<\/p>\nARTICLE I – DEFINITIONS 2
\n1.01. Definitions 2
\nARTICLE II – PLAN OF REORGANIZATION 4
\n2.01. The Merger 4
\n2.02. Effective Time 4
\n2.03. Effect of the Merger 5
\n2.04. Certificate of Incorporation; By-Laws 5
\n2.05. Directors and Officers 5
\n2.06. Effect on Capital Stock 5
\n2.07. Exchange of Certificates 6
\n2.08. Stock Transfer Books 8
\n2.09. Dissenting Shares 8
\n2.10. No Further Ownership Rights in Company Common Stock 8
\n2.11. Lost, Stolen or Destroyed Certificates 9
\n2.12. Tax and Accounting Consequences 9
\n2.13. Taking of Necessary Action; Further Action 9
\nARTICLE III – REPRESENTATIONS AND WARRANTIES OF THE SELLER 9
\n3.01. Binding Effect 10
\n3.02. Corporate Existence and Power 10
\n3.03. Governmental Authorization; Consents 10
\n3.04. Non-Contravention 11
\n3.05. Capitalization 11
\n3.06. Subsidiaries 11
\n3.07. Financial Statements 11
\n3.08. Absence of Certain Changes 12
\n3.09. Property and Equipment 13
\n3.10. No Undisclosed Material Liabilities 14
\n3.11. Litigation 14
\n3.12. Material Contracts 14
\n3.13. Insurance Coverage 16
\n3.14. Compliance with Laws; Permits; No Defaults 16
\n3.15. Finder’s Fees 17
\n3.16. Intellectual Property 17
\n3.17. Taxes 18
\n3.18. Employees 20
\n3.19. Transactions with Affiliates 21
\n3.20. Other Information 21
\n3.21. Investment Representations 21
\n(a) No Distribution 21
\n(b) Investor Qualification 21
\n(c) Restrictions on Resale 21
\n(d) Access to Information 22
\n3.22. Option Plans 22
\n3.23. Vote Required 22
\n3.24. Content Provider Agreements 23
\nARTICLE IV – REPRESENTATIONS AND WARRANTIES OF THE BUYER 23
\n4.01. Binding Effect 23
\n4.02. Corporate Existence and Power 23
\n4.03. Governmental Authorization 24
\n4.04. Non-Contravention 25
\n4.05. Finders’ Fees 25
\n4.06. Capitalization 25
\n4.07. Purchase for Investment 26
\n4.08. SEC Reports 26
\n4.09 Broadview Fee Payment Agreement 26
\n4.10 Absence of Certain Changes 26
\n4.11 Valid Issuance 27
\nARTICLE V – COVENANTS OF THE SELLER 27
\n5.01. Conduct of the Company 27
\n5.02. Access to Information 28
\n5.03. Notices of Certain Events 29
\n5.04. No Negotiations with Third Parties 29
\n5.05. Confidentiality 29
\n5.06. Continuing Disclosure 30
\n5.07. Stockholder Approval 30
\n5.08. Approval of Parachute Payments 30
\nARTICLE VI – COVENANTS OF THE BUYER 30
\n6.01. Confidentiality 30
\n6.02. Access 31
\n6.03. Documents to be Furnished 31
\n6.04. Notices of Certain Events 31
\n6.05. Continuing Disclosure 32
\nARTICLE VII – COVENANTS OF ALL PARTIES 32
\n7.01. Best Efforts 32
\n7.02. Certain Filings 32
\n7.03. Public Announcements 33
\n7.04. Assumption of Company Stock Options 33
\nARTICLE VIII – EMPLOYEE BENEFITS 33
\n8.01. Employee Benefits Definitions 34
\n8.02. Employee Benefit Representations 34
\n8.03. No Third Party Beneficiaries 36
\nARTICLE IX – CONDITIONS TO CLOSING 36
\n9.01. Conditions to the Obligations of Each Party 36
\n9.02. Conditions to Obligation of the Buyer 37
\n9.03. Additional Conditions to Obligation of the Company 38
\nARTICLE X – SURVIVAL; INDEMNIFICATION 40
\n10.01. Survival 40
\n10.02. Indemnification 41
\n10.03. Procedures; No Waiver 41
\nARTICLE XI – TERMINATION 42
\n11.01. Grounds for Termination 42
\n11.02. Effect of Termination 42
\n11.03 Break-up Fee 43
\nARTICLE XII – MISCELLANEOUS 43
\n12.01. Notices 43
\n12.02. Amendments; No Waivers 44
\n12.03. Expenses 45
\n12.04. Successors and Assigns 45
\n12.05. Further Assurances 45
\n12.06. Governing Law 45
\n12.07. Counterparts; Effectiveness 45
\n12.08. Entire Agreement 45
\n12.09. Captions 46
\n12.10. Jurisdiction 46
\n<\/c><\/s><\/caption>\n<\/table>\n
——<\/p>\n
SCHEDULES
\n———<\/p>\n
Schedule 7.04 Terms of Assumed Options
\nSchedule 8.02 Employee Plans and Benefit Arrangements
\nSchedule 9.02(c) Opinion of Company Counsel
\nSchedule 9.03(c) Opinion of Buyer’s Counsel<\/p>\n
EXHIBITS
\n——–<\/p>\n
Exhibit 1 Agreement of Merger
\nExhibit 2 Form of Registration Rights Agreement
\nExhibit 3 Form of Fee Payment Agreement
\nExhibit 4 Form of Noncompetition Agreement
\nExhibit 9.02(n) Form of Affiliate Agreement<\/p>\n
288LAG4525\/25.365579-4<\/p>\n
AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
This AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is dated as of
\n ———
\nJune 13, 1997 by and among Individual, Inc., a Delaware corporation
\n(“Buyer”), CN Merger Corp., a Delaware corporation and wholly-owned subsidiary
\nof the Buyer (“Merger Sub”), ClariNet Communications Corp., a California
\n ———–
\ncorporation (the “Company”), and certain shareholders of the Company listed on
\n ——-
\nthe signature pages hereto (the “Shareholders”).
\n ————<\/p>\n
WITNESSETH:<\/p>\n
WHEREAS, the Boards of Directors of the Buyer, Merger Sub and the Company
\nhave each determined that it is advisable and in the best interests of their
\nrespective stockholders and shareholders for the Buyer to enter into a
\nbusiness combination with the Company upon the terms and subject to the
\nconditions set forth herein;<\/p>\n
WHEREAS, in furtherance of such combination, the Boards of Directors of
\nthe Buyer, Merger Sub and the Company have each approved the merger (the
\n“Merger”) of Merger Sub with and into the Company, all pursuant to the terms
\n —
\nand conditions of this Agreement and an Agreement of Merger in the form of
\nExhibit 1 (the “Agreement of Merger”) and the applicable provisions of the
\n ——- ——————–
\nDelaware General Corporation Law (“Delaware Law”) and the California General
\n ————
\nCorporation Law (“California Law”);
\n —————<\/p>\n
WHEREAS, pursuant to the Merger, each outstanding share (a “Share”) of
\n —–
\nthe Company’s Common Stock, no par value per share, shall be converted into
\nthe right to receive shares of Common Stock of the Buyer, $.01 par value per
\nshare, upon the terms and subject to the conditions set forth herein and in
\nthe Agreement of Merger;<\/p>\n
WHEREAS, the Buyer, Merger Sub and the Company intend, by approving
\nresolutions authorizing this Agreement, to adopt this Agreement as a plan of
\nreorganization within the meaning of Section 368(a) of the Internal Revenue
\nCode of 1986, as amended (the “Code”), and the regulations thereunder, and to
\n —-
\ncause the Merger to qualify as a reorganization under the provisions of
\nSection 368(a) of the Code;<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the mutual
\ncovenants and agreements set forth herein, and intending to be legally bound,
\nthe parties hereto agree as follows:<\/p>\n
ARTICLE I”ARTICLE-DEFINITIONS”<\/p>\n
DEFINITIONS<\/p>\n
1.01. DEFINITIONS1.01. DEFINITIONS. In addition to the other
\n ———– ———–
\ncapitalized terms defined in this Agreement, the following terms, as used
\nherein, shall have the following meanings:<\/p>\n
“Affiliate” means, with respect to any Person, any Person directly
\n ———
\nor indirectly controlling, controlled by, or under common control with such
\nPerson.<\/p>\n
“Ancillary Agreements” means the Registration Rights Agreement, the
\n ———————
\nNoncompetition Agreement, the Fee Payment Agreement and the Affiliate
\nAgreements.<\/p>\n
“Balance Sheet” means the balance sheet of the Company as of April
\n ————–
\n30, 1997 referred to in Section 3.07.<\/p>\n
“Balance Sheet Date” means April 30, 1997.
\n ——————–<\/p>\n
“Buyer Stock” means Common Stock, $.01 par value per share, of the
\n ————
\nBuyer.<\/p>\n
“Buyer’s Counsel” means the law firm of Testa, Hurwitz & Thibeault,
\n —————-
\nLLP, Boston, Massachusetts.<\/p>\n
“Closing Date” means the date of the Closing.
\n ————-<\/p>\n
“Company Common Stock” means the Common Stock, no par value per
\n ———————-
\nshare, of the Company.
\n “Company Counsel” means Cooley Godward LLP, Palo Alto, California.
\n —————-<\/p>\n
“Intellectual Property” shall mean all domestic and foreign letters
\n ———————-
\npatent, patents, patent applications and patent licenses; proprietary know-how
\nand know-how licenses; inventions, discoveries, ideas, trade secrets and
\ntrade secret licenses; proprietary (including “confidential”) information of
\nevery nature, and proprietary information licenses; software and software
\nlicenses, including all source code and object code, algorithms, architecture,
\nstructure, display screens, layouts, development tools, and documentation and
\nmedia constituting, describing or relating to the foregoing; all moral rights
\nor other similar rights of paternity, integrity or authorship; common law
\ntrademarks; trademarks and trademark registration applications and
\nregistrations therefor; service marks, registered service marks and service
\nmark registration applications; trade names, registered trade names and trade
\nname registration applications; domain names and URLs; common law copyrights,
\nregistered copyrights and copyright registration applications; all other
\ntechnical or technological information or intellectual property rights of
\nevery nature, owned by or licensed to the Company or any Subsidiary, whether
\nor not used by the Company or any such Subsidiary in, or necessary to the
\nconduct of, its business as presently conducted; and all rights, claims,
\ncredits, causes of action or rights of set-off against third parties relating
\nto the foregoing.<\/p>\n
“Lien” means, with respect to any asset, any mortgage, lien, pledge,
\n —-
\ncharge, security interest, restriction or encumbrance of any kind in respect
\nof such asset.<\/p>\n
“Material Adverse Change” means a material adverse change in the
\n ————————-
\nbusiness, assets, liabilities, condition (financial or otherwise) or results
\nof operations of the Company or the Buyer, as the case may be.<\/p>\n
“Material Adverse Effect” means a material adverse effect on the
\n ————————-
\nbusiness, assets, liabilities, condition (financial or otherwise) or results
\nor operations of the Company or the Buyer, as the case may be.<\/p>\n
“1934 Act” means the Securities Exchange Act of 1934, as amended,
\n ———
\nand the rules and regulations promulgated thereunder.<\/p>\n
“1933 Act” means the Securities Act of 1933, as amended, and the
\n ———
\nrules and regulations promulgated thereunder.<\/p>\n
“1933 Act Legend” means the following legend:
\n —————–<\/p>\n
“The Securities represented hereby have not been registered under the
\nSecurities Act of 1933, as amended, and may not be sold, transferred or
\notherwise disposed of except in accordance with the terms thereof and unless
\nregistered with the Securities and Exchange Commission of the United States
\nand the securities regulatory authorities of certain states or unless an
\nexemption from such registration is available.”<\/p>\n
“Noncompetition Agreement” means the Noncompetition, Nondisclosure
\n ————————-
\nand Developments Agreement entered into by each of the Shareholders in
\nsubstantially the form attached hereto as Exhibit 4.
\n ———-<\/p>\n
“Person” means an individual, corporation, partnership, limited
\n ——
\nliability company or partnership, association, trust or other entity or
\norganization, including a government or political subdivision or an agency or
\ninstrumentality thereof.<\/p>\n
“Registration Rights Agreement” means the Registration Rights
\n ——————————-
\nAgreement entered into among the Buyer and certain shareholders of the Company
\nin substantially the form attached hereto as Exhibit 2.
\n ———-<\/p>\n
“Subsidiary” means any entity of which securities or other
\n ———-
\nownership interests having ordinary voting power to elect a majority of the
\nboard of directors or other persons performing similar functions are owned
\ndirectly or indirectly by the Company.<\/p>\n
ARTICLE IIARTICLE II – PLAN OF REORGANIZATION<\/p>\n
THE PLAN OF REORGANIZATION<\/p>\n
2.01. THE MERGER.2.01. THE MERGER
\n ———–<\/p>\n
(a) Effective Time. At the Effective Time (as defined in
\nSection 2.02), and subject to and upon the terms and conditions of this
\nAgreement and in accordance with California Law and Delaware Law, Merger Sub
\nshall be merged with and into the Company, the separate corporate existence of
\nMerger Sub shall cease, and the Company shall continue as the surviving
\ncorporation. The Company as the surviving corporation after the Merger is
\nhereinafter sometimes referred to as the “Surviving Corporation.”
\n ———————-<\/p>\n
(b) Closing. Unless this Agreement shall have been terminated
\nand the transactions herein contemplated shall have been abandoned pursuant to
\nSection 11.01 and subject to the satisfaction or waiver of the conditions set
\nforth in Article IX, the consummation of the Merger (the “Closing”) will take
\n ——-
\nplace on Wednesday, June 18, 1997, or, if later, as promptly as practicable
\n(and in any event within two business days) after satisfaction or waiver of
\nthe conditions set forth in Article IX, at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts, unless another date,
\ntime or place is agreed to in writing by the parties hereto.<\/p>\n
2.02. EFFECTIVE TIME.2.02. EFFECTIVE TIME As promptly as practicable
\n ————–
\nafter the satisfaction or waiver of the conditions set forth in Article IX,
\nthe parties hereto shall cause the Merger to be consummated by filing a
\nproperly executed Agreement of Merger as contemplated by Chapter 11 of
\nCalifornia Law and a duly executed Certificate of Merger as contemplated by
\nSection 252 of Delaware Law (the “Certificate of Merger”), in each case
\n ———————-
\ntogether with any required related certificates, with the Secretaries of State
\nof the States of California and Delaware, respectively, in such forms as
\nrequired by, and executed in accordance with, the relevant provisions of,
\nCalifornia Law and Delaware Law, respectively, and the Merger shall become
\neffective in accordance with applicable law upon such filings (the time of
\nsuch effectiveness being the “Effective Time”). Upon the filing of both the
\n ————–
\nAgreement of Merger and the Certificate of Merger, this Agreement shall be
\nbinding upon each of the parties hereto, and the parties agree to use their
\nbest efforts to facilitate the review of the Agreement of Merger and
\nCertificate of Merger, and accompanying documents, by the Secretaries of State
\nof the States of California and Delaware, respectively, and to cause the
\nMerger to become effective as expeditiously as possible. In no event shall
\nany shares of Buyer Stock be issued to any shareholders of the Company unless
\nand until the Agreement of Merger and Certificate of Merger are accepted and
\nthe Merger becomes effective.<\/p>\n
2.03. EFFECT OF THE MERGER.2.03. EFFECT OF THE MERGER At the Effective
\n ——————–
\nTime, the effect of the Merger shall be as provided in this Agreement, the
\nAgreement of Merger, the Certificate of Merger and the applicable provisions
\nof California Law and Delaware Law. Without limiting the generality of the
\nforegoing, and subject thereto, at the Effective Time all the property,
\nrights, privileges, powers and franchises of the Company and Merger Sub shall
\nvest in the Surviving Corporation, and all debts, liabilities and duties of
\nthe Company and Merger Sub shall become the debts, liabilities and duties of
\nthe Surviving Corporation.<\/p>\n
2.04. ARTICLES OF INCORPORATION; BY-LAWS2.04. CERTIFICATE OF
\n ————————————-
\nINCORPORATION; BY-LAWS.<\/p>\n
(a) Articles of Incorporation. Unless otherwise determined by
\nthe Buyer in its sole discretion prior to the Effective Time, at the Effective
\nTime, the Articles of Incorporation of the Company, as amended and restated in
\nthe form set forth in Exhibit I to the Agreement of Merger, shall be the
\nArticles of Incorporation of the Surviving Corporation until thereafter
\namended as provided by California Law and such Articles of Incorporation<\/p>\n
(b) By-Laws. The By-Laws of Merger Sub, as in effect
\nimmediately prior to the Effective Time, shall be the By-Laws of the Surviving
\nCorporation until thereafter amended as provided by California Law, the
\nCertificate of Incorporation of the Surviving Corporation and such By-Laws.<\/p>\n
2.05. DIRECTORS AND OFFICERS.2.05. DIRECTORS AND OFFICERS The
\n ————————
\ndirectors of Merger Sub immediately prior to the Effective Time shall be the
\ninitial directors of the Surviving Corporation, each to hold office in
\naccordance with the Articles of Incorporation and By-Laws of the Surviving
\nCorporation, and the officers of the Company immediately prior to the
\nEffective Time shall be the initial officers of the Surviving Corporation, in
\neach case until their respective successors are duly elected or appointed and
\nqualified.<\/p>\n
2.06. EFFECT ON CAPITAL STOCK.2.06. EFFECT ON CAPITAL STOCK At the
\n ————————-
\nEffective Time, by virtue of the Merger and without any action on the part of
\nthe Buyer, Merger Sub, the Company or the holders of any of the following
\nsecurities:<\/p>\n
(a) Conversion of Securities. Each Share issued and outstanding
\n(or issuable pursuant to outstanding stock options of the Company immediately
\nprior to the Effective Time) (excluding any Dissenting Shares (as defined in
\nSection 2.09)) shall be converted into the right to receive .21954874 shares
\n(as adjusted to reflect any permitted changes to the Company’s capitalization
\nprior to the Effective Time) of validly issued, fully paid and nonassessable
\nshares of Buyer Stock (the ratio of such number of shares of Buyer Stock for
\neach Share hereinafter referred to as the “Exchange Ratio”), provided that the
\n ————–
\nmaximum number of shares of Buyer Stock to be issued in the Merger shall be
\n1,475,000 (including shares of Buyer Stock reserved for issuance upon exercise
\nof all outstanding Company Options (as defined in Section 7.04) assumed in
\nconnection with the Merger). The Exchange Ratio shall be adjusted to reflect
\nfully the effect of any stock split, reverse stock split, stock dividend,
\nreorganization, recapitalization or other like change with respect to Buyer
\nStock or Shares that occurs or has a record date after the date hereof and
\nprior to the Effective Time.<\/p>\n
(b) Cancellation. Each Share held in the treasury of the
\nCompany and each Share owned by the Buyer, Merger Sub or any direct or
\nindirect wholly-owned subsidiary of the Company or the Buyer immediately prior
\nto the Effective Time shall, by virtue of the Merger and without any action on
\nthe part of the holder thereof, cease to be outstanding, be canceled and
\nretired without payment of any consideration therefor and cease to exist.<\/p>\n
(c) Assumption of Stock Options. All Company Options, whether
\nvested or unvested, shall be assumed by the Buyer in accordance with Section
\n7.04.<\/p>\n
(d) Capital Stock of Merger Sub. Each share of Common Stock,
\n$0.01 par value per share, of Merger Sub issued and outstanding immediately
\nprior to the Effective Time shall be converted into and exchanged for one
\nvalidly issued, fully paid and nonassessable share of Common Stock, no par
\nvalue per share, of the Surviving Corporation. Each stock certificate of
\nMerger Sub evidencing ownership of any such shares shall continue to evidence
\nownership of such shares of capital stock of the Surviving Corporation.<\/p>\n
(e) Fractional Shares. No fraction of a share of Buyer Stock
\nwill be issued, but, except as provided in Section 7.04, in lieu thereof, each
\nholder of Company Common Stock who would otherwise be entitled to a fraction
\nof a share of Buyer Stock (after aggregating all fractional shares of Buyer
\nStock to be received by such holder) shall receive from the Buyer an amount of
\ncash (rounded to the nearest whole cent), without interest, equal to the
\nproduct of (i) such fraction, multiplied by (ii) the closing sale price of
\nBuyer Stock on the Nasdaq National Market on the day immediately preceding the
\nClosing Date.<\/p>\n
2.07. EXCHANGE OF CERTIFICATES.2.07. EXCHANGE OF CERTIFICATES
\n ————————–<\/p>\n
(a) Exchange Agent. Immediately prior to the Effective Time,
\nthe Buyer shall supply, or shall cause to be supplied, to or for the account
\nof a bank or trust company designated by the Buyer, which may in the Buyer’s
\nsole discretion be the Buyer’s transfer agent (the “Exchange Agent”), in trust
\n ————–
\nfor the benefit of the holders of Company Common Stock (other than Dissenting
\nShares), for exchange in accordance with this Section 2.07, through the
\nExchange Agent, certificates evidencing the shares of Buyer Stock issuable
\npursuant to Section 2.06 in exchange for outstanding Shares plus cash in an
\namount sufficient for payment in lieu of fractional shares as provided in
\nSection 2.06(e).<\/p>\n
(b) Exchange Procedures. Promptly after the Effective Time, the
\nBuyer shall cause the Exchange Agent to mail to each holder of record of a
\ncertificate or certificates which immediately prior to the Effective Time
\nevidenced outstanding Shares (other than Dissenting Shares) (the
\n“Certificates”) (i) a letter of transmittal (which shall specify that delivery
\nshall be effected, and risk of loss and title to the Certificates shall pass,
\nonly upon proper delivery of the Certificates to the Exchange Agent and shall
\nbe in such form and have such other provisions as the Buyer may reasonably
\nspecify) and (ii) instructions to effect the surrender of the Certificates in
\nexchange for the certificates evidencing shares of Buyer Stock and, in lieu of
\nany fractional shares thereof, cash. Upon surrender of a Certificate for
\ncancellation to the Exchange Agent together with such letter of transmittal,
\nduly executed, and such other customary documents as may be required pursuant
\nto such instructions, the holder of such Certificate shall be entitled to
\nreceive in exchange therefor (A) certificates evidencing that number of whole
\nshares of Buyer Stock which such holder has the right to receive in accordance
\nwith the Exchange Ratio in respect of the Shares formerly evidenced by such
\nCertificate, (B) any dividends or other distributions to which such holder is
\nentitled pursuant to Section 2.07(c), and (C) cash in lieu of fractional
\nshares of Buyer Stock to which such holder is entitled pursuant to Section
\n2.06(e) (the Buyer Stock, dividends, distributions and cash described in this
\nclause (C) being, collectively, the “Merger Consideration”), and the
\n ———————
\nCertificate so surrendered shall forthwith be canceled. In the event of a
\ntransfer of ownership of Shares which is not registered in the transfer
\nrecords of the Company immediately prior to the Effective Time, Buyer Stock
\nand cash may be issued and paid in accordance with this Article to a
\ntransferee if the Certificate evidencing such Shares is presented to the
\nExchange Agent, accompanied by all documents required to evidence and effect
\nsuch transfer pursuant to this Section 2.07(b) and by evidence that any
\napplicable stock transfer taxes have been paid. Until so surrendered, each
\noutstanding Certificate that, prior to the Effective Time, represented shares
\nof the Company Common Stock will be deemed from and after the Effective Time,
\nfor all corporate purposes, other than the payment of dividends, to evidence
\nthe ownership of the number of full shares of Buyer Stock into which such
\nshares of the Company Common Stock shall have been so converted and the right
\nto receive an amount in cash in lieu of the issuance of any fractional shares
\nin accordance with Section 2.06.<\/p>\n
(c) Distributions with Respect to Unexchanged Shares. No
\ndividends or other distributions declared or made after the Effective Time
\nwith respect to Buyer Stock with a record date after the Effective Time, shall
\nbe paid to the holder of any unsurrendered Certificate until the holder of
\nsuch Certificate shall surrender such Certificate. Subject to applicable law,
\nfollowing surrender of any such Certificate, there shall be paid to the record
\nholder of the certificates representing whole shares of Buyer Stock issued in
\nexchange therefor, without interest, at the time of such surrender, the amount
\nof dividends or other distributions with a record date after the Effective
\nTime theretofore paid with respect to such whole shares of Buyer Stock.<\/p>\n
(d) Transfers of Ownership. If any certificate for shares of
\nBuyer Stock is to be issued in a name other than that in which the Certificate
\nsurrendered in exchange therefor is registered, it will be a condition of the
\nissuance thereof that the Certificate so surrendered will be properly endorsed
\nand otherwise in proper form for transfer and that the person requesting such
\nexchange will have paid to the Buyer or any person designated by it any
\ntransfer or other taxes required by reason of the issuance of a certificate
\nfor shares of Buyer Stock in any name other than that of the registered holder
\nof the certificate surrendered, or established to the satisfaction of the
\nBuyer or any agent designated by it that such tax has been paid or is not
\npayable.<\/p>\n
(e) Withholding Rights. The Buyer, the Surviving Corporation
\nand the Exchange Agent shall be entitled to deduct and withhold from the
\nMerger Consideration otherwise payable pursuant to this Agreement to any
\nholder of Company Common Stock such amounts as the Buyer, the Surviving
\nCorporation or the Exchange Agent are required to deduct and withhold with
\nrespect to the making of such payment under the Internal Revenue Code of 1986,
\nas amended (the “Code”) or any provision of state, local, provincial or
\n —-
\nforeign tax law. To the extent that amounts are so withheld, such withheld
\namounts shall be treated for all purposes of this Agreement as having been
\npaid to the holder of the Shares in respect of which such deduction and
\nwithholding was made by the Buyer or the Exchange Agent.<\/p>\n
2.08. STOCK TRANSFER BOOKS.2.08. STOCK TRANSFER BOOKS At the Effective
\n ——————–
\nTime, the stock transfer books of the Company shall be closed, and there shall
\nbe no further registration of transfers of the Company Common Stock thereafter
\non the records of the Company.<\/p>\n
2.09. DISSENTING SHARES2.09. DISSENTING SHARES.
\n —————— ——————<\/p>\n
(a) Notwithstanding any provision of this Agreement to the
\ncontrary, any shares of capital stock of the Company held by a holder who has
\nexercised dissenters’ rights for such shares in accordance with California Law
\nand who, as of the Effective Time, has not effectively withdrawn or lost such
\ndissenters’ rights (“Dissenting Shares”), shall not be converted into or
\n ——————
\nrepresent a right to receive Merger Consideration pursuant to Section 2.06,
\nbut the holder thereof shall only be entitled to such rights as are granted by
\nCalifornia Law.<\/p>\n
(b) Notwithstanding the provisions of subsection (a), if any
\nholder of Dissenting Shares shall effectively withdraw or lose (through
\nfailure to perfect or otherwise) such holder’s dissenters’ rights, then, at
\nthe later of the Effective Time or the occurrence of such event, such holder’s
\nshares shall automatically be converted into and represent only the right to
\nreceive the Merger Consideration, without interest thereon, upon surrender of
\nthe certificate or certificates representing such Dissenting Shares.<\/p>\n
(c) The Company shall give the Buyer (i) prompt notice of any
\nwritten demands received by the Company for an appraisal of shares of capital
\nstock of the Company pursuant to Chapter 13 of California Law, withdrawals of
\nsuch demands, and any other related instruments served pursuant to California
\nLaw and received by the Company and (ii) the opportunity to participate in all
\nnegotiations and proceedings with respect to such demands. The Company shall
\nnot, except with the prior written consent of the Buyer, voluntarily make any
\npayment with respect to any such demands or offer to settle or settle any such
\ndemands.<\/p>\n
2.10. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.2.10. NO
\n ——————————————————
\nFURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK The Merger Consideration
\ndelivered upon the surrender for exchange of Shares in accordance with the
\nterms hereof shall be deemed to have been issued in full satisfaction of all
\nrights pertaining to such Shares, and there shall be no further registration
\nof transfers on the records of the Surviving Corporation of Shares which were
\noutstanding immediately prior to the Effective Time. If, after the Effective
\nTime, Certificates are presented to the Surviving Corporation for any reason,
\nthey shall be canceled and exchanged as provided in this Article II.<\/p>\n
2.11. LOST, STOLEN OR DESTROYED CERTIFICATES2.11. LOST, STOLEN OR
\n ——————————————
\nDESTROYED CERTIFICATES. In the event any Certificates shall have been lost,
\nstolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
\nstolen or destroyed Certificates, upon the making of an affidavit of that fact
\nand an indemnity by the holder thereof, such shares of Buyer Stock as may be
\nrequired pursuant to Section 2.06; provided, however, that, in the event a
\nShareholder cannot exchange his Certificate(s) because they have been lost,
\nstolen or destroyed, the Buyer may, in its sole discretion and as a condition
\nprecedent to the issuance thereof, require the Shareholder to deliver a bond
\nin such sum as it may reasonably direct as indemnity against any claim that
\nmay be made against the Buyer or the Exchange Agent with respect to the
\nCertificates alleged to have been lost, stolen or destroyed.<\/p>\n
2.12. TAX CONSEQUENCES.2.12. TAX AND ACCOUNTING CONSEQUENCES It is
\n —————–
\nintended by the parties hereto that the Merger shall constitute a
\nreorganization within the meaning of Section 368 of the Code.<\/p>\n
2.13. TAKING OF NECESSARY ACTION; FURTHER ACTION.2.13. TAKING OF
\n ———————————————–
\nNECESSARY ACTION; FURTHER ACTION Subject to the terms and conditions herein,
\neach of the Buyer, Merger Sub and the Company in good faith will take all such
\ncommercially reasonable and lawful action as may be necessary or appropriate
\nin order to effectuate the Merger in accordance with this Agreement as
\npromptly as possible. If, at any time after the Effective Time, any such
\nfurther action is necessary or desirable to carry out the purposes of this
\nAgreement and to vest the Surviving Corporation with full right, title and
\npossession to all assets, property, rights, privileges, powers and franchises
\nof the Company and Merger Sub, the officers and directors of the Company and
\nMerger Sub are fully authorized in the name of their respective corporations
\nor otherwise to take, and will take, all such lawful and necessary action.<\/p>\n
ARTICLE III”ARTICLEII-REPRESENTATIONSANDWARRANTIESOFTHESELLER””1″<\/p>\n
REPRESENTATIONS AND WARRANTIES
\n OF THE COMPANY AND THE SHAREHOLDERS<\/p>\n
Except as is otherwise set forth in the schedules (the “Disclosure
\nSchedules”) contained in the disclosure letter provided by the Company and the
\nShareholders to Buyer contemporaneously with the execution and delivery of
\nthis Agreement (the “Disclosure Letter”), which Disclosure Schedules shall
\nspecifically identify or cross-reference the paragraph or paragraphs of this
\nArticle III to which the exceptions therein relate, the Company and the
\nShareholders hereby jointly and severally represent and warrant to the Buyer
\nthat:<\/p>\n
3.01. BINDING EFFECT3.01. BINDING EFFECT. The Company and the
\n ————— —————
\nShareholders have full legal right, power and authority to enter into this
\nAgreement and the Ancillary Agreements, to perform their obligations hereunder
\nand thereunder, and to consummate the transactions contemplated hereby and
\nthereby. The execution and delivery of this Agreement by the Company and the
\nconsummation by the Company of the transactions contemplated hereby have been
\nduly and validly authorized by all necessary corporate action of the Company
\nand no other corporate proceedings on the part of the Company are necessary to
\nauthorize this Agreement or to consummate the transactions so contemplated
\n(other than the approval and adoption of the Merger by the holders of at least
\na majority of the outstanding shares of the Company Common Stock entitled to
\nvote in accordance with California Law and the Company’s charter and by-laws).
\nThe Board of Directors of the Company has determined that it is advisable and
\nin the best interest of the Company’s shareholders for the Company to enter
\ninto a business combination with the Buyer upon the terms and subject to the
\nconditions of this Agreement. This Agreement and the Ancillary Agreements
\nhave been duly and validly executed and delivered by the Company and the
\nShareholders, as applicable, and constitute the legal, valid and binding
\nobligation of the Company and the Shareholders, as the case may be,
\nenforceable against them in accordance with their respective terms.<\/p>\n
3.02. CORPORATE EXISTENCE AND POWER3.02. CORPORATE EXISTENCE AND POWER.
\n —————————– —————————–
\nThe Company is a corporation duly incorporated, validly existing and in good
\nstanding under the laws of the State of California, and has all corporate
\npowers and authority and all governmental licenses, authorizations, consents
\nand approvals required to own, lease and operate the properties it purports to
\nown, operate or lease and to carry on its business as now conducted. The
\nCompany is duly qualified to do business as a foreign corporation, and is in
\ngood standing as a foreign corporation, in each of the jurisdictions listed in
\nSchedule 3.02 of the Disclosure Schedules, which constitute all jurisdictions
\n————–
\nwhere the character of the property owned or leased by the Company or the
\nnature of its activities make such qualification necessary, except for those
\njurisdictions where the failure to be so qualified and in good standing would
\nnot, individually or in the aggregate, have a Material Adverse Effect. The
\nCompany has heretofore delivered to the Buyer true and complete copies of the
\ncorporate charter and bylaws of the Company as currently in effect.<\/p>\n
3.03. GOVERNMENTAL AUTHORIZATION;
\n —————————-
\nCONSENTS”3.03.GOVERNMENTALAUTHORIZATION;CONSENTS”. (a) The execution,
\n ————————————
\ndelivery and performance by the Company and the Shareholders of this Agreement
\nand the Ancillary Agreements requires no action by or in respect of, or filing
\nwith, any governmental body, agency, official or authority (each a
\n“Governmental Authority”).
\n ————-<\/p>\n
(b) No consent, approval, waiver or other action by any Person
\nunder any contract, agreement, indenture, lease, instrument or other document
\nto which the Company or any Subsidiary or any Shareholder is a party or by
\nwhich any of them is bound is required or necessary for the execution,
\ndelivery and performance of this Agreement and each of the Ancillary
\nAgreements by the Company and the Shareholders or the consummation of the
\ntransactions contemplated hereby and thereby, except for those consents,
\napprovals, waivers or other actions as shall have been obtained and provided
\nto Buyer prior to the Closing.<\/p>\n
3.04. NON-CONTRAVENTION”3.04.NON-CONTRAVENTION””2″. The execution,
\n —————– —————–
\ndelivery and performance by the Company and the Shareholders of this Agreement
\nand each of the Ancillary Agreements and the consummation of the transactions
\ncontemplated hereby and thereby do not and will not (i) contravene or conflict
\nwith the corporate charter or bylaws of the Company, (ii) contravene or
\nconflict with or constitute a violation of any provision of any law,
\nregulation, judgment, injunction, order or decree binding upon or applicable
\nto the Company, which would result in a Material Adverse Effect on the
\nCompany; (iii) constitute a default under or give rise to any right of
\ntermination, cancellation or acceleration of any right or obligation of the
\nCompany or to a loss of any benefit to which the Company is entitled under any
\nprovision of any agreement, contract or other instrument binding upon the
\nCompany or any permit held by the Company, in each case which would result in
\na Material Adverse Effect on the Company or (iv) assuming the receipt of all
\nrequired consents, result in the creation or imposition of any Lien on any
\nasset of the Company, which would result in a Material Adverse Effect on the
\nCompany.<\/p>\n
3.05. CAPITALIZATION”3.05.CAPITALIZATION”. The authorized capital stock
\n ————– ————–
\nof the Company consists of 10,000,000 shares of Company Common Stock, of which
\n6,087,350 shares are outstanding as of the date hereof. All outstanding
\nshares of capital stock of the Company have been duly authorized and validly
\nissued and are fully paid and non-assessable and are not subject to any right
\nof rescission. As of the date hereof, there are outstanding Company Options
\nto purchase an aggregate of 630,976 shares of Company Common Stock, of which
\nCompany Options to purchase 149,281 shares are now exercisable. A complete
\nand accurate list of the holders of all such outstanding shares of Company
\nCommon Stock and Company Options as of the date hereof is set forth in
\nSchedule 3.05 of the Disclosure Schedules. Except as set forth in this
\n ——-
\nSection 3.05, there are no outstanding (i) shares of capital stock, other
\nsecurities or phantom or other equity interests of the Company, (ii)
\nsecurities of the Company convertible into or exchangeable for shares of
\ncapital stock or other securities of the Company or (iii) options, warrants or
\nother rights to acquire from the Company any capital stock, other securities
\nor phantom or other equity interests of the Company (the items in clauses (i),
\n(ii) and (iii) being referred to collectively as the “Company Securities”).
\n ——————
\nThere are no outstanding obligations of the Company, actual or contingent, to
\nissue or deliver or to repurchase, redeem or otherwise acquire any Company
\nSecurities, except as disclosed on Schedule 3.05 of the Disclosure Schedules.
\n ————-<\/p>\n
3.06. SUBSIDIARIES”3.06.SUBSIDIARIES”. Except as set forth in Schedule
\n ———— ———— ——–
\n3.06 of the Disclosure Schedules, the Company does not own, directly or
\n—-
\nindirectly, any capital stock or other equity ownership or proprietary
\n—-
\ninterest in any Subsidiary or other Person.
\n—-<\/p>\n
3.07. FINANCIAL STATEMENTS”3.07.FINANCIALSTATEMENTS””2″. The Company
\n ——————— ——————-
\nhas previously furnished to the Buyer a true and complete copy of the audited
\nBalance Sheet of the Company and its Subsidiaries as of November 30, 1996 and
\nits statement of operations for the fiscal year then ended, certified by KPMG
\nPeat Marwick LLP, the Company’s independent public accountants, and the
\nunaudited consolidated balance sheet of the Company and its Subsidiaries as of
\nApril 30, 1997 and the related statement of income for the five months then
\nended (as well as copies of the respective United States federal and state
\nincome tax returns of the Company for all periods through November 30, 1995)
\n(collectively, the “Financial Statements,” copies of which, except for the tax
\n ——————–
\nreturns, are set forth in Schedule 3.07 of the Disclosure Schedules). Each
\n ————-
\nof the balance sheets and statements of operations included in the Financial
\nStatements has been prepared from the books and records of the Company and
\nfairly and accurately presents in all material respects the financial position
\nof the Company as of its date and the results of operations of the Company for
\nthe periods therein set forth, in each case in accordance with generally
\naccepted accounting principles, subject, in the case of the unaudited
\nfinancial statements, to normal year-end audit adjustments and the absence of
\nfootnotes, which are not expected to be material.<\/p>\n
3.08. ABSENCE OF CERTAIN CHANGES”3.08.ABSENCEOFCERTAINCHANGES”67.
\n —————————– ———————–
\nExcept as set forth on Schedule 3.08 of the Disclosure schedules, since the
\n ————-
\nBalance Sheet Date, the Company has conducted its business in the ordinary
\ncourse consistent with past practices and there has not been:<\/p>\n
(a) any Material Adverse Change or any event, occurrence,
\ndevelopment or state of circumstances or facts which could reasonably be
\nexpected to result in a Material Adverse Change;<\/p>\n
(b) any declaration, setting aside or payment of any dividend or
\nother distribution with respect to any Company Securities or any repurchase,
\nredemption or other acquisition by the Company of any outstanding shares of
\ncapital stock or other securities of, or other ownership interests in, the
\nCompany;<\/p>\n
(c) any amendment of any outstanding security of the Company;<\/p>\n
(d) any incurrence, assumption or guarantee by the Company of
\nany indebtedness for borrowed money, except for loans or indebtedness made,
\nassumed or guaranteed in the ordinary course of business consistent with past
\npractices and which do not exceed $25,000 in the aggregate;<\/p>\n
(e) any creation or assumption by the Company of any Lien on any
\nasset, except for liens created or assumed in the ordinary course of business
\nconsistent with past practices and which do not exceed $25,000 in the
\naggregate;<\/p>\n
(f) any making of any loan, advance or capital contribution to
\nor investment in any Person other than loans, advances or capital
\ncontributions made in the ordinary course of business consistent with past
\npractices;<\/p>\n
(g) any damage, destruction or other casualty loss (whether or
\nnot covered by insurance) affecting the business or assets of the Company that
\nhas or could reasonably be expected to have a Material Adverse Effect;
\n (h) any material transaction or material commitment made, or any
\nmaterial contract or agreement entered into, by the Company relating to its
\nassets or business (including the acquisition or disposition of any assets) or
\nany relinquishment by the Company of any contract or other right, other than
\nthose made in the ordinary course of business consistent with past practices
\nand those contemplated by this Agreement;<\/p>\n
(i) any change in any method of accounting or accounting
\npractice by the Company; or<\/p>\n
(j) any (i) grant of any severance or termination pay to any
\ndirector, officer or employee of the Company, (ii) entering into of any
\nemployment, deferred compensation or other similar agreement (or any amendment
\nto any such existing agreement) with any director, officer or employee of the
\nCompany, (iii) change in benefits payable under existing severance or
\ntermination pay policies or employment agreements or (iv) change in
\ncompensation, bonus or other benefits payable to directors, officers or
\nemployees of the Company, other than in the ordinary course of business
\nconsistent with past practices or as specifically contemplated by this
\nAgreement.<\/p>\n
3.09. PROPERTY AND EQUIPMENT”3.09.PROPERTYANDEQUIPMENT””2″. (a) The
\n ———————— ——————–
\nCompany does not own any real property. The Company has good and marketable
\ntitle to, or in the case of leased property has valid leasehold interests in,
\nall property and assets (whether real or personal, tangible or intangible)
\nreflected on the Balance Sheet or acquired after the Balance Sheet Date,
\nexcept for properties and assets sold since the Balance Sheet Date in the
\nordinary course of business consistent with past practices and except for such
\nimperfections of title and encumbrances, if any, which are not material in
\ncharacter, amount or extent, and which do not materially detract from the
\nvalue of, or materially interfere with the present use of, the property
\nsubject thereto or affected thereby. Except as set forth in Schedule 3.09 of
\n ————-
\nthe Disclosure Schedules, none of such properties or assets is subject to any
\nLiens, except:<\/p>\n
(i) Liens disclosed on the Balance Sheet;<\/p>\n
(ii) Liens for purchase money security interests;<\/p>\n
(iii) Liens for taxes not yet due or being contested in
\ngood faith (and for which adequate accruals or reserves have been established
\non the Balance Sheet); or<\/p>\n
(iv) Liens which do not materially detract from the value
\nof such property or assets as now used, or materially interfere with any
\npresent or intended use of such property or assets.<\/p>\n
(b) There are no developments affecting any of such properties
\nor assets pending or, to the knowledge of the Company and the Shareholders,
\nthreatened, which might materially detract from the value of such property or
\nassets, materially interfere with any present or intended use of any such
\nproperty or assets or materially adversely affect the marketability of such
\nproperties or assets.<\/p>\n
(c) To the best knowledge of the Company and the Shareholders,
\nthe equipment owned by the Company has no material defects, is in good
\noperating condition and repair (ordinary wear and tear excepted), and is
\nsubstantially adequate for the uses to which it is being put.<\/p>\n
(d) Except as set forth in Schedule 3.09 of the Disclosure
\n ————-
\nSchedules, the assets owned or leased by the Company, or which it otherwise
\nhas the right to use, constitute all of the assets held for use or used in
\nconnection with the business of the Company and are generally adequate to
\nconduct such business as currently conducted.<\/p>\n
3.10. NO UNDISCLOSED MATERIAL
\n ————————-
\nLIABILITIES”3.10.NOUNDISCLOSEDMATERIALLIABILITIES”. To the best knowledge of
\n ———————–
\nthe Company and the Shareholders after due inquiry, except as set forth in
\nSchedule 3.10 of the Disclosure Schedules, there are no liabilities of the
\n ———–
\nCompany which should, in accordance with GAAP, be reflected on the Company’s
\nbalance sheet as liabilities, whether accrued, contingent, absolute,
\ndetermined, determinable or otherwise, and there is no existing condition,
\nsituation or set of circumstances which could reasonably be expected to result
\nin such a liability, other than:<\/p>\n
(a) liabilities disclosed or provided for in the Balance Sheet;
\nand<\/p>\n
(b) liabilities incurred in the ordinary course of business
\nconsistent with past practices since the Balance Sheet Date, including,
\nwithout limitation, accounts payable or accrued salaries incurred in the
\nordinary course of business consistent with past practices, and which,
\nindividually or in the aggregate, are not material to the Company.<\/p>\n
3.11. LITIGATION”3.11.LITIGATION”. There is no action, suit,
\n ———- ———-
\ninvestigation or proceeding before any court or arbitrator or any Governmental
\nAuthority (or, to the knowledge of the Company and the Shareholders, any basis
\ntherefor) pending against, or to the knowledge of the Company and the
\nShareholders, threatened against or affecting, the Company or any of its
\nproperties or the transactions contemplated hereby (including, without
\nlimitation, challenging or seeking to prevent, enjoin, alter or delay the
\ntransactions contemplated by this Agreement).<\/p>\n
3.12. MATERIAL CONTRACTS”3.12.MATERIALCONTRACTS””2″. (a) Except for
\n ——————- —————–
\nagreements, contracts, plans, leases, arrangements or commitments (including
\noral agreements, contracts, plans, leases, arrangements or commitments)
\ndisclosed in Schedule 3.12 of the Disclosure Schedules, the Company is not a
\n ————-
\nparty to or subject to:<\/p>\n
(i) any lease providing for annual rentals of $50,000 or
\nmore;<\/p>\n
(ii) any contract for the purchase of materials, supplies,
\ngoods, services, equipment or other assets providing for annual payments by
\nthe Company of $50,000 or more;<\/p>\n
(iii) any sales, distribution or other similar agreement
\nproviding for the sale by the Company of materials, supplies, goods, services,
\nequipment or other assets providing for annual payments to the Company of
\n$50,000 or more;<\/p>\n
(iv) any partnership, joint venture or other similar
\narrangement or agreement;<\/p>\n
(v) any contract relating to indebtedness for borrowed
\nmoney or the deferred purchase price of property (whether incurred, assumed,
\nguaranteed or secured by any asset), except such contracts relating to
\nindebtedness incurred in the ordinary course of business in an amount not
\nexceeding $50,000;<\/p>\n
(vi) any license agreement, franchise agreement or
\nagreement in respect of similar rights granted to or held by the Company;<\/p>\n
(vii) any agency, dealer, sales representative or other
\nsimilar agreement, except for such agreements entered into in the ordinary
\ncourse of business consistent with past practices;<\/p>\n
(viii) any contract or agreement, or any judgment, decree
\nor order of any Governmental Authority, that currently prohibits, limits or
\nmaterially impairs, or could reasonably be expected to prohibit, limit or
\nmaterially impair, the ability of the Company or either of the Shareholders to
\nengage in any line of business or with any Person or in any area, or which
\nwould so prohibit, limit or impair the freedom of the Company or either of the
\nShareholders after the Effective Time, and in any case which has had, or is
\nlikely to have, a Material Adverse Effect;<\/p>\n
(ix) any material agreement with any current or, in the
\nevent that any rights or obligations under such agreement survived the
\ntermination of the business relationship, any former consultant or independent
\ncontractor engaged by the Company to perform product development, engineering
\nor other technical services;<\/p>\n
(x) any contract or agreement relating to the bartering or
\nother non-monetary exchange of goods or services; or<\/p>\n
(xi) any other contract or commitment that is material to
\nthe Company.<\/p>\n
(b) Each agreement, contract, plan, lease, arrangement and
\ncommitment disclosed in any Schedule of the Disclosure Schedules or required
\nto be disclosed pursuant to Section 3.12(a) is a valid and binding agreement
\nof the Company and is in full force and effect (except for any such
\nagreements, contracts, plans, leases, arrangements or commitments which have
\nterminated as disclosed on such Schedule), and neither the Company, nor, to
\nthe knowledge of the Company and the Shareholders, any other party thereto is
\nin default in any material respect under the terms of any such agreement,
\ncontract, plan, lease, arrangement or commitment.<\/p>\n
3.13. INSURANCE COVERAGE”3.13.INSURANCECOVERAGE””2″. Schedule 3.13 of
\n —————— —————– ————-
\nthe Disclosure Schedules sets forth a complete and correct list of all
\ninsurance policies and fidelity bonds covering the assets, business,
\nequipment, properties, operations, employees, officers and directors of the
\nCompany. To the knowledge of the Company and the Shareholders and after due
\ninquiry, there is no claim by the Company pending under any of such policies
\nor bonds as to which coverage has been questioned, denied or disputed by the
\nunderwriters of such policies or bonds. All premiums payable under all such
\npolicies and bonds have been paid and the Company is otherwise in full
\ncompliance with the terms and conditions of all such policies and bonds. Such
\npolicies of insurance and bonds (or other policies and bonds providing
\nsubstantially similar insurance coverage) have been in effect since the
\nrespective dates set forth in Schedule 3.13 of the Disclosure Schedules and
\n ————-
\nremain in full force and effect. To the knowledge of the Company and the
\nShareholders, such policies of insurance and bonds are of the type and in
\namounts customarily carried by Persons conducting businesses similar to those
\nof the Company. Neither the Company nor either of the Shareholders knows of
\nany threatened termination of, or premium increase with respect to, any of
\nsuch policies or bonds.<\/p>\n
3.14. COMPLIANCE WITH LAWS; PERMITS; NO
\n ————————————-
\nDEFAULTS”3.14.COMPLIANCEWITHLAWS;PERMITS;NODEFAULTS”.
\n —————————————<\/p>\n
(a) To the best knowledge of the Company and the Shareholders
\nafter due inquiry, the Company is in compliance with all applicable laws,
\nrules, regulations, orders, judgments, awards and decrees, including, without
\nlimitation, all federal, state and local laws relating to (i) the sale,
\nlicensing, ownership or operation of the Company’s Intellectual Property, (ii)
\nemployment practices, terms and conditions of employment and wages and hours,
\nand (iii) safety, health, environmental protection, toxic waste disposal and
\nother similar matters, except where the failure to be so in compliance would
\nnot, individually or in the aggregate, have a Material Adverse Effect.<\/p>\n
(b) To the best knowledge of the Company, Schedule 3.14 of the
\n ————-
\nDisclosure Schedules correctly sets forth and describes each business license,
\nfranchise and permit, (each a “Permit”) material to the business of the
\n ——
\nCompany, together with the name of the Governmental Authority issuing such
\nPermit. Such Permits are valid and in full force and effect and none of such
\nPermits will be terminated or impaired or become terminable as a result of the
\ntransactions contemplated hereby.<\/p>\n
(c) The Company is not in default under, and no condition exists
\nthat with notice or lapse of time or both would constitute a default under,
\n(i) any mortgage, loan agreement, indenture or evidence of indebtedness for
\nborrowed money or any other material agreement or instrument to which the
\nCompany is a party or by which the Company or any of its assets is bound or
\n(ii) any judgment, order or injunction of any court, arbitrator or
\nGovernmental Authority, in either case which defaults or potential defaults
\nindividually or in the aggregate could result in a Material Adverse Effect.<\/p>\n
3.15. FINDERS’ FEES”3.15.FINDER’SFEES””2″. Except for Broadview
\n ————– ————
\nAssociates, there is no investment banker, broker, “finder” or other
\nintermediary which has been retained by or is authorized to act on behalf of
\nthe Company and\/or the Shareholders who might be entitled to any fee or
\ncommission from the Buyer, the Company, or any of their respective Affiliates
\nupon consummation of the transactions contemplated by this Agreement.<\/p>\n
3.16. INTELLECTUAL PROPERTY”3.16.INTELLECTUALPROPERTY”. (a) Schedule
\n ———————- ——————– ——–
\n3.16(a) of the Disclosure Schedules lists all of the Company’s Intellectual
\n —–
\nProperty, including, without limitation, a separate listing of all
\nIntellectual Property licensed by the Company to others. Unless otherwise
\nindicated on Schedule 3.16(a), the Company owns the entire right, title and
\n —————–
\ninterest in and to the Intellectual Property (including, without limitation,
\nthe exclusive and unrestricted right to use and license the same) and is not
\ncontractually obligated to pay any compensation or other amount to any third
\nparty in respect thereof. Each item constituting part of the Intellectual
\nProperty which is owned by the Company, to the extent indicated on Schedule
\n ——–
\n3.16(a), has been duly registered with, filed in or issued by, as the case may
\n —–
\nbe, the United States Patent and Trademark Office or such other government
\nentities, domestic or foreign, as are indicated on Schedule 3.16(a), and such
\n —————-
\nregistrations, filings and issuances remain in full force and effect.<\/p>\n
(b) Schedule 3.16(a) also identifies all of the Intellectual
\n —————-
\nProperty used by the Company in its business which is owned or controlled by
\nany shareholder, director, officer or employee of the Company. Except as set
\nforth in Schedule 3.16(b) of the Disclosure Schedules, the Company will cause
\n —————-
\nfull right, title and interest in any such Intellectual Property to be duly
\nand effectively transferred to the Company as of or prior to the Effective
\nTime, and no royalties will be due and payable by the Company or the Buyer
\nwith respect to such Intellectual Property.<\/p>\n
(c) Except as set forth in Schedule 3.16(c) of the Disclosure
\n —————-
\nSchedules, all current and former employees and consultants of the Company
\nhave entered into non-disclosure and assignment of inventions agreements with
\nthe Company relating to Intellectual Property, substantially in the form of
\nthe agreements attached to Schedule 3.16(c) and previously furnished to the
\n —————-
\nBuyer.<\/p>\n
(d) There are no pending or, to the knowledge of the Company and
\nthe Shareholders, threatened, proceedings, litigation or other adverse claims
\naffecting or with respect to any part of the Intellectual Property, and, to
\nthe knowledge of the Company and the Shareholders, no Person is infringing the
\nIntellectual Property. The Intellectual Property comprises all such rights
\nnecessary to permit the operation of the business of the Company in all
\nmaterial respects as it is now being conducted. None of the Intellectual
\nProperty is subject to any material outstanding order, decree, judgment,
\nstipulation, lien, charge, encumbrance or attachment other than as set forth
\nin Schedule 3.16(d) of the Disclosure Schedules.
\n —————–<\/p>\n
(e) Schedule 3.16(e) of the Disclosure Schedules lists all
\n —————–
\nnotices or claims (whether written or oral) received by the Company which
\nclaim infringement, violation or breach by the Company of any domestic and
\nforeign letters patent, patents, patent applications and patent licenses;
\nproprietary know-how and know-how licenses; inventions, discoveries, ideas,
\ntrade secrets and trade secret licenses; proprietary (including
\n“confidential”) information of every nature, and proprietary information
\nlicenses; software and software licenses, including all source code and object
\ncode, algorithms, architecture, structure, display screens, layouts,
\ndevelopment tools, and documentation and media constituting, describing or
\nrelating to the foregoing; all moral rights or other similar rights of
\npaternity, integrity or authorship; common law trademarks; trademarks and
\ntrademark registration applications and registrations therefor; service marks,
\nregistered service marks and service mark registration applications; trade
\nnames, registered trade names and trade name registration applications; domain
\nnames and URLs; common law copyrights, registered copyrights and copyright
\nregistration applications; and all other technical or technological
\ninformation or intellectual property rights of every nature, owned or
\ncontrolled by parties other than the Company or any of their respective
\ndirectors, officers and employees (collectively, “Others’ Intellectual
\n ———————
\nProperty”) and which infringements, violations or breaches have, or could
\n –
\nreasonably be expected to have, individually or in the aggregate, a Material
\nAdverse Effect. To the knowledge of the Company and the Shareholders, except
\nas set forth in Schedule 3.16(e), neither the Company nor either of the
\n —————–
\nShareholders infringes, violates or is in breach of any part of Others’
\nIntellectual Property which is likely to result, individually or in the
\naggregate, in a Material Adverse Effect on the Company. The execution,
\ndelivery and performance by the Company and the Shareholders of this Agreement
\nand each of the Ancillary Agreements and the consummation of the transactions
\ncontemplated hereby and thereby and, to the best knowledge of the Company and
\nthe Shareholders, the Buyer’s ownership and usage of the Intellectual Property
\nas presently used after the Effective Time, will not infringe, violate or
\nbreach any part of Others’ Intellectual Property.<\/p>\n
3.17. TAXES”3.17.TAXES”. (a) The term “Taxes” as used herein means all
\n —– —– —–
\nfederal, state, local, foreign and other net income, gross income, gross
\nreceipts, sales, use, ad valorem, transfer, franchise, profits, license,
\nlease, service, service use, withholding, payroll, employment, excise,
\nseverance, stamp, occupation, premium, property, windfall profits, customs
\nduties, unemployment insurance, environmental, worker’s compensation, Pension
\nBenefit Guaranty Corporation premiums and all other taxes, fees, assessments
\nor other charges of any kind similar to such Taxes, together with any interest
\nand any penalties, additions to tax or additional amounts with respect
\nthereto, and the term “Tax” means any one of the foregoing taxes. The term
\n —
\n“Returns” as used herein means all returns, declarations, reports, statements
\n ——
\nand other documents required to be filed in respect of Taxes, including
\ninformation returns or reports with respect to backup withholding and other
\npayments to third parties, and “Return” means any one of the foregoing
\n ——
\nreturns. All citations to the Code, or the Treasury Regulations promulgated
\nthereunder, shall include any amendments or any substitute or successor
\nprovisions thereto. The Representations and Warranties contained in this
\nSection 3.17 shall pertain to the period from the Company’s inception up to
\nand including the Effective Time.<\/p>\n
(b) Except as disclosed on Schedule 3.17 of the Disclosure
\n ————-
\nSchedules, the Company has filed all Returns required to be filed by or on its
\nbehalf on a timely basis and such Returns are true, complete and correct in
\nall material respects. None of the Returns filed or required to be filed by
\nthe Company contains or will contain a disclosure statement under former
\nSection 6661 or Section 6662 of the Code or any similar provision of any
\nstate, local or foreign law.<\/p>\n
(c) Except as disclosed on Schedule 3.17(c) of the Disclosure
\n ———–
\nSchedules, all Taxes shown to be payable on the Returns or on subsequent
\nassessments with respect thereto have been paid in full on a timely basis, and
\nno other Taxes are payable by the Company with respect to items or periods
\ncovered by such Returns (whether or not shown on or reportable on such
\nReturns) or with respect to any period ending on or prior to the Effective
\nTime. The Company has withheld and paid over all Taxes required to have been
\nwithheld and paid over by it, and complied with all information reporting and
\nbackup withholding requirements, including maintenance of required records
\nwith respect thereto, 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 and for which
\nappropriate reserves have been established, which reserves are fully reflected
\nin the Financial Statements.<\/p>\n
(d) Except as set forth in Schedule 3.17(d) of the Disclosure
\n —————-
\nSchedules, the amount of the Company’s liability for unpaid Taxes for all
\nperiods ending as of or prior to the Effective Time does not, in the
\naggregate, exceed the amount of the net current liability accruals for Taxes
\nset forth on the Balance Sheet, and the Company will incur no additional Taxes
\nsubsequent to the Balance Sheet Date until the Effective Time, except in the
\nordinary course of business and except for Taxes which do not have, and are
\nnot likely to have, a Material Adverse Effect.<\/p>\n
(e) No issues have been raised (and are currently pending) by
\nany taxing authority in connection with any of the Returns. No waivers of
\nstatutes of limitation with respect to any of the Returns have been given by
\nor requested from the Company. All deficiencies asserted or assessments made
\nas a result of any examinations have been fully paid, or are fully reflected
\nas a liability in the Financial Statements, or are being contested and an
\nappropriate reserve therefor has been established and is fully reflected in
\nthe Financial Statements. All material elections with respect to Taxes
\naffecting the Company, as of the date hereof, are set forth in the Returns,
\nother than any such elections which are not required to be included in the
\nReturns, copies of which have been made available to Buyer. The Company is
\nnot a party to any agreement, contract, arrangement or plan that has resulted
\nor would result, separately or in the aggregate, in the payment of (i) any
\n“excess parachute payments” within the meaning of Section 280G of the Code
\n(without regard to the exception in Sections 280G(b)(4) and 280G(b)(5) of the
\nCode) or (ii) any other amount for which a deduction would be disallowed under
\nSection 162(m) or Section 404 of the Code, except as may be contemplated by
\nthis Agreement or any Ancillary Agreement. The Company has not agreed to make
\nany adjustment under Section 481(a) of the Code by reason of a change in
\naccounting method or otherwise, and the Company will not be required to make
\nany such adjustment as a result of the acquisition of the Shares by the Buyer.
\nExcept as set forth in Schedule 3.17(e) to the Disclosure Schedules, the
\n —————–
\nCompany has not had a permanent establishment in any foreign country, as
\ndefined in any applicable tax treaty or convention between the United States
\nof America and such foreign country. The Company is not a party to any safe
\nharbor lease within the meaning of Section 168(f)(8) of the Code, as in effect
\nprior to amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
\nThe Company is not and has not ever been, a “United States real property
\nholding corporation” within the meaning of Section 897(c)(2) of the Code.
\nNone of the Shareholders nor any other holder of Company Common Stock is a
\n“foreign person” as that term is defined in Section 1445 of the Code. The
\nCompany is not (and has not ever been) a party to a tax-sharing agreement and
\nhas not assumed the liability of any other Person, for Taxes under contract.
\nThe Company has not ever been a member of a group of corporations filing a
\nconsolidated, unitary or combined Return. The Company has not taken any
\naction that would have the effect of deferring any material liability for
\nTaxes for the Company from any taxable period ending at or before the
\nEffective Time to any taxable period thereafter. No consent has been filed
\nunder Section 341(f) of the Code with respect to the Company. The Company has
\nnot participated in or cooperated with any international boycott within the
\nmeaning of Section 999 of the Code. As of the Closing Date the ability of the
\nCompany to use its net operating loss and other carryovers will not have been
\naffected by Sections 382, 383 or 384 of the Code (other than as a result of
\nthe Merger). To the best knowledge of the Company, no claim has ever been
\nmade by a tax authority in a jurisdiction where the Company does not file
\nReturns that it is or may be subject to Tax in that jurisdiction. The
\ntransactions set forth in this Agreement are not subject to the Tax
\nwithholding provisions of Section 3406 of the Code, or of Subchapter A of
\nChapter 3 of the Code or of any other provision of law. The Company is not a
\nparty to any joint venture, partnership, or other arrangement or contract
\nwhich could be treated as a partnership for federal income tax purposes. Any
\nadjustment of Taxes made by the Internal Revenue Service in any examination
\nwhich is required to be reported to state, local, foreign or other taxing
\nauthorities has been so reported, and any additional Taxes due with respect
\nthereto have been paid. No power of attorney has been granted by the Company,
\nand is currently in force, with respect to any matter relating to Taxes.
\nExcept as set forth in Schedule 3.17(e) of the Disclosure Schedules,each
\n —————– –
\nCompany Option (as defined in Section 7.04 below) qualified, when granted, was
\nan incentive stock option within the meaning of Section 422 of the Code.<\/p>\n
3.18. EMPLOYEES”3.18.EMPLOYEES”. Schedule 3.18 of the Disclosure
\n ——— ——— ————–
\nSchedules sets forth a true and complete list of (a) the names, titles, annual
\nsalaries and other compensation of all employees of the Company (the
\n“Employees”) and the location at which such Employees regularly perform
\n –
\nservices for the Company and (b) the wage rates for non-salaried Employees of
\nthe Company (by classification). Any agreements or commitments between the
\nCompany and any Employee concerning such Employee’s future salary,
\ncompensation or terms of employment are described in Schedule 3.18 of the
\n ————-
\nDisclosure Schedules. None of such Employees has indicated to the Company
\nthat he intends to resign or retire as a result of the transactions
\ncontemplated by this Agreement or otherwise. The Company has no employees
\nrepresented by a union and the Company (i) is in compliance with all
\napplicable laws and regulations respecting employment wages and laws and (ii)
\nis not engaged in any unfair labor practice.<\/p>\n
3.19. TRANSACTIONS WITH AFFILIATES”3.19.TRANSACTIONSWITHAFFILIATES”.
\n —————————— ————————–
\nExcept as set forth in Schedule 3.19 of the Disclosure Schedules, there are no
\n ————-
\nloans, leases, royalty agreements or other continuing transactions between the
\nCompany, on the one hand, and any Affiliate of the Company, either of the
\nShareholders, any Affiliate of either Shareholder, or any member of either
\nShareholder’s family, on the other hand. To the knowledge of the Company and
\nthe Shareholders, none of the officers or directors of the Company (a) has any
\nmaterial direct or indirect interest in any entity which does business with
\nthe Company; (b) has any direct or indirect interest in any property, asset or
\nright which is used by the Company in the conduct of its business; or (c) has
\nany contractual relationship with the Company other than such relationships
\nwhich occur from being an officer, director or shareholder of the Company.<\/p>\n
3.20. OTHER INFORMATION”3.20.OTHERINFORMATION””2″. None of the
\n —————— —————-
\ndocuments or information delivered to the Buyer in connection with the
\ntransactions contemplated by this Agreement and the Ancillary Agreements
\ncontains any untrue statement of a material fact or omits to state a material
\nfact necessary in order to make the statements contained therein not
\nmisleading.<\/p>\n
3.21. INVESTMENT REPRESENTATIONS3.21. INVESTMENT REPRESENTATIONS.
\n ————————— —————————<\/p>\n
(a) NO DISTRIBUTION(A) NO DISTRIBUTION. The Shareholders
\n ————— —————
\nare acquiring the shares of Buyer Stock solely for the purpose of investment
\nfor the Shareholders’ own accounts, and not with a view to, or for resale in
\nconnection with, any distribution of such shares. Except as set forth in
\nSchedule 3.21 of the Disclosure Schedules, the Shareholders are not a party to
\n ———
\nany contract, undertaking, agreement or arrangement with any Person to sell,
\ntransfer or grant participation rights to any such Person or any third party
\nwith respect to such shares of Buyer Stock.<\/p>\n
(b) INVESTOR QUALIFICATION”(B)INVESTORQUALIFICATION”. Each of
\n ———————- ———————
\nthe Shareholders, either alone or with such Shareholder’s purchaser
\nrepresentative, has such knowledge and experience in financial and business
\nmatters so as to enable the Shareholder to evaluate the merits and risks
\nattendant to receipt of and investment in the Buyer Stock. The Shareholder is
\nable to bear the risk of a complete loss of his investment in the Buyer Stock.<\/p>\n
(c) RESTRICTIONS ON RESALE”(C)RESTRICTIONSONRESALE”. Each of
\n ———————- ——————–
\nthe Shareholders acknowledges and understands that:<\/p>\n
(i) The shares of Buyer Stock are being issued without
\nregistration under the 1933 Act based upon an exemption provided under the
\n1933 Act, and the Shareholder’s representations contained in this Agreement
\nare a material factor with respect to that exemption.<\/p>\n
(ii) The shares of Buyer Stock are “restricted securities”
\nwithin the meaning of Rule 144 under the 1933 Act and as such may not be sold
\nor disposed of other than pursuant to Rule 144, pursuant to an exemption from
\nregistration provided by the 1933 Act or pursuant to an effective registration
\nstatement thereunder.<\/p>\n
(iii) The Shareholder hereby consents to the 1933 Act
\nLegend being placed on the certificates representing the Buyer Stock.<\/p>\n
(d) ACCESS TO INFORMATION(D) ACCESS TO INFORMATION. Each of
\n ——————— ———————
\nthe Shareholders acknowledges that he has had the opportunity to ask questions
\nof and receive answers from officers and employees of the Buyer relating to
\nthe terms and conditions of this Agreement and the Ancillary Agreements. Each
\nShareholder has received and reviewed complete and accurate copies, as amended
\nor supplemented, of the Buyer’s SEC Reports (as defined in Section 4.08).
\nEach Shareholder has had the opportunity to receive and review such other
\ndocuments concerning the Buyer as the Shareholder has requested.<\/p>\n
3.22. OPTION PLANS3.22. OPTION PLANS. Except as disclosed in Schedule
\n ———— ———— ——–
\n3.22 of the Disclosure Schedules, the Board of Directors of the Company has
\n—
\ntaken all necessary action (or refrained from taking action, where
\n—
\nappropriate) under the Company Stock Option Plans (as defined in Section 7.04)
\n—
\nso that no Company Options (or any portion thereof) will be accelerated or
\nentitled to receive cash or other property as a result of the consummation of
\nthe transactions contemplated hereby, but instead shall be assumed by the
\nBuyer as provided in Sections 2.06(c) and 7.04 hereof.<\/p>\n
3.23. VOTE REQUIRED3.23. VOTE REQUIRED. The affirmative vote of the
\n ————– ————-
\nholders of at least a majority of the outstanding shares of Company Common
\nStock are the only votes of the holders of any class or series of the
\nCompany’s capital stock necessary to approve the Merger.<\/p>\n
3.24. CONTENT PROVIDER AGREEMENTS3.24. CONTENT PROVIDER AGREEMENTS.
\n —————————– —————————<\/p>\n
(a) Set forth in Schedule 3.24 of the Disclosure Schedules is a
\n ————-
\nlist of all of the third-party providers of content for any of the Company’s
\nproducts or services (collectively, the “Content Providers”). The agreements
\n —————–
\nfor the provision of content from the Content Providers are referred to herein
\nas the “Content Provider Agreements”.
\n —————————–<\/p>\n
(b) Except as set forth in Schedule 3.24 of the Disclosure
\n ————-
\nSchedules, all of such Content Provider Agreements are legally valid and
\nbinding obligations of the Company and the respective Content Providers and
\nare in full force and effect, and, to the Company’s knowledge, there exists no
\nmaterial default under any such Content Provider Agreements or any material
\nbreach of any of the provisions thereof on the part of the Company, and no
\nevent or condition which, upon the giving of notice or the passage of time, or
\nboth, would constitute a material default or material breach thereunder,
\nincluding in each case, without limitation, a material breach of the
\nproprietary rights of any Content Provider thereunder. Except as set forth in
\nSchedule 3.24 of the Disclosure Schedules, no Content Provider has given
\n————
\nwritten notice to the Company of a material default under such Content
\n—–
\nProvider Agreements or a breach of any of the terms thereof. Except as set
\n—–
\nforth in Schedule 3.24 of the Disclosure Schedules, the operation of the
\n— ————
\nCompany’s business as it is currently conducted, including without limitation
\n—
\nthe sale of its products and services thereunder, does not materially conflict
\nwith any of the material terms and conditions of any of the Content Provider
\nAgreements and, assuming that the Content Provider Agreements remain in effect
\nin accordance with their terms and the conduct of the Company’s business does
\nnot change, is not reasonably expected to result in a material default under,
\nor a material breach with respect to any of the material terms and conditions
\nof, any of the Content Provider Agreements, including, without limitation, the
\nproprietary rights of any Content Provider.<\/p>\n
(c) Except as set forth in Schedule 3.24 of the Disclosure
\n ———–
\nSchedules, each such Content Provider Agreement is in writing and the Company
\nhas originals or copies of all such Content Provider Agreements.<\/p>\n
(d) Except as set forth in Schedule 3.24 of the Disclosure
\n ———–
\nSchedules, the execution and delivery of this Agreement and the Ancillary
\nAgreements and the performance of the transactions contemplated hereby and
\nthereby will not result in and of themselves either automatically or at the
\ndiscretion of any Content Provider, in the termination of any of the Content
\nProvider Agreements, or result either automatically or at the discretion of
\nany of the Content Providers in any increase, acceleration or other change in
\nany of the royalties, commissions, fees, disbursements or other costs (the
\n“Costs of Content”) payable to the Content Providers under any of the Content
\n —————
\nProvider Agreements. Except as set forth in Schedule 3.24 of the Disclosure
\n ———–
\nSchedules, except for ordinary accounts payable obligations, none of which
\nexceed 90 days past due, the Company has made all payments currently due and
\npayable under the Content Provider Agreements to the satisfaction of the
\napplicable Content Provider, and to the Company’s knowledge, there exists no
\nmaterial default under any such Content Provider Agreements or any material
\nbreach of any of the provisions thereof on the part of the Company. In the
\ncase of each Content Provider Agreement, any restrictive provisions contained
\nin such Content Provider Agreement are limited solely to restrictions on the
\ncontent provided thereunder. Without limiting the foregoing, none of the
\nContent Provider Agreements require the Company to use the Content Provider as
\na sole source of content.<\/p>\n
ARTICLE IV”ARTICLEV-REPRESENTATIONSANDWARRANTIESOFTHEBUYER”<\/p>\n
REPRESENTATIONS AND WARRANTIES
\n OF THE BUYER AND MERGER SUB<\/p>\n
The Buyer and, where applicable, Merger Sub, hereby represent and warrant
\nto the Company and the Shareholders that:<\/p>\n
4.01. BINDING EFFECT4.01. BINDING EFFECT. Each of the Buyer and Merger
\n ————– ————–
\nSub has full legal right, power and authority to enter into this Agreement and
\nthe Ancillary Agreements to be executed by it, to perform its obligations
\nhereunder and thereunder, and to consummate the transactions contemplated
\nhereby and thereby. The execution and delivery of this Agreement by the Buyer
\nand Merger Sub and the consummation by the Buyer and Merger Sub of the
\ntransactions contemplated hereby have been duly and validly authorized by all
\nnecessary corporate action of the Buyer and Merger Sub, respectively, and no
\nother corporate proceedings on the part of the Buyer or Merger Sub are
\nnecessary to authorize this Agreement or to consummate the transactions so
\ncontemplated. The Board of Directors of the Buyer has determined that it is
\nadvisable and in the best interest of the Buyer’s stockholders for the Buyer
\nto enter into a business combination with the Company upon the terms and
\nsubject to the conditions of this Agreement. This Agreement and the Ancillary
\nAgreements to be executed by the Buyer and Merger Sub have been duly and
\nvalidly executed and delivered by the Buyer and Merger Sub, as the case may
\nbe, and constitute the legal, valid and binding obligation of the Buyer and
\nMerger Sub, respectively, enforceable against it in accordance with their
\nrespective terms.<\/p>\n
4.02. CORPORATE EXISTENCE AND POWER4.02. CORPORATE EXISTENCE AND POWER.
\n —————————– —————————–
\nThe Buyer is a corporation duly incorporated, validly existing and in good
\nstanding under the laws of the State of Delaware, and has all corporate powers
\nand authority and all governmental licenses, authorizations, consents and
\napprovals required to own, lease and operate the properties it purports to
\nown, operate or lease and to carry on its business as now conducted. The
\nBuyer is duly qualified to do business as a foreign corporation in the States
\nof New York and California and the Commonwealth of Massachusetts and in each
\nother jurisdiction where the character of the property owned or leased by it
\nor the nature of its activities make such qualification necessary, except for
\nthose jurisdictions where the failure to be so qualified and in good standing
\nwould not, individually or in the aggregate, have a Material Adverse Effect.
\nMerger Sub is a corporation duly incorporated, validly existing and in good
\nstanding under the laws of the State of Delaware.<\/p>\n
4.03. GOVERNMENTAL AUTHORIZATION”4.03.GOVERNMENTALAUTHORIZATION”.
\n ————————— ————————-<\/p>\n
(a) The execution, delivery and performance by the Buyer and
\nMerger Sub of this Agreement and each of the Ancillary Agreements to be
\nexecuted by them requires no action by or in respect of, or filing with, any
\nGovernmental Authority, other than compliance with any applicable requirements
\nof the 1933 Act and United States state securities or “Blue Sky” laws and
\ncompliance with any applicable requirements of the Nasdaq Stock Market.<\/p>\n
(b) Except for consents, approvals or waivers or other actions
\nwhich have been received by the Buyer or will be received by the Buyer prior
\nto the Effective Time, no consent, approval, waiver or other action by any
\nPerson under any contract, agreement, indenture, lease, instrument or other
\ndocument to which the Buyer or Merger Sub is a party or by which it is bound
\nis required or necessary for the execution, delivery and performance by the
\nBuyer and Merger Sub of this Agreement and each of the Ancillary Agreements to
\nbe executed by the Buyer or Merger Sub or the consummation of the transactions
\ncontemplated hereby and thereby.<\/p>\n
4.04. NON-CONTRAVENTION”4.04.NON-CONTRAVENTION””2″. The execution,
\n —————– —————–
\ndelivery and performance by the Buyer and Merger Sub of this Agreement and
\neach of the Ancillary Agreements to be executed by them and the consummation
\nof the transactions contemplated hereby and thereby does not and will not (i)
\ncontravene or conflict with the corporate charter or bylaws of the Buyer or
\nMerger Sub, (ii) assuming compliance with the matters referred to in Section
\n4.03, materially contravene or conflict with any provision of any material
\nlaw, regulation, judgment, injunction, order or decree binding upon or
\napplicable to the Buyer or Merger Sub, (iii) assuming receipt of all required
\nconsents, constitute a default under or give rise to any right of termination,
\ncancellation or acceleration of any right or obligation of the Buyer or Merger
\nSub or to a loss of any material benefit to which the Buyer or Merger Sub is
\nentitled under any provision of any agreement, contract or other instrument
\nbinding upon the Buyer or Merger Sub or any permit held by the Buyer or Merger
\nSub or (iv) assuming the receipt of all required consents, result in the
\ncreation or imposition of any material Lien on any asset of the Buyer or
\nMerger Sub.<\/p>\n
4.05. FINDERS’ FEES”4.05.FINDERS’FEES”. There is no investment banker,
\n ————- ————
\nbroker, “finder” or other intermediary which has been retained by or is
\nauthorized to act on behalf of the Buyer who might be entitled to any fee or
\ncommission from the Shareholders, the Company or any of their respective
\nAffiliates upon consummation of the transactions contemplated by this
\nAgreement.<\/p>\n
4.06. CAPITALIZATION”4.06.CAPITALIZATION”. (a) The authorized share
\n ————– ————–
\ncapital of the Buyer consists of (i) 25,000,000 million shares of Common
\nStock, $.01 par value per share, and (ii) 1,000,000 shares of Preferred Stock
\n(the “Preferred Stock”). As of June 6, 1997, there were outstanding
\n —————-
\n14,658,446 shares of Buyer Stock and no shares of Preferred Stock. Except for
\n —
\noutstanding stock options and warrants to acquire up to an aggregate of
\n5,674,414 shares of Buyer Stock, as of June 6, 1997 there were no outstanding
\n(i) shares of capital stock, other securities or phantom or other equity
\ninterests of the Buyer, (ii) securities of the Buyer convertible into or
\nexchangeable for shares of capital stock or other securities of the Buyer or
\n(iii) options, warrants or other rights to acquire from the Buyer any capital
\nstock, other securities or phantom or other equity interests of the Buyer.<\/p>\n
(b) The authorized share capital of Merger Sub consists of 3,000
\nshares of Common Stock, $.01 par value per share, of which 1,000 shares were
\noutstanding as of the date hereof. As of the date hereof, there were no
\noutstanding (i) shares of capital stock, other securities or phantom or other
\nequity interests of Merger Sub, (ii) securities of Merger Sub convertible into
\nor exchangeable for shares of capital stock or other securities of Merger Sub
\nor (iii) options, warrants or other rights to acquire from Merger Sub any
\ncapital stock, other securities or phantom or other equity interests of Merger
\nSub.<\/p>\n
4.07. PURCHASE FOR INVESTMENT”4.07.PURCHASEFORINVESTMENT”. The Buyer is
\n ———————– ———————
\npurchasing the Shares for investment for its own account and not with a view
\nto, or for sale in connection with, any distribution thereof; provided,
\n ——–
\nhowever, that the disposition of the Buyer’s property shall at all times
\n –
\nremain within the sole control of the Buyer.<\/p>\n
4.08. SEC REPORTS4.08. SEC REPORTS. The Buyer has previously furnished
\n ———– ———–
\nto the Company true and correct copies of its (i) Annual Report on Form 10-K
\nfor the fiscal year ended December 31, 1996; (ii) its Quarterly Report on Form
\n10-Q for the first quarter of 1997; (iii) its Proxy Statement for the Annual
\nMeeting of Stockholders held in 1997 and (iv) all other reports and
\nregistration statements filed by the Buyer with the United States Securities
\nand Exchange Commission (the “SEC”) under the 1934 Act and the 1933 Act since
\n —
\nDecember 31, 1996 (other than Reports on Forms 3, 4 or 5), all in the forms so
\nfiled (collectively, the “SEC Reports”). The Company has no reason to believe
\n ———–
\nthat, as of their respective dates, the SEC Reports did not comply in all
\nmaterial respects with the requirements of the 1933 Act or the 1934 Act, as
\nthe case may be, or contained any untrue statement of a material fact or
\nomitted to state a material fact required to be stated therein or necessary to
\nmake the statements therein, in light of the circumstances under which they
\nwere made, not misleading. Each of the audited consolidated financial
\nstatements and unaudited interim financial statements included in the SEC
\nReports has been prepared in accordance with GAAP (except as may be indicated
\ntherein or in the notes thereto) and fairly presents in all material respects
\nthe consolidated financial position of the Buyer as at its date or the results
\nof operations, stockholders equity or cash flows, subject to normal year-end
\nadjustments and any other adjustments described therein.<\/p>\n
4.09 BROADVIEW FEE PAYMENT AGREEMENT4.09 BROADVIEW FEE PAYMENT
\n ———————————- ———————–
\nAGREEMENT. Buyer has entered into a Fee Payment Agreement (the “Fee Payment
\n – ———–
\nAgreement”) with Broadview Associates (“Broadview”) in substantially the form
\n ——– ———
\nattached hereto as Exhibit 3.
\n ———-<\/p>\n
4.10 ABSENCE OF CERTAIN CHANGES4.10 ABSENCE OF CERTAIN CHANGES. Except
\n ————————– ————————–
\nas disclosed in a letter provided by Buyer to the Company contemporaneously
\nwith the execution of this Agreement (the “Buyer Update Letter”), since the
\ndate of the Buyer’s Quarterly Report on Form 10-Q for the first quarter of
\n1997, the Company has conducted its business in the ordinary course of its
\nbusiness consistent with past practices and there has not been:<\/p>\n
(a) any Material Adverse Change or any event, occurrence,
\ndevelopment or state of affairs which would require the filing of any report
\nor other filing with the SEC that was not so filed;<\/p>\n
(b) any amendment to the Buyer’s Certificate of Incorporation or
\nBy-Laws; or<\/p>\n
(c) any damage, destruction or casualty loss of or to any assets
\nof the Buyer (whether or not covered by insurance) that has had or could
\nreasonably be expected to have a Material Adverse Effect to Buyer.<\/p>\n
4.11 VALID ISSUANCE4.11 VALID ISSUANCE. The shares of Buyer Stock to
\n ————– ————–
\nbe issued in the Merger will, when issued in accordance with the provisions of
\nthis Agreement, be validly issued, fully paid and nonassessable.<\/p>\n
ARTICLE V”ARTICLEV-COVENANTSOFTHESELLER”<\/p>\n
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS<\/p>\n
The Company and the Shareholders agree that:<\/p>\n
5.01. CONDUCT OF THE COMPANY”5.01.CONDUCTOFTHECOMPANY””2″. From the
\n ———————— ——————-
\ndate hereof until the Effective Time, the Company and the Shareholders shall,
\nand the Shareholders shall cause the Company to, conduct its businesses in the
\nordinary course consistent with past practices and to use their best efforts
\nto preserve intact its business organizations and relationships with third
\nparties and to keep available the services of its present officers and
\nemployees. Without limiting the generality of the foregoing, from the date
\nhereof until the Effective Time, the Company and the Shareholders will not,
\nand the Shareholders will not permit the Company, without the prior written
\nconsent of the Buyer, which such consent shall not be unreasonably withheld,
\nto:<\/p>\n
(a) adopt or propose any change in its corporate charter or
\nbylaws;<\/p>\n
(b) merge or consolidate with any other Person or acquire a
\nmaterial amount of assets or share capital of any other Person;<\/p>\n
(c) sell, lease, license or otherwise dispose of any material
\nassets or property or enter into any distribution agreement with respect to
\nany of its products except (i) pursuant to existing contracts or commitments
\nor (ii) in the ordinary course of its business consistent with past practices;<\/p>\n
(d) effect any direct or indirect redemption, purchase or other
\nacquisition of any Company Securities, or declare, set aside or pay any
\ndividend or make any other distribution of assets of any kind whatsoever with
\nrespect to any Company Securities;<\/p>\n
(e) issue any Company Securities, except pursuant to the
\nexercise of Company Options outstanding on the date hereof and the issuance of
\nadditional stock options exercisable to purchase up to a maximum of 20,000
\nshares of Company Common Stock;<\/p>\n
(f) enter into any license agreement in which the Company is
\neither a licensor or licensee or any OEM, distributor, or other reseller
\nagreement, or any Content Provider Agreement, involving annual payments either
\nto or from the Company in excess of $50,000 in the aggregate;<\/p>\n
(g) enter into any agreements or commitments involving
\nexpenditures by the Company in excess of $50,000 singly or $100,000 in the
\naggregate, or incur any liabilities, contingent or otherwise, in excess of
\n$50,000 singly or $100,000 in the aggregate, except for the refinancing,
\nrenewal or replacement of lines of credit existing as of the date hereof and
\ndisclosed in the Disclosure Schedules, and except for an increase in the
\nCompany’s existing bank line of credit to up to $750,000 in the aggregate and
\nnew equipment and lease lines of up to $150,000 in the aggregate;<\/p>\n
(h) take any action which would have the effect of preventing
\nthe Buyer from accounting for the Merger as a “pooling-of-interests”; or<\/p>\n
(i) agree or commit to do any of the foregoing.<\/p>\n
Neither the Company nor either of the Shareholders will, and neither of the
\nShareholders will permit the Company to, (i) take or agree or commit to take
\nany action that would make any representation and warranty of the Company or
\neither of the Shareholders under this Agreement on the date of its execution
\nand delivery inaccurate in any respect at, or at any time prior to the
\nEffective Time or (ii) omit or agree or commit to omit to take any action
\nnecessary to prevent any such representation or warranty from being inaccurate
\nin any respect at any such time.<\/p>\n
5.02. ACCESS TO INFORMATION”5.02.ACCESSTOINFORMATION””2″. From the date
\n ——————— ——————-
\nhereof until the Effective Time, the Company and the Shareholders shall, and
\nthe Shareholders shall cause the Company, to (a) give the Buyer, its counsel,
\nfinancial advisors, financing sources, auditors and other authorized
\nrepresentatives full access to the offices, properties, books and records of
\nthe Company, (b) furnish the Buyer, its counsel, financial advisors, auditors
\nand other authorized representatives such financial and operating data and
\nother information relating to the Company as such Persons may reasonably
\nrequest and (c) instruct the employees, counsel and financial advisors of the
\nCompany to cooperate with the Buyer in its investigation of the Company,
\nexcept to the extent any such access or disclosure is prohibited by a
\nconfidentiality obligation binding upon the Company as of the date of this
\nAgreement pursuant to a Content Provider Agreement and disclosed in the
\nDisclosure Schedules; and provided in any case that no investigation pursuant
\n ——————–
\nto this Section shall affect any representation or warranty given by the
\nCompany or either of the Shareholders.<\/p>\n
5.03. NOTICES OF CERTAIN EVENTS”5.03.NOTICESOFCERTAINEVENTS”. The
\n —————————- ———————-
\nCompany and the Shareholders will, and the Shareholders will cause the Company
\nto, promptly notify the Buyer of:<\/p>\n
(i) any notice or other communication from any Person alleging
\nthat the consent of such Person is or may be required in connection with the
\ntransactions contemplated by this Agreement and\/or the Ancillary Agreements;<\/p>\n
(ii) any notice or other communication from any Governmental
\nAuthority in connection with the transactions contemplated by this Agreement
\nand\/or the Ancillary Agreements; and<\/p>\n
(iii) any actions, suits, claims, investigations or proceedings
\ncommenced or, to its knowledge threatened against, relating to or involving or
\notherwise affecting the Company and\/or either of the Shareholders which are
\nrequired to be disclosed pursuant to Section 3.11.<\/p>\n
5.04. NO NEGOTIATIONS WITH THIRD
\n —————————–
\nPARTIES”5.04.NONEGOTIATIONSWITHTHIRDPARTIES”. From the date hereof until the
\n ————————–
\nearlier of the Effective Time or the date on which this Agreement is
\nterminated, none of the Shareholders, the Company nor any of their respective
\nAffiliates, agents or representatives, shall, directly or indirectly,
\nencourage, solicit or engage in any discussions or negotiations with, or
\nprovide any information to, any Person or group concerning the possible
\nacquisition by such third party of all or any part of the business of the
\nCompany, whether by purchase of assets, stock, merger or otherwise, other than
\nas contemplated or permitted by this Agreement. Each of the Company and the
\nShareholders agrees to, and the Shareholders agree to cause the Company to,
\npromptly notify the Buyer of any indication of interest by any Person with
\nrespect to any such possible transaction.<\/p>\n
5.05. CONFIDENTIALITY”5.05.CONFIDENTIALITY”. Prior to the Effective
\n ————— —————
\nTime and after any termination of this Agreement, the Company and the
\nShareholders will hold, and the Shareholders will cause the Company and its
\nAffiliates to hold, and use their best efforts to cause their respective
\nofficers, directors, employees, accountants, counsel, consultants, advisors
\nand agents to hold, in confidence, unless compelled to disclose by judicial or
\nadministrative process or by other requirements of law, all confidential
\ndocuments and information concerning the Buyer or any of its Affiliates
\nfurnished to the Shareholders, the Company or any of their Affiliates in
\nconnection with the transactions contemplated by this Agreement and the
\nAncillary Agreements, and (after the Effective Time) all confidential
\ndocuments and information concerning the Company, except to the extent that
\nsuch information can be shown to have been (i) previously known on a
\nnonconfidential basis by the Company or the Shareholders, (ii) in the public
\ndomain through no fault of the Company or the Shareholders or (iii) later
\nlawfully acquired by the Company or the Shareholders from sources other than
\nthe Buyer; provided that the Company may disclose such information to its
\n ——–
\nofficers, directors, employees, accountants, counsel, consultants, advisors
\nand agents in connection with the transactions contemplated by this Agreement,
\nin each case so long as such Persons are informed by the Company of the
\nconfidential nature of such information and are directed by the Company and
\nagree to treat such information confidentially. The obligation of the
\nShareholders, the Company and their Affiliates to hold any such information in
\nconfidence shall be satisfied if they exercise the same care with respect to
\nsuch information as they would take to preserve the confidentiality of their
\nown similar information. If this Agreement is terminated, the Company, the
\nShareholders and their respective Affiliates will, and will use their best
\nefforts to cause their respective officers, directors, employees, accountants,
\ncounsel, consultants, advisors and agents to, destroy or deliver to the Buyer,
\nupon request in the Buyer’s sole discretion, all documents and other
\nmaterials, and all copies thereof, obtained by the Shareholders, the Company,
\nand\/or their Affiliates or on their behalf from the Buyer in connection with
\nthis Agreement that are subject to such confidence. The terms of this
\nAgreement and the Ancillary Agreements shall be treated as confidential
\ninformation of Buyer for purposes of this Section.<\/p>\n
5.06. CONTINUING DISCLOSURE”5.06.CONTINUINGDISCLOSURE””2″. The Company
\n ——————— ——————–
\nand the Shareholders shall have the continuing obligation promptly to advise
\nthe Buyer with respect to any matter hereafter arising or discovered that, if
\nexisting or known at the date of this Agreement, would have been required to
\nbe set forth or described in a Schedule in the Disclosure Schedules, or that
\nconstitutes a breach or prospective breach of this Agreement by the Company or
\neither of the Shareholders. The delivery of any such notice shall not affect
\nthe Buyer’s remedies hereunder.<\/p>\n
5.07. SHAREHOLDER APPROVAL5.07. STOCKHOLDER APPROVAL. The Company and
\n ——————– ——————–
\nthe Shareholders shall promptly convene a duly and validly constituted meeting
\nof the shareholders of the Company, or prepare and circulate to the
\nshareholders of the Company a written consent in lieu of meeting, for the
\npurposes of obtaining the approval of the Merger by such shareholders in
\naccordance with California law and shall use their respective best efforts to
\nobtain such approval as promptly as possible after the execution of this
\nAgreement.<\/p>\n
5.08. APPROVAL OF PARACHUTE PAYMENTS5.08. APPROVAL OF PARACHUTE
\n ——————————— ———————-
\nPAYMENTS. With respect to all payments that would constitute “excess
\n –
\nparachute payments” (within the meaning of Section 280G of the Code) but for
\n –
\nthe exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code,
\nthe Company shall obtain the shareholder approval described in Section
\n280G(b)(5)(B) of the Code so that such payments will not be nondeductible
\nunder Section 280G of the Code and will not be subject to the tax imposed
\nunder Section 4999 of the Code.<\/p>\n
ARTICLE VI”ARTICLEVI-COVENANTSOFTHEBUYER”<\/p>\n
COVENANTS OF THE BUYER<\/p>\n
The Buyer agrees that:<\/p>\n
6.01. CONFIDENTIALITY”6.01.CONFIDENTIALITY”. Prior to the Effective
\n ————— —————
\nTime and after any termination of this Agreement, the Buyer and its Affiliates
\nwill hold, and will use their best efforts to cause their respective officers,
\ndirectors, employees, accountants, counsel, consultants, advisors and agents
\nto hold, in confidence, unless compelled to disclose by judicial or
\nadministrative process or by other requirements of law, all confidential
\ndocuments and information concerning the Company or any of its Affiliates and
\nthe Shareholders furnished to the Buyer or its Affiliates in connection with
\nthe transactions contemplated by this Agreement and the Ancillary Agreements,
\nexcept to the extent that such information can be shown to have been (i)
\npreviously known on a nonconfidential basis by the Buyer, (ii) in the public
\ndomain through no fault of the Buyer or (iii) later lawfully acquired by the
\nBuyer from sources other than the Company or the Shareholders; provided that
\n ——–
\nthe Buyer may disclose such information to its officers, directors, employees,
\naccountants, counsel, consultants, advisors and agents in connection with the
\ntransactions contemplated by this Agreement in each case so long as such
\nPersons are informed by the Buyer of the confidential nature of such
\ninformation and are directed by the Buyer and agree to treat such information
\nconfidentially. The obligation of the Buyer and its Affiliates to hold any
\nsuch information in confidence shall be satisfied if they exercise the same
\ncare with respect to such information as they would take to preserve the
\nconfidentiality of their own similar information. If this Agreement is
\nterminated, the Buyer and its Affiliates will, and will use their best efforts
\nto cause their respective officers, directors, employees, accountants,
\ncounsel, consultants, advisors and agents to, destroy or deliver to the
\nCompany or either of the Shareholders (with respect to documents and materials
\npertaining to such Shareholder), upon request in the sole discretion of the
\nCompany or either Shareholder (with respect to documents and materials
\npertaining to such Shareholder), all documents and other materials, and all
\ncopies thereof, obtained by the Buyer or its Affiliates or on their behalf
\nfrom the Shareholders or the Company in connection with this Agreement that
\nare subject to such confidence.<\/p>\n
6.02. ACCESS”6.02.ACCESS”. After the Effective Time, Buyer will afford
\n —— ——
\npromptly to the Shareholders and their agents reasonable access to their
\nproperties, books, records, employees and auditors to the extent necessary to
\npermit the Shareholders to determine any matter relating to their rights and
\nobligations hereunder or to any period ending prior to the Effective Time.
\nThe Shareholders will hold, and will cause their accountants, counsel,
\nconsultants, advisors and agents to hold, in confidence, unless compelled to
\ndisclose by judicial or administrative process or by other requirements of
\nlaw, all confidential documents and information concerning the Company and the
\nSubsidiaries provided to them pursuant to this Section.<\/p>\n
6.03. DOCUMENTS TO BE FURNISHED”6.03.DOCUMENTSTOBEFURNISHED”. The Buyer
\n ————————- ———————-
\nshall furnish to the Shareholders promptly after such documents are available
\nto the Buyer’s stockholders all reports, statements, documents and other items
\nthe Buyer delivers, or is required to deliver, to its stockholders prior to
\nthe Effective Time.<\/p>\n
6.04. NOTICES OF CERTAIN EVENTS6.04. NOTICES OF CERTAIN EVENTS. The
\n ————————– ————————-
\nBuyer and Merger Sub will promptly notify the Company and the Shareholders of:<\/p>\n
(i) any notice or other communication from any Person alleging
\nthat the consent of such Person is or may be required in connection with the
\ntransactions contemplated by this Agreement and\/or the Ancillary Agreements;<\/p>\n
(ii) any notice or other communication from any Governmental
\nAuthority in connection with the transactions contemplated by this Agreement
\nand\/or the Ancillary Agreements; and<\/p>\n
(iii) any actions, suits, claims, investigations or proceedings
\ncommenced or, to its knowledge threatened against, relating to or involving or
\notherwise affecting the Buyer.<\/p>\n
6.05. CONTINUING DISCLOSURE6.05. CONTINUING DISCLOSURE. The Buyer
\n ———————- ———————
\nshall have the continuing obligation promptly to advise the Company and the
\nShareholders with respect to any matter hereafter arising or discovered that,
\nif existing or known at the date of this Agreement, would constitute a breach
\nor prospective breach of this Agreement by Buyer or Merger Sub. The delivery
\nof any such notice shall not affect the Company’s or the Shareholders’
\nremedies hereunder.<\/p>\n
ARTICLE VII”ARTICLEVII-COVENANTSOFALLPARTIES”<\/p>\n
COVENANTS OF ALL PARTIES<\/p>\n
The parties hereto agree that:<\/p>\n
7.01. BEST EFFORTS”7.01.BESTEFFORTS”. Subject to the terms and
\n ————- ———–
\nconditions of this Agreement, each party will use its best efforts to take, or
\ncause to be taken, all actions and to do, or cause to be done, all things
\nnecessary or desirable under applicable laws and regulations to consummate the
\ntransactions contemplated by this Agreement, including the seeking and
\nobtaining of any consents or approvals required to be obtained by it to
\nconsummate the transactions contemplated hereby or by the Ancillary
\nAgreements. Each of the Company, the Shareholders and the Buyer agree, and
\nthe Shareholders, prior to the Effective Time, and the Buyer, after the
\nEffective Time, agree to cause the Company to execute and deliver such other
\ndocuments, certificates, agreements and other writings and to take such other
\nactions as may be necessary or desirable in order to consummate or implement
\nexpeditiously the transactions contemplated by this Agreement.<\/p>\n
7.02. CERTAIN FILINGS”7.02.CERTAINFILINGS”. The Company and the Buyer
\n ————— ————–
\nshall cooperate with each other (a) in determining whether any action by or in
\nrespect of, or filing with, any Governmental Authority is required, or any
\nactions, consents, approvals or waivers are required to be obtained from
\nparties to any material contracts, in connection with the consummation of the
\ntransactions contemplated by this Agreement and the Ancillary Agreements and
\n(b) in taking such actions or making any such filings, furnishing information
\nrequired in connection therewith and seeking timely to obtain any such
\nactions, consents, approvals or waivers.<\/p>\n
7.03. PUBLIC ANNOUNCEMENTS”7.03.PUBLICANNOUNCEMENTS””2″. The parties
\n ——————— ——————-
\nagree to consult with each other before issuing any press release or making
\nany public statement with respect to this Agreement or the transactions
\ncontemplated hereby and, except as may be required by applicable law
\n(including, without limitation, the 1933 Act, the 1934 Act or any rules or
\nregulations thereunder) or any listing agreement with any securities exchange
\nor similar entity (including, without limitation, the Nasdaq National Market),
\nwill not issue any such press release or make any such public statement prior
\nto the execution of this Agreement unless approved verbally by Roy Folk on
\nbehalf of the Company.<\/p>\n
7.04. ASSUMPTION OF COMPANY STOCK OPTIONS.7.04. ASSUMPTION OF COMPANY
\n ———————————– ———————
\nSTOCK OPTIONS.
\n ————-<\/p>\n
(a) At the Effective Time, the Company’s obligations with
\nrespect to each outstanding option to purchase shares of Company Common Stock
\n(each, a “Company Option”) under the Company’s 1994 Incentive Stock Option
\n —————
\nPlan, 1995 Incentive Stock Option Plan and 1996 Stock Option Plan (the
\n“Company Stock Option Plans”), whether vested or unvested, shall be assumed by
\n ——————–
\nthe Buyer. Each Company Option so assumed by the Buyer under this Agreement
\nshall continue to have, and be subject to, the same terms and conditions set
\nforth in the Company Stock Option Plans and option agreement pursuant to which
\nsuch Company Option was issued as is in effect immediately prior to the
\nEffective Time, except that (i) such Company Option will be exercisable for
\nthat number of shares of Buyer Stock equal to the product of the number of
\nshares of Company Common Stock that were purchasable under such Company Option
\nimmediately prior to the Effective Time multiplied by the Exchange Ratio,
\nrounded down to the nearest whole number of shares of Buyer Stock and (ii) the
\nper share exercise price for the shares of Buyer Stock issuable upon exercise
\nof such assumed Company Option will be equal to the quotient determined by
\ndividing the exercise price per share of Company Common Stock at which such
\nCompany Option was exercisable immediately prior to the Effective Time by the
\nExchange Ratio, and rounding the resulting exercise price up to the nearest
\nwhole cent.<\/p>\n
(b) It is the intention of the parties that the Company Options
\nassumed by the Buyer qualify following the Effective Time as incentive stock
\noptions as defined in the Code (“ISO’s”) to the extent the Company Options
\n —–
\nqualified as ISO’s prior to the Effective Time, provided, however, that no
\nrepresentation is made by any party to that effect.<\/p>\n
(c) After the Effective Time, the Buyer will issue to each
\nholder of an outstanding Company Option an agreement evidencing the foregoing
\nassumption of such Company Option by the Buyer, in substantially the form set
\nforth in Schedule 7.04 attached hereto.
\n ————–<\/p>\n
(d) The Buyer will file a registration statement on Form S-8
\nwith the SEC covering the Company Options assumed by the Buyer under this
\nSection promptly after the Effective Time.<\/p>\n
ARTICLE VIII”ARTICLEVIII-EMPLOYEEBENEFITS”<\/p>\n
EMPLOYEE BENEFITS<\/p>\n
8.01. EMPLOYEE BENEFITS DEFINITIONS”8.01.EMPLOYEEBENEFITSDEFINITIONS”.
\n —————————– —————————
\nThe following terms, as used herein, shall have the following meanings:<\/p>\n
“Benefit Arrangement” means each employment, severance or other
\n ——————–
\nsimilar contract, arrangement or policy (written or oral) and each plan or
\narrangement (written or oral) providing for severance benefits, insurance
\ncoverage (including any self-insured arrangements), workers’ compensation,
\ndisability benefits, supplemental unemployment benefits, vacation benefits,
\nretirement benefits or for deferred compensation, profit-sharing, bonuses,
\nstock options, stock appreciation rights or other forms of incentive
\ncompensation or post-retirement insurance, compensation or benefits which (i)
\nis not an Employee Plan, (ii) is entered into, maintained or contributed to,
\nas the case may be, by the Shareholders, the Company or any Subsidiary or any
\nof their Affiliates and (iii) covers any employee or former employee of the
\nCompany or any of its Subsidiaries.<\/p>\n
“Employee Plans” means each “employee benefit plan”, as such term is
\n ————– ———————
\ndefined in Section 3(3) of ERISA, that (i) is subject to any provision of
\nERISA and (ii) is maintained or contributed to by the Company, any Subsidiary
\nor any of their ERISA Affiliates, as the case may be.<\/p>\n
“ERISA” means the Employment Retirement Income Security Act of 1974,
\n —–
\nas amended.<\/p>\n
“ERISA Affiliate” of any entity means any other entity that,
\n —————-
\ntogether with such entity, would be treated as a single employer under Section
\n414 of the Code.<\/p>\n
“Multiemployer Plan” means each Employee Plan that is a
\n ——————-
\nmultiemployer plan, as defined in Section 3(37) of ERISA.
\n –<\/p>\n
8.02. EMPLOYEE BENEFIT
\n —————–
\nREPRESENTATIONS”8.02.EMPLOYEEBENEFITREPRESENTATIONS”. The Company represents
\n —————-
\nand warrants to the Buyer that:<\/p>\n
(a) Schedule 8.02 lists each Employee Plan that covers any
\n ————–
\nemployee of the Company or any of its Subsidiaries, copies or descriptions of
\nall of which have previously been made available or furnished to the Buyer.
\nWith respect to each Employee Plan, the Company has provided the most recently
\nfiled Form 5500 and an accurate summary plan description. The Company has
\nprovided the Buyer with complete age, salary, service and related data as of
\nthe most recent practicable date for employees of the Company.<\/p>\n
(b) Schedule 8.02 also includes a list of each Benefit
\n ————–
\nArrangement of the Company, copies or descriptions of which have been made
\navailable or furnished previously to the Buyer.<\/p>\n
(c) Except as set forth in Schedule 8.02, none of the Employee
\n ————-
\nPlans or other arrangements listed on Schedule 8.02 covers any non-United
\n ————-
\nStates employee or former employee of the Company.<\/p>\n
(d) No “prohibited transaction”, as defined in Section 406 of
\n ———————-
\nERISA or Section 4975 of the Code, has occurred to the knowledge of the
\nCompany or the Shareholders with respect to any Employee Plan.<\/p>\n
(e) No Employee Plan is a Multiemployer Plan and no Employee
\nPlan is subject to Title IV of ERISA. The Company and its Affiliates have not
\nincurred any liability under Title IV of ERISA arising in connection with the
\ntermination of any plan covered or previously covered by Title IV of ERISA.<\/p>\n
(f) Each Employee Plan which is intended to be qualified under
\nSection 401(a) of the Code is so qualified and has been so qualified during
\nthe period from its adoption to date, and each trust forming a part thereof is
\nexempt from tax pursuant to Section 501(a) of the Code. The Company has
\nfurnished to the Buyer copies of the most recent Internal Revenue Service
\ndetermination letters with respect to each such plan. Each Employee Plan has
\nbeen maintained in compliance with its terms and with the requirements
\nprescribed by any and all statutes, orders, rules and regulations, including
\nbut not limited to ERISA and the Code, which are applicable to such plan.<\/p>\n
(g) Each Employee Plan and each Benefit Arrangement has been
\nmaintained in substantial compliance with its terms and with the requirements
\nprescribed by any and all statutes, orders, rules and regulations which are
\napplicable to such Benefit Arrangement.<\/p>\n
(h) With respect to the employees and former employees of the
\nCompany, there are no employee post-retirement medical or health plans in
\neffect, except as required by Section 4980B of the Code.<\/p>\n
(i) All contributions and payments accrued under each Employee
\nPlan and Benefit Arrangement, determined in accordance with prior funding and
\naccrual practices, as adjusted to include proportional accruals for the period
\nending at the Effective Time, will be discharged and paid prior to the
\nEffective Time except to the extent reflected on the Balance Sheet. Except as
\ndisclosed in writing to the Buyer prior to the date hereof, there has been no
\namendment to, written interpretation of or announcement (whether or not
\nwritten) by the Shareholders or any of their ERISA Affiliates relating to, or
\nchange in employee participation or coverage under, any Employee Plan or
\nBenefit Arrangement that would increase materially the expense of maintaining
\nsuch Employee Plan or Benefit Arrangement above the level of the expense
\nincurred in respect thereof for the fiscal year ended prior to the date
\nhereof.<\/p>\n
(j) No tax under Section 4980B of the Code has been incurred in
\nrespect of any Employee Plan that is a group health plan, as defined in
\nSection 5000(b)(1) of the Code.<\/p>\n
(k) No employee of the Company will become entitled to any
\nbonus, retirement, severance or similar benefit or enhanced benefit solely as
\na result of the transactions contemplated hereby.<\/p>\n
(l) The Company does not have, and is it not reasonably expected
\nto have, any liability under Title IV of ERISA.<\/p>\n
8.03. NO THIRD PARTY BENEFICIARIES”8.03.NOTHIRDPARTYBENEFICIARIES”.
\n ——————————- ————————-<\/p>\n
(a) No provision of this Article VIII shall create any third
\nparty beneficiary or other rights in any employee or former employee
\n(including any beneficiary or dependent thereof) of the Company in respect of
\ncontinued employment (or resumed employment) with the Company and no provision
\nof this Article VIII shall create any such rights in any such Persons in
\nrespect of any benefits that may be provided, directly or indirectly, under
\nany Employee Plan or Benefit Arrangement or any plan or arrangement that may
\nbe established by the Buyer or any of its Affiliates. No provision of this
\nAgreement shall constitute a limitation on rights to amend, modify or
\nterminate after the Effective Time any Employee Plan or Benefit Arrangement.<\/p>\n
(b) Notwithstanding the foregoing, Employees of the Company
\nshall be eligible following consummation of the Merger to participate in
\nEmployee Plans and Benefit Arrangements of Buyer on the same basis as
\nemployees of Buyer generally, including, to the extent permissible under the
\nterms of such Employee Plan or Benefit Arrangement, with full credit for
\nemployment with the Company for purposes of eligibility and vesting.<\/p>\n
ARTICLE IX”ARTICLEX-CONDITIONSTOCLOSING”<\/p>\n
CONDITIONS TO THE MERGER<\/p>\n
9.01. CONDITIONS TO THE OBLIGATIONS OF EACH
\n ——————————————
\nPARTY”9.01.CONDITIONSTOTHEOBLIGATIONSOFEACHPARTY”. The respective obligations
\n ————————————
\nof each party to consummate the Merger are subject to the satisfaction at or
\nprior to the Effective Time of the following conditions:<\/p>\n
(a) No proceeding challenging this Agreement or the Ancillary
\nAgreements or the transactions contemplated hereby or thereby or seeking to
\nprohibit, alter, prevent or materially delay the Closing shall have been
\ninstituted by any Person before any court, arbitrator or governmental body,
\nagency or official and be pending.<\/p>\n
(b) All actions by or in respect of or filings with any
\nGovernmental Authority required to permit the consummation of the Closing
\nshall have been obtained.<\/p>\n
(c) This Agreement and the Merger shall have been authorized and
\napproved by the requisite vote of the shareholders of the Company.<\/p>\n
9.02. ADDITIONAL CONDITIONS TO OBLIGATION OF THE
\n ———————————————–
\nBUYER”9.02.CONDITIONSTOOBLIGATIONOFTHEBUYER”. The obligation of the Buyer to
\n ——————————-
\nconsummate the Merger is subject to the satisfaction of the following further
\nconditions:<\/p>\n
(a)(i) The Company and the Shareholders shall have performed in
\nall material respects all of their obligations hereunder required to be
\nperformed as of or prior to the Effective Time, (ii) the representations and
\nwarranties of the Company and the Shareholders contained in this Agreement at
\nthe time of its execution and delivery and in any certificate or other writing
\ndelivered by the Company or the Shareholders pursuant hereto, shall be true
\nand correct at and as of the Effective Time, as if made at and as of such date
\nand (iii) the Buyer shall have received a certificate signed by the Company
\nand the Shareholders to the foregoing effect.<\/p>\n
(b) No court, arbitrator or governmental body, agency or
\nofficial shall have issued any order, and there shall not be any statute, rule
\nor regulation, restraining the effective operation by the Buyer of the
\nbusiness of the Company after the Effective Time, and no proceeding
\nchallenging this Agreement or the transactions contemplated hereby or seeking
\nto prohibit, alter, prevent or materially delay the Closing shall have been
\ninstituted by any Person before any court, arbitrator or governmental body,
\nagency or official and be pending.<\/p>\n
(c) The Buyer shall have received an opinion of Company Counsel,
\ndated the Closing Date, in form and substance reasonably satisfactory to Buyer
\nand Buyer’s Counsel, covering the matters set forth in Schedule 9.02(c)
\n —————-
\nattached hereto.<\/p>\n
(d) The Company shall have received and provided copies to Buyer
\nof all consents, authorizations or approvals from the Governmental Authorities
\nreferred to in Section 3.03(a), in each case in form and substance reasonably
\nsatisfactory to the Buyer, and no such consent, authorization or approval
\nshall have been revoked.<\/p>\n
(e) The Buyer shall have received all other closing documents
\nspecified in Section 2.02 of this Agreement and all other closing documents
\nthat it may reasonably request, all in form and substance reasonably
\nsatisfactory to the Buyer.<\/p>\n
(f) Each of the Shareholders shall have executed and delivered
\nto the Buyer a Noncompetition Agreement.<\/p>\n
(g) There shall have been no Material Adverse Change with
\nrespect to the Company as of or prior to the Effective Time.<\/p>\n
(h) There shall be no action, suit, investigation or proceeding
\npending or threatened against or affecting the Company or any Subsidiary or
\nany of their respective properties before any court, arbitrator or
\nGovernmental Authority.<\/p>\n
(i) The Company shall have delivered to the Buyer the
\nresignations of all officers and directors of the Company from their positions
\nwith the Company at or prior to the Effective Time, unless otherwise specified
\nby the Buyer.<\/p>\n
(j) The Dissenting Shares shall not constitute more than 4% of
\nthe total number of shares of Company Common Stock outstanding immediately
\nprior to the Effective Time.<\/p>\n
(k) Any registration rights, rights of first refusal, rights to
\nany liquidation preference or redemption rights of any Company shareholder
\nshall have been terminated or irrevocably waived as of the Closing.<\/p>\n
(l) [Intentionally Omitted.]<\/p>\n
(m) The Buyer shall have received a written opinion from Coopers
\n& Lybrand L.L.P. (“Coopers”), dated as of the Effective Time and satisfactory
\n ——-
\nto the Board of Directors of the Buyer, to the effect that, in the opinion of
\nCoopers, the Merger qualifies for pooling-of-interests accounting treatment if
\nconsummated in accordance with the terms of this Agreement.<\/p>\n
(n) Each affiliate of the Company shall have executed and
\ndelivered to the Buyer an Affiliate Agreement in substantially the form
\nattached hereto as Exhibit 9.02(n) (each, an “Affiliate Agreement”), and each
\n ————— ——————-
\nsuch Affiliate Agreement shall be in full force and effect.<\/p>\n
(o) The Company shall have delivered to Buyer a clearance
\ncertificate or similar document(s) to the extent required by any tax authority
\nto relieve Buyer of any obligation to withhold Taxes in connection with the
\nconsummation of the transactions contemplated by this Agreement and the
\nAncillary Agreements. The Company shall have paid any sales, use, transfer
\nand documentary Taxes and recording and filing fees applicable to the
\nconsummation of the transactions contemplated by this Agreement. The Company
\nshall have delivered to Buyer a properly executed statement satisfying the
\nrequirements of Treasury Regulation Sections 1.897-2(h) and 1.1445-1(c)(3) in
\na form reasonably acceptable to Buyer.<\/p>\n
9.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY9.03.
\n ——————————————————–
\nADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The obligations of the
\n ——————————————–
\nCompany and the Shareholders to consummate the Closing are subject to the
\nsatisfaction of the following further conditions:<\/p>\n
(a)(i) The Buyer and Merger Sub shall have performed in all
\nmaterial respects all of its obligations hereunder required to be performed by
\nit at or prior to the Effective Time, (ii) the representations and warranties
\nof the Buyer and Merger Sub contained in this Agreement at the time of its
\nexecution and delivery and in any certificate or other writing delivered by
\nthe Buyer pursuant hereto shall be true and correct at and as of the Effective
\nTime, as if made at and as of such date and (iii) the Company shall have
\nreceived a certificate signed by the President and the Chief Financial Officer
\nof the Buyer to the foregoing effect.<\/p>\n
(b) No proceeding challenging this Agreement or the transactions
\ncontemplated hereby or seeking to prohibit, alter, prevent or materially delay
\nthe Closing shall have been instituted by any Person before any court,
\narbitrator or governmental body, agency or official and be pending.<\/p>\n
(c) The Company shall have received an opinion of Buyer’s
\nCounsel, dated the Closing Date, in form and substance reasonably satisfactory
\nto the Company and Company Counsel covering the matters set forth in Schedule
\n ——–
\n9.03(c).
\n——-<\/p>\n
(d) The Buyer shall have received all consents, authorizations
\nor approvals from the Governmental Authorities referred to in Section 4.03, in
\neach case in form and substance reasonably satisfactory to the Shareholders,
\nand no such consent, authorization or approval shall have been revoked.<\/p>\n
(e) The Buyer shall have executed and delivered to the
\nShareholders the Registration Rights Agreement and the Buyer and Broadview
\nshall have executed the Fee Payment Agreement.<\/p>\n
(f) There shall have been no material adverse change in the
\nbusiness, assets, liabilities, condition (financial or otherwise) or results
\nof operations of the Buyer since the Balance Sheet Date.<\/p>\n
(g) There shall be no action, suit, investigation or proceeding
\npending or threatened against or affecting the Buyer or any of its properties
\nbefore any court, arbitrator or Government Authority, except for the amended
\nconsolidated securities class action lawsuit filed against the Buyer and
\ncertain other parties in the U.S. District Court for the District of
\nMassachusetts on February 28, 1997.<\/p>\n
(h) In connection with the Shareholders’ employment by Buyer
\nfollowing the Merger, the Buyer shall have granted the Shareholders incentive
\nstock options (each, a “Shareholder Option”) under the Buyer’s Amended and
\n ——————
\nRestated 1989 Stock Option Plan, as amended, exercisable for the purchase of
\nan aggregate of 250,000 shares of Buyer Stock, at an exercise price equal to
\nthe last sale price of Buyer Stock on the Nasdaq National Market on the day
\nimmediately preceding the Closing Date, each such Shareholder Option to vest
\nover a four-year period commencing upon the Effective Time on the Closing
\nDate, as follows: (x) 12.5% of each Shareholder Option shall become
\nexercisable on the six-month anniversary of the Closing Date, (y) an
\nadditional 12.5% of each Shareholder Option shall become exercisable on the
\none-year anniversary of the Closing Date (the “One-Year Anniversary”) and (z)
\n ——————–
\nthe remaining 75% of each Shareholder Option shall become exercisable in 35
\nequal monthly installments commencing on the last day of the month immediately
\nfollowing the month of the One Year Anniversary.<\/p>\n
ARTICLE X”ARTICLEX-SURVIVAL;INDEMNIFICATION”<\/p>\n
SURVIVAL; INDEMNIFICATION<\/p>\n
10.01. SURVIVAL”10.01.SURVIVAL”. The covenants, agreements,
\n ——– ——–
\nrepresentations and warranties of the parties hereto contained in this
\nAgreement or in any certificate or other writing delivered pursuant hereto or
\nin connection herewith shall survive the Closing and any investigation at any
\ntime made by or on behalf of any party until March 31, 1998; provided,
\n ———
\nhowever, that the covenants, agreements, representations and warranties set
\nforth in Sections 3.17 and 9.02(o) shall survive until the applicable statutes
\nof limitations with respect to Taxes shall have expired. Notwithstanding the
\npreceding sentence, any covenant, agreement, representation or warranty in
\nrespect of which indemnity may be sought under Section 10.02 shall survive the
\ntime at which it would otherwise terminate pursuant to the preceding sentence,
\nif notice of the inaccuracy or breach thereof giving rise to such right to
\nindemnity shall have been given to the party against whom such indemnity may
\nbe sought prior to such time. Notwithstanding anything herein to the
\ncontrary, this Article 10 shall survive the Closing and the termination of
\nthis Agreement.<\/p>\n
10.02. INDEMNIFICATION”10.02.INDEMNIFICATION”. (a) Each shareholder of
\n ————— —————
\nthe Company (individually, a “Company Shareholder” and collectively, the
\n“Company Shareholders”) , jointly and severally, hereby indemnifies Buyer and,
\neffective at and as of the Effective Time, without duplication, the Company
\nagainst, and hold them harmless from, any and all damage, loss, liability and
\nexpense (including without limitation reasonable expenses of investigation and
\nreasonable attorneys’ fees and expenses in connection with any action, suit or
\nproceeding) (collectively, “Loss”) incurred or suffered by the Buyer or the
\n —-
\nCompany arising out of any misrepresentation or breach of warranty or covenant
\nmade or to be performed by the Company or either or any Company Shareholder
\npursuant to this Agreement; provided that (x) no Company Shareholder shall be
\n ——–
\nliable for greater than his pro rata share of any Loss (calculated based on
\neach Company Shareholder’s relative percentage ownership of Company Common
\nStock immediately prior to the Effective Time as between all of the Company
\nShareholders) and (y) the maximum aggregate liability of the Company
\nShareholders under this Section shall not exceed 10% of the aggregate Merger
\nConsideration received by the Company Shareholders, payable in accordance with
\nparagraph (d) of this Section 10.02.<\/p>\n
(b) The Buyer hereby indemnifies the Company Shareholders
\nagainst and agrees to hold the Company Shareholders harmless from any and all
\nLoss incurred or suffered by such Company Shareholders arising out of any
\nmisrepresentation or breach of warranty or covenant made or to be performed by
\nthe Buyer pursuant to this Agreement, including, without limitation, any
\nmisrepresentation or breach of warrant or covenant made in or required to be
\nperformed by Buyer pursuant to the terms of the Fee Payment Agreement;
\nprovided that the Buyer’s maximum liability under this Section shall not
\nexceed 10% of the aggregate Merger Consideration received by the Company
\nShareholders. In the event that Buyer shall be liable for any Loss under this
\nSection 10.02, Buyer’s liability must be satisfied solely by issuing and
\ndelivering to the Company Shareholders the number of shares of Buyer Stock
\ndetermined by dividing (i) the aggregate dollar amount of such liability by
\n(ii) the closing sale price of Buyer Stock on the Nasdaq National Market on
\nthe Closing Date, as adjusted as appropriate to reflect any stock split,
\nreverse stock split, stock dividend, recapitalization or other similar
\ntransaction effected by Buyer between the Effective Time and the date of
\ndelivery of such shares.<\/p>\n
(c) The Indemnifying Party (as defined below) shall not be
\nliable for indemnification pursuant to this Section 10.02 until such time as
\nthe total amount of all Losses exceeds Seventy-Five Thousand dollars
\n($75,000), and then only to the extent of such excess.<\/p>\n
(d) In the event that any Company Shareholders shall be liable
\nfor any Loss under this Section 10.02, such Company Shareholder must, to the
\nextent that such Company Shareholder continues to hold shares of Buyer Stock,
\nsatisfy such liability by delivering to Buyer for cancellation on the stock
\nrecords of Buyer the number of shares of Buyer Stock determined by dividing
\n(i) the aggregate dollar amount of such liability by (ii) the closing sale
\nprice of Buyer Stock on the Nasdaq National Market on the Closing Date, as
\nadjusted as appropriate to reflect any stock split, reverse stock split, stock
\ndividend, recapitalization or other similar transaction effected by Buyer
\nbetween the Effective Time and the date of delivery of such shares. If the
\nCompany Shareholder certifies to the Company that the Company Shareholder no
\nlonger holds any shares of Buyer Stock, the Company Shareholder shall instead
\nsatisfy any liability hereunder through a cash payment.<\/p>\n
10.03. PROCEDURES; NO WAIVER”10.03.PROCEDURES;NOWAIVER””2″. (a) The
\n ———————– ——————-
\nparty seeking indemnification under Section 10.02 (the “Indemnified Party”)
\n —————–
\nagrees to give prompt notice to the party against whom indemnity is sought
\n(the “Indemnifying Party”) of the assertion of any claim, or the commencement
\n ——————
\nof any suit, action or proceeding in respect of which indemnity may be sought
\nunder such Section. The Indemnifying Party may, and at the request of the
\nIndemnified Party shall, participate in and control the defense of any third
\nparty suit, action or proceeding at its own expense. The Indemnifying Party
\nshall not be liable for any settlement effected without its consent of any
\nclaim, litigation or proceeding in respect of which indemnity may be sought
\nhereunder.<\/p>\n
(b) No waiver of a closing condition by either the Buyer or the
\nShareholders shall limit its rights under Section 10.02.<\/p>\n
ARTICLE XI”ARTICLEXI-TERMINATION”<\/p>\n
TERMINATION<\/p>\n
11.01. GROUNDS FOR TERMINATION”11.01.GROUNDSFORTERMINATION”. This
\n ————————- ———————
\nAgreement may be terminated at any time prior to the Effective Time:<\/p>\n
(i) by mutual written agreement duly authorized by the Board of
\nDirectors of the Buyer and the Company;<\/p>\n
(ii) by either the Buyer or the Company if the Merger shall not
\nhave been consummated on or before June 30, 1997 (provided that the right to
\nterminate this Agreement under this subsection shall not be available to any
\nparty whose failure to fulfill any obligation under this Agreement has been
\nthe cause of or resulted in the failure of the Merger to occur on or before
\nsuch date);<\/p>\n
(iii) by either the Buyer or the Company if there shall be any
\nlaw or regulation that makes consummation of the transactions contemplated
\nhereby illegal or otherwise prohibited or if consummation of the transactions
\ncontemplated hereby would violate any nonappealable final order, decree or
\njudgment of any court or Governmental Authority having competent jurisdiction;<\/p>\n
(iv) by the Buyer in the event of a material breach by the
\nCompany or the Shareholders of any of their covenants, representations or
\nwarranties set forth herein and the Company or the Shareholders, as the case
\nmay be, fail to cure such breach within 15 days of written notice of such
\nmaterial breach from the Buyer; or<\/p>\n
(v) by the Company in the event of a material breach by the
\nBuyer of any of its covenants, representations or warranties set forth herein
\nand the Buyer fails to cure such breach within 15 days of written notice of
\nsuch material breach from the Company.<\/p>\n
The party desiring to terminate this Agreement pursuant to clauses (ii),
\n(iii), (iv) or (v) shall give notice of such termination to the other party.<\/p>\n
11.02. EFFECT OF TERMINATION”11.02.EFFECTOFTERMINATION””2″. If this
\n ———————– ——————-
\nAgreement is terminated as permitted by Section 11.01, such termination shall
\nbe without liability of any party (or any shareholder, director, officer,
\nemployee, agent, consultant or representative of such party) to the other
\nparties to this Agreement; provided that if such termination shall result from
\n ——–
\nthe willful failure of any party to fulfill a condition to the performance of
\nthe obligations of another party or from the failure to perform a covenant of
\nthis Agreement or from a breach of any representation or warranty by any party
\nto this Agreement, such party shall be fully liable for any and all damages
\nincurred or suffered by the other party as a result of such failure or breach.
\nThe provisions of Sections 5.05, 6.01, 7.03 and 12.03 shall survive any
\ntermination hereof pursuant to Section 11.01.<\/p>\n
11.03 BREAK-UP FEE11.03 BREAK-UP FEE. In the event that Buyer
\n ———— ————
\nshall announce the execution of this Agreement prior to the consummation of
\nthe Merger, then, in the event that the Merger is not consummated prior to
\n5:00 p.m. Eastern Standard Time on the later to occur of (i) the seventh day
\nafter the execution of this Agreement or (ii) the day on which all of the
\nCompany’s and the Shareholders’ conditions to Buyer’s obligation to consummate
\nthe Merger set forth in Section 9.02 of this Agreement are satisfied in full
\n(assuming for purposes of this clause (ii) the full satisfaction of any
\nconditions which were not satisfied solely because Buyer acted or failed to
\nact with the intention of causing such failure of satisfaction), Buyer shall
\nimmediately pay the Company the sum of Two Hundred Thousand dollars ($200,000)
\ncash (the “Break-up Fee”), provided, however, that the Company shall
\n ——————
\nimmediately return the Break-up Fee to Buyer in the event that the Merger is
\nconsummated on or before June 30, 1997 or both parties agree in writing to
\ncontinue negotiations for the consummation of the Merger beyond June 30, 1997.
\nNotwithstanding the foregoing, upon the satisfaction in full of the conditions
\nto the Buyer’s obligations set forth in Section 9.02 and the filing of the
\nAgreement of Merger with the Secretary of State of the State of California
\npursuant to Section 2.02, the preceding 7-day period shall be suspended and
\nBuyer shall have no obligation to pay the Break-up Fee to the Company pending
\nthe Secretary of State’s review and approval of the Merger, for so long as the
\nparties are engaged in efforts to obtain such approval. If the Secretary of
\nState’s approval is not so obtained and the Merger does not become effective
\ndue to Individual’s failure to proceed with such efforts, Individual shall
\npromptly pay the Break-up Fee to the Company.<\/p>\n
ARTICLE XII”ARTICLEXII-MISCELLANEOUS”<\/p>\n
MISCELLANEOUS<\/p>\n
12.01. NOTICES”12.01.NOTICES”. All notices, requests and other
\n ——- ——-
\ncommunications to either party hereunder shall be in writing (including
\ntelecopy or similar writing) and shall be given,<\/p>\n
if to the Buyer, to:<\/p>\n
Individual, Inc.
\n8 New England Executive Park West
\nBurlington, MA 01803
\nAttention: President
\nTelecopy: (617) 273-6060<\/p>\n
with a copy to:<\/p>\n
William B. Asher, Jr., Esq.
\nTesta, Hurwitz & Thibeault, LLP
\nHigh Street Tower
\n125 High Street
\nBoston, MA 02110
\nTelecopy: (617) 248-7100<\/p>\n
if to the Company, to:<\/p>\n
ClariNet Communications Corp.
\n 4880 Stevens Creek Boulevard
\n Suite 206
\n San Jose, California 95129
\n Attention: President
\n Telecopy: (408) 296-1668<\/p>\n
with a copy to:<\/p>\n
James C. Kitch, Esq.
\n Cooley Godward LLP
\n Five Palo Alto Square
\n 3000 El Camino Real
\n Palo Alto, California 94306-2155
\n Telecopy: (415) 857-0663<\/p>\n
if to the Shareholders, to:<\/p>\n
The Shareholders at the addresses set forth
\non the signature pages hereto.<\/p>\n
12.02. AMENDMENTS; NO WAIVERS”12.02.AMENDMENTS;NOWAIVERS”. (a) Any
\n ———————— ——————–
\nprovision of this Agreement may be amended or waived if, and only if, such
\namendment or waiver is in writing and signed by all of the parties hereto.<\/p>\n
(b) No failure or delay by either party in exercising any right,
\npower or privilege hereunder shall operate as a waiver thereof nor shall any
\nsingle or partial exercise thereof preclude any other or further exercise
\nthereof or the exercise of any other right, power or privilege. The rights
\nand remedies herein provided shall be cumulative and not exclusive of any
\nrights or remedies provided by law.<\/p>\n
12.03. EXPENSES”12.03.EXPENSES”. All costs and expenses incurred in
\n ——– ——–
\nconnection with this Agreement shall be paid by Buyer if such costs and
\nexpenses were incurred on behalf of Buyer, its shareholders or Merger Sub and
\nby the Shareholders if such costs and expenses were incurred on behalf of the
\nCompany or the Shareholders, provided, however, that (i) if the Merger is
\nconsummated, Buyer shall pay all reasonable, documented accounting and legal
\nfees and expenses incurred on behalf of the Company and the Shareholders in
\nconnection with the Merger and (ii) Buyer shall pay the expenses of Broadview
\nAssociates pursuant to the Fee Payment Agreement. Any such expenses of the
\nCompany and the Shareholders paid by Buyer shall be assumed and paid directly
\nby Buyer and shall only include such expenses which are permitted to be
\nassumed and paid directly by Buyer under Revenue Ruling 73-54 1973-1 C.B. 187.<\/p>\n
12.04. SUCCESSORS AND ASSIGNS”12.04.SUCCESSORSANDASSIGNS”. The
\n ———————— ——————–
\nprovisions of this Agreement shall be binding upon and inure to the benefit of
\nthe parties hereto and their respective successors and assigns; provided that
\n ——–
\nno party may assign, delegate or otherwise transfer any of his or its rights
\nor obligations under this Agreement without the consent of the other parties
\nhereto, except that the Buyer may transfer or assign, in whole or from time to
\ntime in part, to one or more of its Affiliates, the Shares or the right to
\npurchase all or a portion of the Shares, but no such transfer or assignment
\nwill relieve the Buyer of its obligations hereunder.<\/p>\n
12.05. FURTHER ASSURANCES”12.05.FURTHERASSURANCES””2″. From time to
\n ——————- —————–
\ntime after the Closing, at the request of a party hereto and without further
\nconsideration, the other party will execute and deliver to such requesting
\nparty such other documents, and take such other action, as such party may
\nreasonably request in order to consummate more effectively the transactions
\ncontemplated hereby and to vest in the Buyer good, valid and marketable title
\nto the Shares, or to vest in the Shareholders good, valid and marketable title
\nto the shares of Buyer Stock, as the case may be.<\/p>\n
12.06. GOVERNING LAW”12.06.GOVERNINGLAW”. This Agreement shall be
\n ————– ————
\nconstrued in accordance with and governed by the laws of the State of
\nDelaware, without regard to the conflicts of laws rules of such State.<\/p>\n
12.07. COUNTERPARTS; EFFECTIVENESS”12.07.COUNTERPARTS;EFFECTIVENESS”.
\n —————————- ————————–
\nThis Agreement may be signed in any number of counterparts, each of which
\nshall be an original, but all of which taken together shall constitute the
\nsame instrument with the same effect as if the signatures thereto and hereto
\nwere upon the same instrument. This Agreement shall become effective when
\neach party hereto shall have received a counterpart or counterparts hereof
\nsigned by the other parties hereto.<\/p>\n
12.08. ENTIRE AGREEMENT”12.08.ENTIREAGREEMENT””2″. This Agreement and
\n —————- —————
\nthe Ancillary Agreements constitute the entire agreement between the parties
\nwith respect to the subject matter hereof and supersede all prior agreements,
\nunderstandings and negotiations, both written and oral, between the parties
\nwith respect to the subject matter hereof. No representation, inducement,
\npromise, understanding, condition or warranty not set forth herein has been
\nmade or relied upon by either party hereto. Neither this Agreement nor any
\nprovision hereof is intended to confer upon any Person other than the parties
\nhereto any rights or remedies hereunder.<\/p>\n
12.09. CAPTIONS”12.09.CAPTIONS”. The captions herein are included for
\n ——– ——–
\nconvenience of reference only and shall be ignored in the construction or
\ninterpretation hereof.<\/p>\n
12.10. JURISDICTION”12.10.JURISDICTION”. Any action or proceeding
\n ———— ————
\nseeking to enforce any provision of, or based on any right arising out of,
\nthis Agreement may be brought against any of the parties in the federal or
\nstate courts of The Commonwealth of Massachusetts, and each of the parties
\nhereby consents to the jurisdiction of such courts (and of the appropriate
\nappellate courts) in any such action or proceeding and waives any objection to
\nvenue laid therein. Process in any such action or proceeding may be served on
\nany party anywhere in the world, whether within or without The Commonwealth of
\nMassachusetts.<\/p>\n
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
\nas of the day and year first above written.<\/p>\n
INDIVIDUAL, INC.<\/p>\n
By:
\n Name:
\n Title:<\/p>\n
CN MERGER CORP.<\/p>\n
By:
\n Name:
\n Title:<\/p>\n
CLARINET COMMUNICATIONS CORP.<\/p>\n
By:
\n Name:
\n Title:<\/p>\n
SHAREHOLDERS:<\/p>\n
Brad Templeton<\/p>\n
Address:<\/p>\n
Roy Folk<\/p>\n
Address:
\n15314 Sobey Road
\nSaratoga, California 95070<\/p>\n
——<\/p>\n
The following schedules and exhibits have been omitted here. The Company will
\nfurnish
\nsupplementally to the Commission upon request a copy of any omitted exhibit or
\nschedule.<\/p>\n
SCHEDULES
\n———<\/p>\n
Schedule 7.04 Terms of Assumed Options
\nSchedule 8.02 Employee Plans and Benefit Arrangements
\nSchedule 9.02(c) Opinion of Company Counsel
\nSchedule 9.03(c) Opinion of Buyer’s Counsel<\/p>\n
EXHIBITS
\n——–<\/p>\n
Exhibit 1 Agreement of Merger
\nExhibit 2 Form of Registration Rights Agreement (Filed as Exhibit 99.1 to
\nthe Report on Form 8-K of which this Exhibit 2.1 is a part)
\nExhibit 3 Form of Fee Payment Agreement (Filed as Exhibit 99.2 to the
\nReport on Form 8-K of which this Exhibit 2.1 is a part)
\nExhibit 4 Form of Noncompetition Agreement<\/p>\n
Exhibit 9.02(n)<\/p>\n
Form of Affiliate Agreement<\/p>\n
AFFILIATE AGREEMENT<\/p>\n
June 18, 1997<\/p>\n
INDIVIDUAL, INC.
\n8 New England Executive Park West
\nBurlington, MA 01803<\/p>\n
Ladies and Gentlemen:<\/p>\n
Pursuant to the terms of the Agreement and Plan of Reorganization dated
\nas of June 18, 1997 (the “Agreement”), among INDIVIDUAL, INC., a Delaware
\ncorporation (“Parent”), CN MERGER CORP., a Delaware corporation and
\nwholly-owned subsidiary of Parent (“Merger Sub”), and ClariNet Communications
\nCorp., a California corporation (the “Company”), Parent will acquire the
\nCompany through the merger of Merger Sub with and into the Company (the
\n“Merger”). Subject to the terms and conditions of the Agreement, at the
\nEffective Time (as defined in the Agreement), outstanding shares of the Common
\nStock, no par value per share, of the Company (the “Company Common Stock”)
\nwill be converted into the right to receive shares of the Common Stock, $.01
\npar value per share, of Parent (the “Parent Common Stock”), on the basis
\ndescribed in the Agreement. Capitalized terms used herein without definition
\nshall have the meanings given such terms in the Agreement.<\/p>\n
The undersigned has been advised that as of the date hereof it may be
\ndeemed to be an “affiliate” of the Company, as the term “affiliate” is (i)
\ndefined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
\nRegulations (the “Rules and Regulations”) of the Securities and Exchange
\nCommission (the “Commission”) under the Securities Act of 1933, as amended
\n(the “Act”), and\/or (ii) used in and for purposes of Accounting Series
\nReleases 130 and 135, as amended, and Staff Accounting Bulletins 65 and 76 of
\nthe Commission.<\/p>\n
The undersigned understands that the representations, warranties and
\ncovenants set forth herein will be relied upon by Parent, stockholders of
\nParent, the Company, other shareholders of the Company and their respective
\ncounsel and accountants.<\/p>\n
The undersigned represents and warrants to and agrees with Parent that:<\/p>\n
1. The undersigned has full power to execute and deliver this
\nAffiliate Agreement and to make the representations and warranties herein and
\nto perform its obligations hereunder;<\/p>\n
2. The undersigned has carefully read this Affiliate Agreement and
\nthe Agreement and discussed the requirements and other applicable limitations
\nupon its ability to sell, transfer or otherwise dispose of Parent Common Stock
\nto the extent the undersigned felt necessary, with its counsel or counsel for
\nthe Company.<\/p>\n
3. The undersigned shall not make any sale, transfer or other
\ndisposition of Parent Common Stock in violation of the Act or the Rules and
\nRegulations.<\/p>\n
4. Except as otherwise provided in the Agreement or the Ancillary
\nAgreements, Parent is under no obligation to register the sale, transfer or
\nother disposition of Parent Common Stock by the undersigned or on its behalf
\nunder the Act or to take any other action necessary in order to make
\ncompliance with an exemption from such registration available.<\/p>\n
5. Parent, in its sole discretion, may cause stop transfer orders to
\nbe placed with the transfer agent with respect to the undersigned’s shares of
\nParent Common Stock and may cause legends to be placed on the certificate(s)
\nrepresenting such shares relating to this Affiliate Agreement and other
\ntransfer restrictions applicable to such shares.<\/p>\n
6. The undersigned is the lawful record and beneficial owner of (i.e.
\nhas sole or shared voting or investment power with respect to) all of the
\nshares of Company Common Stock and options to purchase Company Common Stock
\nindicated on Annex A attached hereto (the “Company Securities”). Except for
\n ——-
\nthe Company Securities, the undersigned does not beneficially own any shares
\nof Company Common Stock or any other equity securities of any kind of the
\nCompany or any options, warrants or other rights of any kind to acquire any
\nequity securities of any kind of the Company.<\/p>\n
7. The undersigned has not at any time since May 10, 1997 or in
\ncontemplation of the Merger engaged, and will not, after the Effective Time
\n(as defined in the Agreement) and until such time as results covering at least
\n30 days of combined operations of the Company and Parent have been published
\nby Parent, in the form of a quarterly or annual earnings report, an effective
\nregistration statement filed with the Commission, a report to the Commission
\non Form 10-K, 10-Q or 8-K, or any other public filing or announcement
\n(including a press release) which includes the combined results of operations,
\nengage, in any sale, exchange, transfer, pledge, disposition of or grant of
\nany option, the establishment of any “short” or put-equivalent position with
\nrespect to or the entry into any similar transaction intended to reduce the
\nrisk of the undersigned’s risk of ownership of or investment in, any of the
\nfollowing:<\/p>\n
(a) any shares of Parent Common Stock which the undersigned acquires
\nin connection with the Merger, or any securities which may be paid as a
\ndividend or otherwise distributed thereon or with respect thereto or issued or
\ndelivered in exchange or substitution therefor (all such shares and other
\nsecurities being referred to herein, collectively, as “Restricted
\nSecurities”), or any option, right or other interest with respect to any
\nRestricted Securities;<\/p>\n
(b) any Company Securities; or<\/p>\n
(c) any shares of Company Common Stock or other Company equity
\nsecurities which the undersigned purchases or otherwise acquires after the
\nexecution of this Affiliate Agreement.<\/p>\n
8. As promptly as practicable following the Merger, Parent shall
\npublish financial results covering at least 30 days of combined operations of
\nthe Company and Parent in the form of a quarterly or annual earnings report,
\nan effective registration statement filed with the Commission, a report to the
\nCommission on Form 10-K, 10-Q or 8-K, or any other public filing or
\nannouncement (including a press release) which includes the combined results
\nof operations of the Company and Parent; provided, however, that Parent shall
\nbe under no obligation to publish any such financial information other than
\nwith respect to a fiscal quarter of Parent.<\/p>\n
9. The undersigned has no present plan or intention to engage in a
\nsale, exchange, transfer, distribution, (including a distribution by a
\npartnership to its partners or by a corporation to its stockholders),
\nredemption or reduction in any way of the undersigned’s risk of ownership by
\nshort sale or otherwise, or other disposition, directly or indirectly (such
\nactions being collectively referred to herein as a “Sale”) of any of the
\nshares of Parent Common Stock to be received by the undersigned in the Merger.
\nThe undersigned is not aware of, or participating in, any plan on the part of
\nthe shareholders of the Company to engage in a Sale or Sales of the Parent
\nCommon Stock to be received in the Merger such that the aggregate fair market
\nvalue, as of the Effective Date of the Merger, of the shares subject to such
\nSales would exceed 50% of the aggregate fair market value of all shares of
\noutstanding Company Common Stock immediately prior to the Merger. Except to
\nthe extent written notification to the contrary is received by Parent from the
\nundersigned prior to the Merger, the representations and warranties contained
\nherein shall be true and correct at all times from the date hereof through the
\ndate on which the Merger occurs.<\/p>\n
10. The undersigned intends to vote all Company Common Stock held by
\nhim in favor of the Merger.<\/p>\n
11 The undersigned will not exercise dissenters’ rights in connection
\nwith the Merger.<\/p>\n
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]<\/p>\n
Very truly yours,<\/p>\n
(Print name of shareholder above)<\/p>\n
By:
\n (Sign name above)
\n Title:
\n (if applicable)<\/p>\n
Accepted this ____ day of
\nJune __, 1997, by<\/p>\n
INDIVIDUAL, INC.<\/p>\n
By:
\n Name:
\n Title:<\/p>\n
ANNEX A<\/p>\n
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