\n 7.7 No Restraints……………………………………………………….45
\n 7.8 No Legal Proceedings…………………………………………………45
\n 7.9 No Material Adverse Change……………………………………………45
\n8. Conditions Precedent to Obligations of the Company………………………46
\n 8.1 Accuracy of Representations…………………………………………..46
\n 8.2 Performance of Covenants……………………………………………..46
\n 8.3 Documents…………………………………………………………..46
\n 8.4 Listing…………………………………………………………….46
\n 8.5 No Restraints……………………………………………………….46
\n 8.6 No Material Adverse Change……………………………………………47
\n 8.7 Tax Opinion…………………………………………………………47
\n9. Termination…………………………………………………………47
\n 9.1 Termination…………………………………………………………47
\n 9.2 Effect of Termination………………………………………………..48
\n10. Indemnification, Etc…………………………………………………48
\n 10.1 Survival of Representations, Etc………………………………………48
\n 10.2 Indemnification……………………………………………………..48
\n 10.3 Exclusive Remedy…………………………………………………….49
\n 10.4 No Contribution……………………………………………………..49
\n 10.5 Defense of Third Party Claims…………………………………………50
\n11. Miscellaneous Provisions……………………………………………..51
\n 11.1 Restrictions on Transfer……………………………………………..51
\n 11.2 Shareholders’ Agent………………………………………………….53
\n 11.3 Further Assurances…………………………………………………..54
\n 11.4 Fees and Expenses……………………………………………………54
\n 11.5 Attorneys’ Fees……………………………………………………..55
\n 11.6 Notices…………………………………………………………….55
\n 11.7 [Intentionally Left Blank]……………………………………………56
\n 11.8 Time of the Essence………………………………………………….56
\n 11.9 Headings……………………………………………………………56
\n 11.10 Counterparts………………………………………………………..56
\n 11.11 Governing Law……………………………………………………….56
\n 11.12 Successors and Assigns……………………………………………….56
\n 11.13 Waiver of Jury Trial…………………………………………………57
\n 11.14 Remedies Cumulative; Specific Performance………………………………57
\n 11.15 Waiver……………………………………………………………..57
\n 11.16 Amendments………………………………………………………….57
\n 11.17 Severability………………………………………………………..57
\n 11.18 Parties in Interest………………………………………………….58
\n 11.19 Entire Agreement…………………………………………………….58
\n 11.20 Construction………………………………………………………..58
\n<\/c><\/s><\/table>\n 5<\/p>\n
EXHIBITS<\/p>\n
Exhibit A – Certain Definitions<\/p>\n
Exhibit B – Form of Escrow Agreement<\/p>\n
Exhibit C-1 – Persons to Execute Affiliate Agreements<\/p>\n
Exhibit C-2 – Form of Affiliate Agreement<\/p>\n
Exhibit D-1 – Persons to Sign Noncompetition Agreements<\/p>\n
Exhibit D-2 – Form of Noncompetition Agreement<\/p>\n
Exhibit E – Form of Legal Opinion of Venture Law Group<\/p>\n
Exhibit F-1 – Persons to Sign Voting Agreement<\/p>\n
Exhibit F-2 – Voting Agreement<\/p>\n
Exhibit G – Form of Opinion of Orrick, Herrington & Sutcliffe LLP<\/p>\n
6<\/p>\n
AGREEMENT AND PLAN<\/p>\n
OF MERGER AND REORGANIZATION<\/p>\n
This Agreement and Plan of Merger and Reorganization (“AGREEMENT”) is
\nmade and entered into as of November 17, 1999 by and among: Accrue Software,
\nInc., a Delaware corporation (“PARENT”); NeoVista Acquisition Corp., a
\nCalifornia corporation and a wholly owned subsidiary of Parent (“MERGER SUB”);
\nand NeoVista Software, Inc., a California corporation (the “COMPANY”). Certain
\nother capitalized terms used in this Agreement are defined in Exhibit A.<\/p>\n
RECITALS<\/p>\n
A. Parent, Merger Sub and the Company intend to effect a merger of
\nMerger Sub with and into the Company in accordance with this Agreement and the
\nCalifornia General Corporation Law (the “MERGER”). Upon consummation of the
\nMerger, Merger Sub will cease to exist, and the Company will become a wholly
\nowned subsidiary of Parent.<\/p>\n
B. It is intended that the Merger qualify as a tax-free reorganization
\nwithin the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
\namended (the “CODE”). For accounting purposes, it is intended that the Merger be
\ntreated as a “purchase.”<\/p>\n
C. This Agreement has been approved by the respective boards of
\ndirectors of Parent, Merger Sub and the Company.<\/p>\n
D. The holders of all the outstanding capital stock of the Company (the
\n“SHAREHOLDERS”) own a total of (A) 3,457,095 shares of the Common Stock (no par
\nvalue per share) of the Company (“COMPANY COMMON STOCK”) and 19,598,969 shares
\nof the Preferred Stock (no par value per share) of the Company (“COMPANY
\nPREFERRED STOCK”) consisting of (i) 548,847 shares of Series I Preferred Stock
\n(“SERIES I PREFERRED STOCK”), (ii) 1,200,000 shares of Series II Preferred Stock
\n(“SERIES II PREFERRED STOCK”), (iii) no shares of Series II-A Preferred Stock
\n(“SERIES II-A PREFERRED STOCK”), (iv) 4,391,175 shares of Series III Preferred
\nStock (“SERIES III PREFERRED STOCK”), (v) no shares of Series III-A Preferred
\nStock (“SERIES III-A PREFERRED STOCK”), (vi) no shares of Series IV Preferred
\nStock (“SERIES IV PREFERRED STOCK”), (vii) no shares of Series IV-A Preferred
\nStock (“SERIES IV-A PREFERRED STOCK”), (viii) 2,981,852 shares of Series V
\nPreferred Stock (“SERIES V PREFERRED STOCK”), (ix) 10,477,095 shares of Series
\nVI Preferred Stock (“SERIES VI PREFERRED STOCK”), (all such series of Preferred
\nStock together with the Company Common Stock, are referred to as the “COMPANY
\nSTOCK”), which shares are all of the issued and outstanding shares of capital
\nstock of the Company.<\/p>\n
AGREEMENT<\/p>\n
For good and valuable consideration, the receipt of which is hereby
\nacknowledged, the parties to this Agreement agree as follows:<\/p>\n
1. DESCRIPTION OF TRANSACTION.<\/p>\n
7<\/p>\n
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
\nthe conditions set forth in this Agreement, at the Effective Time (as defined in
\nSection 1.3), Merger Sub shall be merged with and into the Company and the
\nseparate existence of Merger Sub shall cease. The Company will continue as the
\nsurviving corporation after the Merger (the “SURVIVING CORPORATION”).<\/p>\n
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
\nthis Agreement and in the applicable provisions of the California General
\nCorporation Law.<\/p>\n
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
\ncontemplated by this Agreement (the “CLOSING”) shall take place at the offices
\nof Venture Law Group, A Professional Corporation, 2775 Sand Hill Road, Menlo
\nPark, California 94025 at 10:00 a.m. on December 15, 1999, or at such other time
\nand date as Parent and the Company may agree. The date on which the Closing
\nactually takes place is referred to in this Agreement as the “Closing Date.”
\nContemporaneously with or as promptly as practicable after the Closing, a
\nproperly executed agreement of merger conforming to the requirements of Chapter
\n11 of the California General Corporation Law shall be filed with the Secretary
\nof State of the State of California. The Merger shall become effective at the
\ntime such agreement of merger is filed with the Secretary of State of the State
\nof California (the “EFFECTIVE TIME”).<\/p>\n
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
\notherwise determined by Parent and the Company prior to the Effective Time:<\/p>\n
(a) At the Effective Time, the Articles of Incorporation of
\nMerger Sub, as in effect immediately prior to the Effective Time, shall be the
\nArticles of Incorporation of the Surviving Corporation until thereafter amended
\nas provided by California law and such Articles of Incorporation; provided,
\nhowever, that Article I of the Articles of Incorporation of the Surviving
\nCorporation shall be amended to read as follows: “The name of the corporation is
\nNeoVista Software, Inc.”<\/p>\n
(b) At the Effective time, the Bylaws of Merger Sub, as in effect
\nimmediately prior to the Effective Time, shall be the Bylaws of the Surviving
\nCorporation until thereafter amended as provided by California law, the Articles
\nof Incorporation of the Surviving Corporation and such Bylaws.<\/p>\n
(c) At the Effective Time, the directors of Merger Sub
\nimmediately prior to the Effective Time shall be the directors of the Surviving
\nCorporation, and the officers of Merger Sub immediately prior to the Effective
\nTime, shall be the officers of the Surviving Corporation, in each case until
\ntheir respective successors are duly elected or appointed and qualified.<\/p>\n
1.5 CONVERSION OF SHARES.<\/p>\n
(a) Subject to Sections 1.9, 1.10 and 1.11 at the Effective Time,
\nby virtue of the Merger and without any further action on the part of Parent,
\nMerger Sub, the Company or any Shareholder:<\/p>\n
-2-
\n 8<\/p>\n
(i) each share of Company Common Stock outstanding
\nimmediately prior to the Effective Time (including the shares of Company Common
\nStock issued upon conversion of all shares of the Company’s Preferred Stock)
\nshall be converted into the right to receive the “Applicable Fraction” (as
\ndefined in Section 1.5(b)) of a share of the common stock (par value $.001 per
\nshare) of Parent (“PARENT COMMON STOCK”); and<\/p>\n
(ii) each share of the common stock (par value $.001 per
\nshare) of Merger Sub outstanding immediately prior to the Effective Time shall
\nbe converted into one share of common stock of the Surviving Corporation.<\/p>\n
(b) For purposes of this Agreement:<\/p>\n
(i) the “APPLICABLE FRACTION” shall be calculated by
\ndividing the Net Merger Shares (as defined below) by the sum of (i) aggregate
\nnumber of outstanding shares of Company Common Stock (after giving effect to the
\nconversion of all outstanding shares of the Company’s Preferred Stock into
\nCommon Stock) and (ii) the aggregate number of shares of Company Common Stock
\nrepresented by Company Options (as defined in Section 1.6), Company Common
\nWarrants (as defined in Section 1.7(a)) and Company Preferred Warrants (as
\ndefined in Section 1.7(b)), in each case as of the Effective Time;<\/p>\n
(ii) the term “TOTAL MERGER SHARES” shall mean 2,400,000
\nshares of Parent Common Stock;<\/p>\n
(iii) the term “NET MERGER SHARES” shall mean the Total
\nMerger Shares less the number of Expense Shares (as defined below); and<\/p>\n
(iv) the term “EXPENSE SHARES” shall mean the number of
\nshares of Parent Common Stock calculated by dividing the sum of (i) the amount
\nof the Company Expenses reflected on the Schedule of Expenses delivered pursuant
\nto Section 7.5(g) and (ii) all principal and accrued interest outstanding under
\nloans made by shareholders of the Company to the Company after September 30,
\n1999, which principal and accrued interest totaled approximately $1 million as
\nof the date of this Agreement by the Stipulated Value (as used herein,
\n“STIPULATED VALUE” shall mean the average of the closing prices per share of
\nParent Common Stock on the Nasdaq Stock Market, as reported in The Wall Street
\nJournal, or if not reported therein, any other authoritative source, on each of
\nthe ten business days immediately prior to the Effective Time).<\/p>\n
(c) The Applicable Fraction shall be adjusted to reflect fully
\nthe effect of any stock split, stock dividend (including any dividend or
\ndistribution of stock convertible into Parent Common Stock or Company Common
\nStock), reorganization, recapitalization or other similar change with respect to
\nParent Common Stock or Company Common Stock after the date hereof and prior to
\nthe Effective Time.<\/p>\n
(d) If any shares of Company Common Stock outstanding immediately
\nprior to the Effective Time are unvested or are subject to a repurchase option,
\nrisk of forfeiture or other condition under any applicable restricted stock
\npurchase agreement or other agreement with the<\/p>\n
-3-
\n 9<\/p>\n
Company contained in any applicable restricted stock agreement or other
\nagreement with the Company, then the shares of Parent Common Stock issued in
\nexchange for such shares of Company Common Stock will also be unvested and
\nsubject to the same repurchase option, risk of forfeiture or other condition,
\nand the certificates representing such shares of Parent Common Stock may
\naccordingly be marked with appropriate legends.<\/p>\n
1.6 EMPLOYEE STOCK OPTIONS. At the Effective Time, each stock option
\nthat is then outstanding under the Company’s 1991 Incentive Stock Option Plan
\n(the “COMPANY ISO PLAN”) and the 1991 Non-Qualified Stock Option\/Stock Issuance
\nPlan (the “COMPANY NSO PLAN”) (the “COMPANY OPTION PLANS”), whether vested or
\nunvested (a “COMPANY OPTION”), shall be assumed by Parent in accordance with the
\nterms (as in effect as of the date of this Agreement) of the Company Option
\nPlans and the stock option agreement by which such Company Option is evidenced.
\nAll rights with respect to Company Common Stock under outstanding Company
\nOptions shall thereupon be converted into rights with respect to Parent Common
\nStock. Accordingly, from and after the Effective Time, (a) each Company Option
\nassumed by Parent may be exercised solely for shares of Parent Common Stock, (b)
\nthe number of shares of Parent Common Stock subject to each such assumed Company
\nOption shall be equal to the number of shares of Company Common Stock that were
\nsubject to such Company Option immediately prior to the Effective Time
\nmultiplied by the Applicable Fraction, rounded down to the nearest whole number
\nof shares of Parent Common Stock (collectively, the “OPTION SHARES”), (c) the
\nper share exercise price for the Parent Common Stock issuable upon exercise of
\neach such assumed Company Option shall be determined by dividing the exercise
\nprice per share of Company Common Stock subject to such Company Option, as in
\neffect immediately prior to the Effective Time, by the Applicable Fraction, and
\nrounding the resulting exercise price up to the nearest whole cent, and (d) all
\nrestrictions on the exercise of each such assumed Company Option shall continue
\nin full force and effect, and the term, exercisability, vesting schedule and
\nother provisions of such Company Option shall otherwise remain unchanged;
\nprovided, however, that each such assumed Company Option shall, in accordance
\nwith its terms, be subject to further adjustment as appropriate to reflect any
\nstock split, reverse stock split, stock dividend, recapitalization or other
\nsimilar transaction effected by Parent after the Effective Time. The Company and
\nParent shall take all action that may be necessary (under the Company Option
\nPlans and otherwise) to effectuate the provisions of this Section 1.6. It is the
\nintention of the parties that the Company Options assumed by Parent qualify
\nfollowing the Effective Time as incentive stock options as defined in Section
\n422 of the Code to the extent such Company Options qualified as incentive stock
\noptions prior to the Effective Time, and this Section 1.6 shall be interpreted
\nconsistent with such intent. Following the Closing, Parent will send to each
\nholder of an assumed Company Option a written notice setting forth (i) the
\nnumber of shares of Parent Common Stock subject to such assumed Company Option,
\nand (ii) the exercise price per share of Parent Common Stock issuable upon
\nexercise of such assumed Company Option. No later than February 1, 2000, Parent
\nshall file a registration statement on Form S-8 for the shares of Parent Common
\nStock issuable with respect to assumed Company Options that are eligible for
\ninclusion on Form S-8 and shall maintain the effectiveness of such registration
\nstatement thereafter for so long as any such options or other rights remain
\noutstanding. The Company has not taken, and shall not take, any action that
\nwould result in the accelerated vesting, exercisability or payment of the
\nCompany Options as a consequence of the execution of, or consummation of the<\/p>\n
-4-
\n 10<\/p>\n
transactions contemplated by, this Agreement. Consistent with the terms of the
\nCompany Option Plans and the documents governing the outstanding options under
\nthe Company Option Plans, the Merger will not terminate any of the outstanding
\nCompany Options or accelerate the vesting, exercisability or payment of any
\nCompany Options or the shares of Parent Common Stock which will be subject to
\nthose options upon the Parent’s assumption of the Company Options in the Merger.<\/p>\n
1.7 COMPANY WARRANTS.<\/p>\n
(a) At the Effective Time, each warrant to purchase Company
\nCommon Stock that is then outstanding, whether vested or unvested (a “COMPANY
\nCOMMON WARRANT”), shall be assumed by Parent in accordance with the terms (as in
\neffect as of the date of this Agreement) of the applicable warrant agreement by
\nwhich such Company Common Warrant is evidenced. All rights with respect to
\nCompany Common Stock under outstanding Company Common Warrants shall thereupon
\nbe converted into rights with respect to Parent Common Stock. Accordingly, from
\nand after the Effective Time, (a) each Company Common Warrant assumed by Parent
\nmay be exercised solely for shares of Parent Common Stock, (b) the number of
\nshares of Parent Common Stock subject to each such assumed Company Common
\nWarrant shall be equal to the number of shares of Company Common Stock that were
\nsubject to such Company Common Warrant immediately prior to the Effective Time
\nmultiplied by the Applicable Fraction, rounded down to the nearest whole number
\nof shares of Parent Common Stock (collectively, the “COMMON WARRANT SHARES”),
\n(c) the per share exercise price for the Parent Common Stock issuable upon
\nexercise of each such assumed Company Common Warrant shall be determined by
\ndividing the exercise price per share of Company Common Stock subject to such
\nCompany Common Warrant, as in effect immediately prior to the Effective Time, by
\nthe Applicable Fraction, and rounding the resulting exercise price up to the
\nnearest whole cent, and (d) all restrictions on the exercise of each such
\nassumed Company Common Warrant shall continue in full force and effect, and the
\nterm, exercisability, vesting schedule and other provisions of such Company
\nCommon Warrant shall otherwise remain unchanged; provided, however, that each
\nsuch assumed Company Common Warrant shall, in accordance with its terms, be
\nsubject to further adjustment as appropriate to reflect any stock split, reverse
\nstock split, stock dividend, recapitalization or other similar transaction
\neffected by Parent after the Effective Time. The Company and Parent shall take
\nall action that may be necessary to effectuate the provisions of this Section
\n1.7(a). Following the Closing, Parent will send to each holder of an assumed
\nCompany Common Warrant a written notice setting forth (i) the number of shares
\nof Parent Common Stock subject to such assumed Company Common Warrant, and (ii)
\nthe exercise price per share of Parent Common Stock issuable upon exercise of
\nsuch assumed Company Common Warrant. Notwithstanding the foregoing, Parent shall
\nnot be required to assume any Company Common Warrant which by its terms has
\nterminated as of the Effective Time of the Merger.<\/p>\n
(b) At the Effective Time, each warrant to purchase Company
\nPreferred Stock that is then outstanding, whether vested or unvested (a “COMPANY
\nPREFERRED WARRANT”), shall be assumed by Parent in accordance with the terms (as
\nin effect as of the date of this Agreement) of the applicable warrant agreement
\nby which such Company Preferred Warrant is evidenced. All rights with respect to
\nCompany Preferred Stock under outstanding Company Preferred Warrants<\/p>\n
-5-
\n 11<\/p>\n
shall thereupon be converted into rights with respect to Parent Common Stock.
\nAccordingly, from and after the Effective Time, (a) each Company Preferred
\nWarrant assumed by Parent may be exercised solely for shares of Parent Common
\nStock, (b) the number of shares of Parent Common Stock subject to each such
\nassumed Company Preferred Warrant shall be equal to the number of shares of
\nCompany Common Stock into which the Company Preferred Stock that were subject to
\nsuch Company Preferred Warrant could then be converted immediately prior to the
\nEffective Time multiplied by the Applicable Fraction, rounded down to the
\nnearest whole number of shares of Parent Common Stock (collectively, the
\n“PREFERRED WARRANT SHARES”), (c) the per share exercise price for the Parent
\nCommon Stock issuable upon exercise of each such assumed Company Preferred
\nWarrant shall be determined by dividing the exercise price per share of Company
\nCommon Stock into which the Company Preferred Stock subject to such Company
\nPreferred Warrant could then be converted, as in effect immediately prior to the
\nEffective Time, by the Applicable Fraction, and rounding the resulting exercise
\nprice up to the nearest whole cent, and (d) all restrictions on the exercise of
\neach such assumed Company Preferred Warrant shall continue in full force and
\neffect, and the term, exercisability, vesting schedule and other provisions of
\nsuch Company Preferred Warrant shall otherwise remain unchanged; provided,
\nhowever, that each such assumed Company Preferred Warrant shall, in accordance
\nwith its terms, be subject to further adjustment as appropriate to reflect any
\nstock split, reverse stock split, stock dividend, recapitalization or other
\nsimilar transaction effected by Parent after the Effective Time. The Company and
\nParent shall take all action that may be necessary to effectuate the provisions
\nof this Section 1.7(b). Following the Closing, Parent will send to each holder
\nof an assumed Company Preferred Warrant a written notice setting forth (i) the
\nnumber of shares of Parent Common Stock subject to such assumed Company
\nPreferred Warrant, and (ii) the exercise price per share of Parent Common Stock
\nissuable upon exercise of such assumed Company Preferred Warrant.
\nNotwithstanding the foregoing, Parent shall not be required to assume any
\nCompany Preferred Warrant which by its terms has terminated as of the Effective
\nTime of the Merger.<\/p>\n
1.8 CLOSING OF THE COMPANY’S TRANSFER BOOKS. At the Effective Time,
\nholders of certificates representing shares of the Company’s capital stock that
\nwere outstanding immediately prior to the Effective Time shall cease to have any
\nrights as shareholders of the Company and the stock transfer books of the
\nCompany shall be closed with respect to all shares of such capital stock
\noutstanding immediately prior to the Effective Time. No further transfer of any
\nsuch shares of the Company’s capital stock shall be made on such stock transfer
\nbooks after the Effective Time. If, after the Effective Time, a valid
\ncertificate previously representing any of such shares of the Company’s capital
\nstock (a “COMPANY STOCK CERTIFICATE”) is presented to the Surviving Corporation
\nor Parent, such Company Stock Certificate shall be canceled and shall be
\nexchanged as provided in Section 1.9.<\/p>\n
1.9 EXCHANGE OF CERTIFICATES.<\/p>\n
(a) At or as soon as practicable after the Effective Time, Parent
\nwill send to the holders of Company Stock Certificates (i) a letter of
\ntransmittal in customary form and containing such provisions as Parent may
\nreasonably specify, and (ii) instructions for use in effecting the surrender of
\nCompany Stock Certificates in exchange for certificates representing<\/p>\n
-6-
\n 12<\/p>\n
Parent Common Stock. Upon surrender of a Company Stock Certificate to Parent for
\nexchange, together with a duly executed letter of transmittal and such other
\ndocuments as may be reasonably requested by Parent, the holder of such Company
\nStock Certificate shall be entitled to receive in exchange therefor a
\ncertificate representing the number of whole shares of Parent Common Stock (and
\ncash in lieu of any fractional share of Parent Common Stock in accordance with
\nSection 1.9(c)) that such holder has the right to receive pursuant to the
\nprovisions of this Section 1, and the Company Stock Certificate so surrendered
\nshall be canceled. Until surrendered as contemplated by this Section 1.9, each
\nCompany Stock Certificate shall be deemed, from and after the Effective Time, to
\nrepresent only the right to receive upon such surrender a certificate
\nrepresenting shares of Parent Common Stock (and cash in lieu of any fractional
\nshare of Parent Common Stock in accordance with Section 1.9(c)) as contemplated
\nby this Section 1. If any Company Stock Certificate shall have been lost, stolen
\nor destroyed, Parent may, in its discretion and as a condition precedent to the
\nissuance of any certificate representing Parent Common Stock, require the owner
\nof such lost, stolen or destroyed Company Stock Certificate to provide an
\nappropriate affidavit and to deliver a bond (in such sum as Parent may
\nreasonably direct) as indemnity against any claim that may be made against
\nParent or the Surviving Corporation with respect to such Company Stock
\nCertificate.<\/p>\n
(b) No dividends or other distributions declared or made with
\nrespect to Parent Common Stock with a record date after the Effective Time shall
\nbe paid to the holder of any unsurrendered Company Stock Certificate with
\nrespect to the shares of Parent Common Stock represented thereby and no cash
\npayment in lieu of any fractional share shall be paid to any such holder, until
\nsuch holder surrenders such Company Stock Certificate in accordance with this
\nSection 1.9 (at which time such holder shall be entitled to receive all such
\ndividends and distributions and such cash payment without interest).<\/p>\n
(c) No fractional shares of Parent Common Stock shall be issued
\nin connection with the Merger and no certificates for any such fractional shares
\nshall be issued. In lieu of such fractional shares, any holder of capital stock
\nof the Company who would otherwise be entitled to receive a fraction of a share
\nof Parent Common Stock (after aggregating all fractional shares of Parent Common
\nStock issuable to such holder) shall, upon surrender of such holder’s Company
\nStock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
\nwhole cent), without interest, determined by multiplying such fraction by the
\nStipulated Value).<\/p>\n
(d) Parent and the Surviving Corporation shall be entitled to
\ndeduct and withhold from any consideration payable or otherwise deliverable to
\nany holder or former holder of capital stock of the Company pursuant to this
\nAgreement such amounts as Parent or the Surviving Corporation may be required to
\ndeduct or withhold therefrom under the Code or under any provision of state,
\nlocal or foreign tax law. To the extent such amounts are so deducted or
\nwithheld, such amounts shall be treated for all purposes under this Agreement as
\nhaving been paid to the Person to whom such amounts would otherwise have been
\npaid.<\/p>\n
(e) Neither Parent nor the Surviving Corporation shall be liable
\nto any holder or former holder of capital stock of the Company for any shares of
\nParent Common Stock (or dividends or distributions with respect thereto) or for
\nany cash amounts if, on or after the<\/p>\n
-7-
\n 13<\/p>\n
expiration of one (1) year after the Effective Time, such shares are delivered
\nto any public official pursuant to any applicable abandoned property, escheat or
\nsimilar law.<\/p>\n
1.10 DISSENTING SHARES.<\/p>\n
(a) Notwithstanding anything to the contrary contained in this
\nAgreement, any shares of capital stock of the Company that, as of the Effective
\nTime, are or may become held by a “dissenting shareholder” within the meaning of
\nChapter 13 of the California General Corporation Law shall not be converted into
\nor represent the right to receive Parent Common Stock in accordance with Section
\n1.5 (or cash in lieu of fractional shares in accordance with Section 1.9(c)),
\nand the holder or holders of such shares shall be entitled only to such rights
\nas may be granted to such holder or holders in Chapter 13 of the California
\nGeneral Corporation Law; provided, however, that if the status of any such
\nholder as a “dissenting shareholder” shall not be perfected, or if such holder
\nshall lose his, her or its status as a “dissenting shareholder,” then, as of the
\nlater of the Effective Time or the time of the failure to perfect such status or
\nthe loss of such status, such shares shall automatically be converted into and
\nshall represent only the right to receive (upon the surrender of the certificate
\nor certificates representing such shares) Parent Common Stock in accordance with
\nSection 1.5 (and cash in lieu of fractional shares in accordance with Section
\n1.9(c)).<\/p>\n
(b) The Company shall give Parent (i) prompt notice of any
\nwritten demand received by the Company prior to the Effective Time to require
\nthe Company to purchase shares of capital stock of the Company pursuant to
\nChapter 13 of the California General Corporation Law and of any other demand,
\nnotice or instrument delivered to the Company prior to the Effective Time
\npursuant to the California General Corporation Law, and (ii) the opportunity to
\nparticipate in all negotiations and proceedings with respect to any such demand,
\nnotice or instrument. The Company shall not make any payment (unless such
\npayment is pursuant to a court order in which event the Company shall give
\nParent notice of any such court order or request therefor as soon as
\npracticable) or settlement offer prior to the Effective Time with respect to any
\nsuch demand unless Parent shall have consented in writing to such payment or
\nsettlement offer.<\/p>\n
1.11 HOLDBACK SHARES.<\/p>\n
(a) Parent shall establish and maintain an escrow (the “ESCROW
\nACCOUNT”) comprised of ten percent (10%) of the remainder of the Net Merger
\nShares less the Option Shares less the Common Warrant Shares less the Preferred
\nWarrant Shares (the “HOLDBACK SHARES”). Parent shall designate and appoint U.S.
\nStock Transfer Corporation or such other third party escrow agent that is
\nmutually and reasonably acceptable to Parent and the Shareholders’ Agent (as
\nhereinafter defined) in connection therewith (the “ESCROW AGENT”) to serve in
\naccordance with the Escrow Agreement substantially in the form attached as
\nExhibit B hereto (the “ESCROW AGREEMENT”) to be entered into among Parent, the
\nEscrow Agent and the Shareholders’ Agent at Closing. Such escrow of the Holdback
\nShares shall be maintained for purposes of satisfying claims brought pursuant to
\nSection 10 and for the period of time set forth in such Section 10.1 (the
\n“HOLDBACK PERIOD”).<\/p>\n
-8-
\n 14<\/p>\n
(b) The right to receive the Holdback Shares upon expiration of
\nthe Holdback Period (i) is an integral part of the consideration in the Merger,
\nand (ii) shall be transferable or assignable only upon submission of evidence of
\nsuch transfer or assignment reasonably satisfactory to Parent and the Escrow
\nAgent. The value of any shares of Parent Common Stock ultimately retained by
\nParent hereunder shall be treated for purposes of this Agreement as a reduction
\nof the consideration paid to the Shareholders in the Merger.<\/p>\n
1.12 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
\nintended to constitute a reorganization within the meaning of Section 368 of the
\nCode. The parties to this Agreement hereby adopt this Agreement as a “plan of
\nreorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
\nUnited States Treasury Regulations.<\/p>\n
1.13 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
\nintended to be treated as a “purchase.”<\/p>\n
1.14 FURTHER ACTION. If, at any time after the Effective Time, any
\nfurther action is determined by Parent to be reasonably necessary or desirable
\nto carry out the purposes of this Agreement or to vest the Surviving Corporation
\nor Parent with full right, title and possession of and to all rights and
\nproperty of Merger Sub and the Company, the officers and directors of the
\nSurviving Corporation and Parent shall be fully authorized (in the name of
\nMerger Sub, in the name of the Company and otherwise) to take such action.<\/p>\n
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY EXECUTIVES.<\/p>\n
The Company represents and warrants, to and for the benefit of the
\nIndemnitees, that, except as set forth in the Company Disclosure Schedule:<\/p>\n
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.<\/p>\n
(a) The Company is a corporation duly organized and validly
\nexisting under the laws of the State of California and has all necessary
\ncorporate power and authority to: (i) conduct its business in the manner in
\nwhich its business is currently being conducted; (ii) own and use its assets in
\nthe manner in which its assets are currently owned and used; and (iii) perform
\nits obligations under all Company Contracts.<\/p>\n
(b) The Company has not conducted any business under or otherwise
\nused, for any purpose or in any jurisdiction, any fictitious name, assumed name,
\ntrade name or other name, other than the names “NeoVista Software, Inc.” and
\n“Maspar Computer Corporation.”<\/p>\n
(c) The Company is not, and has not been required to be,
\nqualified, authorized, registered or licensed to do business as a foreign
\ncorporation in any jurisdiction other than the jurisdictions identified in Part
\n2.1(c) of the Company Disclosure Schedule, except where the failure to be so
\nqualified, authorized, registered or licensed has not had and could not
\nreasonably be expected to result in a Company Material Adverse Effect. The
\nCompany is in good standing as a foreign corporation in each of the
\njurisdictions identified in Part 2.1(c) of the Company Disclosure Schedule.<\/p>\n
-9-
\n 15<\/p>\n
(d) Part 2.1(d) of the Company Disclosure Schedule accurately
\nsets forth (i) the names of the members of the Company’s board of directors,
\n(ii) the names of the members of each committee of the Company’s board of
\ndirectors, and (iii) the names and titles of the Company’s officers.<\/p>\n
(e) Except as set forth in Part 2.1(e) of the Company Disclosure
\nSchedule, the Company does not own any controlling interest in any Entity and
\nthe Company has never owned, beneficially or otherwise, any shares or other
\nsecurities of, or any direct or indirect equity interest in, any Entity. The
\nCompany has not agreed and is not obligated to make any future investment in, or
\ncapital contribution to, any Entity.<\/p>\n
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
\ndelivered to Parent accurate, complete and up-to-date copies of: (a) the
\nCompany’s articles of incorporation and bylaws, including all amendments
\nthereto; (b) the stock records of the Company; and (c) the minutes and other
\nrecords of the meetings and other proceedings (including any actions taken by
\nwritten consent or otherwise without a meeting) of the shareholders of the
\nCompany, the board of directors of the Company and all committees of the board
\nof directors of the Company since the date of the Company’s incorporation. There
\nhave been no formal meetings or other proceedings of the shareholders of the
\nCompany, the board of directors of the Company or any committee of the board of
\ndirectors of the Company that are not fully reflected in such minutes or other
\nrecords. There has not been any violation of any of the provisions of the
\nCompany’s articles of incorporation or bylaws, and the Company has not taken any
\naction that is inconsistent in any material respect with any resolution adopted
\nby the Company’s shareholders, the Company’s board of directors or any committee
\nof the Company’s board of directors. The books of account, stock records, minute
\nbooks and other records of the Company are accurate, up-to-date and complete in
\nall material respects, and have been maintained in accordance with prudent
\nbusiness practices.<\/p>\n
2.3 CAPITALIZATION, ETC.<\/p>\n
(a) The authorized capital stock of the Company consists of: (A)
\n50,000,000 shares of Common Stock, of which 3,457,095 shares have been issued
\nand are outstanding as of the date of this Agreement; and (B) 37,399,827 shares
\nof Preferred Stock, 19,598,969 shares of which are issued and outstanding as of
\nthe date of this Agreement, (i) 548,847 of which have been designated “Series I
\nPreferred Stock,” all of which shares have been issued and are outstanding as of
\nthe date of this Agreement and are convertible into an aggregate of 548,847
\nshares of Common Stock, (ii) 1,200,000 of which have been designated “Series II
\nPreferred Stock,” all of which shares have been issued and are outstanding as of
\nthe date of this Agreement and are convertible into an aggregate of 1,200,000
\nshares of Common Stock, (iii) 1,200,000 of which have been designated “Series
\nII-A Preferred Stock,” none of which shares have been issued and are outstanding
\nas of the date of this Agreement, (iv) 5,882,353 of which have been designated
\n“Series III Preferred Stock,” of which 4,391,175 shares have been issued and are
\noutstanding as of the date of this Agreement and are convertible into an
\naggregate of 6,426,586 shares of Common Stock, (v) 5,882,353 of which have been
\ndesignated “Series III-A Preferred Stock,” none of which shares have been issued
\nand are outstanding as of the date of this<\/p>\n
-10-
\n 16<\/p>\n
Agreement, (vi) 1,176,470 of which have been designated “Series IV Preferred
\nStock,” none of which shares have been issued and are outstanding as of the date
\nof this Agreement, (vii) 1,176,470 of which have been designated “Series IV-A
\nPreferred Stock,” none of which shares have been issued and are outstanding as
\nof the date of this Agreement, (viii) 7,000,000 of which have been designated
\n“Series V Preferred Stock,” of which 2,981,852 shares have been issued and are
\noutstanding as of the date of this Agreement and are convertible into an
\naggregate of 3,681,294 shares of Common Stock, and (ix) 13,333,334 of which have
\nbeen designated “Series VI Preferred Stock,” of which 10,477,095 shares have
\nbeen issued and are outstanding as of the date of this Agreement and are
\nconvertible into an aggregate of 19,644,538 shares of Common Stock. All of the
\noutstanding shares of Company Stock have been duly authorized and validly
\nissued, and are fully paid and non-assessable. Part 2.3 of the Company
\nDisclosure Schedule (i) sets forth the name of each Shareholder of the Company
\nand the number and type of all shares of Company Common Stock and Company
\nPreferred Stock held by such Shareholder and (ii) provides an accurate and
\ncomplete description of the terms of each repurchase option which is held by the
\nCompany and to which any of such shares is subject.<\/p>\n
(b) The Company has reserved 12,764,396 shares of Company Common
\nStock for issuance under the Company Option Plans. As of the date of this
\nAgreement, of such reserved shares of Company Common Stock, options to purchase
\n11,973,518 shares have been granted and are outstanding (which includes options
\nto purchase 6,185,117 shares of Common Stock granted at the Company’s September
\n27, 1999 Board meeting), 260,259 shares have been granted and exercised and
\n530,619 shares remain available for issuance to officers, directors, employees
\nand consultants pursuant to the Company Option Plans. Part 2.3(b) of the Company
\nDisclosure Schedule accurately sets forth, with respect to each Company Option
\nthat is outstanding as of the date of this Agreement: (i) the name of the holder
\nof such Company Option; (ii) the total number of shares of Company Common Stock
\nthat are subject to such Company Option and the number of shares of Company
\nCommon Stock with respect to which such Company Option is immediately
\nexercisable; (iii) the date on which such Company Option was granted and the
\nterm of such Company Option; (iv) the vesting schedule for such Company Option;
\n(v) the exercise price per share of Company Common Stock purchasable under such
\nCompany Option; and (vi) whether such Company Option has been designated an
\n“incentive stock option” as defined in Section 422 of the Code. Each Company
\nOption designated as an “incentive stock option” as defined in Section 422 of
\nthe Code on the applicable books and records of the Company qualified as an
\n“incentive stock option” within the meaning of Section 422 of the Code on the
\ndate of grant of such Company Option. In addition, as of the date of this
\nAgreement, there are warrants outstanding to purchase 1,669,353 shares of the
\nCompany’s Common Stock, and warrants outstanding to purchase 60,000 shares of
\nthe Company’s Series III Preferred Stock, which are convertible upon exercise
\ninto 70,750 shares of the Company’s Common Stock. Part 2.3(b) of the Company
\nDisclosure Schedule accurately sets forth, with respect to each warrant that is
\noutstanding as of the date of this Agreement: (i) the name of the Warrant
\nholder; (ii) the total number of shares of Company capital stock subject to such
\nwarrant; (iii) the date on which each warrant was granted and the term of such
\nwarrant; and (iv) the exercise price per share of Company capital stock
\npurchasable under such warrant. Except as set forth in Part 2.3(b) of the
\nCompany Disclosure Schedule, there is no: (i) outstanding subscription, option,
\ncall, warrant or right (whether or not currently exercisable) to acquire any<\/p>\n
-11-
\n 17<\/p>\n
shares of the capital stock or other securities of the Company; (ii) outstanding
\nsecurity, instrument or obligation that is or may become convertible into or
\nexchangeable for any shares of the capital stock or other securities of the
\nCompany; (iii) Contract under which the Company is or may become obligated to
\nsell or otherwise issue any shares of its capital stock or any other securities;
\nor (iv) to the knowledge of the Company, condition or circumstance that may give
\nrise to or provide a basis for the assertion of a claim by any Person to the
\neffect that such Person is entitled to acquire or receive any shares of capital
\nstock or other securities of the Company.<\/p>\n
(c) All outstanding shares of Company Stock and all outstanding
\nCompany Options and Company Common Warrants and Company Preferred Warrants have
\nbeen issued and granted in compliance with (i) all applicable securities laws
\nand other applicable Legal Requirements, and (ii) all requirements set forth in
\napplicable Contracts.<\/p>\n
(d) Except as set forth in Part 2.3(d) of the Company Disclosure
\nSchedule, the Company has never repurchased, redeemed or otherwise reacquired
\nany shares of capital stock or other securities of the Company. All securities
\nso reacquired by the Company were reacquired in compliance with (i) the
\napplicable provisions of the California General Corporation Law and all other
\napplicable Legal Requirements, and (ii) all requirements set forth in applicable
\nrestricted stock purchase agreements and other applicable Contracts.<\/p>\n
(e) The terms of the Company Option Plans permit the assumption
\nor substitution of options to purchase Parent Common Stock and the assignment of
\nthe Company’s repurchase rights and rights of first refusal under stock purchase
\nagreements, the terms of the Company Common Warrants and the Company Preferred
\nWarrants permit the assumption or substitution of warrants to purchase Parent
\nCommon Stock, and the terms of all other agreements between the Company and its
\nsecurities holders under which the Company’s securities have been issued to such
\nsecurities holders permit the assignment of the Company’s repurchase rights and
\nrights of first refusal under such agreements, without the consent or approval
\nof the holders of such securities, the Company’s shareholders, or otherwise and
\nwithout any acceleration of the exercise schedule or vesting provisions in
\neffect for those options, warrants or other securities. True and complete copies
\nof all agreements and instruments relating to or issued under the Company Option
\nPlans have been made available to Parent and such agreements and instruments
\nhave not been amended, modified or supplemented, and there are no agreements to
\namend, modify or supplement such agreements or instruments in any case from the
\nform made available to Parent. All amendments to the 1991 ISO Plan have been
\napproved by the Company’s shareholders, including amendments made from time to
\ntime to increase the number of shares reserved for issuance thereunder.<\/p>\n
2.4 FINANCIAL STATEMENTS.<\/p>\n
(a) The Company has delivered to Parent the following financial
\nstatements and the notes, if any, thereto (collectively, the “COMPANY FINANCIAL
\nSTATEMENTS”):<\/p>\n
(i) The audited balance sheets of the Company as of December
\n31, 1997 and 1998, and the related audited income statements, statements of
\nshareholders’ equity<\/p>\n
-12-
\n 18<\/p>\n
and statements of cash flows of the Company for the years then ended, together
\nwith the notes thereto and the unqualified report and opinion of Deloitte & Touche LLP relating thereto; and<\/p>\n
(ii) the unaudited balance sheet of the Company as of
\nSeptember 30, 1999, (the “UNAUDITED INTERIM BALANCE SHEET”), and the related
\nunaudited income statement, statement of shareholder’s equity and statement of
\ncash flows of the Company for the ten months then ended.<\/p>\n
(b) The Company Financial Statements are accurate and complete in
\nall material respects and present fairly the financial position of the Company
\nas of the respective dates thereof and the results of operations and cash flows
\nof the Company for the periods covered thereby. The Company Financial Statements
\nhave been prepared in accordance with generally accepted accounting principles
\napplied on a consistent basis throughout the periods covered (except that the
\nfinancial statements referred to in Section 2.4(a)(ii) do not contain footnotes
\nand are subject to normal and recurring year end audit adjustments, which will
\nnot, individually or in the aggregate, be material in magnitude).<\/p>\n
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
\nDisclosure Schedule, since September 30, 1999:<\/p>\n
(a) there has not been any material adverse change in the
\nCompany’s business, condition, assets, liabilities, operations, financial
\nperformance or prospects, and, to the knowledge of the Company, no event has
\noccurred that will or could reasonably be expected to result in a Company
\nMaterial Adverse Effect;<\/p>\n
(b) there has not been any material loss, damage or destruction
\nto, or any material interruption in the use of, any of the Company’s assets
\n(whether or not covered by insurance);<\/p>\n
(c) the Company has not declared, accrued, set aside or paid any
\ndividend or made any other distribution in respect of any shares of its capital
\nstock, and has not repurchased, redeemed or otherwise reacquired any shares of
\nits capital stock or other securities;<\/p>\n
(d) the Company has not sold, issued or authorized the issuance
\nof (i) any shares of its capital stock or other security (except for Company
\nCommon Stock issued upon the exercise of outstanding Company Options), (ii) any
\noption or right to acquire any shares of its capital stock or any other security
\n(except for Company Options described in Part 2.3(b) of the Company Disclosure
\nSchedule), or (iii) any instrument convertible into or exchangeable for any
\ncapital stock or other security;<\/p>\n
(e) the Company has not amended or waived any of its rights
\nunder, or modified the vesting provisions under, (i) any provision of the
\nCompany Option Plan, (ii) any provision of any agreement evidencing any
\noutstanding Company Option, or (iii) any restricted stock purchase agreement;<\/p>\n
-13-
\n 19<\/p>\n
(f) there has been no amendment to the Company’s articles of
\nincorporation or bylaws, and the Company has not effected or been a party to any
\nAcquisition Transaction, recapitalization, reclassification of shares, stock
\nsplit, reverse stock split or similar transaction;<\/p>\n
(g) the Company has not formed any subsidiary or acquired any
\nequity interest or other interest in any other Entity;<\/p>\n
(h) the Company has not made any capital expenditure which, when
\nadded to all other capital expenditures made on behalf of the Company since
\nOctober 31, 1999, exceeds $50,000;<\/p>\n
(i) the Company has not (i) entered into or permitted any of the
\nassets owned or used by it to become bound by any Contract that is or would
\nconstitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
\nor prematurely terminated, or waived any material right or remedy under, any
\nsuch Contract;<\/p>\n
(j) the Company has not (i) acquired, leased or licensed any
\nright or other asset from any other Person, (ii) sold or otherwise disposed of,
\nor leased or licensed, any right or other asset to any other Person, or (iii)
\nwaived or relinquished any right, except for immaterial rights or other
\nimmaterial assets acquired, leased, licensed or disposed of in the ordinary
\ncourse of business and consistent with the Company’s past practices;<\/p>\n
(k) the Company has not written off as uncollectible, or
\nestablished any extraordinary reserve with respect to, any account receivable or
\nother indebtedness;<\/p>\n
(l) the Company has not made any pledge of any of its assets or
\notherwise permitted any of its assets to become subject to any Encumbrance,
\nexcept for pledges of immaterial assets made in the ordinary course of business
\nand consistent with the Company’s past practices and Permitted Liens;<\/p>\n
(m) the Company has not (i) lent money to any Person (other than
\npursuant to routine advances for business expenses made to employees in the
\nordinary course of business), or (ii) incurred or guaranteed any indebtedness
\nfor borrowed money;<\/p>\n
(n) the Company has not (i) established or adopted any Employee
\nBenefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
\nto, or increased the amount of the wages, salary, commissions, fringe benefits
\nor other compensation or remuneration payable to, any of its directors,
\nofficers, employees or consultants, or (iii) hired any new employee;<\/p>\n
(o) the Company has not changed any of its methods of accounting
\nor accounting practices in any respect;<\/p>\n
(p) the Company has not made any Tax election;<\/p>\n
(q) the Company has not commenced or settled any Legal
\nProceeding;<\/p>\n
-14-
\n 20<\/p>\n
(r) the Company has not entered into any material transaction or
\ntaken any other material action outside the ordinary course of business or
\ninconsistent with its past practices; and<\/p>\n
(s) increase in the salary or other compensation payable or to
\nbecome payable by the Company to any officers, directors, employees or advisors
\nof the Company, except in the ordinary course of business consistent with past
\npractice, or the declaration, payment, or commitment or obligation of any kind
\nfor the payment by the Company of a bonus or other additional salary or
\ncompensation to any such person except as otherwise contemplated by this
\nAgreement, or other than as set forth in Section 2.16 below, the establishment
\nof any bonus, insurance, deferred compensation, pension, retirement, profit
\nsharing, stock option (including without limitation, the granting of stock
\noptions, stock appreciation rights, performance awards), stock purchase or other
\nemployee benefit plan;<\/p>\n
(t) change in pricing or royalties set or charged by the Company
\nto its customers or licensees or in pricing or royalties set or charged by
\npersons who have licensed Intellectual Property to the Company;<\/p>\n
(u) the Company has not agreed or committed to take any of the
\nactions referred to in clauses “(c)” through “(t)” above.<\/p>\n
2.6 TITLE TO ASSETS.<\/p>\n
(a) The Company owns, and has good and valid title to, all assets
\npurported to be owned by it, including: (i) all assets reflected on the
\nUnaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.7(b) and
\n2.9 of the Company Disclosure Schedule; and (iii) all other assets reflected in
\nthe Company’s books and records as being owned by the Company. Except as set
\nforth in Part 2.6(a) of the Company Disclosure Schedule, all of said assets are
\nowned by the Company free and clear of any liens or other Encumbrances, except
\nfor Permitted Liens.<\/p>\n
(b) Part 2.6(b) of the Company Disclosure Schedule identifies all
\nassets that are material to the business of the Company and that are being
\nleased or licensed to the Company.<\/p>\n
2.7 BANK ACCOUNTS; RECEIVABLES.<\/p>\n
(a) Part 2.7(a) of the Company Disclosure Schedule provides
\naccurate information with respect to each account maintained by or for the
\nbenefit of the Company at any bank or other financial institution.<\/p>\n
(b) Part 2.7(b) of the Company Disclosure Schedule provides an
\naccurate and complete breakdown and aging of all accounts receivable, notes
\nreceivable and other receivables of the Company as of October 31, 1999. Except
\nas set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
\naccounts receivable of the Company (including the accounts receivable reflected
\non the Unaudited Interim Balance Sheet that have not yet been collected and
\nthose accounts receivable that have arisen since October 31, 1999 and have not
\nyet been<\/p>\n
-15-
\n 21<\/p>\n
collected) (i) represent valid obligations of customers of the Company arising
\nfrom bona fide transactions entered into in the ordinary course of business, and
\n(ii) are current and, except to the extent of a reserve which the Company has
\nestablished specifically for doubtful accounts receivable (which reserve is set
\nforth on the Unaudited Interim Balance Sheet, is reasonable under the
\ncircumstances and is consistent with the Company’s past practice) will be
\ncollected in full when due, without any counterclaim or set off.<\/p>\n
2.8 EQUIPMENT; LEASEHOLD.<\/p>\n
(a) All material items of equipment and other tangible assets
\nowned by or leased to the Company are adequate for the uses to which they are
\nbeing put, are in good condition and repair (ordinary wear and tear excepted)
\nand constitute all of the material items of equipment and other tangible assets
\nreasonably necessary for the conduct of the Company’s business in the manner in
\nwhich such business is currently being conducted.<\/p>\n
(b) The Company does not own any real property or any interest in
\nreal property, except for the leasehold created under the real property lease
\nidentified in Part 2.10 of the Company Disclosure Schedule.<\/p>\n
2.9 PROPRIETARY ASSETS.<\/p>\n
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
\nwith respect to each Company Proprietary Asset registered with any Governmental
\nBody or for which an application has been filed with any Governmental Body, (i)
\na brief description of such Proprietary Asset, and (ii) the names of the
\njurisdictions covered by the applicable registration or application. Part
\n2.9(a)(ii) of the Company Disclosure Schedule identifies and provides a brief
\ndescription of all other Company Proprietary Assets owned by the Company that
\nare material to the Company’s business. Part 2.9(a)(iii) of the Company
\nDisclosure Schedule identifies and provides a brief description of each
\nProprietary Asset licensed to the Company by any Person (except for any
\nProprietary Asset that is licensed to the Company under any third party software
\nlicense generally available to the public at a cost of less than $10,000), and
\nidentifies the license agreement under which such Proprietary Asset is being
\nlicensed to the Company. Part 2.9(a)(iv) of the Company Disclosure Schedule
\nidentifies all licenses, sublicenses and other agreements to which the Company
\nis a party and pursuant to which any person is authorized to use any Company
\nProprietary Assets (except for licenses of Company Proprietary Assets to
\ncustomers under the Company’s standard end-user license agreements, the forms of
\nwhich have been provided to Parent and its legal counsel. Except as set forth in
\nPart 2.9(a)(v) of the Company Disclosure Schedule, the Company has good and
\nvalid title to all of the Company Proprietary Assets identified in Parts
\n2.9(a)(i) and 2.9(a)(ii) of the Company Disclosure Schedule, free and clear of
\nall liens and other Encumbrances other than Permitted Liens, and has a valid
\nright to use all Proprietary Assets identified in Part 2.9(a)(iii) of the
\nCompany Disclosure Schedule. Except as set forth in Part 2.9(a)(vi) of the
\nCompany Disclosure Schedule, the Company is not obligated to make any payment to
\nany Person for the use of any Company Proprietary Asset. Except as set forth in
\nPart 2.9(a)(vii) of the Company Disclosure Schedule, the Company has not
\ndeveloped<\/p>\n
-16-
\n 22<\/p>\n
jointly with any other Person any Company Proprietary Asset with respect to
\nwhich such other Person has any rights.<\/p>\n
(b) The Company has taken all reasonable steps to protect and
\nmaintain the confidentiality and secrecy of all Company Proprietary Assets and
\notherwise to maintain and protect the value of all Company Proprietary Assets.
\nExcept as set forth in Part 2.9(b) of the Company Disclosure Schedule, the
\nCompany has not (other than pursuant to license agreements identified in Part
\n2.10(a)(iv) of the Company Disclosure Schedule) disclosed or delivered to any
\nPerson, or permitted the disclosure or delivery to any Person of, the source
\ncode, or any portion or aspect of the source code, of any Company Proprietary
\nAsset.<\/p>\n
(c) None of the Company Proprietary Assets infringe or conflict
\nwith any Proprietary Asset owned or used by any other Person. The Company is not
\ninfringing, misappropriating or making any unlawful use of, and the Company has
\nnot at any time, including with respect to the Former Hardware Business (as
\ndefined in Section 2.10) infringed, misappropriated or made any unlawful use of,
\nor received any written notice (including written notices in electronic form) of
\nany actual, alleged, possible or potential infringement, misappropriation or
\nunlawful use of, any Proprietary Asset owned or used by any other Person. To the
\nknowledge of the Company, no other Person is infringing, misappropriating or
\nmaking any unlawful use of, and no Proprietary Asset owned or used by any other
\nPerson infringes or conflicts with, any Company Proprietary Asset.<\/p>\n
(d) Except as set forth in Part 2.9(d) of the Company Disclosure
\nSchedule: (i) each Company Proprietary Asset conforms in all material respects
\nwith any specification, documentation, performance standard, representation or
\nstatement made or provided with respect thereto by or on behalf of the Company;
\nand (ii) there has not been any written claim (including written claims in
\nelectronic form) by any customer or other Person alleging that any Company
\nProprietary Asset (including each version thereof that has ever been licensed or
\notherwise made available by the Company to any Person) does not conform in all
\nmaterial respects with any specification, documentation, performance standard,
\nrepresentation or statement made or provided by or on behalf of the Company,
\nand, to the knowledge of the Company, there is no basis for any such claim. The
\nCompany has established adequate reserves on the Unaudited Interim Balance Sheet
\nto cover all costs associated with any obligations that the Company may have
\nwith respect to the correction or repair of programming errors or other defects
\nin the Company Proprietary Assets.<\/p>\n
(e) The Company Proprietary Assets constitute all the Proprietary
\nAssets necessary to enable the Company to conduct its business in the manner in
\nwhich such business is being conducted and as presently proposed to be
\nconducted. Except as set forth in Part 2.9(e) of the Company Disclosure
\nSchedule, (i) the Company has not licensed any of the Company Proprietary Assets
\nto any Person on an exclusive basis, and (ii) the Company has not entered into
\nany covenant not to compete or Contract limiting its ability to exploit fully
\nany of its Proprietary Assets or to transact business in any market or
\ngeographical area or with any Person.<\/p>\n
-17-
\n 23<\/p>\n
(f) Except as set forth in Part 2.9(f) of the Company Disclosure
\nSchedule, (i) all current and former employees of the Company have executed and
\ndelivered to the Company an agreement (containing no exceptions to or exclusions
\nfrom the scope of its coverage) that is substantially identical to the form of
\nProprietary Information and Inventions Agreement previously delivered to Parent,
\nand (ii) all current and former consultants and independent contractors to the
\nCompany have executed and delivered to the Company an agreement (containing no
\nexceptions to or exclusions from the scope of its coverage) that is
\nsubstantially identical to the form of Consultant Proprietary Information and
\nInventions Agreement previously delivered to Parent.<\/p>\n
(g) Each item of software and hardware that has been developed by
\nor for the Company is Year 2000 Compliant and, to the knowledge of the Company,
\neach other item of software and hardware that is owned or used by the Company is
\nYear 2000 Compliant.<\/p>\n
(h) Each item of software that is or has been distributed by the
\nCompany for use of its customers in its current business has been licensed to
\ncustomers pursuant to the Company’s standard Software License Agreements or
\nProfessional Services Agreements which remain in full legal force and effect.
\nForms of these agreements have been provided to Parent’s legal counsel.<\/p>\n
2.10 CONTRACTS.<\/p>\n
(a) Part 2.10(a) of the Company Disclosure Schedule identifies:<\/p>\n
(i) each Company Contract relating to the employment of, or
\nthe performance of services by, any employee, consultant or independent
\ncontractor;<\/p>\n
(ii) each Company Contract relating to the acquisition,
\ntransfer, use, development, sharing or license of any technology or any
\nProprietary Asset;<\/p>\n
(iii) each Company Contract imposing any restriction on the
\nCompany’s right or ability (A) to compete with any other Person, (B) to acquire
\nany product or other asset or any services from any other Person, to sell any
\nproduct or other asset to or perform any services for any other Person or to
\ntransact business or deal in any other manner with any other Person, or (C)
\ndevelop or distribute any technology;<\/p>\n
(iv) each Company Contract creating or involving any agency
\nrelationship, distribution arrangement or franchise relationship;<\/p>\n
(v) each Company Contract relating to the acquisition,
\nissuance or transfer of any securities;<\/p>\n
(vi) each Company Contract relating to the creation of any
\nEncumbrance with respect to any asset of the Company;<\/p>\n
-18-
\n 24<\/p>\n
(vii) each Company Contract involving or incorporating any
\nguaranty, any pledge, any performance or completion bond, any indemnity or any
\nsurety arrangement;<\/p>\n
(viii) each Company Contract creating or relating to any
\npartnership or joint venture or any sharing of revenues, profits, losses, costs
\nor liabilities;<\/p>\n
(ix) each Company Contract relating to the purchase or sale
\nof any product or other asset by or to, or the performance of any services by or
\nfor, any Related Party (as defined in Section 2.18);<\/p>\n
(x) any Company Contract that was entered into outside the
\nordinary course of business or was inconsistent with the Company’s past
\npractices and is material to the Company;<\/p>\n
(xi) any Company Contract that is material to the Company
\nand that has a term of more than 60 days and that may not be terminated by the
\nCompany (without penalty) within 60 days after the delivery of a termination
\nnotice by the Company;<\/p>\n
(xii) any other Company Contract that is material to the
\nCompany.<\/p>\n
For purposes of this Section 2.10, “material” shall mean any Company Contract
\nthat contemplates or involves (A) the payment or delivery of cash or other
\nconsideration in an amount or having a value in excess of $25,000 in the
\naggregate, or (B) the performance of services having a value in excess of
\n$25,000 in the aggregate. Contracts in the respective categories described in
\nclauses “(i)” through “(xii)” above are referred to in this Agreement as
\n“Material Contracts.”<\/p>\n
(b) The Company has delivered to Parent accurate and complete
\ncopies of all written Contracts identified in Part 2.10(a) of the Company
\nDisclosure Schedule, including all amendments thereto. Part 2.10(a) of the
\nCompany Disclosure Schedule provides an accurate description of the terms of
\neach Material Contract that is not in written form. Each Material Contract
\nidentified in Part 2.10(a) of the Company Disclosure Schedule is valid and in
\nfull force and effect and is enforceable by the Company in accordance with its
\nterms, subject to (i) laws of general application relating to bankruptcy,
\ninsolvency and the relief of debtors, and (ii) rules of law governing specific
\nperformance, injunctive relief and other equitable remedies.<\/p>\n
(c) Except as set forth in Part 2.10(c) of the Company Disclosure
\nSchedule:<\/p>\n
(i) the Company has not violated or breached, in any
\nmaterial respect, or committed any material default under, any Material Contract
\nand, to the knowledge of the Company, no other Person has violated or breached,
\nin any material respect, or committed any material default under, any Material
\nContract;<\/p>\n
(ii) to the knowledge of the Company, no event has occurred,
\nand no circumstance or condition exists, that (with or without notice or lapse
\nof time) will, or could reasonably be expected to, (A) result in a material
\nviolation or breach of any of the provisions of<\/p>\n
-19-
\n 25<\/p>\n
any Material Contract, (B) give any Person the right to declare a default or
\nexercise any other material remedy under any Material Contract, (C) give any
\nPerson the right to accelerate the maturity or performance of any Material
\nContract, or (D) give any Person the right to cancel, terminate or modify any
\nMaterial Contract;<\/p>\n
(iii) the Company has not received any written notice
\n(including written notices in electronic form) regarding any actual or possible
\nviolation or breach of, or default under, any Material Contract; and<\/p>\n
(iv) the Company has not waived any of its material rights
\nunder any Material Contract.<\/p>\n
(d) No Person is renegotiating, or has a right pursuant to the
\nterms of any Company Contract to renegotiate, any amount paid or payable to the
\nCompany under any Material Contract or any other material term or provision of
\nany Material Contract.<\/p>\n
(e) Part 2.10(e) of the Company Disclosure Schedule separately
\nidentifies: (i) each Company Contract under which the Company is obligated to
\nperform services, maintenance or support, or has warranty or indemnification
\nobligations to customers of the Company’s discontinued computer hardware line of
\nbusiness (the “FORMER HARDWARE BUSINESS”); and (ii) each other Contract relating
\nto the Company’s Former Hardware Business under which the Company has any
\nliabilities (accrued, contingent or otherwise of any nature, either matured or
\nunmatured) or owes obligations to any third party. The disclosure of Contracts
\npursuant to this Section 2.10(e) shall not limit the Company’s obligation to
\nprovide disclosure under other relevant subsections of this Section 2.10.<\/p>\n
(f) The Material Contracts identified in Part 2.10(a) of the
\nCompany Disclosure Schedule collectively constitute all of the Contracts
\nreasonably necessary to enable the Company to conduct its business in the manner
\nin which its business is currently being conducted.<\/p>\n
2.11 LIABILITIES. The Company has no accrued, contingent or other
\nliabilities of any nature, either matured or unmatured (whether or not required
\nto be reflected in financial statements in accordance with generally accepted
\naccounting principles, and whether due or to become due), except for
\nliabilities: (a) identified as such in the “liabilities” column of the Unaudited
\nInterim Balance Sheet; (b) incurred by the Company since October 31, 1999 in the
\nordinary course of business and consistent with the Company’s past practices;
\n(c) under the Company Contracts identified in Part 2.10 of the Company
\nDisclosure Schedule, to the extent the nature of such liabilities can be
\nspecifically ascertained by reference to the text of such Company Contracts; and
\n(d) identified in Part 2.11 of the Company Disclosure Schedule.<\/p>\n
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
\ntimes been, in compliance with all applicable Legal Requirements, except where
\nthe failure to comply with such Legal Requirements has not had and could not
\nreasonably be expected to result in a Company Material Adverse Effect. Except as
\nset forth in Part 2.12 of the Company Disclosure Schedule, the Company has not
\nreceived any written notice (including written notices in<\/p>\n
-20-
\n 26<\/p>\n
electronic form) from any Governmental Body regarding any actual or possible
\nviolation of, or failure to comply with, any Legal Requirement.<\/p>\n
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Company Disclosure
\nSchedule identifies each material Governmental Authorization held by the
\nCompany, and the Company has delivered to Parent accurate and complete copies of
\nall Governmental Authorizations identified in Part 2.13 of the Company
\nDisclosure Schedule. The Governmental Authorizations identified in Part 2.13 of
\nthe Company Disclosure Schedule are valid and in full force and effect, and
\ncollectively constitute all Governmental Authorizations reasonably necessary to
\nenable the Company to conduct its business in the manner in which its business
\nis currently being conducted. The Company is, and at all times has been, in
\ncompliance with the terms and requirements of the respective Governmental
\nAuthorizations identified in Part 2.13 of the Company Disclosure Schedule,
\nexcept where the failure to comply with such Governmental Authorizations has not
\nhad and could not reasonably be expected to result in a Company Material Adverse
\nEffect. The Company has not received any notice or other communication from any
\nGovernmental Body regarding (a) any actual or possible violation of or failure
\nto comply with any term or requirement of any Governmental Authorization, or (b)
\nany actual or possible revocation, withdrawal, suspension, cancellation,
\ntermination or modification of any Governmental Authorization.<\/p>\n
2.14 TAX MATTERS.<\/p>\n
(a) All Tax Returns required to be filed by or on behalf of the
\nCompany (taking into account extensions) with any Governmental Body prior to the
\nClosing Date (the “COMPANY RETURNS”) (i) have been filed or will be filed, and
\n(ii) have been, or will be when filed, accurately and completely prepared in all
\nmaterial respects in compliance with all applicable Legal Requirements. All
\namounts shown on the Company Returns to be due on or before the Closing Date
\nhave been or will be paid on or before the Closing Date. The Company has
\ndelivered to Parent accurate and complete copies of all Company Returns which
\nhave been requested by Parent. The Company has withheld and paid over all Taxes
\nrequired to have been withheld and paid over, and complied with all information
\nreporting and backup withholding in connection with amounts paid or owing to any
\nemployee, creditor, independent contractor, or other third party. There are no
\nliens on any of the assets of the Company with respect to Taxes, other than
\nliens for Taxes not yet due and payable or for Taxes that the Company is
\ncontesting in good faith through appropriate proceedings. The Company has not
\nbeen at any time a member of an affiliated group of corporations filing
\nconsolidated, combined or unitary income or franchise tax returns for a period
\nfor which the statute of limitations for any Tax potentially applicable as a
\nresult of such membership has not expired.<\/p>\n
(b) The Company Financial Statements fully accrue all actual and
\ncontingent liabilities for Taxes with respect to all periods through the dates
\nthereof in accordance with generally accepted accounting principles. The Company
\nwill establish, in the ordinary course of business and consistent with its past
\npractices, reserves adequate for the payment of all Taxes for the period from
\nOctober 31, 1999 through the Closing Date and no liabilities for Taxes have been<\/p>\n
-21-
\n 27<\/p>\n
incurred (or prior to the Closing will be incurred) since such date other than
\nin the ordinary course of business.<\/p>\n
(c) Except as set forth in Part 2.14 of the Company Disclosure
\nSchedule, there have been no examinations or audits of any Company Return. The
\nCompany has delivered to Parent accurate and complete copies of all audit
\nreports and similar documents (to which the Company has access) relating to the
\nCompany Returns. Except as set forth in Part 2.14 of the Company Disclosure
\nSchedule, no extension or waiver of the limitation period applicable to any of
\nthe Company Returns has been granted that is still in effect (by the Company or
\nany other Person), and no request for such extension or waiver from the Company
\nis pending.<\/p>\n
(d) Except as set forth in Part 2.14 of the Company Disclosure
\nSchedule, no claim or Legal Proceeding is pending or has been threatened against
\nor with respect to the Company in respect of any Tax. There are no unsatisfied
\nliabilities for Taxes with respect to any notice of deficiency or similar
\ndocument received by the Company with respect to any Tax (other than liabilities
\nfor Taxes asserted under any such notice of deficiency or similar document which
\nare being contested in good faith by the Company and with respect to which
\nadequate reserves for payment have been established). There are no liens for
\nTaxes upon any of the assets of the Company except liens for current Taxes not
\nyet due and payable. The Company has not entered into or become bound by any
\nagreement or consent pursuant to Section 341(f) of the Code. The Company has not
\nbeen, and the Company will not be, required to include any adjustment in taxable
\nincome for any tax period (or portion thereof) pursuant to Section 481 or 263A
\nof the Code or any comparable provision under state or foreign Tax laws as a
\nresult of transactions or events occurring, or accounting methods employed,
\nprior to the Closing.<\/p>\n
(e) Except as set forth in Part 2.14 of the Company Disclosure
\nSchedule, there is no agreement, plan, arrangement or other Contract covering
\nany employee or independent contractor or former employee or independent
\ncontractor of the Company that, considered individually or considered
\ncollectively with any other such Contracts, will, or could reasonably be
\nexpected to, give rise directly or indirectly to the payment of any amount that
\nwould not be deductible pursuant to Section 280G or Section 162 of the Code. The
\nCompany is not liable for the Taxes of any other Person.<\/p>\n
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.<\/p>\n
(a) Part 2.15(a) of the Company Disclosure Schedule identifies
\neach salary, bonus, deferred compensation, incentive compensation, stock
\npurchase, stock option, severance pay, termination pay, hospitalization,
\nmedical, life or other insurance, supplemental unemployment benefits,
\nprofit-sharing, pension or retirement plan, program or agreement (collectively,
\nthe “PLANS”) sponsored, maintained, contributed to or required to be contributed
\nto by the Company for the benefit of any employee of the Company (“EMPLOYEE”),
\nexcept for Plans which would not require the Company to make payments or provide
\nbenefits having a value in excess of $25,000 in the aggregate.<\/p>\n
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
\nSchedule, the Company does not maintain, sponsor or contribute to, and, to the
\nknowledge of the Company,<\/p>\n
-22-
\n 28<\/p>\n
has not at any time in the past maintained, sponsored or contributed to, any
\nemployee pension benefit plan (as defined in Section 3(2) of the Employee
\nRetirement Income Security Act of 1974, as amended (“ERISA”), whether or not
\nexcluded from coverage under specific Titles or Merger Subtitles of ERISA) for
\nthe benefit of Employees or former Employees (a “PENSION PLAN”).<\/p>\n
(c) The Company maintains, sponsors or contributes only to those
\nemployee welfare benefit plans (as defined in Section 3(1) of ERISA) for the
\nbenefit of Employees or former Employees which are described in Part 2.15(c) of
\nthe Company Disclosure Schedule (the “WELFARE PLANS”), none of which is a
\nmultiemployer plan (within the meaning of Section 3(37) of ERISA).<\/p>\n
(d) With respect to each Plan, the Company has delivered to
\nParent:<\/p>\n
(i) an accurate and complete copy of such Plan (including
\nall amendments thereto);<\/p>\n
(ii) an accurate and complete copy of the annual report, if
\nrequired under ERISA, with respect to such Plan for the last two years;<\/p>\n
(iii) an accurate and complete copy of the most recent
\nsummary plan description, together with each Summary of Material Modifications,
\nif required under ERISA, with respect to such Plan, and all material employee
\ncommunications relating to such Plan;<\/p>\n
(iv) if such Plan is funded through a trust or any third
\nparty funding vehicle, an accurate and complete copy of the trust or other
\nfunding agreement (including all amendments thereto) and accurate and complete
\ncopies the most recent financial statements thereof;<\/p>\n
(v) accurate and complete copies of all Contracts relating
\nto such Plan, including service provider agreements, insurance contracts,
\nminimum premium contracts, stop-loss agreements, investment management
\nagreements, subscription and participation agreements and recordkeeping
\nagreements; and<\/p>\n
(vi) an accurate and complete copy of the most recent
\ndetermination letter received from the Internal Revenue Service with respect to
\nsuch Plan (if such Plan is intended to be qualified under Section 401(a) of the
\nCode).<\/p>\n
(a) The Company is not required to be, and, to the knowledge of
\nthe Company, has never been required to be, treated as a single employer with
\nany other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m)
\nor (o) of the Code. The Company has never been a member of an “affiliated
\nservice group” within the meaning of Section 414(m) of the Code. To the
\nknowledge of the Company, the Company has never made a complete or partial
\nwithdrawal from a multiemployer plan, as such term is defined in Section 3(37)
\nof ERISA, resulting in “withdrawal liability,” as such term is defined in
\nSection 4201 of ERISA<\/p>\n
-23-
\n 29<\/p>\n
(without regard to subsequent reduction or waiver of such liability under either
\nSection 4207 or 4208 of ERISA).<\/p>\n
(b) The Company does not have any plan or commitment to create
\nany additional Welfare Plan or any Pension Plan, or to modify or change any
\nexisting Welfare Plan or Pension Plan (other than to comply with applicable law)
\nin a manner that would affect any Employee.<\/p>\n
(c) Except as set forth in Part 2.15(g) of the Company Disclosure
\nSchedule, no Welfare Plan provides death, medical or health benefits (whether or
\nnot insured) with respect to any current or former Employee after any such
\nEmployee’s termination of service (other than (i) benefit coverage mandated by
\napplicable law, including coverage provided pursuant to Section 4980B of the
\nCode, (ii) deferred compensation benefits accrued as liabilities on the
\nUnaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
\nborne by current or former Employees (or the Employees’ beneficiaries)).<\/p>\n
(d) With respect to each of the Welfare Plans constituting a
\ngroup health plan within the meaning of Section 4980B(g)(2) of the Code, to the
\nknowledge of the Company, the provisions of Section 4980B of the Code (“COBRA”)
\nhave been complied with in all material respects.<\/p>\n
(e) To the knowledge of the Company, each of the Plans has been
\noperated and administered in all material respects in accordance with applicable
\nLegal Requirements, including but not limited to ERISA and the Code.<\/p>\n
(f) Each of the Plans intended to be qualified under Section
\n401(a) of the Code has received a favorable determination from the Internal
\nRevenue Service or has time remaining in which to apply for such favorable
\ndetermination within the remedial amendment period under Section 401(b) of the
\nCode and the regulations thereunder, and the Company is not aware of any reason
\nwhy any such determination letter should be revoked or denied.<\/p>\n
(g) Except as set forth in Part 2.15(k) of the Company Disclosure
\nSchedule, neither the execution, delivery or performance of this Agreement, nor
\nthe consummation of the Merger or any of the other transactions contemplated by
\nthis Agreement, will result in any payment (including any bonus, golden
\nparachute or severance payment) to any current or former Employee or director of
\nthe Company (whether or not under any Plan), or materially increase the benefits
\npayable under any Plan, or result in any acceleration of the time of payment or
\nvesting of any such benefits.<\/p>\n
(h) Part 2.15(l) of the Company Disclosure Schedule contains a
\nlist of all salaried employees of the Company as of the date of this Agreement,
\nand correctly reflects, in all material respects, their salaries, any other
\ncompensation payable to them (including compensation payable pursuant to bonus,
\ndeferred compensation or commission arrangements), their dates of employment and
\ntheir positions. The Company is not a party to any collective bargaining
\ncontract or other Contract with a labor union involving any of its Employees.
\nAll of the Company’s employees are “at will” employees.<\/p>\n
-24-
\n 30<\/p>\n
(i) Part 2.15(m) of the Company Disclosure Schedule identifies
\neach Employee who is not fully available to perform work because of disability
\nor other leave and sets forth the basis of such leave and the anticipated date
\nof return to full service.<\/p>\n
(j) To the knowledge of the Company, the Company is in compliance
\nin all material respects with all applicable Legal Requirements and Contracts
\nrelating to employment, employment practices, wages, bonuses and terms and
\nconditions of employment, including employee compensation matters.<\/p>\n
(k) Except as set forth in Part 2.15(o) of the Company Disclosure
\nSchedule, to the knowledge of the Company, the Company has good labor relations
\nand (i) the consummation of the Merger or any of the other transactions
\ncontemplated by this Agreement could not reasonably be expected to result in a
\nmaterial adverse effect on the Company’s labor relations, and (ii) none of the
\nCompany’s employees intends to terminate his or her employment with the Company
\nas a result of the Merger.<\/p>\n
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance with all
\napplicable Environmental Laws, which compliance includes the possession by the
\nCompany of all permits and other Governmental Authorizations required under
\napplicable Environmental Laws, and compliance with the terms and conditions
\nthereof, except where the failure to comply with such Environmental Laws has not
\nhad and could not reasonably be expected to result in a Company Material Adverse
\nEffect. The Company has not received any written notice (including written
\nnotices in electronic form), whether from a Governmental Body, citizens group,
\nemployee or otherwise, that alleges that the Company is not in compliance with
\nany Environmental Law and, to the knowledge of the Company, there are no
\ncircumstances that may prevent or interfere with the Company’s compliance with
\nany Environmental Law in the future. To the knowledge of the Company, no current
\nor prior owner of any property leased or controlled by the Company has received
\nany notice or other communication (in writing or otherwise), whether from a
\nGovernment Body, citizens group, employee or otherwise, that alleges that such
\ncurrent or prior owner or the Company is not in compliance with any
\nEnvironmental Law. All Governmental Authorizations currently held by the Company
\npursuant to Environmental Laws are identified in Part 2.16 of the Company
\nDisclosure Schedule. For purposes of this Section 2.16: (i) “Environmental Law”
\nmeans any federal, state, local or foreign Legal Requirement relating to
\npollution or protection of human health or the environment (including ambient
\nair, surface water, ground water, land surface or subsurface strata), including
\nany law or regulation relating to emissions, discharges, releases or threatened
\nreleases of Materials of Environmental Concern, or otherwise relating to the
\nmanufacture, processing, distribution, use, treatment, storage, disposal,
\ntransport or handling of Materials of Environmental Concern; and (ii) “Materials
\nof Environmental Concern” include chemicals, pollutants, contaminants, wastes,
\ntoxic substances, petroleum and petroleum products and any other substance that
\nis regulated by any Environmental Law.<\/p>\n
2.17 INSURANCE. Part 2.17 of the Company Disclosure Schedule identifies
\nall insurance policies maintained by, at the expense of or for the benefit of
\nthe Company and identifies any material claims made thereunder, and the Company
\nhas delivered to Parent<\/p>\n
-25-
\n 31<\/p>\n
accurate and complete copies of the insurance policies identified on Part 2.17
\nof the Company Disclosure Schedule. Each of the insurance policies identified in
\nPart 2.17 of the Company Disclosure Schedule is in full force and effect. The
\nCompany has not received any notice or other communication regarding any actual
\nor possible (a) cancellation or invalidation of any insurance policy, (b)
\nrefusal of any coverage or rejection of any claim under any insurance policy, or
\n(c) material adjustment in the amount of the premiums payable with respect to
\nany insurance policy.<\/p>\n
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.18 of the
\nCompany Disclosure Schedule, to the knowledge of the Company: (a) no Related
\nParty has, and no Related Party has at any time had, any direct or indirect
\ninterest in any material asset used in or otherwise relating to the business of
\nthe Company; (b) no Related Party is, or has at any time been, indebted to the
\nCompany; (c) no Related Party has entered into, or has had any direct or
\nindirect financial interest in, any Material Contract, transaction or business
\ndealing involving the Company; (d) no Related Party is competing, or has at any
\ntime competed, directly or indirectly, with the Company; and (e) no Related
\nParty has any claim or right against the Company (other than rights under
\nCompany Options and rights to receive compensation for services performed as an
\nemployee of the Company). For purposes of this Agreement each of the following
\nshall be deemed to be a “Related Party”: (i) each of the Shareholders; (ii) each
\nindividual who is an officer of the Company; (iii) each member of the immediate
\nfamily of each of the individuals referred to in clauses (i) and (ii) above; and
\n(iv) any trust or other Entity (other than the Company) in which any one of the
\nindividuals referred to in clauses (i), (ii) and (iii) above holds (or in which
\nmore than one of such individuals collectively hold), beneficially or otherwise,
\na material voting, proprietary or equity interest.<\/p>\n
2.19 LEGAL PROCEEDINGS; ORDERS.<\/p>\n
(a) Except as set forth in Part 2.19(a) of the Company Disclosure
\nSchedule, there is no pending Legal Proceeding and, to the knowledge of the
\nCompany, no Person has threatened to commence any Legal Proceeding: (i) that
\ninvolves the Company or any of the assets owned or used by the Company,
\nincluding assets owned or used by the Company in connection with the Former
\nHardware Business, or any Person whose liability the Company has retained or
\nassumed, either contractually or by operation of law; or (ii) that challenges,
\nor that may have the effect of preventing, delaying, making illegal or otherwise
\ninterfering with, the Merger or any of the other transactions contemplated by
\nthis Agreement. To the knowledge of the Company, except as set forth in Part
\n2.19(a) of the Company Disclosure Schedule, no event has occurred, and no claim,
\ndispute or other condition or circumstance exists, that will, or that could
\nreasonably be expected to, give rise to or serve as a basis for the commencement
\nof any such Legal Proceeding.<\/p>\n
(b) Except as set forth in Part 2.19(b) of the Company Disclosure
\nSchedule, no Legal Proceeding has ever been commenced by or has ever been
\npending against the Company.<\/p>\n
-26-
\n 32<\/p>\n
(c) There is no order, writ, injunction, judgment or decree to
\nwhich the Company, or any of the assets owned or used by the Company, is
\nsubject. To the knowledge of the Company, no officer or other employee of the
\nCompany is subject to any order, writ, injunction, judgment or decree that
\nprohibits such officer or other employee from engaging in or continuing any
\nconduct, activity or practice relating to the Company’s business.<\/p>\n
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
\nabsolute and unrestricted right, power and authority to enter into and, subject
\nonly to the approval by the Company’s shareholders of this Agreement, the Merger
\nand each Related Agreement to which the Company is a party, to perform its
\nobligations under this Agreement and each Related Agreement to which the Company
\nis a party and the transactions contemplated hereby and thereby; and the
\nexecution, delivery and, subject only to the approval by the Company’s
\nshareholders of this Agreement and the Merger, performance by the Company of
\nthis Agreement has been duly authorized by all necessary action on the part of
\nthe Company and its board of directors. This Agreement constitutes a legal,
\nvalid and binding obligation of the Company, enforceable against the Company in
\naccordance with its terms, and the Related Agreements to which the Company is a
\nparty, when executed and delivered by the company, shall be legal, valid and
\nbinding obligations of the Company, enforceable against the Company in
\naccordance with their respective terms, subject to (i) laws of general
\napplication relating to bankruptcy, insolvency and the relief of debtors, and
\n(ii) rules of law governing specific performance, injunctive relief and other
\nequitable remedies.<\/p>\n
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
\nthe Company Disclosure Schedule and subject to the approval of this Agreement
\nand the Merger by the Company’s shareholders, neither (1) the execution,
\ndelivery or performance of this Agreement or any of the other agreements
\nreferred to herein or therein, nor (2) the consummation of the Merger or any of
\nthe other transactions contemplated by this Agreement, will directly or
\nindirectly (with or without notice or lapse of time):<\/p>\n
(a) contravene, conflict with or result in a violation of (i) any
\nof the provisions of the Company’s articles of incorporation or bylaws, or (ii)
\nany currently effective resolution adopted by the Company’s shareholders, the
\nCompany’s board of directors or any committee of the Company’s board of
\ndirectors;<\/p>\n
(b) contravene, conflict with or result in a violation of, or
\ngive any Governmental Body or other Person the right to challenge any of the
\ntransactions contemplated by this Agreement or to exercise any remedy or obtain
\nany relief under, any Legal Requirement or any order, writ, injunction, judgment
\nor decree to which the Company, or any of the assets owned or used by the
\nCompany, is subject, other than such contravention, conflict, violation or right
\nto exercise any remedy that could not be reasonably likely to result in a
\nCompany Material Adverse Effect;<\/p>\n
(c) give any Governmental Body or other Person the right to
\nchallenge any of the transactions contemplated by this Agreement;<\/p>\n
-27-
\n 33<\/p>\n
(d) contravene, conflict with or result in a violation of any of
\nthe terms or requirements of, or give any Governmental Body the right to revoke,
\nwithdraw, suspend, cancel, terminate or modify, any Governmental Authorization
\nthat is held by the Company or that otherwise relates to the Company’s business
\nor to any of the assets owned or used by the Company, other than any such
\ncontravention, conflict, violation or right to revoke, withdraw, suspend,
\ncancel, terminate or modify any such Governmental Authorization which could not
\nreasonably be expected to result in a Company Material Adverse Effect;<\/p>\n
(e) contravene, conflict with or result in a violation or breach
\nof, or result in a default under, any provision of any Material Contract, or
\ngive any Person the right to (i) declare a default or exercise any remedy under
\nany such Material Contract, (ii) accelerate the maturity or performance of any
\nsuch Material Contract, or (iii) cancel, terminate or modify any such Material
\nContract; or<\/p>\n
(f) result in the imposition or creation of any lien or other
\nEncumbrance upon or with respect to any asset owned or used by the Company
\n(except for minor liens, pledges, hypothecations, charges, mortgage, and
\nsecurity interests that will not, individually or in the aggregate, materially
\ndetract from the value of the assets subject thereto or materially impair the
\noperations of the Company).<\/p>\n
Except as set forth in Part 2.21 of the Company Disclosure Schedule and except
\nfor (i) the filing of the Agreement of Merger with the California Secretary of
\nState and appropriate documents in other states where the Company is qualified
\nto do business, and (ii) obtaining the approval by the Company’s shareholders of
\nthis Agreement and the Merger, the Company is not and will not be required to
\nmake any filing with or give any notice to, or to obtain any Consent from, any
\nPerson in connection with (x) the execution, delivery or performance of this
\nAgreement or any of the other agreements referred to in this Agreement, or (y)
\nthe consummation of the Merger or any of the other transactions contemplated by
\nthis Agreement.<\/p>\n
2.22 BROKERS. The Company has not, nor have any of its directors,
\nofficers, securityholders or employees, employed any broker or finder (other
\nthan Broadview International LLC) or incurred any liability (other than to
\nBroadview International LLC) for any brokerage fees, commissions or finders’
\nfees in connection with the transactions contemplated hereby. The Company has
\npreviously furnished to Parent a complete and correct copy of all agreements
\nbetween the Company and Broadview International LLC pursuant to which such firm
\nwould be entitled to any payment relating to the transactions contemplated by
\nthis Agreement (collectively, the “BROADVIEW EXPENSES”).<\/p>\n
2.23 COMPLIANCE WITH THE HART-SCOTT-RODINO ACT. The Company’s total
\nassets and annual net sales do not exceed $10,000,000 within the meaning of, and
\ncalculated in accordance with, the Hart-Scott-Rodino Antitrust Improvements Act
\nof 1976, as amended, Section 7A(a)(3) of the Clayton Act, 15 U.S.C. Section 18A,
\nand the regulations promulgated thereunder.<\/p>\n
2.24 PERMIT APPLICATION; INFORMATION STATEMENT. The information supplied
\nby the Company for inclusion in the application for issuance of a permit
\npursuant to Section 25121 of the California Securities Law pursuant to which the
\nshares of Parent Common Stock to be issued<\/p>\n
-28-
\n 34<\/p>\n
in the Merger and the options and warrants to be assumed in the Merger will be
\nqualified under the California Securities Law (the “PERMIT APPLICATION”) shall
\nnot at the time the fairness hearing is held pursuant to Section 25142 of the
\nCalifornia Securities Law and the time the qualification of such securities is
\neffective under Section 25122 of the California Securities Law contain any
\nuntrue statement of a material fact or omit to state any material fact required
\nto be stated therein or necessary in order to make the statements therein, in
\nlight of the circumstances under which they were made, not misleading. The
\ninformation supplied by the Company for inclusion in the information statement
\nto be sent to the shareholders of the Company in connection with the meeting of
\nthe Company’s shareholders to consider the Merger (the “COMPANY SHAREHOLDERS
\nMeeting”) (such information statement as amended or supplemented is referred to
\nherein as the “INFORMATION STATEMENT”) shall not, on the date the Information
\nStatement is first mailed to the Company’s shareholders, at the time of the
\nCompany Shareholders Meeting and at the Effective Time, contain any statement
\nwhich, at such time, is false or misleading with respect to any material fact,
\nor omit to state any material fact necessary in order to make the statements
\nmade therein, in light of the circumstances under which they are made, not false
\nor misleading; or omit to state any material fact necessary to correct any
\nstatement in any earlier communication with respect to the solicitation of
\nproxies for the Company Shareholders Meeting which has become false or
\nmisleading. Notwithstanding the foregoing, Company makes no representation,
\nwarranty or covenant with respect to any information supplied by Parent or
\nMerger Sub which is contained in any of the foregoing documents.<\/p>\n
2.25 AFFILIATE AND VOTING AGREEMENTS. All of the persons and\/or entities
\ndeemed “AFFILIATES” of the Company within the meaning of Rule 145 promulgated
\nunder the Securities Act have agreed in writing to vote for approval of the
\nMerger pursuant to shareholder agreements attached hereto as Exhibit C-2
\n(“AFFILIATE AGREEMENTS”), and pursuant to Voting Agreements attached hereto as
\nExhibit F-2 (“VOTING AGREEMENTS”). Pursuant to the Affiliate Agreements, all of
\nthe Company’s Affiliates have also agreed not to sell shares of Parent Common
\nStock, or take other actions as set forth therein during the 180 day period
\nfollowing the effectiveness of Parent’s registration statement on Form S-1
\ndeclared effective by the Securities and Exchange Commission on July 29, 1999.
\nThe Company shall use its best efforts to obtain such a written agreement from
\nany other person as soon as practicable after the date on which such person
\nattains such status as an Affiliate of the Company. In addition, upon the
\nexecution of the Affiliate Agreement by the persons listed on Exhibit C-1, the
\nThird Amended and Restated Investors’ Rights Agreement dated as of August 5,
\n1998 between the Company and certain investors of the Company, the Amended and
\nRestated Voting Agreement dated as of August 5, 1998 between the Company and
\ncertain investors of the Company, the Amended and Restated Co-Sale Agreement
\ndated as of August 5, 1998 between the Company and certain investors of the
\nCompany, and the Investment Agreement dated August 20, 1996 between the Company
\nand New York Life Insurance Company (collectively, the “PRIOR RIGHTS
\nAGREEMENTS”) will be amended to provide that the Prior Rights Agreements, and
\nthe rights and obligations of the Company and the investors of the Company that
\nare parties to the Prior Rights Agreements, will terminate immediately prior to
\nthe Effective Time and will thereafter have no further force or effect.<\/p>\n
-29-
\n 35<\/p>\n
2.26 VOTE REQUIRED. The affirmative vote of the holders of a majority of
\nthe shares of Company Stock outstanding on the record date set for the Company
\nShareholders Meeting plus the affirmative vote of two-thirds of the shares of
\nthe Company Preferred Stock outstanding on the record date set for the Company
\nShareholders Meeting are the only votes of the holders of any of the Company’s
\nStock necessary to approve this Agreement and the transactions contemplated
\nhereby (except for the conversion of the Company Preferred Stock into Company
\nCommon Stock which may require the affirmative vote of two-thirds of the shares
\nof each class of Company Preferred Stock, voting separately).<\/p>\n
2.27 BOARD APPROVAL. The Board of Directors of the Company has
\nunanimously (i) approved this Agreement and the Merger, (ii) determined that the
\nMerger is in the best interests of the shareholders of the Company and is on
\nterms that are fair to such shareholders and (iii) recommended that the
\nshareholders of the Company approve this Agreement and the Merger.<\/p>\n
2.28 CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer which
\nindividually accounted for more than 5% of the Company’s gross revenues during
\nthe 12-month period preceding the date hereof, and no supplier of Target, has
\ncancelled or otherwise terminated, or made any written threat to Target to
\ncancel or otherwise terminate its relationship with Target, or has at any time
\non or after October 31, 1999 decreased materially its services or supplies to
\nTarget in the case of any such supplier, or its usage of the services or
\nproducts of Target in the case of such customer, and to Target’s knowledge, no
\nsuch supplier or customer intends to cancel or otherwise terminate its
\nrelationship with Target or to decrease materially its services or supplies to
\nTarget or its usage of the services or products of Target, as the case may be.
\nFrom and after the date hereof, no customer which individually accounted for
\nmore than 5% of Target’s gross revenues during the 12 month period preceding the
\nClosing Date, has cancelled or otherwise terminated, or made any written threat
\nto Target to cancel or otherwise terminate, for any reason, including without
\nlimitation the consummation of the transactions contemplated hereby, its
\nrelationship with Target, and to Target’s knowledge, no such customer intends to
\ncancel or otherwise terminate its relationship with Target or to decrease
\nmaterially its usage of the services or products of Target. Target has not
\nknowingly breached, so as to provide a benefit to Target that was not intended
\nby the parties, any agreement with, or engaged in any fraudulent conduct with
\nrespect to, any customer or supplier of Target.<\/p>\n
2.29 [INTENTIONALLY LEFT BLANK].<\/p>\n
2.30 NO COMMITMENTS REGARDING FUTURE PRODUCTS. The Company has made no
\nsales to customers that are contingent upon providing future enhancements of
\nexisting products, to add features not presently available on existing products
\nor to otherwise enhance the performance of its existing products (other than
\nbeta or similar arrangements pursuant to which the Company’s customers from time
\nto time test or evaluate products). The products the Company has delivered to
\ncustomers substantially comply with published specifications for such products
\nand the Company has not received material complaints from customers about its
\nproducts that remain unresolved. Part 2.32 of the Company Disclosure Schedule
\naccurately sets<\/p>\n
-30-
\n 36<\/p>\n
forth a complete list of products in development (exclusive of mere enhancements
\nto and additional features for existing products).<\/p>\n
2.31 FULL DISCLOSURE.<\/p>\n
(a) This Agreement (including the Company Disclosure Schedule)
\ndoes not, and the Officer’s Closing Certificate will not, (i) contain any
\nrepresentation, warranty or information that is false or misleading with respect
\nto any material fact, or (ii) omit to state any material fact necessary in order
\nto make the representations, warranties and information contained and to be
\ncontained herein and therein (in the light of the circumstances under which such
\nrepresentations, warranties and information were or will be made or provided)
\nnot false or misleading.<\/p>\n
(b) In the event that information regarding the Merger is
\nprepared by the Company and distributed to its shareholders, such information
\nwill not contain any statement that is inaccurate or misleading with respect to
\nany material fact.<\/p>\n
3. [INTENTIONALLY LEFT BLANK].<\/p>\n
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.<\/p>\n
Parent and Merger Sub jointly and severally represent and warrant to the
\nCompany and the Shareholders as follows:<\/p>\n
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of Parent
\nand Merger Sub (i) is a corporation duly organized, validly existing and in good
\nstanding under the laws of its respective state of incorporation and (ii) has
\nall requisite corporate power and corporate authority to own, lease and operate
\nits properties and assets and to carry on its business as now being conducted,
\nto enter into this Agreement and each Related Agreement to which it is a party,
\nto perform its obligations hereunder and thereunder and to consummate the
\ntransactions contemplated hereby or thereby. Parent has delivered to the Company
\ntrue and correct copies of Parent’s Certificate of Incorporation and Bylaws and
\nMerger Sub’s Articles of Incorporation and Bylaws, each as amended to date.
\nNeither Parent nor any of its subsidiaries is in violation of any material
\nprovisions of its Certificate of Incorporation or Bylaws or equivalent
\norganizational documents.<\/p>\n
4.2 PARENT CAPITALIZATION. The authorized capital stock of Parent
\nconsists of 75,000,000 shares of Common Stock, $.001 par value per share, of
\nwhich 24,760,620 shares were issued and outstanding as of the close of business
\non October 31, 1999, and 5,000,000 shares of Preferred Stock, $.001 par value
\nper share, of which no shares were issued and outstanding as of the close of
\nbusiness on October 31, 1999. As of the close of business on October 31, 1999,
\nParent had reserved (a) 6,630,000 shares of Common Stock for issuance to
\nemployees and independent contractors pursuant to Parent’s 1996 Stock Option
\nPlan (the “PARENT EMPLOYEE STOCK OPTION PLAN”), of which, as of October 31,
\n1999, 4,073,942 shares had been issued pursuant to option exercises and
\n1,939,774 shares were subject to outstanding, unexercised options (b) 250,000
\nshares of Common Stock for issuance to directors pursuant to<\/p>\n
-31-
\n 37<\/p>\n
Parent’s 1999 Directors’ Stock Option Plan (the “PARENT DIRECTORS STOCK OPTION
\nPLAN”), of which, as of October 31, 1999, no shares had been issued pursuant to
\noption exercises and 50,000 shares were subject to outstanding, unexercised
\noptions and (c) options to purchase 560,267 shares were outstanding under the
\nMarketwave stock plan assumed by Parent. As of October 31, 1999, 20,000 shares
\nof Common Stock were issuable pursuant to an outstanding warrant. There are no
\nother outstanding shares of capital stock or voting securities of Parent other
\nthan shares of Parent Common Stock issued after the date of this Agreement upon
\nthe exercise of options issued under the Parent Employee Stock Option Plan or
\nthe Parent Directors Stock Option Plan. Other than as contemplated under this
\nAgreement, there are no other options, warrants, calls, rights, commitments or
\nagreements of any character to which Parent or Merger Sub is a party or by which
\neither of them is bound obligating Parent or Merger Sub to issue, deliver, sell,
\nrepurchase or redeem, or cause to be issued, delivered, sold, repurchased or
\nredeemed, any shares of the capital stock of Parent or Merger Sub or obligating
\nParent or Merger Sub to grant, extend or enter into any such option, warrant,
\ncall, right, commitment or agreement.<\/p>\n
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) The execution and delivery of this Agreement and the Related
\nAgreements do not, and the consummation of the transactions contemplated hereby
\nwill not, conflict with, or result in any violation of, or default under (with
\nor without notice or lapse of time, or both), or give rise to a right of
\ntermination, cancellation or acceleration of any obligation or loss of a benefit
\nunder (i) any provision of the Certificate of Incorporation or Bylaws of Parent
\nor the Articles of Incorporation of Bylaws of Merger Sub, as amended, or (ii)
\nany material mortgage, indenture, lease, contract or other material agreement or
\ninstrument, permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to Parent or Merger Sub
\nor their properties or assets.<\/p>\n
(b) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any Governmental Body, is required by
\nor with respect to Parent or Merger Sub in connection with the execution and
\ndelivery of this Agreement by Parent and Merger Sub or the consummation by
\nParent and Merger Sub of the transactions contemplated hereby, except for (i)
\nthe filing of appropriate merger documents as required by California law, (ii)
\nthe filing of a Form 8-K with the SEC and National Association of Securities
\nDealers (“NASD”) within 15 days after the Closing Date, (iii) any filings as may
\nbe required under applicable state securities laws and the securities laws of
\nany foreign country and (iv) the filing with the Nasdaq National Market of a
\nNotification Form for Listing of Additional Shares with respect to the shares of
\nParent Common Stock to be issued to the Shareholders in connection with the
\nMerger and upon exercise of the options under the Company Stock Option Plan
\nassumed by Parent, and (vi) such other consents, authorizations, filings,
\napprovals and registrations which, if not obtained or made, would not have a
\nParent Material Adverse Effect and would not prevent, materially alter or
\nmaterially delay any the transactions contemplated by this Agreement.<\/p>\n
-32-
\n 38<\/p>\n
4.4 SEC FILINGS; FINANCIAL STATEMENTS.<\/p>\n
(a) Parent has made available to the Company accurate and
\ncomplete copies of each report, registration statement (on a form other than
\nForm S-8 or 8-A) and definitive proxy statement filed by Parent with the SEC
\nbetween May 1, 1999 and the date of this Agreement, which are all the documents
\n(other than preliminary material) that Parent was required to file (or otherwise
\ndid file) with the SEC in accordance with Section 6(a) of the Securities Act or
\nSections 13, 14 and 15(d) of the Exchange Act since May 1, 1999 (collectively,
\nthe “PARENT’S SEC DOCUMENTS”). As of the time it was filed with the SEC (or, if
\namended or superseded by a filing prior to the date of this Agreement, then on
\nthe date of such filing): (i) each of the Parent’s SEC Documents complied in all
\nmaterial respects with the applicable requirements of the Securities Act or the
\nExchange Act, as the case may be, and the rules and regulations promulgated by
\nthe SEC thereunder; and (ii) none of the Parent’s SEC Documents contained any
\nuntrue statement of a material fact or omitted to state a material fact required
\nto be stated therein or necessary in order to make the statements therein, in
\nthe light of the circumstances under which they were made, not misleading.<\/p>\n
(b) The financial statements (including the notes thereto)
\ncontained in the Parent’s SEC Documents: (i) complied as to form in all material
\nrespects with the published rules and regulations of the SEC applicable thereto;
\n(ii) were prepared in accordance with generally accepted accounting principles
\napplied on a consistent basis throughout the periods covered, except as may be
\nindicated in the notes to such financial statements and (in the case of
\nunaudited statements) as permitted by Form 10-Q of the SEC, and except that
\nunaudited financial statements may not contain footnotes and are subject to
\nnormal and recurring year-end audit adjustments, which will not, individually or
\nin the aggregate, be material in magnitude; and (iii) fairly present in all
\nmaterial respects the financial position of Parent as of the respective dates
\nthereof and the results of operations, shareholders’ equity and cash flows of
\nParent for the periods covered thereby. There has been no material change in
\nParent’s accounting policies except as described in the notes to the financial
\nstatements included as part of Parent’s final Prospectus dated July 30, 1999.<\/p>\n
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Parent has no material
\nobligations or liabilities of any nature (matured or unmatured, fixed or
\ncontingent) other than (i) those set forth or adequately provided for in the
\nbalance sheet included in Parent’s Quarterly Report on Form 10-Q heretofore
\nprovided to the Company for the period ended September 30, 1999 (the “PARENT
\nBALANCE SHEET”), (ii) those incurred in the ordinary course of business and not
\nrequired to be set forth in the Parent Balance Sheet under United States
\ngenerally accepted accounting principles, and (iii) those incurred in the
\nordinary course of business since the Parent Balance Sheet Date and consistent
\nwith past practice.<\/p>\n
4.6 ABSENCE OF CERTAIN CHANGES. Since September 30, 1999 (the “PARENT
\nBALANCE SHEET DATE”), Parent has conducted its business in the ordinary course
\nin a manner consistent with past practice and there has not occurred: (i) any
\nchange, event or condition (whether or not covered by insurance) that has
\nresulted in, or might reasonably be expected to result in, a Parent Material
\nAdverse Effect; (ii) any declaration, setting aside, or payment of a dividend or
\nother<\/p>\n
-33-
\n 39<\/p>\n
distribution with respect to the shares of Parent, or any direct or indirect
\nredemption, purchase or other acquisition by Parent of any of its shares of
\ncapital stock; (iii) any material amendment or change to Parent’s Certificate of
\nIncorporation or Bylaws; or (iv) any negotiation or agreement by Parent to do
\nany of the things described in the preceding clauses (i) through (iii) (other
\nthan negotiations with the Company and its representatives regarding the
\ntransactions contemplated by this Agreement).<\/p>\n
4.7 LITIGATION. There is no private or governmental action, suit,
\nproceeding, claim, arbitration or investigation pending before any agency, court
\nor tribunal, foreign or domestic, or, to the knowledge of Parent, threatened
\nagainst Parent or any of its subsidiaries or any of their respective properties
\nor any of their respective officers or directors (in their capacities as such)
\nthat, individually or in the aggregate, could reasonably be expected to have a
\nParent Material Adverse Effect. There is no judgment, decree or order against
\nParent or any of its subsidiaries or, to the knowledge of Parent or any of its
\nsubsidiaries, any of their respective directors or officers (in their capacities
\nas such) that could reasonably be expected to prevent, enjoin, or materially
\nalter or delay any of the transactions contemplated by this Agreement, or that
\ncould reasonably be expected to have a Parent Material Adverse Effect.<\/p>\n
4.8 GOVERNMENTAL AUTHORIZATION. Each of Parent and its subsidiaries has
\nobtained each federal, state, county, local or foreign governmental consent,
\nlicense, permit, grant, or other authorization of a Governmental Body that is
\nrequired for the operation of Parent’s or any of its subsidiaries’ business
\n(“PARENT AUTHORIZATIONS”), and all of such Parent Authorizations are in full
\nforce and effect, except where the failure to obtain or have any of such Parent
\nAuthorizations could not reasonably be expected to have a Parent Material
\nAdverse Effect.<\/p>\n
4.9 COMPLIANCE WITH LAWS. Each of Parent and its subsidiaries has
\ncomplied with, are not in violation of, and have not received any notices of
\nviolation with respect to, any federal, state, local or foreign statute, law or
\nregulation with respect to the conduct of its business, or the ownership or
\noperation of its business, except for such violations or failures to comply as
\ncould not reasonably be expected to have a Parent Material Adverse Effect.<\/p>\n
4.10 ACCOUNTING AND TAX MATTERS. Parent is not aware of any agreement,
\nplan or other circumstance that would prevent the Merger from constituting a
\nreorganization under Section 368(a) of the Code.<\/p>\n
4.11 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
\nthe right, power and authority to perform their obligations under this Agreement
\nand the Related Agreements to which Parent or Merger Sub, as applicable, is a
\nparty and the transactions contemplated hereby and thereby; and the execution,
\ndelivery and performance by each of Parent and Merger Sub of this Agreement, the
\nRelated Agreements to which it is a party and the transactions contemplated
\nhereby and thereby (including the contemplated issuance of Parent Common Stock
\nin the Merger in accordance with this Agreement) have been duly authorized by
\nall necessary corporate action on the part of Parent and Merger Sub, their
\nrespective boards of directors and the shareholder of Merger Sub. No vote of
\nParent’s Shareholders is required to approve the Merger. This Agreement
\nconstitutes the legal, valid and binding obligation of Parent<\/p>\n
-34-
\n 40<\/p>\n
and Merger Sub, enforceable against them in accordance with its terms, and the
\nRelated Agreements to which they are a party, when executed and delivered by
\nParent and Merger Sub, as applicable, shall be legal, valid and binding
\nobligations of Parent and Merger Sub, as applicable, enforceable against them in
\naccordance with their respective terms, in each case subject to (i) laws of
\ngeneral application relating to bankruptcy, insolvency and the relief of
\ndebtors, and (ii) rules of law governing specific performance, injunctive relief
\nand other equitable remedies.<\/p>\n
4.12 VALID ISSUANCE. The Merger Shares will, when issued in accordance
\nwith the provisions of this Agreement and the Agreement of Merger, be duly
\nauthorized, validly issued, fully paid and nonassessable and free of preemptive
\nrights and Encumbrances. Parent owns all the outstanding shares of capital stock
\nof Merger Sub and all of such shares are duly authorized, validly issued, fully
\npaid and nonassessable and not subject to preemptive rights or Encumbrances.<\/p>\n
4.13 PERMIT APPLICATION; INFORMATION STATEMENT. The information supplied
\nby Parent or Merger Sub for inclusion in the Permit Application shall not at the
\ntime the fairness hearing is held pursuant to Section 25142 of the California
\nSecurities Law and the time the qualification of such securities is effective
\nunder Section 25122 of the California Securities Law contain any untrue
\nstatement of a material fact or omit to state any material fact required to be
\nstated therein or necessary in order to make the statements therein, in light of
\nthe circumstances under which they were made, not misleading. The information
\nsupplied by Parent or Merger Sub for inclusion in the Information Statement
\nshall not, on the date the Information Statement is first mailed to the
\nCompany’s shareholders, at the time of the Company Shareholders Meeting and at
\nthe Effective Time, contain any statement which, at such time, is false or
\nmisleading with respect to any material fact, or omit to state any material fact
\nnecessary in order to make the statements made therein, in light of the
\ncircumstances under which they are made, not false or misleading; or omit to
\nstate any material fact necessary to correct any statement in any earlier
\ncommunication with respect to the solicitation of proxies for the Company
\nShareholders Meeting which has become false or misleading. Notwithstanding the
\nforegoing, neither Parent nor Merger Sub makes any representation, warranty or
\ncovenant with respect to any information supplied by the Company which is
\ncontained in any of the foregoing documents.<\/p>\n
5. CERTAIN COVENANTS OF THE COMPANY.<\/p>\n
5.1 ACCESS AND INVESTIGATION. During the period from the date of this
\nAgreement through the Effective Time or the earlier termination of this
\nAgreement pursuant to Section 9.1 (the “PRE-CLOSING PERIOD”), the Company shall,
\nand shall cause its Representatives to, (a) provide Parent and Parent’s
\nRepresentatives with reasonable access to the Company’s Representatives,
\npersonnel and assets and to all existing books, records, Tax Returns, work
\npapers and other documents and information relating to the Company; and (b)
\nprovide Parent and Parent’s Representatives with copies of such existing books,
\nrecords, Tax Returns, work papers and other documents and information relating
\nto the Company, and with such additional financial, operating and other data and
\ninformation regarding the Company, as Parent may reasonably request.<\/p>\n
-35-
\n 41<\/p>\n
5.2 OPERATION OF THE COMPANY’S BUSINESS. During the Pre-Closing Period,
\nwithout the prior written consent of Parent:<\/p>\n
(a) the Company shall conduct its business and operations in the
\nordinary course and in substantially the same manner as such business and
\noperations have been conducted prior to the date of this Agreement;<\/p>\n
(b) the Company shall use all commercially reasonable efforts to
\npreserve intact its current business organization, including paying all debts
\nand obligations when due, keep available the services of its current officers
\nand employees and maintain its relations and good will with all suppliers,
\ncustomers, landlords, creditors, employees and other Persons having business
\nrelationships with the Company;<\/p>\n
(c) the Company shall use all commercially reasonable efforts to
\nkeep in full force all insurance policies identified in Part 2.17 of the Company
\nDisclosure Schedule;<\/p>\n
(d) the Company shall cause its officers to respond to reasonable
\nrequests from Parent and Parent’s Representatives for information concerning the
\nstatus of the Company’s business;<\/p>\n
(e) the Company shall not declare, accrue, set aside or pay any
\ndividend or make any other distribution in respect of any shares of capital
\nstock, and shall not repurchase, redeem or otherwise reacquire any shares of
\ncapital stock or other securities (except that the Company may repurchase
\nCompany Common Stock from former employees pursuant to the terms of existing
\nrestricted stock purchase agreements);<\/p>\n
(f) the Company shall not sell, issue or authorize the issuance
\nof (i) any capital stock or other security, (ii) any option or right to acquire
\nany capital stock or other security, or (iii) any instrument convertible into or
\nexchangeable for any capital stock or other security (except that the Company
\nshall be permitted (x) to grant stock options to employees in accordance with
\nits past practices, (y) to issue Company Common Stock to employees upon the
\nexercise of outstanding Company Options, and (z) to issue shares of Company
\nCommon Stock upon the conversion of shares of Company Preferred Stock);<\/p>\n
(g) the Company shall not amend or waive any of its rights under,
\nor modify the vesting provisions under, (i) any provision of the Company Option
\nPlan, (ii) any provision of any agreement evidencing any outstanding Company
\nOption, or (iii) any provision of any restricted stock purchase agreement;<\/p>\n
(h) neither the Company nor any of the Shareholders shall amend
\nor permit the adoption of any amendment to the Company’s articles of
\nincorporation or bylaws, or effect or permit the Company to become a party to
\nany Acquisition Transaction, recapitalization, reclassification of shares, stock
\nsplit, reverse stock split or similar transaction (except that the Company may
\nissue shares of Company Common Stock upon the conversion of shares of Company
\nPreferred Stock);<\/p>\n
-36-
\n 42<\/p>\n
(i) the Company shall not form any subsidiary or acquire any
\nequity interest or other interest in any other Entity;<\/p>\n
(j) the Company shall not amend or prematurely terminate, or
\nwaive any material right or remedy under, any Material Contract;<\/p>\n
(k) the Company shall not (i) acquire, lease or license any right
\nor other asset from any other Person other than in the ordinary course of
\nbusiness consistent with past practice, or (ii) sell or otherwise dispose of, or
\nlease or license, any right or other asset to any other Person other than in the
\nordinary course of business consistent with past practice;<\/p>\n
(l) the Company shall not (i) lend money to any Person (except
\nthat the Company may make routine advances for business expenses to employees in
\nthe ordinary course of business, consistent with past practice and may,
\nconsistent with its past practices, allow employees to acquire Company Common
\nStock in exchange for promissory notes upon exercise of Company Options), or
\n(ii) incur or guarantee any indebtedness for borrowed money, including drawing
\nadditional indebtedness under existing credit facilities, terms loans or
\nequipment lines;<\/p>\n
(m) the Company shall not (i) establish, adopt or amend any
\nEmployee Benefit Plan (other than such amendments as may be required to comply
\nwith applicable law and as to which Parent is notified in writing), (ii) pay any
\nbonus or make any profit-sharing payment, cash incentive payment or similar
\npayment to, or increase the amount of the wages, salary, commissions, fringe
\nbenefits or other compensation or remuneration payable to, any of its directors,
\nofficers or employees other than in the ordinary course of business consistent
\nwith past practice, or (iii) hire any new employee whose aggregate annual
\ncompensation is expected to exceed $75,000;<\/p>\n
(n) the Company shall not change any of its methods of accounting
\nor accounting practices in any material respect;<\/p>\n
(o) the Company shall not make any Tax election; provided that
\nParent shall not unreasonably withhold its consent for any tax election the
\nCompany may propose to make;<\/p>\n
(p) the Company shall not commence or settle any material Legal
\nProceeding; provided that Parent shall not unreasonably withhold its consent to
\nthe commencement or settlement of any such legal proceeding; and<\/p>\n
(q) the Company shall not agree or commit to take any of the
\nactions described in clauses (e) through (p) above and, to the extent not
\nalready addressed in this Section 5.3, shall not agree or consent to take any of
\nthe actions described in clauses (a) through (t) of Section 2.5.<\/p>\n
5.3 NOTIFICATION; UPDATES TO THE COMPANY DISCLOSURE SCHEDULE.<\/p>\n
(a) During the Pre-Closing Period, the Company shall promptly
\nnotify Parent in writing of:<\/p>\n
-37-
\n 43<\/p>\n
(i) the discovery by the Company of any event, condition,
\nfact or circumstance that occurred or existed on or prior to the date of this
\nAgreement and that caused or constitutes an inaccuracy in or breach of any
\nrepresentation or warranty made by the Company or any of the Shareholders in
\nthis Agreement;<\/p>\n
(ii) the discovery by the Company of any event, condition,
\nfact or circumstance that occurs, arises or exists after the date of this
\nAgreement and that would cause or constitute an inaccuracy in or breach of any
\nrepresentation or warranty made by the Company or any of the Shareholders in
\nthis Agreement if (A) such representation or warranty had been made as of the
\ntime of the occurrence, existence or discovery of such event, condition, fact or
\ncircumstance, or (B) such event, condition, fact or circumstance had occurred,
\narisen or existed on or prior to the date of this Agreement;<\/p>\n
(iii) the discovery by the Company of any breach of any
\ncovenant or obligation of the Company or, to the best knowledge of the Company,
\nany of the Shareholders; and<\/p>\n
(iv) the discovery by the Company of any event, condition,
\nfact or circumstance that would make the satisfaction of any of the conditions
\nset forth in Section 7 or Section 8 on or prior to the Closing Date impossible
\nor unlikely (a notice under this Section 5.3(a)(iv) is hereinafter referred to
\nas a “NOTICE OF BREACH”).<\/p>\n
(b) If any event, condition, fact or circumstance that is
\nrequired to be disclosed pursuant to Section 5.3(a) requires any change in the
\nCompany Disclosure Schedule, or if any such event, condition, fact or
\ncircumstance would require such a change assuming the Company Disclosure
\nSchedule were dated as of the date of the occurrence, existence or discovery of
\nsuch event, condition, fact or circumstance, then the Company shall promptly
\ndeliver to Parent an update to the Company Disclosure Schedule specifying such
\nchange. Except for updates to the Company Disclosure Schedule that arise out of
\nfacts and circumstances arising after the date hereof, which, as of the date
\nhereof, could not reasonably have been expected by the Company or the Company
\nExecutives to arise and which updates could not reasonably be expected
\nindividually or in the aggregate to result in a Company Material Adverse Effect
\n(a “PERMITTED UPDATE”), no such update shall be deemed to supplement or amend
\nthe Company Disclosure Schedule for the purpose of determining (i) the accuracy
\nof any of the representations and warranties made by the Company or any of the
\nShareholders in this Agreement and (ii) whether any of the conditions set forth
\nin Section 7 has been satisfied.<\/p>\n
5.4 NON-SOLICITATION. The Company and the Company’s Representatives
\nshall not, directly or indirectly (a) solicit or encourage the initiation of any
\ninquiry, proposal or offer from any Person (other than Parent or a wholly-owned
\nsubsidiary of Parent) relating to a possible Acquisition Transaction; (b)
\nparticipate in any discussions or negotiations or enter into any agreement with,
\nor provide any information to, any Person (other than Parent or a wholly-owned
\nsubsidiary of Parent) relating to or in connection with a possible Acquisition
\nTransaction; (c) consider, entertain or accept any proposal or offer from any
\nPerson (other than Parent or a wholly-owned subsidiary of Parent) relating to a
\npossible Acquisition Transaction; or (d) allow<\/p>\n
-38-
\n 44<\/p>\n
or otherwise authorize any of its Representatives to take any of the actions
\ndescribed in clauses (a) through (c) above. The Company will promptly notify
\nParent in writing of any material inquiry, proposal or offer relating to a
\npossible Acquisition Transaction that is received by the Company or any of the
\nCompany’s Representatives and will keep Parent fully informed of the status and
\ndetails of any such inquiry, proposal or offer. “ACQUISITION TRANSACTION” shall
\nmean any transaction involving: (a) the sale, license, disposition or
\nacquisition of all or a material portion of the Company’s business or assets;
\n(b) the issuance, disposition or acquisition of (i) any capital stock or other
\nequity security of the Company (other than common stock issued to employees of
\nthe Company upon exercise of stock options or otherwise in routine transactions
\nin accordance with the Company’s past practices), (ii) any option, call, warrant
\nor right (whether or not immediately exercisable) to acquire any capital stock
\nor other equity security of the Company (other than stock options granted to
\nemployees of the Company in routine transactions in accordance with the
\nCompany’s past practices), or (iii) any security, instrument or obligation that
\nis or may become convertible into or exchangeable for any capital stock or other
\nequity security of the Company; or (c) any merger, consolidation, business
\ncombination, reorganization or similar transaction involving the Company.<\/p>\n
6. ADDITIONAL COVENANTS OF THE PARTIES.<\/p>\n
6.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
\nof this Agreement, each party to this Agreement (a) shall make all filings (if
\nany) and give all notices (if any) required to be made and given by such party
\nin connection with the Merger and the other transactions contemplated by this
\nAgreement, and (b) shall use all commercially reasonable efforts to obtain all
\nConsents (if any) required to be obtained (pursuant to any applicable Legal
\nRequirement or Contract, or otherwise) by such party in connection with the
\nMerger and the other transactions contemplated by this Agreement. Each party
\nshall (upon request) promptly deliver to the other party a copy of each such
\nfiling made, each such notice given and each such Consent obtained by such party
\nduring the Pre-Closing Period.<\/p>\n
6.2 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, but subject to
\napplicable legal and regulatory obligations, neither Parent nor the Company
\nshall permit any of their respective Representatives to, issue any press release
\nor make any public statement regarding this Agreement, the Merger or any of the
\nother transactions contemplated by this Agreement, without the prior written
\nconsent of Parent, with respect to disclosures by the Company or any Shareholder
\nor their respective Representative, and the Company, with respect to disclosures
\nby Parent (which consents shall not be unreasonably withheld or delayed).<\/p>\n
6.3 AFFILIATE AGREEMENTS. The Company shall use all commercially
\nreasonable efforts to cause each other Person identified on Exhibit C-1 (and any
\nother Person that could reasonably be deemed to be an “affiliate” of the Company
\nwithin the meaning of Rule 145 promulgated under the Securities Act), to execute
\nand deliver to Parent, as promptly as practicable after the execution of this
\nAgreement, an Affiliate Agreement in the form of Exhibit C-2.<\/p>\n
-39-
\n 45<\/p>\n
6.4 COMMERCIALLY REASONABLE EFFORTS. During the Pre-Closing Period, (a)
\nthe Company and the Shareholders shall use all commercially reasonable efforts
\nto cause the conditions set forth in Section 7 to be satisfied on a timely
\nbasis, and (b) Parent and Merger Sub shall use all commercially reasonable
\nefforts to cause the conditions set forth in Section 8 to be satisfied on a
\ntimely basis.<\/p>\n
6.5 NONCOMPETITION AGREEMENTS. At or prior to the Closing, the Company
\nshall use all commercially reasonable efforts to cause each of the individuals
\nidentified on Exhibit D-1 to execute and deliver to the Company and Parent a
\nNoncompetition Agreement in the form of Exhibit D-2.<\/p>\n
6.6 FIRPTA MATTERS. The Company shall, prior to the Closing Date,
\nprovide Parent with a properly executed Foreign Investment and Real Property Tax
\nAct of 1980 (“FIRPTA”) Notification Letter, which shall state that shares of
\ncapital stock of the Company do not constitute “United States real property
\ninterests” under Section 897(c) of the Code, for purposes of satisfying
\nAcquiror’s obligations under Treasury Regulation Section 1.1445-2(c)(3). In
\naddition, simultaneously with delivery of such Notification Letter, the Company
\nshall have provided to Acquiror, as agent for the Company, a form of notice to
\nthe Internal Revenue Service in accordance with the requirements of Treasury
\nRegulation Section 1.897-2(h)(2) along with written authorization for Parent to
\ndeliver such notice form to the Internal Revenue Service on behalf of the
\nCompany upon the Closing of the Merger.<\/p>\n
6.7 ADVICE OF CHANGES. Parent will promptly advise the Company in
\nwriting of (a) any event occurring subsequent to the date of this Agreement that
\nwould render any representation or warranty of Parent or Merger Sub contained in
\nthis Agreement, if made on or as of the date of such event or the Closing Date,
\nuntrue or inaccurate in any material respect and (ii) any Material Adverse
\nChange in Parent’s business or financial condition, taken as a whole.<\/p>\n
6.8 REORGANIZATION TREATMENT. Neither Parent nor the Company shall take
\nany action (either before or after the Closing) that would cause the Merger to
\nfail to qualify as a reorganization within the meaning of Section 368(a) of the
\nCode. Parent shall, and shall use its reasonable best efforts to cause the
\nSurviving Corporation to, report to the extent required by the Code or the
\nregulations thereunder, the Merger for United States federal income tax purposes
\nas a reorganization within the meaning of Section 368(a) of the Code.<\/p>\n
6.9 CERTAIN EMPLOYEE BENEFITS MATTERS. Employees of the Company at the
\nEffective Time will be provided with welfare benefits by the Surviving
\nCorporation, Parent or one of its subsidiaries which welfare benefits shall be
\nsubstantially similar to such welfare benefits provided to similarly situated
\nemployees of Parent immediately prior to the Closing. If any employee of the
\nCompany becomes a participant in any employee benefit plan, program, policy or
\narrangement of Parent or one of its subsidiaries, such employee shall, to the
\nextent permitted by such plan, program, policy or arrangement, be given credit
\nfor all service with the Company prior to the Effective Time for purposes of
\nvesting eligibility and benefit accrual purposes. No later than the expiration
\nof the Lock-up Period (as defined in Section 11.1(g) below), Parent shall file a
\nRegistration Statement on Form S-8 with respect to the options held by<\/p>\n
-40-
\n 46<\/p>\n
former employees of the Company. Effective at the Effective Time, Parent shall
\ngrant an aggregate of 300,000 options to purchase shares of its Common Stock to
\nthe former employees of the Company identified by Parent, on such terms and
\nconditions as generally applicable to stock options granted to Parent’s other
\nemployees similarly situated, with an exercise price at fair market value as
\ndetermined under Parent’s stock option plan then in effect.<\/p>\n
6.10 SECTION 16 MATTERS. The Board of Directors of Parent shall, to the
\nextent permitted by applicable law, take or cause to be taken all actions
\nnecessary to obtain approval in the form required by Rule 16b-3 of the Exchange
\nAct so that, with respect to persons who will or may become officers or
\ndirectors of Parent, the transactions relating to the Merger that may be
\nconsidered acquisitions under such Rule for such persons will be exempt from
\nSection 16(b) of the Exchange Act.<\/p>\n
6.11 SHAREHOLDER APPROVAL.<\/p>\n
(a) INFORMATION STATEMENT. As promptly as practicable after the
\nexecution of this Agreement, the Company and Parent shall prepare, and Parent
\nshall file with the Commissioner, the Permit Application and a request for the
\nHearing to be held by the Commissioner to consider the terms, conditions and
\nfairness of the transactions contemplated by this Agreement pursuant to Section
\n25142 of the California Securities Law. As soon as permitted by the
\nCommissioner, the Company shall mail the hearing notice prescribed by the
\nCommissioner to all shareholders of the Company entitled to receive such notice
\nunder California law. The Company and Parent will notify each other promptly of
\nthe receipt of any comments from the Commissioner or its staff and of any
\nrequest by the Commissioner or its staff or any other government officials for
\namendments or supplements to any of the documents filed therewith or any other
\nfiling or for additional information and will supply each other with copies of
\nall correspondence between such party or any of its representatives, on the one
\nhand, and the Commissioner, or its staff or any other government officials, on
\nthe other hand, with respect to the filing. The Information Statement shall
\nconstitute a disclosure document for the offer and issuance of the shares of
\nParent Common Stock to be received by the holders of the capital stock of the
\nCompany in the Merger. The Company and Parent shall each use its best efforts to
\ncause the Information Statement to comply with applicable federal and state
\nsecurities laws requirements.<\/p>\n
(b) Each of Parent and the Company agrees to provide promptly to
\nthe other such information concerning its business and financial statements and
\naffairs as, in the reasonable judgment of the providing party or its counsel,
\nmay be required or appropriate for inclusion in the Information Statement, or in
\nany amendments or supplements thereto, and to cause its counsel and auditors to
\ncooperate with the other’s counsel and auditors in the preparation of the
\nInformation Statement. The Company will promptly advise Parent, and Parent will
\npromptly advise the Company, in writing if at any time prior to the Effective
\nTime either the Company or Parent shall obtain knowledge of any facts that might
\nmake it necessary or appropriate to amend or supplement the Permit Application
\nor Information Statement in order to make the statements contained or
\nincorporated by reference therein not misleading or to comply with applicable
\nlaw.<\/p>\n
-41-
\n 47<\/p>\n
(c) The Information Statement shall contain the unanimous
\nrecommendation of the Board of Directors of the Company that the Company
\nshareholders approve the Merger and this Agreement and the conclusion of the
\nBoard of Directors that the terms and conditions of the Merger are fair and
\nreasonable to the shareholders of the Company. Anything to the contrary
\ncontained herein notwithstanding, the Company shall not include in the
\nInformation Statement any information with respect to Parent or its affiliates
\nor associates, the form and content of which information shall not have been
\napproved by Parent prior to such inclusion.<\/p>\n
(d) In the event that the outcome of the Hearing is not
\nsuccessful, Parent shall use commercially reasonable efforts to prepare and
\nfile, as promptly as practicable, and, in any event, within 45 days following
\nsuch determination, a registration statement with the Securities and Exchange
\nCommission (the “SEC”) covering the issuance of shares of Parent Common Stock
\nissued in connection with the Merger, and Parent shall use commercially
\nreasonable efforts to cause such registration statement to become effective as
\npromptly as practicable after filing.<\/p>\n
6.12 COMPANY SHAREHOLDERS MEETING. As promptly as practicable after the
\ndate hereof, the Company shall take all action necessary in accordance with
\nCalifornia law and its Articles of Incorporation and Bylaws to convene the
\nCompany Shareholders Meeting for the purposes of voting upon the adoption of
\nthis Agreement, the agreement of merger and the transactions contemplated hereby
\nand thereby. The Company shall consult with Parent regarding the date of the
\nCompany Shareholders Meeting and shall not postpone or adjourn (other than for
\nthe absence of a quorum) the Company Shareholders Meeting without the consent of
\nParent. The Company shall use its best efforts to solicit from the shareholders
\nof the Company proxies in favor of the Merger and shall take all other action
\nnecessary or advisable to secure the vote or consent of shareholders required
\nunder California law and its Articles of Incorporation and Bylaws to effect the
\nMerger.<\/p>\n
6.13 LINE OF CREDIT. At the Company’s request, as soon as practicable
\nafter the date hereof and prior to the Closing, Parent and the Company shall
\nnegotiate in good faith to enter into a Loan Agreement, in the form of a line of
\ncredit, pursuant to which Parent shall lend to the Company up to $500,000. Draws
\nunder this line of credit shall be made at Parent’s sole discretion. The
\nindebtedness outstanding under this line of credit shall be secured and senior
\nto all other outstanding indebtedness of the Company except for its current
\nindebtedness to Greyrock or Meier Mitchell (but senior to any additional
\nindebtedness to such entities).<\/p>\n
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.<\/p>\n
The obligations of Parent and Merger Sub to effect the Merger and
\notherwise consummate the transactions contemplated by this Agreement are subject
\nto the satisfaction, at or prior to the Closing, of each of the following
\nconditions:<\/p>\n
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
\nwarranties made by the Company in this Agreement shall have been accurate in all
\nmaterial respects as of the date of this Agreement (without giving effect to any
\nmateriality qualifications contained or incorporated directly or indirectly in
\nsuch representations and warranties), and shall be accurate in all material
\nrespects as of the Closing Date as if made at the Closing Date (without giving<\/p>\n
-42-
\n 48<\/p>\n
effect to any update to the Company Disclosure Schedule other than Permitted
\nUpdates, and without giving effect to any materiality qualifications contained
\nor incorporated, directly or indirectly, in such representations and
\nwarranties).<\/p>\n
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
\nthe Company is required to comply with or to perform at or prior to the Closing
\nDate shall have been complied with and performed in all material respects.<\/p>\n
7.3 DISSENTERS’ RIGHTS; CONVERSION OF PREFERRED. No more than 10% of the
\nshares of Company Stock outstanding immediately prior to the Merger shall have
\nperfected their Dissenters’ Rights under applicable law at the Effective Time of
\nthe Merger; and the Company Preferred Stock shall have converted into shares of
\nthe Company Common Stock, effective immediately prior to the Merger.<\/p>\n
7.4 CONSENTS. All Consents required to be obtained in connection with
\nthe Merger and the other transactions contemplated by this Agreement (including
\nthose Consents identified in Part 2.21 of the Company Disclosure Schedule as
\nconditions to Closing and those set forth in Section 4.3) shall have been
\nobtained and shall be in full force and effect.<\/p>\n
7.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
\nagreements and documents, each of which shall be in full force and effect:<\/p>\n
(a) Affiliate Agreements substantially in the form of Exhibit C-2
\n(each, an “AFFILIATE AGREEMENT”), executed by the Persons identified on Exhibit
\nC-1;<\/p>\n
(b) Noncompetition Agreements substantially in the form of
\nExhibit D-2 (each a “NONCOMPETITION AGREEMENT”) with a term of at least one year
\nfrom the Effective Time, executed by the individuals identified on Exhibit D-1;<\/p>\n
(c) Voting Agreements substantially in the form of Exhibit F-2
\n(the “VOTING AGREEMENTS”) executed by the individuals identified on Exhibit F-1;<\/p>\n
(d) Proprietary information and inventions agreements, reasonably
\nsatisfactory in form and content to Parent, executed by all employees and former
\nemployees of the Company and by all consultants and independent contractors and
\nformer consultants and former independent contractors to the Company who have
\nnot already signed such agreements (including the individuals identified in Part
\n2.9(f) of the Company Disclosure Schedule);<\/p>\n
(e) a legal opinion of Orrick, Herrington & Sutcliffe LLP,
\ncounsel to the Company, dated as of the Closing Date, substantially in the form
\nof Exhibit G;<\/p>\n
(f) a certificate executed by the President and Chief Executive
\nOfficer of the Company that each of the representations and warranties set forth
\nin Section 2 is accurate in all material respects as of the Closing Date as if
\nmade on the Closing Date and that the conditions set forth in Section 7 have
\nbeen duly satisfied in all material respects (the “COMPANY OFFICER’S CLOSING
\nCERTIFICATE”);<\/p>\n
-43-
\n 49<\/p>\n
(g) A true, correct and complete schedule (the “SCHEDULES OF
\nEXPENSES”) of all Company Expenses paid or incurred by or on behalf of the
\nCompany or the Shareholders through the Closing Date, accompanied by a
\ncertificate signed by the President and Chief Financial Officer of the Company
\ncertifying the accuracy and completeness thereof, shall have been delivered by
\nthe Company.<\/p>\n
(h) written resignations of all officers and directors of the
\nCompany, effective as of the Effective Time;<\/p>\n
(i) the Escrow Agreement substantially in the form of Exhibit B
\n(the “ESCROW AGREEMENT”) executed by the Shareholders’ Agent.<\/p>\n
7.6 EXEMPTION FROM APPLICABLE SECURITIES LAWS. The issuance of shares of
\nParent Common Stock and the other transactions contemplated by this Agreement in
\nthe Merger shall be exempt from applicable state and federal securities laws.<\/p>\n
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or
\npermanent injunction or other order preventing the consummation of the Merger
\nshall have been issued by any court of competent jurisdiction and remain in
\neffect, and there shall not be any Legal Requirement enacted or deemed
\napplicable to the Merger that makes consummation of the Merger illegal.<\/p>\n
7.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
\nto commence any Legal Proceeding challenging or seeking the recovery of a
\nmaterial amount of damages in connection with the Merger or seeking to prohibit
\nor limit the exercise by Parent of any material right pertaining to its
\nownership of stock of the Surviving Corporation.<\/p>\n
7.9 NO MATERIAL ADVERSE CHANGE. There shall have been no material
\nadverse change in the Company’s business, condition, assets, liabilities,
\noperations, financial performance or prospects since the date of this Agreement
\n(it being understood that none of the following shall be deemed, in and of
\nitself, to constitute a material adverse change in the business, condition,
\nassets, liabilities, operations, financial or prospects performance of the
\nCompany since the date of this Agreement: (a) a change that results from
\nconditions affecting the U.S. economy or the world economy, (b) a change that
\nresults from conditions affecting the Internet or the e-commerce industry so
\nlong as such conditions do not affect the Company in a disproportionate manner
\nas compared with companies of a similar size, (c) a change that results from the
\nannouncement or pendency of the Merger or the transactions contemplated hereby
\nand (d) a change that results from the taking of any action required by this
\nAgreement).<\/p>\n
7.10 TERMINATION OF 401(k) PLAN. The Company’s Board of Directors shall
\nhave resolved to terminate the Company’s 401(k) Plan as of a date prior to the
\nEffective Time and such plan shall have been terminated as of a date prior to
\nthe Effective Time.<\/p>\n
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.<\/p>\n
-44-
\n 50<\/p>\n
The obligations of the Company to effect the Merger and otherwise
\nconsummate the transactions contemplated by this Agreement are subject to the
\nsatisfaction, at or prior to the Closing, of the following conditions:<\/p>\n
8.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
\nwarranties made by Parent and Merger Sub in this Agreement shall have been
\naccurate in all material respects as of the date of this Agreement (without
\ngiving effect to any materiality or similar qualifications contained in such
\nrepresentations and warranties), and shall be accurate in all material respects
\nas of the Closing Date as if made at the Closing Date (without giving effect to
\nany materiality or similar qualifications contained in such representations and
\nwarranties).<\/p>\n
8.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
\nParent and Merger Sub are required to comply with or to perform at or prior to
\nthe Closing Date shall have been complied with and performed in all respects.<\/p>\n
8.3 DOCUMENTS. The Company shall have received the following documents:<\/p>\n
(a) the Escrow Agreement executed by Parent and the Escrow Agent;<\/p>\n
(b) a certificate executed by the President and Chief Executive
\nOfficer of Parent that each of the representations and warranties set forth in
\nSection 4 is accurate in all material respects as of the Closing Date as if made
\non the Closing Date and that the conditions set forth in Section 8 have been
\nduly satisfied in all material respects (the “PARENT OFFICER’S CLOSING
\nCERTIFICATE”); and<\/p>\n
(c) a legal opinion of Venture Law Group, counsel to Parent and
\nMerger Sub, dated as of the Closing Date, substantially in the form of Exhibit
\nI.<\/p>\n
8.4 LISTING. The Merger Shares shall have been approved for listing
\n(subject to notice of issuance) on the Nasdaq National Market.<\/p>\n
8.5 NO RESTRAINTS. No temporary restraining order, preliminary or
\npermanent injunction or other order preventing the consummation of the Merger
\nshall have been issued by any court of competent jurisdiction and remain in
\neffect, and there shall not be any Legal Requirement enacted or deemed
\napplicable to the Merger that makes consummation of the Merger illegal.<\/p>\n
8.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material
\nadverse change in Parent’s business, condition, assets, liabilities, operations,
\nfinancial performance or prospects since the date of this Agreement (it being
\nunderstood that none of the following shall be deemed, in and of itself, to
\nconstitute a material adverse change in the business, condition, assets,
\nliabilities, operations or financial performance of Parent since the date of
\nthis Agreement: (a) a change in the market price or trading volume of Parent’s
\nCommon Stock, (b) a failure by Parent to meet any securities analyst estimates
\nof Parent’s financial results for any period (c) a change that results from
\nconditions affecting the U.S. economy or the world economy, (d) a change that
\nresults from conditions affecting the Internet or the e-commerce industry so
\nlong as<\/p>\n
-45-
\n 51<\/p>\n
such conditions do not affect Parent in a disproportionate manner as compared
\nwith companies of a similar size, (e) a change that results from the
\nannouncement or pendency of the Merger or the transactions contemplated hereby
\nand (f) a change that results from the taking of any action required by this
\nAgreement).<\/p>\n
8.7 TAX OPINION. The Company shall have received a written opinion of
\nthe Company’s legal counsel in form and substance reasonably satisfactory to it
\nand dated on or about the Closing Date to the effect that the Merger will
\nconstitute a reorganization within the meaning of Section 368(a) of the Code,
\nand such opinion shall not have been withdrawn. In rendering such opinion,
\ncounsel shall be entitled to rely upon, among other things, reasonable
\nassumptions as well as customary representations of Parent and the Company.<\/p>\n
9. TERMINATION.<\/p>\n
9.1 TERMINATION. This Agreement may be terminated, and the Merger
\nabandoned, notwithstanding the approval by Parent, Merger Sub and the Company of
\nthis Agreement, at any time prior to the Effective Time, by:<\/p>\n
(a) the mutual consent of Parent, Merger Sub and the Company; or<\/p>\n
(b) Parent and Merger Sub if the conditions set forth in Section
\n7 hereof shall not have been satisfied by January 24, 1999, except if such
\nconditions have not been satisfied solely as a result of the action or inaction
\nof Parent or Merger Sub, or such earlier date upon which Parent receives a
\nNotice of Breach from the Company; or<\/p>\n
(c) the Company if the conditions set forth in Section 8 hereof
\nshall not have been satisfied by January 24, 1999, except if such conditions
\nhave not been satisfied solely as a result of the action or inaction of the
\nCompany; or<\/p>\n
(d) Parent and Merger Sub or the Company if, without fault of the
\nterminating party, there shall be any applicable federal or state law that makes
\nconsummation of the Merger illegal or otherwise prohibited or if any court of
\ncompetent jurisdiction or Governmental Body shall have issued an order, decree,
\nruling or taken any other action restraining, enjoining or otherwise prohibiting
\nthe Merger and such order, decree, ruling or other action shall have become
\nfinal and nonappealable.<\/p>\n
Any termination pursuant to this Section 9.1 (other than a termination pursuant
\nto Section 9.1(a) hereof) shall be effected by written notice from the party or
\nparties so terminating to the other parties hereto.<\/p>\n
9.2 EFFECT OF TERMINATION. In the event of the termination of this
\nAgreement as provided in Section 9.1, this Agreement shall be of no further
\nforce or effect, except for this Section 9.2 and Section 11, each of which shall
\nsurvive the termination of this Agreement; provided, however, that the liability
\nof any party for any breach by such party of the representations, warranties,
\ncovenants or agreements of such party set forth in this Agreement<\/p>\n
-46-
\n 52<\/p>\n
occurring prior to the termination of this Agreement shall survive the
\ntermination of this Agreement.<\/p>\n
10. INDEMNIFICATION, ETC.<\/p>\n
10.1 SURVIVAL OF REPRESENTATIONS, ETC.<\/p>\n
(a) The representations and warranties made by the Company set
\nforth in Section 2 shall survive the Closing and shall expire on the first
\nanniversary of the Closing Date (the “TERMINATION DATE”); provided, however,
\nthat if, at any time prior to the Termination Date, any Indemnitee (acting in
\ngood faith) delivers to the Shareholders’ Agent a written notice alleging the
\nexistence of an inaccuracy in or a breach of any of the representations and
\nwarranties made by the Company and the Company Executives set forth in Section 2
\n(and setting forth in reasonable detail the basis for such Indemnitee’s belief
\nthat such an inaccuracy or breach may exist) and asserting a claim for recovery
\nunder Section 10.2 based on such alleged inaccuracy or breach, then the claim
\nasserted in such notice shall survive the Termination Date until such time as
\nsuch claim is fully and finally resolved. All representations and warranties
\nmade by Parent shall terminate and expire as of the Closing Date, and any
\nliability of Parent with respect to such representations and warranties shall
\nthereupon cease.<\/p>\n
(b) The representations, warranties, covenants and obligations of
\nCompany, and the rights and remedies that may be exercised by the Indemnitees,
\nshall not be limited or otherwise affected by or as a result of any information
\nfurnished to, or any investigation made by or knowledge of, any of the
\nIndemnitees or any of their Representatives.<\/p>\n
(c) For purposes of this Agreement, each statement or other item
\nof information set forth in the Company Disclosure Schedule shall be deemed to
\nbe a representation and warranty made by the Company in this Agreement.<\/p>\n
10.2 INDEMNIFICATION.<\/p>\n
(a) Indemnification by Company Indemnitors. From and after the
\nClosing Date (but subject to Section 10.1(a)), the Shareholders (the
\n“INDEMNITORS”), on a ratable basis, shall hold harmless and indemnify each of
\nthe Indemnitees from and against, and the Holdback Shares shall be available to
\ncompensate and reimburse each of the Indemnitees for, any Damages that are
\ndirectly or indirectly suffered or incurred by any of the Indemnitees or to
\nwhich any of the Indemnitees may otherwise become subject (regardless of whether
\nor not such Damages relate to any third-party claim) and that arise from or as a
\nresult of, or are directly or indirectly connected with: (i) any breach of any
\nrepresentation or warranty set forth in Section 2 (without giving effect to any
\n“Company Material Adverse Effect” or other materiality qualification or any
\nsimilar qualification contained or incorporated directly or indirectly in such
\nrepresentation or warranty), or (ii) any Legal Proceeding relating to any breach
\nof the type referred to in clause (i) above (including any Legal Proceeding
\ncommenced by any Indemnitee for the purpose of enforcing any of its rights under
\nthis Section 10).<\/p>\n
-47-
\n 53<\/p>\n
(b) Deductible. The Indemnitors shall not be required to make any
\nindemnification payment pursuant to Section 10.2(a) for any inaccuracy in or
\nbreach of any representation and warranty set forth in Section 2 until such time
\nas the total amount of all Damages (including the Damages arising from such
\ninaccuracy or breach and all other Damages arising from any other inaccuracies
\nin or breaches of any representations or warranties) that have been directly or
\nindirectly suffered or incurred by any one or more of the Indemnitees, or to
\nwhich any one or more of the Indemnitees has or have otherwise become subject,
\nexceeds $250,000 in the aggregate. (If the total amount of such Damages exceeds
\n$250,000, then the Indemnitees shall be entitled to be indemnified against and
\ncompensated and reimbursed for the entire amount of such Damages up to a maximum
\nof the full amount of the Holdback Shares.)<\/p>\n
(c) Limitation Due to Post-Closing Actions. None of the
\nIndemnitors shall have any liability for Damages which arise solely as a result
\nof (i) actions taken by or on behalf of, or omissions of, Parent or the
\nSurviving Corporation after the Closing; (ii) changes in accounting methods or
\npolicies of the Surviving Corporation after the Closing; or (iii) the passing
\nof, or any change in, after the Closing, any law or administrative practice of
\nany Governmental Body in any such case not actually in force as of the date of
\nthis Agreement (even if retroactive in effect), including any increase in the
\ntax rates in effect on the date of this Agreement or the imposition of any Tax
\nnot in effect on the date of this Agreement.<\/p>\n
10.3 EXCLUSIVE REMEDY. With the exception of claims based upon fraud,
\nfrom and after the Closing, recourse of the Indemnitees to the Holdback Shares
\npursuant to this Agreement and the Escrow Agreement shall be the sole and
\nexclusive remedy of the Indemnitees for monetary damages for any inaccuracy in
\nor breach of any representation or, warranty contained in Section 2 of this
\nAgreement or any Legal Proceeding related thereto. Any distribution of Holdback
\nShares to satisfy a claim hereunder shall be done so as to reduce the Escrow
\nAccount. Any Holdback Shares remaining upon termination of the Escrow Account
\nshall be distributed to the Shareholders in accordance with the Escrow
\nAgreement.<\/p>\n
10.4 NO CONTRIBUTION. No Indemnitors shall have any right of
\ncontribution, right of indemnity or other right or remedy against the Company in
\nconnection with any indemnification obligation or any other liability to which
\nshe, he or it may become subject under or in connection with this Agreement.<\/p>\n
10.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
\ncommencement by any Person of any claim or Legal Proceeding (whether against the
\nCompany, Parent or against any other Person) with respect to which any of the
\nIndemnitors may become obligated to hold harmless, indemnify, compensate or
\nreimburse any Indemnitee pursuant to this Section 10, Parent shall have the
\nright, at its election, to proceed with the defense of such claim or Legal
\nProceeding on its own. If Parent so proceeds with the defense of any such claim
\nor Legal Proceeding:<\/p>\n
(a) all reasonable expenses relating to the defense of such claim
\nor Legal Proceeding by counsel reasonably satisfactory to the Shareholders’
\nAgent shall be borne and paid exclusively from the Holdback Shares;<\/p>\n
-48-
\n 54<\/p>\n
(b) each Indemnitor shall make available to Parent any documents
\nand materials in his, her or its possession or control that reasonably may be
\nnecessary to the defense of such claim or Legal Proceeding; and<\/p>\n
(c) Parent shall have the right to settle, adjust or compromise
\nsuch claim or Legal Proceeding with the written consent of the Shareholders’
\nAgent (as defined in Section 11.2); provided, however, that such consent shall
\nnot be unreasonably withheld.<\/p>\n
Parent shall give the Shareholders’ Agent prompt notice of the commencement of
\nany such Legal Proceeding against Parent or the Company; provided, however, that
\nany failure on the part of Parent to so notify the Shareholders’ Agent shall not
\nlimit any of the obligations of the Indemnitors under this Section 10 (except to
\nthe extent such failure materially prejudices the defense of such Legal
\nProceeding). Parent shall conduct the defense of such claim or Legal Proceeding
\ndiligently and in good faith using all reasonable means and defenses available
\nto it or to the Company. The Shareholders’ Agent shall have the right, if it so
\nnotifies Parent with reasonable promptness after receipt of Parent’s claim
\nnotice, to assist at its own expense and with counsel of its choice in the
\ndefense of such claim or Legal Proceeding by Parent (or in the case of a claim
\nor Legal Proceeding against the Company, by the Company). In such event, Parent
\nshall afford the Shareholders’ Agent and its counsel a reasonable opportunity to
\ncomment and the right to object (which right shall not be unreasonably
\nexercised) with respect to the conduct of the defense of such claim or Legal
\nProceeding. Parent shall keep the Shareholders’ Agent reasonably informed of the
\nprogress of any claim or Legal Proceeding and its defense, and shall with
\nreasonable promptness provide the Shareholders’ Agent with copies of all
\nmaterial notices, written communications and filings (including court papers)
\nmade by or on behalf of any of the parties to the underlying claim or Legal
\nProceeding. If Parent does not elect to proceed with the defense of any such
\nclaim or Legal Proceeding, the Shareholders’ Agent may proceed with the defense
\nof such claim or Legal Proceeding with counsel reasonably satisfactory to
\nParent; provided, however, that the Shareholders’ Agent may not settle, adjust
\nor compromise any such claim or Legal Proceeding without the prior written
\nconsent of the Parent (which consent may not be unreasonably withheld).<\/p>\n
11. MISCELLANEOUS PROVISIONS.<\/p>\n
11.1 RESTRICTIONS ON TRANSFER.<\/p>\n
(a) The shares of Parent Common Stock to be issued to each
\nShareholder at the Effective Time pursuant to Section 1 of this Agreement and
\nany shares of capital stock or other securities received with respect thereto,
\nincluding options or warrants to purchase any shares of Parent Common Stock or
\nany securities convertible into or exercisable for shares of Parent Common Stock
\nmay contain any legend required by applicable law. Each Shareholder shall
\nobserve and comply with the Securities Act and the rules and regulations
\npromulgated by the SEC thereunder as now in effect or hereafter enacted or
\npromulgated, and as from time to time amended, in connection with any sale,
\ncontract for sale, transfer, assignment, loan, pledge, encumbrance, granting of
\nany rights with respect to, or otherwise disposing of (each, a “TRANSFER”) of
\nshares of Parent Common Stock beneficially owned by the Shareholder.<\/p>\n
-49-
\n 55<\/p>\n
(b) Each certificate representing the shares of Parent Common
\nStock to be issued to each Shareholder at the Effective Time pursuant to Section
\n1 of this Agreement and any shares of capital stock or other securities received
\nwith respect thereto, including options or warrants to purchase any shares of
\nParent Common Stock or any securities convertible into or exercisable for shares
\nof Parent Common Stock issued to a Shareholder who is an “affiliate” of the
\nCompany, Parent or Merger Sub (as defined in Rule 145 under the Securities Act)
\n(such shares are referred to herein as “RESTRICTED SECURITIES” and such holder
\nis referred to herein as an “AFFILIATE”) and each certificate for such
\nsecurities issued to subsequent transferees of any such certificate,
\nrespectively, shall (unless otherwise permitted by the provisions of Sections
\n11.1(c) and 11.1(d) hereof) be stamped or otherwise imprinted with a legend in
\nsubstantially the following forms:<\/p>\n
Form for certificate representing Restricted Securities issued to an
\n Affiliate:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
\n TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
\n THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
\n ACCORDANCE WITH THE TERMS OF AN AGREEMENT AND PLAN OF REORGANIZATION
\n DATED NOVEMBER 17, 1999, AMONG ACCRUE SOFTWARE, INC., NEOVISTA
\n ACQUISITION CORP. AND NEOVISTA SOFTWARE, INC. AND THE OTHER SIGNATORIES
\n THERETO, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES
\n OF ACCRUE SOFTWARE, INC..”<\/p>\n
Form for certificate representing securities issued to subsequent
\n transferees of any Affiliate:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
\n UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
\n RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
\n UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
\n BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
\n DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
\n AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
\n ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
\n SECURITIES ACT OF 1933.”<\/p>\n
(c) Prior to any Transfer of Restricted Securities, each
\nAffiliate shall give written notice to Parent of such Affiliate’s intention to
\neffect such Transfer and to comply in all other respects with the provisions of
\nthis Section 11.1. Each such notice shall describe the<\/p>\n
-50-
\n 56<\/p>\n
manner and circumstances of the proposed Transfer and shall be accompanied by
\nthe written opinion, addressed to Parent, of counsel for the holder of such
\nRestricted Securities, stating that in the opinion of such counsel (which
\nopinion and counsel shall be reasonably satisfactory to Parent) such proposed
\ntransfer does not involve a transaction requiring registration or qualification
\nof such Restricted Securities under the Securities Act or the securities or
\n“blue-sky” laws of any relevant state of the United States. The holder thereof
\nshall thereupon, with the written consent of Parent, be entitled to Transfer
\nsuch Restricted Securities in accordance with the terms of the notice delivered
\nby it to Parent. Each certificate or other instrument evidencing the securities
\nissued upon the Transfer of any such Restricted Securities (and each certificate
\nor other instrument evidencing any untransferred balance of such Restricted
\nSecurities) shall bear the legend set forth in Section 11.1(b) unless (x) in
\nsuch opinion of counsel of Parent registration of any future Transfer is not
\nrequired by the applicable provisions of the Securities Act or (y) Parent shall
\nhave waived the requirement of such legends. No Shareholder shall Transfer any
\nRestricted Securities until such opinion of counsel has been given (unless
\nwaived by Parent or unless such opinion is not required in accordance with the
\nprovisions of this Section 11.1(c)).<\/p>\n
(d) Notwithstanding the foregoing provisions of this Section
\n11.1, the restrictions imposed by this Section 11.1 upon the transferability of
\nRestricted Securities shall cease and terminate when (i) any such shares are
\nsold or otherwise disposed of pursuant to an effective registration statement
\nunder the Securities Act or as otherwise contemplated by Section 11.1(c) and,
\npursuant to Section 11.1(c), the securities so transferred are not required to
\nbear the legend set forth in Section 11.1(b) or (ii) the holder of such
\nRestricted Securities has met the requirements for Transfer of such Restricted
\nSecurities pursuant to Rule 145. Whenever the restrictions imposed by this
\nSection 11.1 shall terminate, as herein provided, the holder of Restricted
\nSecurities as to which such restrictions have terminated shall be entitled to
\nreceive from Parent, without expense, a new certificate not bearing the
\nrestrictive legend set forth in Section 11.1(b) and not containing any other
\nreference to the restrictions imposed by this Section 11.1.<\/p>\n
(e) Parent, at its discretion, may cause stop transfer orders to
\nbe placed with its transfer agent with respect to certificates for Restricted
\nSecurities owned by such Shareholder but not as to certificates for such shares
\nof Parent Common Stock as to which the legend set forth in this Section 11.1(b)
\nis no longer required because one or more of the conditions set forth in Section
\n11.2(d) shall have been satisfied.<\/p>\n
(f) The provisions of this Section 11.1 shall be in addition to,
\nand shall not alter or otherwise limit, the provisions set forth in the
\nAffiliate Agreements.<\/p>\n
(g) Notwithstanding the provisions of this Section 11.1, and
\nwhether or not the Hearing shall have been successful, none of the shares of
\nParent Common Stock to be issued to each Shareholder at the Effective Time
\npursuant to Section 1 of this Agreement or any shares of capital stock or other
\nsecurities received with respect thereto, including options or warrants to
\npurchase any shares of Parent Common Stock or any securities convertible into or
\nexercisable for shares of Parent Common Stock may be Transferred, otherwise than
\n(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
\nwriting to be bound by this restriction, (ii) as<\/p>\n
-51-
\n 57<\/p>\n
a distribution to partners or shareholders of such person, provided that the
\ndistributees thereof agree in writing to be bound by the terms of this
\nrestriction, (iii) with respect to dispositions of Common Shares acquired on the
\nopen market or (iv) with the prior written consent of Parent for a period
\ncommencing on the date hereof and continuing until the earlier of (i) the
\neffective date of the registration statement on Form S-1 filed by Parent in
\nconnection with the registration of Common Stock issued by Parent to former
\nshareholders of Marketwave Corporation or (ii) March 1, 2000 (the “LOCK-UP
\nPeriod”). The foregoing restriction shall preclude the holder of the Restricted
\nSecurities from engaging in any hedging or other transaction which is designed
\nto or reasonably expected to lead to or result in a Sale of Parent Securities
\nduring the Lock-up Period, even if such Restricted Securities would be disposed
\nof by someone other than such holder. Such prohibited hedging or other
\ntransactions would include, without limitation, any short sale (whether or not
\nagainst the box) or any purchase, sale or grant of any right (including, without
\nlimitation, any put or call option) with respect to any Restricted Securities or
\nwith respect to any security (other than a broad-based market basket or index)
\nthat included, relates to or derives any significant part of its value from
\nRestricted Securities. Parent, at its discretion may cause stop transfer orders
\nto be placed with Parent’s transfer agent and registrar against the transfer of
\nshares of parent Common Stock or Restricted Securities held by the holder except
\nin compliance with the foregoing restrictions. Until the end of the Lock-up
\nPeriod, all such shares may contain the following legend:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
\n TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
\n AND PLAN OF REORGANIZATION DATE NOVEMBER 17, 1999, AMONG
\n ACCRUE SOFTWARE, INC., NEOVISTA ACQUISITION CORP. AND
\n NEOVISTA SOFTWARE, INC., A COPY OF WHICH IS ON FILE AT THE
\n PRINCIPAL OFFICES OF ACCRUE SOFTWARE, INC.”<\/p>\n
11.2 SHAREHOLDERS’ AGENT. Jonathan Becher shall be irrevocably appointed
\nas the agent for the Indemnitors for purposes of all matters relating to Section
\n1.11, Section 10 and the Escrow Agreement (the “SHAREHOLDERS’ AGENT”), and
\nJonathan Becher hereby accepts his appointment as the Shareholders’ Agent.
\nParent shall be entitled to deal exclusively with the Shareholders’ Agent on all
\nmatters relating to Section 1.11, Section 10 and the Escrow Agreement, and shall
\nbe entitled to rely conclusively (without further evidence of any kind
\nwhatsoever) on any document executed or purported to be executed on behalf of
\nany Shareholder or Indemnitor by the Shareholders’ Agent, and on any other
\naction taken or purported to be taken on behalf of any Shareholder or Indemnitor
\nby the Shareholders’ Agent, as fully binding upon such Shareholder or
\nIndemnitor. If the Shareholders’ Agent shall die, become disabled or otherwise
\nbe unable to fulfill his responsibilities as agent of the Shareholders and
\nIndemnitors, then the Shareholders shall, within ten days after such death or
\ndisability, appoint a successor agent and, promptly thereafter, shall notify
\nParent of the identity of such successor. Any such successor shall become the
\n“Shareholders’ Agent” in accordance with this Section 11.2. If for any reason
\nthere is no Shareholders’ Agent at any time, all references herein to the
\nShareholders’ Agent shall be deemed to refer to the Shareholders. The
\nShareholders’ Agent shall be reimbursed<\/p>\n
-52-
\n 58<\/p>\n
out of the Holdback Shares for his reasonable out-of-pocket expenses incurred in
\nconnection with serving as the Shareholders’ Agent under this Agreement and the
\nEscrow Agreement. Shareholders’ Agent shall not be liable for any act done or
\nomitted hereunder as Shareholders’ Agent while acting in good faith and in the
\nexercise of reasonable judgment. The Shareholders on whose behalf Holdback
\nShares were contributed to the Escrow Account shall severally indemnify
\nShareholders’ Agent and hold Shareholders’ Agent harmless against any loss,
\nliability or expense incurred without gross negligence, bad faith or willful
\nmisconduct on the part of Shareholders’ Agent and arising out of or in
\nconnection with the acceptance or administration of Shareholders’ Agent’s duties
\nhereunder and under the Escrow Agreement, including the reasonable fees and
\nexpenses of any legal counsel retained by Shareholders’ Agent.<\/p>\n
11.3 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
\ndelivered to each other party hereto such instruments and other documents, and
\nshall take such other actions, as such other party may reasonably request (prior
\nto, at or after the Closing) for the purpose of carrying out or evidencing any
\nof the transactions contemplated by this Agreement.<\/p>\n
11.4 FEES AND EXPENSES. As used in this Agreement, “TRANSACTION COSTS”
\nshall mean, with respect to any party, all actual, out-of-pocket expenses
\nincurred or accrued as of the Closing by such party to third parties in
\nconnection with this Agreement, the Agreement of Merger, the Related Agreements,
\nthe Merger and all other transactions provided for herein and therein, including
\nthe management bonus equal to two months pay for those employees of the Company
\nthat Parent, in good faith, identifies as employees that Parent intends, as of
\nthe Closing, to continue to employ for an indeterminate amount of time after the
\nClosing (the “GO FORWARD EMPLOYEES”), but not including the severance amounts
\nequal to two month’s pay that is paid or becomes payable prior to the Closing to
\nemployees of the Company whose employment is terminated prior to the Closing who
\nare not Go Forward Employees), but the term “Transaction Costs” shall not in any
\nevent include general overhead; the time spent by employees of such party
\ninternally; postage, telephone, telecopy, photocopy and delivery expenses of
\nsuch party; permit and filing fees; and other non-material expenses that are
\nincidental to the ordinary course of business. Each party hereto shall bear its
\nown Transaction Costs; provided, however, that in the event the Merger shall be
\nconsummated, the Shareholders shall bear all Transaction Costs of the Company,
\nby deducting the Expense Shares as set forth in Section 1.5, whether or not such
\nfees and expenses have been paid by the Company on or before the Closing Date
\nand whether or not such fees and expenses are reflected in the Company
\nDisclosure Schedule or the Schedule of Expenses (such Transaction Costs of the
\nCompany being herein collectively referred to as the “COMPANY EXPENSES”);
\nprovided, further that, to the extent the Company shall not have paid such
\nexpenses prior to Closing, Parent shall pay in cash at Closing the Broadview
\nExpenses and the Company’s reasonable legal fees and expenses of Orrick,
\nHerrington & Sutcliffe LLP, and shall pay promptly upon receipt of invoices
\ntherefore, any other Company Expenses. Parent shall not be required to pay any
\nbonus, golden parachute or severance payment to any current or former employee,
\nofficer or director of the Company in connection with the Merger except for two
\nmonths of salary as a severance payment to employees terminated without cause by
\nthe Company at Parent’s request as of the Effective Time of the Merger. Subject
\nto the foregoing, Parent shall pay at the Effective Time all principal and
\naccrued interest outstanding under the Company’s loans outstanding as of the
\ndate of this<\/p>\n
-53-
\n 59<\/p>\n
Agreement to its shareholders, which loans dated prior to September 30, 1999
\ntotal approximately $2.0 million and which loans dated subsequent to September
\n30, 1999 total approximately $0.9 million.<\/p>\n
11.5 ATTORNEYS’ FEES. If any action or proceeding relating to this
\nAgreement or the enforcement of any provision of this Agreement is brought
\nagainst any party hereto, the prevailing party shall be entitled to recover
\nreasonable attorneys’ fees, costs and disbursements (in addition to any other
\nrelief to which the prevailing party may be entitled).<\/p>\n
11.6 NOTICES. Any notice or other communication required or permitted to
\nbe delivered to any party under this Agreement shall be in writing and shall be
\ndeemed properly delivered, given and received when delivered (by hand, by
\nregistered mail, by courier or express delivery service or by facsimile) to the
\naddress or facsimile telephone number set forth beneath the name of such party
\nbelow (or to such other address or facsimile telephone number as such party
\nshall have specified in a written notice given to the other parties hereto):<\/p>\n
if to Parent:<\/p>\n
Accrue Software, Inc.
\n 48634 Milmont Drive
\n Fremont, CA 94538-7353
\n Facsimile: (510) 580-4509
\n Attn: Richard D. Kreysar<\/p>\n
with a copy (not constituting notice) to:<\/p>\n
Venture Law Group
\n 2775 Sand Hill Road
\n Menlo Park, CA 94025
\n Facsimile: (650) 233-8386
\n Attn: John V. Bautista<\/p>\n
if to the Company:<\/p>\n
NeoVista Software, Inc.
\n 10710 N. Tantau Avenue
\n Cupertino, CA 95015
\n Facsimile:(408) 777-2930
\n Attn: Jonathan Becker
\n with a copy (not constituting notice) to:<\/p>\n
Orrick, Herrington & Sutcliffe, LLP
\n 1020 Marsh Road
\n Menlo Park, CA 94025
\n Facsimile: (650) 614-7401
\n Attn: Lowell D. Ness<\/p>\n
-54-
\n 60<\/p>\n
11.7 [INTENTIONALLY LEFT BLANK].<\/p>\n
11.8 TIME OF THE ESSENCE. Time is of the essence of this Agreement.<\/p>\n
11.9 HEADINGS. The headings contained in this Agreement are for
\nconvenience of reference only, shall not be deemed to be a part of this
\nAgreement and shall not be referred to in connection with the construction or
\ninterpretation of this Agreement.<\/p>\n
11.10 COUNTERPARTS. This Agreement may be executed in several
\ncounterparts, each of which shall constitute an original and all of which, when
\ntaken together, shall constitute one agreement.<\/p>\n
11.11 GOVERNING LAW. This Agreement shall be construed in accordance
\nwith, and governed in all respects by, the internal laws of the State of
\nCalifornia (without giving effect to principles of conflicts of laws).<\/p>\n
11.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
\nCompany and its successors and assigns (if any); Parent and its successors and
\nassigns (if any); and Merger Sub and its successors and assigns (if any). This
\nAgreement shall inure to the benefit of: the Company; the Shareholders (to the
\nextent set forth in Section 1.5); the holders of assumed Company Options (to the
\nextent set forth in Section 1.6); the holders of assumed Company Common Warrants
\nand Company Preferred Warrants (to the extent set forth in Section 1.7) Parent;
\nMerger Sub; the other Indemnitees (subject to Section 10); and the respective
\nsuccessors and assigns (if any) of the foregoing. Parent may freely assign any
\nor all of its rights under this Agreement (including its indemnification rights
\nunder Section 10), in whole or in part, to any other Person without obtaining
\nthe consent or approval of any other party hereto or of any other Person.<\/p>\n
11.13 WAIVER OF JURY TRIAL. Each of the parties hereto irrevocably and
\nunconditionally waives trial by jury in any Action relating to this Agreement,
\nthe Related Agreements, the Agreement of Merger or any transaction contemplated
\nhereby or thereby, and for any counterclaim with respect thereto.<\/p>\n
11.14 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
\nof the parties hereto shall be cumulative (and not alternative). The parties to
\nthis Agreement agree that, in the event of any breach or threatened breach by
\nany party to this Agreement of any covenant, obligation or other provision set
\nforth in this Agreement for the benefit of any other party to this Agreement,
\nsuch other party shall be entitled (in addition to any other remedy that may be
\navailable to it) to (a) a decree or order of specific performance or mandamus to
\nenforce the observance and performance of such covenant, obligation or other
\nprovision, and (b) an injunction restraining such breach or threatened breach.<\/p>\n
11.15 WAIVER.<\/p>\n
-55-
\n 61<\/p>\n
(a) No failure on the part of any Person to exercise any power,
\nright, privilege or remedy under this Agreement, and no delay on the part of any
\nPerson in exercising any power, right, privilege or remedy under this Agreement,
\nshall operate as a waiver of such power, right, privilege or remedy; and no
\nsingle or partial exercise of any such power, right, privilege or remedy shall
\npreclude any other or further exercise thereof or of any other power, right,
\nprivilege or remedy.<\/p>\n
(b) No Person shall be deemed to have waived any claim arising
\nout of this Agreement, or any power, right, privilege or remedy under this
\nAgreement, unless the waiver of such claim, power, right, privilege or remedy is
\nexpressly set forth in a written instrument duly executed and delivered on
\nbehalf of such Person; and any such waiver shall not be applicable or have any
\neffect except in the specific instance in which it is given.<\/p>\n
11.16 AMENDMENTS. This Agreement may not be amended, modified, altered
\nor supplemented other than by means of a written instrument duly executed and
\ndelivered on behalf of all of the parties hereto.<\/p>\n
11.17 SEVERABILITY. In the event that any provision of this Agreement,
\nor the application of any such provision to any Person or set of circumstances,
\nshall be determined to be invalid, unlawful, void or unenforceable to any
\nextent, the remainder of this Agreement, and the application of such provision
\nto Persons or circumstances other than those as to which it is determined to be
\ninvalid, unlawful, void or unenforceable, shall not be impaired or otherwise
\naffected and shall continue to be valid and enforceable to the fullest extent
\npermitted by law.<\/p>\n
11.18 PARTIES IN INTEREST. Except for the provisions of Sections 1.6 and
\n10, none of the provisions of this Agreement is intended to provide any rights
\nor remedies to any Person other than the parties hereto and their respective
\nsuccessors and assigns (if any).<\/p>\n
11.19 ENTIRE AGREEMENT. This Agreement and the other agreements referred
\nto herein set forth the entire understanding of the parties hereto relating to
\nthe subject matter hereof and thereof and supersede all prior agreements and
\nunderstandings among or between any of the parties relating to the subject
\nmatter hereof and thereof; provided, however, that the letter agreement executed
\non behalf of Parent and the Company on October 7, 1999 relating to nondisclosure
\n(the “NON-DISCLOSURE AGREEMENT”) shall not be superseded by this Agreement and
\nshall remain in effect in accordance with their terms until the earlier of (a)
\nthe Effective Time, or (b) the date on which such Non-Disclosure Agreement is
\nterminated in accordance with its terms.<\/p>\n
11.20 CONSTRUCTION.<\/p>\n
(a) For purposes of this Agreement, whenever the context
\nrequires: the singular number shall include the plural, and vice versa; the
\nmasculine gender shall include the feminine and neuter genders; the feminine
\ngender shall include the masculine and neuter genders; and the neuter gender
\nshall include the masculine and feminine genders.<\/p>\n
-56-
\n 62<\/p>\n
(b) The parties hereto agree that any rule of construction to the
\neffect that ambiguities are to be resolved against the drafting party shall not
\nbe applied in the construction or interpretation of this Agreement.<\/p>\n
(c) As used in this Agreement, the words “include” and
\n“including,” and variations thereof, shall not be deemed to be terms of
\nlimitation, but rather shall be deemed to be followed by the words “without
\nlimitation.”<\/p>\n
(d) Except as otherwise indicated, all references in this
\nAgreement to “Sections” and “Exhibits” are intended to refer to Sections of this
\nAgreement and Exhibits to this Agreement.<\/p>\n
(e) Any references in this Agreement to the “knowledge” of the
\nCompany, or to matters “known” to the Company, shall mean, with respect to a
\ngiven matter, the actual knowledge of the Company Executives, such knowledge
\nthat could have been obtained by the Company Executives after due inquiry and a
\nreasonable investigation and any information contained in the files of the
\nCompany. Any references in this Agreement to the “knowledge” of Parent, or the
\nmatters “known” to Parent, shall mean, with respect to a given matter, the
\nactual knowledge of the executive officers of Parent listed on Schedule 11.20
\n(the “PARENT EXECUTIVES”), such knowledge that could have been obtained by the
\nParent Executives after due inquiry and a reasonable investigation and a
\nreasonable investigation and any information contained in the files of Parent.<\/p>\n
-57-
\n 63<\/p>\n
The parties hereto have caused this Agreement to be executed and
\ndelivered as of November 17, 1999.<\/p>\n
ACCRUE SOFTWARE, INC.,
\n a Delaware corporation<\/p>\n
\/s\/ Richard Kreysar
\n ———————————
\n Chief Executive Officer<\/p>\n
NEOVISTA ACQUISITION CORP.,
\n a California corporation
\n \/s\/ Richard Kreysar
\n ———————————
\n Chief Executive Officer<\/p>\n
NEOVISTA SOFTWARE, INC.,
\n a California corporation<\/p>\n
\/s\/ Jonathan D. Becher
\n ———————————
\n President and Chief Executive
\n Officer<\/p>\n
[Signature page to Agreement and Plan of Merger and Reorganization]<\/p>\n
64<\/p>\n
EXHIBIT A<\/p>\n
CERTAIN DEFINITIONS<\/p>\n
For purposes of the Agreement (including this Exhibit A):<\/p>\n
“ACQUISITION TRANSACTION” shall mean any transaction involving:<\/p>\n
(a) the sale, license, disposition or acquisition of all or a
\nmaterial portion of the Company’s business or assets;<\/p>\n
(b) the issuance, disposition or acquisition of (i) any capital
\nstock or other equity security of the Company (other than common stock issued to
\nemployees of the Company, upon exercise of Company Options or otherwise, in
\nroutine transactions in accordance with the Company’s past practices), (ii) any
\noption, call, warrant or right (whether or not immediately exercisable) to
\nacquire any capital stock or other equity security of the Company (other than
\nstock options granted to employees of the Company in routine transactions in
\naccordance with the Company’s past practices), or (iii) any security, instrument
\nor obligation that is or may become convertible into or exchangeable for any
\ncapital stock or other equity security of the Company; or<\/p>\n
(c) any merger, consolidation, business combination,
\nreorganization or similar transaction involving the Company.<\/p>\n
“AGREEMENT” shall mean the Agreement and Plan of Merger and
\nReorganization to which this Exhibit A is attached (including the Company
\nDisclosure Schedule), as it may be amended from time to time.<\/p>\n
“CALIFORNIA SECURITIES LAW” shall mean the California Corporate
\nSecurities Law of 1968, as amended.<\/p>\n
“COMPANY CONTRACT” shall mean any Contract: (a) to which the Company is
\na party; (b) by which the Company or any of its assets is or may become bound or
\nunder which the Company has, or may become subject to, any obligation; or (c)
\nunder which the Company has or may acquire any right or interest.<\/p>\n
“COMPANY PROPRIETARY ASSET” shall mean any Proprietary Asset owned by or
\nlicensed to the Company or otherwise used by the Company.<\/p>\n
“CONSENT” shall mean any approval, consent, ratification, permission,
\nwaiver or authorization (including any Governmental Authorization).<\/p>\n
“CONTRACT” shall mean any written, oral or other agreement, contract,
\nsubcontract, lease, understanding, instrument, note, warranty, insurance policy,
\nbenefit plan or legally binding commitment or undertaking of any nature.<\/p>\n
65<\/p>\n
“COMPANY DISCLOSURE SCHEDULE” shall mean the schedule (dated as of the
\ndate of the Agreement) delivered to Parent on behalf of the Company and the
\nShareholders.<\/p>\n
“COMPANY MATERIAL ADVERSE EFFECT” shall mean a violation or other matter
\nthat could reasonably be expected to result in a material adverse effect on the
\nCompany’s business, condition, assets, liabilities, operations, financial
\nperformance or prospects (it being understood that none of the following shall
\nbe deemed, in and of itself, to constitute a material adverse effect on the
\nbusiness, condition, assets, liabilities, operations or financial performance of
\nthe Company: (a) a change that results from conditions affecting the U.S.
\neconomy or the world economy, (b) a change that results from conditions
\naffecting the Internet or the e-commerce industry so long as such conditions do
\nnot affect the Company in a disproportionate manner as compared with companies
\nof a similar size, (c) a change that results from the announcement or pendency
\nof the Merger or the transactions contemplated hereby and (d) a change that
\nresults from the taking of any action required by this Agreement).<\/p>\n
“DAMAGES” shall include any loss, damage, injury, decline in value, lost
\nopportunity, liability, claim, demand, settlement, judgment, award, fine,
\npenalty, Tax, fee (including reasonable attorneys’ fees), charge, cost
\n(including costs of investigation) or expense of any nature.<\/p>\n
“ENCUMBRANCE” shall mean any lien, pledge, hypothecation, charge,
\nmortgage, security interest, encumbrance, claim, infringement, interference,
\noption, right of first refusal, preemptive right, community property interest or
\nrestriction of any nature (including any restriction on the voting of any
\nsecurity, any restriction on the transfer of any security or other asset, any
\nrestriction on the receipt of any income derived from any asset, any restriction
\non the use of any asset and any restriction on the possession, exercise or
\ntransfer of any other attribute of ownership of any asset).<\/p>\n
“ENTITY” shall mean any corporation (including any non-profit
\ncorporation), general partnership, limited partnership, limited liability
\npartnership, joint venture, estate, trust, company (including any limited
\nliability company or joint stock company), firm or other enterprise,
\nassociation, organization or entity.<\/p>\n
“EXCHANGE ACT” shall mean the Securities Exchange Act of 1934, as
\namended.<\/p>\n
“GOVERNMENTAL AUTHORIZATION” shall mean any: (a) permit, license,
\ncertificate, franchise, permission, clearance, registration, qualification or
\nauthorization issued, granted, given or otherwise made available by or under the
\nauthority of any Governmental Body or pursuant to any Legal Requirement; or (b)
\nright under any Contract with any Governmental Body.<\/p>\n
“GOVERNMENTAL BODY” shall mean any: (a) nation, state, commonwealth,
\nprovince, territory, county, municipality, district or other jurisdiction of any
\nnature; (b) federal, state, local, municipal, foreign or other government; or
\n(c) governmental or quasi-governmental authority of any nature (including any
\ngovernmental division, department, agency, commission, instrumentality,
\nofficial, organization, unit, body or Entity and any court or other tribunal).<\/p>\n
2
\n 66<\/p>\n
“INDEMNITEES” shall mean the following Persons: (a) Parent; (b) Parent’s
\ncurrent and future affiliates (including the Surviving Corporation); (c) the
\nrespective Representatives of the Persons referred to in clauses “(a)” and “(b)”
\nabove; and (d) the respective successors and assigns of the Persons referred to
\nin clauses “(a)”, “(b)” and “(c)” above; provided, however, that the
\nShareholders shall not be deemed to be “Indemnitees.”<\/p>\n
“LEGAL PROCEEDING” shall mean any action, suit, litigation, arbitration,
\nproceeding (including any civil, criminal, administrative, investigative or
\nappellate proceeding), hearing, inquiry, audit, examination or investigation
\ncommenced, brought, conducted or heard by or before, or otherwise involving, any
\ncourt or other Governmental Body or any arbitrator or arbitration panel.<\/p>\n
“LEGAL REQUIREMENT” shall mean any federal, state, local, municipal,
\nforeign or other law, statute, constitution, principle of common law,
\nresolution, ordinance, code, edict, decree, rule, regulation, ruling or
\nrequirement issued, enacted, adopted, promulgated, implemented or otherwise put
\ninto effect by or under the authority of any Governmental Body.<\/p>\n
“PARENT MATERIAL ADVERSE EFFECT” shall mean a violation or other matter
\nthat could reasonably be expected to result in a material adverse effect on
\nParent’s business, condition, assets, liabilities, operations, financial
\nperformance or prospects (it being understood that none of the following shall
\nbe deemed, in and of itself, to constitute a material adverse effect on the
\nbusiness, condition, assets, liabilities, operations or financial performance of
\nParent: (a) a change in the market price or trading volume of Parent’s Common
\nStock, (b) a failure by Parent to meet any securities analyst estimates of
\nParent’s financial results for any period (c) a change that results from
\nconditions affecting the U.S. economy or the world economy, (d) a change that
\nresults from conditions affecting the Internet or the e-commerce industry so
\nlong as such conditions do not affect Parent in a disproportionate manner as
\ncompared with companies of a similar size, (e) a change that results from the
\nannouncement or pendency of the Merger or the transactions contemplated hereby
\nand (f) a change that results from the taking of any action required by this
\nAgreement).<\/p>\n
“PERMITTED LIENS” shall mean (i) taxes or other charges which are not
\ndue and payable; and (ii) minor liens that have arisen in the ordinary course of
\nbusiness and that do not individually, or in the aggregate, materially detract
\nfrom the value of the asset subject thereto or materially impair the operations
\nof the Company.<\/p>\n
“PERSON” shall mean any individual, Entity or Governmental Body.<\/p>\n
“PROPRIETARY ASSET” shall mean any: (a) patent, patent application,
\ntrademark (whether registered or unregistered), trademark application, trade
\nname, fictitious business name, service mark (whether registered or
\nunregistered), service mark application, copyright (whether registered or
\nunregistered), copyright application, maskwork, maskwork application, trade
\nsecret, know-how, customer list, franchise, system, computer software, computer
\nprogram, invention, design, blueprint, engineering drawing, proprietary product,
\ntechnology, proprietary right or other intellectual property right or intangible
\nasset; or (b) right to use or exploit any of the foregoing.<\/p>\n
3
\n 67<\/p>\n
“RELATED AGREEMENTS” shall mean the Agreement of Merger, the Escrow
\nAgreement, the Affiliate Agreements and the Voting Agreement.<\/p>\n
“REPRESENTATIVES” shall mean officers, directors, employees, agents,
\nattorneys, accountants, advisors and representatives.<\/p>\n
“SEC” shall mean the United States Securities and Exchange Commission.<\/p>\n
“SECURITIES ACT” shall mean the Securities Act of 1933, as amended.<\/p>\n
“TAX” shall mean any tax (including any income tax, franchise tax,
\ncapital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
\nvalorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
\ntax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
\nany customs duty), deficiency or fee, and any related charge or amount
\n(including any fine, penalty or interest), imposed, assessed or collected by or
\nunder the authority of any Governmental Body.<\/p>\n
“TAX RETURN” shall mean any return (including any information return),
\nreport, statement, declaration, estimate, schedule, notice, notification, form,
\nelection, certificate or other document or information filed with or submitted
\nto, or required to be filed with or submitted to, any Governmental Body in
\nconnection with the determination, assessment, collection or payment of any Tax
\nor in connection with the administration, implementation or enforcement of or
\ncompliance with any Legal Requirement relating to any Tax.<\/p>\n
“YEAR 2000 COMPLIANT”, for purposes of the Agreement, shall mean an item
\nof software or hardware shall be deemed to be “Year 2000 Compliant” only if
\noperating on a stand-alone basis without reference to dates supplied by third
\nparty software or hardware: (i) the functions, calculations, and other computing
\nprocesses of such item of software or hardware (collectively, “PROCESSES”)
\nperform in a consistent and correct manner without interruption regardless of
\nthe date on which the Processes are actually performed and regardless of the
\ndate input to the applicable computer system (before, on or after January 1,
\n2000 until December 31, 2099); (ii) such item of software or hardware accepts,
\ncalculates, compares, sorts, extracts, sequences and otherwise processes date
\ninputs and date values, and returns and displays date values, in a consistent
\nand correct manner regardless of the dates used (before, on or after January 1,
\n2000 until December 31, 2099); (iii) such item of software or hardware accepts
\nand can respond to year input, if any, in a manner that resolves any ambiguities
\nas to century in a defined, predetermined and appropriate manner; (iv) such item
\nof software or hardware stores and displays date information in ways that are
\nunambiguous as to the determination of the century; and (v) if such item of
\nsoftware or hardware determines leap years, it uses the following standard: (A)
\nif dividing the year by four yields an integer, it is a leap year, except for
\nyears ending in 00, but (B) a year ending in 00 is a leap year if dividing it by
\n400 yields an integer.<\/p>\n
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