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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 30, 1998
THE VANTIVE CORPORATION
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(Exact name of registrant as specified in charter)
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Delaware 0-26592 77-0266662
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
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The Vantive Corporation, 2455 Augustine Drive, Santa Clara, CA 95054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 982-5700
Not applicable.
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 30, 1998, and effective on that date, The Vantive
Corporation (the "Company") completed an acquisition (the "Merger") of Wayfarer
Communications, Inc., a privately-held California corporation ("Wayfarer"),
pursuant to an Agreement and Plan of Reorganization, dated June 18, 1998, by and
between the Company, Revo Acquisition Corporation, a wholly-owned subsidiary of
the Company, and Wayfarer. Upon consummation of the Merger, Wayfarer became a
wholly-owned subsidiary of the Company.
Under the terms of the Merger, Wayfarer's securityholders will
receive approximately 179,000 shares of the Company's Common Stock in exchange
for all outstanding shares of Wayfarer capital stock. The transaction will be
accounted for as a purchase. Vantive expects to record charges related to the
acquisition of approximately $11.5 million in the second quarter of 1998,
including a one-time in-process research and development charge and a
compensatory bonus expense.
The amount of the Merger consideration was determined through
arms-length negotiation. There were no material relationships between the
Wayfarer shareholders and the Company or any of its affiliates, any director or
officer of the Company, or any associate of any such director or officer prior
to the Merger. The Company is obligated to prepare and file with the Securities
and Exchange Commission a registration statement on Form S-3 with respect to the
shares of the Company's Common Stock issued in the Merger.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
It is impracticable to provide the audited financial
statements of Wayfarer for the periods required at the date of
this report. The Company intends to file such financial
statements as are required to be filed as soon as they become
available and in any event not later than September 14, 1998.
(b) Pro forma financial information.
It is impracticable to provide the pro forma financial
information required pursuant to Article 11 of Regulation S-X
at the date of this report. The Company intends to file such
pro forma financial information as are required to be filed as
soon as they become available and in any event not later than
September 14, 1998.
(c) The following exhibits are attached and filed herewith:
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Exhibit No. Description
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2.1 Agreement and Plan of Reorganization dated as
of June 18, 1998, by and among The Vantive
Corporation, Wayfarer Communications, Inc. and
Revo Acquisition Corporation.
The above agreement contains a list identifying
all exhibits and schedules thereto not filed as
a part of Exhibit 2.1. The Company agrees to
furnish supplementally a copy of any omitted
exhibits or schedules to the Securities and
Exchange Commission upon request.
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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.
THE VANTIVE CORPORATION
Date: July 14, 1998 By: /s/ David Schellhase
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David Schellhase
Vice President and General Counsel
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EXHIBIT INDEX
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Exhibit No. Description
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2.1 Agreement and Plan of Reorganization dated as of June 18,
1998, by and among The Vantive Corporation, Wayfarer
Communications, Inc. and Revo Acquisition Corporation.
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EXHIIBT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among
THE VANTIVE CORPORATION,
a Delaware corporation,
REVO ACQUISITION CORPORATION,
a Delaware corporation and a wholly-owned
subsidiary of The Vantive Corporation,
and
WAYFARER COMMUNICATIONS, INC.,
a California corporation
Dated as of June 18, 1998
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ARTICLE I THE MERGER................................................................1
Section 1.1 The Merger............................................................1
Section 1.2 Closing; Effective Time of the Merger.................................1
Section 1.3 Effects of Merger.....................................................2
Section 1.4 Directors and Officers................................................2
ARTICLE II CONVERSION OF SECURITIES; MERGER CONSIDERATION............................2
Section 2.1 Conversion of Capital Stock...........................................2
Section 2.2 Exchange of Certificates..............................................4
Section 2.3 Escrow................................................................6
Section 2.4 Calculation and Payment of Post-Closing Adjustment....................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET..................................8
Section 3.1 Organization, Standing and Power; Qualification; Subsidiaries.........8
Section 3.2 Target Capital Structure..............................................8
Section 3.3 Authority; No Conflict; Required Filings and Consents.................9
Section 3.4 Financial Statements.................................................10
Section 3.5 Absence of Liabilities...............................................11
Section 3.6 Accounts Receivable..................................................11
Section 3.7 Inventory............................................................11
Section 3.8 Absence of Certain Changes or Events.................................12
Section 3.9 Taxes................................................................13
Section 3.10 Tangible Assets and Real Property....................................14
Section 3.11 Intellectual Property................................................15
Section 3.12 Bank Accounts........................................................16
Section 3.13 Contracts............................................................16
Section 3.14 Labor Difficulties...................................................17
Section 3.15 Trade Regulation.....................................................17
Section 3.16 Environmental Matters................................................18
Section 3.17 Employee Benefit Plans...............................................18
Section 3.18 Compliance with Laws.................................................20
Section 3.19 Employees and Consultants............................................20
Section 3.20 Litigation...........................................................20
Section 3.21 Restrictions on Business Activities..................................20
Section 3.22 Governmental Authorization...........................................20
Section 3.23 Insurance............................................................20
Section 3.24 Indemnification Claims...............................................21
Section 3.25 No Brokers...........................................................21
Section 3.26 Real Property Holding Corporation....................................21
Section 3.27 Payments Resulting from Mergers......................................21
Section 3.28 Interested Party Transactions........................................21
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Section 3.29 No Existing Discussions..............................................21
Section 3.30 Corporate Documents..................................................22
Section 3.31 No Misrepresentation.................................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB..........................22
Section 4.1 Organization.........................................................22
Section 4.2 Buyer Capital Structure..............................................22
Section 4.3 Authority; No Conflict; Required Filings and Consents................23
Section 4.4 SEC Filings; Financial Statements....................................24
Section 4.5 Absence of Undisclosed Liabilities...................................25
Section 4.6 Absence of Certain Changes or Events.................................25
Section 4.7 Interim Operations of Sub............................................25
Section 4.8 Litigation...........................................................25
ARTICLE V CONDUCT OF BUSINESS......................................................26
Section 5.1 Covenants of Target by Target........................................26
Section 5.2 Cooperation..........................................................28
ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS......................................28
Section 6.1 No Solicitation......................................................28
Section 6.2 Approval of Shareholders.............................................29
Section 6.3 Consents.............................................................29
Section 6.4 Access to Information................................................29
Section 6.5 Legal Conditions to Merger...........................................30
Section 6.6 Public Disclosure....................................................30
Section 6.7 Nasdaq National Market Listing.......................................30
Section 6.8 Tax-Free Reorganization..............................................30
Section 6.9 Tax Certificates.....................................................30
Section 6.10 Indemnification......................................................31
Section 6.11 Additional Agreements; Reasonable Efforts............................31
Section 6.12 Stock Options........................................................32
Section 6.13 Target Warrants......................................................32
Section 6.14 Stock Grants.........................................................32
Section 6.15 Registration of Buyer Common Stock...................................33
Section 6.16 Expenses.............................................................36
Section 6.17 Employee Arrangements................................................36
Section 6.18 Target 1997 Audited Financials.......................................37
Section 6.19 Voting Agreements....................................................37
Section 6.20 Target 401(k) Plan...................................................37
Section 6.21 Notification of Certain Matters......................................37
ARTICLE VII CONDITIONS TO MERGER.....................................................37
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger...........37
Section 7.2 Additional Conditions to Obligations of Buyer and Sub................38
Section 7.3 Additional Conditions to Obligations of Target.......................39
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ARTICLE VIII TERMINATION AND AMENDMENT................................................40
Section 8.1 Termination..........................................................40
Section 8.2 Effect of Termination................................................40
Section 8.3 Fees and Expenses....................................................41
Section 8.4 Amendment............................................................41
Section 8.5 Extension; Waiver....................................................42
ARTICLE IX ESCROW AND INDEMNIFICATION...............................................42
Section 9.1 Survival of Representations, Warranties, Covenants and
Agreements...........................................................42
Section 9.2 Indemnification by Target Shareholders...............................42
Section 9.3 Procedures for Indemnification.......................................43
Section 9.4 Defense of Third Party Claims........................................43
Section 9.5 Settlement of Third Party Claims.....................................44
Section 9.6 Resolution of Indemnification Claims.................................44
Section 9.7 Shareholder Representative...........................................44
ARTICLE X GENERAL PROVISIONS.......................................................47
Section 10.1 Notices..............................................................47
Section 10.2 Interpretation.......................................................48
Section 10.3 Counterparts.........................................................48
Section 10.4 Severability.........................................................48
Section 10.5 Entire Agreement.....................................................49
Section 10.6 Governing Law........................................................49
Section 10.7 Assignment...........................................................49
Section 10.8 Third Party Beneficiary..............................................49
ANNEXES
Annex 2.1(c)(iii) Calculation of "Pool of Shares"
Annex 2.3 Form of Escrow Agreement
Annex 2.4(a) Target's Management Bonus Obligation
Annex 3 Target Disclosure Schedule
Annex 4 Buyer Disclosure Schedule
Annex 6.9 Form of Tax Certificates
Annex 6.12 Schedule of New Option Grants
Annex 6.14 Schedule of Stock Grants and Cash Bonuses
Annex 6.17 Schedule of Target Employees
Annex 6.19 Form of Voting Agreement
Annex 7.2(c) Form of Confidentiality and Inventions Agreement
Annex 7.2(d) Form of Noncompetition Agreement
Annex 7.2(e) Schedule of Target Employees
Annex 7.2(g) Form of Fenwick & West Legal Opinion
Annex 7.2(j) Form of Investor Representation Letter
Annex 7.3(d) Form of GCW&F Legal Opinion
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of June 18,
1998 by and among The Vantive Corporation, a Delaware corporation ("Buyer"),
Revo Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Buyer ("Sub"), and Wayfarer Communications, Inc., a California
corporation ("Target").
Recitals
WHEREAS, the Boards of Directors of Buyer, Sub and Target deem it
advisable and in the best interests of each corporation and its respective
shareholders that Buyer and Target combine in order to advance the long-term
business interests of Buyer and Target;
WHEREAS, the combination of Buyer and Target shall be effected by the
terms of this Agreement through a transaction in which Sub will merge with and
into Target, Target will become a wholly-owned subsidiary of Buyer and the
shareholders of Target will become stockholders of Buyer; and
WHEREAS, for federal income tax purposes, the parties to this Agreement
intend, by approving resolutions authorizing this Agreement, to adopt this
Agreement as a plan of reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, and that the merger of Sub with and into Target shall qualify as a
reorganization within the meaning of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the provisions of this Agreement and
in accordance with the California General Corporation Law (the "GCL"), Sub shall
be merged with and into Target (the "Merger"). As a result of the Merger, the
outstanding shares of capital stock of Sub and Target shall be converted or
canceled in the manner provided in Article II of this Agreement; the separate
corporate existence of Sub shall cease; and Target shall be the surviving
corporation in the Merger and shall become a subsidiary of Buyer (the "Surviving
Corporation").
Section 1.2 Closing; Effective Time of the Merger. The closing of the
Merger (the "Closing") will take place at 10:00 a.m., Pacific Time, on a date to
be specified by Buyer and Target (the "Closing Date"), which shall be no later
than the second business day after satisfaction of all conditions set forth in
Sections 7.1, 7.2(b) (other than the delivery of the officers' certificate
referred to therein) and 7.3(b) (other than the delivery of the officers'
certificate referred to therein), provided that the other closing conditions set
forth in Article VII
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have been satisfied or waived, at the offices of Gray Cary Ware & Freidenrich
LLP, 400 Hamilton Avenue, Palo Alto, CA 94301, unless another date or place is
agreed to in writing by Buyer and Target. On, or as soon as practical after, the
Closing Date, an agreement of merger containing the substantive provisions of
this Article I and Article II (the "Merger Agreement") shall be duly signed by
Target and Sub and shall be filed, together with certificates of officers of
Target and Sub, with the Secretary of State of the State of California (the
"Secretary of State"). The Merger shall become effective upon the filing of the
Merger Agreement with the Secretary of State and the filing of a certificate of
merger with the Secretary of State of the State of Delaware in accordance with
the Delaware General Corporation Law (the "DGCL") (the date and time of such
filing being referred to herein as the "Effective Time").
Section 1.3 Effects of Merger.
(a) At the Effective Time: (i) the separate existence of Sub
shall cease and Sub shall be merged with and into Target (ii) the Articles of
Incorporation of Target as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation; and (iii)
the Bylaws of Sub as in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation. Sub and Target are sometimes referred
to herein as the "Constituent Corporations."
(b) From and after the Effective Time, (i) the Surviving
Corporation shall possess all the rights, privileges, immunities, powers and
purposes of each of the Constituent Corporations; (ii) all the property, real
and personal, including subscriptions to shares, causes of action and every
other asset of each of the Constituent Corporations, shall vest in the Surviving
Corporation without further act or deed; (iii) the Surviving Corporation shall
assume and be liable for all the liabilities, obligations and penalties of each
of the Constituent Corporations; and (iv) the Merger shall have the further
effects set forth in this Agreement and in the GCL and the DGCL.
Section 1.4 Directors and Officers. The directors and officers of Sub
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation and shall hold office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES; MERGER CONSIDERATION
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of Buyer, Sub, Target or
the holder of any shares of common stock, no par value per share, of Target
("Target Common Stock") or capital stock of Sub:
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(a) Capital Stock of Sub. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, $0.001 par value, of the Surviving
Corporation.
(b) Cancellation of Treasury Shares and Buyer-Owned Stock. All
shares of Target Common Stock and/or shares of preferred stock, no par value per
share, of Target ("Target Preferred Stock" and, collectively with Target Common
Stock, "Target Stock") owned by Target as treasury shares or by Buyer, Sub or
any other wholly-owned subsidiary of Buyer shall be canceled and retired and
shall cease to exist, and no stock of Buyer or other consideration shall be
delivered in exchange therefor.
(c) Exchange Ratios for Target Stock. Subject to Section 2.2, all
shares of Target Stock shall be converted as follows:
(i) Target Common Stock. Each issued and outstanding share of
Target Common Stock (other than shares canceled in accordance with Section
2.1(b) and Dissenting Shares as defined in Section 2.1(e)) shall be converted
into the right to receive 0.0006262 fully paid and nonassessable shares of
common stock, $0.001 par value, of Buyer ("Buyer Common Stock"). The foregoing
conversion ratio shall be subject to adjustment to reflect any stock split or
stock dividend with respect to Target Common Stock effected between the date of
this Agreement and the Effective Time.
(ii) Target Preferred Stock. Each issued and outstanding
share of Target Preferred Stock (other than shares canceled in accordance with
Section 2.1(b) and Dissenting Shares as defined in Section 2.1(e)) shall be
converted into the right to receive that number of shares of fully paid and
nonassessable Buyer Common Stock equal to the quotient obtained by dividing (A)
the Pool of Shares (as defined below) for such share's series, by (B) the total
number of then issued and outstanding shares of Target Preferred Stock in such
series and the number of shares of such series subject to then outstanding
warrants, with the quotient thereby obtained carried to seven (7) decimal
places. The foregoing conversion ratios shall be subject to the Post-Closing
Adjustment (as defined in Section 2.4(a)) and to adjustment to reflect any stock
split or stock dividend with respect to such series of Target Preferred Stock
effected between the date of this Agreement and the Effective Time.
(iii) Definition of "Pool of Shares" for Each Series of
Target Preferred Stock. The "Pool of Shares" with respect to each series of
Target Preferred Stock shall mean the product of (A) 178,603 shares of Buyer
Common Stock (which number of shares is calculated as set forth in Annex
2.1(c)(iii)) and (B) the ratio of the aggregate dollar liquidation preference of
such series (including outstanding shares and shares subject to outstanding
warrants) as set forth in the Articles of Incorporation of Target to the
aggregate dollar liquidation preference of all series of Target Preferred Stock
(including outstanding shares and shares subject to outstanding warrants) as set
forth in the Articles of Incorporation of Target (the product thereby obtained
carried to four (4) decimal places).
All such shares of Target Common Stock and Target Preferred Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to
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exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the shares
of Buyer Common Stock to be issued in consideration therefor upon the surrender
of such certificate in accordance with this Article II.
(d) Target Options and Warrants. At the Effective Time, (i) all
then outstanding options to purchase Target Common Stock ("Target Options") will
be canceled by Target in accordance with the provisions of Section 6.12 and (ii)
all then outstanding warrants to purchase Target Stock (the "Target Warrants")
will be assumed by Buyer in accordance with the provisions of Section 6.13.
(e) Dissenters' Rights. Any shares of Target Stock held by
shareholders of Target who properly exercise and perfect the dissenters'
appraisal rights set forth in Chapter 13 of the GCL ("Dissenting Shares") shall
not be converted into the right to receive Buyer Common Stock but shall instead
be converted into the right to receive such consideration as may be determined
to be due with respect to such Dissenting Shares pursuant to the provisions of
the GCL. Target shall give Buyer prompt notice of any demand received by Target
for appraisal of Target Stock, and Buyer shall have the right to control all
negotiations and proceedings with respect to such demand. Target agrees that,
except with the prior written consent of Buyer or as required under the GCL, it
will not voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for appraisal. Each holder of Dissenting Shares (a
"Dissenting Shareholder") who, pursuant to the provisions of the GCL, becomes
entitled to payment of the value of shares of Target Stock shall receive payment
therefor (but only after the value therefor shall have been agreed upon or
finally determined pursuant to the provisions of the GCL). In the event that any
holder of shares of Target Stock fails to make an effective demand for payment
or otherwise loses his or her status as a Dissenting Shareholder, that holder
shall thereafter be entitled to the same rights to receive Buyer Common Stock
and any cash payment in lieu of fractional shares, in each case without interest
thereon, to which such Dissenting Shareholder would have been entitled to under
Section 2.1 and the Merger Agreement.
(f) Certificate Legends. The shares of Buyer Common Stock to be
issued pursuant to this Article II shall not have been registered and shall be
characterized as "restricted securities" under the federal securities laws, and
under such laws such shares may be resold without registration under the
Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. Each certificate evidencing shares of Buyer Common Stock
to be issued pursuant to this Article II shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION
OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."
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Section 2.2 Exchange of Certificates. The procedures for exchanging
outstanding shares of Target Common Stock and Target Preferred Stock for Buyer
Common Stock pursuant to the Merger are as follows:
(a) Exchange Agent. Promptly after the Effective Time, Buyer
shall deposit with an exchange agent designated by Buyer (the "Exchange Agent"),
for the benefit of the holders of shares of Target Stock, for exchange in
accordance with this Section 2.2, through the Exchange Agent, certificates
representing the shares of Buyer Common Stock issuable pursuant to Section 2.1,
less the Escrow Shares (as defined in Section 2.3). The shares of Buyer Common
Stock deposited with the Exchange Agent, together with any dividends or
distributions with respect thereto, hereinafter shall be referred to as the
"Exchange Fund."
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate that immediately prior to the Effective Time represented outstanding
shares of Target Stock (a "Target Certificate") (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Target Certificates shall pass, only upon delivery of the Target
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Buyer and Target may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Target Certificates in exchange for
certificates representing shares of Buyer Common Stock ("Buyer Certificates").
Upon surrender of a Target Certificate for cancellation to the Exchange Agent
(or such other agent or agents as may be appointed by Buyer), together with a
duly executed letter of transmittal, the holder of such Target Certificate shall
be entitled to receive in exchange therefor a Buyer Certificate representing
that number of whole shares of Buyer Common Stock which such holder has the
right to receive pursuant to the provisions of Section 2.1(c) less such
shareholder's pro rata portion of the Escrow Shares, and the Target Certificate
so surrendered shall immediately be canceled. If any Target Certificate shall
have been lost, stolen or destroyed, Buyer may, in its reasonable discretion and
as a condition precedent to the issuance of any certificate representing Buyer
Common Stock, require the owner of such lost, stolen or destroyed Target
Certificate to provide an appropriate affidavit and to deliver a bond (in such
sum as Buyer may reasonably direct) as indemnity against any claim that may be
made against Buyer or the Surviving Corporation with respect to such Target
Certificate (such affidavit and bond, if required, together an "Acceptable
Affidavit"). In the event of a transfer of ownership of Target Stock which is
not registered in the transfer records of Target, a Buyer Certificate
representing the proper number of shares of Buyer Common Stock may be issued to
a transferee if the Target Certificate representing such Target Stock is
presented to the Exchange Agent, accompanied by all documents reasonably
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Target Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender a Buyer Certificate as contemplated by this Agreement.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Buyer Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered
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Target Certificate with respect to the shares of Buyer Common Stock represented
thereby until the holder of record of such Target Certificate shall surrender
such Target Certificate or, in the case of a lost, stolen or destroyed Target
Certificate, an Acceptable Affidavit. Subject to the effect of applicable laws,
following surrender of any such Target Certificate or Acceptable Affidavit,
there shall be paid to the record holder of the Buyer Certificates issued in
exchange therefor, without interest, (i) the amount of dividends or other
distributions with a record date after the Effective Time previously paid with
respect to such whole shares of Buyer Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Buyer Common Stock.
(d) No Further Ownership Rights in Target Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of shares of Target
Stock in accordance with the terms hereof (including any cash paid pursuant to
subsection (c) of this Section 2.2) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Target Stock, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Target Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Target
Certificates or Acceptable Affidavits are presented to Buyer or the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.2.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Target Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Buyer.
Notwithstanding any other provision of this Agreement, (i) the number of shares
to be issued to each holder of shares of Target Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of Buyer Common Stock shall be rounded up to the nearest whole share and
(ii) the number of shares to be issued to each holder of Target Preferred Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Buyer Common Stock shall be rounded to the
nearest whole integer.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the shareholders of Target one year after
the Effective Time shall be delivered to Buyer, upon demand, and any
shareholders of Target who have not previously complied with this Section 2.2
shall thereafter look only to Buyer for payment of their claim for Buyer Common
Stock and any dividends or distributions with respect to Buyer Common Stock.
(g) No Liability. Neither Buyer nor Target shall be liable to any
holder of shares of Target Stock or Buyer Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.3 Escrow. At the Closing, Buyer will deduct from the number of
shares of Buyer Common Stock deliverable to the holders of Target Preferred
Stock (whether or not such
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holders also hold Target Common Stock) pursuant to Section 2.2(b), and will
deposit into escrow (the "Escrow") a certificate representing twenty-five
percent (25%) of the shares of Buyer Common Stock issuable in the Merger to such
holders with respect to the shares of Target Preferred Stock, on a pro rata
basis, rounded down to the nearest whole share (the "Escrow Shares"). The Escrow
Shares shall be held by Harris Trust and Savings Bank (or such other institution
as shall be agreed upon by Buyer and the Shareholder Representative (as defined
in Section 9.7)) as escrow agent (the "Escrow Agent"), in accordance with and
subject to the provisions of an Escrow Agreement substantially in the form of
Annex 2.3 (the "Escrow Agreement"). The Escrow Shares shall be held as (i) a
fund from which the Post-Closing Adjustment (as defined in Section 2.4(a)) may
be deducted and (ii) collateral for the indemnification obligations under
Article IX of the persons who were holders of Target Preferred Stock immediately
prior to the Effective Time.
Section 2.4 Calculation and Payment of Post-Closing Adjustment.
(a) Signing Date Balance Sheet, Closing Date Balance Sheet and
Liabilities Certificate. As soon as practicable, and no later than fifteen (15)
days following the Effective Date, the Shareholder Representative, on behalf of
the former Target shareholders, shall cause to be prepared and shall furnish to
Buyer (i) a balance sheet of Target as of the date hereof (the "Signing Date
Balance Sheet") and (ii) a balance sheet of Target as of the Closing Date (the
"Closing Date Balance Sheet"). The Signing Date Balance Sheet and the Closing
Date Balance Sheet shall be prepared in accordance with generally accepted
accounting principals ("GAAP") applied on a consistent basis, except for the
absence of required footnotes, and shall be certified by the persons who
immediately prior to the Effective Time served as the President and Chief
Financial Officer of Target, each in their respective official capacity. The
Signing Date Balance Sheet and the Closing Date Balance Sheet shall be
accompanied by a certificate, certified by such persons (the "Liabilities
Certificate"), setting forth (i) a detailed schedule of all liabilities of
Target reflected on the Signing Date Balance Sheet, and (ii) a calculation of
the "Post-Closing Adjustment" which shall be the amount by which $4,675,000 is
exceeded by the amount of the liabilities of Target reflected on the Signing
Date Balance Sheet, including, without limitation, "Target's Management Bonus
Obligation" which shall be the amount on Annex 2.4(a), and Target Transaction
Expenses (as defined in Section 6.16) but excluding (A) any deferred liabilities
relating to deferred revenue generated by Target's dealings with Sumitomo
Corporation and Targetvision Inc., and (B) financial advisory fees of $225,000
included in the Target Transaction Expenses. Buyer and the Surviving Corporation
shall afford the Shareholder Representative and Target's accountants access to
Target's books and records for the purpose of preparing the Signing Date Balance
Sheet, the Closing Date Balance Sheet and the Liabilities Certificate and
calculating the Post-Closing Adjustment.
(b) Buyer's Review and Approval. Buyer shall have fifteen (15)
days after receipt of the Signing Date Balance Sheet, the Closing Date Balance
Sheet and the Liabilities Certificate in which to give the Shareholder
Representative written notice of any objection
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(which notice shall specify the factual basis of such objection and the amount
at issue) to the Signing Date Balance Sheet, the Closing Date Balance Sheet, the
Liabilities Certificate or the proposed Post-Closing Adjustment. If Buyer does
not timely object, the Shareholder Representative's proposed Post-Closing
Adjustment shall be deemed to be binding on the parties for purposes of this
Section 2.4.
(c) Dispute Resolution. If Buyer timely objects to the Signing
Date Balance Sheet, the Liabilities Certificate or the Shareholder
Representative's proposed Post-Closing Adjustment, the Shareholder
Representative shall promptly meet with Buyer and attempt in good faith to reach
a resolution of such disagreement. Any such dispute which is not resolved by the
Shareholder Representative and Buyer and their respective accountants within
fifteen (15) days after delivery of notice of the dispute by Buyer shall, upon
written request of either the Shareholder Representative or Buyer delivered to
the other party, be submitted for final resolution to an independent certified
public accounting firm of national reputation selected jointly by Buyer's
independent certified public accountants and an independent certified public
accounting firm designated by the Shareholder Representative. Each party shall,
within five (5) business days after submission of such dispute, deliver to such
accounting firm the information such party wishes to have considered by such
firm in making its determination. Such accounting firm shall present its
determination or resolution of any dispute within fifteen (15) days after
submission of such dispute to the firm. The determination of the Post-Closing
Adjustment by such accounting firm shall be binding on the parties for purposes
of this Section 2.4. The fees of such accounting firm shall be borne by the
party whose position in the dispute with respect to the calculation of the
Post-Closing Adjustment is furthest from the final Post-Closing Adjustment as
determined by such accounting firm. Any such fees to be borne by Target shall
constitute Target Transaction Expenses and shall be added to the Post-Closing
Adjustment.
(d) Post-Closing Adjustment. Within five (5) business days
following the determination of the Post-Closing Adjustment pursuant to Section
2.4(b) or 2.4(c), Buyer and the Shareholder Representative shall direct the
Escrow Agent to deliver out of the Escrow to Buyer the number of shares of Buyer
Common Stock determined by dividing the amount of the Post-Closing Adjustment by
$31.9375.
(e) Effect on Rights of Buyer. No acceptance by Buyer of the
Closing Date Balance Sheet or the Liabilities Certificate or any determination
of the Post-Closing Adjustment for purposes of this Section 2.4 shall constitute
a waiver of any inaccuracies in the representations or warranties of Target
contained in this Agreement or limit in any way Buyer's right to assert claims
for indemnification pursuant to Article IX, except with respect to any claim(s)
relating to the amount of, or requiring adjustment of, the Post-Closing
Adjustment.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Except as set forth in the disclosure schedule (which disclosure
schedule shall be organized into numbered sections corresponding with the
section numbers of this Agreement) delivered by Target to Buyer on or before the
date of this Agreement and attached hereto as Annex 3 (the "Target Disclosure
Schedule"), Target represents and warrants to Buyer as follows:
Section 3.1 Organization, Standing and Power; Qualification;
Subsidiaries. Target is a corporation duly organized, validly existing and in
good standing under the laws of the State of California; has all requisite
corporate power to own, lease and operate its properties and to carry on its
business as currently being conducted and as currently proposed to be conducted;
is duly qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a material
adverse effect on the business, assets (including intangible assets),
properties, liabilities (contingent or otherwise), financial condition,
operations, or results of operation (a "Material Adverse Effect") of Target; and
Target does not directly or indirectly own any equity or similar interest in, or
any interest convertible or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity. Target has delivered true and correct copies of
the Articles of Incorporation and Bylaws of Target, each as amended to date, to
Buyer. Target is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws.
Section 3.2 Target Capital Structure.
(a) The authorized capital stock of Target consists of (i)
20,000,000 shares of Target Common Stock, of which 3,516,954 shares are issued
and outstanding and (ii) 8,801,708 shares of Target Preferred Stock, no par
value, of which: (A) 800,000 shares are designated as Series A Preferred Stock,
all 800,000 of which are issued and outstanding; (B) 400,000 shares are
designated as Series C Preferred Stock, all 400,000 of which are issued and
outstanding; (C) 2,161,308 shares are designated as Series D Preferred Stock,
2,142,308 of which are issued and outstanding; (D) 1,576,800 shares are
designated as Series E Preferred Stock, 1,576,800 of which are issued and
outstanding; and (E) 3,520,000 shares are designated as Series F Preferred
Stock, 2,100,844 of which are issued and outstanding. The outstanding Target
Stock is held of record by those persons set forth in Section 3.2 of the Target
Disclosure Schedule (which list sets forth the amount of Target Common Stock and
Target Preferred Stock held by each such person and/or entity). All outstanding
shares of Target Common Stock and Target Preferred Stock have been duly
authorized and validly issued, are fully paid and nonassessable, were issued in
compliance with state and federal securities laws, and are subject to no
preemptive rights or rights of first refusal created by statute, the Articles of
Incorporation or Bylaws of Target or any agreement to which Target is a party or
by which it is bound.
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(b) Except as set forth in Section 3.2(a) or Section 3.2 of the
Target Disclosure Schedule, and except for the conversion rights of the holders
of the outstanding Target Preferred Stock, there are (i) no equity securities of
any class of Target or any securities exchangeable into or exercisable for such
equity securities issued, reserved for issuance, or outstanding and (ii) no
outstanding subscriptions, options, warrants, puts, calls, rights, or other
commitments or agreements of any character to which Target is a party or by
which it is bound obligating Target to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
equity securities of Target or obligating Target to grant, extend, accelerate
the vesting of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement. Section 3.2 of the Target
Disclosure Schedule sets forth the names of all holders of Target Options and
Target Warrants, together with the number of shares of Target Stock for which
each such option and warrant may be exercised, and the exercise price and
vesting schedule (including acceleration provisions, if any) for each such
option and warrant. There are no contracts, commitments or agreements relating
to voting, purchase or sale of Target capital stock (i) between or among Target
and any of its shareholders or the holders of any Target Options or Target
Warrants, or (ii) to Target's knowledge, between or among any Target
shareholders or the holders of any Target Options or Target Warrants.
Section 3.3 Authority; No Conflict; Required Filings and Consents.
(a) Target has all requisite corporate power and authority to
enter into this Agreement and the other documents required to be executed and
delivered by Target hereunder, including the Merger Agreement (collectively, the
"Target Transaction Documents"), and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the other
Target Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Target, subject only to the approval of the
Merger by Target's shareholders in accordance with the GCL. This Agreement and
the other Target Transaction Documents have been duly executed and delivered by
Target and constitute the valid and binding obligations of Target, enforceable
against Target in accordance with their respective terms, except as such
enforceability may be limited (i) by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally and (ii)
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law and except for the need for Target to obtain shareholder
approval for the Merger.
(b) The execution and delivery by Target of this Agreement and
the other Target Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not, (i) conflict with, or
result in any violation or breach of any provision of the Articles of
Incorporation or Bylaws of Target, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default under,
or give rise to a right of termination, cancellation or acceleration of any
material obligation or loss of any material benefit under, any note, bond,
mortgage, indenture, lease, contract or other agreement or obligation to which
Target is a party or by which Target or any of its properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Target or any of its properties or
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assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not be
reasonably likely to have a Material Adverse Effect on Target or to interfere
with the consummation by Target of its obligations under this Agreement and the
other Target Transaction Documents.
(c) The outstanding shares of Target Common Stock and Target
Preferred Stock are the only shares of Target capital stock entitled to vote
with respect to the Merger, and the approval of this Agreement by the holders of
a majority of the issued and outstanding shares of Target Common Stock, voting
as a separate class, and by the holders of a majority of the issued and
outstanding shares of Target Preferred Stock, voting as a separate class, are
the only approvals of Target shareholders required for the consummation of the
Merger, no other vote of any series or class of Target Stock being required. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity (as defined in Section 10.2) is required by
or with respect to Target in connection with the execution and delivery of this
Agreement or the other Target Transaction Documents or the consummation of the
transactions contemplated hereby or thereby except for (i) the filing of the
Merger Agreement in accordance with the GCL, (ii) the filing of a certificate of
merger in accordance with the DGCL, (iii) items described in Section 3.3 of the
Target Disclosure Schedule, and (iv) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
be reasonably likely to have a Material Adverse Effect on Target or materially
and adversely affect the ability of Target to consummate the transactions
contemplated by this Agreement in accordance with its terms.
Section 3.4 Financial Statements. Target has delivered to Buyer copies
of (i) its audited financial statements as of, and for the years ended, December
31, 1995 and 1996, (ii) its unaudited financial statements as of, and for the
year ended, December 31, 1997 and (iii) its interim financial statements as of,
and for the four-month period ended, April 30, 1998 (collectively, with the
Target 1997 Audited Financials to be delivered pursuant to Section 6.18, the
"Target Financial Statements"). The Target Financial Statements have been, and
will be, prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved, except (in the case of the unaudited financial
statements) for the absence of required footnotes. The Target Financial
Statements present, and will present, fairly in all material respects the
financial position of Target as of the respective dates and the results of
Target's operations and cash flows for the periods indicated, except that the
interim Target Financial Statements are subject to normal and recurring year-end
audit adjustments which will not be material in amount. Target maintains a
standard system of accounting established and administered in accordance with
GAAP.
Section 3.5 Absence of Liabilities. Target does not have any
liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with GAAP), and whether due or
to become due, except for (i) liabilities reflected on Target's balance sheet as
of April 30, 1998 ("the Target Balance Sheet"), (ii) the $350,000 indebtedness
of Target to Buyer pursuant to that certain Promissory Note dated May 29, 1998,
(iii) liabilities incurred in the ordinary course of business that either are
not required to be set forth on the Target Balance
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Sheet or were incurred thereafter, and (iv) other liabilities listed in Section
3.5 of the Target Disclosure Schedule.
Section 3.6 Accounts Receivable. The accounts receivable shown on the
Target Balance Sheet arose in the ordinary course of business and have been
collected or will be collectible in the book amounts thereof, less an amount not
in excess of the allowance for doubtful accounts and returns provided for in the
Target Balance Sheet. The accounts receivable of Target arising after the date
of the Target Balance Sheet and prior to the Closing Date arose, or will arise,
in the ordinary course of business and have been collected or will be
collectible in the book amounts thereof, less allowances for doubtful accounts
and returns determined in accordance with the past practices of Target. None of
such accounts receivables is subject to any valid and material claim of offset
or recoupment or counterclaim, and Target has no knowledge of any specific facts
that would be likely to give rise to any such claim; no material amount of such
accounts receivable are contingent upon the performance by Target of any
obligation; and no agreement for deduction or discount has been made with
respect to any such accounts receivable.
Section 3.7 Inventory. The inventories shown on the Target Balance
Sheet, or thereafter acquired by Target, consist of items of a quantity and
quality usable or salable in the ordinary course of Target's business. Since
April 30, 1998, Target has continued to replenish inventories in a normal and
customary manner consistent with past practices. Target has not received notice
that it will experience in the foreseeable future any difficulty in obtaining,
in the desired quantity and quality and at a reasonable price and upon
reasonable terms and conditions, the supplies or component products required for
the manufacture, assembly or production of its products. The value at which
inventories are carried reflect the inventory valuation policy of Target, which
is consistent with its past practice and in accordance with GAAP. Due provision
has been made on the books of Target, consistent with past practices, to provide
for all slow-moving, obsolete, or unusable inventories at their estimated useful
or scrap values, and such inventory reserves are adequate to provide for such
slow-moving, obsolete or unusable inventory and inventory shrinkage.
Section 3.8 Absence of Certain Changes or Events. Since December 31,
1997, Target has conducted its business in the ordinary course and in a manner
consistent with past practices, and has not:
(a) to its knowledge, suffered any event or occurrence that has
had or could reasonably be expected to have a Material Adverse Effect on Target,
excluding all events or occurrences that generally affect other companies in the
software business;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, adversely affecting its properties or business;
(c) granted any increase in the compensation payable or to become
payable by Target to its officers or employees;
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(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of its capital stock or declared any
direct or indirect redemption, retirement, purchase or other acquisition of such
shares;
(e) issued any shares of its capital stock or any warrants,
rights, or options for, or entered into any commitment relating to such capital
stock except for exercises of employee stock options.
(f) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of any real
property or machinery, equipment or other operating property;
(h) sold, assigned, transferred, licensed or otherwise disposed
of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other material intangible asset, except for non-exclusive licenses which were
granted in the ordinary course of business and in a manner consistent with past
practices;
(i) entered into any material commitment or transaction
(including without limitation any borrowing or capital expenditure);
(j) incurred any liability, except in the ordinary course of
business and consistent with past practice;
(k) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except for liens for current taxes not yet due
and purchase money security interests incurred in the ordinary course of
business;
(l) made any capital expenditure or commitment for additions to
property, plant or equipment individually in excess of $10,000 or in the
aggregate in excess of $25,000;
(m) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets to, or entered into any agreement or
arrangement with any of its officers, directors or shareholders or any affiliate
of any of the foregoing, other than employee compensation and benefits and
advances against or reimbursement of employment related business expenses
incurred in the ordinary course of business; or
(n) agreed to take any action described in this Section 3.8 or
which to its knowledge would constitute a breach of any of the representations
or warranties of Target contained in this Agreement.
Section 3.9 Taxes.
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(a) As used in this Agreement, the terms "Tax" and, collectively,
"Taxes" mean any and all federal, state and local taxes of any country,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Target has prepared and timely filed all returns, estimates,
information statements and reports required to be filed prior to the Closing
Date with any taxing authority ("Returns") relating to any and all Taxes
concerning or attributable to Target or its operations, and such Returns are
true and correct in all material respects.
(c) Target, as of the Closing Date: (i) will have paid all Taxes
shown to be due and payable on such Returns covered by Section 3.9(b) and (ii)
will have withheld with respect to its employees all Taxes required to be
withheld.
(d) There is no Tax deficiency outstanding or assessed or, to the
best of Target's knowledge, proposed against Target that is not reflected as a
liability on the Target Balance Sheet nor has Target executed any agreements or
waivers extending any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(e) Target has no material liabilities for unpaid Taxes that have
not been accrued for or reserved on the Target Balance Sheet, whether asserted
or unasserted, contingent or otherwise, except taxes accrued in the ordinary
course of Target's business since the Target Balance Sheet.
(f) Target is not a party to any tax-sharing agreement or similar
arrangement with any other party, or any contractual obligation to pay any Tax
obligations of, or with respect to any transaction relating to, any other person
or to indemnify any other person with respect to any Tax.
(g) Section 3.9 of the Target Disclosure Schedule sets forth (i)
the date or dates through which the Internal Revenue Service ("IRS") has
examined the federal tax returns of Target and the date or dates through which
any foreign, state, local or other taxing authority has examined any other
Returns of Target, provided that Target knows of such examination or audit, (ii)
a complete list of each year for which any federal, state, local or foreign tax
authority has obtained or has requested an extension of the statute of
limitations from Target, (iii) a list of each tax case of Target currently
pending in audit, at the administrative appeals level or in litigation
and (iv) the date and issuing authority of each statutory notice of deficiency,
notice of proposed assessment and revenue agent's report issued to Target within
the last twelve (12) months if such notice, assessment or report is known to
Target. Except as set forth in Section 3.9 of the Target Disclosure Schedule, to
Target's knowledge neither the IRS nor any foreign, state, local or other taxing
authority has, since Target's inception, examined or is in the process of
examining any federal, foreign, state, local or other tax returns of Target. To
the knowledge of
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Target, neither the IRS nor any foreign, state, local or other taxing authority
is now asserting or threatening to assert any deficiency or claim for additional
taxes (or interest thereon or penalties in connection therewith) except as set
forth on Section 3.9 of the Target Disclosure Schedule.
(h) There is no contract, agreement, plan or arrangement to which
Target is a party as of the date of this Agreement, including but not limited to
the provisions of this Agreement or any transaction contemplated hereby,
covering any employee or former employee of Target that, individually or
collectively, that could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280(G), 404 or 162(m) of the Code.
Section 3.10 Tangible Assets and Real Property.
(a) Target owns or leases all tangible assets and properties
which are reasonably necessary for the conduct of its business as currently
conducted or which are reflected on the Target Balance Sheet or acquired since
the date of the Target Balance Sheet ("the Material Tangible Assets"). The
Material Tangible Assets are in good operating condition and repair.
(b) Target has good and marketable title to all Material Tangible
Assets that it owns, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except for liens for current taxes not
yet due and payable and purchase money security interests.
(c) Assuming the due execution and delivery thereof by the other
parties thereto, all leases of Material Tangible Assets to which Target is a
party are in full force and effect and are valid, binding and enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law. True and correct copies of all
such leases have been provided to Buyer.
(d) Target owns no real property. The Target Disclosure Schedule
sets forth a true and complete list of all real property leased by Target.
Assuming the due execution and delivery thereof by the other parties thereto,
all such real property leases are in full force and effect and are valid,
binding and enforceable in accordance with their respective terms, except as
such enforceability may be limited by (i) bankruptcy laws and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law. True and
correct copies all such of real property leases have been provided to Buyer.
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Section 3.11 Intellectual Property.
(a) Target owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights and mask works, and any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or materials that are material to the conduct of the business of
Target as currently conducted (all of which are referred to as the "Target
Intellectual Property Rights").
(b) Section 3.11 of the Target Disclosure Schedule contains an
accurate and complete description of (i) all patents and patent applications and
all registered trademarks, trade names, service marks and copyrights included in
the Target Intellectual Property Rights, including the jurisdictions in which
each such Target Intellectual Property Right has been issued or registered or in
which any such application for such issuance and registration has been filed,
(ii) all licenses, sublicenses, distribution agreements and other agreements to
which Target is a party and pursuant to which any person is granted rights with
respect to any Target Intellectual Property Rights or has the right to
manufacture, reproduce, market or exploit any product of Target (a "Target
Product") or any adaptation, translation or derivative work based on any Target
Product or any portion thereof, (iii) all licenses, sublicenses and other
agreements to which Target is a party and pursuant to which Target is authorized
to use any third party technology, trade secret, know-how, process, patent,
trademark or copyright, including software ("Licensed Intellectual Property"),
except for freely transferable "shrink wrap" software for which no royalties are
currently owed or in the future may be owed, (iv) all joint development
agreements to which Target is a party, and (v) all agreements with Governmental
Entities or other third parties pursuant to which Target has obtained funding
for research and development activities.
(c) Target is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Target Intellectual Property Rights or Licensed Intellectual Property.
(d) Target (i) has not received notice that it has been sued in
any suit, action or proceeding which involves a claim of infringement of any
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party; (ii) has not received any communications alleging that
the Company has violated, or by conducting its business as proposed, would
violate any patent, trademark, service mark, copyright, trade secret or other
proprietary right of any third party; (iii) has no reason to believe that the
manufacturing, marketing, licensing or sale of any Target Product or the
provision of services in the course of Target's business infringes any patent,
trademark, service mark, copyright, trade secret or other proprietary right of
any third party; and (iv) has no knowledge of any claim challenging or
questioning the validity or effectiveness of any license or agreement relating
to any Target Intellectual Property Rights or Licensed Intellectual Property.
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(e) All designs, drawings, specifications, source code, object
code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any Target Product at any stage of its development or created in the
course of providing services to customers of Target (the "Target Components")
were written, developed and created solely and exclusively by employees of
Target without the assistance of any third party or were created by third
parties who assigned ownership of their rights with respect thereto to Target by
means of valid and enforceable agreements, copies of which have been provided to
Buyer. Target has at all times used commercially reasonable efforts to treat the
Target Products and Target Components as containing trade secrets and has not
disclosed or otherwise dealt with such items in such a manner as to cause the
loss of such trade secrets by their release into the public domain.
(f) Each person currently or formerly employed by Target
(including independent contractors, if any) that has or had access to
confidential information of Target has executed and delivered to Target a
confidentiality and non-disclosure agreement in the form previously provided to
Buyer. Each person currently or formerly employed by Target (including
independent contractors, if any) has executed and delivered to Target an
inventions agreement in the form previously provided to Buyer. To Target's
knowledge, neither the execution or delivery of any such agreement, nor the
carrying on of Target's business as currently conducted and as currently
proposed to be conducted by any such person, as an employee or independent
contractor, has conflicted or will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such persons is obligated.
Section 3.12 Bank Accounts. Section 3.12 of the Target Disclosure
Schedule sets forth the names and locations of all banks and other financial
institutions at which Target presently maintains accounts of any nature, the
type of accounts maintained at each such institution and the names of all
persons authorized to draw thereon or make withdrawals therefrom.
Section 3.13 Contracts.
(a) Except as set forth in Section 3.13 of the Target Disclosure
Schedule, Target is not a party or subject to any agreement, obligation or
commitment, written or oral:
(i) that calls for any fixed and/or contingent payment
or expenditure or any related series of fixed and/or contingent payments or
expenditures by or to Target totaling more than $25,000 in any calendar year;
(ii) with agents, advisors, salesmen, sales
representatives, independent contractors or consultants that are not cancelable
by it on no more than thirty (30) days' notice and without liability, penalty or
premium;
(iii) that restricts Target from carrying on anywhere in
the world its business or any portion thereof as currently conducted;
(iv) to provide funds to or to make any investment in
any other person or entity (in the form of a loan, capital contribution or
otherwise);
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(v) with respect to obligations as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other person or entity;
(vi) for any line of credit, standby financing,
revolving credit or other similar financing arrangement;
(vii) with any distributor, original equipment
manufacturer, value added remarketer or other person for the distribution of any
of the Target Products; or
(viii) that is otherwise material to the business or
financial results of operations of Target.
(b) To Target's knowledge, no party to any contract, agreement or
instrument described in Section 3.10(c), 3.10(d) or 3.13(a) has expressed its
intention to cancel, withdraw, modify or amend such contract, agreement or
instrument.
(c) Target is not in material default under or in material breach
or violation of, nor is there any valid basis for any claim of material default
by Target under, or material breach or violation by Target of, any contract,
commitment or restriction to which Target is a party or by which Target or any
of its properties or assets is bound or affected. To Target's knowledge, no
other party is in material default under or in material breach or violation of,
nor, to Target's knowledge, is there any valid basis for any claim of material
default by any other party under, or any material breach or violation by any
other party of, any contract, commitment, or restriction to which Target is a
party or by which Target or any of its properties or assets is bound or
affected.
Section 3.14 Labor Difficulties. Target is not engaged in any unfair
labor practice or in violation of any applicable laws respecting employment,
employment practices or terms and conditions of employment. There is no unfair
labor practice complaint against Target pending, or to Target's knowledge
threatened, before any Governmental Entity. There is no strike, labor dispute,
slowdown, or stoppage pending, or to Target's knowledge threatened, against
Target. To Target's knowledge, Target is not now and has never been subject to
any union organizing activities. Target has never experienced any work stoppage
or other labor difficulty. To Target's knowledge, except as set forth in Section
3.14 of the Target Disclosure Schedule, no Target employees intend to leave
their employment, whether as a result of the transactions contemplated by this
Agreement or otherwise.
Section 3.15 Trade Regulation. Target has not terminated its
relationship with or refused to ship Target Products to any dealer, distributor,
third party marketing entity or customer which had theretofore paid or been
obligated to pay Target in excess of $10,000 over any consecutive twelve (12)
month period. To Target's knowledge, all of the prices charged by Target in
connection with the marketing or sale of any Target products or services have
been in compliance with all applicable laws and regulations. No claims have been
asserted or, to Target's knowledge, threatened against Target with respect to
the wrongful termination of any dealer, distributor or any other marketing
entity, discriminatory pricing, price fixing, unfair competition, false
advertising, or any other material violation of any laws or regulations relating
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to anti-competitive practices or unfair trade practices of any kind, and, to
Target's knowledge, no specific situation, set of facts, or occurrence provides
any basis for any such claim.
Section 3.16 Environmental Matters.
(a) No material amount of any substance that has been designated
by applicable law or regulation to be radioactive, toxic, hazardous or otherwise
a danger to health or the environment (a "Hazardous Material"), excluding
office, janitorial and other supplies held in very limited quantities, is
present, as a result of the actions of Target or, to Target's knowledge, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water, that Target has at any time owned, operated, occupied or leased. To
Target's knowledge, no underground storage tanks are present under any property
that Target has at any time owned, operated, occupied or leased.
(b) At no time has Target transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law, rule, regulation or treaty
promulgated by any Governmental Entity (collectively, "Hazardous Materials
Activities").
(c) Target currently holds all environmental approvals, permits,
licenses, clearances and consents (the "Environmental Permits") necessary for
the conduct of its business as such businesses is currently being conducted.
(d) No action, proceeding, writ, injunction or claim is pending
or, to the best of Target's knowledge, threatened concerning any Environmental
Permit or any Hazardous Materials Activity of Target. Target is not aware of any
fact or circumstance which could involve Target in any material environmental
litigation or impose upon Target any material liability concerning Hazardous
Materials Activities.
Section 3.17 Employee Benefit Plans.
(a) Section 3.17 of the Target Disclosure Schedule lists (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended) ("ERISA"), (ii) all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and (iii) all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Target or any trade or business
(whether or not incorporated) which is a member or which is under common control
with Target within the meaning of Section 414 of the Code ("Target's Controlled
Group") (together, the "Target Employee Plans").
(b) With respect to each Target Employee Plan, Target has
provided to Buyer true and correct copies of (i) all documents enbodying such
Target Employee Plan, including all amendments thereto, and (ii) each trust
agreement, group annuity contract and other agreement, if any, relating to such
Target Employee Plan.
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(c) With respect to the Target Employee Plans, individually and
in the aggregate, no event has occurred, and to the best of Target's knowledge,
there exists no condition or set of circumstances in connection with which
Target could be subject to any material liability.
(d) With respect to the Target Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves on the
financial statements or books of Target.
(e) Target is not a party to any oral or written (i) union or
collective bargaining agreement, (ii) agreement with any officer or other key
employee of Target, the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving Target of
the nature contemplated by this Agreement, (iii) agreement with any officer of
Target providing any term of employment or compensation guarantee extending for
a period longer than six months from the date hereof or for the payment of
compensation in excess of $60,000 per annum, or (iv) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(f) Target has performed in all material respects all obligations
required to be performed by it under, is not in material default or violation
of, and has no knowledge of any default or violation by any other party to, each
Target Employee Plan, and each Target Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance in all material respects with all applicable laws, statutes, orders,
rules and regulations, including but not limited to applicable provisions of
ERISA and the Code. Each Target Employee Plan intended to qualify under Section
401(a) of the Code and each trust intended to qualify under Section 501(a) of
the Code has either received a favorable determination letter from the IRS with
respect to such plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Target Employee Plan. There are no
actions, suits or claims pending, or, to the knowledge of Target, threatened or
reasonably anticipated (other than routine claims for benefits) against any
Target Employee Plan or against the assets of any Target Employee Plan. Each
Target Employee Plan can be amended, terminated or otherwise discontinued in
accordance with its terms, without liability to Buyer, Target or any of its
affiliates (other than ordinary administration expenses typically incurred in a
termination event). There are no audits, inquiries or proceedings pending or, to
the knowledge of Target, threatened by the IRS or the U.S. Department of Labor
with respect to any Target Employee Plan. Neither Target nor any affiliate of
Target is subject to any penalty or tax with
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respect to any Target Employee Plan under Section 402(i) of ERISA or Sections
4975 through 4980 of the Code. Each Target Employee Plan which is a group health
plan (within the meaning of Section 5000(b)(1) of the Code) and subject to the
Consolidated Omnibus Reconciliation Act of 1985, as amended ("COBRA"), has been
maintained in all material respects in compliance with its terms and conditions
and has complied in all material respects with the Code and ERISA, including the
continuation coverage requirements of COBRA, and such plan is not subject to any
damages, penalties, or excise taxes arising out of or in connection with COBRA.
Neither Target nor any member of Target's Controlled Group is or could be liable
for an excise tax under Section 4980 B of the Code in connection with any
employee plan maintained by a member of Target's Controlled Group.
(g) Target does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any pension plan
within the meaning of Section 3(2) of ERISA which is subject to Title IV of
ERISA or Section 412 of the Code. At no time has Target contributed to or been
requested to contribute to any multiemployer plan as defined in Section 3(37) of
ERISA.
Section 3.18 Compliance with Laws. Target has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any statute, law or regulation applicable to the
ownership or operation of its business, including, without limitation, United
States statutes, laws and regulations governing the license and delivery of
technology and products abroad by persons subject to the jurisdiction of the
United States.
Section 3.19 Employees and Consultants. Section 3.19 of the Target
Disclosure Schedule contains a list of the names of all present employees and
consultants of Target, their salaries or wages, other compensation and dates of
employment and positions.
Section 3.20 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending before any agency, court or tribunal, or to
Target's knowledge, threatened, against Target or any of its properties or
officers or directors (in their capacities as such). There is no judgment,
decree or order against Target or, to Target's knowledge, any of its directors
or officers (in their capacities as such) that could prevent, enjoin or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target.
Section 3.21 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Target which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current business practice of Target, any acquisition of property by Target,
or the conduct of business by Target as currently conducted or as currently
proposed to be conducted.
Section 3.22 Governmental Authorization. Target has obtained each
governmental consent, license, permit, grant or other authorization of a
Governmental Entity that is required for the operation of the business of Target
as currently conducted (collectively, the "Target Authorizations"), and all such
Target Authorizations are in full force and effect.
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Section 3.23 Insurance. Section 3.23 of the Target Disclosure Schedule
contains a list and description of all insurance policies of Target. There is no
material claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies. All
premiums due and payable under all such policies have been paid, and Target is
otherwise in compliance with the terms of such policies. Target has no knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies.
Section 3.24 Indemnification Claims. Section 3.24 of the Target
Disclosure Schedule sets forth a list of all persons who are parties to
director, officer and/or employee indemnification agreements with Target (the
"Indemnification Agreements"). Except as set forth in Section 3.24 of the Target
Disclosure Schedule, there are no outstanding claims under any of the
Indemnification Agreements or under any indemnification rights granted pursuant
to the Articles of Incorporation or Bylaws of Target (as currently in effect);
and to Target's knowledge, there are no facts or circumstances that either now,
or with the passage of time, could reasonably be expected to provide a basis for
a claim under any such Indemnification Agreement or under any indemnification
rights granted pursuant to the Articles of Incorporation or Bylaws of Target.
Section 3.25 No Brokers. Except as set forth in Section 3.25 of the
Target Disclosure Schedule, Target is not obligated for the payment of fees or
expenses of any broker, finder or other person in connection with the
origination, negotiation or execution of this Agreement or the other Target
Transaction Documents or any transaction contemplated hereby or thereby. Target
agrees to indemnify and hold Buyer and its affiliates harmless from and against
any and all claims, liabilities or obligations with respect to any such fees,
commissions or expenses.
Section 3.26 Real Property Holding Corporation. Target is not a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
Section 3.27 Payments Resulting from Mergers. Neither the consummation
nor announcement of any transaction contemplated by this Agreement will (either
alone or upon the occurrence of any additional or further acts or events) result
in any material payment (whether of severance pay or otherwise) becoming due
from Target to any director, officer, employee or former employee thereof under
(i) any management, employment, deferred compensation, severance (including any
payment, right or benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or employee or any
plan, agreement or understanding similar to any of the foregoing, or any "rabbi
trust" or similar arrangement, or (ii) material benefit under any Target
Employee Plan being established or becoming accelerated, vested or payable.
Section 3.28 Interested Party Transactions. To the knowledge of Target,
no director, officer or shareholder of Target has any interest in (i) any
material equipment or other property or asset, real or personal, tangible or
intangible, including, without limitation, any of the Target Intellectual
Property Rights, used in connection with or pertaining to the business of
Target, (ii) any creditor, supplier, customer, manufacturer, agent,
representative, or distributor of any of the Target Products, (iii) any entity
that competes with Target, or with which Target is affiliated
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or has a business relationship, or (iv) any agreement, obligation or commitment,
written or oral, to which Target is a party; provided, however, that no such
person shall be deemed to have any interest described in clauses (i) through
(iv) of this Section 3.28 solely by virtue of such person's ownership of less
than five percent (5%) of the outstanding stock or debt securities of any
publicly held company, the stock or debt securities of which are traded on a
recognized stock exchange or on any of the Nasdaq Stock Markets.
Section 3.29 No Existing Discussions. As of the date hereof, Target is
not engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal (as defined in Section 6.1).
Section 3.30 Corporate Documents. Target has furnished to Buyer, or its
representatives, for its examination (i) its minute book containing all records
required to be set forth of all proceedings, consents, actions, and meetings of
the shareholders, the Board of Directors and any committees thereof and (ii) all
permits, orders, and consents issued by any Governmental Entity with respect to
Target. The corporate minute books and other corporate records of Target are
complete and accurate in all material respects, and the signatures appearing on
all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in such books and
records were duly and validly taken in compliance with the laws of the
applicable jurisdiction. Target has delivered or made available to Buyer or its
representatives true and complete copies of all documents which are referred to
in this Article III or in the Target Disclosure Schedule.
Section 3.31 No Misrepresentation. No representation or warranty by
Target in this Agreement, and no statement, certificate or schedule furnished or
to be furnished by or on behalf of Target pursuant to this Agreement, when taken
together, contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make such
statements, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Except as set forth in the disclosure schedule delivered by Buyer to
Target on or before the date of this Agreement and attached hereto as Annex 4
(the "Buyer Disclosure Schedule"), or in the Buyer SEC Reports (as defined in
Section 4.4), Buyer and Sub represent and warrant to Target as follows:
Section 4.1 Organization. Each of Buyer, Sub and Buyer's other
Subsidiaries (as defined in Section 10.2) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a
whole, or on Sub alone.
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Section 4.2 Buyer Capital Structure.
(a) The authorized capital stock of Buyer consists of 50,000,000
shares of Buyer Common Stock, $0.001 par value, and 2,000,000 shares of
preferred stock, $0.001 par value ("Buyer Preferred Stock"). As of June 9, 1998:
(i) 25,839,855 shares of Buyer Common Stock were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable; (ii) no
shares of Buyer Common Stock were held in the treasury of Buyer or by
Subsidiaries of Buyer; (iii) approximately 3,059,987 shares of Buyer Common
Stock were reserved for future issuance pursuant to stock options granted and
outstanding under Buyer's stock option plans (the "Buyer Option Plans") and
rights outstanding under Buyer's employee stock purchase plan (the "Buyer
Purchase Plan") and (iv) 1,645,600 shares of Buyer Common Stock were reserved
for issuance upon conversion of Buyer's outstanding 4 3/4% convertible
subordinated notes due 2002. As of the date of this Agreement, none of the
shares of Buyer Preferred Stock are issued and outstanding. The authorized
capital stock of Sub consists of 1,000 shares of common stock, par value $0.001
per share ("Sub Common Stock"), of which one hundred 100 shares are or will be
issued and outstanding as of the Closing Date. All of the outstanding shares of
capital stock of Sub are duly authorized, validly issued, fully paid and
nonassessable, and all such shares are owned by Buyer free and clear of all
security interests, liens, claims, pledges, agreements, limitations on Buyer's
voting rights, charges or other encumbrances of any nature.
(b) Except as set forth in Section 4.2(a) or as reserved for
future grants of options under the Buyer Option Plans or the Buyer Purchase
Plan, there are (i) no equity securities of any class of Buyer, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding and (ii) no options, warrants, equity securities,
calls, rights, commitments or agreements of any character to which Buyer is a
party or by which it is bound obligating Buyer to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
Buyer or obligating Buyer to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. To the knowledge of Buyer, there are no voting trusts, proxies or
other agreements or understandings with respect to the shares of capital stock
of Buyer.
(c) The shares of Buyer Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid, and
nonassessable, and free of and not subject to any preemptive rights or rights of
first refusal and (subject to the accuracy of representations and warranties to
be obtained from Target shareholders) will be issued in compliance with all
state and federal securities laws.
Section 4.3 Authority; No Conflict; Required Filings and Consents.
(a) Buyer and Sub have all requisite corporate power and
authority to enter into this Agreement and the other documents required to be
executed and delivered by Buyer or Sub hereunder (collectively, the "Buyer
Transaction Documents") and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the other Buyer
Transaction Documents and the consummation of the transactions
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contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer and Sub, respectively. This Agreement and
the Buyer Transaction Documents to which they are parties have been duly
executed and delivered by Buyer and Sub and constitute the valid and binding
obligations of Buyer and Sub, respectively, enforceable in accordance with their
terms, except as such enforceability may be limited by (i) bankruptcy laws and
other similar laws affecting creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law.
(b) The execution and delivery by Buyer and Sub of this Agreement
and the other Buyer Transaction Documents do not, and the consummation of the
transactions contemplated hereby or thereby will not, (i) conflict with, or
result in any violation or breach of any provision of the Certificate of
Incorporation or Bylaws of Buyer or Sub, (ii) result in any violation or breach
of, or constitute (with or without notice or lapse of time, or both) a default,
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit under, any note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or obligation to which
Buyer or Sub is a party or by which either of them or any of their properties or
assets may be bound, or (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Buyer or Sub or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not be
reasonably likely to have a Material Adverse Effect on Buyer and its
Subsidiaries, taken as a whole, and that would not interfere with the
consummation by Buyer or Sub of its obligations under this Agreement and the
other Buyer Transaction Documents.
(c) The outstanding shares of Sub Common Stock are the only
shares of Sub capital stock entitled to vote with respect to the Merger, and the
approval of this Agreement by the holders of a majority of the issued and
outstanding shares of Sub Common Stock is the only approval of Sub shareholders
required for the consummation of the Merger. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Buyer or any of its subsidiaries in
connection with the execution and delivery of this Agreement or the other Buyer
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the Merger Agreement in
accordance with the CGL, (ii) the filing of a certificate of merger in
accordance with the DGCL, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign
country, and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole,
or on Sub alone.
Section 4.4 SEC Filings; Financial Statements.
(a) Buyer has filed and made available to Target all forms,
reports and documents required to be filed by Buyer with the SEC since December
31, 1995 other than registration statements on Form S-8 (collectively, the
"Buyer SEC Reports"). The Buyer SEC Reports (i) at the time filed, complied in
all material respects with the applicable requirements of
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the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Buyer SEC Reports or necessary in order to make the statements in such Buyer SEC
Reports, in the light of the circumstances under which they were made, not
misleading. None of Buyer's Subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) contained in the Buyer SEC Reports, including any
Buyer SEC Reports filed after the date of this Agreement until the Closing,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
promulgated by the SEC) and fairly presented or will present in all material
respects the consolidated financial position of Buyer and its Subsidiaries as of
the respective dates and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements do not contain notes and were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount. The unaudited consolidated balance sheet of Buyer as of March 31, 1998
is referred to herein as the "Buyer Balance Sheet."
(c) The Buyer SEC Reports, this Agreement, the exhibits and
schedules hereto, and any certificates or documents to be delivered to Target
pursuant to this Agreement, when taken together, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
Section 4.5 Absence of Undisclosed Liabilities. Except as disclosed in
writing to Target or as otherwise disclosed in the Buyer SEC Reports, Buyer and
its Subsidiaries do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in accordance
with GAAP), and whether due or to become due, which individually or in the
aggregate would be reasonably likely to have a Material Adverse Effect on Buyer
and its Subsidiaries, taken as a whole, or on Sub alone other than (i)
liabilities reflected in the Buyer Balance Sheet, (ii) liabilities specifically
described in this Agreement, and (iii) normal or recurring liabilities incurred
since March 31, 1998, in the ordinary course of business consistent with past
practices.
Section 4.6 Absence of Certain Changes or Events. Since March 31, 1998,
Buyer has conducted its business only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been: (i) any
event or occurrence that has had a Material Adverse Effect on Buyer and its
Subsidiaries, taken as a whole, or on Sub alone; (ii) any damage, destruction or
loss (whether or not covered by insurance) with respect to Buyer having a
Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole, or on
Sub alone; (iii) any material change by Buyer in its accounting methods,
principles or practices to which Target has
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not previously consented in writing; or (iv) any revaluation by Buyer of any of
its assets having a Material Adverse Effect on Buyer and its Subsidiaries, taken
as a whole, or on Sub alone.
Section 4.7 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
Section 4.8 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or to the knowledge of Buyer, threatened,
against Buyer or Sub which is reasonably likely to have a Material Adverse
Effect on Buyer and its subsidiaries, taken as a whole, or on Sub alone, or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay any of the transactions contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1 Covenants of Target by Target. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Target agrees (except to the extent that
Buyer shall otherwise consent or request, in each case in writing) to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due, subject to
good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, to use
all reasonable efforts consistent with past practices and policies to (i)
preserve intact its present business organization, (ii) keep available the
services of its present officers and key employees; provided, however, that with
the prior written consent of Buyer, which shall not be unreasonably withheld,
Target may reduce its workforce, so long as Target does not terminate any
officer or key employee listed on Annex 6.13, which officers and key employees
Buyer desires to retain after the Effective Time, and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees and
others having business dealings with it. Target shall promptly notify Buyer of
any event or occurrence not in the ordinary course of business of Target where
such event or occurrence would result in a breach of any covenant of Target set
forth in this Agreement or cause any representation or warranty of Target set
forth in this Agreement to be untrue as of the date of, or giving effect to,
such event or occurrence. Except as expressly contemplated by this Agreement,
Target shall not, without the prior written consent of Buyer:
(a) transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Target Intellectual Property Rights
other than in the ordinary course of business consistent with past practices;
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(b) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service by such party;
(c) issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities convertible
into shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities (except upon the exercise
or conversion of securities outstanding on the date of this Agreement);
(d) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership
or other business organization or division, or otherwise acquire or agree to
acquire any assets other than acquisitions involving aggregate consideration of
not more than $10,000 and inventory purchased in the ordinary course of business
consistent with past practices;
(e) sell, lease, license or otherwise dispose of any of its
properties or assets except for transactions entered into in the ordinary course
of business consistent with past practice;
(f) take any action to: (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees, (ii)
grant any severance or termination pay to, or enter into any employment or
severance agreements with, any officer or employee, (iii) enter into any
collective bargaining agreement, or (iv) establish, adopt, enter into or amend
in any material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) revalue any of its assets, including writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business;
(h) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others, other
than indebtedness incurred under outstanding lines of credit in the ordinary
course of business consistent with past practice;
(i) amend or propose to amend its Articles of Incorporation or
Bylaws;
(j) incur or commit to incur any individual capital expenditure
other than the existing commitments set forth in the Target Disclosure Schedule;
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(k) enter into or amend any agreements pursuant to which any
third party is granted exclusive marketing or manufacturing rights with respect
to any Target Product;
(l) amend or terminate any material contract, agreement or
license to which it is a party except in the ordinary course of business;
(m) waive or release any material right or claim, except in the
ordinary course of business; provided, however, that Target shall not be
required under this clause (m) to exercise any right of repurchase it may have
to reacquire shares of Target Stock held by directors, officers, employees or
consultants who terminate their employment with the Target;
(n) initiate any litigation or arbitration proceeding;
(o) accelerate, amend or change the period of exercisability of
any options or restricted stock granted to employees of Target or authorize cash
payments in exchange for any options granted under any of such plans; provided,
however, Target may adopt procedures for acceleration of vesting of all
outstanding options and awards under its 1997 Equity Incentive Plan on terms
consistent with the existing provisions of such Plan;
(p) compromise or otherwise settle or adjust any assertion or
claim of a deficiency in taxes (or interest thereon or penalties in connection
therewith), extend the statute of limitations with any tax authority or file any
pleading in court in any tax litigation or any appeal from an asserted
deficiency;
(q) change any of Target's accounting policies and practices,
except such changes as may be required in the reasonable opinion of Target's
management to respond to economic or market conditions or as may be required by
the rules of the Institute of Certified Public Accountants or Financial
Accounting Standards Board or by applicable governmental authorities;
(r) change its personnel policies;
(s) grant any person a power of attorney or similar authority; or
(t) agree in writing or otherwise to take, any of the actions
described in subsections (a) through (s) above, or any action which is
reasonably likely to make any of its representations or warranties contained in
this Agreement untrue or incorrect in any material respect on the date made (to
the extent so limited) or as of the Effective Time.
Section 5.2 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Buyer and Target shall confer
on a regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status of
ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity
whether or not in connection with this Agreement, the Merger and the other
transactions contemplated hereby.
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ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 No Solicitation.
(a) From and after the date of this Agreement until the earlier
of the termination of this Agreement or the Effective Time, Target shall not,
directly or indirectly through any officer, director, employee, representative
or agent of Target or otherwise, (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, share exchange, business
combination, sale of all or substantially all assets, sale of shares of capital
stock (including without limitation by way of a tender offer) or similar
transactions involving Target other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage or participate in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or (iii) agree to,
enter into, accept, approve or recommend any Acquisition Proposal.
(b) Target shall notify Buyer immediately (and no later than 24
hours) after receipt by Target (or its advisors) of any Acquisition Proposal or
any request for nonpublic information in connection with an Acquisition Proposal
or for access to the properties, books or records of Target by any person or
entity that informs Target that it is considering making, or has made, an
Acquisition Proposal. Such notice shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
Section 6.2 Approval of Shareholders. Target shall promptly after the
date hereof take all action necessary in accordance with the law of the State of
California and its Articles of Incorporation to seek the approval of the Merger
by Target shareholders as soon as possible. As promptly as practicable after the
execution of this Agreement, subject to the review and approval of Buyer, Target
shall prepare and, after receiving the authorization of Buyer, distribute an
information statement (the "Information Statement") to its shareholders for the
purpose of soliciting approval of the Merger by the Target shareholders. The
Information Statement shall include the recommendation of the Board of Directors
of Target in favor of the Merger and this Agreement. Target and Buyer represent
and warrant to the other that the respective information supplied by Target and
Buyer for inclusion in the Information Statement to be sent to the shareholders
of Target shall not, on the date the Information Statement is first mailed to
the shareholders of Target, or at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it was made,
is false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Information
Statement not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication to the Target shareholders
which has become false or misleading. If at any time prior to the Effective Time
any event relating to Target or any of its Affiliates, officers or directors
should be discovered by Target which should be set forth in a supplement to the
Information Statement, Target shall promptly inform Buyer. If at any time prior
to the Effective Time any event relating to Buyer or any of its officers or
directors should be discovered by Buyer which should be set forth in
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a supplement to the Information Statement, Buyer shall promptly inform Target.
From the date of this Agreement until the earlier of the termination of this
Agreement or the Effective Time, Buyer shall deliver to Target, promptly after
their filing with the SEC, each Buyer SEC Report, including without limitation
each report on Form 8-K filed by Buyer. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Information
Statement, Target shall promptly inform Buyer of such occurrence and cooperate
in mailing to shareholders of Target, such amendment or supplement. Target shall
take all other action necessary or advisable to secure the vote or consent of
shareholders required to effect the Merger.
Section 6.3 Consents. Each of Buyer and Target shall use all reasonable
efforts to obtain all necessary consents, waivers and approvals under its
respective material agreements, contracts, licenses and leases as may be
necessary or advisable to consummate the Merger and the other transactions
contemplated by this Agreement.
Section 6.4 Access to Information. Upon reasonable notice, Target shall
afford to the officers, employees, accountants, counsel and other
representatives of Buyer, reasonable access, during normal business hours during
the period prior to the earlier of the termination of this Agreement or the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, Target shall furnish promptly to Buyer (i) a copy of
each report, schedule, registration statement and other document filed by it
with or received by it from any Governmental Entity and (ii) all other
information concerning its business, properties and personnel as Buyer may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 6.4 shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Merger. Buyer shall ensure that
each person receiving such access to Target information or properties, or
requesting documents as provided herein, shall be bound by the Joint
Confidentiality Agreement by and between Buyer and Target dated June 18, 1998,
pertaining to the use and disclosure of such Target information.
Section 6.5 Legal Conditions to Merger. Each of Buyer and Target will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger (which
actions shall include, without limitation, furnishing all information in
connection with approvals of or filings with any Governmental Entity) and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon either of them in connection with the Merger.
Each of Buyer and Target will take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
third party, required to be obtained or made by Target, Buyer or Sub in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
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Section 6.6 Public Disclosure. Except with the prior written consent of
Buyer, Target shall issue no press release or other public statement with
respect to the Merger or this Agreement. Prior to the Effective Time, Buyer
shall not make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transaction contemplated hereby without prior
consultation with Target, subject to Buyer's obligations to comply with
applicable securities laws and NASD listing requirements.
Section 6.7 Nasdaq National Market Listing. Buyer agrees to file with
the Nasdaq National Market (the "NNM") prior to the Effective Time a
Notification Form for Listing of Additional Shares with respect to shares of
Buyer Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger, upon official notice of issuance.
Section 6.8 Tax-Free Reorganization. Buyer and Target shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code.
Section 6.9 Tax Certificates. Buyer and Target each agree to deliver an
executed tax certificate to the other and its counsel in the form attached
hereto as Annex 6.9, which certificate makes certain representations and
warranties regarding the intended tax-free nature of the Merger and Buyer's
intentions regarding the conduct of the business of the Surviving Corporation
following the Merger.
Section 6.10 Indemnification.
(a) From and after the Effective Time, Buyer agrees that it will
fulfill and honor and will cause the Surviving Corporation to fulfill and honor
in all respects the obligations of Target pursuant to any indemnification
provisions contained in Target's Articles of Incorporation or Bylaws with
respect to Target's respective directors and officers (the "Target Indemnified
Parties") existing prior to the date hereof. From and after the Effective Time,
such obligations shall be the joint and several obligations of Buyer and the
Surviving Corporation and, by executing this Agreement, Buyer hereby assumes
such obligations. The Articles of Incorporation and Bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification and
elimination of liability for monetary damages set forth in the Articles of
Incorporation and Bylaws of Target, which provisions will not be amended,
repealed or otherwise modified from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of Target,
unless such modification is required by law.
(b) In the event of any claim, action, suit, proceeding or
investigation to which paragraph (a) applies, (i) any counsel retained by the
Target Indemnified Parties from any period after the Effective Time will be
reasonably satisfactory to the Surviving Corporation and Buyer, (ii) subject to
the provisions, of Target's Articles of Incorporation and Bylaws, and applicable
law, after the Effective Time, the Surviving Corporation or Buyer will pay the
reasonable fees and expenses of such counsel, promptly after statements therefor
are received and (iii) the
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Surviving Corporation and Buyer will cooperate in the defense of any matter;
provided, however, that neither Buyer nor the Surviving Corporation will be
liable for any settlement effected without the Surviving Corporation's or
Buyer's written consent (which consent will not be unreasonably withheld); and
provided, further, that, in the event that any claim or claims for
indemnification are asserted or made, all rights to indemnification in respect
of any such claim or claims will continue until the disposition of any and all
such claims. The Target Indemnified Parties as a group may retain only one law
firm (in addition to local counsel) to represent them with respect to any single
action unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Target Indemnified Parties.
(c) This Section 6.10 will survive any termination of this
Agreement and the consummation of the Merger at the Effective Time, is intended
to benefit Target, the Surviving Corporation and the persons who are or were
directors or officers of Target on or prior to the Effective Time, and will be
binding on all successors and assigns of the Surviving Corporation.
Section 6.11 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including cooperating fully with the other party, including by
provision of information. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
Section 6.12 Stock Options.
(a) At the Effective Time, each outstanding Target Option which
is unexercised, whether vested or unvested, shall be canceled by Target in
accordance with the provisions of Target's 1995 Stock Option Plan.
(b) Buyer agrees that, at the Effective Time, it shall
irrevocably offer to grant options to purchase an aggregate of at least 211,500
shares of Buyer Common Stock to the persons, and in the share amounts, listed on
Annex 6.12 (the "New Options"). Buyer shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Buyer Common Stock to
enable the exercise of the New Options in full. Buyer agrees that the Buyer
Common Stock issuable with respect to the New Options shall have been registered
prior to the Effective Time, or as promptly as practicable (and in any event no
later than thirty (30) days after the Effective Time) shall be registered,
pursuant to a registration statement on Form S-8.
Section 6.13 Target Warrants. At the Effective Time, each outstanding
Target Warrant shall be deemed to constitute a warrant (an "Assumed Warrant") to
acquire, on the same terms and conditions as were applicable under the Target
Warrant, such number of shares of Buyer Common Stock as the holder of such
Target Warrant would have been entitled to receive
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pursuant to the Merger (giving effect to the Post-Closing Adjustment) had such
holder exercised such Target Warrant in full immediately prior to the Effective
Time (rounded down to the nearest whole share), at a price per share (rounded up
to the nearest whole cent) equal to (i) the aggregate exercise price per share
of Target Stock purchasable pursuant to such Target Warrant immediately prior to
the Effective Time divided by (ii) the number of full shares of Buyer Common
Stock deemed purchasable pursuant to such Assumed Warrant in accordance with the
foregoing.
Section 6.14 Stock Grants.
(a) Buyer agrees that, at the Effective Time, it shall
irrevocably (i) grant an aggregate of 39,865 shares of Buyer Common Stock (the
"Stock Grants") and (ii) pay cash bonuses (the "Cash Bonuses") to the persons,
and in the share and dollar amounts, listed and described on Annex 6.14.
(b) Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock to enable the
issuance of the Stock Grants in full. Buyer agrees that the Buyer Common Stock
issuable in the Stock Grants shall have been registered prior to the Effective
Time, or as promptly as practicable (and in any event no later than thirty (30)
days after the Effective Time) shall be registered, pursuant to a registration
statement on Form S-8.
Section 6.15 Registration of Buyer Common Stock.
(a) Buyer shall use all reasonable efforts to cause the Buyer
Common Stock issued in exchange for Target Stock and Buyer Common Stock issuable
upon exercise of the Target Warrants (collectively, "Registrable Buyer Common
Stock") to be registered under the Securities Act so as to permit the resale
thereof, and in connection therewith shall prepare and file with the SEC within
forty five (45) days following the Closing, and shall use all reasonable efforts
to cause to become effective no later than ninety (90) days following the
Closing, a registration statement (the "Registration Statement") on Form S-3 or
on such other form as is then available under the Securities Act covering such
Buyer Common Stock; provided, however, that each holder of such Buyer Common
Stock shall provide all such information and materials to Buyer and take all
such action as may be required in order to permit Buyer to comply with all
applicable requirements of the SEC and to obtain any desired acceleration of the
effective date of such Registration Statement. Such provision of information and
materials is a condition precedent to the obligations of Buyer pursuant to this
Section 6.15. Buyer shall not be required to effect more than one (1)
registration under this Section 6.15. The offering made pursuant to such
registration shall not be underwritten.
(b) Notwithstanding the provisions of Section 6.15(a), Buyer
shall be entitled to a one-time postponement of the declaration of effectiveness
of the Registration Statement prepared and filed pursuant to Section 6.15(a) for
a period of time up to forty-five (45) calendar days after the deadline therefor
set forth in Section 6.15(a), if the Board of Directors of Buyer, acting in good
faith, determines that there exists material nonpublic information about Buyer
which the Board does not wish to disclose in a registration statement, which
information would
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otherwise be required by the Securities Act to be disclosed in the Registration
Statement to be filed pursuant to Section 6.15(a) above.
(c) Subject to the limitations of Section 6.15(b), Buyer shall:
(i) prepare and file with the SEC the Registration Statement in accordance with
Section 6.15(a) with respect to the shares of Registrable Buyer Common Stock and
shall use all reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable after filing and to keep the Registration
Statement effective until the earlier of (A) one (1) year after the Effective
Time or (B) such time as the shares of Registrable Buyer Common Stock can be
sold without compliance with the registration requirements of the Securities
Act; (ii) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect to
the sale or other disposition of all securities proposed to be registered in the
Registration Statement during such period; and (iii) furnish to each holder of
Registrable Buyer Common Stock such number of copies of any prospectus
(including any preliminary prospectus and any amended or supplemented
prospectus) in conformity with the requirements of the Securities Act, and such
other documents, as each such holder may reasonably request in order to effect
the offering and sale of the shares of such Registrable Buyer Common Stock, but
only so long as Buyer shall be required under the provisions hereof to cause the
Registration Statement to remain effective.
(d) Notwithstanding any other provision of this Section 6.15 but
subject to Section 6.15(e), Buyer shall have the right at any time to require
that all holders suspend open market offers and sales of Registrable Buyer
Common Stock whenever, and for so long as, in the reasonable judgment of Buyer
in good faith after consultation with counsel, there is or may be in existence
material undisclosed information or events with respect to Buyer (the
"Suspension Right"). In the event Buyer exercises the Suspension Right, such
suspension will continue for the period of time reasonably necessary for
disclosure to occur at a time that is not materially detrimental to Buyer and
its stockholders or until such time as the information or event is no longer
material, each as determined in good faith by Buyer after consultation with
counsel. Buyer will use all reasonable efforts to limit the length of any such
suspension to thirty (30) calendar days or less.
(e) If any holder of Registrable Buyer Common Stock shall propose
to sell any Registrable Buyer Common Stock pursuant to the Registration
Statement, it shall notify the General Counsel of Buyer of its intent to do so
(including the proposed manner and timing of all sales) at least three (3) full
trading days prior to such sale, and the provision of such notice to Buyer shall
conclusively be deemed to reestablish and reconfirm an agreement by such holder
to comply with the registration provisions set forth in this Agreement. Unless
otherwise specified in such notice, such notice shall be deemed to constitute a
representation that any information previously supplied by such holder expressly
for inclusion in the Registration Statement (as such information may have been
superseded by information provided subsequently) is accurate as of the date of
such notice. At any time within such three (3) trading day period, Buyer may
refuse to permit such holder to resell any Registrable Buyer Common Stock
pursuant to the Registration Statement; provided, however, that in order to
exercise this right, Buyer must deliver a certificate
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in writing to such holder to the effect that a delay in such sale is necessary
because a sale pursuant to the Registration Statement in its then current form
without the addition of material, non-public information about Buyer could
constitute a violation of the federal securities laws; and provided further,
that Buyer will use all reasonable efforts to limit any such delay to as short a
period as practicable and agrees to notify such holder promptly upon termination
of the suspension. Notwithstanding anything to the contrary in this Agreement,
Buyer will ensure that in any event such holders of Registrable Buyer Common
Stock shall have at least thirty (30) trading days (prorated for partial
quarters) available to sell Buyer Common Stock during each calendar quarter (or
portion thereof) after the effectiveness of the Registration Statement until the
first anniversary of the Effective Time. For any offer or sale of any of
Registrable Buyer Common Stock by a holder of Registrable Buyer Common Stock in
a transaction that is not exempt under the Securities Act, the holder, in
addition to complying with any other federal securities laws, shall deliver a
copy of the final prospectus (or amendment of or supplement to such prospectus)
of Buyer covering the Registrable Buyer Common Stock in the form furnished to
such holder by Buyer to the purchaser of any of the Registrable Buyer Common
Stock on or before the settlement date for the purchase of such Registrable
Buyer Common Stock.
(f) Buyer will indemnify each holder of Registrable Buyer Common
Stock, each of its officers and directors and partners, and each person
controlling such holder within the meaning of Section 15 of the Securities Act
against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, preliminary prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any
registration, qualification or compliance effected pursuant to this Section
6.15, or based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, or any
violation or any alleged violation by Buyer of any rule or regulation
promulgated under the Securities Act or the Exchange Act in connection with any
such registration, qualification or compliance, and Buyer will reimburse each
such holder, each of its officers and directors, and each person controlling
such holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, as such expenses are incurred; provided, however,
that Buyer will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to Buyer by
such holder or controlling person for use therein.
(g) Each holder of Registrable Buyer Common Stock will, if
Registrable Buyer Common Stock held by such holder is included in the securities
as to which such registration is being effected, indemnify Buyer, each of its
directors and officers, each person who controls Buyer within the meaning of
Section 15 of the Securities Act, and each other such holder of Registrable
Buyer Common Stock, each of its officers and directors and each person
controlling such holder within the meaning of Section 15 of the Securities Act,
against all claims,
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losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse Buyer, such other holders of
Registrable Buyer Common Stock, directors, officers, persons or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, as
such expenses are incurred, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to Buyer by such holder for use therein.
(h) Each party entitled to indemnification under Section 6.15(f)
or 6.15(g) (for purposes of this Section 6.15, the "Indemnified Party") shall
give notice to the party required to provide indemnification (for purposes of
this Section 6.15, the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to differing or potentially differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under Section
6.15(f) or 6.15(g) unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(i) Buyer shall pay all of the out-of-pocket expenses, other than
underwriting discounts and commissions, if any, incurred in connection with any
registration of Registrable Buyer Common Stock pursuant to this Section 6.15,
including, without limitation, all registration and filing fees, printing
expenses, transfer agents' and registrars' fees, and the reasonable fees and
disbursements of Buyer's outside counsel and independent accountants.
Section 6.16 Expenses. The parties shall each pay their own legal,
accounting and financial advisory fees and other out-of-pocket expenses related
to the negotiation, preparation and carrying out of this Agreement and the
transactions herein contemplated. In the event the
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Merger is consummated, all legal, accounting and financial advisory fees and
other out-of-pocket expenses incurred by Target relating to the negotiation,
preparation and carrying out of this Agreement and the transactions herein
contemplated, (including the termination of the Target 401(k) Plan) and, in all
cases, including such expenses incurred between the date hereof and the Closing
Date (the "Target Transaction Expenses") shall be borne by the Surviving
Corporation, subject to the Post-Closing Adjustment pursuant to Section 2.4.
Section 6.17 Employee Arrangements.
(a) Buyer shall offer, or cause the Surviving Corporation to
offer, employment with the Surviving Corporation after the Closing to all of the
employees of Target listed on Annex 6.17 hereto. All such Target employees
accepting employment with the Surviving Corporation shall be eligible for
substantially similar employee benefits, on substantially similar terms, as
other employees of Buyer of comparable rank and length of service. In
determining eligibility for benefits which depend on length of service, Buyer
shall provide each such Target employee with full credit for the period of such
employee's service with Target (other than with respect to options, if any,
granted by Buyer to such Target employees). Except as set forth in this Section
6.17, the terms of employment of such Target employees shall be determined by
agreement of Buyer (or the Surviving Corporation, as the case may be) and each
such employee, provided that such terms of employment include (i) the New
Options and Cash Bonuses set forth as provided in Section 6.12 and (ii) the
Stock Grants as set forth in Section 6.14.
(b) Buyer shall offer, or cause the Surviving Corporation to
offer, continued group health coverage pursuant to COBRA to those individuals
receiving COBRA coverage through Target Employee Plans immediately prior to the
Closing. With respect to those employees of Target who participate immediately
prior to the Closing in Target Employee Plans (and any dependents of such
employees that participate in Target Employee Plans) that are not offered or do
not accept employment with the Surviving Corporation, Buyer shall offer, or
cause the Surviving Corporation to offer, COBRA coverage to such individuals and
their covered dependents.
Section 6.18 Target 1997 Audited Financials. Target will cause an audit
to be conducted of Target's financial statements for the year ended December 31,
1997 and, as promptly as practicable following the date of this Agreement shall
deliver to Buyer Target's balance sheet as of December 31, 1997 and its
statements of operations, shareholders' equity and cash flows for the year then
ended, audited and reported upon by its independent certified public accountants
(the "Target 1997 Audited Financials").
Section 6.19 Voting Agreements. Target shall cause each of Edward Colby,
Philipp Beisel, Greg Seitz, Sequoia Capital VII, Sequoia Technology Partners VI,
Sequoia XXIV, Sequoia 1995, Sequoia 1997, SQP 1997, Hummer Winblad, Venture
Partners II, L.P., Hummer Winblad Technology Fund II, L.P., Hummer Winblad
Technology Fund II (A), L.P., Bay Partners SBIC, Bayview Investors, Ltd., and RS
& Co. IV, L.P., to execute and deliver to Buyer, on or before the date of this
Agreement, voting agreements and irrevocable proxies in the forms
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annexed hereto as Annex 6.19 (the "Voting Agreements"), agreeing, among other
things, to vote in favor of the Merger. Such directors, officers, affiliates and
other shareholders will own, in the aggregate, no less than fifty percent (50%)
of the voting power of each of the outstanding Target Common Stock and Target
Preferred Stock as of the date of this Agreement.
Section 6.20 Target 401(k) Plan. Target shall take all actions necessary
to ratify the adoption of Target's 401(k) Plan (the "Target 401(k) Plan") and
all amendments thereto prior to the Closing. Target shall take all actions
necessary to terminate the Target 401(k) Plan prior to the Closing. If annual
returns have not been filed for the Target 401(k) Plan for any years for which
such returns are required to be filed, Target shall file such returns under the
U.S. Department of Labor's Delinquent Filer Voluntary Compliance Program.
Penalties required to be paid under such program shall be treated as a liability
of Target and shall be set forth on the Liabilities Certificate for purposes of
determining the Post-Closing Adjustment under Section 2.4.
Section 6.21 Notification of Certain Matters. Target shall give prompt
notice to Buyer, and Buyer and Sub shall give prompt notice to Target, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur, if uncured, would be likely to cause the failure of any of the conditions
set forth in Article VII of this Agreement.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the holders of
outstanding shares of Target Common Stock and Target Preferred Stock, as
required by Target's Articles of Incorporation and the CGL.
(b) Governmental Approvals. All authorizations, consents, orders
or approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity shall have been obtained or filed,
or shall have occurred as the case may be.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or restricting
Buyer's conduct or operation of the business of Buyer or Target after the Merger
shall have been issued, nor shall any proceeding brought by a domestic
administrative agency or commission or other domestic Governmental Entity,
seeking any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal or
prevents or prohibits the Merger.
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Section 7.2 Additional Conditions to Obligations of Buyer and Sub. The
obligations of Buyer and Sub to effect the Merger are subject to the
satisfaction of each of the following additional conditions, any of which may be
waived in writing exclusively by Buyer and Sub:
(a) Representations and Warranties. The representations and
warranties of Target set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement, and Buyer shall have received a certificate
signed on behalf of Target by an executive officer of Target to such effect.
(b) Performance Obligations. Target shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Buyer shall have received a
certificate signed on behalf of Target by an executive officer of Target to such
effect.
(c) Confidentiality and Inventions Agreements. Buyer shall have
received confidentiality and inventions assignment agreements signed by each
current Target employee that has or had access to confidential information of
Target in substantially the form of Annex 7.2(c), and each such agreement shall
be in full force and effect.
(d) Non-Competition Agreements. Buyer shall have received from
each of Philipp Beisel and Greg Seitz, a Non-Competition Agreement in
substantially the form of Annex 7.2(d).
(e) Target Employees. Buyer shall be satisfied, in its sole
discretion, that (i) all of the employees identified as Key Employees on Annex
7.2(e) and (ii) not less than eighty five percent (85%) of the other Target
employees listed on Annex 7.2(e) are ready, willing and able to remain employed
by Buyer or the Surviving Corporation after the Effective Time on terms
reasonably satisfactory to Buyer.
(f) Tax Opinion. Buyer shall have received the opinion of Gray
Cary Ware & Freidenrich LLP, counsel to Buyer, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. Such opinion shall be substantially
similar to that delivered pursuant to Section 7.3(c).
(g) Legal Opinion. Buyer shall have received a legal opinion from
Fenwick & West LLP, counsel to Target, substantially in the form of Annex
7.2(g).
(h) No Material Adverse Effect. Since April 30, 1998, there shall
have been no event or occurrence that had or could reasonably be expected to
have a Material Adverse Effect on Target.
(i) Third-Party Consents and Waivers. Target shall have provided
all notices to third parties, and shall have received all third-party consents
or waivers required in connection with the consummation of the transactions
contemplated by this Agreement under any contract
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set forth (or required to be set forth) in Section 3.4 of the Target Disclosure
Schedule or required to be obtained pursuant to Section 6.3.
(j) Investor Representation Letters. Buyer shall have received an
executed Investor Representation Letter in the form of Annex 7.2(j) from each
person and entity that is to receive Buyer Common Stock or Assumed Warrants in
the Merger.
(k) Dissenting Shares. Holders of Target Stock entitled to
receive not more than five percent (5%) of all of the Buyer Common Stock
issuable in the Merger shall have elected, or shall be eligible to elect, to
have their shares treated as Dissenting Shares under Section 2.1(e).
(l) Target 1997 Audited Financials. Target shall have delivered
the Target 1997 Audited Financials to Buyer.
(m) Target 401(k) Plan. Target shall have taken all actions
necessary to terminate the Target 401(k) Plan prior to the Closing.
(n) Miscellaneous Agreements. Target shall have taken all actions
necessary to terminate (i) the Second Amended & Restated Co-Sale Agreement dated
July 31, 1997 by and between Target and various Target shareholders and (ii) the
Fifth Amended and Restated Investor's Rights Agreement dated July 31, 1997.
(o) Target 401(k) Plan. Target shall have taken all actions
necessary to ratify the adoption of the Target 401(k) Plan and all amendments
thereto prior to the Closing. Target shall have taken all actions necessary to
terminate the Target 401(k) Plan prior to the Closing.
Section 7.3 Additional Conditions to Obligations of Target. The
obligation of Target to effect the Merger is subject to the satisfaction of each
of the following additional conditions, any of which may be waived, in writing,
exclusively by Target:
(a) Representations and Warranties. The representations and
warranties of Buyer and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement, and Target shall have received a certificate
signed on behalf of Buyer by an executive officer of Buyer to such effect.
(b) Performance Obligations. Buyer and Sub shall have performed
in all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date, and Target shall have received a
certificate signed on behalf of Buyer by an executive officer of Buyer to such
effect.
(c) Tax Opinion. Target shall have received the opinion of
Fenwick & West LLP, counsel to Target, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code. Such opinion shall be substantially similar to
that delivered pursuant to Section 7.2(f).
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(d) Legal Opinion. Target shall have received a legal opinion
from Gray Cary Ware & Freidenrich LLP, counsel to Buyer, substantially in the
form of Annex 7.3(d).
(e) Nasdaq National Market Listing. Buyer shall have filed with
the NNM prior to the Effective Time a Notification Form for Listing of
Additional Shares with respect to the shares of Buyer Common Stock issuable, and
those reserved for future issuance, in connection with the Merger, upon official
notice of issuance.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.1(b) through 8.1(f), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Merger by the
shareholders of Target:
(a) by mutual written consent duly authorized by the Board of
Directors of Buyer and Target;
(b) by either Buyer or Target if the Merger shall not have been
consummated by June 30, 1998 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date);
(c) by either Buyer or Target, if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other
action has not materially complied with its obligations under Article VI of this
Agreement;
(d) by Target, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Buyer or Sub,
which breach shall not have been cured within ten (10) business days following
receipt by the breaching party of written notice of such breach from Target;
(e) by Buyer, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Target, which
breach shall not have been cured within ten (10) business days following receipt
by the breaching party of written notice of such breach from Buyer; or
(f) by Buyer, if for any reason Target shareholders fail to
approve this Agreement and the transactions contemplated hereby by June 30,
1998.
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Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, there shall be no liability or obligation
on the part of Buyer, Target, Sub or their respective officers, directors,
shareholders or Affiliates, except (a) as set forth in Section 8.3 and (b) to
the extent that such termination results from the intentional breach by a party
of any of its representations, warranties or covenants set forth in this
Agreement; provided that, the provisions of Sections 6.6, 6.16 and 8.3 shall
remain in full force and effect and survive any termination of this Agreement.
Section 8.3 Fees and Expenses.
(a) If (i) the Merger is consummated or (ii) this Agreement is
terminated other than as described in Section 8.3(b), all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid in accordance with Section 6.16.
(b) If this Agreement is terminated by Buyer as provided in
Sections 8.1(e) or 8.1(f) (but only to the extent there has not been (i) a
material breach of this Agreement by Buyer that has not been cured within ten
(10) business days following receipt by Buyer of written notice of such breach
from Target, or (ii) an event or occurrence that has a Material Adverse Effect
on Buyer), Target shall pay to Buyer, within five (5) business days after
receipt of a written request therefor, in same day funds, an amount equal to all
costs and expenses reasonably incurred by Buyer in connection with this
Agreement and the transactions contemplated hereby, including all reasonable
legal, accounting, financial advisory and other professional and service fees
and expenses.
(c) If this Agreement is terminated by Target as provided in
Section 8.1(d) (but only to the extent there has not been (i) a material breach
of this Agreement by Target that has not been cured within ten (10) business
days following receipt by Target of written notice of such breach from Buyer, or
(ii) an event or occurrence that has a Material Adverse Effect on Target), Buyer
shall pay to Target, within five (5) business days of the receipt of a written
request therefor, in same day funds, an amount equal to all costs and expenses
reasonably incurred by Target in connection with this Agreement and the
transactions contemplated hereby, including all reasonable legal, accounting,
financial advisory and other professional and service fees and expenses.
Section 8.4 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the shareholders of Target, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties
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contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE IX
ESCROW AND INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of Target
contained in this Agreement or any instrument delivered pursuant to this
Agreement shall survive the Closing Date and shall continue in full force and
effect until the second anniversary of the Closing Date (the "Termination
Date").
Section 9.2 Indemnification by Target Shareholders.
(a) Subject to the terms and conditions contained in this Article
IX, the holders of Target Preferred Stock outstanding immediately prior to the
Effective Time (the "Indemnifying Shareholders") shall jointly and severally
indemnify, defend and hold harmless Buyer, its shareholders, officers,
directors, employees and attorneys, all Subsidiaries and affiliates of Buyer,
and the respective officers, directors, employees and attorneys of such entities
(all such persons and entities being collectively referred to as the "Buyer
Group") from, against, for and in respect of any and all claims, losses,
liabilities, damages, costs and expenses (including reasonable legal fees and
expenses and expenses of investigation and defense) which any member of the
Buyer Group may sustain or incur (collectively, "Buyer Losses") which are caused
by or arise out of any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by Target in this Agreement, the Target
Disclosure Schedule or any officer certificate delivered pursuant to Section 7.2
or which relate to either the failure to file annual returns for the Target
401(k) Plan for the year 1994 or the failure to properly adopt the Target 401(k)
Plan and any amendments thereto in a form complying with the applicable
requirement of the Code.
(b) Anything in this Agreement to the contrary notwithstanding,
none of the Indemnifying Shareholders shall be liable for indemnification under
this Section 9.2 until the aggregate of all Buyer Losses for which indemnity is
claimed exceeds $50,000, in which case Buyer shall be entitled to
indemnification for the full amount of the indemnification including the first
$50,000.
(c) The obligation of the Indemnifying Shareholders to indemnify
members of the Buyer Group for a Buyer Loss under this Article IX is subject to
the condition that the Shareholder Representative (as defined in Section 9.7)
shall have received an Indemnification Claim (as defined in Section 9.3(b)) for
such Buyer Loss on or before the Termination Date.
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(d) The amount of Buyer Losses in respect to any Indemnity Claim
shall be reduced by the amount of any insurance payment received by Buyer or the
Surviving Corporation in compensation for such Buyer Losses.
(e) The provisions of Sections 9.2(b) and (c) and Section 9.6
shall not limit, in any manner, any remedy at law or in equity to which any
member of the Buyer Group shall be entitled against Target or any shareholder or
former shareholder of Target as a result of fraud or intentional
misrepresentation by Target, any Target shareholder or any of their respective
representatives or agents.
Section 9.3 Procedures for Indemnification.
(a) As used in this Article IX, the term "Indemnitee" means the
member or members of the Buyer Group seeking indemnification hereunder.
(b) A claim for indemnification hereunder (an "Indemnification
Claim") shall be made by Indemnitee by delivery of a written notice to the
Shareholder Representative with a copy to the Escrow Agent. The Indemnification
Claim shall specify the basis on which indemnification is sought in reasonable
detail (and shall include relevant documentation related to the Indemnification
Claim), the amount of the asserted Buyer Losses and, in the case of a Third
Party Claim (as defined in Section 9.4), shall contain (by attachment or
otherwise) such other information as Indemnitee shall have concerning such Third
Party Claim.
(c) If the Indemnification Claim involves a Third Party Claim,
the procedures set forth in Section 9.4 shall be observed by Indemnitee and
Indemnitor.
Section 9.4 Defense of Third Party Claims. Should any claim be made or
any suit or proceeding instituted by a third party against an Indemnitee which,
if prosecuted successfully, would be a matter for which such Indemnitee would be
entitled to indemnification under this Article IX (a "Third Party Claim"), the
obligations and liabilities of the parties hereunder with respect to such Third
Party Claim shall be subject to the following terms and conditions:
(a) Indemnitee shall give the Shareholder Representative written
notice of any such claim promptly after receipt by Indemnitee of notice thereof,
and the Shareholder Representative may undertake control of the defense thereof
by counsel of its own choosing reasonably acceptable to Indemnitee. Indemnitee
may participate in the defense through its own counsel at its own expense. The
assumption of the defense of any Third Party Claim by the Shareholder
Representative shall be an acknowledgment by the Indemnifying Shareholders that
such Third Party Claim is subject to indemnification under the provisions of
this Article IX and that such provisions are binding on the Indemnifying
Shareholders. If, however, the Shareholder Representative fails or refuses to
undertake the defense of such Third Party Claim within ten (10) days after
written notice of such claim has been delivered to the Shareholder
Representative by Indemnitee, Indemnitee shall have the right to undertake the
defense, compromise and, subject to Section 9.5, settlement of such Third Party
Claim with counsel of its own choosing. Failure of Indemnitee to furnish written
notice to Indemnitor of a Third Party Claim shall not release the
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Indemnifying Shareholders from their obligations hereunder, except to the extent
the Indemnifying Shareholders are prejudiced by such failure.
(b) Indemnitee and the Indemnifying Shareholders shall cooperate
with each other in all reasonable respects in connection with the defense of any
Third Party Claim, including making available records relating to such claim and
furnishing employees of Indemnitee as may be reasonably necessary for the
preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim.
Section 9.5 Settlement of Third Party Claims. Unless the Shareholder
Representative has failed to fulfill his obligations under Section 9.4, no
settlement by Indemnitee of a Third Party Claim shall be made without the prior
written consent by the Shareholder Representative which consent shall not be
unreasonably withheld or delayed. If the Shareholder Representative has assumed
the defense of a Third Party Claim as contemplated by Section 9.4(a), no
settlement of such Third Party Claim may be made by the Indemnifying
Shareholders without the prior written consent by or on behalf of Indemnitee,
unless such settlement includes a complete release of all claims against
Indemnitee.
Section 9.6 Resolution of Indemnification Claims.2 Any Indemnification
Claim received by the Shareholder Representative pursuant to Section 9.3 above
will be resolved as follows:
(a) To provide a fund against which members of the Buyer Group
may assert Indemnification Claims under this Article IX, the Escrow Shares shall
be withheld and deposited into the Escrow in accordance with the provisions of
Section 2.3. The Escrow Shares so deposited shall be held and distributed in
accordance with the Escrow Agreement.
(b) Subject to the provisions of Section 9.2(e), all
Indemnification Claims shall be made in accordance with this Article IX and the
Escrow Agreement against the Escrow Fund, and no claim for indemnification shall
be asserted against any Indemnifying Shareholder or any other former shareholder
of Target.
(c) In the event that the Shareholder Representative gives
written notice contesting all, or a portion of, an Indemnification Claim to
Indemnitee (a "Contested Claim") within thirty (30) days after receipt of such
Indemnification Claim, the matter will be settled by binding arbitration
pursuant to Section 9.6(d), unless otherwise agreed by Indemnitor and
Indemnitee. The final decision of the arbitrator shall be furnished to the
Shareholder Representative and Indemnitee in writing and will constitute a
conclusive determination of the issue in question, binding upon the Indemnifying
Shareholders and Indemnitee and shall not be contested or appealed by any of
them.
(d) Any Contested Claim shall be settled by arbitration at a
mutually agreeable location in Santa Clara, California and, except as herein
specifically stated, in accordance with the commercial arbitration rules of the
American Arbitration Association (the "AAA Rules") then in effect. However, in
all events, these arbitration provisions shall govern over any conflicting rules
which may now or hereafter be contained in the AAA Rules. Any
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judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter thereof. The arbitrator shall have
the authority to grant any equitable and legal remedies that would be available
in any judicial proceeding instituted to resolve a Contested Claim.
Section 9.7 Shareholder Representative.
(a) Authority. For the purposes of this Agreement the holders of
Target Preferred Stock, without any further action on the part of any such
shareholder, shall be deemed to have consented to the appointment of Philipp
Beisel as the representative of such shareholders (the "Shareholder
Representative"), as the attorney-in-fact for and on behalf of each such
shareholder, and the taking by the Shareholder Representative of any and all
actions and the making of any decisions required or permitted to be taken by
them under this Agreement or the Escrow Agreement, including, without
limitation, the exercise of the power to (i) execute the Escrow Agreement, (ii)
prepare, or cause to be prepared, and deliver to Buyer the Signing Date Balance
Sheet, the Closing Date Balance Sheet and the Liabilities Certificate, (iii)
negotiate and agree with Buyer on the amount of the Post-Closing Adjustment,
(iv) receive or give any notice on behalf of the Indemnifying Shareholders
pursuant to this Agreement or the Escrow Agreement, (v) authorize delivery to
Buyer of the Escrow Shares, or any portion thereof, in satisfaction of
Indemnification Claims, (vi) agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to, such Indemnification Claims, and (vii)
take all other actions necessary in the judgment of the Shareholder
Representative for the accomplishment of the foregoing and all of the other
terms, conditions and limitations of this Agreement and the Escrow Agreement.
Accordingly, the Shareholder Representative has the authority and power
conferred by this Agreement to act on behalf of each holder of Target Preferred
Stock and each Indemnifying Shareholder with respect to this Agreement and the
Escrow Agreement and the disposition, settlement or other handling of all
claims, rights or obligations arising from and taken pursuant to this Agreement
or the Escrow Agreement. Such shareholders will be bound by all actions taken by
the Shareholder Representatives in connection with this Agreement and the Escrow
Agreement, and Buyer shall be entitled to rely on any action or decision of the
Shareholder Representative as the action or decision of each holder of Target
Preferred Stock and each Indemnifying Shareholder.
(b) Standard of Conduct. Neither the Shareholder Representative
nor any of his agents shall be liable to any holder of Target Preferred Stock or
any Indemnifying Shareholder for any error of judgment, act done or omitted by
him, or mistake of fact or law in connection with his services pursuant to
Section 9.7, unless caused by his own gross negligence or willful misconduct. In
taking any action or refraining from taking any action whatsoever the
Shareholder Representative shall be protected in relying upon any notice, paper
or other document reasonably believed by him to be genuine, or upon any evidence
reasonably deemed by him to be sufficient. The Shareholder Representative shall
not be required to take any action which is contrary to this Agreement, the
Escrow Agreement or applicable law. The Shareholder Representative may consult
with counsel in connection with his duties and shall be fully protected in any
act taken, suffered or permitted by him in good faith in accordance with the
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advice of counsel. In connection with his services under Section 9.7, the
Shareholder Representative shall not be responsible for determining or verifying
the authority of any person acting or purporting to act on behalf of any party
to this Agreement.
(c) Indemnification of the Shareholder Representative. Each
Indemnifying Shareholder shall indemnify the Shareholder Representative, ratably
in accordance with the value of the shares of Buyer Common Stock received by
such shareholder in the Merger, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by or asserted against the Shareholder Representative in any way
relating to or arising out of this Agreement or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or the enforcement of any of the terms hereof or thereof or of any such other
documents; provided, however, that no such shareholder shall be liable for any
of the foregoing to the extent they arise from the Shareholder Representative's
gross negligence or willful misconduct. The Shareholder Representative shall be
fully justified in refusing to take or to continue to take any action hereunder
unless it shall first be indemnified to its reasonable satisfaction by such
shareholder against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
(d) Resignation or Removal of the Shareholder Representative.
Subject to the appointment and acceptance of a successor Shareholder
Representative as provided below, the Shareholder Representative may resign at
any time thirty (30) days subsequent to giving notice thereof to all
Indemnifying Shareholders, Buyer and the Escrow Agent, and the Shareholder
Representative may be removed at any time with or without cause by action of the
Indemnifying Shareholders who represent a majority of the shares of all
Indemnifying Shareholders. Upon any such resignation or removal, Indemnifying
Shareholders representing a majority of the shares of the Indemnifying
Shareholders shall have the right to appoint a successor Shareholder
Representative, which Shareholder Representative shall be reasonably acceptable
to Buyer. If no successor Shareholder Representative shall have been appointed
by Indemnifying Shareholders and accepted such appointment within twenty (20)
days after the retiring Shareholder Representative gives notice of resignation
or the Shareholder Representative's removal, then the retiring or removed
Shareholder Representative may appoint a successor which shall be reasonably
acceptable to Buyer. Upon the acceptance of any appointment as Shareholder
Representative hereunder, such successor Shareholder Representative shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Shareholder Representative, and the
retiring or removed Shareholder Representative shall be discharged from its
duties and obligations hereunder. After any retiring Shareholders
Representative's resignation or removal hereunder as the Shareholder
Representative, the provisions of this Section 9.7 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
he was acting as the Shareholder Representative.
(e) Individual Capacity. The Shareholder Representative, to the
extent he is an Indemnifying Shareholder, shall have the same rights and powers
under this Agreement as any other Indemnifying Shareholder and may exercise the
same as though he were not the
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Shareholder Representative, and the term "Indemnitor," as used in this Article
IX, shall refer to the Shareholder Representative in his capacity as such.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial overnight delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buyer of Sub, to:
The Vantive Corporation
2455 Augustine Drive
Santa Clara, CA 95054
Attention: President and Chief Executive Officer
Fax: (408) 982-5711
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Ave.
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Fax: (650) 327-3699
(b) if to Target, to
Wayfarer Communications, Inc.
2041 Landings Drive
Mountain View, CA 94043
Attention: President and Chief Executive Officer
Fax: (650) 426-2038
with a copy to:
Fenwick & West LLP
2 Palo Alto Square
Palo Alto, CA 94306
Attention: Dennis R. DeBroeck, Esq.
49
<PAGE> 54
Fax: (650) 494-1417
(c) If to the Shareholder Representative, to:
Mr. Philipp Beisel
Wayfarer Communications, Inc.
2041 Landings Drive
Mountain View, CA 94043
Fax: (650) 426-2038
with a copy to:
Fenwick & West LLP
2 Palo Alto Square
Palo Alto, CA 94306
Attention: Dennis R. DeBroeck, Esq.
Fax: (650) 494-1417
Section 10.2 Interpretation. When a reference is made in this Agreement
to an Article or Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrases "the date of this Agreement," "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the first date written above. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. In
determining whether a Material Adverse Effect exists with respect to a party,
materiality shall be determined on the basis of the applicable party and all of
its Subsidiaries, taken together as a whole, and not on the basis of the party
or any single Subsidiary alone. Reference to a party's "knowledge" mean actual
knowledge after reasonable inquiry of such party's directors, officers, and
other management-level employees who could reasonably be expected to have
knowledge of such matters. As used in this Agreement, the term "Governmental
Entity" means any (i) nation, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (ii) federal, state,
local, municipal, foreign or other government; or (iii) governmental or
quasi-governmental authority of any nature (including any governmental division,
department, agency, commission, official, organization, and any court or other
tribunal), and the term "Subsidiary" means, with respect to any party, any
corporation, at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
50
<PAGE> 55
Section 10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 10.4 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 10.5 Entire Agreement. This Agreement (including the documents
and the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
Section 10.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law.
Section 10.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 10.8 Third Party Beneficiary. Nothing contained in this
Agreement is intended to confer upon any person other than the parties hereto
and their respective successors and permitted assigns, any rights, remedies or
obligations under, or by reason of this Agreement, except that the persons who
are holders of Target Stock or Target Warrants immediately prior to the
Effective Time of the Merger (and their successors and assigns) are express
intended third party beneficiaries of Articles I and II, Section 6.10, 6.11,
6.12, 6.13, 6.14, 6.15, Article IX, and, to the extent relevant to any of the
foregoing, this Article X and as such are entitled to rely on the provisions
hereof as if a party hereto.
[Remainder of Page Intentionally Left Blank]
51
<PAGE> 56
IN WITNESS WHEREOF, each of Buyer, Sub and Target has caused this
Agreement to be signed by its respective officer thereunto duly authorized as of
the date first written above.
THE VANTIVE CORPORATION WAYFARER COMMUNICATIONS, INC.
By: By:
-------------------------------- --------------------------------
Title: Title:
----------------------------- -----------------------------
REVO ACQUISITION CORPORATION
By:
--------------------------------
Title:
-----------------------------
52
<PAGE> 57
ANNEX 2.1(c)(iii)
CALCULATION OF "POOL OF SHARES"
<TABLE>
<S> <C>
Total Number of Shares of Buyer Common Stock 187,867
to be exchanged for Target Stock
Less Number of Shares of Buyer Common Stock (2,219)
exchanged for Target Common Stock
Less Number of Shares of Buyer Common Stock (7,045)
equal to one-half of the DLJ Advisory Fees (i.e.,
$225,000) divided by 31.9375
- ---------------------------------------- ----------------
Pool of Shares 178,603
</TABLE>
<PAGE> 58
ANNEX 2.3
FORM OF ESCROW AGREEMENT
<PAGE> 59
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of June 30, 1998 by
and among The Vantive Corporation, a Delaware corporation ("Buyer"), Harris
Trust and Savings Bank (the "Escrow Agent") and Philipp Beisel (the "Shareholder
Representative") for and on behalf of holders of Preferred Stock (the
"Indemnifying Shareholders") of Wayfarer Communications, Inc., a California
corporation ("Revo").
R E C I T A L S
A. Pursuant to that certain Agreement and Plan of Reorganization dated
as of June 18, 1998 (the "Plan of Reorganization"), Buyer will issue to the
Indemnifying Shareholders shares of Buyer Common Stock, $0.001 par value ("Buyer
Common Stock"), pursuant to the merger (the "Merger") of Revo Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Buyer
("Sub"), with and into Revo;
B. Pursuant to Section 2.4 of the Plan of Reorganization, a Post-Closing
Adjustment (as defined therein) will be made with respect to the number of
shares of Buyer Common Stock issuable to the Indemnifying Shareholders in the
Merger;
C. Pursuant to Article IX of the Plan of Reorganization, the
Indemnifying Shareholders have agreed to indemnify Buyer and other members of
the Buyer Group (as defined therein) with respect to inaccuracies in or breaches
of representations, warranties or covenants made by Revo in the Plan of
Reorganization and certain other matters; and
D. In accordance with the Plan of Reorganization, the parties desire to
establish an escrow for the purpose of providing a fund (i) from which the
Post-Closing Adjustment may be deducted and (ii) against which Buyer (on behalf
of itself and other members of the Buyer Group) may seek indemnification from
the Indemnifying Shareholders under the Plan of Reorganization.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual obligations herein, the parties agree as follows:
1. Establishment of Escrow. On the date hereof or as soon thereafter
as practicable, Buyer shall deliver to the Escrow Agent for deposit into escrow
(the "Escrow") certificates representing an aggregate of 44,076 shares of Buyer
Common Stock otherwise distributable to the Indemnifying Shareholders in the
Merger (the "Escrow Shares"). The Escrow Shares so delivered to the Escrow Agent
and any other securities, cash or other property from time to time held by the
Escrow Agent pursuant to the terms hereof is herein referred to as the "Escrow
Fund." The Escrow Agent agrees to accept the Escrow Shares and to hold the
Escrow Fund in escrow subject to the terms and conditions of this Escrow
Agreement.
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<PAGE> 60
2. Maintenance of the Escrow. The Escrow Agent shall establish a
separate account for each Indemnifying Shareholder showing the number of Escrow
Shares and the amount and type of other property, if any, held in the Escrow for
such Indemnifying Shareholder on the basis of a list of the Indemnifying
Shareholders' respective ownership percentage provided to the Escrow Agent by
the Shareholder Representative. The Escrow Agent shall maintain records showing
each Indemnifying Shareholder's Proportionate Interest (as defined below) in the
Escrow Fund and shall adjust each Indemnifying Shareholder's account to reflect
distributions from, and additions or substitutions to, the property held for the
account of such Indemnifying Shareholder in the Escrow so that, at all times,
each Indemnifying Shareholder's Proportionate Interest in the Escrow Fund shall
be maintained. For purposes of this Escrow Agreement, each Indemnifying
Shareholder's "Proportionate Interest" in the Escrow Fund as of a specific date
shall be equal to the percentage that the value of the Escrow Shares and other
property held for the account of such Indemnifying Shareholder in the Escrow
bears to the value of all property held for the account of all Indemnifying
Shareholders in the Escrow as of such date. For purposes of the provisions of
this Escrow Agreement relating to indemnification and claims, the Escrow Shares
shall be deemed to have a value equal to the average closing sale price of Buyer
Common Stock (as quoted on the Nasdaq National Market and reported in The Wall
Street Journal) for the ten (10) trading days next preceding the date of a
valuation. The Escrow Agent is hereby granted the power to effect any transfer
of Escrow Shares required by this Agreement. Buyer shall cooperate with the
Escrow Agent in promptly issuing, or causing its transfer agent to promptly
issue, such stock certificates as shall be required to effect such transfers.
All Escrow Shares and any other securities from time to time held in the Escrow
Fund shall be registered in the name of the Escrow Agent or its nominee.
3. Shareholder Representative. From and after the establishment of
the Escrow as provided in Section 1 hereof, the Indemnifying Shareholders shall
be represented by the Shareholder Representative, or, upon written notice to the
Escrow Agent, by his successor appointed in accordance with Section 9.7 of the
Plan of Reorganization, who shall have the duties and authority set forth in
said section.
4. Dividends, Voting and Rights of Ownership. Except for tax-free
dividends paid in stock declared with respect to the Escrow Shares pursuant to
Section 305(a) of the Internal Revenue Code of 1986, as amended (the "Code'),
which shall be treated in the manner set forth in Section 1 hereof, any cash
dividends, dividends payable in securities or other distributions of any kind
made in respect of the Escrow Shares will be distributed currently to the
Indemnifying Shareholders and, if distributed to the Escrow Agent, shall
promptly be paid over to the Indemnifying Shareholders. Each Indemnifying
Shareholder will have voting rights with respect to the Escrow Shares deposited
in the Escrow with respect to such Indemnifying Shareholder so long as such
Escrow Shares are held in the Escrow, and Buyer shall take all reasonable steps
necessary to allow the exercise of such rights. The Escrow Agent shall forward
to the Shareholder Representative all voting materials and proxies received by
the Escrow Agent. In the event an Indemnifying Shareholder elects to vote, it
shall direct the Escrow Agent in writing to do so. In the absence of such
direction, the Escrow Agent shall have no duty or obligation to vote with
respect to any of the Escrow Shares. While the Escrow Shares remain in the
Escrow Agent's possession pursuant to this Escrow Agreement, the Indemnifying
Shareholders will
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<PAGE> 61
retain and will be entitled to exercise all other incidents of ownership of the
Escrow Shares which are not inconsistent with the terms and conditions of this
Escrow Agreement. Subject to the rights of Buyer and the other members of the
Buyer Group under the Plan of Reorganization and this Escrow Agreement, all
beneficial interest in the Escrow Fund shall be the property of the Indemnifying
Shareholders from and after the Closing, and Buyer shall have no interest
therein. None of the rights of the Indemnifying Shareholders hereunder shall be
transferable except as otherwise provided by law. Each of the Indemnifying
Shareholders shall be obligated for all federal, state or local taxes applicable
to such Indemnifying Shareholder's interest in the Escrow Fund.
5. Post-Closing Adjustment.
(a) Within five (5) business days following the determination of
the Post-Closing Adjustment pursuant to Section 2.4(b) or 2.4(c) of the Plan of
Reorganization, Buyer and the Shareholder Representative shall give written
notice to the Escrow Agent directing the Escrow Agent to deliver out of the
Escrow to Buyer the number of Escrow Shares determined by dividing the amount of
the Post-Closing Adjustment by $31.9375, rounded to the nearest whole share.
(b) Within ten (10) business days following delivery of such
notice, the Escrow Agent will (i) deliver out of the Escrow to Buyer the number
of Escrow Shares specified in Section 5(a) hereof and (ii) deliver out of the
Escrow to the Indemnifying Shareholders (in accordance with their Proportionate
Interests) the number of Escrow Shares remaining in the Escrow after the
distribution specified in clause (i) above, to the extent such remaining Escrow
Shares exceed (A) 35,261, plus (B), the number of whole Escrow Shares having an
aggregate value at the time of such delivery most nearly equal to the amount of
any then pending Indemnification Claims (as defined in and asserted pursuant to
Section 6 hereof), and expenses reasonably estimated by Buyer to be necessary
for the disposition of all such Indemnification Claims.
6. Claims for Indemnification; Disposition Thereof.
(a) If an Indemnitee (as defined in the Plan of Reorganization)
shall, during the term of this Escrow Agreement, have any claim for
indemnification pursuant to Article IX of the Plan of Reorganization
("Indemnification Claim"), such Indemnitee or Buyer shall promptly deliver to
the Shareholder Representative and the Escrow Agent written notice of such an
Indemnification Claim in accordance with Section 9.3(b) of the Plan of
Reorganization.
(b) If the Shareholder Representative shall not have notified
Buyer and the Escrow Agent in writing objecting to the delivery of any of the
Escrow Fund out of the Escrow to Buyer for application to such notice of Claim
within thirty (30) calendar days after delivery of notice of such
Indemnification Claim, the Escrow Agent shall, as promptly as practicable
following the expiration of such period, deliver out of the Escrow to Buyer the
number of whole Escrow Shares and/or other property then held in the Escrow
having an aggregate value at the time of such delivery most nearly equal to the
amount of such Indemnification Claim.
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<PAGE> 62
(c) If the Shareholder Representative gives written notice to the
Escrow Agent and Buyer objecting to the delivery of any of the Escrow Fund out
of the Escrow to Buyer for application to an Indemnification Claim (a "Contested
Claim") within the 30-day period specified in Section 6(b) hereof, the Escrow
Agent shall make no delivery to Buyer out of the Escrow Fund with respect to
such Contested Claim until the rights of the Indemnifying Shareholders and the
Indemnitee with respect thereto have been agreed upon between the Shareholder
Representative and Buyer or until such rights are finally determined by
arbitration pursuant to Section 14 hereof. If the arbitrator in such proceeding
shall determine that the Escrow Fund, or any part thereof, is to be delivered
out of the Escrow to Buyer to satisfy such Contested Claim, the Escrow Agent
shall, as promptly as practicable following receipt of such determination,
deliver out of the Escrow to Buyer the number of whole Escrow Shares and/or
other property then held in the Escrow having an aggregate value most nearly
equal to the amount determined by such arbitrator .
(d) All Indemnitees wishing to assert substantially similar
claims against the Escrow must assert such claims in the same Indemnification
Claim and in the same arbitration proceeding. A decision or result with respect
to any Indemnification Claim asserted by an Indemnitee will be final, binding
and conclusive upon all Indemnitees with respect to any substantially similar
Indemnification Claims of such Indemnitees asserted or to be asserted against
the Escrow.
7. Distribution of Escrow Fund; Termination of Escrow. The portion
of the Escrow Fund not previously distributed in accordance with the terms of
Section 5 and Section 6 hereof shall be held by the Escrow Agent until ten (10)
business days following the second anniversary of this Escrow Agreement (the
"Release Date"), at which time it shall be delivered to the Indemnifying
Shareholders in accordance with their Proportionate Interests. Notwithstanding
the foregoing, there shall be retained in the Escrow the lesser of (i) the
number of Escrow Shares and other property then held in the Escrow having an
aggregate value equal to 100% of the amount of all pending Indemnification
Claims asserted pursuant to Section 6 hereof and expenses reasonably estimated
by Buyer to be necessary for the disposition of all such Indemnification Claims,
and (ii) the entire remaining Escrow Fund. The Escrow Fund not so distributed
shall be retained by the Escrow Agent until all such pending Indemnification
Claims are resolved and the remaining Escrow Fund deliverable to any Buyer as a
result thereof, if any, shall have been delivered to Buyer. Thereafter, the
Escrow Agent shall, as promptly as practicable, deliver the remaining Escrow
Fund to the Indemnifying Shareholders in accordance with their Proportionate
Interests.
8. Term of Escrow Agreement. This Escrow Agreement shall terminate
upon the distribution by the Escrow Agent of all property held in the Escrow
Fund.
9. Fees of the Escrow Agent. Buyer and the Shareholder
Representative (on behalf of the Indemnifying Shareholders) agree, jointly and
severally to pay to the Escrow Agent a fee according to the fee schedule
attached as Schedule I hereto and all of the expenses of the Escrow Agent,
including expenses related to the indemnity provided in Section 12 hereof. To
the extent
4
<PAGE> 63
such fees and expenses are not paid by Buyer, they may paid from the Escrow Fund
after ten (10) days written notice from the Escrow Agent to Buyer and the
Shareholder Representative. As between themselves, Buyer and the Shareholder
Representative (on behalf of the Indemnifying Shareholders) agree that: (i) all
fees and expenses payable to the Escrow Agent will be paid in the first instance
by Buyer as and when they became payable; (ii) the normal and usual fees and
expenses of administering the Escrow and the distribution made pursuant to
Section 5 hereof shall be borne by Buyer; and (iii) all fees and expenses
associated with the administration of any Indemnification Claim shall be borne
by the Indemnifying Shareholders and shall be recoverable by Buyer out of the
Escrow as a part of such Indemnification Claim.
10. Liability of the Escrow Agent. In performing any of its duties
under this Escrow Agreement, the Escrow Agent shall not be liable to any party
for damages, losses or expenses, except in the event of gross negligence or
willful misconduct on its part. The Escrow Agent shall not incur any such
liability for (i) any act or failure to act made or omitted in good faith, or
(ii) any action taken or omitted in reliance upon any instrument, including any
written statement or affidavit provided for in this Escrow Agreement that the
Escrow Agent shall in good faith believe to be genuine; nor will the Escrow
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any agent's authority. In addition, the Escrow Agent
may consult with legal counsel of its choice in connection with its duties under
this Agreement and shall be fully protected in any act taken, suffered, or
permitted by it in good faith in accordance with the advice of counsel. The
Escrow Agent is not responsible for determining and verifying the authority of
any person acting or purporting to act on behalf of any party to this Escrow
Agreement. The Escrow Agent undertakes to perform such duties as are
specifically set forth in this Escrow Agreement, and the Escrow Agent shall not
be liable except for the performance of such duties as are specifically set
forth in this Escrow Agreement. No implied covenants or obligations shall be
read into this Escrow Agreement against the Escrow Agent.
11. Controversies. If any controversy arises between the parties to
this Escrow Agreement, or with any other party, concerning the subject matter of
the Escrow, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, it may require, despite what may be set forth
elsewhere in this Escrow Agreement. In such event, the Escrow Agent will not be
liable for interest or damage. Furthermore, the Escrow Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to deposit
with the clerk of the court all documents and funds held in the Escrow, except
all costs, expenses, charges and reasonable attorneys' fees incurred by it due
to the interpleader action and which the parties jointly and severally agree to
pay. Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of the
Escrow.
12. Indemnification of Escrow Agent. Buyer and the Indemnifying
Shareholders and their respective successors and assigns agree jointly and
severally to indemnify and hold the Escrow Agent harmless against any and all
losses, claims, damages, liabilities and expenses,
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<PAGE> 64
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel, and disbursements that may be imposed on the Escrow
Agent, or incurred by it in connection with the performance of its duties under
this Escrow Agreement, including but not limited to any arbitration or
litigation arising from this Escrow Agreement or involving its subject matter.
The costs and expenses of enforcing this right of indemnification shall be paid
by Buyer and the Indemnifying Shareholders, provided, however, that the Buyer
and the Indemnifying Shareholders shall not pay such costs and expenses to the
extent that the Escrow Agent is judicially determined to have been negligent or
acted with willful misconduct. This right of indemnification shall survive the
termination of this Escrow Agreement, and the removal or resignation of the
Escrow Agent. Nothing contained in this Section 12 shall impair the rights of
the Indemnifying Shareholders and Buyer, as between themselves, including
without limitation, their rights to enforce the provisions of Section 9 hereof
with respect to the allocation of the Escrow Agent's fees.
13. Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon giving at least thirty (30) days written notice to the other parties;
provided, however, that no such resignation shall become effective until the
appointment of a successor Escrow Agent which shall be accomplished as follows:
Buyer and the Shareholder Representative shall use their best efforts to agree
on a successor Escrow Agent within thirty (30) days after receiving such notice.
If the parties fail to agree on a successor Escrow Agent within such time, the
Escrow Agent may, at the expense of Buyer and the Shareholder Representative,
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent authorized to do business in the State of California and, in such
event, shall give written notice to the other parties of such appointment. The
successor Escrow Agent shall execute and deliver to the Escrow Agent an
instrument accepting such appointment, and the successor Escrow Agent shall,
without further acts, be vested with all the estates, property rights, powers,
and duties of the predecessor Escrow Agent as if originally named as Escrow
Agent herein. The predecessor Escrow Agent then shall be discharged from any
further duties and liability under this Escrow Agreement.
14. Arbitration.
(a) Each Contested Claim will be settled by binding arbitration
pursuant to Section 9.6(d) of the Plan of Reorganization unless otherwise agreed
by the Shareholder Representative and Buyer. Any portion of a Contested Claim
which is not contested shall be resolved as set forth in Section 6(b) hereof.
The final decision of the arbitrator shall be furnished to the Escrow Agent, the
Shareholder Representative and Buyer in writing and will constitute a conclusive
determination of the issue in question, binding upon Revo, the Indemnifying
Shareholders and Buyer and shall not be contested or appealed by any of them.
After notice that the Indemnification Claim is contested by the Shareholder
Representative, the Escrow Agent will continue to hold in the Escrow Fund Escrow
Shares and/or other property having a value sufficient to cover such Contested
Claim, as determined pursuant to Section 2 hereof (notwithstanding the
occurrence of the Release Date), until the earlier of the receipt by the Escrow
Agent of (i) a settlement agreement executed by Buyer and the Shareholder
Representative setting forth a resolution of such Contested Claim, or (ii)
receipt of a copy of the final award of the arbitrator with respect to such
Contested Claim.
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<PAGE> 65
(b) The number of Escrow Shares to be delivered upon resolution
of a Contested Claim shall be equal to (i) the aggregate dollar amount of the
Contested Claim as determined pursuant to this Section 14 divided by (ii) the
value of the Escrow Shares, as determined pursuant to Section 2 hereof, as of
the date of such determination.
15. Miscellaneous.
(a) Assignment; Binding upon Successors and Assigns. None of the
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other parties. This Escrow Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(b) Severability. If any provision of this Escrow Agreement, or
the application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Escrow Agreement and the
application of such provision to other persons or circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
The parties further agree to replace such invalid or unenforceable provision of
this Escrow Agreement with a valid and enforceable provision which will achieve,
to the extent possible, the economic, business and other purposes of the invalid
or unenforceable provision.
(c) Entire Agreement. This Escrow Agreement, the Exhibits hereto,
the documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
(d) Notices. No notice or other communication shall be deemed
given unless sent in the manner, and to the persons, specified in this Section
15(d). All notices and other communications hereunder will be in writing and
will be deemed given (i) upon receipt if delivered personally (or if mailed by
registered or certified mail), (ii) the day after dispatch if sent by overnight
courier, or (iii) upon dispatch if transmitted by facsimile (and confirmed by a
copy delivered in accordance with clause (i) or (ii)), addressed to the parties
at the following addresses:
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<PAGE> 66
To the Escrow Agent: Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attn: Escrow Division/Marianne Tinerella
Phone: 312-461-2420
Fax: 312-461-3525
To Vantive: The Vantive Corporation
2455 Augustine Drive
Santa Clara, California 95054
Attn: General Counsel
Phone: 408-367-4660
Fax: 408-982-5711
with a copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Attn: Dennis C. Sullivan, Esq.
Phone: 650-833-2245
Fax: 650-327-3699
To the Shareholder Representative: Philipp Beisel
Wayfarer Communications, Inc.
2041 Landings Drive
Mountain View, CA 94043
Phone: 650-426-2080
Fax: 650-426-2038
with a copy to: Fenwick & West
Two Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attn: Dennis R. DeBroeck, Esq.
Phone: 650-494-0600
Fax: 650-494-1417
Any party may change its address for such communications by giving notice
thereof to the other parties.
(e) Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party shall be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by law on such
party, and the exercise of any one remedy shall not preclude the exercise of any
other.
(f) Amendment and Waivers. Any term or provision of this Escrow
Agreement may be amended, and the observance of any term of this Escrow
Agreement may be
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<PAGE> 67
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
(g) Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Escrow Agreement.
(h) Absence of Third Party Beneficiary Rights. No provisions of
this Escrow Agreement are intended, nor shall be interpreted, to provide or
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, partner of any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof shall be solely between the parties
to this Escrow Agreement.
(i) Governing Law. It is the intention of the parties hereto that
the internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Escrow Agreement, the construction
of its terms, and the interpretation and enforcement of the rights and duties of
the parties hereto.
(j) Counterparts. This Escrow Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 68
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
THE VANTIVE CORPORATION
By:
--------------------------------
Title:
-----------------------------
HARRIS TRUST AND SAVINGS BANK,
as Escrow Agent
By:
--------------------------------
Title:
-----------------------------
SHAREHOLDER REPRESENTATIVE:
- -----------------------------------
Philipp Beisel
10
<PAGE> 69
Appendix I
Schedule of Fees
as Escrow Agent
for
Vantive Corporation and Philipp Beisel
on behalf of Preferred Stock Shareholders of Wayfarer Communications, Inc.
<TABLE>
<S> <C>
Acceptance Fee...............................................................$ 1,500
o in-house legal review of escrow document
o administrative review of documents
o establishment of appropriate accounts
o participation in pre-closing and closing
Annual Administration Fee....................................................$ 2,500
o routine administrative functions under the agreement
o custody of investments
Activity Fees
o deposit, delivery of securities (per event) ........................$ 35
o deposit of funds ...................................................$ 20
o disbursements (checks, wires, etc.) ................................$ 20
o international wires ................................................$ 40
o purchases, sales of individual securities (per event) ..............$ 100
o investment in selected money market mutual funds ......................No Charge
o asset/transaction report (per statement) ...........................$ 10
</TABLE>
Out-of-Pocket
Additionally, the cost of items that can be directly allocated such as
postage, telephone, overnight delivery, etc. incurred during the routine
administration of the agreement will be billed separately.
Acceptance of the appointment as escrow agent is contingent upon our mutual
agreement to and execution of an escrow document.
This schedule applies to Escrow Agent appointments requiring the usual amount of
responsibility, time and attention. Fees are subject to reasonable adjustment as
changes in laws, procedures, or costs of doing business demand. If in any
specific situation, the agent's duties and responsibilities are greater than
customary or additional work becomes necessary because of the imposition of
governmental legislation or regulation, we reserve the right to adjust our fees.
Fees for services not specifically covered in this schedule will be assessed in
an amount commensurate with the services rendered. The acceptance fee and first
year's administration fee are billed at closing.
11
<PAGE> 70
ANNEX 2.4(a)
TARGET'S MANAGEMENT BONUS OBLIGATION
<TABLE>
<S> <C>
J. Laing $ 191,667
R. Patterson $ 116,667
M. Seifert $ 133,333
R. Schoettle $ 58,333
-----------
Total $ 500,000
</TABLE>
<PAGE> 71
ANNEX 3
TARGET DISCLOSURE SCHEDULE
<PAGE> 72
ANNEX 4
BUYER DISCLOSURE SCHEDULE
<PAGE> 73
ANNEX 6.9
FORM OF TAX CERTIFICATES
<PAGE> 74
ANNEX 6.12
SCHEDULE OF NEW OPTION GRANTS
<PAGE> 75
ANNEX 6.14
SCHEDULE OF STOCK GRANTS AND CASH BONUSES
<PAGE> 76
ANNEX 6.17
SCHEDULE OF TARGET EMPLOYEES
<PAGE> 77
ANNEX 6.19
FORM OF VOTING AGREEMENT
<PAGE> 78
VOTING AGREEMENT
THIS VOTING AGREEMENT is made and entered into as of June ___, 1998 by
and between The Vantive Corporation, a Delaware corporation (the "Company"), and
the undersigned shareholder (the "Shareholder") of Wayfarer Communications,
Inc., a California corporation ("Wayfarer").
RECITALS
A. Concurrently with the execution of this Agreement, the Company,
Wayfarer and Revo Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Company ("Sub"), have entered into an Agreement
and Plan of Reorganization dated as of June ___, 1998 (the "Reorganization
Agreement"), providing for the merger of Sub with and into Wayfarer (the
"Merger") pursuant to which Wayfarer will become a wholly-owned subsidiary of
the Company;
B. The Shareholder is the beneficial holder of record of the number of
shares of the outstanding Common Stock and/or Preferred Stock of Wayfarer as is
indicated on the final page of this Agreement (the "Shares");
C. In connection with the Merger, the Company will acquire the
Shareholder's entire equity interest in Wayfarer and the Shareholder will
receive in exchange an equity interest in the Company; and
D. In consideration of and to induce the execution of the Reorganization
Agreement by the Company, the Shareholder is willing to agree not to sell or
otherwise dispose of any shares of Wayfarer stock held by the Shareholder and to
vote the Shares so as to facilitate consummation of the Merger, as more fully
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. Agreement to Retain Shares. The Shareholder agrees not to transfer,
pledge, sell, exchange or offer to transfer or sell or otherwise dispose of or
encumber any of the Shares at any time prior to the Expiration Date, as defined
herein. The "Expiration Date" shall mean the earlier of (i) the date and time on
which the Merger shall become effective in accordance with the terms and
provisions of the Reorganization Agreement or (ii) the date on which the
Reorganization Agreement shall be terminated pursuant to Article VIII of the
Reorganization Agreement.
2. Agreement to Vote Shares. At any meeting of the Wayfarer shareholders
called with respect to any of the following, and at any adjournment thereof, and
with respect to any written consent solicited with respect to any of the
following, the Shareholder agrees to vote the Shares: (i) in favor of approval
of the Reorganization Agreement and the Merger and any matter which would, or
could reasonably be expected to, facilitate the Merger and (ii) against approval
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<PAGE> 79
of any proposal made in opposition to or competition with consummation of the
Merger and the Reorganization Agreement, against any other merger,
consolidation, sale of assets or reorganization with any other party, against
any recapitalization, liquidation, or winding up of Wayfarer and against any
other matter which would, or could reasonably be expected to, prohibit or
discourage the Merger (each of the foregoing is referred to as an "Opposing
Proposal"). The Shareholder, as the holder of voting stock of Wayfarer agrees to
be present, in person or by proxy, at all meetings of shareholders of Wayfarer
held prior to the Expiration Date so that all Shares are counted for the
purposes of determining the presence of a quorum at such meetings. This
Agreement is intended to bind the Shareholder only with respect to the specific
matters set forth herein, and shall not prohibit the Shareholder from acting in
accordance with his fiduciary duties as an officer or director of Wayfarer.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
the Shareholder agrees to deliver to the Company a proxy in the form attached
hereto as Annex A (the "Proxy"), which shall be irrevocable to the extent
provided therein; provided that the Proxy shall be revoked upon termination of
this Agreement in accordance with its terms.
4. Additional Purchases. For purposes of this Agreement, the term
"Shares" shall include any shares of Wayfarer capital stock which the
Shareholder purchases or otherwise acquires after the execution of this
Agreement and prior to the Expiration Date.
5. Representations, Warranties and Covenants of the Shareholder. The
Shareholder hereby represents, warrants and covenants to the Company the
following:
5.1 Ownership of Shares. Except as specifically described on Annex B
to this Agreement, the Shareholder (i) is the holder and beneficial owner of the
Shares, which at the date hereof are, and at all times until the Expiration Date
will be, free and clear of any liens, claims, options, charges or other
encumbrances, (ii) does not beneficially own any shares of stock of Wayfarer
other than the Shares and (iii) has full power and authority to make, enter
into, deliver and carry out the terms of this Agreement and the Proxy.
5.2 Validity; No Conflict. This Agreement constitutes the legal,
valid and binding obligation of the Shareholder. Neither the execution of this
Agreement by the Shareholder nor the consummation of the transactions
contemplated hereby will result in a breach or violation of the terms of any
agreement by which the Shareholder is bound or of any decree, judgment, order,
law or regulation now in effect of any court or other governmental body
applicable to the Shareholder.
5.3 No Voting Trusts and Agreements. Between the date of this
Agreement and the Expiration Date, the Shareholder will not, and will not permit
any entity under the Shareholder's control to, deposit any shares of Wayfarer
capital stock held by the Shareholder or such entity in a voting trust or
subject any shares of Wayfarer capital stock held by the Shareholder or such
entity to any arrangement or agreement with respect to the voting of such shares
of capital stock, other than agreements entered into with the Company.
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<PAGE> 80
5.4 No Proxy Solicitations. Between the date hereof and the
Expiration Date, the Shareholder will not, and will not permit any entity under
the Shareholder's control to, (i) solicit proxies or become a participant in a
"solicitation" (as such term is defined in Rule 14a-11 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), with respect to an
Opposing Proposal or otherwise encourage or assist any party in taking or
planning any action which would compete with, restrain or otherwise serve to
interfere with or inhibit the timely consummation of the Merger in accordance
with the terms of the Reorganization Agreement, (ii) initiate a shareholders'
vote or action by written consent of Wayfarer shareholders or (iii) become a
member of a "group" (as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of Wayfarer with respect to an Opposing
Proposal.
6. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants to the Shareholder as follows:
6.1 Due Authorization. This Agreement has been authorized by all
necessary corporate action on the part of the Company and has been duly executed
by a duly authorized officer of the Company.
6.2 Validity; No Conflict. This Agreement constitutes the legal,
valid and binding obligation of the Company. Neither the execution of this
Agreement by the Company nor the consummation of the transactions contemplated
hereby will result in a breach or violation of the terms of any agreement by
which the Company is bound or of any decree, judgment, order, law or regulation
now in effect of any court or other governmental body applicable to the Company.
7. Additional Documents. The Shareholder and the Company hereby covenant
and agree to execute and deliver any additional documents necessary or
desirable, in the reasonable opinion of the Company's legal counsel or the
Shareholder, as the case may be, to carry out the intent of this Agreement.
8. Consent and Waiver. The Shareholder hereby gives any consent or
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreement to which the Shareholder is a party or pursuant to
any other rights the Shareholder may have.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither
3
<PAGE> 81
this Agreement nor any of the rights, interests or obligations of the parties
hereto may be assigned by any of the parties without the prior written consent
of the other.
9.3 Amendments and Modifications. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
9.4 Specific Performance: Injunctive Relief. The parties hereto
acknowledge that the Company will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or agreements
of the Shareholder set forth herein. Therefore, it is agreed that, in addition
to any other remedies which may be available to the Company upon such violation,
the Company shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to it at
law or in equity.
9.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by commercial overnight courier service, by confirmed telecopy, or sent
by mail (registered or certified mail, postage prepaid, return receipt
requested) to the respective parties as follows:
If to the Company: The Vantive Corporation
2455 Augustine Drive
Santa Clara, CA 95054
Attn: General Counsel
Telecopy No.: 408-982-5738
Telephone No.: 408-982-5700
If to Shareholder: To the address for notice set forth on the
last page hereof.
With a copy to: Wayfarer Communications, Inc.
2041 Landings Drive
Mountain View, CA 94043
Attn: President
Telecopy No.:
Telephone No.:
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
9.6 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of California without giving
effect to principles of conflicts of law.
4
<PAGE> 82
9.7 Entire Agreement. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
9.8 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
9.9 Effect of Headings. This section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
10. Termination. Notwithstanding anything else in this Agreement, this
Agreement and the Proxy, and all obligations of the Shareholder under either of
them, shall automatically terminate as of the Expiration Date.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
THE VANTIVE CORPORATION
By:
--------------------------------------
SHAREHOLDER
By:
--------------------------------------
Shareholder's Address for Notice:
----------------------------------------
----------------------------------------
----------------------------------------
Shares beneficially owned:
______________ shares of Common Stock
______________ shares of Preferred Stock
5
<PAGE> 83
ANNEX A
IRREVOCABLE PROXY
The undersigned shareholder of Wayfarer Communications, Inc., a
California corporation ("Wayfarer"), hereby irrevocably appoints and constitutes
the members of the Board of Directors of The Vantive Corporation, a Delaware
corporation ("Vantive"), and each of them (the "Proxyholders"), the agents and
proxies of the undersigned, with full power of substitution and resubstitution,
to the full extent of the undersigned's rights with respect to the shares of
capital stock of Wayfarer beneficially owned by the undersigned, which shares
are listed below (the "Shares"), and any and all other shares or securities
issued or issuable in respect thereof on or after the date hereof and prior to
the date this proxy terminates, to vote the Shares as follows:
The agents and proxies named above are empowered at any time prior to
termination of this proxy to exercise all voting and other rights
(including, without limitation, the power to execute and deliver written
consents with respect to the Shares) of the undersigned at every annual,
special or adjourned meeting of Wayfarer shareholders, and in every
written consent in lieu of such a meeting, or otherwise,
1. In favor of approval of that certain Agreement and Plan of
Reorganization dated as of June ___, 1998 by and among Vantive,
Wayfarer, and Revo Acquisition Corporation, a California corporation and
a wholly-owned subsidiary of The Vantive Corporation (the
"Reorganization Agreement"), and the Merger (as defined in the
Reorganization Agreement), and any matter which would, or could
reasonably be expected to, facilitate the Merger, and
2. Against (i) approval of any proposal made in opposition to or
competition with consummation of the Merger and the Reorganization
Agreement, (ii) any other merger, consolidation, sale of assets or
reorganization involving Wayfarer and with any party, (iii) any
recapitalization, liquidation, or winding up of Wayfarer and (iv) any
other matter which would, or could reasonably be expected to, prohibit
or discourage the Merger.
The Proxyholders may not exercise this proxy on any other matter. The
undersigned shareholder may vote the Shares on all such other matters.
The proxy granted by the Shareholder to the Proxyholders hereby is
granted as of the date of this Agreement in order to secure the obligations of
the Shareholders set forth in Section 2 of the Voting Agreement, and is
irrevocable and coupled with an interest in such obligations and in the
interests in Wayfarer to be purchased and sold pursuant to the Reorganization
Agreement. This proxy will terminate upon the termination of the Voting
Agreement in accordance with its terms.
6
<PAGE> 84
Upon the execution hereof, all prior proxies given by the undersigned
with respect to the Shares and any and all other shares or securities issued or
issuable in respect thereof on or after the date hereof are hereby revoked and
no subsequent proxies will be given until such time as this proxy shall be
terminated in accordance with its terms.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned. The undersigned shareholder
authorizes the Proxyholders to file this proxy and any substitution or
revocation of substitution with the Secretary of Revo and with any Inspector of
Elections at any meeting of the shareholders of Revo.
This proxy is irrevocable and shall survive the insolvency, incapacity,
death or liquidation of the undersigned.
Dated: June ___, 1998
Signature of Shareholder: _____________________________
Print name of Shareholder: _____________________________
Shares beneficially owned:
_________ shares of Common Stock
_________ shares of Preferred Stock
7
<PAGE> 85
ANNEX B
EXCEPTIONS TO OWNERSHIP OF SHARES
8
<PAGE> 86
ANNEX 7.2(c)
FORM OF CONFIDENTIALITY AND INVENTIONS AGREEMENT
<PAGE> 87
ANNEX 7.2(d)
FORM OF NONCOMPETITION AGREEMENT
<PAGE> 88
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is made and entered into this 8th day of
June, 1998, by and between , an individual ("Shareholder"), and The Vantive
Corporation, a Delaware corporation ("Buyer"). For the purposes of this
Agreement, "Buyer" shall be deemed to include Buyer and its majority owned
direct and indirect subsidiaries that operate the Business of Wayfarer (as
hereinafter defined) during the term of this Agreement.
RECITALS
A. Wayfarer Communications, Inc., a California corporation ("Wayfarer"),
is engaged throughout the United States of America and the world. Wayfarer is in
the business of providing client/server software that extracts and filters
top-line business content in real-time for enterprise desktops (the "Business of
Wayfarer");
B. Pursuant to that certain Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated June 17, 1998 by and among Buyer, Revo
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
Buyer ("Sub"), and Wayfarer, Buyer is acquiring Wayfarer through a merger of Sub
with and into Wayfarer (the "Merger"). After the Merger becomes effective, the
separate existence of Sub shall cease, and Wayfarer, as the surviving
corporation in the Merger, shall continue its corporate existence under the laws
of the State of California and will continue to operate the Business of Wayfarer
as a wholly-owned subsidiary of Buyer;
C. Shareholder is the beneficial owner of shares of capital stock of
Wayfarer and is a key employee or officer of Wayfarer;
D. Shareholder has been actively involved in the design, development
and/or marketing of Wayfarer's products, including the management of a key
function within Wayfarer; and
E. In consideration of and as an inducement to Buyer and Sub to
consummate the Merger, Shareholder, intending to be bound hereby, has agreed to
execute this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Covenant Not to Compete. Shareholder agrees that, for a period of one
(1) year from the Effective Time of the Merger (as defined in the Reorganization
Agreement) and for so long thereafter as he is employed by or serves as a
consultant to Buyer, or such shorter period ending upon Shareholder's
termination of employment from the Company without "Cause" or
1
<PAGE> 89
because of "Certain Reasons" (as defined in Section 1(d) and 1(e) hereof,
respectively) (the "Noncompetition Period"), he will not:
(a) engage directly or indirectly in Competition;
(b) directly or indirectly be or become an officer, director,
shareholder, owner, partner, promoter, employee, agent, consultant, licensor or
joint venturer, of, for or to, or otherwise be or become associated with or
acquire or hold (of record, beneficially or otherwise) any direct or indirect
interest in, any Person that engages directly or indirectly in Competition,
except that Shareholder may be or become an employee, consultant, agent,
licensor or sublicensor of, for or to, or otherwise be or become associated
with, such Person if Shareholder's actual services rendered or activity in
connection with such Person do not reasonably relate to a Competing Product or
Competing Service; or
(c) request or advise any of the customers, suppliers or other
business contacts of Wayfarer with which Shareholder had contact while employed
by Wayfarer to withdraw, curtail, cancel or not increase their business with
Wayfarer. Notwithstanding the foregoing, Shareholder is permitted to own as a
passive investor up to a three (3%) interest in any publicly traded entity.
Shareholder agrees to notify Buyer in writing of each employment or consulting
position he accepts during the Noncompetition Period (including the name and
address of the hiring party) and will, upon request by Buyer, describe in
reasonable detail the nature of his duties in each such position.
(d) "Cause" shall mean Shareholder's:
(i) failure to perform such assigned duties and
responsibilities as shall be consistent with the duties and responsibilities of
an employee of Wayfarer in a similar job position after receipt of a written
notice of specific deficiencies consistent with Buyer's performance review
policies in effect at such time and a reasonable period not to exceed thirty
(30) days for Shareholder to cure any such deficiencies;
(ii) engaging in gross negligence or willful misconduct
which is or is likely to be materially injurious to Wayfarer;
(iii) committing a felony, an act of fraud against, or the
misappropriation of property belonging to Wayfarer; or
(iv) breaching in any material respect the terms of any
employment agreement or any confidential or proprietary information agreement
between Shareholder and Wayfarer or Buyer; and
2
<PAGE> 90
(v) a majority vote of the Board of Directors of Buyer
authorizes a for Cause termination after the occurrence of any of the events
described in clauses (i), (ii), (iii) or (iv) as set forth above.
(e) "Certain Reasons" shall mean (i) a reduction in cash compensation
(exclusive of bonuses) or a material reduction in benefits, except as part of a
salary or benefit reduction program by Buyer that is applicable generally to
employees of Shareholder's level, (ii) assignment to a position materially not
commensurate with Shareholder's training and abilities, or (iii) relocation of
Shareholder's workplace to any place more than fifty miles from Mountain View,
California, provided, in each case, that Shareholder has given Buyer written
notice of Shareholder's intention to terminate for Certain Reasons, citing the
Certain Reasons, and Wayfarer has not cured the Certain Reasons within thirty
(30) days after receipt of such notice.
(f) "Competing Product" means client/server software that extracts
and filters top-line business content in real time for enterprise desktops or
any other product that is substantially the same as, is based upon or competes
in any material respect with such products.
(g) "Competing Service" means any: (i) activities relating to the
development, marketing and/or distribution of Competing Products carried on by
any business worldwide which competes with the Business of Wayfarer; (ii)
service that has been provided, performed or offered by or on behalf of Wayfarer
at any time on or prior to the date of this Noncompetition Agreement; (iii)
service that facilitates, supports or otherwise relates to the design,
development, marketing, promotion, sale, supply distribution, resale,
installation, support, maintenance, license or sublicense of any Competing
Product; or (iv) service that is substantially the same as, is based upon or
competes in any material respect with any service referred to in clause (i),
(ii) or (iii) of this sentence.
(h) "Competition": a Person shall be deemed to be engaged in
"Competition" if: (a) such Person is engaged in the design, development,
marketing, promotion, sale, supply, distribution, resale, installation, support,
maintenance, license or sublicense of any Competing Product; or (b) such Person
is engaged in providing, performing or offering any Competing Service.
References to engaging directly or indirectly in Competition include (without
prejudice to the generality of that expression) references to acting alone or
jointly with or by means of any other Person.
(i) "Person" means any: (i) individual; (ii) corporation, general
partnership, limited partnership, limited liability partnership, trust, company
(including any limited liability company or joint stock company) or other
organization or entity; or (iii) governmental body or authority.
2. Covenant Not to Hire. During the Noncompetition Period,
Shareholder agrees that he will not directly or indirectly hire or attempt to
hire, whether as an employee, consultant
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<PAGE> 91
or otherwise, any person who at such time is, or who at any time in the six (6)
month period prior to such time had been, employed by Buyer or Wayfarer.
3. Nondisruption; Other Matters. During the Noncompetition Period,
Shareholder agrees that he will not directly or indirectly interfere with,
disrupt or attempt to disrupt any past, present or prospective relationship,
contractual or otherwise, between Buyer or Wayfarer, on the one hand, and any of
their respective customers, suppliers or employees, on the other hand.
4. Equitable Relief. Shareholder acknowledges and agrees that
Buyer's remedies at law for breach of any of the provisions of this Agreement
would be inadequate and, in recognition of this fact, Shareholder agrees that,
in the event of such breach, in addition to any remedies at law it may have,
Buyer, without posting any bond, shall be entitled to obtain equitable relief in
the form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy that may be available.
Shareholder further acknowledges that should Shareholder violate any of the
provisions of this Agreement, it will be difficult to determine the amount of
damages resulting to Buyer and that in addition to any other remedies it may
have, Buyer shall be entitled to temporary and permanent injunctive relief
without the necessity of proving damages.
5. Acknowledgment. Each of Shareholder and Buyer acknowledges and
agrees that the covenants and agreements contained in this Agreement have been
negotiated in good faith by the parties, are reasonable and are not more
restrictive or broader than necessary to protect the interests of the parties
thereto, and would not achieve their intended purpose if they were on different
terms or for periods of time shorter than the periods of time provided herein or
applied in more restrictive geographical areas than are provided herein. Each
party further acknowledges that Buyer would not enter into the Reorganization
Agreement and the transactions contemplated thereby in the absence of the
covenants and agreements contained in this Agreement and that such covenants and
agreements are essential to protect the value of Wayfarer to Buyer.
6. Separate Covenants. The covenants contained in this Agreement
shall be construed as a series of separate covenants, one for each of the
counties in each of the states of the United States of America one for each
province of Canada, and one for each country outside the United States and
Canada.
7. Severability. The parties agree that construction of this
Agreement shall be in favor of its reasonable nature, legality and
enforceability, and that any construction causing unenforceability shall yield
to a construction permitting enforceability. It is agreed that the
noncompetition, nonsolicitation, and nonhiring covenants and provisions of this
Agreement are severable, and that if any single covenant or provision or
multiple covenants or provisions should be found unenforceable, the entire
Agreement and remaining covenants and provisions shall not fail but shall be
construed as enforceable without any severed covenant or provision in accordance
with the tenor of this Agreement. The parties specifically agree that no
covenant or
4
<PAGE> 92
provision of this Agreement shall be invalidated because of overbreadth insofar
as the parties acknowledge the scope of the covenants and provisions contained
herein to be reasonable and necessary for the protection of Buyer and Wayfarer
and not unduly restrictive upon Shareholder. However, should a court or any
other trier of fact or law determine not to enforce any covenant or provision of
this Agreement as written due to overbreadth, then the parties agree that said
covenant or provision shall be enforced to the extent reasonable, with the court
or such trier to make any necessary revisions to said covenant or provision to
permit its enforceability.
8. Not an Employment Agreement. This Agreement is not, and nothing
in this Agreement shall be construed as, an agreement to provide employment to
Shareholder.
9. Governing Law. This Agreement is made under and shall be governed
by, construed in accordance with and enforced under the internal laws of the
State of California. All disputes arising under this Agreement shall be brought
in the federal and state courts located in Santa Clara County, California, as
permitted by law, and each of the parties hereby consents to the personal
jurisdiction, service of process and venue of such courts.
10. Entire Agreement. This Agreement, together with the
Reorganization Agreement, constitutes and contains the entire agreement and
understanding concerning the subject matter addressed herein between the
parties, and supersedes and replaces all prior negotiations and all agreements
proposed or otherwise, whether written or oral, concerning the subject matter
hereof, and the parties hereto have made no agreements, representations or
warranties relating to the subject matter of this Agreement that are not set
forth herein or in the Reorganization Agreement.
11. Notices. Any notice or other communication under this Agreement
shall be in writing, signed by the party making the same, and shall be delivered
personally or sent by certified or registered mail, postage prepaid, addressed
as follows:
If to Shareholder:
-------------------------------
-------------------------------
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If to Buyer: The Vantive Corporation
2455 Augustine Drive
Santa Clara, CA 95054
Attn: General Counsel
with a copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Attn: Dennis C. Sullivan, Esq.
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or to such other address as may hereafter be designated by either party hereto.
All such notices shall be deemed given on the date personally delivered or
mailed.
12. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT.
13. Amendments; No Waiver.
(a) No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
14. Assignment. This Agreement may be assigned by Buyer to any
affiliate of Buyer or to any nonaffiliate of Buyer that shall succeed to the
business and assets of Buyer, Wayfarer and the Business of Wayfarer. In the
event of any such assignment, Buyer shall cause such affiliate or nonaffiliate,
as the case may be, to assume the obligations of Buyer hereunder, by a written
agreement addressed to Shareholder, concurrently with any assignment with the
same effect as if such assignee were "Buyer" hereunder. This Agreement is
personal to Shareholder, and Shareholder may not assign any rights or delegate
any responsibilities hereunder.
15. Headings. The headings of paragraphs in this Agreement are solely
for convenience of reference and shall not control the meaning or interpretation
of any provision of this Agreement.
16. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
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[Shareholder]
THE VANTIVE CORPORATION
By:
--------------------------------
Title:
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ANNEX 7.2(e)
SCHEDULE OF TARGET EMPLOYEES
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ANNEX 7.2(g)
FORM OF FENWICK & WEST LEGAL OPINION
<PAGE> 97
ANNEX 7.2(j)
FORM OF INVESTOR REPRESENTATION LETTER
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ANNEX 7.3(d)
FORM OF GCW&F LEGAL OPINION
