SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 5, 1999
MYSOFTWARE COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-26008 77-0195362
(Commission File No.) (IRS Employer Identification No.)
2197 E. Bayshore Road
Palo Alto, California 94303
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (650) 473-3600
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This Current Report on Form 8-K contains forward looking
statements that involve risks and uncertainties relating to the
acquisition by MySoftware Company, a Delaware corporation
("MySoftware"), of MarketHome, a California corporation
("MarketHome"). Actual results and developments may differ
materially from those described in this Current Report. For more
information about MySoftware and risks relating to investing in
MySoftware, refer to MySoftware's most recent reports on Form 10-
Q and Form 10-K.
Item 2. Acquisition or Disposition of Assets.
On August 5, 1999, MySoftware completed the acquisition of
MarketHome by merging My Market Acquisition Corp., a California
corporation and wholly owned subsidiary of MySoftware ("Merger
Sub"), with and into MarketHome with MarketHome surviving as the
wholly owned subsidiary of MySoftware. The tax-free acquisition
was accomplished pursuant to an Agreement and Plan of Merger and
Reorganization, dated as of July 2, 1999 (the "Reorganization
Agreement") among MySoftware, Merger Sub, MarketHome and the
shareholders of MarketHome. The total number of shares of
MySoftware common stock issued in connection with the acquisition
was 726,803 shares. The purchase price was arrived at through
arms-length negotiations. In addition to the payment of shares
of MySoftware common stock, MySoftware assumed the outstanding
options to purchase MarketHome common stock, which were converted
into options to purchase up to approximately 158,776 MySoftware
shares. The acquisition will be accounted for as a pooling of
interests.
MarketHome is a supplier of opt-in e-mail marketing software and services.
A copy of the press release announcing the signing of the
definitive agreement is attached hereto as Exhibit 99.1 and
incorporated by reference herein. A copy of the press release
announcing the consummation of the acquisition is attached hereto
as Exhibit 99.2 and incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger and Reorganization,
dated as of July 2, 1999, among MySoftware Company,
My Market Acquisition Corp., MarketHome, and the
shareholders of MarketHome.
4.1 Reference is made to Exhibits 2.1.
99.1 Press release announcing the execution of the
definitive agreement.
99.2 Press release announcing the consummation of the
acquisition.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
MYSOFTWARE TECHNOLOGIES, INC.
Dated: August 19, 1999 By: /s/SharonS.Chiu
------------------------
Sharon S. Chiu
Chief Financial Officer and Secretary
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger and Reorganization,
dated as of July 2, 1999, among MySoftware Company,
My Market Acquisition Corp., MarketHome, and the
shareholders of MarketHome.
4.1 Reference is made to Exhibits 2.1.
99.1 Press release announcing the execution of the
definitive agreement.
99.2 Press release announcing the consummation of the
acquisition.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
("Agreement") is made and entered into as of July 2, 1999, by and
among: MYSOFTWARE COMPANY, a Delaware corporation ("Parent"); MY
MARKET ACQUISITION CORP., a California corporation and a wholly
owned subsidiary of Parent ("Merger Sub"); MarketHome, a
California corporation (the "Company"); and the parties
identified on Exhibit A (the "Shareholders"). Certain other
capitalized terms used in this Agreement are defined in Exhibit B.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a
merger of Merger Sub into the Company in accordance with this
Agreement and the California General Corporation Law (the
"Merger"). Upon consummation of the Merger, Merger Sub will
cease to exist, and the Company will become a wholly owned
subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). For
accounting purposes, it is intended that the Merger be treated as
a "pooling of interests."
C. This Agreement has been approved by the respective boards
of directors of Parent, Merger Sub and the Company.
D. The Shareholders own a total of (i) 4,380,833 shares of the
Common Stock (with no par value) of the Company ("Company Common
Stock"), (ii) 1,333,333 shares of the Series A Preferred Stock
(with no par value) of the Company ("Series A Preferred Stock"),
and (iii) 2,729,164 shares of the Series B Preferred Stock (with
no par value) of the Company ("Series B Preferred Stock"), which
shares are all of the outstanding shares of capital stock of the
Company.
AGREEMENT
For good and valuable consideration, the receipt of which is
hereby acknowledged, the parties to this Agreement agree as
follows:
Section 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into the Company. Upon the terms and
subject to the conditions set forth in this Agreement, at the
Effective Time (as defined in Section 1.3), Merger Sub shall be
merged with and into the Company, and the separate existence of
Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving
Corporation").
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1.2 Effect of the Merger. The Merger shall have the effects set forth in this
Agreement and in the applicable provisions of the California General
Corporation Law.
1.3 Closing; Effective Time. The consummation of the
transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Cooley Godward LLP, Five Palo Alto
Square, Palo Alto, California 94306 at 10:00 a.m. on August 2,
1999, or at such other time and date as Parent and the Company
may agree (the "Scheduled Closing Time"). The date on which the
Closing actually takes place is referred to in this Agreement as
the "Closing Date." Contemporaneously with or as promptly as
practicable after the Closing, a properly executed agreement of
merger conforming to the requirements of Chapter 11 of the
California General Corporation Law shall be filed with the
Secretary of State of the State of California. The Merger shall
become effective at the time such agreement of merger is filed
with the Secretary of State of the State of California (the
"Effective Time").
1.4 Articles of Incorporation and Bylaws; Directors and Officers. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform
to Exhibit C;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of 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 individuals
identified on Exhibit D.
1.5 Conversion of Shares.
(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time, by
virtue of the Merger and without any further action on the part
of Parent, Merger Sub, the Company or any shareholder of the
Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to
receive 90% of the "Common Stock Applicable Fraction" (as defined
in Section 1.5(b) of a share of the common stock (par value
$.001 per share) of Parent, including the associated preferred
share purchase right ("Parent Common Stock");
(ii) each share of Series A Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into
the right to receive 90% of the Series A Applicable Fraction of a
share of Parent Common Stock;
(iii) each share of Series B Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into
the right to receive 90% of the Series B Applicable Fraction of a
share of Parent Common Stock;
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(iv) in addition each share of Company Common Stock, Series A
Preferred Stock and Series B Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into
and represent the right to participate in the distribution of the
Holdback Shares (as hereinafter defined) subject to set off,
deduction or indemnification as provided herein and in the Escrow
Agreement (as hereinafter defined); and
(v) each share of the common stock (with $.001 par value) of
Merger Sub outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the
Surviving Corporation.
(b) For purposes of this Agreement, the "Common Stock Applicable Fraction"
shall be .0727, the "Series A Applicable Fraction" shall be .0993 and the
"Series B Applicable Fraction" shall be .1011.
(c) The Common Stock, Series A and Series B Applicable Fraction
shall be adjusted to reflect fully the effect of any stock split,
stock dividend (including any dividend or distribution of stock
convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization or other similar change with
respect to Parent Common Stock or Company Common Stock after the
date hereof and prior to the Effective Time.
(d) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other
agreement with the Company after giving effect to any provisions
providing for acceleration as a result of the Merger contained in
any applicable restricted stock agreement or other agreement with
the Company, then the shares of Parent Common Stock issued in
exchange for such shares of Company Common Stock will also be
unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing
such shares of Parent Common Stock may accordingly be marked with
appropriate legends.
1.6 Employee Stock Options. At the Effective Time, each stock
option that is then outstanding under the Company's 1997 Equity
Incentive Plan, whether vested or unvested (a "Company Option"),
shall be assumed by Parent in accordance with the terms (as in
effect as of the date of this Agreement) of the Company's 1997
Equity Incentive Plan and the stock option agreement by which
such Company Option is evidenced. All rights with respect to
Company Common Stock under outstanding Company Options shall
thereupon be converted into rights with respect to Parent Common
Stock. Accordingly, from and after the Effective Time, (a) each
Company Option assumed by Parent may be exercised solely for
shares of Parent Common Stock, (b) the number of shares of Parent
Common Stock subject to each such assumed Company Option shall be
equal to the number of shares of Company Common Stock that were
subject to such Company Option immediately prior to the Effective
Time multiplied by the Common Stock Applicable Fraction, rounded
down to the nearest whole number of shares of Parent Common
Stock, (c) the per share exercise price for the Parent Common
Stock issuable upon exercise of each such assumed Company Option
shall be determined by dividing the exercise price per share of
Company Common Stock subject to such Company Option, as in effect
immediately prior to the Effective Time, by the Common Stock
Applicable Fraction, and rounding the resulting exercise price up
to the nearest whole cent, and (d) all restrictions on the
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exercise of each such assumed Company Option shall continue in
full force and effect, and the term, exercisability, vesting
schedule and other provisions of such Company Option shall
otherwise remain unchanged; provided, however, that each such
assumed Company Option shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock
split, reverse stock split, stock dividend, recapitalization or
other similar transaction effected by Parent after the Effective
Time. The Company and Parent shall take all action that may be
necessary (under the Company's 1997 Equity Incentive Plan and
otherwise) to effectuate the provisions of this Section 1.6.
Following the Closing, Parent will send to each holder of an
assumed Company Option a written notice setting forth (i) the
number of shares of Parent Common Stock subject to such assumed
Company Option, and (ii) the exercise price per share of Parent
Common Stock issuable upon exercise of such assumed Company
Option. Within ten (10) days of the Closing Date, Parent shall
file with the SEC a registration statement on Form S-8
registering the exercise of the Company Options assumed by Parent
pursuant to this Section 1.6.
1.7 Closing of the Company's Transfer Books. At the Effective
Time, holders of certificates representing shares of the
Company's capital stock that were outstanding immediately prior
to the Effective Time shall cease to have any rights as
shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such
capital stock outstanding immediately prior to the Effective
Time. No further transfer of any such shares of the Company's
capital stock shall be made on such stock transfer books after
the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the
Company's capital stock (a "Company Stock Certificate") is
presented to the Surviving Corporation or Parent, such Company
Stock Certificate shall be canceled and shall be exchanged as
provided in Section 1.8.
1.8 Exchange of Certificates.
(a) At or as soon as practicable after the Effective Time, Parent
will send to the holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such
provisions as Parent may reasonably specify, and (ii)
instructions for use in effecting the surrender of Company Stock
Certificates in exchange for certificates representing Parent
Common Stock. Upon surrender of a Company Stock Certificate to
Parent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably
required by Parent, the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock
(and cash in lieu of any fractional share of Parent Common Stock)
that such holder has the right to receive pursuant to the
provisions of this Section 1, and the Company Stock Certificate
so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.8, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent
only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock (and cash in lieu of
any fractional share of Parent Common Stock) as contemplated by
this Section 1. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent may, in its discretion and as a
condition precedent to the issuance of any certificate
representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as
<PAGE>
Parent may reasonably direct) as indemnity against any claim that
may be made against Parent or the Surviving Corporation with
respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Company Stock Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of
any fractional share shall be paid to any such holder, until such
holder surrenders such Company Stock Certificate in accordance
with this Section 1.8 (at which time such holder shall be
entitled to receive all such dividends and distributions and such
cash payment).
(c) No fractional shares of Parent Common Stock shall be issued
in connection with the Merger, and no certificates for any such
fractional shares shall be issued. In lieu of such fractional
shares, any holder of capital stock of the Company who would
otherwise be entitled to receive a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such holder) shall, upon surrender of
such holder's Company Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the
Stipulated Value (as defined in Section 1.10(c) below).
(d) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise
deliverable to any holder or former holder of capital stock of
the Company pursuant to this Agreement such amounts as Parent or
the Surviving Corporation may be required to deduct or withhold
therefrom under the Code or under any provision of state, local
or foreign tax law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under
this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable
to any holder or former holder of capital stock of the Company
for any shares of Parent Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, if,
on or after the expiration of one (1) year after the Effective
Time, such shares are delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of
the Effective Time, are or may become "dissenting shares" within
the meaning of Section 1300(b) of the California Corporations
Code shall not be converted into or represent the right to
receive Parent Common Stock in accordance with Section 1.5 (or
cash in lieu of fractional shares in accordance with Section
1.8(c)), and the holder or holders of such shares shall be
entitled only to such rights as may be granted to such holder or
holders in Chapter 13 of the California General Corporation Law;
provided, however, that if the status of any such shares as
"dissenting shares" shall not be perfected, or if any such shares
shall lose their status as "dissenting shares," then, as of the
later of the Effective Time or the time of the failure to perfect
such status or the loss of such status, such shares shall
automatically be converted into and shall represent only the
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right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in
accordance with Section 1.5 (and cash in lieu of fractional
shares in accordance with Section 1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any
written demand received by the Company prior to the Effective
Time to require the Company to purchase shares of capital stock
of the Company pursuant to Chapter 13 of the California General
Corporation Law and of any other demand, notice or instrument
delivered to the Company prior to the Effective Time pursuant to
the California General Corporation Law, and (ii) the opportunity
to participate in all negotiations and proceedings with respect
to any such demand, notice or instrument. The Company shall not
make any payment (unless such payment is pursuant to a court
order in which event the Company shall give Parent notice of any
such court order or request therefor as soon as practicable) or
settlement offer prior to the Effective Time with respect to any
such demand unless Parent shall have consented in writing to such
payment or settlement offer.
1.10 Holdback Shares.
(a) Parent shall establish and maintain an escrow (the "Escrow
Account") comprised of shares of Parent Common Stock in a number
equal to the product of ten percent (10%) of (i) the aggregate
number of shares of Company Common Stock outstanding immediately
prior to the Effective Time times the Common Stock Applicable
Fraction, plus (ii) the aggregate number of shares of Series A
Preferred Stock outstanding immediately prior to the Effective
Time times the Series A Stock Applicable Fraction, plus (iii) the
aggregate number of shares of Series B Preferred Stock
outstanding immediately prior to the Effective Time times the
Series B Stock Applicable Fraction, in each case less any shares
for which dissenters' rights have been perfected (collectively,
the "Holdback Shares"). Parent shall designate and appoint
Norwest Bank Minnesota, National Association or such other third
party escrow agent that is mutually and reasonably acceptable to
Parent and the Shareholders' Agent (as hereinafter defined) in
connection therewith (the "Escrow Agent") to serve in accordance
with the Escrow Agreement attached as Exhibit L hereto (the
"Escrow Agreement") to be entered into among Parent, the Escrow
Agent and the Shareholders' Agent at Closing. Such escrow of the
Holdback Shares shall be maintained for purposes of satisfying
claims brought pursuant to Section 9 and for the period of time
set forth in such Section 9.1 (the "Holdback Period"). Each
Company shareholder that does not perfect its dissenters' rights
and is otherwise entitled to receive shares of Parent Common
Stock pursuant to Section 1.5 (the "Merger Shareholders") shall
be entitled to a ratable portion of the shares held in escrow in
accordance with the terms and conditions of this Agreement and
the Escrow Agreement (each such ratable portion, a "Holdback
Portion").
(b) Upon expiration of the Holdback Period, and subject to the
terms of subsection (c) of this Section 1.10, Section 9 and
the Escrow Agreement, the Escrow Agent shall deliver to each
Merger Shareholder a certificate representing the number of
shares of Parent Common Stock comprising such Merger
Shareholder's Holdback Portion, with any fractional shares
rounded to the nearest whole share and accrued dividends, if any.
(c) If, prior to the expiration of the Holdback Period, an
Indemnitee shall have asserted a claim for Damages in accordance
with Section 9 and such claim is pending or unresolved at the
time of such expiration, the Escrow Agent shall, subject to the
<PAGE>
terms of the Escrow Agreement, withhold from delivery to each
Merger Shareholder its ratable portion of that number of Holdback
Shares as specified in the Escrow Agreement until such matter is
resolved. If it is finally determined that Parent is entitled to
recovery on account of such claim for Damages, the amount due and
payable with respect to such claim for Damages and any expenses
incurred by the Shareholders' Agent (subject to Section 1.10(d))
may be offset against each Merger Shareholder's Holdback Portion
and the remainder of each Merger Shareholder's Holdback Portion,
if any, shall be delivered to each Merger Shareholder pursuant to
this Agreement, without interest, but including any applicable
dividends. For purposes of this Section 1.10, each Holdback
Share shall be valued at the closing price per share of Parent
Common Stock on The Nasdaq Stock Market (as reported in The Wall
Street Journal, or, if not reported therein, any other
authoritative source) on the Closing Date (the "Stipulated
Value"). The value of any shares of Parent Common Stock
ultimately retained by Parent hereunder shall be treated for
purposes of this Agreement as a reduction of the consideration
paid to the Shareholders in the Merger.
(d) The Shareholders' Agent shall be reimbursed out of the
Holdback Shares for his reasonable out-of-pocket expenses
incurred in connection with serving as the Shareholders' Agent
under this Agreement and the Escrow Agreement.
(e) The right to receive the Holdback Shares upon expiration of
the Holdback Period (i) is an integral part of the consideration
in the Merger, and (ii) shall be transferable or assignable only
upon submission of evidence of such transfer or assignment
reasonably satisfactory to Parent and the Escrow Agent.
1.11 Tax Consequences. For federal income tax purposes, the
Merger is intended to constitute a reorganization within the
meaning of Section 368 of the Code. The parties to this
Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.12 Accounting Treatment. For accounting purposes, the Merger
is intended to be treated as a "pooling of interests."
1.13 Further Action. If, at any time after the Effective Time,
any further action is determined by Parent to be reasonably
necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and
property of Merger Sub and the Company, the officers and
directors of the Surviving Corporation and Parent shall be fully
authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders jointly and severally represent
and warrant, to and for the benefit of the Indemnitees, that,
except as set forth in the Disclosure Schedule:
2.1 Due Organization; No Subsidiaries; Etc.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California
and has all necessary corporate power and authority to: (i)
conduct its business in the manner in which its business is
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currently being conducted; (ii) own and use its assets in the
manner in which its assets are currently owned and used; and
(iii) perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule,
the Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious
name, assumed name, trade name or other name, other than the
names "MarketHome, Inc.", "MarketHome", "MarketMail" and
"MarketHome.com."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions
identified in Part 2.1 of the Disclosure Schedule, except where
the failure to be so qualified, authorized, registered or
licensed has not had and could not reasonably be expected to
result in a Material Adverse Effect. The Company is in good
standing as a foreign corporation in each of the jurisdictions
identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i)
the names of the members of the Company's board of directors,
(ii) the names of the members of each committee of the Company's
board of directors, and (iii) the names and titles of the
Company's officers.
(e) The Company does not own any controlling interest in any
Entity and the Company has never owned, beneficially or
otherwise, any shares or other securities of, or any direct or
indirect equity interest in, any Entity. The Company has not
agreed and is not obligated to make any future investment in, or
capital contribution to, any Entity. The Company has not
guaranteed and is not responsible or liable for any obligation of
any of the Entities in which it owns or has owned any equity
interest.
2.2 Articles of Incorporation and Bylaws; Records. The Company
has delivered to Parent accurate and complete copies of:
(1) the Company's articles of incorporation and bylaws,
including all amendments thereto; (2) the stock records of
the Company; and (3) except as set forth in Part 2.2 of the
Disclosure Schedule, the minutes and other records of the
meetings and other proceedings (including any actions taken
by written consent or otherwise without a meeting) of the
shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the
Company. There have been no formal meetings or other
proceedings of the shareholders of the Company, the board
of directors of the Company or any committee of the board
of directors of the Company that are not fully reflected in
such minutes or other records. There has not been any
violation of any of the provisions of the Company's
articles of incorporation or bylaws, and the Company has
not taken any action that is inconsistent in any material
respect with any resolution adopted by the Company's
shareholders, the Company's board of directors or any
committee of the Company's board of directors. The books
of account, stock records, minute books and other records
of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance
with prudent business practices.
2.3 Capitalization, Etc.
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(a) The authorized capital stock of the Company consists of: (i)
15,000,000 shares of Common Stock (with no par value), of which
4,380,833 shares have been issued and are outstanding as of the
date of this Agreement; and (ii) 10,000,000 shares of Preferred
Stock (with no par value), 1,333,333 of which have been
designated "Series A Preferred Stock," all of which shares have
been issued and are outstanding as of the date of this Agreement,
and 2,729,167 of which have been designated "Series B Preferred
Stock," of which 2,729,164 shares have been issued and are
outstanding as of the date of this Agreement. Each outstanding
share of Series A Preferred Stock and Series B Preferred Stock is
convertible into one share of Company Common Stock. All of the
outstanding shares of Company Common Stock, Series A Preferred
Stock and Series B Preferred Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. Part 2.3
of the Disclosure Schedule provides an accurate and complete
description of the terms of each repurchase option which is held
by the Company and to which any of such shares is subject.
(b) The Company has reserved 4,600,000 shares of Company Common
Stock for issuance under its 1997 Equity Incentive Plan, of which
options to purchase 2,269,833 shares are outstanding as of the
date of this Agreement. Part 2.3 of the Disclosure Schedule
accurately sets forth, with respect to each Company Option that
is outstanding as of the date of this Agreement: (i) the name of
the holder of such Company Option; (ii) the total number of
shares of Company Common Stock that are subject to such Company
Option and the number of shares of Company Common Stock with
respect to which such Company Option is immediately exercisable;
(iii) the date on which such Company Option was granted and the
term of such Company Option; (iv) the vesting schedule for such
Company Option; (v) the exercise price per share of Company
Common Stock purchasable under such Company Option; and (vi)
whether such Company Option has been designated an "incentive
stock option" as defined in Section 422 of the Code. Except as
set forth in Part 2.3 of the Disclosure Schedule, there is no:
(i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of
the capital stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the
capital stock or other securities of the Company; (iii) Contract
under which the Company is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other
securities; or (iv) to the best of the knowledge of the Company
and the Shareholders, condition or circumstance that may give
rise to or provide a basis for the assertion of a claim by any
Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of the
Company.
(c) Except as set forth in Part 2.3 of the Disclosure Schedule,
all outstanding shares of Company Common Stock and Series A
Preferred Stock, and all outstanding Company Options, 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.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule,
the Company has never repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities of the
Company. All securities so reacquired by the Company were
reacquired in compliance with (i) the applicable provisions of
the California General Corporation Law and all other applicable
Legal Requirements, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other
applicable Contracts.
<PAGE>
2.4 Financial Statements.
(a) The Company has delivered to Parent the following financial
statements and the notes, if any, thereto (collectively, the
"Company Financial Statements"):
(i) The unaudited Statements of Assets, Liabilities and Equity-
Income Tax Basis of the Company as of December 31, 1998 and 1997
and the related unaudited Statement of Revenues and Expenses -
Income Tax Basis of the Company for the years then ended,
together with the notes, if any, thereto; and
(ii) the unaudited Statement of Assets, Liabilities and Equity-
Income Tax Basis of the Company as of May 31, 1999 (the
"Unaudited Interim Statement of Assets, Liabilities and Equity"),
and the related unaudited income statement of the Company for the
five months then ended.
(b) The Company Financial Statements present fairly, in all
material respects, the financial position of the Company as of
the respective dates thereof and the results of operations of the
Company for the periods covered thereby.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the
Disclosure Schedule, since May 31, 1999:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations,
financial performance or prospects, and, to the best of the
knowledge of the Company and the Shareholders, no event has
occurred that will or could reasonably be expected to result in a
Material Adverse Effect;
(b) there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of the
Company's assets (whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares
of capital stock, and has not repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance
of (i) any capital stock or other security (except for Company
Common Stock issued upon the exercise of outstanding Company
Options), (ii) any option or right to acquire any capital stock
or any other security (except for Company Options described in
Part 2.3 of the Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other
security;
(e) the Company has not amended or waived any of its rights
under, or modified the vesting provisions under, (i) any
provision of its 1997 Equity Incentive Plan, (ii) any provision
of any agreement evidencing any outstanding Company Option, or
(iii) any restricted stock purchase agreement;
<PAGE>
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been
a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or
similar transaction;
(g) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the
Company since May 31, 1999, exceeds $15,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that
is or would constitute a Material Contract (as defined in Section
2.10(a)), or (ii) amended or prematurely terminated, or waived
any material right or remedy under, any such Contract;
(j) the Company has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or
otherwise disposed of, or leased or licensed, any right or other
asset to any other Person, or (iii) waived or relinquished any
right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course
of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any
account receivable or other indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of immaterial assets made in the
ordinary course of business and consistent with the Company's
past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine advances for business expenses made to
employees in the ordinary course of business), or (ii) incurred
or guaranteed any indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or
employees, or (iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting
or accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
<PAGE>
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of
business or inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 Title to Assets.
(a) The Company owns, and has good and valid title to, all assets
purported to be owned by it, including: (i) all assets
reflected on the Unaudited Interim Statement of Assets,
Liabilities and Equity; (ii) all assets referred to in Parts
2.7(b) and 2.9 of the Disclosure Schedule; and (iii) all other
material assets reflected in the Company's books and records as
being owned by the Company. Except as set forth in Part 2.6 of
the Disclosure Schedule, all of said assets are owned by the
Company free and clear of any liens or other Encumbrances, except
for Permitted Liens.
(b) Part 2.6 of the Disclosure Schedule identifies all assets
that are material to the business of the Company and that are
being leased or licensed to the Company.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the
benefit of the Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate
and complete breakdown and aging of all accounts receivable,
notes receivable and other receivables of the Company as of May
31, 1999. Except as set forth in Part 2.7(b) of the Disclosure
Schedule, all existing accounts receivable of the Company
(including those accounts receivable reflected on the Unaudited
Interim Statement of Assets, Liabilities and Equity that have not
yet been collected and those accounts receivable that have arisen
since May 31, 1999 and have not yet been collected) (i) represent
valid obligations of customers of the Company arising from bona
fide transactions entered into in the ordinary course of
business, and (ii) are current and will be collected in full when
due, without any counterclaim or set off (net of an allowance for
doubtful accounts not to exceed $3,000 in the aggregate).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to
which they are being put, are in good condition and repair
(ordinary wear and tear excepted) and constitute all of the
material items of equipment and other tangible assets reasonably
necessary for the conduct of the Company's business in the manner
in which such business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property.
<PAGE>
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any
Governmental Body or for which an application has been filed with
any Governmental Body, (i) a brief description of such
Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration or application. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a
brief description of all other Company Proprietary Assets owned
by the Company. Part 2.9(a)(iii) of the Disclosure Schedule
identifies and provides a brief description of each Proprietary
Asset licensed to the Company by any Person (except for any
Proprietary Asset that is licensed to the Company under any third
party software license generally available to the public at a
cost of less than $10,000), and identifies the license agreement
under which such Proprietary Asset is being licensed to the
Company. Except as set forth in Part 2.9(a)(iv) of the
Disclosure Schedule, the Company has good and valid title to all
of the Company Proprietary Assets identified in Parts 2.9(a)(i)
and 2.9(a)(ii) of the Disclosure Schedule, free and clear of all
liens and other Encumbrances, and has a valid right to use all
Proprietary Assets identified in Part 2.9(a)(iii) of the
Disclosure Schedule. Except as set forth in Part 2.9(a)(v) of
the Disclosure Schedule, the Company is not obligated to make any
payment to any Person for the use of any Company Proprietary
Asset. Except as set forth in Part 2.9(a)(vi) of the Disclosure
Schedule, the Company has not developed jointly with any other
Person any Company Proprietary Asset with respect to which such
other Person has any rights.
(b) The Company has taken all reasonable steps to protect and
maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to
maintain and protect the value of all Company Proprietary Assets.
Except as set forth in Part 2.9(b) of the Disclosure Schedule,
the Company has not (other than pursuant to license agreements
identified in Part 2.10 of the Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery
to any Person of, (i) the source code, or any portion or aspect
of the source code, of any Company Proprietary Asset, or (ii) the
object code, or any portion or aspect of the object code, of any
Company Proprietary Asset.
(c) To the extent that could be determined by performing all
diligent investigation, none of the Company Proprietary Assets
infringes or conflicts with any Proprietary Asset owned or used
by any other Person. To the extent that could be determined by
performing all diligent investigation, the Company is not
infringing, misappropriating or making any unlawful use of, and
the Company has not at any time infringed, misappropriated or
made any unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful
use of, any Proprietary Asset owned or used by any other Person.
To the best of the knowledge of the Company and the Shareholders,
no other Person is infringing, misappropriating or making any
unlawful use of, and no Proprietary Asset owned or used by any
other Person infringes or conflicts with, any Company Proprietary
Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all
material respects with any specification, documentation,
performance standard, representation or statement made or
provided in writing with respect thereto by or on behalf of the
<PAGE>
Company; and (ii) there has not been any claim by any customer or
other Person alleging that any Company Proprietary Asset
(including each version thereof that has ever been licensed or
otherwise made available by the Company to any Person) does not
conform in all material respects with any specification,
documentation, performance standard, representation or statement
made or provided by or on behalf of the Company, and, to the best
of the knowledge of the Company and the Shareholders, there is no
basis for any such claim. The Company has established adequate
reserves on the Unaudited Interim Statement of Assets,
Liabilities and Equity to cover all costs associated with any
obligations that the Company may have with respect to the
correction or repair of programming errors or other defects in
the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in
the manner in which such business is being conducted. Except as
set forth in Part 2.9(e) of the Disclosure Schedule, (i) the
Company has not licensed any of the Company Proprietary Assets to
any Person on an exclusive basis, and (ii) the Company has not
entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Proprietary Assets or to
transact business in any market or geographical area or with any
Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure
Schedule, (i) all current and former employees of the Company
have executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of
Confidential Information and Invention Assignment Agreement
previously delivered to Parent, and (ii) all current and former
consultants and independent contractors to the Company have
executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously
delivered to Parent.
(g) Except as set forth in Part 2.9(g) of the Disclosure
Schedule, each item of software and hardware that is owned or
used by the Company is Year 2000 Compliant.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or
independent contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person,
(B) to acquire any product or other asset or any services from
any other Person, to sell any product or other asset to or
perform any services for any other Person or to transact business
or deal in any other manner with any other Person, or (C) develop
or distribute any technology;
<PAGE>
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
(vii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits,
losses, costs or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any
services by or for, any Related Party (as defined in Section
2.18);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the
Company's past practices;
(xii) any other Company Contract that has a term of more
than 60 days and that may not be terminated by the Company (without
penalty) within 60 days after the delivery of a termination
notice by the Company; and
(xiii) any other Company Contract that contemplates or involves
the payment or delivery of cash or other consideration in an
amount or having a value in excess of $10,000 in the
aggregate, or (B) the performance of services having a value in excess of
$10,000 in the aggregate.
Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts."
(b) The Company has delivered to Parent accurate and complete
copies of all written Contracts identified in Part 2.10 of the
Disclosure Schedule, including all amendments thereto. Part 2.10
of the Disclosure Schedule provides an accurate description of
the terms of each Material Contract that is not in written form.
Each Contract identified in Part 2.10 of the Disclosure Schedule
is valid and in full force and effect, and, to the best of the
knowledge of the Company and the Shareholders, is enforceable by
the Company in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
<PAGE>
(i) the Company has not violated or breached, in any material
respect, or committed any material default under, any Company
Contract, and, to the best of the knowledge of the Company and
the Shareholders, no other Person has violated or breached, in
any material respect, or committed any material default under,
any Material Contract;
(ii) to the best of the knowledge of the Company and the
Shareholders, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, (A) result in a
material violation or breach of any of the provisions of any
Material Contract, (B) give any Person the right to declare a
default or exercise any other material remedy under any Material
Contract, (C) give any Person the right to accelerate the
maturity or performance of any Material Contract, or (D) give any
Person the right to cancel, terminate or modify any Material
Contract;
(iii) the Company has not received any notice or other
communication regarding any actual or possible violation or
breach of, or default under, any Material Contract; and
(iv) the Company has not waived any of its material rights under
any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Company Contract to renegotiate, any amount paid or
payable to the Company under any Material Contract or any other
material term or provision of any Material Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure
Schedule collectively constitute all of the Contracts reasonably
necessary to enable the Company to conduct its business in the
manner in which its business is currently being conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and provides
a brief description of each proposed Contract as to which any
bid, offer, award, written proposal, term sheet or similar
document has been submitted or received by the Company since
January 1, 1999 or which remains outstanding.
2.11 Liabilities. The Company has no accrued, contingent or
other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in financial statements
in accordance with generally accepted accounting principles, and
whether due or to become due), except for liabilities: (a)
identified as such in the "liabilities" column of the Unaudited
Interim Statement of Assets, Liabilities and Equity; (b) incurred
by the Company since May 31, 1999 in the ordinary course of
business and consistent with the Company's past practices; (c)
under the Company Contracts identified in Part 2.10 of the
Disclosure Schedule, to the extent the nature of such liabilities
can be specifically ascertained by reference to the text of such
Company Contracts; and (d) identified in Part 2.11 of the
Disclosure Schedule.
2.12 Compliance with Legal Requirements. The Company is, and has
at all times been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal
Requirements has not had and could not reasonably be expected to
result in a Material Adverse Effect. Except as set forth in Part
2.12 of the Disclosure Schedule, the Company has not received any
<PAGE>
notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to
comply with, any Legal Requirement.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure
Schedule identifies each material Governmental Authorization held
by the Company, and the Company has delivered to Parent accurate
and complete copies of all Governmental Authorizations identified
in Part 2.13 of the Disclosure Schedule. The Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively
constitute all Governmental Authorizations reasonably necessary
to enable the Company to conduct its business in the manner in
which its business is currently being conducted. The Company is,
and at all times has been, in substantial compliance with the
terms and requirements of the respective Governmental
Authorizations identified in Part 2.13 of the Disclosure
Schedule. The Company has not received any notice or other
communication from any Governmental Body regarding (a) any actual
or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual
or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization.
2.14 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the
Company (taking into account extensions) with any Governmental
Body prior to the Closing Date (the "Company Returns") (i) have
been filed or will be filed, and (ii) have been, or will be when
filed, accurately and completely prepared in all material
respects in compliance with all applicable Legal Requirements.
All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the
Closing Date. The Company has delivered to Parent accurate and
complete copies of all Company Returns which have been requested
by Parent.
(b) The Unaudited Interim Statement of Assets, Liabilities and
Equity fully accrues all actual and contingent liabilities for
Taxes with respect to all periods through the dates thereof in
accordance with generally accepted accounting principles. The
Company will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the
payment of all Taxes for the period from May 31, 1999 through the
Closing Date.
(c) Except as set forth in Part 2.14 of the Disclosure Schedule,
there have been no examinations or audits of any Company Return.
The Company has delivered to Parent accurate and complete copies
of all audit reports and similar documents (to which the Company
has access) relating to the Company Returns. Except as set forth
in Part 2.14 of the Disclosure Schedule, no extension or waiver
of the limitation period applicable to any of the Company Returns
has been granted (by the Company or any other Person), and no
such extension or waiver has been requested in writing from the
Company.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule,
no claim or Legal Proceeding is pending or has been threatened in
writing against or with respect to the Company in respect of any
Tax. There are no unsatisfied liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon
and related expenses) with respect to any notice of deficiency or
<PAGE>
similar document received by the Company with respect to any Tax
(other than liabilities for Taxes asserted under any such notice
of deficiency or similar document which are being contested in
good faith by the Company and with respect to which adequate
reserves for payment have been established). There are no liens
for Taxes upon any of the assets of the Company except liens for
current Taxes not yet due and payable. The Company has not
entered into or become bound by any agreement or consent pursuant
to Section 341(f) of the Code. The Company has not been, and the
Company will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant
to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions or
events occurring, or accounting methods employed, prior to the
Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former
employee or independent contractor of the Company that,
considered individually or considered collectively with any other
such Contracts, will, or could reasonably be expected to, give
rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162
of the Code. The Company is not liable for the Taxes of any
other Person.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Part 2.15(a) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance pay, termination pay,
hospitalization, medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension or retirement
plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by
the Company for the benefit of any employee of the Company
("Employee"), except for Plans which would not require the
Company to make payments or provide benefits having a value in
excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure
Schedule, the Company does not maintain, sponsor or contribute
to, and, to the best of the knowledge of the Company and the
Shareholders, has not at any time in the past maintained,
sponsored or contributed to, any employee pension benefit plan
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles
of ERISA) for the benefit of Employees or former Employees (a
"Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of
ERISA, whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Employees
or former Employees which are described in Part 2.15(c) of the
Disclosure Schedule (the "Welfare Plans"), none of which is a
multiemployer plan (within the meaning of Section 3(37) of
ERISA).
(d) With respect to each Plan, the Company has delivered to
Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
<PAGE>
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two
years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such
Plan, and all material employee communications relating to such
Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or
other funding agreement (including all amendments thereto) and
accurate and complete copies the most recent financial statements
thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements,
investment management agreements, subscription and participation
agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service
with respect to such Plan (if such Plan is intended to be
qualified under Section 401(a) of the Code).
(e) The Company is not required to be, and, to the best of the
knowledge of the Company and the Shareholders, has never been
required to be, treated as a single employer with any other
Person under Section 4001(b)(1) of ERISA or Section 414(b), (c),
(m) or (o) of the Code. The Company has never been a member of
an "affiliated service group" within the meaning of Section
414(m) of the Code. To the best of the knowledge of the Company
and the Shareholders, the Company has never made a complete or
partial withdrawal from a multiemployer plan, as such term is
defined in Section 3(37) of ERISA, resulting in "withdrawal
liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create
any additional Welfare Plan or any Pension Plan, or to modify or
change any existing Welfare Plan or Pension Plan (other than to
comply with applicable law) in a manner that would affect any
Employee.
(g) Except as set forth in Part 2.15(g) of the Disclosure
Schedule, no Welfare Plan provides death, medical or health
benefits (whether or not insured) with respect to any current or
former Employee after any such Employee's termination of service
(other than (i) benefit coverage mandated by applicable law,
including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities
on the Unaudited Interim Statement of Assets, Liabilities and
Equity, and (iii) benefits the full cost of which are borne by
current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of
the Code, the provisions of Section 4980B of the Code ("COBRA")
have been complied with in all material respects.
<PAGE>
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal
Requirements, including but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from
the Internal Revenue Service, and neither the Company nor any of
the Shareholders is aware of any reason why any such
determination letter should be revoked.
(k) Except as set forth in Part 2.15(k) of the Disclosure
Schedule, neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will result in any
payment (including any bonus, golden parachute or severance
payment) to any current or former Employee or director of the
Company (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such
benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of
all salaried employees of the Company as of the date of this
Agreement, and correctly reflects, in all material respects,
their salaries, any other compensation payable to them (including
compensation payable pursuant to bonus, deferred compensation or
commission arrangements), their dates of employment and their
positions. The Company is not a party to any collective
bargaining contract or other Contract with a labor union
involving any of its Employees. All of the Company's employees
are "at will" employees.
(m) Part 2.15(m) of the Disclosure Schedule identifies each
Employee who is not fully available to perform work because of
disability or other leave and sets forth the basis of such leave
and the anticipated date of return to full service.
(n) The Company is in compliance in all material respects with
all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and
conditions of employment, including employee compensation
matters.
(o) Except as set forth in Part 2.15(o) of the Disclosure
Schedule, the Company has good labor relations and, to the best
of the knowledge of the Shareholders, (i) the consummation of the
Merger or any of the other transactions contemplated by this
Agreement could not reasonably be expected to result in a
material adverse effect on the Company's labor relations, and
(ii) none of the Company's employees intends to terminate his or
her employment with the Company as a result of the Merger.
2.16 Environmental Matters. The Company is in compliance in all
material respects with all applicable Environmental Laws, which
compliance includes the possession by the Company of all permits
and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that
alleges that the Company is not in compliance with any
Environmental Law, and, to the best of the knowledge of the
Company and Shareholders, there are no circumstances that may
<PAGE>
prevent or interfere with the Company's compliance with any
Environmental Law in the future. To the best of the knowledge of
the Company and the Shareholders, no current or prior owner of
any property leased or controlled by the Company has received any
notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise,
that alleges that such current or prior owner or the Company is
not in compliance with any Environmental Law. All Governmental
Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Disclosure
Schedule. For purposes of this Section 2.16: (i) "Environmental
Law" means any federal, state, local or foreign Legal Requirement
relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum
products and any other substance that is regulated by any
Environmental Law.
2.17 Insurance. Part 2.17 of the Disclosure Schedule identifies
all insurance policies maintained by, at the expense of or for
the benefit of the Company and identifies any material claims
made thereunder, and the Company has delivered to Parent accurate
and complete copies of the insurance policies identified on Part
2.17 of the Disclosure Schedule. Each of the insurance policies
identified in Part 2.17 of the Disclosure Schedule is in full
force and effect. The Company has not received any notice or
other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal
of any coverage or rejection of any claim under any insurance
policy, or (c) material adjustment in the amount of the premiums
payable with respect to any insurance policy.
2.18 Related Party Transactions. Except as set forth in Part
2.18 of the Disclosure Schedule: (a) no Related Party has, and
no Related Party has at any time had, any direct or indirect
interest in any material asset used in or otherwise relating to
the business of the Company; (b) no Related Party is, or has at
any time been, indebted to the Company; (c) no Related Party has
entered into, or has had any direct or indirect financial
interest in, any Material Contract, transaction or business
dealing involving the Company; (d) no Related Party is competing,
or has at any time competed, directly or indirectly, with the
Company; and (e) no Related Party has any claim or right against
the Company (other than rights under Company Options and rights
to receive compensation for services performed as an employee of
the Company). (For purposes of the Section 2.18 each of the
following shall be deemed to be a "Related Party": (i) each of
the Shareholders; (ii) each individual who is, or who has at
any time been, an officer of the Company; (iii) each member of
the immediate family of each of the individuals referred to in
clauses "(i)" and "(ii)" above; and (iv) any trust or other
Entity (other than the Company) in which any one of the
individuals referred to in clauses "(i)", "(ii)" and "(iii)"
above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.)
2.19 Legal Proceedings; Orders.
<PAGE>
(a) Except as set forth in Part 2.19 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the
knowledge of the Company and the Shareholders) no Person has
threatened to commence any Legal Proceeding: (i) that involves
the Company or any of the assets owned or used by the Company or
any Person whose liability the Company has retained or assumed,
either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any
of the other transactions contemplated by this Agreement. To the
best of the knowledge of the Company and the Shareholders, except
as set forth in Part 2.19 of the Disclosure Schedule, no event
has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule,
no Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the
Company, is subject. None of the Shareholders is subject to any
order, writ, injunction, judgment or decree that relates to the
Company's business or to any of the assets owned or used by the
Company. To the best of the knowledge of the Company and the
Shareholders, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to the
Company's business.
2.20 Authority; Binding Nature of Agreement. The Company has the
absolute and unrestricted right, power and authority to enter
into and, subject only to the approval by the Company's
shareholders of this Agreement and the Merger, to perform its
obligations under this Agreement, the Secured Promissory Note,
dated the date hereof, given by the Company in favor of Parent
(the "Note") and the Security Agreement dated the date hereof
between Parent and the Company (the "Security Agreement") and the
related Financing Statement and each of the other Agreements
contemplated hereby or thereby to which the Company is a party
and the transactions contemplated hereby and thereby; and the
execution, delivery and, subject only to the approval by the
Company's shareholders of this Agreement and the Merger,
performance by the Company of this Agreement, the Note, the
Security Agreement and the related Financing Statement has been
duly authorized by all necessary action on the part of the
Company and its board of directors. This Agreement, the Note and
the Security Agreement constitute legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part
2.21 of the Disclosure Schedule and subject to the approval of
this Agreement and the Merger by the Company's shareholders,
neither (1) the execution, delivery or performance of this
Agreement, the Note, the Security Agreement or the related
Financing Statement or any of the other agreements referred to
herein or therein, nor (2) the consummation of the Merger or any
of the other transactions contemplated by this Agreement, the
<PAGE>
Note, the Security Agreement or the Financing Statement will
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of the Company's articles of incorporation or
bylaws, or (ii) any currently effective resolution adopted by the
Company's shareholders, the Company's board of directors or any
committee of the Company's board of directors;
(b)contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge
any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal
Requirement or any order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the
Company, is subject, other than such contravention, conflict,
violation or right to exercise any remedy that could not be
reasonably likely to result in a Material Adverse Effect;
(c) give any Governmental Body or other Person the right to
challenge any of the transactions contemplated by this Agreement;
(d) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify,
any Governmental Authorization that is held by the Company or
that otherwise relates to the Company's business or to any of the
assets owned or used by the Company, other than any such
contravention, conflict, violation or right to revoke, withdraw,
suspend, cancel, terminate or modify any such Governmental
Authorization which could not reasonably be expected to result in
a Material Adverse Effect;
(e) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Material
Contract, or give any Person the right to (i) declare a default
or exercise any remedy under any such Material Contract, (ii)
accelerate the maturity or performance of any such Material
Contract, or (iii) cancel, terminate or modify any such Material
Contract; or
(f) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by
the Company (except for minor liens, pledges, hypothecations,
charges, mortgage, and security interests that will not, in any
case or in the aggregate, to materially detract from the value of
the assets subject thereto or materially impair the operations of
the Company).
Except as set forth in Part 2.21 of the Disclosure Schedule and
except for (i) the filing of the Agreement of Merger with the
California Secretary of State and appropriate documents in other
states where the Company is qualified to do business, and (ii)
obtaining the approval by the Company's shareholders of this
Agreement and the Merger, the Company is not and will not be
required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of
the other agreements referred to in this Agreement, or (y) the
consummation of the Merger or any of the other transactions
contemplated by this Agreement.
<PAGE>
2.22 Full Disclosure.
(a) This Agreement (including the Disclosure Schedule) does not,
and the Shareholders' Closing Certificate will not, (i) contain
any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to
state any material fact or necessary in order to make the
representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances
under which such representations, warranties and information were
or will be made or provided) not false or misleading.
(b) In the event that information regarding the Merger is
prepared by the Company and distributed to its shareholders, such
information will not contain any statement that is inaccurate or
misleading with respect to any material fact.
Section 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant
to the Company and the Shareholders as follows:
3.1 Organization; Good Standing; Qualification and Power. Each
of Parent and Merger Sub (i) is a corporation duly organized,
validly existing and in good standing under the laws of its
respective state of incorporation and (ii) has all requisite
corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being
conducted, to enter into this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Agreement of Merger, and
each of the other agreements contemplated hereby or thereby (the
"Merger Documents"), to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby
or thereby. Parent has delivered to the Company true and complete
copies of the charter and by-laws of each of Parent and Merger
Sub.
3.2 Capital Stock. Parent's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1999 filed with the SEC (the "Most
Recent 10-QSB") sets forth the number of the authorized and
outstanding shares of Parent Common Stock and Preferred Stock of
Parent, $.001 par value, as of March 31, 1999. All outstanding
shares of capital stock of Parent are validly issued, fully paid
and non-assessable. The shares of Parent Stock to be issued in
the Merger shall be approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
3.3 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and complete
copies of each report, registration statement (on a form other
than Form S-8) and definitive proxy statement filed by Parent
with the SEC between January 1, 1999 and the date of this
Agreement which are all the documents (other than preliminary
material) that Parent was required to file (or otherwise did
file) with the SEC in accordance with Sections 13, 14 and 15(d)
of the Exchange Act since January 1, 1999 (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 the rules and regulations
<PAGE>
promulgated by the SEC thereunder; 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 (including the notes
thereto) contained in the Parent SEC Documents: (i) complied as
to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods covered, except as
may be indicated in the notes to such financial statements and
(in the case of unaudited statements) as permitted by Form 10-QSB
of the SEC, and except that unaudited financial statements may
not contain footnotes and are subject to normal and recurring
year-end audit adjustments, which will not, individually or in
the aggregate, be material in magnitude; 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, stockholders' equity and cash
flows of Parent and its subsidiaries for the periods covered
thereby.
(c) Since March 31, 1999, no event has occurred as of the date
hereof which is required to be reported by Parent by filing a
Current Report on Form 8-K under the Exchange Act.
3.4 Authority; Binding Nature of Agreement. Parent and Merger
Sub have the absolute and unrestricted right, power and authority
to perform their obligations under this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the
Agreement of Merger and each of the other agreements executed in
connection therewith to which Parent or Merger Sub, as
applicable, is a party (collectively, the "Merger Documents") and
the transactions contemplated hereby and thereby; and the
execution, delivery and performance by each of Parent and Merger
Sub of this Agreement, the other Merger Documents to which it is
a party and the transactions contemplated hereby and thereby
(including the contemplated issuance of Parent Common Stock in
the Merger in accordance with this Agreement) have been duly
authorized by all necessary action on the part of Parent and
Merger Sub, their respective boards of directors and the
shareholders of Merger Sub. No vote of Parent's stockholders is
needed to approve the Merger. This Agreement constitutes the
legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, and the
other Merger Documents, when executed and delivered by Parent and
Merger Sub, shall be legal, valid and binding obligations of
Parent and Merger Sub, enforceable against them in accordance
with their respective terms, in each case 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.
3.5 No Conflict. Neither the execution, delivery and performance
by Parent of this Agreement and the other Merger Documents to
which Parent is a party, the execution, delivery and performance
of this Agreement and the Agreement of Merger by Merger Sub, nor
the consummation of the transactions contemplated hereby or
thereby, will (a) contravene, conflict with or result in a
violation of any of the provisions of the Company's articles of
incorporation or bylaws, (b) result in any material violation of,
under any term, condition or provision of any material law,
<PAGE>
statute, rule, regulation, order, writ, injunction or decree of
any Governmental Body applicable to Parent or Merger Sub, or (c)
result in (i) any material violation of, cause a material default
under (with or without due notice, lapse of time or both), give
rise to any material right of termination, amendment,
cancellation or acceleration of any obligation contained in or
the material loss of any benefit under any term, condition or
provision of any material instrument or agreement to which Parent
or Merger Sub is a party, or by which Parent or Merger Sub or any
of their respective properties, assets or rights may be bound, or
(ii) the imposition or creation of any lien or other Encumbrance
upon or with respect to any asset owned or used by the Company,
except in the case of clauses (a), (b) or (c) for such
violations, conflicts, impositions of liens or other Encumbrances
or other events which will not (y) prevent or materially delay
consummation of the transactions contemplated by this Agreement,
or (z) could not reasonably be expected to result in a material
adverse effect on the Parent's business, condition, assets,
liabilities, operations, financial performance or prospects,
taken as a whole. Except as contemplated by this Agreement, no
Governmental Authorization is required in connection with the
execution, delivery and performance by Parent or Merger Sub of
this Agreement, the Agreement of Merger (in the case of Merger
Sub) or the other Merger Documents to which they are a party or
the consummation of the transactions contemplated hereby or
thereby, other than (i) the filing with the SEC of such reports
and information under the Exchange and the rules and regulations
promulgated by the SEC thereunder, as may be required in
connection with this Agreement and the transactions contemplated
hereby, (ii) the filing of such documents with, and the obtaining
of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions
contemplated hereby, (iii) the filing of the Agreement of Merger
with the Secretary of State of the State of California, and (iv)
such other consents, waivers, authorizations, filings, approvals
and registrations which if not obtained or made would materially
impair the ability of Parent or Merger Sub to consummate the
transactions contemplated by this Agreement, including, without
limitation, the Merger (each of the filings set forth in clauses
(i), (ii) and (iii) have been or will be made by Parent when
due).
3.6 Valid Issuance. Subject to Section 1.5(c), the Parent Common
Stock to be issued in the Merger will, when issued in accordance
with the provisions of this Agreement, be validly issued, fully
paid and nonassessable and free of preemptive rights and
Encumbrances. Parent owns all the outstanding shares of capital
stock of Merger Sub and all of such shares are validly issued,
fully paid and nonassessable and not subject to preemptive rights
and Encumbrances.
3.7 Employees. Parent currently intends to provide employment on
an ongoing basis to all of the current employees of the Company.
<PAGE>
Section 4. CERTAIN COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
4.1 Access and Investigation. During the period from the date of
this Agreement through the Effective Time or the earlier
termination of this Agreement pursuant to Section 8.1 (the "Pre-
Closing Period"), the Company shall, and shall cause its
Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's
Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and
information relating to the Company; and (b) provide Parent and
Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and
information relating to the Company, and with such additional
financial, operating and other data and information regarding the
Company, as Parent may reasonably request.
4.2 Operation of the Company's Business. Except as permitted by
Section 4.4, during the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such
business and operations have been conducted prior to the date of
this Agreement;
(b) the Company shall use reasonable efforts to preserve intact
its current business organization, keep available the services of
its current officers and employees and maintain its relations and
good will with all suppliers, customers, landlords, creditors,
employees and other Persons having business relationships with
the Company;
(c) the Company shall use all reasonable efforts to keep in full
force all insurance policies identified in Part 2.17 of the
Disclosure Schedule;
(d) the Company shall cause its officers to respond to requests
from Parent for information concerning the status of the
Company's business;
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares
of capital stock, and shall not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities (except
that the Company may repurchase Company Common Stock from former
employees pursuant to the terms of existing restricted stock
purchase agreements);
(f) the Company shall not sell, issue or authorize the issuance
of (i) any capital stock or other security, (ii) any option or
right to acquire any capital stock or other security, or (iii)
any instrument convertible into or exchangeable for any capital
stock or other security (except that the Company shall be
permitted (x) to grant stock options to employees in accordance
with its past practices, (y) to issue Company Common Stock to
employees upon the exercise of outstanding Company Options, and
(z) to issue shares of Company Common Stock upon the conversion
of shares of Series A Preferred Stock or Series B Preferred
Stock);
(g) the Company shall not amend or waive any of its rights under,
or modify the vesting provisions under, (i) any provision of its
1997 Equity Incentive Plan, (ii) any provision of any agreement
<PAGE>
evidencing any outstanding Company Option, or (iii) any provision
of any restricted stock purchase agreement;
(h) neither the Company nor any of the Shareholders shall amend
or permit the adoption of any amendment to the Company's articles
of incorporation or bylaws, or effect or permit the Company to
become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or
similar transaction (except that the Company may issue shares of
Company Common Stock upon the conversion of shares of Series A
Preferred Stock or Series B Preferred Stock);
(i) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(j) without the prior consent of Parent, which consent shall not
be unreasonably withheld, conditioned or delayed, the Company
shall not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures
made on behalf of the Company during the Pre-Closing Period, do
not exceed $5,000 per month;
(k) without the prior consent of Parent, which consent shall not
be unreasonably withheld, conditioned or delayed, the Company
shall not (i) enter into, or permit any of the assets owned or
used by it to become bound by, any Contract that is or would
constitute a Material Contract or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any such
Contract;
(l) without the prior consent of Parent, which consent shall not
be unreasonably withheld, conditioned, conditioned or delayed,
the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose
of, or lease or license, any right or other asset to any other
Person, or (iii) waive or relinquish any right, except for assets
acquired, leased, licensed or disposed of by the Company pursuant
to Contracts that are not Material Contracts;
(m) the Company shall not (i) lend money to any Person (except
that the Company may make routine advances for business expenses
to employees in the ordinary course of business and may,
consistent with its past practices, allow employees to acquire
Company Common Stock in exchange for promissory notes upon
exercise of Company Options), or (ii) incur or guarantee any
indebtedness for borrowed money other than as consented to by
Parent;
(n) the Company shall not (i) establish, adopt or amend any
Employee Benefit Plan, (ii) pay any bonus or make any profit-
sharing payment, cash incentive payment or similar payment to, or
increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of
its directors, officers or employees, or (iii) hire any new
employee whose aggregate annual compensation is expected to
exceed $100,000;
(o) the Company shall not change any of its methods of accounting
or accounting practices in any material respect;
(p) the Company shall not make any Tax election;
<PAGE>
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the
actions described in clauses "(e)" through "(q)" above.
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of:
(i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of
this Agreement and that caused or constitutes an inaccuracy in or
breach of any representation or warranty made by the Company or
any of the Shareholders in this Agreement;
(ii) the discovery by the Company of any event, condition, fact
or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute an inaccuracy
in or breach of any representation or warranty made by the
Company or any of the Shareholders in this Agreement if (A) such
representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact
or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the
date of this Agreement;
(iii) the discovery by the Company of any breach of any covenant
or obligation of the Company or, to the best knowledge of the
Company, any of the Shareholders; and
(iv) the discovery by the Company of any event, condition, fact
or circumstance that would make the timely satisfaction of any of
the conditions set forth in Section 6 or Section 7 impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any
change in the Disclosure Schedule, or if any such event,
condition, fact or circumstance would require such a change
assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact
or circumstance, then the Company shall promptly deliver to
Parent an update to the Disclosure Schedule specifying such
change. Except for updates to the Disclosure Schedule that arise
out of facts and circumstances arising after the date hereof,
which, as of the date hereof, could not reasonably have been
expected by the Company or the Shareholders to arise and which
updates could not reasonably be expected individually or in the
aggregate to result in a Material Adverse Effect (a "Permitted
Update"), no such update shall be deemed to supplement or amend
the Disclosure Schedule for the purpose of determining (i) the
accuracy of any of the representations and warranties made by the
Company or any of the Shareholders in this Agreement and, (ii)
whether any of the conditions set forth in Section 6 has been
satisfied.
4.4 No Negotiation. During the Pre-Closing Period, neither the
Company nor any of the Shareholders shall, directly or indirectly:
<PAGE>
(a) solicit or encourage the initiation of any inquiry, proposal
or offer from any Person (other than Parent or Merger Sub)
relating to a possible Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into
any agreement with, or provide any non-public information to, any
Person (other than Parent or Merger Sub) relating to or in
connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent or Merger Sub) relating to a possible
Acquisition Transaction.
The Company shall promptly notify Parent in writing of any
material inquiry, proposal or offer relating to a possible
Acquisition Transaction that is received by the Company or any of
the Shareholders during the Pre-Closing Period. Notwithstanding
anything to the contrary in this Section 4.4, in the event that
the Company receives a bona fide, written, unsolicited proposal
relating to the possible acquisition of the Company (whether by
way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its capital stock or assets
by any person other than Parent or Merger Sub, which proposal, in
the reasonable good faith judgment of the Company's Board of
Directors, is reasonably likely to be consummated and is
financially more favorable to the Company's shareholders than the
terms of the Merger (a "Superior Proposal"), nothing contained
herein shall prevent the Shareholders, in their capacities as
such, from considering such Superior Proposal and voting any
shares of capital stock of the Company held by them in favor of
any such Superior Proposal presented to them.
Section 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Filings and Consents. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a)
shall make all filings (if any) and give all notices (if any)
required to be made and given by such party in connection with
the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts
to obtain all Consents (if any) required to be obtained (pursuant
to any applicable Legal Requirement or Contract, or otherwise) by
such party in connection with the Merger and the other
transactions contemplated by this Agreement. Each party shall
(upon request) promptly deliver to the other party a copy of each
such filing made, each such notice given and each such Consent
obtained by such party during the Pre-Closing Period.
5.2 Company Shareholders' Meeting. The Company shall, in
accordance with its articles of incorporation and bylaws and the
applicable requirements of the California General Corporation
Law, call and hold a special meeting of its shareholders or
obtain the unanimous written consent of its shareholders as
promptly as practicable after the date hereof for the purpose of
permitting them to consider and to vote upon and approve the
Merger and this Agreement (the "Company Shareholders' Meeting").
The Company shall cause a copy of an information statement (the
"Information Statement") which shall be in form and substance
satisfactory to Parent) to be delivered to each shareholder of
the Company who is entitled to vote at the Company Shareholders'
Meeting. Each Shareholder shall cause all shares of the capital
stock of the Company that are owned, beneficially or of record,
by such Shareholder on the record date for the Company
Shareholders' Meeting to be voted in favor of the Merger and this
Agreement at such meeting.
<PAGE>
5.3 Public Announcements. During the Pre-Closing Period, (a)
subject to applicable legal and regulatory obligations, neither
the Company nor any of the Shareholders shall, and the Company
shall not permit any of its Representatives to, issue any press
release or make any public statement regarding this Agreement,
the Merger or any of the other transactions contemplated by this
Agreement, without Parent's prior written consent, and (b) Parent
shall use reasonable efforts to advise and confer with the
Company prior to the issuance, and provide copies to the Company
prior to issuance, of any public announcements, reports,
statements or releases pertaining to the Merger.
5.4 Pooling of Interests. During the Pre-Closing Period, no
party to this Agreement shall take any action that could
reasonably be expected to have an adverse effect on the ability
of Parent to account for the Merger as a "pooling of interests."
5.5 Affiliate Agreements. Each Shareholder identified on Exhibit
E-2 shall execute and deliver to Parent, and the Company shall
use all commercially reasonable efforts to cause each other
Person identified on Exhibit E-2 (and any other Person that could
reasonably be deemed to be an "affiliate" of the Company for
purposes of the Securities Act), to execute and deliver to
Parent, as promptly as practicable after the execution of this
Agreement, an Affiliate Agreement in the form of Exhibit E-1.
5.6 Commercially Reasonable Efforts. During the Pre-Closing
Period, (a) the Company and the Shareholders shall use all
commercially reasonable efforts to cause the conditions set forth
in Section 6 to be satisfied on a timely basis, and (b) Parent
and Merger Sub shall use all commercially reasonable efforts to
cause the conditions set forth in Section 7 to be satisfied on a
timely basis.
5.7 Employment and Noncompetition Agreements. At or prior to the
Closing, each of the individuals identified on Exhibit F shall
execute and deliver to the Company and Parent an Employment
Agreement in the form of Exhibit G and a Noncompetition Agreement
in the form of Exhibit H.
5.8 Consents. Each party agrees to use all reasonable commercial
efforts to obtain, prior to the Closing Date, all such
governmental and other consents and approvals as may be
reasonably necessary and appropriate in order to enable it to
perform its obligations hereunder and to consummate the
transactions contemplated hereby.
5.9 FIRPTA Matters. At the Closing, the Company shall deliver to
Parent separate statements (in such form as may be reasonably
requested by counsel to Parent) signed under penalty of perjury
by each of the Shareholders, certifying as to such Shareholder's
non-foreign status for purposes of U.S. income taxation and
setting forth such Shareholder's tax identification number and
home or principal address.
5.10 Tax Matters. Prior to the closing, Parent and the Company
shall execute and deliver to Cooley Godward LLP and Orrick,
Herrington & Sutcliffe, LLP tax representation letters in
customary form reasonably satisfactory to such counsel, which may
be relied upon by such counsel in connection with the legal
opinions contemplated by Sections 6.5(g) and 7.3(b) below.
<PAGE>
5.11 Employees. Parent agrees that, to the extent permitted by
applicable laws and its benefit plans, it will provide employees
of the Company who become employees of Parent or the Surviving
Corporation following the Merger with benefits comparable to
those provided to Parent's employees in comparable positions
(giving credit for length of employment with the Company).
Section 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
6.1 Accuracy of Representations. Each of the representations and
warranties made by the Company and the Shareholders in this
Agreement shall have been accurate in all material respects as of
the date of this Agreement (without giving effect to any
materiality qualifications contained or incorporated directly or
indirectly in such representations and warranties and provided
that each of the representations and warranties made by the
Company and the Shareholders in this Agreement that has a
"Material Adverse Effect" qualification has been accurate in all
respects as of such date), and shall be accurate in all material
respects as of the Scheduled Closing Time as if made at the
Scheduled Closing Time without giving effect to any update to the
Disclosure Schedule (other than Permitted Updates), and without
giving effect to any materiality qualifications contained or
incorporated, directly or indirectly, in such representations and
warranties and provided that each of the representations and
warranties made by the Company and the Shareholders in this
Agreement that has a "Material Adverse Effect" qualification has
been accurate in all respects as of such date.
6.2 Performance of Covenants. All of the covenants and
obligations that the Company and the Shareholders are required to
comply with or to perform at or prior to the Closing shall have
been complied with and performed in all material respects.
6.3 Shareholder Approval. The principal terms of the Merger
shall have been duly approved by the affirmative vote of (a) all
of the shares of Company Common Stock entitled to vote with
respect thereto, (b) all of the shares of Series A Preferred
Stock entitled to vote with respect thereto and (c) all of the
shares of Series B Preferred Stock entitled to vote with respect
thereto.
6.4 Consents. All Consents required to be obtained in connection
with the Merger and the other transactions contemplated by this
Agreement (including the Consents identified in Part 2.21 of the
Disclosure Schedule) shall have been obtained and shall be in
full force and effect.
6.5 Agreements and Documents. Parent and 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 E-1, executed by
the Persons identified on Exhibit E-2;
<PAGE>
(b) Employment Agreements in the form of Exhibit G, executed by
the individuals identified on Exhibit F;
(c) Noncompetition Agreements in the form of Exhibit H, executed
by the individuals identified on Exhibit F;
(d) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all
employees and former employees of the Company and by all
consultants and independent contractors and former consultants
and former independent contractors to the Company who have not
already signed such agreements (including the individuals
identified in Part 2.9(f) of the Disclosure Schedule);
(e) the statement referred to in Section 5.9(a), executed by the
Company;
(f) a legal opinion of Orrick, Herrington & Sutcliffe LLP, dated
as of the Closing Date, in the form of Exhibit I;
(g) a legal opinion of Cooley Godward LLP (or, if Cooley Godward
LLP for any reason does not render such legal opinion, a legal
opinion of Orrick, Herrington & Sutcliffe 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, such counsel
may rely upon tax representation letters referred to in Section
5.10);
(h) a letter from KPMG Peat Marwick, dated as of the Closing
Date, regarding that firm's concurrence with the conclusions of
the management of Parent and the management of the Company as to
the appropriateness of pooling of interests accounting for the
Merger under Accounting Principles Board Opinion No. 16, if the
Merger is consummated in accordance with this Agreement;
(i) a certificate executed by the Shareholders (other than
Robertson Stephens Emerging Growth Partners L.P.) and containing
the representation and warranty of each Shareholder (other than
Robertson Stephens Emerging Growth Partners L.P.) that each of
the representations and warranties set forth in Section 2 is
accurate in all material respects as of the Closing Date as if
made on the Closing Date and that the conditions set forth in
Sections 6.1, 6.2, 6.3 and 6.4 (with respect to Consents required
to be obtained by the Company only) have been duly satisfied (the
"Shareholders' Closing Certificate");
(j) written resignations of all directors of the Company (except
Gregory Slayton), effective as of the Effective Time;
(k) the Escrow Agreement in the Form of Exhibit L executed by the
Shareholders' Agent; and
(l) the Registration Rights Agreement in the form of Exhibit M
executed by the Shareholders.
<PAGE>
6.6 Exemption from Applicable Securities Laws. The issuance of
shares of Parent Common Stock and the other transactions
contemplated by this Agreement in the Merger shall be exempt from
applicable state and federal securities laws.
6.7 No Restraints. No temporary restraining order, preliminary
or permanent injunction or other order preventing the
consummation of the Merger shall have been issued by any court of
competent jurisdiction and remain in effect, and there shall not
be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
6.8 No Legal Proceedings. No Person shall have commenced or
threatened to commence any Legal Proceeding challenging or
seeking the recovery of a material amount of damages in
connection with the Merger or seeking to prohibit or limit the
exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.9 Employees. None of the individuals identified on Exhibit J
shall have ceased to be employed by, or expressed an intention to
terminate their employment with, the Company.
6.10 Issuance of Shares. Parent shall not presently or
potentially be required to issue in excess of 890,000 shares of
Parent Common Stock (including all securities convertible into or
exercisable for Parent Common Stock) in connection with the
Merger.
Section 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of the
following conditions:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall
have been accurate in all material respects as of the date of
this Agreement (without giving effect to any materiality or
similar qualifications contained in such representations and
warranties), and shall be accurate in all material respects as of
the Scheduled Closing Time as if made at the Scheduled Closing
Time (without giving effect to any materiality or similar
qualifications contained in such representations and warranties).
7.2 Performance of Covenants. All of the covenants and
obligations that Parent and Merger Sub are required to comply
with or to perform at or prior to the Closing shall have been
complied with and performed in all respects.
7.3 Documents. The Company shall have received the following
documents:
(a) a legal opinion of Cooley Godward LLP, dated as of the
Closing Date, in the form of Exhibit K;
(b) a legal opinion of Orrick, Herrington & Sutcliffe LLP (or, if
Orrick, Herrington & Sutcliffe LLP for any reason does not render
such legal opinion, a legal opinion of Cooley Godward 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,
<PAGE>
such counsel may rely upon the tax representation letters
referred to in Section 5.11(a);
(c) the Escrow Agreement in the Form of Exhibit L executed by
Parent and the Escrow Agent; and
(d) the Registration Rights Agreement in the form of Exhibit M
executed by Parent.
7.4 Listing. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for listing (subject to
notice of issuance) on the Nasdaq National Market.
7.5 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.
7.6 Fees and Disbursements of the Company's Counsel. Parent
shall have paid by check or wire transfer all of the reasonable
fees and expenses of Orrick, Herrington & Sutcliffe LLP incurred
through the Closing Date in connection with this Agreement, the
Merger and any other matter related hereto, subject to Section
10.3.
Section 8. TERMINATION
8.1 Termination Events. This Agreement may be terminated prior
to the Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of (i) any condition set forth in Section 6.1, 6.2,
6.3, 6.5, 6.6 or (ii) any condition set forth in Section 6.4,
6.7, 6.8, 6.9, or 6.10 has become impossible (other than as a
result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or
Merger Sub set forth in this Agreement or in any other agreement
or instrument delivered to the Company or the Shareholders
pursuant to the terms hereof);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has
become impossible (other than as a result of any failure on the
part of the Company or any of the Shareholders to comply with or
perform any covenant or obligation set forth in this Agreement or
in any other agreement or instrument delivered to Parent pursuant
to the terms hereof);
(c) by Parent at or after the Scheduled Closing Time if (i) any
condition set forth in Section 6.1, 6.2, 6.3, 6.5, 6.6 or (ii)
any condition set forth in Section 6.4, 6.7, 6.8, 6.9, or 6.10
has not been satisfied by the Scheduled Closing Time (other than
as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or
Merger Sub set forth in this Agreement or in any other agreement
or instrument delivered to the Company or the Shareholders
pursuant to the terms hereof);
(d) by the Company at or after the Scheduled Closing Time if any
<PAGE>
condition set forth in Section 7 has not been satisfied by the
Scheduled Closing Time (other than as a result of any failure on
the part of the Company or any of the Shareholders to comply with
or perform any covenant or obligation set forth in this Agreement
or in any other agreement or instrument delivered to Parent
pursuant to the terms hereof);
(e) by Parent if the Closing has not taken place on or before
September 3, 1999 (other than as a result of any failure on the
part of Parent to comply with or perform any covenant or
obligation of Parent set forth in this Agreement or in any other
agreement or instrument delivered to the Company or the
Shareholders pursuant to the terms hereof);
(f) by the Company if the Closing has not taken place on or
before September 3, 1999 (other than as a result of the failure
on the part of the Company or any of the Shareholders to comply
with or perform any covenant or obligation set forth in this
Agreement or in any other agreement or instrument delivered to
Parent pursuant to the terms hereof); or
(g) by the mutual consent of Parent and the Company.
8.2 Termination Procedures. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section
8.1(e), Parent shall deliver to the Company a written notice
stating that Parent is terminating this Agreement and setting
forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate
this Agreement pursuant to Section 8.1(b), Section 8.1(d) or
Section 8.1(f), the Company shall deliver to Parent a written
notice stating that the Company is terminating this Agreement and
setting forth a brief description of the basis on which the
Company is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties
under this Agreement shall terminate; provided, however, that:
(a) neither the Company nor Parent shall be relieved of any
obligation or liability arising from any prior breach by such
party of any provision of this Agreement; (b) the parties shall,
in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10; and (c) Parent and Merger Sub
shall, in all events, remain bound by and continue to be subject
to Section 5.8.
Section 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Company and
the Shareholders (including the representations and warranties
set forth in Section 2) shall survive the Closing and shall
expire on (i) the date of the issuance of the audit report on the
first financial statements of Parent containing combined
operations of the Company and Parent for those representations
related to matters expected to be encountered in the audit
process and (ii) the first anniversary of the Closing Date for
other matters (the "Termination Date"); provided, however, that
if, at any time prior to the Termination Date, any Indemnitee
(acting in good faith) delivers to the Shareholders' Agent a
written notice alleging the existence of an inaccuracy in or a
breach of any of the representations and warranties made by the
Company and the Shareholders (and setting forth in reasonable
detail the basis for such Indemnitee's belief that such an
<PAGE>
inaccuracy or breach may exist) and asserting a claim for
recovery under Section 9.2 based on such alleged inaccuracy
or breach, then the claim asserted in such notice shall survive
the Termination Date until such time as such claim is fully and
finally resolved. All representations and warranties made by
Parent shall terminate and expire as of the Closing Date, and
any liability of Parent with respect to such representations and
warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of
Company and the Shareholders, and the rights and remedies that
may be exercised by the Indemnitees, shall not be limited or
otherwise affected by or as a result of any information furnished
to, or any investigation made by or knowledge of, any of the
Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule shall be
deemed to be a representation and warranty made by the Company
and the Shareholders in this Agreement.
9.2 Indemnification.
(a) Indemnification by Company Indemnitors. From and after the
Closing Date (but subject to Section 9.1(a)), the Merger
Shareholders (the "Indemnitors"), severally but not jointly,
shall hold harmless and indemnify each of the Indemnitees from
and against, and the Holdback Shares shall be available to
compensate and reimburse each of the Indemnitees for, any Damages
that are directly or indirectly suffered or incurred by any of
the Indemnitees or to which any of the Indemnitees may otherwise
become subject (regardless of whether or not such Damages relate
to any third-party claim) and that arise from or as a result of,
or are directly or indirectly connected with: (i) any breach of
any representation or warranty set forth in Section 2 (without
giving effect to any "Material Adverse Effect" or other
materiality qualification or any similar qualification contained
or incorporated directly or indirectly in such representation or
warranty), or (ii) any Legal Proceeding relating to any breach of
the type referred to in clause (i) above (including any Legal
Proceeding commenced by any Indemnitee for the purpose of
enforcing any of its rights under this Section 9).
(b) Deductible. The Indemnitors shall not be required to make any
indemnification payment pursuant to Section 9.2(a) for any
inaccuracy in or breach of any of their representations and
warranties set forth in Section 2 until such time as the total
amount of all Damages (including the Damages arising from such
inaccuracy or breach and all other Damages arising from any other
inaccuracies in or breaches of any representations or warranties)
that have been directly or indirectly suffered or incurred by any
one or more of the Indemnitees, or to which any one or more of
the Indemnitees has or have otherwise become subject, exceeds
$100,000 in the aggregate. (If the total amount of such Damages
exceeds $100,000, then the Indemnitees shall be entitled to be
indemnified against and compensated and reimbursed only for the
portion of such Damages exceeding $50,000.)
(c) Limitation Due to Post-Closing Actions; Insurance. None of
the Indemnitors shall have any liability for Damages which arise
solely as a result of (i) actions taken by or on behalf of, or
omissions of, Parent or the Surviving Corporation after the
Closing; (ii) changes in accounting methods or policies of the
Surviving Corporation after the Closing; or (iii) the passing of,
or any change in, after the Closing, any law or administrative
<PAGE>
practice of any Governmental Body in any such case not actually
in force as of the date of this Agreement (even if retroactive in
effect), including any increase in the tax rates in effect on the
date of this Agreement or the imposition of any tax not in effect
on the date of this Agreement. Any claim for indemnification for
Damages hereunder shall be offset or reduced by the amount of any
insurance proceeds received by the Indemnitees for such Damages.
9.3 Exclusive Remedy. With the exception of claims based upon
fraud, from and after the Closing, recourse of the Indemnitees to
the Holdback Shares pursuant to this Agreement and the Escrow
Agreement shall be the sole and exclusive remedy of the
Indemnitees for monetary damages for any inaccuracy in or breach
of any representation, warranty, covenant or agreement contained
in this Agreement or any Legal Proceeding related thereto. Any
distribution of Holdback Shares to satisfy a claim hereunder
shall be done so as to reduce the Escrow Account. Any Holdback
Shares remaining upon termination of the Escrow Account shall be
distributed to the Merger Shareholders on a pro rata basis in
accordance with the Escrow Agreement.
9.4 No Contribution. No Indemnitors shall have any right of
contribution, right of indemnity or other right or remedy against
the Company in connection with any indemnification obligation or
any other liability to which she, he or it may become subject
under or in connection with this Agreement.
9.5 No Implied Representations. Parent, Merger Sub and the
Company acknowledge that, except as expressly provided in
Sections 2 and 3, neither party hereto, and none of the officers,
employees or agents of either party hereto, has made or is making
any representations or warranties whatsoever, implied or
otherwise.
9.6 Defense of Third Party Claims. In the event of the assertion
or commencement by any Person of any claim or Legal Proceeding
(whether against the Company, Parent or against any other Person)
with respect to which any of the Indemnitors may become obligated
to hold harmless, indemnify, compensate or reimburse any
Indemnitee pursuant to this Section 4, Parent shall have the
right, at its election, to proceed with the defense of such claim
or Legal Proceeding on its own. If Parent so proceeds with the
defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim
or Legal Proceeding by counsel reasonably satisfactory to the
Shareholders' Agent shall be borne and paid exclusively from the
Holdback Shares;
(b) each Indemnitor shall make available to Parent any documents
and materials in his or its possession or control that reasonably
may be necessary to the defense of such claim or Legal
Proceeding; and
(c) Parent shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the written consent of the
Shareholders' Agent (as defined in Section 10.1); provided,
however, that such consent shall not be unreasonably withheld.
Parent shall give the Shareholders' Agent prompt notice of the
commencement of any such Legal Proceeding against Parent or the
Company; provided, however, that any failure on the part of
<PAGE>
Parent to so notify the Shareholders' Agent shall not limit any
of the obligations of the Indemnitors under this Section 9
(except to the extent such failure materially prejudices the
defense of such Legal Proceeding). Parent shall conduct the
defense of such claim or Legal Proceeding diligently and in good
faith using all reasonable means and defenses available to it or
to the Company. The Shareholders' Agent shall have the right to
assist at its own expense and with counsel of its choice in the
defense of such claim or Legal Proceeding by Parent (or in the
case of a claim or Legal Proceeding against the Company, by the
Company). In such event, Parent shall afford the Shareholders'
Agent and its counsel a reasonable opportunity to comment and the
right to object (which right shall not be unreasonably exercised)
with respect to the conduct of the defense of such claim or Legal
Proceeding. Parent shall keep the Shareholders' Agent reasonably
informed of the progress of any claim or Legal Proceeding and its
defense, and shall with reasonable promptness provide the
Shareholders' Agent with copies of all material notices, written
communications and filings (including court papers) made by or on
behalf of any of the parties to the underlying claim or Legal
Proceeding. If Parent does not elect to proceed with the defense
of any such claim or Legal Proceeding, the Shareholders' Agent
may proceed with the defense of such claim or Legal Proceeding
with counsel reasonably satisfactory to Parent; provided,
however, that the Shareholders' Agent may not settle, adjust or
compromise any such claim or Legal Proceeding without the prior
written consent of the Parent (which consent may not be
unreasonably withheld).
Section 10. MISCELLANEOUS PROVISIONS
10.1 Shareholders' Agent. The Company and the Shareholders
hereby irrevocably appoint, and the Merger Shareholders, upon and
by virtue of approval of this Agreement and the Merger will
irrevocably appoint, Jim Williams as their agent and as the agent
for the Indemnitors for purposes of Section 9 (the "Shareholders'
Agent"), and Jim Williams hereby accepts his appointment as the
Shareholders' Agent. Parent shall be entitled to deal
exclusively with the Shareholders' Agent on all matters relating
to Section 9, Section 1.10 and the Escrow Agreement, and shall be
entitled to rely conclusively (without further evidence of any
kind whatsoever) on any document executed or purported to be
executed on behalf of any Shareholder or Indemnitor by the
Shareholders' Agent, and on any other action taken or purported
to be taken on behalf of any Shareholder or Indemnitor by the
Shareholders' Agent, as fully binding upon such Shareholder or
Indemnitor. If the Shareholders' Agent shall die, become
disabled or otherwise be unable to fulfill his responsibilities
as agent of the Shareholders and Indemnitors, then the
Shareholders shall, within ten days after such death or
disability, appoint a successor agent and, promptly thereafter,
shall notify Parent of the identity of such successor. Any such
successor shall become the "Shareholders' Agent" for purposes of
Section 9 and this Section 10.1. If for any reason there is no
Shareholders' Agent at any time, all references herein to the
Shareholders' Agent shall be deemed to refer to the Shareholders.
10.2 Further Assurances. Each party hereto shall execute and
cause to be delivered to each other party hereto such instruments
and other documents, and shall take such other actions, as such
other party may reasonably request (prior to, at or after the
Closing) for the purpose of carrying out or evidencing any of the
transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each party to this Agreement shall bear
and pay all fees, costs and expenses (including legal fees and
accounting fees) that have been incurred or that are incurred by
<PAGE>
such party in connection with the transactions contemplated by
the Merger Documents, including all fees, costs and expenses
incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its
Representatives with respect to the Company's business (and the
furnishing of information to Parent and its Representatives in
connection with such investigation and review), (b) the
negotiation, preparation and review of the Merger Documents
(including the Disclosure Schedule) and all agreements,
certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the transactions
contemplated by the Merger Documents, (c) the preparation and
submission of any filing or notice required to be made or given
in connection with any of the transactions contemplated by the
Merger Documents, and the obtaining of any Consent required to be
obtained in connection with any of such transactions, and (d) the
consummation of the Merger; provided, however, that, to the
extent the total amount of (a) all legal fees, costs and expenses
incurred by or for the benefit of the Company exceed $100,000, or
(b) all other fees, costs and expenses incurred by or for the
benefit of the Company (including all such fees, costs and
expenses incurred prior to the date of this Agreement and
including the amount of all special bonuses and other amounts
that may become payable to any officers of the Company (other
than as a result of acceleration of stock options and directors'
restricted shares as disclosed in the Disclosure Schedule) or
other Persons in connection with the consummation of the
transactions contemplated by this Agreement) exceeds $150,000 in
the aggregate, such fees, costs and expenses shall be borne and paid
by the Shareholders and not by the Company.
10.4 Attorneys' Fees. If any action or proceeding relating to
this Agreement or the enforcement of any provision of this
Agreement is brought against any party hereto, the prevailing
party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which
the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall
be in writing and shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier
or express delivery service or by facsimile) to the address or
facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice
given to the other parties hereto):
if to Parent:
Public Co., Inc.
2197 East Bayshore Road
Palo Alto, CA 94303
Attn: Chief Executive Officer
With a copy (not constituting notice ) to:
Cooley Godward LLP
Five Palo Alto Square
Palo Alto, CA 94306
Attn: Julia L. Davidson, Esq.
<PAGE>
if to the Company:
MarketHome
2680 Bancroft Way, Suite 700
Berkeley, CA 94704
Attn: Chief Executive Officer
With a copy (not constituting notice ) to:
Orrick, Herrington & Sutcliffe LLP
400 Capitol Mall, Suite 3000
Sacramento, CA 95814
Attn: Iain Mickle, Esq.
if to any of the Shareholders:
Trilogy Asset Management, Inc.
550 Hartz Avenue, Suite 200
Danville, CA 94526
Attn: Jim Williams
10.6 Confidentiality. Without limiting the generality of
anything contained in Section 5.3, on and at all times after the
Closing Date, each Shareholder shall keep confidential, and shall
not use or disclose to any other Person, any non-public document
or other non-public information in such Shareholder's possession
that relates to the business of the Company or Parent.
10.7 Time of the Essence. Time is of the essence of this
Agreement.
10.8 Headings. The underlined headings contained in this
Agreement are for convenience of reference only, shall not be
deemed to be a part of this Agreement and shall not be referred
to in connection with the construction or interpretation of this
Agreement.
10.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all
of which, when taken together, shall constitute one agreement.
10.10 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal
laws of the State of California (without giving effect to
principles of conflicts of laws).
10.11 Successors and Assigns. This Agreement shall be binding
upon: the Company and its successors and assigns (if any); the
Shareholders and their respective personal representatives,
executors, administrators, estates, heirs, successors and assigns
(if any); Parent and its successors and assigns (if any); and
Merger Sub and its successors and assigns (if any). This
Agreement shall inure to the benefit of: the Company; the
Company's shareholders (to the extent set forth in Section 1.5);
the holders of assumed Company Options (to the extent set forth
in Section 1.6); Parent; Merger Sub; the other Indemnitees
(subject to Section 9); and the respective successors and assigns
(if any) of the foregoing. Parent may freely assign any or all
of its rights under this Agreement (including its indemnification
rights under Section 9), in whole or in part, to any other Person
<PAGE>
without obtaining the consent or approval of any other party
hereto or of any other Person.
10.12 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not
alternative). The parties to this Agreement agree that, in the
event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to
this Agreement, such other party shall be entitled (in addition
to any other remedy that may be available to it) to (a) a decree
or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or
threatened breach.
10.13 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on
the part of any Person in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such
power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power,
right, privilege or remedy is expressly set forth in a written
instrument duly executed and delivered on behalf of such Person;
and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
10.14 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written
instrument duly executed and delivered on behalf of all of the
parties hereto.
10.15 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any Person
or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of
this Agreement, and the application of such provision to Persons
or circumstances other than those as to which it is determined to
be invalid, unlawful, void or unenforceable, shall not be
impaired or otherwise affected and shall continue to be valid and
enforceable to the fullest extent permitted by law.
10.16 Parties in Interest. Except for the provisions of Sections
1.5, 1.6 and 9, none of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other
than the parties hereto and their respective successors and
assigns (if any).
10.17 Entire Agreement. This Agreement and the other agreements
referred to herein set forth the entire understanding of the
parties hereto relating to the subject matter hereof and thereof
and supersede all prior agreements and understandings among or
between any of the parties relating to the subject matter hereof
and thereof; provided, however, that the two letter agreements
executed on behalf of Parent and the Company on July 2, 1999
relating to nondisclosure (the "Non-Disclosure Agreements") shall
not be superseded by this Agreement and shall remain in effect in
<PAGE>
accordance with their terms until the earlier of (a) the
Effective Time, or (b) the date on which such Non-Disclosure
Agreements are terminated in accordance with their terms.
10.18 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and
neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting
party shall not be applied in the construction or interpretation
of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by
the words "without limitation."
(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.
<PAGE>
The parties hereto have caused this Agreement to be executed and
delivered as of July 2, 1999.
MYSOFTWARE COMPANY,
a Delaware corporation
/s/ David Mans
----------------------
David Mans
Chairman of the Board
MY MARKET ACQUISITION CORP.,
a California corporation
/s/ David Mans
----------------------
David Mans
Chairman of the Board
MARKETHOME,
a California corporation
/s/ Jim Williams
----------------------
Jim Williams
President
/s/ Jim Williams
JIM WILLIAMS
/s/ David Hehman
DAVID HEHMAN
/s/ Bozena Ivashenko
BOZENA IVASHENKO
/s/ Serge Ivashenko
SERGE IVASHENKO
TRILOGY ASSET MANAGEMENT, L.P.
Signature: /s/ Stuart Knowles
Printed Name: Stuart Knowles
Title: President
PETERSON VENTURES I, L.L.C.
<PAGE>
Signature: /s/ Jordan W. Clements
Printed Name: Jordan W. Clements
Title: Manager
LOVE CAPITAL PARTNERS, L.P.
Signature: /s/ Howard M. Love, Jr.
Printed Name: Howard M. Love, Jr.
Title: General Partner
SLAYTON CAPITAL
Signature: /s/ Gregory Slayton
Printed Name: Gregory Slayton
Title: Managing Director
<PAGE>
ROBERTSON STEPHENS EMERGING GROWTH
PARTNERS L.P.
Signature: /s/ James L. Callinan
Printed Name: James L. Callinan
Title: Chief Investment Officer
INTERACTIVE MINDS VENTURES L.P.
Signature: /s/ Carl Nichols
Printed Name: Carl Nichols
Title: Managing Partner
<PAGE>
/s/ Carl Nichols
CARL NICHOLS
/s/ Gregory Slayton
GREGORY SLAYTON
/s/ Stuart A. Knowles
STUART A. KNOWLES AND ANN R. KNOWLES
/s/ Howard Love
HOWARD LOVE
<PAGE>
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
Acquisition Transaction. "Acquisition Transaction" shall mean
any transaction involving:
(e) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(f) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common
stock issued to employees of the Company, upon exercise of
Company Options or otherwise, in routine transactions in
accordance with the Company's past practices), (ii) any option,
call, warrant or right (whether or not immediately exercisable)
to acquire any capital stock or other equity security of the
Company (other than stock options granted to employees of the
Company in routine transactions in accordance with the Company's
past practices), or (iii) any security, instrument or obligation
that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(g) any merger, consolidation, business combination,
reorganization or similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of
Merger and Reorganization to which this Exhibit B is attached
(including the Disclosure Schedule), as it may be amended from
time to time.
Company Contract. "Company Contract" shall mean any Contract:
(a) to which the Company is a party; (b) by which the Company or
any of its assets is or may become bound or under which the
Company has, or may become subject to, any obligation; or (c)
under which the Company has or may acquire any right or interest.
Company Proprietary Asset. "Company Proprietary Asset" shall
mean any Proprietary Asset owned by or licensed to the Company or
otherwise used by the Company.
Consent. "Consent" shall mean any approval, consent,
ratification, permission, waiver or authorization (including any
Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other
agreement, contract, subcontract, lease, understanding,
instrument, note, warranty, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature.
Damages. "Damages" shall include any loss, damage, injury,
decline in value, lost opportunity, liability, claim, demand,
settlement, judgment, award, fine, penalty, Tax, fee (including
reasonable attorneys' fees), charge, cost (including costs of
investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to
Parent on behalf of the Company and the Shareholders.
Encumbrance. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance,
claim, infringement, interference, option, right of first
refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the
<PAGE>
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
(b) governmental or quasi-governmental authority of any nature
(including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body
or Entity and any court or other tribunal).
Indemnitees. "Indemnitees" shall mean the following Persons:
(a) Parent; (b) Parent's current and future affiliates (including
the Surviving Corporation); (c) the respective Representatives of
the Persons referred to in clauses "(a)" and "(b)" above; and (d)
the respective successors and assigns of the Persons referred to
in clauses "(a)", "(b)" and "(c)" above; provided, however, that
the Shareholders shall not be deemed to be "Indemnitees."
Legal Proceeding. "Legal Proceeding" shall mean any action,
suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving,
any court or other Governmental Body or any arbitrator or
arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal,
state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance,
code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental
Body.
Material Adverse Effect. A violation or other matter will be
deemed to have a "Material Adverse Effect" on the Company if such
violation or other matter could reasonably be expected to result
in a material adverse effect on the Company's business,
condition, assets, liabilities, operations, financial performance
or prospects.
Person. "Person" shall mean any individual, Entity or
Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a)
patent, patent application, trademark (whether registered or
unregistered), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise,
system, computer software, computer program, invention, design,
blueprint, engineering drawing, proprietary product, technology,
<PAGE>
proprietary right or other intellectual property right or
intangible asset; or (b) right to use or exploit any of the
foregoing.
Representatives. "Representatives" shall mean officers,
directors, employees, agents, attorneys, accountants, advisors
and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.
Tax. "Tax" shall mean any tax (including any income tax,
franchise tax, capital gains tax, gross receipts tax, value-added
tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax,
sales tax, use tax, property tax, business tax, withholding tax
or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed,
assessed or collected by or under the authority of any
Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate,
schedule, notice, notification, form, election, certificate or
other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body
in connection with the determination, assessment, collection or
payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
Year 2000 Compliant. For purposes of the Agreement, an item of
software or hardware shall be deemed to be "Year 2000 Compliant"
only if: (i) the functions, calculations, and other computing
processes of such item of software or hardware (collectively,
"Processes") perform in a consistent and correct manner without
interruption regardless of the date on which the Processes are
actually performed and regardless of the date input to the
applicable computer system (before, on and after January 1,
2000); (ii) such item of software or hardware accepts,
calculates, compares, sorts, extracts, sequences and otherwise
processes date inputs and date values, and returns and displays
date values, in a consistent and correct manner regardless of the
dates used (before, on and after January 1, 2000); (iii) such
item of software or hardware accepts and responds to year input,
if any, in a manner that resolves any ambiguities as to century
in a defined, predetermined and appropriate manner; (iv) such
item of software or hardware stores and displays date information
in ways that are unambiguous as to the determination of the
century; and (v) such item of software or hardware determines
leap years by the following standard: (A) if dividing the year by
four yields an integer, it is a leap year, except for years
ending in 00, but (B) a year ending in 00 is a leap year if
dividing it by 400 yields an integer.
<PAGE>
EXHIBIT 99.1
Press Release Announcing the Execution of the Definitive Agreement
Company Contact MediaContact
Rachel Brant Laurie Head
MYSOFTWARE OGILVY PUBLIC RELATIONS
(650) 473.3621 (202) 452.9529
[email protected] [email protected]
For Immediate Release
Tuesday, July 6, 1999
MYSOFTWARE COMPANY ACQUIRES MARKETHOME, INC. TO EXTEND
LEADERSHIP IN INTERNET DIRECT MARKETING ARENA
Internet Direct Marketing Services Now Include a Complete E-mail Solution,
Combining E-Prospecting with E-mail Campaign Management
PALO ALTO, Calif. - July 6, 1999 - Capping a series of bold moves
designed to extend its leadership position in Internet direct
marketing, MySoftware Company (Nasdaq: MYSW) today announced it
will acquire Berkeley, California based MarketHome, Inc., a
preeminent e-mail campaign management company, in a $15 million
all-stock transaction. The companies have reached a definitive
agreement and expect to close the transaction in the next 30
days.
"With this acquisition, we combine MarketHome's market leadership
in permission-based, opt-in e-mail communication, with
MySoftware's new My eProspects.com services," said Gregory
Slayton, CEO and president of MySoftware. "This, in combination
with our robust offering of other powerful direct marketing
products and services, solidifies our position as a leader in the
Internet direct marketing space."
"The eMarketing industry is poised for phenomenal growth,"
according to eMarketing senior analyst Tara Long of C.E.
Unterberg, Towbin. "Worldwide expenditures for online marketing
reached $6.2 billion in 1998, up 81% from $3.4 billion in 1997.
As the Internet continues to gain acceptance and new interactive
technologies emerge, we anticipate expenditures in this category
will exceed $31 billion in 2002."
MySoftware will acquire MarketHome, Inc., the leading provider of
permission-based, opt-in email marketing services to catalogers,
including top-tier industry icons L.L. Bean, Boise Cascade Office
Products, Coach, the NBA, Dean & Deluca, Joseph A. Bank, and
Talbots. MarketHome helps its large and rapidly growing list of
more than 40 world-class clients increase sales and customer
loyalty through targeted, personalized e-mail campaigns that can
be created, managed and analyzed entirely through a simple Web-
based interface. Consumer acceptance has been rapid, and to date,
more than one million customers have signed up to receive
promotional communications on specific topics of personal
interest.
"Through this acquisition and a series of new strategic
partnerships, MySoftware now offers a comprehensive range of
Internet direct marketing services," Slayton continued. "Our
complete set of Internet direct marketing tools enable businesses
1) to manage outbound e-mail campaigns of any size, 2) to
prospect for new customers from one of the largest permission-
based, opt-in email database in the world through our new
service, My eProspects.com, and 3) to leverage the Internet by
prospecting for new customers for traditional direct marketing
programs."
<PAGE>
"We help our clients build strong and profitable relationships
with their customers using e-mail," said Jim Williams, MarketHome
founder and CEO. "Every single company in the world that seeks
to strengthen their relationships with its customers and make
money from its website needs this service. We think MarketHome
adds a lot of value to MySoftware's visionary Internet direct
marketing strategy by providing the universality and flexibility
of e-mail to businesses looking to attract customers, generate
repeat sales, and engage in a personalized, on-going dialogue
with the consumer."
MarketHome will become the e-mail marketing division of
MySoftware Company, and Jim Williams, president and CEO of
MarketHome, will become general manager of this division.
About MySoftware Company
MySoftware Company (Nasdaq: MYSW), the 9th highest performer on
all US Capital Markets in 1998 according to The Wall Street
Journal and Barron's, combines powerful software with effective,
affordable Internet and annuities solutions to easily turn any PC
into a direct marketing powerhouse. MySoftware's Internet
services are dedicated to helping businesses find new customers
(www.MyProspects.com and www.MyeProspects.com) to grow their
businesses using the Internet. MySoftware actively works with
some of the world's best-known companies to provide Internet
direct marketing solutions for their small business customers.
More information on MySoftware and its alliances and products is
available at www.MySoftware.com.
<PAGE>
EXHIBIT 99.2
Press Release Announcing the Consummation of the Acquisition
Corporate Contact Media Contact
Rachel Brant Laurie Head
MySoftware Company Ogilvy Public Relations
650.473.3621 202.452.9529
[email protected] [email protected]
For Immediate Release
Thursday, August 5, 1999
MYSOFTWARE CLOSES ACQUISITION OF MARKETHOME TO SOLIDIFY POSITION
AS LEADER IN E-MARKETING SOLUTIONS
MarketHome, Inc. Becomes E-mail Marketing Division of MySoftware
PALO ALTO, Calif. - August 5, 1999 (MySoftware Company( (Nasdaq:
MYSW), the leader in e-marketing solutions, today finalized the
acquisition of MarketHome in a move to quickly propel the
combined company to leadership in the e-mail marketing space.
MarketHome, the leading provider of permission-based, opt-in
email marketing services to more than 50 world-class clients, was
acquired for $15 million in an all-stock transaction.
"This acquisition is a strategic move for MySoftware because it
enables us to solve the top two problems of e-marketers today: 1)
driving qualified prospects to their web sites in a cost
effective manner, and 2) developing profitable ongoing
relationships with these prospects," explained Gregory Slayton,
president and CEO of MySoftware. "We expect the acquisition of
MarketHome to significantly contribute to future revenue growth
as we maintain a leadership role in what market analysts project
will be a $31 billion e-marketing industry by 2002."
The MarketHome e-mail service allows marketers to drive highly
targeted prospects to their Web sites, and then use e-mail
communication to build profitable, one-to-one relationships with
them. Users can create, manage and analyze targeted,
personalized e-mail campaigns, all through a simple Web-based
interface.
<PAGE>
"We are expanding these e-marketing solutions by combining the
incredible technology of the MarketHome E-mail Marketing Service
with our existing suite of powerful Web services and desktop
direct marketing software," Mr. Slayton continued. "For every
business - large or small - looking to grow its customer base,
top line revenues, and bottom line profits, the
MySoftware/MarketHome system is a powerful, easy-to-use, cost
effective e-marketing solution that drives traffic and revenues."
(a) About MySoftware Company
MySoftware Company (Nasdaq: MYSW), the leader in e-marketing
solutions, provides easy to use, effective services that leverage
the powerful technology offered by the Internet. By utilizing
request-based e-mail campaigns, Internet lead generation, and
MySoftware's direct marketing products, any marketer can
establish profitable on-going relationships with their customers,
drive traffic, and increase revenues. MySoftware actively
partners with some of the world's best-known companies to provide
e-marketing solutions for their customers. More information on
MySoftware and its alliances and products is available at
www.MySoftware.com
<PAGE>
