stock Certificate in accordance with this Section 1.7 (at which time such holder
shall be entitled to receive all such dividends and distributions, without
interest).
(d) Any portion of the Exchange Fund that remains undistributed to
holders of Company Stock Certificates as of the date 270 days after the date on
which the Merger becomes effective shall be delivered to Parent upon demand, and
any holders of Company Stock Certificates who have not theretofore surrendered
their Company Stock Certificates in accordance with this Section 1.7 shall
thereafter look only to Parent for satisfaction of their claims for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Common Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock with respect to any shares
of Parent Common Stock (or dividends or distributions with respect thereto), or
for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.9 ACCOUNTING CONSEQUENCES. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.10 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
5.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the Company SEC Documents (as defined in Section 2.2(a)) or in
the disclosure schedule delivered by the Company to Parent on the date of this
Agreement and signed by the President of the Company (the "Company Disclosure
Schedule"):
2.1 ORGANIZATION, STANDING AND POWER. The Company and each of its direct
and indirect majority-owned subsidiaries which are listed on Exhibit 21 of the
Company's most recent Annual Report on Form 10-K comprising a Company SEC
Document (defined below) (collectively, the "Acquired Corporations"), are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation. Each of the Acquired
Corporations has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby. Except as described in the Company Disclosure
Schedule, the Company has no equity interest in any Entity except the other
Acquired Corporations.
2.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to Parent accurate and complete
copies (excluding copies of exhibits) of each report, registration statement and
definitive proxy statement filed by the Company with the SEC between the date of
the final amendment to the Company's Registration Statement in respect of the
Company's initial public offering (which became effective on or about May 23,
1995) and the date of this Agreement (including without limitation all exhibits
and schedules thereto, collectively, the "Company SEC Documents"). As of the
time it was filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing): (i) each of the
Company SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be); and
(ii) none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Company SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes to
such financial statements and,
6.
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in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and
except that unaudited financial statements may not contain footnotes and are
subject to year-end audit adjustments); and (iii) fairly present the
consolidated financial position of the Company and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of the
Company and its subsidiaries for the periods covered thereby.
2.3 DISCLOSURE. None of the information to be supplied by or on behalf of
the Company for inclusion in the S-4 Registration Statement will, at the time
the S-4 Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information to be supplied by or on behalf of the
Company for inclusion in the Joint Proxy Statement will, at the time the Joint
Proxy Statement is mailed to the stockholders of the Company or to the
shareholders of Parent, or at the time of the Company Stockholders' Meeting or
the Parent Shareholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
2.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1997: (i) there
has not been any event that has had or is reasonably likely to have a Material
Adverse Effect on the Acquired Corporations; and (ii) the Company has not
declared, accrued, set aside or paid any dividend or distribution.
2.5 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the corporate
power and authority to perform its obligations under this Agreement. The board
of directors of the Company (at a meeting duly called and held) has unanimously
determined that the Merger is advisable and fair and in the best interests of
the Company and its stockholders; has unanimously approved the execution,
delivery and performance of this Agreement by the Company and has unanimously
approved the Merger and the transactions contemplated hereby; and has
unanimously recommended the adoption and approval of this Agreement and the
approval of the Merger by the holders of Company Common Stock and directed that
such matters be submitted for consideration by the Company's stockholders at the
Company Stockholders' Meeting (as defined in Section 5.2). The execution,
delivery and performance by the Company of this Agreement have been duly
authorized by all necessary action on the part of the board of directors of the
Company. This Agreement constitutes the legal, valid and binding obligation of
the Company, enforceable against it in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
7.
<PAGE> 13
2.6 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of this
Agreement by the Company nor the consummation by the Company of the Merger will
(a) conflict with or result in any breach of any provision of the Certificate of
Incorporation or bylaws of the Company, or (b) result in a default by the
Company under any Contract to which the Company is a party, except for any
default which has not had and will not have a Material Adverse Effect on the
Acquired Corporations, or (c) result in a violation by the Company of any order,
writ, injunction, judgment or decree to which the Company is subject, except for
any violation which has not had and will not have a Material Adverse Effect on
the Acquired Corporations. Except as may be required by the Securities Act, the
Exchange Act, state securities or "blue sky" laws, the DGCL, the HSR Act and the
NASD Bylaws, the Company is not and will not be required to make any filing with
or give any notice to, or to obtain any Consent from, any Person in connection
with the execution and delivery of this Agreement, or the consummation of the
Merger, except for any Consent the absence of which has not had and will not
have a Material Adverse Effect on the Acquired Corporations.
2.7 ACCOUNTING MATTERS. To the actual knowledge of the Company's executive
officers, neither the Company nor any of its affiliates (as such term is used in
Rule 145 under the Securities Act) has taken or agreed to, or plans to, take any
action that could prevent Parent from accounting for the Merger as a "pooling of
interests."
2.8 VOTE REQUIRED. The affirmative vote of the holders of a majority of the
shares of Company Common Stock outstanding on the record date for the Company
Stockholders' Meeting in favor of (i) the adoption and approval of this
Agreement, and (ii) the approval of the Merger and the other transactions
contemplated by this Agreement (the "Required Company Stockholder Vote"), is the
only vote of the holders of any class or series of the Company's capital stock
necessary to adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement.
2.9 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
30,000,000 shares of Company Common Stock, of which 4,596,120 shares have been
issued and are outstanding as of the date of this Agreement; and (ii) 5,000,000
shares of Preferred Stock, $0.001 par value per share, of which no shares are
outstanding as of the date of this Agreement. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. As of the date of this Agreement, there are no shares of
Company Common Stock held in treasury by the Company or held by any subsidiary
of the Company. Except as set forth in the Company Disclosure Schedule: (i) none
of the outstanding shares of Company Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right; (ii) none of the outstanding shares of Company
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Common Stock is subject to any right of first refusal in favor of the Company;
and (iii) there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging or
otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. The Company is under no obligation to
repurchase, redeem or otherwise acquire any outstanding shares of Company Common
Stock.
(b) As of the date of this Agreement: (i) there are options to
purchase 128,000 shares of Company Common Stock outstanding under the Company's
1997 Stock Option Plan; (ii) there are options to purchase 347,021 shares of
Company Common Stock outstanding under the Company's 1995 Stock Option Plan;
(iii) there are options to purchase no shares of Company Common Stock
outstanding under the Company's 1993 Stock Option Plan; (iv) there are options
to purchase 60,000 shares of Company Common Stock outstanding outside all such
plans (stock options granted by the Company pursuant to the 1997 Stock Option
Plan, the 1995 Stock Option Plan, the 1993 Stock Option Plan and outside all
such plans are referred to in this Agreement as "Company Options"); (v) there
are warrants to purchase 130,000 shares of Company Common Stock outstanding
(each, a "Company Warrant"); and (vi) 47,434 shares of Company Common Stock are
reserved for future issuance under the Company's 1995 Employee Stock Purchase
Plan (the "1995 Purchase Plan"). The Company Disclosure Schedule sets forth the
following information with respect to each Company Option outstanding as of the
date of this Agreement: (i) the particular plan, if any, pursuant to which such
Company Option was granted; (ii) the name of the optionee; (iii) the number of
shares of Company Common Stock subject to such Company Option; (iv) the exercise
price of such Company Option; (v) the date on which such Company Option was
granted; (vi) the applicable vesting schedule(s), and the extent to which such
Company Option is vested as of the date of this Agreement; and (vii) the date on
which such Company Option expires. The Company Disclosure Schedule also sets
forth the relevant corresponding information with respect to each Company
Warrant. The Company has made available to Parent accurate and complete copies
of all stock option plans pursuant to which the Company has ever granted stock
options, and the forms of all stock option agreements evidencing such options,
and accurate and complete copies of all Company Warrants.
(c) Except as set forth in the Company Disclosure Schedule or as
permitted pursuant to Section 4.3(b), there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire
any shares of the capital stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) stockholder rights plan (or similar plan commonly referred to
as a "poison pill") or Contract under which the Company is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) to the best of the knowledge of the Company's
executive officers,
9.
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condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of the
Company.
(d) All outstanding shares of Company Common Stock, all outstanding
Company Options and Company Warrants, and all outstanding shares of capital
stock of each subsidiary of the Company have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of each of the
Acquired Corporations other than the Company are validly issued, fully paid and
nonassessable and are owned beneficially and of record by the Company, free and
clear of any Encumbrances.
2.10 FAIRNESS OPINION. The Company's board of directors has received the
written opinion of UBS Securities LLC ("UBS"), financial advisor to the Company,
dated on or about the date of this Agreement, to the effect that the Exchange
Ratio is fair to the stockholders of the Company from a financial point of view.
2.11 APPROVAL OF VOTING AGREEMENTS AND OPTION AGREEMENT. Prior to the
execution of those certain Voting Agreements between Parent and certain
stockholders of the Company, and that certain Option Agreement of even date
herewith between Parent and Company, the Board of Directors of the Company shall
have approved: (a) said Voting Agreements and the transactions contemplated
thereby; and (b) said Option Agreement and the transactions contemplated
thereby.
2.12 NO EXISTING DISCUSSIONS. None of the Acquired Corporations, and no
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
2.13 FINANCIAL ADVISOR. Except for UBS, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or any of the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of any of the Acquired
Corporations. A copy of the only two written agreements in effect relating to
the Company's obligations to UBS have been made available to Parent and there
are no other obligations of the Company to UBS not contemplated by such
agreements.
10.
<PAGE> 16
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub represent and warrant to the Company that, except as
set forth in the Parent SEC Documents (as defined in Section 3.2(a)) or in the
disclosure schedule delivered to the Company on the date of this Agreement and
signed by the President of Parent (the "Parent Disclosure Schedule"):
3.1 ORGANIZATION, STANDING AND POWER. Parent, Merger Sub and each of
Parent's other direct and indirect majority-owned subsidiaries which are listed
on Exhibit 21 of Parent's most recent Annual Report on Form 10-K comprising a
Parent SEC Document (collectively, the "Acquiring Corporations"), are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation. Each of the Acquiring
Corporations has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby. Except as described in the
Parent Disclosure Schedule, Parent has no equity interest in any Entity except
the other Acquiring Corporations.
3.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement and
definitive proxy statement filed by Parent with the SEC between the date of the
final amendment to the Company's Registration Statement in respect of the
Company's initial public offering (which became effective on or about October
27, 1995), and the date of this Agreement (including without limitation all
exhibits and schedules thereto, collectively, the "Parent SEC Documents"). As of
the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Parent SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except as may be indicated in the notes to
such financial statements and, in the
11.
<PAGE> 17
case of unaudited statements, as permitted by Form 10-Q of the SEC, and except
that unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments); and (iii) fairly present the consolidated financial
position of Parent and its subsidiaries as of the respective dates thereof and
the consolidated results of operations of Parent and its subsidiaries for the
periods covered thereby.
3.3 DISCLOSURE. None of the information to be supplied by or on behalf of
Parent for inclusion in the S-4 Registration Statement will, at the time the S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. None
of the information to be supplied by or on behalf of Parent for inclusion in the
Joint Proxy Statement will, at the time the Joint Proxy Statement is mailed to
the stockholders of the Company or to the shareholders of Parent, or at the time
of the Company Stockholders' Meeting or the Parent Shareholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The S-4 Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated by the SEC thereunder; except that no representation or
warranty is made by Parent with respect to statements made or incorporated by
reference therein based on information supplied by the Company (as supplemented
or revised) for inclusion or incorporation by reference in the Joint Proxy
Statement.
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1997: (i) there
has not been any event that has had or is reasonably likely to have a Material
Adverse Effect on the Acquiring Corporations; and (ii) Parent has not declared,
accrued, set aside or paid any dividend or distribution.
3.5 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have the
corporate right, power and authority to perform their obligations under this
Agreement. The board of directors of Parent (at a meeting duly called and held)
has unanimously determined that the Merger is advisable and fair and in the best
interests of Parent and its shareholders; has unanimously approved the
execution, delivery and performance of this Agreement by Parent and has
unanimously approved the Merger and the transactions contemplated hereby (as the
board of directors of Parent and on behalf of Parent as the sole stockholder of
Merger Sub); and has unanimously recommended the approval of the principal terms
of the Merger by the holders of Parent Common Stock and directed that the such
matters be submitted for consideration by the Parent's shareholders at the
Parent Shareholders' Meeting (as defined in Section 5.3). The execution,
delivery and performance by Parent and Merger Sub of this Agreement have been
duly authorized
12.
<PAGE> 18
by all necessary action on the part of the respective boards of directors of
Parent and Merger Sub. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.6 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of this
Agreement by Parent and Merger Sub nor the consummation by Parent and Merger Sub
of the Merger will (a) conflict with or result in any breach of any provision of
the Articles or Certificate of Incorporation or the bylaws of Parent or Merger
Sub, or (b) result in a default by Parent or Merger Sub under any Contract to
which Parent or Merger Sub is a party, except for any default which has not had
and will not have a Material Adverse Effect on the Acquiring Corporations, or
(c) result in a violation by Parent or Merger Sub of any order, writ,
injunction, judgment or decree to which Parent or Merger Sub is subject, except
for any violation which has not had and will not have a Material Adverse Effect
on the Acquiring Corporations. Except as may be required by the Securities Act,
the Exchange Act, state securities or "blue sky" laws, the California General
Corporation Law, the HSR Act and the NASD Bylaws, neither Parent nor Merger Sub
is or will 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 of the Merger, except for any
Consent the absence of which has not had and will not have a Material Adverse
Effect on the Acquiring Corporations.
3.7 ACCOUNTING MATTERS. To the actual knowledge of Parent's executive
officers, neither Parent nor any of its affiliates (as such term is used in Rule
145 under the Securities Act) has taken or agreed to, or plans to, take any
action that could prevent Parent from accounting for the Merger as a "pooling of
interests."
3.8 VOTE REQUIRED. The affirmative vote of the holders of a majority of the
shares of Parent Common Stock outstanding on the record date for the Parent
Shareholders' Meeting in favor of the approval of the principal terms of the
Merger (the "Required Parent Shareholder Vote") is the only vote of the holders
of any class or series of Parent's capital stock necessary to adopt and approve
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
3.9 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of: (i) 25,000,000
shares of Parent Common Stock, of which 10,118,908 shares have been issued and
are outstanding as of the date of this Agreement; and (ii) 5,000,000 shares of
Preferred Stock, no par value per share, of which no shares are outstanding as
of the date of this
13.
<PAGE> 19
Agreement. All of the outstanding shares of Parent Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable. As of the
date of this Agreement, there are no shares of Parent Common Stock held in
treasury by Parent or held by any subsidiary of Parent. Except as set forth in
the Parent Disclosure Schedule: (i) none of the outstanding shares of Parent
Common Stock is entitled or subject to any preemptive right, right of
participation, right of maintenance or any similar right; (ii) none of the
outstanding shares of Parent Common Stock is subject to any right of first
refusal in favor of the Parent; and (iii) there is no Acquiring Corporation
Contract relating to the voting or registration of, or restricting any Person
from purchasing, selling, pledging or otherwise disposing of (or granting any
option or similar right with respect to), any shares of Parent Common Stock.
Parent is under no obligation to repurchase, redeem or otherwise acquire any
outstanding shares of Parent Common Stock.
(b) As of the date of this Agreement: (i) there are options to
purchase 1,136,385 shares of Parent Common Stock outstanding under Parent's
Equity Incentive Plan; (ii) there are options to purchase 96,666 shares of
Parent Common Stock outstanding under Parent's Non-Employee Directors' Stock
Option Plan; and (iii) 170,555 shares of Parent Common Stock are reserved for
future issuance under Parent's Employee Stock Purchase Plan. Parent has made
available to the Company accurate and complete copies of all stock option plans
pursuant to which Parent has ever granted stock options, and the forms of all
stock option agreements evidencing such options. Parent also has outstanding
warrants to purchase 22,222 shares of Parent Common Stock, and Parent has made
available to the Company accurate and complete copies of all warrant agreements
relating thereto.
(c) Except as set forth in the Parent Disclosure Schedule or as
permitted pursuant to Section 4.4(b) there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire
any shares of the capital stock or other securities of Parent; (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 Parent;
(iii) stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which Parent is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or (iv)
to the best of the knowledge of Parent's executive officers, condition or
circumstance that may give rise to or provide a basis for the assertion of a
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of Parent.
(d) All outstanding shares of Parent Common Stock, all outstanding
options to purchase Parent Common Stock, and all outstanding shares of capital
stock of Merger Sub have been issued and granted in compliance with (i) all
applicable securities
14.
<PAGE> 20
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of each Acquiring
Corporation other than Parent are validly issued, fully paid and nonassessable
and are owned beneficially and of record by Parent, free and clear of any
Encumbrances.
3.10 FAIRNESS OPINION. Parent's board of directors has received the written
opinion of Lehman Brothers Inc., financial advisor to Parent, dated the date of
this Agreement, to the effect that the Exchange Ratio is fair to Parent from a
financial point of view.
3.11 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable and shall have been approved for
quotation (subject to notice of issuance) on the Nasdaq National Market.
SECTION 4. CERTAIN COVENANTS OF THE PARTIES.
4.1 PARENT ACCESS AND INVESTIGATION. During the period from the date of
this Agreement through the Effective Time (the "Pre-Closing Period"), the
Company shall, and shall cause the respective Representatives of the Acquired
Corporations to: (a) provide Parent and Parent's Representatives with reasonable
access to the Acquired Corporations' Representatives, personnel and assets and
to all existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and (b) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations, and with such additional financial, operating and other
data and information regarding the Acquired Corporations, as Parent may
reasonably request.
4.2 COMPANY ACCESS AND INVESTIGATION. During the Pre-Closing Period, Parent
shall, and shall cause the respective Representatives of its subsidiaries to:
(a) provide the Company and the Company's Representatives with reasonable access
to the Parent's and such subsidiaries' Representatives, personnel and assets and
to all existing books, records, Tax Returns, work papers and other documents and
information relating to Parent and its subsidiaries; and (b) provide the Company
and the Company's Representatives with such copies of the existing books,
records, Tax Returns, work papers and other documents and information relating
to Parent and its subsidiaries, and with such additional financial, operating
and other data and information regarding Parent and its subsidiaries, as the
Company may reasonably request.
15.
<PAGE> 21
4.3 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period the Company shall: (i) ensure that
each of the Acquired Corporations conducts its business and operations (A) in
the ordinary course and in accordance with past practices and (B) in compliance
with all applicable Legal Requirements and the requirements of all applicable
material Contracts; (ii) use all reasonable efforts to ensure that each of the
Acquired Corporations preserves intact its current business organization, keeps
available the services of its current officers and employees and maintains its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the respective Acquired Corporations; (iii) use all reasonable efforts to
keep in full force all of its existing insurance policies; and (iv) provide all
material notices, assurances and support required by any material Contract to
which an Acquired Corporation is a party.
(b) Without the prior written consent of Parent, which consent shall
not be unreasonably withheld or delayed, during the Pre-Closing Period the
Company shall not, and shall not permit any of the other Acquired Corporations
to:
(i) declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other securities;
(ii) sell, issue, grant or authorize the issuance or grant of (i)
any capital stock or other security, (ii) any option, call, warrant or right to
acquire any capital stock or other security, or (iii) any instrument convertible
into or exchangeable for any capital stock or other security (except that the
Company may (x) issue Company Common Stock upon the valid exercise of Company
Options or Company Warrants, (y) grant Company Options to new employees
consistent with past practice, and (z) issue shares of Company Common Stock
pursuant to the 1995 Purchase Plan);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans or stock
purchase plan, any provision of any agreement evidencing any outstanding stock
option or any restricted stock purchase agreement, or otherwise modify any of
the terms of any outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
16.
<PAGE> 22
(v) form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(vi) acquire, lease or license any material right or other
material asset from any other Person or sell or otherwise dispose of, or lease
or license, any material right or other material asset to any other Person
(except in each case for assets acquired, leased, licensed or disposed of by the
Company in the ordinary course of business and consistent with past practices),
or waive or relinquish any material right;
(vii) lend money to any Person, or incur or guarantee any
indebtedness (except that the Company may make routine borrowings and/or advance
funds to employees and officers in the ordinary course of business and in
accordance with past practices under its current financing facilities);
(viii) establish, adopt or amend any employee benefit plan, pay
any bonus or make any profit-sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees (except
for routine increases for non-officers consistent with past practices);
(ix) change any of its methods of accounting or accounting
practices in any respect;
(x) make any Tax election;
(xi) commence or settle any Legal Proceeding;
(xii) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices; or
(xiii) agree or commit to take any of the actions described in
clauses "(i)" through "(xii)" of this Section 4.3(b).
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by the Company in this Agreement if (A)
such representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior
17.
<PAGE> 23
to the date of this Agreement; (iii) any material breach of any covenant or
obligation of the Company; and (iv) any event, condition, fact or circumstance
that would make the timely satisfaction of any of the conditions set forth in
Section 6 or Section 7 impossible or unlikely or that has had or could
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations. No notification given to Parent pursuant to this Section 4.3(c)
shall limit or otherwise affect any of the representations, warranties,
covenants or obligations of the Company contained in this Agreement.
4.4 OPERATION OF PARENT'S BUSINESS; MERGER SUB.
(a) During the Pre-Closing Period Parent shall: (i) ensure that each
of the Acquiring Corporations conducts its business and operations (A) in the
ordinary course and in accordance with past practices and (B) in compliance with
all applicable Legal Requirements and the requirements of all applicable
material Contracts; (ii) use all reasonable efforts to ensure that each of the
Acquiring Corporations preserves intact its current business organization, keeps
available the services of its current officers and employees and maintains its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with such entity; (iii) use all reasonable efforts to keep in full force all of
its existing insurance policies; and (iv) provide all material notices,
assurances and support required by any material Contract to which any Acquiring
Corporation is a party.
(b) Without the prior written consent of the Company, which consent
shall not be unreasonably withheld or delayed, during the Pre-Closing Period
Parent shall not, and shall not permit any of the Acquiring Corporations to:
(i) declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other securities;
(ii) sell, issue, grant or authorize the issuance or grant of (i)
any capital stock or other security, (ii) any option, call, warrant or right to
acquire any capital stock or other security, or (iii) any instrument convertible
into or exchangeable for any capital stock or other security (except that Parent
may (x) issue Parent Common Stock upon the valid exercise of outstanding options
or warrants, (y) grant options and/or warrants to employees and consultants
consistent with past practice, and (z) issue shares of Parent Common Stock
pursuant to its existing option and stock plans);
(iii) amend or permit the adoption of any amendment to its
Articles of Incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, consolidation, share
exchange, business combination,
18.
<PAGE> 24
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(iv) form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(v) acquire, lease or license any material right or other
material asset from any other Person or sell or otherwise dispose of, or lease
or license, any material right or other material asset to any other Person
(except in each case for assets acquired, leased, licensed or disposed of by
Parent in the ordinary course of business and consistent with past practices),
or waive or relinquish any material right;
(vi) lend money to any Person, or incur or guarantee any
indebtedness (except that Parent may make routine borrowings and/or advance
funds to employees and officers in the ordinary course of business and in
accordance with past practices under its current financing facilities);
(vii) change any of its methods of accounting or accounting
practices in any respect;
(viii) make any Tax election;
(ix) commence or settle any Legal Proceeding;
(x) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices; or
(xi) agree or commit to take any of the actions described in
clauses "(i)" through "(x)" of this Section 4.4(b).
(c) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of: (i) the discovery by Parent of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Parent in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Parent; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 6 or Section 7 impossible or unlikely or that has had
19.
<PAGE> 25
or could reasonably be expected to have a Material Adverse Effect on the
Acquiring Corporations. No notification given to the Company pursuant to this
Section 4.4(c) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of Parent contained in this Agreement.
(d) During the period from the date of this Agreement to the Effective
Time, Merger Sub shall not engage in any activities of any nature except as
provided in or contemplated by this Agreement. Parent shall take all actions
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth herein.
4.5 NO SOLICITATION.
(a) The Company shall not directly or indirectly, and shall not
authorize or permit any subsidiary of the Company or any Representative of any
of the Acquired Corporations directly or indirectly to, (i) solicit, initiate,
encourage or induce the making, submission or announcement of any Acquisition
Proposal or take any action (excluding any press releases issued in connection
with the announcement of the Merger or action in compliance with the Company's
required disclosure obligations under the Exchange Act) that could reasonably be
expected to lead to an Acquisition Proposal, (ii) furnish any information
regarding any of the Acquired Corporations to any Person in connection with or
in response to an Acquisition Proposal, or (iii) engage in discussions or
negotiations with any Person with respect to any Acquisition Proposal; provided,
however, that the foregoing clauses (ii) and (iii) of this Section 4.5(a) shall
not apply following the Company's receipt of a Superior Offer submitted by any
Person if (1) neither the Company nor any Representative of any of the Acquired
Corporations shall have violated any of the restrictions set forth in this
Section 4.5, (2) the board of directors of the Company concludes in good faith,
based upon the advice of its outside legal counsel, that a response to any such
Superior Offer is required in order for the board of directors of the Company to
comply with its fiduciary obligations to the Company's stockholders under
applicable law, (3) prior to furnishing any such nonpublic information to, or
entering into discussions with, such Person, the Company gives Parent written
notice of the identity of such Person and of the Company's intention to furnish
nonpublic information to, or enter into discussions with, such Person, and the
Company receives from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such Person by or on behalf of the
Company, and (4) prior to furnishing any such nonpublic information to such
Person, the Company furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by the
Company to Parent). Without limiting the generality of the foregoing, the
Company acknowledges and agrees that any violation of any of the restrictions
set forth in the preceding sentence by any Representative of any of the Acquired
Corporations, whether or not such Representative
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is purporting to act on behalf of any of the Acquired Corporations, shall be
deemed to constitute a breach of this Section 4.5 by the Company.
(b) The Company shall promptly advise Parent orally and in writing of
any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal and any modifications or proposed modifications thereto.
(c) The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement,
Parent shall prepare and cause to be filed with the SEC a registration statement
on Form S-4 concerning the Parent Common Stock to be issued upon the Merger (the
"S-4 Registration Statement"), in which the Joint Proxy Statement will be
included as a prospectus, and any other documents required by the Securities Act
or the Exchange Act in connection with the Merger. Parent shall use all
reasonable efforts to cause the S-4 Registration Statement (including the Joint
Proxy Statement) to comply with the rules and regulations promulgated by the
SEC, to respond promptly to any comments of the SEC or its staff and to have the
S-4 Registration Statement declared effective under the Securities Act as
promptly as practicable after it is filed with the SEC. Parent will use all
reasonable efforts to cause the Joint Proxy Statement to be mailed to Parent's
shareholders, and the Company will use all reasonable efforts to cause the Joint
Proxy Statement to be mailed to the Company's stockholders, as promptly as
practicable after the S-4 Registration Statement is declared effective under the
Securities Act. The Company shall promptly furnish to Parent all information
concerning the Acquired Corporations and the Company's stockholders that may be
required or reasonably requested in connection with any action contemplated by
this Section 5.1. If any event relating to any of the Acquired Corporations
occurs, or if the Company becomes aware of any information that should be set
forth in an amendment or supplement to the S-4 Registration Statement or the
Joint Proxy Statement, then the Company shall promptly inform Parent thereof and
shall cooperate with Parent in filing such amendment or supplement with the SEC
and, if appropriate, in mailing such amendment or supplement to the stockholders
of the Company.
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(b) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be registered or qualified under the securities
law of every jurisdiction of the United States in which any registered holder of
Company Common Stock has an address of record on the record date for determining
the stockholders entitled to notice of and to vote at the Company Stockholders'
Meeting.
5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and duly hold a meeting of
the holders of Company Common Stock (the "Company Stockholders' Meeting") to
consider, act upon and vote upon the adoption and approval of this Agreement and
approval of the Merger. The Company Stockholders' Meeting will be held as
promptly as practicable and in any event within 45 days after the S-4
Registration Statement is declared effective under the Securities Act (which
45-day period shall be extended on a day-for-day basis if and for so long as any
stop order or other similar action is in place, pending or threatened by the
SEC).
(b) Subject to Section 5.2(c): (i) the board of directors of the
Company shall unanimously recommend that the Company's stockholders vote in
favor of and adopt and approve this Agreement and approve the Merger at the
Company Stockholders' Meeting; (ii) the Joint Proxy Statement shall include a
statement to the effect that the board of directors of the Company has
unanimously recommended that the Company's stockholders vote in favor of and
adopt and approve this Agreement and approve the Merger at the Company
Stockholders' Meeting; and (iii) neither the board of directors of the Company
nor any committee thereof shall withdraw, amend or modify, or propose or resolve
to withdraw, amend or modify, in a manner adverse to Parent, the unanimous
recommendation of the board of directors of the Company that the Company's
stockholders vote in favor of the adoption and approval this Agreement and the
approval of the Merger. For purposes of this Agreement, said recommendation of
the board of directors shall be deemed to have been modified in a manner adverse
to Parent if said recommendation shall no longer be unanimous.
(c) Nothing in Section 5.2(b) shall prevent the board of directors of
the Company from withdrawing, amending or modifying its unanimous recommendation
in favor of the Merger if (i) a Superior Offer is made to the Company and is not
withdrawn, (ii) neither the Company nor any of its Representatives shall have
violated any of the restrictions set forth in Section 4.5, and (iii) the board
of directors of the Company concludes in good faith, based upon the advice of
its outside counsel, that the withdrawal, amendment or modification of such
recommendation is required in order for the board of
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directors of the Company to comply with its fiduciary obligations to the
Company's stockholders under applicable law.
5.3 PARENT SHAREHOLDERS' MEETING.
(a) Parent shall take all action necessary under all applicable Legal
Requirements to call, give notice of, convene and duly hold a meeting of the
holders of outstanding Parent Common Stock to consider and vote upon the
approval of the principal terms of the Merger (the "Parent Shareholders'
Meeting"). The Parent Shareholders' Meeting will be held as promptly as
practicable and in any event within 45 days after the S-4 Registration Statement
is declared effective under the Securities Act (which 45-day period shall be
extended on a day-for-day basis if and for so long as any stop order or other
similar action is in place, pending or threatened by the SEC).
(b) The board of directors of Parent shall unanimously recommend that
Parent's shareholders vote in favor of the approval of the principal terms of
the Merger; the Joint Proxy Statement shall include a statement to the effect
that the board of directors of Parent has unanimously recommended that Parent's
shareholders vote in favor of the approval of the principal terms of the Merger;
and neither the board of directors of Parent nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify,
in a manner adverse to the Company, the unanimous recommendation of the board of
directors of Parent that Parent's shareholders vote in favor of the approval of
the principal terms of the Merger. For purposes of this Agreement, said
recommendation of Parent's board of directors shall be deemed to have been
modified in a manner adverse to the Company if said recommendation shall no
longer be unanimous.
5.4 REGULATORY APPROVALS. The Company and Parent shall use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any Governmental
Body with respect to the Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. Without limiting the generality of the foregoing, the
Company and Parent shall, promptly after the date of this Agreement, prepare and
file the notifications required under the HSR Act in connection with the Merger.
The Company and Parent shall respond as promptly as practicable to (i) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Parent shall (1) give the other party prompt notice of the
commencement of any Legal Proceeding by or before any Governmental Body with
respect to the Merger or any of the other transactions contemplated by this
Agreement, (2) keep the other party informed as
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to the status of any such Legal Proceeding, and (3) promptly inform the other
party of any communication to or from the Federal Trade Commission, the
Department of Justice or any other Governmental Body regarding the Merger. The
Company and Parent will consult and cooperate with one another, and will
consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Legal Proceeding under or
relating to the HSR Act or any other federal or state antitrust or fair trade
law. In addition, except as may be prohibited by any Governmental Body or by any
Legal Requirement, in connection with any Legal Proceeding under or relating to
the HSR Act or any other federal or state antitrust or fair trade law or any
other similar Legal Proceeding, each of the Company and Parent agrees to permit
authorized Representatives of the other party to be present at each meeting or
conference relating to any such Legal Proceeding and to have access to and be
consulted in connection with any document, opinion or proposal made or submitted
to any Governmental Body in connection with any such Legal Proceeding.
5.5 STOCK OPTIONS; WARRANTS.
(a) At the Effective Time, all rights with respect to Company Common
Stock under each Company Option and Company Warrant then outstanding shall be
converted into and become rights with respect to Parent Common Stock, and Parent
shall assume each such Company Option and Company Warrant in accordance with the
terms (as in effect as of the date of this Agreement) of the stock option plan
under which it was issued (if applicable) and the stock option agreement or
warrant agreement by which it is evidenced. From and after the Effective Time,
(i) each Company Option and each Company Warrant assumed by Parent may be
exercised solely for shares of Parent Common Stock, (ii) the number of shares of
Parent Common Stock subject to each such Company Option and each such Company
Warrant shall be equal to the number of shares of Company Common Stock subject
to such Company Option or Company Warrant immediately prior to the Effective
Time multiplied by the Exchange Ratio, rounding down to the nearest whole share
(with cash, less the applicable exercise price, being payable for any fraction
of a share), (iii) the per share exercise price under each such Company Option
and each such Company Warrant shall be adjusted by dividing the per share
exercise price under such Company Option or Company Warrant by the Exchange
Ratio and rounding up to the nearest cent and (iv) any restriction on the
exercise of any such Company Option or Company Warrant shall continue in full
force and effect and the term, exercisability, vesting schedule and other
provisions of such Company Option and Company Warrant shall otherwise remain
unchanged; provided, however, that each Company Option and each Company Warrant
assumed by Parent in accordance with this Section 5.5(a) shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization, merger, consolidation, sale of all or substantially all assets
or other
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similar transaction subsequent to the Effective Time. Parent shall file with the
SEC, promptly following the date on which the Merger becomes effective, a
Registration Statement on Form S-8 relating to the shares of Parent Common Stock
issuable with respect to the Company Options assumed by Parent in accordance
with this Section 5.5(a).
(b) The Company shall terminate the 1995 Purchase Plan and all
outstanding rights to purchase shares thereunder prior to the Effective Time,
and shall take such actions as may be necessary to ensure that: (i) all
outstanding rights to purchase shares under the 1995 Purchase Plan terminate on
the last trading day preceding the date on which the Merger becomes effective;
(ii) the price per share of the Company Common Stock purchased pursuant to all
such rights to purchase shares is determined as if the "Purchase Date" under
Section 8 of the 1995 Purchase Plan were the last trading day preceding the date
on which the Merger becomes effective; (iii) any shares of Company Common Stock
purchased pursuant to such rights are automatically converted as of the
Effective Time into the right to receive Parent Common Stock on the same basis
as all other outstanding shares of Company Common Stock; and (iv) the 1995
Purchase Plan terminates immediately following the purchase of shares of Company
Common Stock pursuant to such rights.
5.6 INDEMNIFICATION OF OFFICERS AND DIRECTORS PRIOR AND FOLLOWING THE
EFFECTIVE TIME.
(a) Effective as of the Effective Time Parent shall indemnify, defend
and hold harmless to the fullest extent permitted under applicable law each
person who is now or has been an officer or director of any Acquired Corporation
(individually, an "Indemnified Party" and collectively, the "Indemnified
Parties"), against all losses, claims, damages, liabilities, costs or expenses
(including reasonable attorneys' fees), judgments, fines, penalties and amounts
paid in settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged acts
or omissions, by them in their capacities as such, whether commenced, asserted
or claimed before or after the Effective Time. In the event of any such claim,
action, suit, proceeding or investigation (an "Action"), (i) Parent shall pay
the reasonable fees and expenses of counsel selected by the Indemnified Party,
which counsel shall be reasonably acceptable to Parent, in advance of the final
disposition of any such Action to the full extent and under all circumstances
permitted by Delaware law as in effect on the date hereof, upon receipt of the
undertaking contemplated by Section 145(e) of the DGCL or required by applicable
law (the "Undertaking"), and (ii) Parent will direct the defense of any such
matter; provided, however, that Parent shall not be obligated pursuant to this
Section 5.6(a) to pay the fees and disbursements of more than one counsel for
all Indemnified Parties in any single Action, except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have
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materially conflicting interests (potential or actual) with respect to issues
material (potentially or actually) to the outcome of such Action. Any
Indemnified Party wishing to claim indemnification under this Section 5.6(a),
upon learning of any such Action, shall notify Parent (although the failure so
to notify Parent shall not relieve Parent from any liability which Parent may
have under this Section 5.6(a), except to the extent such failure materially
prejudices Parent), and shall deliver to Parent the Undertaking. Promptly
following the Effective Time, Parent shall purchase and maintain or cause the
Surviving Corporation to purchase and maintain, for a period of six (6) years
following the Effective Time, policies of directors' and officers' liability
insurance covering each person who was a director or officer of the Company at
any time prior to the Effective Time with respect to claims arising from facts
or events that occurred on or prior to the Effective Time and providing at least
the same coverage and amounts and containing terms that are no less advantageous
to the insured parties as those in effect immediately prior to the Effective
Time for officers and directors of the Company; provided, however, that in no
event shall Parent be required to obtain coverage under such policies beyond
that coverage that may be obtained at an aggregate premium cost for all such
policies for the six-year period not exceeding $120,000. The provisions of this
Section 5.6(a) are intended to be for the benefit of, and shall be enforceable
by, each Indemnified Party and each party entitled to insurance coverage under
the previous sentence hereof, respectively, and his or her heirs and legal
representatives, and shall be in addition to any other rights an Indemnified
Party may have under the certificate or articles of incorporation or bylaws of
the Surviving Corporation or any of its subsidiaries, under the DGCL, under any
indemnification agreement with any Acquired Corporation or otherwise.
(b) Further, in the event and for so long as current directors and
officers of the Company are directors and officers, as the case may be, of any
Acquiring Corporation or any Acquired Corporation, such Persons shall have the
same rights to indemnification by Parent or otherwise for acts and omissions
occurring following the Effective Time as have other directors and officers, as
applicable, of any Acquiring Corporation or any Acquired Corporation.
5.7 POOLING OF INTERESTS. Each of the Company and Parent agrees (a) not to
take any action during the Pre-Closing Period that would adversely affect the
ability of Parent to account for the Merger as a "pooling of interests," and (b)
to use all reasonable efforts to attempt to ensure that none of its "affiliates"
(as that term is used in Rule 145 under the Securities Act) takes any action
that could adversely affect the ability of Parent to account for the Merger as a
"pooling of interests."
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5.8 ADDITIONAL AGREEMENTS.
(a) Subject to Section 5.8(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, but subject to
Section 5.8(b), each party to this Agreement shall (i) make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, (ii) use all reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) use all
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. Each party shall promptly deliver to the other, to the extent material,
a copy of each such filing made, each such notice given and each such Consent
obtained by such party during the Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Company shall have any obligation under this
Agreement to do any of the following (or cause the other to do any of the
following): (i) to dispose or cause any of its subsidiaries to dispose of any
assets; (ii) to discontinue or cause any of its subsidiaries to discontinue
offering any product; (iii) to license or otherwise make available, or cause any
of its subsidiaries to license or otherwise make available, to any Person, any
technology, software or other Proprietary Asset; (iv) to hold separate or cause
any of its subsidiaries to hold separate any assets or operations (either before
or after the Closing Date); or (v) to make or cause any of its subsidiaries to
make any commitment (to any Governmental Body or otherwise) regarding its future
operations.
5.9 DISCLOSURE. Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Merger or any of the other transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, each of Parent and the Company
shall not, and shall not permit any of its Representatives to, make any
disclosure regarding the Merger or any of the other transactions contemplated by
this Agreement unless (a) the Company and Parent shall have approved such
disclosure or (b) it shall have been advised in writing by its outside legal
counsel that such disclosure is required by applicable law.
5.10 AFFILIATE AGREEMENTS. The Company shall use all reasonable efforts to
cause each Person who could reasonably be deemed to be an "affiliate" of the
Company to execute and deliver to Parent, prior to the date of the mailing of
the Joint Proxy Statement to the Company's stockholders, an Affiliate Agreement
in the form of Exhibit C. Parent shall use all reasonable efforts to cause each
Person who could
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reasonably be deemed to be an "affiliate" of Parent to execute and deliver to
Company, prior to the date of the mailing of the Joint Proxy Statement to the
Parent's shareholders, an Affiliate Agreement in the form of Exhibit D.
5.11 TAX MATTERS. The Company shall use all reasonable efforts to obtain
and deliver to Parent, as soon as practicable after the date of this Agreement,
Continuity of Interest Certificates substantially in the form of Exhibit E
signed by the Company's executive officers, directors and 5% stockholders as
reflected in the Company's most recent definitive Proxy Statement filed with the
SEC. At or prior to the Closing, the Company and Parent shall execute and
deliver to Cooley Godward LLP and to Pillsbury Madison & Sutro LLP tax
representation letters in the form of Exhibit F and Exhibit G, respectively.
Parent and the Company shall use all reasonable efforts to cause the Merger to
qualify as a tax free reorganization under Section 368(a) of the Code.
5.12 LETTERS FROM ACCOUNTANTS.
(a) The Company shall cause to be delivered to Parent a letter of
Ernst & Young LLP, dated no more than two business days before the date on which
the S-4 Registration Statement becomes effective (and reasonably satisfactory in
form and substance to Parent), that is customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the S-4 Registration Statement with respect
to financial information of the Company.
(b) Parent and the Company shall use all reasonable efforts to obtain
separate letters, dated on or before the Closing Date, and addressed to Parent
and the Company, respectively, to the effect that Ernst & Young LLP concurs with
Parent management's conclusions as to the appropriateness of "pooling of
interests" accounting treatment for the Merger assuming the Merger is
consummated in accordance with the terms of this Agreement.
5.13 RESIGNATION OF COMPANY OFFICERS AND DIRECTORS; MANAGEMENT STRUCTURE OF
PARENT. The Company shall use all reasonable efforts to obtain and deliver to
Parent prior to the Closing the resignation of each officer and director of each
of the Acquired Corporations (to be effective at the Effective Time). Parent
shall use all reasonable efforts, subject to the fiduciary duties of Parent's
directors and officers, to ensure that as soon as practicable following the
Effective Time (a) the Board and management structure of Parent shall be as
described on Exhibit H and (b) Mr. Robert C. Vernon shall be elected as a member
of Parent's Board of Directors.
5.14 PARENT PLANS AND BENEFIT ARRANGEMENTS. The employee benefit plans and
benefit arrangements maintained by the Acquired Corporations that provide
non-discretionary, non-cash benefits to employees of the Acquired Corporations
and that are
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substantially similar to benefit plans and benefit arrangements currently
maintained by the Acquiring Corporations shall, to the extent practicable, be
maintained in effect by the Surviving Corporation and/or the Acquired
Corporations until the Continuing Employees (as defined in this Section 5.14)
are allowed to participate in such similar benefit plans or benefit arrangements
maintained by the Acquiring Corporations (each, a "Plan"). Parent shall use
reasonable efforts to attempt to ensure that: (a) as soon as practicable after
the Effective Time, the benefit plans and benefit arrangements applicable to the
Continuing Employees will provide benefits to the Continuing Employees that are
comparable to the non-discretionary, non-cash benefits provided to similarly
situated employees of the Acquiring Corporations; (b) to the extent practicable,
any pre-existing condition limitations contained in such health plans and health
benefit arrangements for any Continuing Employee who would be deemed under such
health plans and health benefit arrangements to have a disqualifying
pre-existing condition are waived, to the extent such condition was covered by a
Plan immediately prior to the Effective Time (provided that, in the case of
disability and life insurance plans, such Continuing Employee is actively at
work and is not hospitalized or on disability leave as of the Effective Time);
and (c) to the extent practicable, such benefit plans and benefit arrangements
give full credit to each Continuing Employee for such Continuing Employee's
period of service with the Acquired Corporations prior to the Effective Time for
all purposes for which such service was recognized under the Plans and
arrangements of the Acquired Corporations prior to the Effective Time. For
purposes of this Section 5.14, "Continuing Employee" shall mean any employee of
any of the Acquired Corporations who continues as an employee of the Surviving
Corporation or any of the Acquiring Corporations after the Effective Time.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS.
(a) Subject to Section 6.1(c), the representations and warranties of
the Company contained in this Agreement shall have been accurate in all material
respects as of the date of this Agreement (it being understood that, for
purposes of determining the accuracy of such representations and warranties, all
"Material Adverse Effect" qualifications and other materiality qualifications
contained in such representations and warranties shall be disregarded, except
with respect to Section 2.4).
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(b) Subject to Section 6.1(c), the representations and warranties of
the Company contained in this Agreement shall be accurate in all respects as of
the Closing Date as if made on and as of the Closing Date, except that any
inaccuracies in such representations and warranties will be disregarded if the
circumstances giving rise to all such inaccuracies (considered collectively) do
not constitute, and could not reasonably be expected to result in, a Material
Adverse Effect on the Acquired Corporations (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (i)
all "Material Adverse Effect" qualifications and other materiality
qualifications contained in such representations and warranties, except with
respect to Section 2.4, shall be disregarded and (ii) any update of or
modification to the Company Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded).
(c) With respect to Section 2.4, notwithstanding any provision to the
contrary in this Section 6.1, both (i) any effect or consequence of any public
announcement by the parties relating to the Merger or this Agreement, and (ii)
any fluctuation in the market price of the Company's Common Stock, in and of
itself, shall be excluded from any assessment or determination of a Material
Adverse Effect on the Acquired Corporations.
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the Company
is required to comply with or to perform at or prior to the Closing shall have
been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act, and no stop order shall have been issued by the SEC with respect to the S-4
Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
approved and the Merger shall have been duly approved by the Required Company
Stockholder Vote, and the principal terms of the Merger shall have been duly
approved by the Required Parent Shareholder Vote.
6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit C, executed by each
Person who could reasonably be deemed to be an "affiliate" of the Company (as
that term is used in Rule 145 under the Securities Act);
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(b) Continuity of Interest Certificates substantially in the form of
Exhibit E, executed by the Company's executive officers, directors and 5%
stockholders as reflected in the Company's most recent definitive Proxy
Statement filed with the SEC;
(c) Employment Agreements in the form of Exhibit I, executed by the
individuals identified on Exhibit J;
(d) Noncompetition Agreements in the form of Exhibit K, executed by
the individuals identified on Exhibit J;
(e) a letter from Ernst & Young LLP, dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to Parent,
updating the letter referred to in Section 5.12(a);
(f) separate letters from Ernst & Young LLP, dated as of the Closing
Date and addressed to Parent and the Company, respectively, to the effect that
Ernst & Young LLP concurs with Parent management's conclusions as to the
appropriateness of "pooling of interests" accounting treatment for the Merger;
(g) a legal opinion of Pillsbury Madison & Sutro LLP, dated as of the
Closing Date, in the form of Exhibit L, as well as one or more opinions of
counsel for Acquired Corporations other than the Company as may be reasonably
requested by Parent, all in a form reasonably satisfactory to Parent;
(h) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date and addressed to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Cooley Godward LLP may rely upon the
Continuity of Interest Certificates and tax representation letters referred to
in Section 5.11);
(i) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1, 6.2
and 6.4 (to the extent it relates to the Required Company Stockholder Vote) have
been duly satisfied; and
(j) the written resignations of all officers and directors of the
Company, effective as of the Effective Time.
6.6 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
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6.7 NASDAQ NATIONAL MARKET. The shares of Parent Common Stock to be issued
in the Merger shall have been approved for quotation (subject to notice of
issuance) on the Nasdaq National Market.
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
6.9 CONSENTS. All material Consents required to be obtained by any Acquired
Corporation in connection with the Merger and the other transactions
contemplated by this Agreement (including the Consents identified in the Company
Disclosure Schedule) shall have been obtained and shall be in full force and
effect.
6.10 EMPLOYEES. None of the individuals identified on Exhibit J shall have
ceased to be employed by the Company, or shall have expressed an intention to
terminate his or her employment with the Company or to decline to accept
employment with Parent.
6.11 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries any damages that may be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or (d)
which would materially and adversely affect the right of Parent, the Surviving
Corporation or any subsidiary of Parent to own the assets or operate the
business of the Company.
6.12 NO OTHER LITIGATION. There shall not be pending any Legal Proceeding
in which there is a reasonable possibility of an outcome that would have a
Material Adverse Effect on the Acquired Corporations or on Parent: (a)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement; (b) relating to
the Merger and seeking to obtain from Parent or any of its subsidiaries any
damages that may be material to Parent; (c) seeking to prohibit or limit in any
material respect Parent's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would affect adversely the right of Parent, the
Surviving Corporation or any subsidiary of Parent to own the assets or operate
the business of the Company.
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6.13 NO BURDENSOME CONDITION. There shall not have been any action taken,
or any Legal Requirement or order enacted, entered, enforced or deemed
applicable to the Merger by any Governmental Body which, in connection with the
grant of any Governmental Authorization, imposes any restriction, condition or
obligation upon Parent or upon the Company or the Surviving Corporation which
could have a Material Adverse Effect on the Surviving Corporation or the
economic or business benefits of the transactions contemplated by this
Agreement.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS.
(a) Subject to Section 7.1(c), the representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all material respects as of the date of this Agreement (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, all "Material Adverse Effect" qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded, except with respect to Section 3.4).
(b) Subject to Section 7.1(c), the representations and warranties of
Parent and Merger Sub contained in this Agreement shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date, except
that any inaccuracies in such representations and warranties will be disregarded
if the circumstances giving rise to all such inaccuracies (considered
collectively) do not constitute, and could not reasonably be expected to result
in, a Material Adverse Effect on the Acquiring Corporations (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect" qualifications and other
materiality qualifications contained in such representations and warranties,
except with respect to Section 3.4, shall be disregarded and (ii) any update of
or modification to the Parent Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded).
(c) With respect to Section 3.4, notwithstanding any provision to the
contrary in this Section 7.1, both (i) any effect or consequence of any public
announcement by the parties relating to the Merger or this Agreement, and (ii)
any fluctuation in the market price of Parent's Common Stock, in and of itself,
shall be excluded from any assessment or determination of a Material Adverse
Effect on the Acquiring Corporations.
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7.2 PERFORMANCE OF COVENANTS. Each covenant and obligation that Parent and
Merger Sub is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act, and no stop order shall have been issued by the SEC with respect to the S-4
Registration Statement.
7.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
approved and the Merger shall have been duly approved by the Required Company
Stockholder Vote, and the principal terms of the Merger shall have been duly
approved by the Required Parent Shareholder Vote.
7.5 AGREEMENTS AND DOCUMENTS. The Company shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit D, executed by each
Person who could reasonably be deemed to be an "affiliate" of Parent (as that
term is used in Rule 145 under the Securities Act);
(b) Employment Agreements in the form of Exhibit I, executed by Parent
with respect to the individuals identified on Exhibit J;
(c) Noncompetition Agreements in the form of Exhibit K, executed by
Parent with respect to the individuals identified on Exhibit J;
(d) separate letters from Ernst & Young LLP, dated as of the Closing
Date and addressed to Parent and the Company, respectively, to the effect that
Ernst & Young LLP concurs with Parent management's conclusions as to the
appropriateness of "pooling of interests" accounting treatment for the Merger;
(e) a legal opinion of Cooley Godward LLP, dated as of the Closing
Date, in the form of Exhibit M;
(f) a legal opinion of Pillsbury Madison & Sutro LLP, dated as of the
Closing Date, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, Pillsbury Madison & Sutro LLP may rely upon the
Continuity of Interest Certificates and tax representation letters referred to
in Section 5.11); provided, however, that if such counsel does not render such
opinion, this condition shall nonetheless be deemed to be satisfied with respect
to the Company if Cooley Godward LLP renders such opinion to the Company; and
34.
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(g) a certificate executed on behalf of Parent by an executive officer
of Parent, confirming that the conditions set forth in Sections 7.1, 7.2 and 7.4
(to the extent it relates to the Required Parent Shareholder Vote) have been
duly satisfied.
7.6 HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
7.7 NASDAQ NATIONAL MARKET. The shares of Parent Common Stock to be issued
in the Merger shall have been approved for quotation (subject to notice of
issuance) on the Nasdaq National Market.
7.8 NO RESTRAINTS. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
7.9 CONSENTS. All material Consents required to be obtained by any
Acquiring Corporation in connection with the Merger and the other transactions
contemplated by this Agreement (including the Consents identified in the Parent
Disclosure Schedule) shall have been obtained and shall be in full force and
effect.
7.10 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries any damages that may be material to
Parent; or (c) which would materially and adversely affect the right of Parent,
the Surviving Corporation or any subsidiary of Parent to own the assets or
operate the business of the Company.
7.11 NO OTHER LITIGATION. There shall not be pending any Legal Proceeding
in which there is a reasonable possibility of an outcome that would have a
Material Adverse Effect on the Acquiring Corporations: (a) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement; (b) relating to the Merger
and seeking to obtain from Parent or any of its subsidiaries any damages that
may be material to Parent; or (c) which would affect adversely the right of
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
7.12 NO BURDENSOME CONDITION. There shall not have been any action taken,
or any Legal Requirement or order enacted, entered, enforced or deemed
applicable to the Merger by any Governmental Body which, in connection with the
grant of any
35.
<PAGE> 41
Governmental Authorization, imposes any restriction, condition or obligation
upon the Company or upon Parent or the Surviving Corporation which could have a
Material Adverse Effect on the Surviving Corporation or the economic or business
benefits of the transactions contemplated by this Agreement.
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time (whether before or after adoption and approval of the Agreement and the
approval of the Merger by the Required Company Stockholder Vote and whether
before or after approval of the principal terms of the Merger by the Required
Parent Shareholder Vote):
(a) by mutual written consent of Parent and the Company;
(b) [Reserved.]
(c) [Reserved.]
(d) by either Parent or the Company if the Merger shall not have been
consummated by December 31, 1997 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(e) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(f) by either Parent or the Company if (i) the Company Stockholders'
Meeting shall have been held and a final vote of the Company's stockholders on a
proposal to adopt and approve the Agreement and to approve the Merger shall have
been taken thereat and (ii) this Agreement and the Merger shall not have been so
adopted and approved at such meeting as provided herein by the Required Company
Stockholder Vote; provided, however, that the Company shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(f) if the failure of the
Company's stockholders to adopt and approve this Agreement and approve the
Merger at the Company Stockholders' Meeting is attributable to a failure on the
part of the Company to perform any material obligation required to have been
performed by the Company under this Agreement; and provided, further, that the
Company may so terminate this Agreement only following its compliance with
Sections 8.3(d) and 8.3(e);
36.
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(g) by either Parent or the Company if (i) the Parent Shareholders'
Meeting shall have been held and a final vote of Parent's shareholders on a
proposal to approve the principal terms of the Merger shall have been taken
thereat and (ii) the principal terms of the Merger shall not have been approved
at such meeting by the Required Parent Shareholder Vote; provided, however, that
Parent shall not be permitted to terminate this Agreement pursuant to this
Section 8.1(g) if the failure of Parent's shareholders to approve the principal
terms of the Merger at the Parent Shareholders' Meeting is attributable to a
failure on the part of Parent to perform any material obligation required to
have been performed by Parent under this Agreement; and provided, further, that
Parent may so terminate this Agreement only following its compliance with
Sections 8.3(b) and 8.3(c);
(h) by Parent or the Company at any time after the date of the Parent
Shareholders' Meeting if at the Parent Shareholders' Meeting, holders of five
percent or more of the shares of Parent Common Stock outstanding on the date for
the determination of shareholders of Parent entitled to vote on the approval of
the principal terms of the Merger shall have both voted against such approval
and demanded dissenters' rights in compliance with Section 1301 of the
California Corporations Code; provided, however, that Parent may so terminate
this Agreement only following its compliance with Sections 8.3(b) and 8.3(c);
and, provided further, that the Company may so terminate this Agreement only
following its compliance with Sections 8.3(d) and 8.3(e);
(i) by Parent or the Company (at any time prior to the adoption and
approval of this Agreement and approval of the Merger by the Required Company
Stockholder Vote) if a Company Triggering Event shall have occurred;
(j) [Reserved.]
(k) by Parent if any of the Company's representations and warranties
contained in this Agreement shall be or shall have become materially inaccurate,
or if any of the Company's covenants contained in this Agreement shall have been
breached in any material respect; provided, however, that if an inaccuracy in
the Company's representations and warranties or a breach of a covenant by the
Company is curable by the Company and the Company is continuing to exercise all
reasonable efforts to cure such inaccuracy or breach, then Parent may not
terminate this Agreement under this Section 8.1(k) on account of such inaccuracy
or breach unless the inaccuracy or breach is not cured within 30 days of notice
thereof delivered by Parent to the Company; or
(l) by the Company if any of Parent's representations and warranties
contained in this Agreement shall be or shall have become materially inaccurate,
or if any of Parent's covenants contained in this Agreement shall have been
breached in any material respect; provided, however, that if an inaccuracy in
Parent's representations and
37.
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warranties or a breach of a covenant by Parent is curable by Parent and Parent
is continuing to exercise all reasonable efforts to cure such inaccuracy or
breach, then the Company may not terminate this Agreement under this Section
8.1(l) on account of such inaccuracy or breach unless the inaccuracy or breach
is not cured within 30 days of notice thereof delivered by the Company to
Parent.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
relieve any party from any liability for any breach of any representation,
warranty or covenant contained in this Agreement.
8.3 EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; provided, however, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' fees, incurred
in connection with (i) the printing and filing of the S-4 Registration Statement
and the Joint Proxy Statement and any amendments or supplements thereto and (ii)
the filing of the premerger notification and report forms, if necessary,
relating to the Merger under the HSR Act.
(b) If this Agreement is terminated (i) by Parent pursuant to Section
8.1(h); or (ii) by Parent or the Company pursuant to Section 8.1(g), then Parent
shall pay to the Company, in cash (at the time specified in Section 8.3(c)), a
nonrefundable fee in the amount of $1,500,000.
(c) In the case of termination of this Agreement by Parent pursuant to
Section 8.1(g) or Section 8.1(h), the fee referred to in Section 8.3(b) shall be
paid by Parent prior to such termination; and in the case of termination of this
Agreement by the Company pursuant to Section 8.1(g), the fee referred to in
Section 8.3(b) shall be paid by Parent within one business day after such
termination.
(d) If this Agreement is terminated (i) by the Company pursuant to
Section 8.1(h); or (ii) by Parent or the Company pursuant to Section 8.1(f) or
Section 8.1(i), then the Company shall pay to Parent, in cash (at the time
specified in Section 8.3(e)), a nonrefundable fee in the amount of $1,500,000.
(e) In the case of termination of this Agreement by the Company
pursuant to Section 8.1(f), Section 8.1(h) or Section 8.1(i), the fee referred
to in Section 8.3(d) shall be paid by the Company prior to such termination; and
in the case of
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termination of this Agreement by Parent pursuant to Section 8.1(f) or Section
8.1(i), the fee referred to in Section 8.3(d) shall be paid by the Company
within one business day after such termination.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after adoption and approval of this Agreement and approval of the
Merger by the stockholders of the Company; and whether before or after approval
of principal terms of the Merger by Parent's shareholders); provided, however,
that (i) after any such adoption and approval of this Agreement and approval of
the Merger by the Company's stockholders, no amendment shall be made which by
law or NASD regulation requires further approval of the stockholders of the
Company without the further approval of such stockholders, and (ii) after any
such approval of the principal terms of the Merger by Parent's shareholders, no
amendment shall be made which by law or NASD regulation requires further
approval of Parent's shareholders without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party 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
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and the
other agreements referred to herein (and the confidentiality letters executed by
each of Parent and the Company as of June 24, 1997) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among or
39.
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between any of the parties with respect to the subject matter hereof and
thereof. This Agreement may be executed in several counterparts, each of which
shall be deemed an original and all of which shall constitute one and the same
instrument, and shall be governed in all respects by the laws of the State of
California as applied to contracts entered into and to be performed entirely
within California.
9.5 ATTORNEYS' FEES. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties hereunder, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.6 ASSIGNABILITY. Neither this Agreement nor any portion hereof shall be
assignable (whether by operation of law or otherwise and including, for this
purpose, a change in control as an assignment). Except as set forth in Section
1.7 with respect to the stockholders of the Company, Section 5.5 with respect to
the holders of Company Options and Company Warrants, and Section 5.6 with
respect to the persons identified therein (with each of the foregoing intended
as a third party beneficiary of the corresponding referenced Section of this
Agreement), nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.7 NOTICES. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT:
DataWorks Corporation
5910 Pacific Center Boulevard
San Diego, CA 92121
Attn: Stuart W. Clifton
IF TO MERGER SUB:
DataWorks Acquisition Sub, Inc.
5910 Pacific Center Boulevard
San Diego, CA 92121
Attn: Stuart W. Clifton
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IF TO THE COMPANY:
Interactive Group, Inc.
5095 Murphy Canyon Road
San Diego, CA 92123
Attn: Robert C. Vernon
9.8 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 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" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
41.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
DATAWORKS CORPORATION
By:
--------------------------------
Stuart W. Clifton
President and Chief Executive Officer
DATAWORKS ACQUISITION SUB, INC.
By:
--------------------------------
Stuart W. Clifton
President and Chief Executive Officer
INTERACTIVE GROUP, INC.
By:
--------------------------------
Robert C. Vernon
Chief Executive Officer
42.
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EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
ACQUIRING CORPORATION CONTRACT. "Acquiring Corporation Contract" shall mean
any Contract: (a) to which any of the Acquiring Corporations is a party; (b) by
which any of the Acquiring Corporations or any asset of any of the Acquiring
Corporations is or may become bound or under which any of the Acquiring
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquiring Corporations has or may acquire any right or interest.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer, proposal
or inquiry (other than an offer, proposal or inquiry by Parent) contemplating or
otherwise relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which the Company is a constituent
corporation, (ii) in which a Person or "group" (as defined in the Exchange Act
and the rules promulgated thereunder) of Persons directly or indirectly acquires
the Company or more than 50% of the Company's business or directly or indirectly
acquires beneficial or record ownership of securities representing more than 20%
of the outstanding securities of any class of voting securities of the Company,
or (iii) in which the Company issues securities representing more than 20% of
the outstanding securities of any class of voting securities of the Company; or
(b) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 50% of the assets of the Company, or any
liquidation or dissolution of the Company.
1.
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AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
$0.001 par value per share, of the Company.
COMPANY TRIGGERING EVENT. A "Company Triggering Event" shall be deemed to
have occurred if: (i) the board of directors of the Company shall have failed to
recommend, or shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its unanimous recommendation in favor of,
the adoption and approval of this Agreement or the approval of the Merger; (ii)
the Company shall have failed to include in the Joint Proxy Statement the
unanimous recommendation of the board of directors of the Company in favor of
adoption and approval of this Agreement and approval of the Merger; (iii) the
board of directors of the Company shall have approved, endorsed or recommended
any Acquisition Proposal; (iv) the Company shall have entered into any letter of
intent or similar document or any Contract relating to any Acquisition Proposal;
(v) the Company shall have failed to hold the Company Stockholders' Meeting as
promptly as practicable and in any event within 45 days after the S-4
Registration Statement is declared effective under the Securities Act (which
45-day period shall be extended on a day-for-day basis if and for so long as any
stop order or other similar action is in place, pending or threatened by the
SEC); (vi) a tender or exchange offer relating to securities of the Company
shall have been commenced and the Company shall not have sent to its
securityholders, within five business days after the commencement of such tender
or exchange offer, a statement disclosing that the Company recommends rejection
of such tender or exchange offer; or (vii) an Acquisition Proposal is publicly
announced, and the Company (A) fails to issue a press release announcing its
opposition to such Acquisition Proposal within five business days after such
Acquisition Proposal is announced or (B) otherwise fails to actively oppose such
Acquisition Proposal.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction
2.
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of any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use of
any asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
JOINT PROXY STATEMENT. "Joint Proxy Statement" shall mean the joint proxy
statement/prospectus to be sent to the Company's stockholders in connection with
the Company Stockholders' Meeting and to Parent's shareholders in connection
with the Parent Shareholders' Meeting.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued,
3.
<PAGE> 51
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement but for the
presence of "Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, in such representations and warranties) would have a
material adverse effect on the business, condition, assets, liabilities,
operations or financial performance of the Acquired Corporations taken as a
whole. An event, violation, inaccuracy, circumstance or other matter will be
deemed to have a "Material Adverse Effect" on the Acquiring Corporations if such
event, violation, inaccuracy, circumstance or other matter (considered together
with all other matters that would constitute exceptions to the representations
and warranties set forth in the Agreement but for the presence of "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of the Acquiring Corporations taken as a whole.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock, no
par value per share, of Parent.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
4.
<PAGE> 52
SUPERIOR OFFER. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of the outstanding
Company Common Stock on terms that the board of directors of the Company
determines in its reasonable judgment, based upon the written advice of its
financial advisor, to be more favorable to the Company's stockholders than the
terms of the Merger; provided, however, that if any financing is required to
consummate the transaction contemplated by such offer, then such offer shall not
be deemed to be a "Superior Offer" unless (i) such third party shall have
received a financing commitment pursuant to which another third party has
committed to provide the required financing to such third party and Parent shall
have been furnished with a copy of such financing commitment, and (ii) the
required financing is reasonably capable of being obtained by such third party.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
5.
<PAGE> 53
EXHIBIT C
AFFILIATE AGREEMENT
This Affiliate Agreement (this "Agreement") is entered into as of July 31,
1997, by and between DATAWORKS CORPORATION, a California corporation ("Parent"),
and the undersigned affiliate ("Affiliate") of INTERACTIVE GROUP, INC., a
Delaware corporation (the "Company").
RECITALS
A. Pursuant to that certain Agreement and Plan of Merger and Reorganization
(the "Merger Agreement"), dated as of July 31, 1997, by and among Parent,
DATAWORKS ACQUISITION SUB, INC., a Delaware corporation ("Merger Sub"), and the
Company, Merger Sub will merge with and into the Company (the "Merger").
B. As a result of the Merger and certain related transactions, the
stockholders of the Company will receive shares (the "Shares") of Parent Common
Stock (as defined in the Merger Agreement). Affiliate understands that he may be
deemed (but does not hereby admit to be) an "affiliate" of the Company as such
term is defined in paragraphs (c) and (d) of Rule 145 ("Rule 145") under the
Securities Act of 1933, as amended (the "Act"), and the Securities and Exchange
Commission Accounting Series Release Nos. 130 and 135 (the "Pooling Rules"), as
amended, and as such Affiliate may only transfer, sell or dispose of Shares in
accordance with Rule 145, this Agreement and the Pooling Rules.
C. Affiliate understands that the representations, warranties and covenants
set forth herein will be relied upon by Parent, Merger Sub and the Company, and
their respective counsel and accounting firms.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms used in this Agreement and not otherwise defined shall
have the meanings given them in the Merger Agreement.
2. Affiliate represents, warrants, understands and agrees that:
(a) Affiliate has full power and capacity to execute and deliver
this Agreement and to make the representations, warranties and agreements
herein and to perform his obligations hereunder.
1.
<PAGE> 54
(b) Affiliate has carefully read this Agreement and has discussed with
counsel, to the extent Affiliate felt necessary, the requirements, limitations
and restrictions on his ability to sell, transfer or otherwise dispose of the
Shares he may receive and fully understands the requirements, limitations and
restrictions this Agreement places upon Affiliate's ability to transfer, sell or
otherwise dispose of such Shares.
(c) If Affiliate has executed a Continuity of Interest Certificate
and/or any other agreement in connection herewith (the "Other Agreements"), he
understands and agrees to abide by all restrictions contained therein.
(d) Except as permitted by the de minimis exceptions to the Pooling
Rules (and only then with the prior written consent of Parent, which shall not
be unreasonably withheld), Affiliate will not, publicly or privately, sell,
transfer or otherwise dispose of, or reduce Affiliate's interest in or risk
relating to, any Shares held by Affiliate until such time as the financial
results covering at least 30 days of post-Closing combined operations of the
Company and Parent have been published by Parent (within the meaning of the
Pooling Rules) (the "Publication Date").
(e) Until the earlier of (i) the Closing Date or (ii) the termination
of the Merger Agreement, Affiliate will not sell, transfer or otherwise dispose
of, or reduce Affiliate's interest in or risk relating to, any Company Common
Stock held by Affiliate.
(f) Subject to Section 2(d) above, Affiliate will not sell, pledge,
transfer or otherwise dispose of any of the Shares held by Affiliate unless at
such time either (i) such transfer shall be in conformity with the provisions of
Rule 145(d) (or any successor rule then in effect), (ii) Affiliate shall have
furnished to Parent an opinion of counsel reasonably satisfactory to Parent, or
a no action letter from the SEC, to the effect that no registration under the
Act would be required in connection with the proposed offer, sale, pledge,
transfer or other disposition or (iii) a registration statement under the Act
covering the proposed offer, sale, pledge, or other disposition shall be
effective under the Act.
3. Parent will use commercially reasonable efforts to at all times comply
with the public reporting requirements set forth in Rule 144(c) under the
Securities Act.
4. Affiliate understands and agrees that, except as set forth herein or in
the Merger Agreement, Parent is under no obligation to register the sale,
transfer or other disposition of the Shares or to take any other action
necessary in order to make compliance with an exemption from registration
available.
5. Affiliate further represents that he is the beneficial owner of the
Company Common Stock set forth below, or, if not set forth below, that he is not
the beneficial owner of any Company Common Stock.
2.
<PAGE> 55
6. Each party hereto acknowledges that (i) it will be impossible to measure
in money the damage to Parent if Affiliate fails to comply with any of the
obligations imposed by this Agreement, (ii) every such obligation is material
and (iii) in the event of any such failure, Parent will not have an adequate
remedy at law or damages and, accordingly, each party hereto agrees that
injunctive relief or other equitable remedy, in addition to remedies at law or
damages, is an appropriate remedy for any such failure.
7. This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
California.
8. This Agreement shall be binding upon, enforceable by and inure to the
benefit of the parties named herein and their respective successors; this
Agreement may not be assigned by any party without the prior written consent of
Parent. Any attempted assignment not in compliance with this Section 7 shall be
void and have no effect.
9. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
DATAWORKS CORPORATION
By:
--------------------------------
-----------------------------------
[Print Name and Title]
AFFILIATE
-----------------------------------
[Print Name, and Title (if applicable)]
Address:
---------------------------
-----------------------------------
Shares of Company Common Stock
Beneficially Owned:
------------
3.
<PAGE> 56
EXHIBIT D
AFFILIATE AGREEMENT
This Affiliate Agreement (this "Agreement") is entered into as of July 31,
1997, by and between INTERACTIVE GROUP, INC., a Delaware corporation (the
"Company"), and the undersigned affiliate ("Affiliate") of DATAWORKS
CORPORATION, a California corporation ("Parent").
RECITALS
1. Pursuant to that certain Agreement and Plan of Merger and Reorganization (the
"Merger Agreement"), dated as of July 31, 1997, by and among Parent, DATAWORKS
ACQUISITION SUB, INC., a Delaware corporation ("Merger Sub"), and the Company,
Merger Sub will merge with and into the Company (the "Merger").
2. Affiliate understands that he, she or it may be deemed (but does not hereby
admit to be) an "affiliate" of Parent as such term is defined in the Securities
and Exchange Commission Accounting Series Release Nos. 130 and 135 (the "Pooling
Rules"), as amended, and as such Affiliate may only transfer, sell or dispose of
shares of Parent Common Stock (as defined in the Merger Agreement) in accordance
with this Agreement and the Pooling Rules.
3. Affiliate understands that the representations, warranties and covenants set
forth herein will be relied upon by Parent, Merger Sub and the Company, and
their respective counsel and accounting firms.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms used in this Agreement and not otherwise defined shall have
the meanings given them in the Merger Agreement.
2. Affiliate represents, warrants, understands and agrees that Affiliate has
full power and capacity to execute and deliver this Agreement and to make the
representations, warranties and agreements herein and to perform Affiliate's
obligations hereunder.
3. Affiliate has carefully read this Agreement and has discussed with counsel,
to the extent Affiliate felt necessary, the requirements, limitations and
restrictions on his ability to sell, transfer or otherwise dispose of his shares
of Parent Common Stock and fully understands the requirements, limitations and
restrictions this Agreement places upon Affiliate's ability to transfer, sell or
otherwise dispose of such shares.
1.
<PAGE> 57
4. Except as permitted by the de minimis exceptions to the Pooling Rules (and
only then with the prior written consent of the Company, which shall not be
unreasonably withheld), Affiliate will not, publicly or privately, sell,
transfer or otherwise dispose of, or reduce Affiliate's interest in or risk
relating to, any shares of Parent Common Stock held by Affiliate until such time
as the financial results covering at least 30 days of post-Closing combined
operations of the Company and Parent have been published by Parent (within the
meaning of the Pooling Rules).
5. Affiliate further represents that he is the beneficial owner of the Parent
Common Stock set forth below, or, if not set forth below, that he is not the
beneficial owner of any Parent Common Stock.
6. Each party hereto acknowledges that (i) it will be impossible to measure in
money the damage to the Company if Affiliate fails to comply with any of the
obligations imposed by this Agreement, (ii) every such obligation is material
and (iii) in the event of any such failure, the Company will not have an
adequate remedy at law or damages and, accordingly, each party hereto agrees
that injunctive relief or other equitable remedy, in addition to remedies at law
or damages, is an appropriate remedy for any such failure.
7. This Agreement shall be deemed a contract made under, and for all purposes
shall be construed in accordance with, the laws of the State of California.
8. This Agreement shall be binding upon, enforceable by and inure to the benefit
of the parties named herein and their respective successors; this Agreement may
not be assigned by any party without the prior written consent of the Company.
Any attempted assignment not in compliance with this paragraph shall be void and
have no effect.
9. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same agreement.
2.
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
INTERACTIVE GROUP, INC.
By:
--------------------------------
-----------------------------------
[Print Name and Title]
AFFILIATE
------------------------------------
stockholder
[Print Name, and Title (if applicable)]
address
Shares of Parent Common Stock
Beneficially Owned:
-----------------------------------
3.
<PAGE> 59
EXHIBIT I
DATAWORKS CORPORATION
5910 PACIFIC CENTER BLVD., SUITE 300
SAN DIEGO, CALIFORNIA 92121
____________, 1997
Mr. Robert C. Vernon
3230 Rutledge Drive
Las Vegas, NV 89120
Re: Employment Terms
Dear Mr. Vernon:
DataWorks Corporation (the "Company") is pleased to offer you the
position of President, International Operations, on the terms set forth below,
effective immediately following the closing of the strategic merger between the
Company and Interactive Group, Inc. As such, you will head DataWorks'
international ERP market and will represent all DataWorks products, including
the JIT and INFOFLO product lines. During your employment with the Company, you,
and your principal offices, will be based in the Las Vegas area; and you will
report directly to me.
Your base compensation will be $250,000 per annum. Upon countersigning
this letter accepting this offer of employment (provided the closing of the
merger between the Company and Interactive has occurred), you will be entitled
to receive from the Company a "retention bonus" of $300,000, payable quarterly
over two years on the first day of each calendar quarter hereafter, to be paid
in installments of $37,500 (with the first payment of $37,500 to be paid on
October 1, 1997). Your compensation hereunder will be subject to payroll
deductions and all required withholdings, and you will be entitled to additional
compensation, including stock options, as may be agreed upon by you and the
Company. In any event, you will be eligible to participate in and benefit from
the employee benefit plans and benefit arrangements of the Company, including
its bonus and stock award programs, to the same extent the Company's other
executive officers are so eligible. You will be evaluated for any award under
the Company's bonus plan as then in effect at the Chief Executive Officer level.
Immediately following the effectiveness of your employment with the
Company as provided above, you will be granted an option to purchase 40,000
shares of Common Stock of the Company pursuant to the Company's 1995 Equity
Incentive Plan, at an exercise price equal to 110% of the fair market value of
the Common Stock on the date of such effectiveness and vesting in accordance
with the Company's standard policies so long as you continue to be employed with
the Company. Such option shall be an incentive stock option to the extent
compliant with applicable law, and a nonstatutory stock option to the extent
necessary to ensure such compliance.
<PAGE> 60
Further, the grant of such option shall not preclude you from receiving other
option grants as described in the preceding paragraph.
You will be paid on the Company's normal paydays. As an exempt salaried
employee, you will be expected to work the hours required by the nature of your
work assignments. The Company or may modify your position, duties, compensation
and benefits from time to time as it deems necessary; provided, however that an
adverse and substantial reduction in the nature or status of your
responsibilities or in your base compensation, other than for Cause (as defined
below), or a change in your work location without your consent, shall be deemed
a constructive termination without Cause for purposes of this Agreement.
As a Company employee, you will be expected to abide by Company rules
and regulations, and (if requested by the Company) sign and comply with a
confidentiality agreement or a proprietary information and inventions agreement,
which, among other things, prohibits unauthorized use or disclosure of Company
proprietary information.
Your employment relationship with the Company is at-will. Subject only
to the obligation to pay you the severance benefits described in next paragraph
and the retention bonus payments described above in the event the Company
terminates your employment without Cause, in order to protect our mutual
employment rights, either you or the Company may terminate your employment
relationship at any time and for any reason whatsoever, with or without Cause or
advance notice. This at-will employment relationship cannot be changed except in
a writing signed by a duly authorized officer of the Company.
In the event the Company terminates your employment without Cause, in
addition to receiving continued payment of your retention bonus until it is
fully paid, you shall receive as severance an aggregate amount equal to your
then annual base salary, which amount shall be paid in equal monthly
installments over the 12-month period following the date of termination. "Cause"
for termination shall mean (a) willful breach or habitual neglect of your duties
and failure to remedy your performance within 30 days after written notice to
you, or (b) misconduct, including but not limited to: (i) conviction of any
felony or of any crime involving moral turpitude or dishonesty; (ii)
participation in any fraud against the Company; (iii) breach of your Proprietary
Information and Inventions Agreement; or (iv) conduct by you which in the good
faith and reasonable determination of the Board of Directors of the Company
demonstrates your gross unfitness to serve.
<PAGE> 61
Mr. Robert C. Vernon
_________, 1997
Page Two
The employment terms in this letter supersede any other agreements or
promises made to you by anyone, whether oral or written, including any
employment agreement or arrangement between you and the Company in existence
prior to the date hereof.
Sincerely,
DATAWORKS CORPORATION
-----------------------------------
[Name and Title]
Accepted by:
- -----------------------------
Robert C. Vernon
- -----------------------------
Date
<PAGE> 62
DATAWORKS CORPORATION
5910 PACIFIC CENTER BLVD., SUITE 300
SAN DIEGO, CALIFORNIA 92121
____________, 1997
Mr. Mark Hellinger
[address]
Re: Employment Terms
Dear Mr. Hellinger:
DataWorks Corporation (the "Company") is pleased to offer you the
position of President, Mid-Tier Division, on the terms set forth below,
effective immediately following the closing of the strategic merger between the
Company and Interactive Group, Inc. As such, you will head DataWorks U.S.
Mid-Tier ERP market. You will report directly to me.
Your base compensation will be $200,000 per annum. Upon countersigning
this letter accepting this offer of employment (provided the closing of the
merger between the Company and Interactive has occurred), you will be entitled
to receive from the Company a "retention bonus" of $300,000, payable quarterly
over two years on the first day of each calendar quarter hereafter to be paid in
installments of $37,500 (with the first payment of $37,500 to be paid on October
1, 1997). Your compensation hereunder will be subject to payroll deductions and
all required withholdings, and you will be entitled to additional compensation,
including stock options, as may be agreed upon by you and the Company. In any
event, you will be eligible to participate in and benefit from the employee
benefit plans and benefit arrangements of the Company, including its bonus and
stock award programs, to the same extent the Company's other executive officers
are so eligible. You will be evaluated for any award under the Company's bonus
plan as then in effect at the Executive Vice President level.
Immediately following the effectiveness of your employment with the
Company as provided above, you will be granted an option to purchase 25,000
shares of Common Stock of the Company pursuant to the Company's 1995 Equity
Incentive Plan, at an exercise price equal to 110% of the fair market value of
the Common Stock on the date of such effectiveness and vesting in accordance
with the Company's standard policies so long as you continue to be employed with
the Company. Such option shall be an incentive stock option to the extent
compliant with applicable law, and a nonstatutory stock option to the extent
necessary to ensure such compliance. Further, the grant of such option shall not
preclude you from receiving other option grants as described in the preceding
paragraph.
You will be paid on the Company's normal paydays. As an exempt salaried
employee, you will be expected to work the hours required by the nature of your
work assignments. The
<PAGE> 63
Mr. Mark Hellinger
_________, 1997
Page 2
Company or may modify your position, duties, work location, compensation and
benefits from time to time as it deems necessary; provided, however that an
adverse and substantial reduction in the nature or status of your
responsibilities or in your base compensation, other than for Cause (as defined
below), shall be deemed a constructive termination without Cause for purposes of
this Agreement.
As a Company employee, you will be expected to abide by Company rules
and regulations, and (if requested by the Company) sign and comply with a
confidentiality agreement or a proprietary information and inventions agreement,
which, among other things, prohibits unauthorized use or disclosure of Company
proprietary information.
Your employment relationship with the Company is at-will. Subject only
to the obligation to pay you the severance benefits described in next paragraph
and the retention bonus payment described above in the event the Company
terminates your employment without Cause, in order to protect our mutual
employment rights, either you or the Company may terminate your employment
relationship at any time and for any reason whatsoever, with or without Cause or
advance notice. This at-will employment relationship cannot be changed except in
a writing signed by a duly authorized officer of the Company.
In the event the Company terminates your employment without Cause, in
addition to receiving continued payment of your retention bonus until it is
fully paid, you shall receive as severance an aggregate amount equal to your
then annual base salary, which amount shall be paid in equal monthly
installments over the 12-month period following the date of termination. "Cause"
for termination shall mean (a) willful breach or habitual neglect of your duties
and failure to remedy your performance within 30 days after written notice to
you, or (b) misconduct, including but not limited to: (i) conviction of any
felony or of any crime involving moral turpitude or dishonesty; (ii)
participation in any fraud against the Company; (iii) breach of your Proprietary
Information and Inventions Agreement; or (iv) conduct by you which in the good
faith and reasonable determination of the Board of Directors of the Company
demonstrates your gross unfitness to serve.
<PAGE> 64
The employment terms in this letter supersede any other agreements or
promises made to you by anyone, whether oral or written, including any
employment agreement or arrangement between you and the Company in existence
prior to the date hereof.
Sincerely,
DATAWORKS CORPORATION
-----------------------------------
[Name and Title]
Accepted by:
- -----------------------------
Mark Hellinger
- -----------------------------
Date
<PAGE> 65
DATAWORKS CORPORATION
5910 PACIFIC CENTER BLVD., SUITE 300
SAN DIEGO, CALIFORNIA 92121
____________, 1997
Mr. Bruce H. Leith
[address]
Re: Employment Terms
Dear Mr. Leith:
DataWorks Corporation (the "Company") is pleased to offer you the
position of ___________________________, on the terms set forth below, effective
as of the closing of the strategic merger between the Company and Interactive
Group, Inc.
Your compensation will be $________ per annum, less payroll deductions
and all required withholdings, and you will be entitled to additional
compensation, including stock options, as may be agreed upon by you and the
Company. You will also be eligible to participate in the Company's standard
health and employee benefit plans. You will be paid on the Company's normal
paydays. As an exempt salaried employee, you will be expected to work the hours
required by the nature of your work assignments. The Company or may modify your
position, duties, work location, compensation and benefits from time to time as
it deems necessary.
As a Company employee, you will be expected to abide by Company rules
and regulations, and (if requested by the Company) sign and comply with a
confidentiality agreement or a proprietary information and inventions agreement,
which, among other things, prohibits unauthorized use or disclosure of Company
proprietary information.
Your employment relationship with the Company is at-will. You may
terminate your employment with the Company at any time and for any reason
whatsoever simply by notifying the Company. Likewise, the Company may terminate
your employment at any time and for any reason whatsoever, with or without cause
or advance notice. This at-will employment relationship cannot be changed except
in a writing signed by a duly authorized officer of the Company.
<PAGE> 66
Mr. Bruce H. Leith
_________, 1997
Page Two
The employment terms in this letter supersede any other agreements or
promises made to you by anyone, whether oral or written, including any
employment agreement or arrangement between you and the Company in existence
prior to the date hereof.
Sincerely,
DATAWORKS CORPORATION
-----------------------------------
[Name and Title]
Accepted by:
- -----------------------------
Bruce H. Leith
- -----------------------------
Date
<PAGE> 67
EXHIBIT J
INDIVIDUALS TO EXECUTE EMPLOYMENT AGREEMENTS
AND NONCOMPETITION AGREEMENTS
- - Robert C. Vernon
- - Mark Hellinger
- - Bruce H. Leith
<PAGE> 68
EXHIBIT K
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") is made as of
_____________, 1997, by and among DataWorks Corporation, a California
corporation ("Parent"), DataWorks Acquisition Sub, Inc., a Delaware corporation
("Merger Sub"), and Robert C. Vernon ("Stockholder").
RECITALS
Stockholder is a stockholder of Interactive Group, Inc., a Delaware
corporation ("Company"). Parent, Merger Sub and Company have entered into an
Agreement and Plan of Merger and Reorganization dated as of July 31, 1997 (the
"Reorganization Agreement"), providing for the acquisition (the "Acquisition")
by Parent of Company pursuant to a merger of Merger Sub and Company (the
"Merger"). Stockholder plans to vote in favor of the Merger and receive all the
benefits of the Merger; and in connection therewith and in exchange for the
additional consideration provided herein, Stockholder has agreed pursuant to and
to the extent permitted by Section 16601 of the Business and Professions Code of
the State of California not to compete with Company in the manner and to the
extent herein set forth. Stockholder is entering into this Agreement as an
inducement to Parent and Merger Sub to consummate the Merger, with all of the
attendant financial benefits to Stockholder as a stockholder of Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contemplated and intending to be legally bound hereby, Merger Sub, Parent and
Stockholder agree as follows:
1. ACKNOWLEDGMENTS BY STOCKHOLDER. Stockholder acknowledges that by virtue of
his position with Company he has developed considerable expertise in the
business operations of Company and has had access to extensive confidential
information with respect to Company. Stockholder recognizes that Merger Sub and
Parent would be irreparably damaged, and their substantial investment in Company
materially impaired, if Stockholder were to enter into an activity competing
with Company's business in violation of the terms of this Agreement or if
Stockholder were to disclose or make unauthorized use of any confidential
information concerning the business of Company. Accordingly, Stockholder
expressly acknowledges that he is voluntarily entering into this Agreement and
that the terms and conditions of this Agreement are fair and reasonable to
Stockholder in all respects.
<PAGE> 69
2. CONFIDENTIALITY. Stockholder hereby expressly affirms that the
confidentiality agreement previously entered into between Company and
Stockholder [SPECIFICALLY DESCRIBE] (the "Confidentiality Agreement") is and
shall remain in full force and effect and Stockholder specifically agrees that
the rights and privileges of Company under the Confidentiality Agreement shall
inure to the benefit of Parent and Merger Sub, to the same extent as if they
were original parties thereto, as well as to Company. Further, Stockholder
hereby expressly agrees that Company's rights under this Agreement are in
addition to, but not in substitution of, its rights under the Confidentiality
Agreement and the Confidentiality Agreement remains in full force and effect.
3. NONCOMPETITION. Until the later of (a) five (5) years after completion of the
Merger or (b) three (3) years after termination of Stockholder's employment with
Parent, Stockholder shall not, directly or indirectly, without the prior written
consent of Parent, (i) own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as an officer, director, employee, partner, principal, agent,
representative, consultant, licensor, licensee or otherwise with, any business
or enterprise engaged in any business which is competitive with the business of
Company, within each of the geographical units which are listed in Appendix A
hereto (the "Territory"), or (ii) engage in any other manner, within the
Territory, in any business which is competitive with the business of Company.
For the purposes of this Section 3, the "business of Company" shall be defined
as set forth in Appendix B hereto (which also includes a list of companies
deemed by the parties to be in competition with the business of Company and
therefore covered by the terms of this Noncompetition Agreement).
Notwithstanding the above, Stockholder shall not be deemed to be engaged
directly or indirectly in any business in contravention of subparagraphs (i) or
(ii) above, if (x) Stockholder participates in any such business solely as a
passive investor in up to 1% of the equity securities of a company or
partnership, the securities of which are publicly traded, or (y) Stockholder is
employed by a business or enterprise that is engaged primarily in a business
other than the business of Company and Stockholder does not apply his expertise
at such business or enterprise to that part of such business or enterprise that
is or could be competitive with the business of Company.
4. NON-INTERFERENCE. Stockholder further agrees that until the later of (a) five
(5) years following completion of the Merger or (b) three (3) years following
termination of Stockholder's employment with Parent, he will not, without the
prior written consent of Parent, (i) interfere with the business of Company,
Parent or Merger Sub, by soliciting, attempting to solicit, inducing, or
otherwise causing any employee or consultant of Company, Parent or Merger Sub to
terminate his or her employment as such in order to become an employee,
consultant or independent contractor to or for any competitor of Company, Parent
or Merger Sub or to or for any company with which Stockholder is associated in
any way; or (ii) induce or attempt to induce any customers, suppliers,
<PAGE> 70
distributors, resellers, or independent contractor of Company to terminate their
relationships with, or to take any action that would be disadvantageous to the
business of, Company.
5. NONCOMPETITION PAYMENT. In consideration of Stockholder's obligations
described herein, concurrent with the Effective Time (as defined in the
Reorganization Agreement) of the Merger, the Company shall pay to Stockholder
the amount of $1,150,000.
6. INDEPENDENCE OF OBLIGATIONS. The covenants of Stockholder set forth in this
Agreement shall be construed as independent of any other agreement or
arrangement between Stockholder, on the one hand, and Merger Sub, Company or
Parent or any of their subsidiaries, on the other, and the existence of any
claim or cause of action by Stockholder against Merger Sub, Company or Parent or
any of their subsidiaries shall not constitute a defense to the enforcement of
such covenants against Stockholder.
7. EQUITABLE RELIEF. Stockholder expressly acknowledges that damages alone will
not be an adequate remedy for any breach by Stockholder of the covenants set
forth in Sections 2, 3, and 4 hereof and that the other parties hereto, in
addition to any other remedies which they may have, shall be entitled, as a
matter of right, to injunctive relief, including specific performance, in any
court of competent jurisdiction with respect to any actual or threatened breach
by Stockholder of any of said covenants.
8. SEVERABILITY, ETC.
(a) If any provision of this Agreement shall be held by a court of
competent jurisdiction to be excessively broad as to duration, activity or
subject, it shall be deemed to extend only over the maximum duration, activity
and/or subject as to which such provision shall be valid and enforceable under
applicable law. If any provisions shall, for any reason, be held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(b) The parties intend that the covenant contained in Section 3 above
shall be construed as a series of separate covenants, one for each geographical
unit specified. Except for geographical coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in Section 3 above.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate covenants deemed included in this Agreement, then the unenforceable
covenant shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
<PAGE> 71
9. NOTICES. All notices or other communications hereunder shall be in writing
and deemed given if and when delivered to a party in person, or if and when
mailed by registered or certified mail, return receipt requested, to the parties
at the addresses set forth below or such other addresses as shall be specified
by notice to the other party hereunder:
To Parent or
Merger Sub at:
DataWorks Corporation
5910 Pacific Center Boulevard
San Diego, CA 92121
Attn: President
To Stockholder at:
-----------------------
-----------------------
-----------------------
-----------------------
10. WAIVER OF BREACH. The failure or delay by Parent or Merger Sub in enforcing
any provision of this Agreement shall not operate as a waiver thereof, and the
waiver by Parent or Merger Sub or a breach of any provision of this Agreement by
Stockholder shall not operate or be construed as a waiver of any subsequent
breach or violation thereof. All waivers shall be in writing and signed by the
party to be bound.
11. ASSIGNMENT. This Agreement shall be assignable by Parent or Merger Sub only
to any person, firm or corporation which may become a successor in interest by
purchase, merger or otherwise to Parent, Merger Sub or Company or the business
operated by Parent, Merger Sub or Company. This Agreement is not assignable by
Stockholder.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Confidentiality
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings of the parties in connection therewith (other than the
Confidentiality Agreement). They may not be altered or amended except by an
agreement in writing signed by the parties to be bound.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Parent and its permitted successors and assigns and Stockholder and
Stockholder's heirs and legal representatives.
<PAGE> 72
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California as applied to
contracts entered into between California residents and to be performed entirely
within California.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
STOCKHOLDER
--------------------------------------
DATAWORKS CORPORATION
By:___________________________________
DATAWORKS ACQUISITION SUB, INC.
By:___________________________________
<PAGE> 73
APPENDIX A
TERRITORY
(1) All counties of California, (2) all other states and territories of
the United States of America and provinces and territories of Canada, and (3)
any other foreign country or territory in which the business of Company is
carried on, or in which Company intends to carry on business.
6.
<PAGE> 74
APPENDIX B
BUSINESS
Enterprise Resource Planning (ERP)-related software applications for
the manufacturing and industrial product marketplaces.
7.
<PAGE> 75
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") is made as of
_____________, 1997, by and among DataWorks Corporation, a California
corporation ("Parent"), DataWorks Acquisition Sub, Inc., a Delaware corporation
("Merger Sub"), and Mark Hellinger ("Stockholder").
RECITALS
Stockholder is a stockholder of Interactive Group, Inc., a Delaware
corporation ("Company"). Parent, Merger Sub and Company have entered into an
Agreement and Plan of Merger and Reorganization dated as of July 31, 1997 (the
"Reorganization Agreement"), providing for the acquisition (the "Acquisition")
by Parent of Company pursuant to a merger of Merger Sub and Company (the
"Merger"). Stockholder plans to vote in favor of the Merger and receive all the
benefits of the Merger; and in connection therewith and in exchange for the
additional consideration provided herein, Stockholder has agreed pursuant to and
to the extent permitted by Section 16601 of the Business and Professions Code of
the State of California not to compete with Company in the manner and to the
extent herein set forth. Stockholder is entering into this Agreement as an
inducement to Parent and Merger Sub to consummate the Merger, with all of the
attendant financial benefits to Stockholder as a stockholder of Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contemplated and intending to be legally bound hereby, Merger Sub, Parent and
Stockholder agree as follows:
1. ACKNOWLEDGMENTS BY STOCKHOLDER. Stockholder acknowledges that by virtue of
his position with Company he has developed considerable expertise in the
business operations of Company and has had access to extensive confidential
information with respect to Company. Stockholder recognizes that Merger Sub and
Parent would be irreparably damaged, and their substantial investment in Company
materially impaired, if Stockholder were to enter into an activity competing
with Company's business in violation of the terms of this Agreement or if
Stockholder were to disclose or make unauthorized use of any confidential
information concerning the business of Company. Accordingly, Stockholder
expressly acknowledges that he is voluntarily entering into this Agreement and
that the terms and conditions of this Agreement are fair and reasonable to
Stockholder in all respects.
2. CONFIDENTIALITY. Stockholder hereby expressly affirms that the
confidentiality agreement previously entered into between Company and
Stockholder [SPECIFICALLY
<PAGE> 76
DESCRIBE] (the "Confidentiality Agreement") is and shall remain in full force
and effect and Stockholder specifically agrees that the rights and privileges of
Company under the Confidentiality Agreement shall inure to the benefit of Parent
and Merger Sub, to the same extent as if they were original parties thereto, as
well as to Company. Further, Stockholder hereby expressly agrees that Company's
rights under this Agreement are in addition to, but not in substitution of, its
rights under the Confidentiality Agreement and the Confidentiality Agreement
remains in full force and effect.
3. NONCOMPETITION. Until the later of (a) three (3) years after completion of
the Merger or (b) two (2) years after termination of Stockholder's employment
with Parent, Stockholder shall not, directly or indirectly, without the prior
written consent of Parent, (i) own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as an officer, director, employee, partner, principal, agent,
representative, consultant, licensor, licensee or otherwise with, any business
or enterprise engaged in any business which is competitive with the business of
Company, within each of the geographical units which are listed in Appendix A
hereto (the "Territory"), or (ii) engage in any other manner, within the
Territory, in any business which is competitive with the business of Company.
For the purposes of this Section 3, the "business of Company" shall be defined
as set forth in Appendix B hereto (which also includes a list of companies
deemed by the parties to be in competition with the business of Company and
therefore covered by the terms of this Noncompetition Agreement).
Notwithstanding the above, Stockholder shall not be deemed to be engaged
directly or indirectly in any business in contravention of subparagraphs (i) or
(ii) above, if (x) Stockholder participates in any such business solely as a
passive investor in up to 1% of the equity securities of a company or
partnership, the securities of which are publicly traded, or (y) Stockholder is
employed by a business or enterprise that is engaged primarily in a business
other than the business of Company and Stockholder does not apply his expertise
at such business or enterprise to that part of such business or enterprise that
is or could be competitive with the business of Company.
4. NON-INTERFERENCE. Stockholder further agrees that until the later of (a)
three (3) years following completion of the Merger or (b) two (2) years
following termination of Stockholder's employment with Parent, he will not,
without the prior written consent of Parent, (i) interfere with the business of
Company, Parent or Merger Sub, by soliciting, attempting to solicit, inducing,
or otherwise causing any employee or consultant of Company, Parent or Merger Sub
to terminate his or her employment as such in order to become an employee,
consultant or independent contractor to or for any competitor of Company, Parent
or Merger Sub or to or for any company with which Stockholder is associated in
any way; or (ii) induce or attempt to induce any customers, suppliers,
distributors, resellers, or independent contractor of Company to terminate their
<PAGE> 77
relationships with, or to take any action that would be disadvantageous to the
business of, Company.
5. NONCOMPETITION PAYMENT. In consideration of Stockholder's obligations
described herein, concurrent with the Effective Time (as defined in the
Reorganization Agreement) of the Merger, the Company shall pay to Stockholder
the amount of $525,000.
6. INDEPENDENCE OF OBLIGATIONS. The covenants of Stockholder set forth in this
Agreement shall be construed as independent of any other agreement or
arrangement between Stockholder, on the one hand, and Merger Sub, Company or
Parent or any of their subsidiaries, on the other, and the existence of any
claim or cause of action by Stockholder against Merger Sub, Company or Parent or
any of their subsidiaries shall not constitute a defense to the enforcement of
such covenants against Stockholder.
7. EQUITABLE RELIEF. Stockholder expressly acknowledges that damages alone will
not be an adequate remedy for any breach by Stockholder of the covenants set
forth in Sections 2, 3, and 4 hereof and that the other parties hereto, in
addition to any other remedies which they may have, shall be entitled, as a
matter of right, to injunctive relief, including specific performance, in any
court of competent jurisdiction with respect to any actual or threatened breach
by Stockholder of any of said covenants.
8. SEVERABILITY, ETC.
(a) If any provision of this Agreement shall be held by a court of
competent jurisdiction to be excessively broad as to duration, activity or
subject, it shall be deemed to extend only over the maximum duration, activity
and/or subject as to which such provision shall be valid and enforceable under
applicable law. If any provisions shall, for any reason, be held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(b) The parties intend that the covenant contained in Section 3 above
shall be construed as a series of separate covenants, one for each geographical
unit specified. Except for geographical coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in Section 3 above.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate covenants deemed included in this Agreement, then the unenforceable
covenant shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
<PAGE> 78
9. NOTICES. All notices or other communications hereunder shall be in writing
and deemed given if and when delivered to a party in person, or if and when
mailed by registered or certified mail, return receipt requested, to the parties
at the addresses set forth below or such other addresses as shall be specified
by notice to the other party hereunder:
To Parent or
Merger Sub at:
DataWorks Corporation
5910 Pacific Center Boulevard
San Diego, CA 92121
Attn: President
To Stockholder at:
---------------------------
---------------------------
---------------------------
10. WAIVER OF BREACH. The failure or delay by Parent or Merger Sub in enforcing
any provision of this Agreement shall not operate as a waiver thereof, and the
waiver by Parent or Merger Sub or a breach of any provision of this Agreement by
Stockholder shall not operate or be construed as a waiver of any subsequent
breach or violation thereof. All waivers shall be in writing and signed by the
party to be bound.
11. ASSIGNMENT. This Agreement shall be assignable by Parent or Merger Sub only
to any person, firm or corporation which may become a successor in interest by
purchase, merger or otherwise to Parent, Merger Sub or Company or the business
operated by Parent, Merger Sub or Company. This Agreement is not assignable by
Stockholder.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Confidentiality
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings of the parties in connection therewith (other than the
Confidentiality Agreement). They may not be altered or amended except by an
agreement in writing signed by the parties to be bound.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Parent and its permitted successors and assigns and Stockholder and
Stockholder's heirs and legal representatives.
<PAGE> 79
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California as applied to
contracts entered into between California residents and to be performed entirely
within California.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
STOCKHOLDER
----------------------------------------
DATAWORKS CORPORATION
By:_____________________________________
DATAWORKS ACQUISITION SUB, INC.
By:_____________________________________
<PAGE> 80
APPENDIX A
TERRITORY
(1) All counties of California, (2) all other states and territories of
the United States of America and provinces and territories of Canada, and (3)
any other foreign country or territory in which the business of Company is
carried on, or in which Company intends to carry on business.
6.
<PAGE> 81
APPENDIX B
BUSINESS
Enterprise Resource Planning (ERP)-related software applications for
the manufacturing and industrial product marketplaces.
7.
<PAGE> 82
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (the "Agreement") is made as of
_____________, 1997, by and among DataWorks Corporation, a California
corporation ("Parent"), DataWorks Acquisition Sub, Inc., a Delaware corporation
("Merger Sub"), and Bruce H. Leith ("Stockholder").
RECITALS
Stockholder is a stockholder of Interactive Group, Inc., a Delaware
corporation ("Company"). Parent, Merger Sub and Company have entered into an
Agreement and Plan of Merger and Reorganization dated as of July 31, 1997 (the
"Reorganization Agreement"), providing for the acquisition (the "Acquisition")
by Parent of Company pursuant to a merger of Merger Sub and Company (the
"Merger"). Stockholder plans to vote in favor of the Merger and receive all the
benefits of the Merger; and in connection therewith and in exchange for the
additional consideration provided herein, Stockholder has agreed pursuant to and
to the extent permitted by Section 16601 of the Business and Professions Code of
the State of California not to compete with Company in the manner and to the
extent herein set forth. Stockholder is entering into this Agreement as an
inducement to Parent and Merger Sub to consummate the Merger, with all of the
attendant financial benefits to Stockholder as a stockholder of Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contemplated and intending to be legally bound hereby, Merger Sub, Parent and
Stockholder agree as follows:
1. ACKNOWLEDGMENTS BY STOCKHOLDER. Stockholder acknowledges that by virtue of
his position with Company he has developed considerable expertise in the
business operations of Company and has had access to extensive confidential
information with respect to Company. Stockholder recognizes that Merger Sub and
Parent would be irreparably damaged, and their substantial investment in Company
materially impaired, if Stockholder were to enter into an activity competing
with Company's business in violation of the terms of this Agreement or if
Stockholder were to disclose or make unauthorized use of any confidential
information concerning the business of Company. Accordingly, Stockholder
expressly acknowledges that he is voluntarily entering into this Agreement and
that the terms and conditions of this Agreement are fair and reasonable to
Stockholder in all respects.
2. CONFIDENTIALITY. Stockholder hereby expressly affirms that the
confidentiality agreement previously entered into between Company and
Stockholder [SPECIFICALLY
<PAGE> 83
DESCRIBE] (the "Confidentiality Agreement") is and shall remain in full force
and effect and Stockholder specifically agrees that the rights and privileges of
Company under the Confidentiality Agreement shall inure to the benefit of Parent
and Merger Sub, to the same extent as if they were original parties thereto, as
well as to Company. Further, Stockholder hereby expressly agrees that Company's
rights under this Agreement are in addition to, but not in substitution of, its
rights under the Confidentiality Agreement and the Confidentiality Agreement
remains in full force and effect.
3. NONCOMPETITION. Until the later of (a) three (3) years after completion of
the Merger or (b) two (2) years after termination of Stockholder's employment
with Parent, Stockholder shall not, directly or indirectly, without the prior
written consent of Parent, (i) own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as an officer, director, employee, partner, principal, agent,
representative, consultant, licensor, licensee or otherwise with, any business
or enterprise engaged in any business which is competitive with the business of
Company, within each of the geographical units which are listed in Appendix A
hereto (the "Territory"), or (ii) engage in any other manner, within the
Territory, in any business which is competitive with the business of Company.
For the purposes of this Section 3, the "business of Company" shall be defined
as set forth in Appendix B hereto (which also includes a list of companies
deemed by the parties to be in competition with the business of Company and
therefore covered by the terms of this Noncompetition Agreement).
Notwithstanding the above, Stockholder shall not be deemed to be engaged
directly or indirectly in any business in contravention of subparagraphs (i) or
(ii) above, if (x) Stockholder participates in any such business solely as a
passive investor in up to 1% of the equity securities of a company or
partnership, the securities of which are publicly traded, or (y) Stockholder is
employed by a business or enterprise that is engaged primarily in a business
other than the business of Company and Stockholder does not apply his expertise
at such business or enterprise to that part of such business or enterprise that
is or could be competitive with the business of Company.
4. NON-INTERFERENCE. Stockholder further agrees that until the later of (a)
three (3) years following completion of the Merger or (b) two (2) years
following termination of Stockholder's employment with Parent, he will not,
without the prior written consent of Parent, (i) interfere with the business of
Company, Parent or Merger Sub, by soliciting, attempting to solicit, inducing,
or otherwise causing any employee or consultant of Company, Parent or Merger Sub
to terminate his or her employment as such in order to become an employee,
consultant or independent contractor to or for any competitor of Company, Parent
or Merger Sub or to or for any company with which Stockholder is associated in
any way; or (ii) induce or attempt to induce any customers, suppliers,
distributors, resellers, or independent contractor of Company to terminate their
<PAGE> 84
relationships with, or to take any action that would be disadvantageous to the
business of, Company.
5. NONCOMPETITION PAYMENT. In consideration of Stockholder's obligations
described herein, concurrent with the Effective Time (as defined in the
Reorganization Agreement) of the Merger, the Company shall pay to Stockholder
the amount of $225,000.
6. INDEPENDENCE OF OBLIGATIONS. The covenants of Stockholder set forth in this
Agreement shall be construed as independent of any other agreement or
arrangement between Stockholder, on the one hand, and Merger Sub, Company or
Parent or any of their subsidiaries, on the other, and the existence of any
claim or cause of action by Stockholder against Merger Sub, Company or Parent or
any of their subsidiaries shall not constitute a defense to the enforcement of
such covenants against Stockholder.
7. EQUITABLE RELIEF. Stockholder expressly acknowledges that damages alone will
not be an adequate remedy for any breach by Stockholder of the covenants set
forth in Sections 2, 3, and 4 hereof and that the other parties hereto, in
addition to any other remedies which they may have, shall be entitled, as a
matter of right, to injunctive relief, including specific performance, in any
court of competent jurisdiction with respect to any actual or threatened breach
by Stockholder of any of said covenants.
8. SEVERABILITY, ETC.
(a) If any provision of this Agreement shall be held by a court of
competent jurisdiction to be excessively broad as to duration, activity or
subject, it shall be deemed to extend only over the maximum duration, activity
and/or subject as to which such provision shall be valid and enforceable under
applicable law. If any provisions shall, for any reason, be held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(b) The parties intend that the covenant contained in Section 3 above
shall be construed as a series of separate covenants, one for each geographical
unit specified. Except for geographical coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in Section 3 above.
If, in any judicial proceeding, a court shall refuse to enforce any of the
separate covenants deemed included in this Agreement, then the unenforceable
covenant shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
<PAGE> 85
9. NOTICES. All notices or other communications hereunder shall be in writing
and deemed given if and when delivered to a party in person, or if and when
mailed by registered or certified mail, return receipt requested, to the parties
at the addresses set forth below or such other addresses as shall be specified
by notice to the other party hereunder:
To Parent or
Merger Sub at:
DataWorks Corporation
5910 Pacific Center Boulevard
San Diego, CA 92121
Attn: President
To Stockholder at:
---------------------------
---------------------------
---------------------------
10. WAIVER OF BREACH. The failure or delay by Parent or Merger Sub in enforcing
any provision of this Agreement shall not operate as a waiver thereof, and the
waiver by Parent or Merger Sub or a breach of any provision of this Agreement by
Stockholder shall not operate or be construed as a waiver of any subsequent
breach or violation thereof. All waivers shall be in writing and signed by the
party to be bound.
11. ASSIGNMENT. This Agreement shall be assignable by Parent or Merger Sub only
to any person, firm or corporation which may become a successor in interest by
purchase, merger or otherwise to Parent, Merger Sub or Company or the business
operated by Parent, Merger Sub or Company. This Agreement is not assignable by
Stockholder.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Confidentiality
Agreement represent the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings of the parties in connection therewith (other than the
Confidentiality Agreement). They may not be altered or amended except by an
agreement in writing signed by the parties to be bound.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Parent and its permitted successors and assigns and Stockholder and
Stockholder's heirs and legal representatives.
<PAGE> 86
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California as applied to
contracts entered into between California residents and to be performed entirely
within California.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
STOCKHOLDER
----------------------------------------
DATAWORKS CORPORATION
By:_____________________________________
DATAWORKS ACQUISITION SUB, INC.
By:_____________________________________
<PAGE> 87
APPENDIX A
TERRITORY
(1) All counties of California, (2) all other states and territories of
the United States of America and provinces and territories of Canada, and (3)
any other foreign country or territory in which the business of Company is
carried on, or in which Company intends to carry on business.
6.
<PAGE> 88
APPENDIX B
BUSINESS
Enterprise Resource Planning (ERP)-related software applications for
the manufacturing and industrial product marketplaces.
7.
<PAGE> 1
EXHIBIT 2.2
THE SECURITIES REPRESENTED BY THIS OPTION AGREEMENT, AS WELL AS THE SECURITIES
ISSUABLE UPON ANY EXERCISE OF THIS OPTION AGREEMENT, HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED UNLESS SO
REGISTERED AND QUALIFIED OR UNLESS EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION ARE AVAILABLE AND IDENTIFIED TO THE ISSUER TO ITS REASONABLE
SATISFACTION.
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of July 31, 1997 by and between
DATAWORKS CORPORATION a California corporation ("Parent"), and INTERACTIVE
GROUP, INC., a Delaware corporation ("Interactive").
RECITALS
A. Parent, DATAWORKS ACQUISITION SUB, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Interactive, are entering
into an Agreement and Plan of Merger and Reorganization of even date herewith
(as amended from time to time, the "Reorganization Agreement"; capitalized terms
used but not otherwise defined in this Option Agreement have the meanings
assigned to such terms in the Reorganization Agreement), which provides (subject
to the conditions set forth therein) for the merger of Merger Sub into
Interactive (the "Merger").
B. As a condition to the willingness of Parent and Merger Sub to enter into
the Reorganization Agreement, Parent and Merger Sub have required that
Interactive agree, and in order to induce Parent and Merger Sub to enter into
the Reorganization Agreement Interactive has agreed, to enter into this Option
Agreement.
AGREEMENT
The parties to this Option Agreement, intending to be legally bound, agree
as follows:
SECTION 1. GRANT OF OPTIONS. Interactive hereby grants Parent an irrevocable
option (the "Stock Option") to purchase up to 344,531 shares of common stock,
$.001 par value per share, of Interactive (the "Subject Shares"), in the manner
set forth below, at a price of $7.50 per share, subject to adjustment as
provided in Section 6 (the "Exercise
1.
<PAGE> 2
Price"), payable in cash (immediately available funds) in the manner set forth
below, or by net issue exercise as contemplated in Section 5 hereof.
1.1 EXERCISE OF OPTION.
(a) Parent may exercise the Stock Option with respect to any of the
Subject Shares in whole or in part, at any time or from time to time, following
the occurrence of a Purchase Event (as defined in Section 1.1(b)) and prior to
the Termination Date (as defined in Section 1.1(c)). Parent's right to purchase
the Subject Shares with respect to which it has exercised the Stock Option shall
not terminate on the Termination Date; accordingly, if Parent exercises the
Stock Option on or prior to the Termination Date with respect to any Subject
Shares, then Parent shall be entitled to purchase such Subject Shares in
accordance with the provisions of this Option Agreement after the Termination
Date.
(b) For purposes of this Option Agreement, a "Purchase Event" shall be
deemed to have occurred upon a termination of the Reorganization Agreement
pursuant to which Interactive is required to pay Parent a fee of $1,500,000 as
set forth in clause (ii) of Section 8.3(d) of the Reorganization Agreement (any
such event, a "Termination").
(c) For purposes of this Option Agreement, "Termination Date" shall
mean 120 days after a Termination; provided, however, that if the Stock Option
cannot be exercised prior to the end of such 120-day period by reason of any
applicable judgment, decree, order, Legal Requirement or other legal impediment,
then the Termination Date shall be extended until the date 30 days after the
date on which such impediment is removed.
1.2 CLOSINGS. In the event Parent wishes to exercise the Stock Option with
respect to any Subject Shares, Parent shall send to Interactive a written notice
(the date of which being herein referred to as the "Notice Date") specifying (a)
the number of Subject Shares Parent will purchase, (b) the place at which such
Subject Shares are to be purchased, and (c) the date on which such Subject
Shares are to be purchased, which shall not be earlier than one business day nor
later than 30 business days after the Notice Date. The closing of the purchase
of such Subject Shares (the "Closing") shall take place at the executive offices
of Interactive and on the date specified in such written notice (the "Closing
Date"); provided, however, that: (i) if such purchase cannot be consummated by
reason of any applicable judgment, decree, order, Legal Requirement or other
legal impediment, the Closing Date may be extended by Parent to a date not more
than 30 days after the date on which such impediment is removed; and (ii) if
prior notification to or approval of any Governmental Body is required in
connection with such purchase, Interactive shall promptly cause to be filed the
required notice or application for approval and shall expeditiously process the
same (and Interactive shall cooperate with Parent in
2.
<PAGE> 3
the filing of any such notice or application required to be filed by Parent and
the obtaining of any such approval required to be obtained by Parent), and the
Closing Date may be extended by Parent to a date not more than 30 days after the
later of (A) the date on which any required notification or waiting period has
expired or been validly terminated, or (B) the date on which any required
approval has been obtained.
1.3 PAYMENT AND DELIVERY OF CERTIFICATES. On each Closing Date, (i) Parent
will deliver to Interactive the Exercise Price payable for the Subject Shares
being issued and sold by Interactive to Parent at the Closing and (ii)
Interactive shall issue and deliver to Parent a certificate representing such
Subject Shares.
SECTION 2. REPRESENTATION AND WARRANTIES OF INTERACTIVE. Interactive represents
and warrants to Parent that (a) Interactive is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Option Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Option Agreement by Interactive and the consummation by Interactive of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Interactive and no other corporate proceedings
on the part of Interactive are necessary to authorize this Option Agreement or
any of the transactions contemplated hereby, (c) this Option Agreement has been
duly executed and delivered by Interactive and constitutes a valid and binding
obligation of Interactive, and, assuming this Option Agreement constitutes a
valid and binding obligation of Parent, is enforceable against Interactive in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles, (d)
Interactive has taken all necessary corporate action to authorize and reserve
for issuance and to permit it to issue, upon exercise of the Stock Option, and
at all times from the date hereof through the expiration of the Stock Option
will have so reserved 344,531 unissued shares of its common stock, all of which,
upon their issuance and delivery in accordance with the terms of this Option
Agreement, will be validly issued, fully paid and nonassessable, (e) upon
delivery of such shares of Interactive common stock to Parent upon exercise of
the Stock Option, Parent will acquire valid title to all of such shares, free
and clear of any and all Encumbrances of any nature whatsoever (except for
restrictions under applicable federal and state securities laws), (f) the
execution and delivery of this Option Agreement by Interactive does not, and the
performance of this Option Agreement by Interactive will not (i) violate the
certificate of incorporation or bylaws of Interactive, (ii) conflict with or
violate any statute, rule, regulation, order, judgment or decree applicable to
Interactive or by which it or any of its assets or properties is bound or
affected, or (iii) result in any breach or violation of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give rise to any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien on any of the property
3.
<PAGE> 4
or assets of Interactive pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, or other instrument or obligation to which
Interactive or properties is bound or affected (except, in the case of clauses
(ii) or (iii) above, for violations, breaches or defaults which would not,
individually or in the aggregate have a Material Adverse Effect on Interactive),
and (g) the execution and delivery of this Option Agreement by Interactive does
not, and the performance of this Option Agreement by Interactive will not, with
respect to Interactive, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority
except for pre-merger notification requirements, if applicable, of the HSR Act.
SECTION 3. REPRESENTATION AND WARRANTIES OF PARENT. Parent represents and
warrants to Interactive that (a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
the corporate power and authority to enter into this Option Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Option Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and no other corporate proceedings on the part of Parent
are necessary to authorize this Option Agreement or any of the transactions
contemplated hereby, (c) this Option Agreement has been duly executed and
delivered by Parent and constitutes a valid and binding obligation of Parent,
and, assuming this Option Agreement constitutes a valid and binding obligation
of Interactive, is enforceable against Parent in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and (d) any Subject Shares
acquired upon exercise of the Stock Option will be, and the Stock Option is
being, acquired by Parent for its own account and not with a view to the
distribution or resale thereof in any manner which would be in violation of
applicable United States securities laws. Parent acknowledges the provisions of
the legend set forth on the top of the first page of this Option Agreement and
covenants to abide by its terms.
SECTION 4. CERTAIN REPURCHASES.
4.1 CASH PUT PRICE. At any time during which (i) the Stock Option is
exercisable pursuant to Section 1 and (ii) a letter of intent or definitive
agreement with respect to a Superior Offer has been entered into by Interactive
and has not been terminated (a "Cash Put Deal"), then Parent shall have the
right to require Interactive (or any successor entity thereof) to repurchase
from Parent the Stock Option, or any portion thereof, for a price equal to (A)
the amount by which the "Market/Offer Price" for shares of Interactive common
stock (as of the date Parent gives notice of its intent to exercise its rights
under this Section 4, which in such event shall be the "Notice Date") exceeds
the
4.
<PAGE> 5
Exercise Price multiplied by (B) the number of Subject Shares then purchasable
pursuant to the Stock Option (or such portion thereof with respect to which
Parent is exercising its rights under this Section 4). "Market/Offer Price"
means the higher of the following:
(X) the per share price called for by the Cash Put Deal; or
(Y) the average of the closing sale prices, on a per share basis, of
Interactive common stock for the 10 trading days immediately preceding the
Notice Date (the "Average Price").
4.2 PAYMENT AND REDELIVERY OF OPTION. In the event that Parent exercises
its rights under Section 4.1, then promptly upon the consummation of the Cash
Put Deal, Interactive (or any successor entity) shall pay the required amount to
Parent in cash (whether or not consummation occurs prior to the Termination
Date). In the event that the Cash Put Deal is terminated prior to consummation
(and Interactive makes a public announcement thereof), then Interactive shall
pay the required amount to Parent in shares of Interactive common stock (valued,
for this purpose, at the Average Price) within 10 business days of the public
announcement of such termination. In either event, at the time of payment Parent
shall surrender to Interactive the Stock Option, and Parent shall warrant that
it owns the Stock Option free and clear of all Encumbrances of any kind or
nature whatsoever.
SECTION 5. NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, at any time prior to the Termination Date, if the Average Price (using
the date of calculation as the "Notice Date") exceeds the Exercise Price then
Parent may elect to exercise the Stock Option (or any unused portion thereof)
pursuant to this Section 5 and receive the number of Subject Shares equal to "X"
where:
X = Y (A-B)
-------
A
Y = the number of Subject Shares subject to the
portion of the Stock Option being exercised
A = the Average Price (using the date of calculation
as the Notice Date)
B = the Exercise Price (as adjusted to the date of
such calculation)
SECTION 6. REGISTRATION RIGHTS. In the event that Parent shall desire to sell
any of the Subject Shares purchased pursuant to the Stock Option within 2 years
after such purchase, and such sale requires in the opinion of counsel to Parent,
which opinion shall
5.
<PAGE> 6
be reasonably satisfactory to Interactive and its counsel, registration of such
shares under the Securities Act of 1933, Parent may, by written notice (the
"Registration Notice") to Interactive, request Interactive to register under the
Securities Act all or any part of the shares purchased pursuant to the Stock
Option ("Registrable Securities"). Interactive (and/or any person designated by
Interactive) shall thereupon have the option, exercisable by written notice
delivered to the Parent within 10 business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities and (ii) the average of the
closing sale prices of shares of Interactive common stock on the Nasdaq National
Market for the 10 trading days immediately preceding receipt by Interactive of
the Registration Notice. Any such purchase of Registrable Securities by
Interactive or its designee hereunder shall take place at a closing to be held
at the principal executive offices of Interactive or its counsel at any
reasonable date and time designated by Interactive or its designee in such
notice within 20 business days after delivery of such notice. Any payment for
the shares to be purchased shall be made by delivery at the time of such closing
of the Option Price in immediately available funds.
If Interactive does not elect to exercise its option pursuant to this
Section 5 with respect to all Registrable Securities designated in the
Registration Notice, it shall use its best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities; provided, however, that (i) Parent shall not be entitled
to more than one effective registration statement hereunder and (ii) Interactive
will not be required to file any such registration statement during any period
of time (not to exceed 90 days after such request in the case of clause (B)
below or 120 days in the case of clauses (A) and (C) below) when (A) Interactive
is in possession of material non-public information which it reasonably believes
would be detrimental to be disclosed at such time and, in the judgment of the
Board of Directors of Interactive, such information would have to be disclosed
if a registration statement were filed at that time; (B) the Registration is
required under the Securities Act to include audited financial statements for
any period in such registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (C) Interactive
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving
Interactive or any of its affiliates. Interactive shall use its commercially
reasonable efforts to cause all Registrable Securities registered pursuant to
this Section 5 to be qualified for sale under the securities or blue-sky laws of
such jurisdictions as Parent may reasonably require and shall continue such
registration or qualification in effect in such jurisdiction; provided, however
that Interactive shall not be required to qualify to do business in, or consent
to general service of process in, any jurisdiction by reason of this provision.
6.
<PAGE> 7
The registration rights set forth in this Section 5 are subject to the
condition that Parent shall provide Interactive with such information with
respect to Parent's Registrable Securities, the plans for the distribution
thereof, and such other information with respect to Parent as, in the reasonable
judgment of counsel for Interactive, is necessary to enable Interactive to
include in such registration statement all material facts required to be
disclosed with respect to a registration thereunder.
A registration effected under this Section 5 shall be effected at
Interactive's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to Parent, and Interactive shall provide to the
underwriters, if any, such documentation (including certificates, opinion of
counsel and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters, if any, in the customary manner and (ii) if
applicable, to enter into an underwriting agreement in form and substance
customary to transactions of this type with the Manager and the other
underwriters participating in such offering.
SECTION 7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in Interactive common stock by reason of stock dividends, stock splits, mergers
(other than the Merger), recapitalizations, combinations, exchange of shares or
the like, the type and number of shares or securities subject to the Stock
Option, and the Exercise Price per share, shall be adjusted appropriately.
SECTION 8. RESTRICTIVE LEGENDS. Each certificate representing Subject Shares
issued to Parent hereunder shall initially be endorsed with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE.
SECTION 9. MISCELLANEOUS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Interactive in this Option
Agreement shall survive any Termination and shall survive any exercise of the
Stock Option and any acquisition by Parent of any Subject Shares.
7.
<PAGE> 8
9.2 INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to either party, each party shall hold harmless and
indemnify the other from and against any damages suffered or incurred by the
other and that arise from any breach of any representation, warranty, covenant
or obligation of the indemnifying party contained herein.
9.3 EXPENSES. Except as otherwise provided herein, all costs and expenses
incurred in connection with the transactions contemplated by this Option
Agreement shall be paid by the party incurring such costs and expenses.
9.4 NOTICES. All notices or other communications under this Option
Agreement shall be in writing and shall be given by delivery in person or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows (or such other address for a party as shall be specified in
a notice given in accordance with this Section 8.4) and shall be deemed to have
been given upon delivery in person or four days after deposit in the U.S. mail:
If to Interactive:
Interactive, Inc.
5095 Murphy Canyon Road
San Diego, CA 92123
Attention: Robert C. Vernon
Facsimile No: (619) 565-8570
With a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, CA 92101-8219
Attention: T. Michael Hird, Esq.
Facsimile No.: (619) 236-1995
8.
<PAGE> 9
If to Parent or Merger Sub:
DataWorks Corporation
5910 Pacific Center Boulevard
San Diego, CA 92121
Attention: Stuart W. Clifton
Facsimile No: (619) 546-0682
With a copy to:
Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Attention: Frederick T. Muto, Esq.
Facsimile No.: (619) 453-3555
9.5 SEVERABILITY. Any term or provision of this Option Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Option Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Option Agreement in any other jurisdiction. If any
provision of this Option Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
9.6 ENTIRE AGREEMENT. This Option Agreement and any documents delivered by
the parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Option Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto.
9.7 ASSIGNMENT, BINDING EFFECT. This Option Agreement shall be assignable
only to the extent not violative of applicable securities laws. This Option
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Option Agreement to the contrary, nothing in this Option
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Option
Agreement.
9.
<PAGE> 10
9.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Option Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Option Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which they are entitled at law or in equity.
9.9 GOVERNING LAW. This Option Agreement shall be governed in all respects
by the laws of the State of Delaware, as applied to contracts entered into and
to be performed entirely within the State of Delaware.
9.10 HEADINGS. Headings of the Sections of this Option Agreement are for
the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
9.11 COUNTERPARTS. This Option Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
IN WITNESS WHEREOF, Parent and Interactive have caused this Option
Agreement to be executed, as of the date first written above.
DATAWORKS CORPORATION
By:
--------------------------------
Stuart W. Clifton
President and Chief Executive Officer
INTERACTIVE GROUP, INC.
By:
--------------------------------
Robert C. Vernon
Chief Executive Officer
10.
<PAGE> 1
EXHIBIT 99.1
VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of July 31, 1997 by and between
INTERACTIVE GROUP, INC., a Delaware corporation (the "Company"), and stockholder
("Shareholder").
RECITALS
A. DATAWORKS CORPORATION, a California corporation ("Parent"), DATAWORKS
ACQUISITION SUB, INC. a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and the Company are entering into an Agreement and Plan
of Merger and Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but not otherwise
defined in this Voting Agreement have the meanings assigned to such terms in the
Reorganization Agreement), which provides (subject to the conditions set forth
therein) for the merger of Merger Sub into the Company (the "Merger").
B. As of the date hereof, Shareholder owns in aggregate (including shares
held both beneficially and of record) the number of shares of Parent Common
Stock set forth below Shareholder's name on the signature page hereof.
C. As a condition to the willingness of the Company to enter into the
Reorganization Agreement, the Company has required that Shareholder agree, and
in order to induce the Company to enter into the Reorganization Agreement
Shareholder has agreed, to enter into this Voting Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound, agree
as follows:
SECTION 1. NO TRANSFER OF SUBJECT SHARES
1.1 SUBJECT SHARES. The shares described above held by Shareholder,
together with any shares of Parent capital stock that may hereafter be acquired
by Shareholder (whether upon exercise of options or otherwise), are referred to
herein as the "Subject Shares".
1.2 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES.
(a) Shareholder hereby covenants and agrees that prior to the
Expiration Date (as defined below), Shareholder will not, directly or
indirectly, (i) offer, sell, offer to
1.
<PAGE> 2
sell, contract to sell, pledge, grant any option to purchase or otherwise
dispose of or transfer (or announce any offer, sale, offer of sale, contract of
sale or grant of any option to purchase or other disposition or transfer of) any
Subject Shares to any Person, (ii) create or permit to exist any Encumbrance
with respect to any of the Subject Shares, (iii) reduce his beneficial ownership
of, interest in or risk relating to any of the Subject Shares or (iv) commit or
agree to do any of the foregoing.
(b) As used in this Voting Agreement, the term "Expiration Date" shall
mean the earlier of the date upon which the Reorganization Agreement is validly
terminated or the date upon which the Merger becomes effective.
1.3 NO TRANSFER OF VOTING RIGHTS. Shareholder covenants and agrees that,
prior to the Expiration Date, Shareholder will not deposit any of the Subject
Shares into a voting trust or grant another proxy (except as provided herein) or
enter into a voting agreement with respect to any of the Subject Shares.
SECTION 2. VOTING OF SUBJECT SHARES
2.1 PRE-TERMINATION VOTING AGREEMENT. Shareholder hereby agrees that, prior
to the earlier to occur of the valid termination of the Reorganization Agreement
or the Effective Time, at any meeting of the shareholders of Parent, however
called, and in any written action by consent of shareholders of Parent, unless
otherwise directed in writing by the Company, Shareholder shall vote the Subject
Shares:
(i) in favor of (1) the approval of the principal terms of the
Merger; and (2) each of the other actions contemplated by the Reorganization
Agreement and any action required in furtherance hereof and thereof; and
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of Parent in the
Reorganization Agreement.
Prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time, Shareholder shall not enter into any agreement
or understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)" or "(ii)" of the preceding sentence.
2.2 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Voting Agreement,
Shareholder shall deliver to the Company a proxy in the form attached hereto as
Exhibit A, which shall be irrevocable to the fullest extent permitted by law
prior to the Expiration Date, with respect to the Subject Shares (the "Proxy").
2.
<PAGE> 3
(b) Shareholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in the
Company the power to carry out and give effect to the provisions of this Voting
Agreement.
SECTION 3. WAIVER OF APPRAISAL RIGHTS.
Shareholder hereby waives any rights of appraisal and any dissenters'
rights that Shareholder may have in connection with the Merger.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder hereby represents and warrants to the Company as follows:
4.1 DUE AUTHORIZATION, ETC. Shareholder has all requisite power and
capacity to execute and deliver this Voting Agreement and to perform his
obligations hereunder. This Voting Agreement has been duly executed and
delivered by Shareholder and constitutes a legal, valid and binding obligation
of Shareholder, enforceable against Shareholder in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
4.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Voting Agreement by Shareholder
do not, and the performance of this Voting Agreement by Shareholder will not:
(i) conflict with or violate any order, decree or judgment applicable to
Shareholder or by which he or any of his properties is bound or affected; or
(ii) result in any breach of or constitute a default (with notice or lapse of
time, or both) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
the Subject Shares pursuant to, any Contract to which Shareholder is a party or
by which Shareholder or any of his properties is bound or affected.
(b) The execution and delivery of this Voting Agreement by Shareholder
do not, and the performance of this Voting Agreement by Shareholder will not,
require any Consent of any Person.
4.3 TITLE TO SUBJECT SHARES. Shareholder owns of record and beneficially
the Subject Shares set forth under Shareholder's name on the signature page
hereof and does not directly or indirectly own, either beneficially or of
record, any shares of capital stock of Parent, or rights to acquire any shares
of capital stock of Parent, other than the Subject Shares set forth below
Shareholder's name on the signature page hereof.
3.
<PAGE> 4
4.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
SECTION 5. COVENANTS OF SHAREHOLDER
5.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Shareholder will execute and deliver, or cause to be executed and
delivered, such additional or further arrangements, proxies, consents and other
instruments as the Company may reasonably request for the purpose of effectively
carrying out and furthering the intent of this Voting Agreement.
SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Shareholder and the Company
in this Voting Agreement shall promptly terminate upon the Expiration Date.
6.2 INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to the Company, Shareholder shall hold harmless and
indemnify the Company from and against any damages suffered or incurred by the
Company and that arise from any breach of any representation, warranty, covenant
or obligation of Shareholder contained herein.
6.3 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
6.4 NOTICES. Any notice or other communication required or permitted to be
delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other party hereto):
4.
<PAGE> 5
if to Shareholder:
at the address set forth below Shareholder's signature on the
signature page hereto;
if to Company:
Interactive Group, Inc.
5095 Murphy Canyon Road
San Diego, CA 92123
with a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway
Suite 1800
San Diego, CA 92101-8219
Attention: T. Michael Hird, Esq.
Facsimile: (619) 236-1995
6.5 SEVERABILITY. Any term or provision of this Voting Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting Agreement in any other jurisdiction. If any
provision of this Voting Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
6.6 ENTIRE AGREEMENT. This Voting Agreement and any documents delivered by
the parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings between the parties with respect thereto. No
addition to or modification of any provision of this Voting Agreement shall be
binding upon either party hereto unless made in writing and signed by both
parties hereto. The parties hereto waive trial by jury in any action at law or
suit in equity based upon, or arising out of, this Voting Agreement or the
subject matter hereof.
6.7 ASSIGNMENT, BINDING EFFECT. Neither this Voting Agreement nor any
portion hereof shall be assignable (whether by operation of law or otherwise and
including, for this purpose, a change in control as an assignment). Subject to
the preceding sentence, this Voting Agreement shall be binding upon and shall
inure to the benefit of (i) Shareholder and his heirs, successors and assigns
and (ii) the Company and its successors and assigns. Notwithstanding anything
contained in this Voting Agreement
5.
<PAGE> 6
to the contrary, nothing in this Voting Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective heirs, successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Voting Agreement.
6.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Voting Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Company shall be entitled to an injunction or
injunctions to prevent breaches of this Voting Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which the Company is entitled at law or in equity.
6.9 OTHER AGREEMENTS. Nothing in this Voting Agreement shall limit any of
the rights or remedies of the Company or any of the obligations of Shareholder
under any Affiliate Agreement between the Company and Shareholder or any other
agreement.
6.10 GOVERNING LAW. This Voting Agreement shall be governed in all respects
by the laws of the State of California, as applied to contracts entered into and
to be performed entirely within the State of California.
6.11 COUNTERPARTS. This Voting Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
6.12 CONSTRUCTION.
(a) Headings of the Sections of this Voting Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Voting 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 masculine and feminine genders.
(c) 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 Voting Agreement.
6.
<PAGE> 7
(d) As used in this Voting 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."
(e) Except as otherwise indicated, all references in this Voting
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Voting Agreement and Exhibits to this Voting Agreement.
7.
<PAGE> 8
IN WITNESS WHEREOF, Parent and Shareholder have caused this Voting
Agreement to be executed as of the date first written above.
INTERACTIVE GROUP, INC.
By:
--------------------------------
Name:
Title:
SHAREHOLDER:
-----------------------------------
stockholder
address
fax
Number of Shares of Parent Common Stock
owned as of the date of this Voting
Agreement:
-----------------------------------
8.
<PAGE> 9
EXHIBIT A
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned shareholder of DataWorks Corporation, Inc., a California
corporation ("Parent"), hereby irrevocably (to the fullest extent permitted by
law) appoints and constitutes Interactive Group, Inc., a Delaware corporation
(the "Company"), the attorney and proxy of the undersigned with full power of
substitution and resubstitution, to the full extent of the undersigned's rights
with respect to (i) the shares of capital stock of Parent owned by the
undersigned as of the date of this proxy, which shares are specified on the
final page of this proxy and (ii) any and all other shares of capital stock of
Parent which the undersigned may acquire after the date hereof. (The shares of
the capital stock of Parent referred to in clauses (i) and (ii) of the
immediately preceding sentence are collectively referred to as the "Shares.")
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and no subsequent proxies will
be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between the
Company and the undersigned (the "Voting Agreement"), and is granted in
consideration of the Company entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, DataWorks Acquisition
Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent, and the
Company (the "Reorganization Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings ascribed to such terms in the
Reorganization Agreement.
The attorney and proxy named above will be empowered, and may exercise this
proxy, to vote the Shares at any time until the earlier to occur of the valid
termination of the Reorganization Agreement or the Effective Time at any meeting
of the shareholders of Parent, however called, or in any written action by
consent of shareholders of Parent:
(I) in favor of (1) the approval of the principal terms of the
Merger; (2) the execution and delivery by Parent of the Reorganization
Agreement; and (3) each of the other actions contemplated by the
Reorganization Agreement and any action required in furtherance hereof and
thereof;
1.
<PAGE> 10
(II) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of Parent in
the Reorganization Agreement; and
(III) in its discretion, with respect to any action which is
intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the Merger or any of the
other transactions contemplated by the Reorganization Agreement or the
Voting Agreement.
The undersigned shareholder may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, successors and assigns of the
undersigned (including any transferee of any of the Shares).
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
This proxy shall terminate upon the Expiration Date.
Dated: ____________, 1997
SHAREHOLDER
-----------------------------------
stockholder
Number of Shares of Parent Common
Stock:
-----------------------------
2.
<PAGE> 1
EXHIBIT 99.2
VOTING AGREEMENT
THIS VOTING AGREEMENT is entered into as of July __, 1997 by and between
DATAWORKS CORPORATION, a California corporation ("Parent"), and stockholder
("Stockholder").
RECITALS
A. Parent, DATAWORKS ACQUISITION SUB, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and INTERACTIVE GROUP, INC., a
Delaware corporation (the "Company"), are entering into an Agreement and Plan of
Merger and Reorganization of even date herewith (as amended from time to time,
the "Reorganization Agreement"; capitalized terms used but not otherwise defined
in this Voting Agreement have the meanings assigned to such terms in the
Reorganization Agreement), which provides (subject to the conditions set forth
therein) for the merger of Merger Sub into the Company (the "Merger").
B. As of the date hereof, Stockholder owns in aggregate (including shares
held both beneficially and of record) the number of shares of Company Common
Stock set forth below Stockholder's name on the signature page hereof.
C. As a condition to the willingness of Parent and Merger Sub to enter into
the Reorganization Agreement, Parent and Merger Sub have required that
Stockholder agree, and in order to induce Parent and Merger Sub to enter into
the Reorganization Agreement Stockholder has agreed, to enter into this Voting
Agreement.
AGREEMENT
The parties to this Voting Agreement, intending to be legally bound, agree
as follows:
SECTION 1. NO TRANSFER OF SUBJECT SHARES
1.1 SUBJECT SHARES. The shares described above held by Stockholder,
together with any shares of Company capital stock that may hereafter be acquired
by Stockholder (whether upon exercise of options or otherwise), are referred to
herein as the "Subject Shares".
1.2 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES.
(a) Stockholder hereby covenants and agrees that, prior to the
Expiration Date (as defined below), Stockholder will not, directly or
indirectly, (i) offer, sell, offer to
1.
<PAGE> 2
sell, contract to sell, pledge, grant any option to purchase or otherwise
dispose of or transfer (or announce any offer, sale, offer of sale, contract of
sale or grant of any option to purchase or other disposition or transfer of) any
Subject Shares to any Person other than Parent or Parent's designee, (ii) create
or permit to exist any Encumbrance with respect to any of the Subject Shares,
(iii) reduce his beneficial ownership of, interest in or risk relating to any of
the Subject Shares or (iv) commit or agree to do any of the foregoing.
(b) As used in this Voting Agreement, the term "Expiration Date" shall
mean the earlier of the date upon which the Reorganization Agreement is validly
terminated or the date upon which the Merger becomes effective.
1.3 NO TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that,
prior to the Expiration Date, Stockholder will not deposit any of the Subject
Shares into a voting trust or grant another proxy (except as provided herein) or
enter into a voting agreement with respect to any of the Subject Shares.
SECTION 2. VOTING OF SUBJECT SHARES
2.1 PRE-TERMINATION VOTING AGREEMENT. Stockholder hereby agrees that, prior
to the earlier to occur of the valid termination of the Reorganization Agreement
or the Effective Time, at any meeting of the stockholders of the Company,
however called, and in any written action by consent of stockholders of the
Company, unless otherwise directed in writing by Parent, Stockholder shall vote
the Subject Shares:
(i) in favor of (1) the adoption and approval of the
Reorganization Agreement and the approval of the Merger; and (2) each of the
other actions contemplated by the Reorganization Agreement and any action
required in furtherance hereof and thereof; and
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the Company in
the Reorganization Agreement.
Prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time, Stockholder shall not enter into any agreement
or understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)" or "(ii)" of the preceding sentence.
2.2 PROXY; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Voting Agreement,
Stockholder shall deliver to Parent a proxy in the form attached hereto as
Exhibit A,
2.
<PAGE> 3
which shall be irrevocable to the fullest extent permitted by law prior to the
Expiration Date, with respect to the Subject Shares (the "Proxy").
(b) Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in
Parent the power to carry out and give effect to the provisions of this Voting
Agreement.
SECTION 3. WAIVER OF APPRAISAL RIGHTS.
Stockholder hereby waives any rights of appraisal and any dissenters'
rights that Stockholder may have in connection with the Merger.
SECTION 4. NO SOLICITATION
Stockholder acknowledges that Stockholder is a Representative of the
Company. Stockholder covenants and agrees that, during the period commencing on
the date of this Voting Agreement and ending on the Expiration Date, Stockholder
shall not, directly or indirectly, and shall not authorize or permit any
Representative of Stockholder, directly or indirectly, to take any action that
would cause the Company to breach its obligations set forth in Section 4.5 of
the Reorganization Agreement. The foregoing provisions of this Section 4 shall
not prevent Stockholder from acting, in respect of any Acquisition Proposal, in
accordance with Stockholder's fiduciary duties as a director or officer, as
applicable, of the Company, provided that such actions are in compliance with
the provisions of Sections 4.5 and 5.2(c) of the Reorganization Agreement.
Stockholder shall immediately cease and cause to be terminated any existing
discussions with any Person that relate to any Acquisition Proposal.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
5.1 DUE AUTHORIZATION, ETC. Stockholder has all requisite power and
capacity to execute and deliver this Voting Agreement and to perform his
obligations hereunder. This Voting Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
5.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Voting Agreement by Stockholder
do not, and the performance of this Voting Agreement by Stockholder will not:
(i)
3.
<PAGE> 4
conflict with or violate any order, decree or judgment applicable to Stockholder
or by which he or any of his properties is bound or affected; or (ii) result in
any breach of or constitute a default (with notice or lapse of time, or both)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on the Subject
Shares pursuant to, any Contract to which Stockholder is a party or by which
Stockholder or any of his properties is bound or affected.
(b) The execution and delivery of this Voting Agreement by Stockholder
do not, and the performance of this Voting Agreement by Stockholder will not,
require any Consent of any Person.
5.3 TITLE TO SUBJECT SHARES. Stockholder owns of record and beneficially
the Subject Shares set forth under Stockholder's name on the signature page
hereof and does not directly or indirectly own, either beneficially or of
record, any shares of capital stock of the Company, or rights to acquire any
shares of capital stock of the Company, other than the Subject Shares set forth
below Stockholder's name on the signature page hereof.
5.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Voting Agreement are accurate in all respects as of the date
of this Voting Agreement, will be accurate in all respects at all times through
the Expiration Date and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
SECTION 6. COVENANTS OF STOCKHOLDER
6.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Stockholder will execute and deliver, or cause to be executed and
delivered, such additional or further arrangements, proxies, consents and other
instruments as Parent may reasonably request for the purpose of effectively
carrying out and furthering the intent of this Voting Agreement.
SECTION 7. MISCELLANEOUS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Stockholder and Parent in
this Voting Agreement shall promptly terminate upon the Expiration Date.
7.2 INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to Parent, Stockholder shall hold harmless and
indemnify Parent from and against any damages suffered or incurred by Parent and
that arise from any breach of any representation, warranty, covenant or
obligation of Stockholder contained herein.
4.
<PAGE> 5
7.3 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses.
7.4 NOTICES. Any notice or other communication required or permitted to be
delivered to either party under this Voting Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other party hereto):
if to Stockholder:
at the address set forth below Stockholder's signature on the
signature page hereto;
if to Parent:
DATAWORKS CORPORATION
5910 Pacific Center Boulevard, Suite 300
San Diego, CA 92121
with a copy to:
Cooley Godward LLP
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Attention: Frederick T. Muto, Esq.
Facsimile: (619) 453-3555
7.5 SEVERABILITY. Any term or provision of this Voting Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting Agreement in any other jurisdiction. If any
provision of this Voting Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
7.6 ENTIRE AGREEMENT. This Voting Agreement and any documents delivered by
the parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings between the parties with respect thereto. No
addition to or
5.
<PAGE> 6
modification of any provision of this Voting Agreement shall be binding upon
either party hereto unless made in writing and signed by both parties hereto.
The parties hereto waive trial by jury in any action at law or suit in equity
based upon, or arising out of, this Voting Agreement or the subject matter
hereof.
7.7 ASSIGNMENT, BINDING EFFECT. Neither this Voting Agreement nor any
portion hereof shall be assignable (whether by operation of law or otherwise and
including, for this purpose, a change in control as an assignment). Subject to
the preceding sentence, this Voting Agreement shall be binding upon and shall
inure to the benefit of (i) Stockholder and his heirs, successors and assigns
and (ii) Parent and its successors and assigns. Notwithstanding anything
contained in this Voting Agreement to the contrary, nothing in this Voting
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto or their respective heirs, successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Voting
Agreement.
7.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Voting Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that Parent shall be entitled to an injunction or
injunctions to prevent breaches of this Voting Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which Parent is entitled at law or in equity.
7.9 OTHER AGREEMENTS. Nothing in this Voting Agreement shall limit any of
the rights or remedies of Parent or any of the obligations of Stockholder under
any Affiliate Agreement between Parent and Stockholder.
7.10 GOVERNING LAW. This Voting Agreement shall be governed in all respects
by the laws of the State of Delaware, as applied to contracts entered into and
to be performed entirely within the State of Delaware.
7.11 COUNTERPARTS. This Voting Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
7.12 CONSTRUCTION.
(a) Headings of the Sections of this Voting Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
6.
<PAGE> 7
(b) For purposes of this Voting 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 masculine and feminine genders.
(c) 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 Voting Agreement.
(d) As used in this Voting 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."
(e) Except as otherwise indicated, all references in this Voting
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Voting Agreement and Exhibits to this Voting Agreement.
7.
<PAGE> 8
IN WITNESS WHEREOF, Parent and Stockholder have caused this Voting
Agreement to be executed as of the date first written above.
DATAWORKS CORPORATION
By:
--------------------------------
Name:
Title:
STOCKHOLDER:
-----------------------------------
stockholder
address
fax
Number of Shares of Company Common Stock
owned as of the date of this Voting
Agreement:
-----------------------------------
8.
<PAGE> 9
EXHIBIT A
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned stockholder of Interactive Group, Inc., a Delaware corporation
(the "Company"), hereby irrevocably (to the fullest extent permitted by law)
appoints and constitutes DataWorks Corporation, a California corporation
("Parent"), the attorney and proxy of the undersigned with respect to (i) the
shares of capital stock of the Company owned by the undersigned as of the date
of this proxy, which shares are specified on the final page of this proxy and
(ii) any and all other shares of capital stock of the Company which the
undersigned may acquire after the date hereof. (The shares of the capital stock
of the Company referred to in clauses (i) and (ii) of the immediately preceding
sentence are collectively referred to as the "Shares.") Upon the execution
hereof, all prior proxies given by the undersigned with respect to any of the
Shares are hereby revoked, and no subsequent proxies will be given with respect
to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between
Parent and the undersigned (the "Voting Agreement"), and is granted in
consideration of Parent entering into the Agreement and Plan of Merger and
Reorganization, dated as of the date hereof, among Parent, DataWorks Acquisition
Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent, and the
Company (the "Reorganization Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings ascribed to such terms in the
Reorganization Agreement.
The attorney and proxy named above will be empowered, and may exercise this
proxy, to vote the Shares at any time until the earlier to occur of the valid
termination of the Reorganization Agreement or the Effective Time at any meeting
of the stockholders of the Company, however called, or in any written action by
consent of stockholders of the Company:
(I) in favor of (1) the adoption and approval of the
Reorganization Agreement and the approval of the Merger; and (2) each of
the other actions contemplated by the Reorganization Agreement and any
action required in furtherance hereof and thereof; and
(II) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the
Company in the Reorganization Agreement.
1.
<PAGE> 10
The undersigned stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
This proxy shall terminate upon the Expiration Date.
Dated: July __, 1997
STOCKHOLDER
-----------------------------------
stockholder
Number of Shares of Company Common
Stock:
-----------------------------
2.
