\nARTICLE VIII TERMINATION AND AMENDMENT…………………………………………40
\n Section 8.1 Termination………………………………………………….40
\n Section 8.2 Effect of Termination…………………………………………40
\n Section 8.3 Fees and Expenses…………………………………………….41
\n Section 8.4 Amendment……………………………………………………41
\n Section 8.5 Extension; Waiver…………………………………………….42<\/p>\nARTICLE IX ESCROW AND INDEMNIFICATION………………………………………..42
\n Section 9.1 Survival of Representations, Warranties, Covenants and
\n Agreements…………………………………………………..42
\n Section 9.2 Indemnification by Target Shareholders………………………….42
\n Section 9.3 Procedures for Indemnification…………………………………43
\n Section 9.4 Defense of Third Party Claims………………………………….43
\n Section 9.5 Settlement of Third Party Claims……………………………….44
\n Section 9.6 Resolution of Indemnification Claims……………………………44
\n Section 9.7 Shareholder Representative…………………………………….44<\/p>\n
ARTICLE X GENERAL PROVISIONS……………………………………………….47
\n Section 10.1 Notices……………………………………………………..47
\n Section 10.2 Interpretation……………………………………………….48
\n Section 10.3 Counterparts…………………………………………………48
\n Section 10.4 Severability…………………………………………………48
\n Section 10.5 Entire Agreement……………………………………………..49
\n Section 10.6 Governing Law………………………………………………..49
\n Section 10.7 Assignment…………………………………………………..49
\n Section 10.8 Third Party Beneficiary……………………………………….49<\/p>\n
ANNEXES<\/p>\n
Annex 2.1(c)(iii) Calculation of “Pool of Shares”
\nAnnex 2.3 Form of Escrow Agreement
\nAnnex 2.4(a) Target’s Management Bonus Obligation
\nAnnex 3 Target Disclosure Schedule
\nAnnex 4 Buyer Disclosure Schedule
\nAnnex 6.9 Form of Tax Certificates
\nAnnex 6.12 Schedule of New Option Grants
\nAnnex 6.14 Schedule of Stock Grants and Cash Bonuses
\nAnnex 6.17 Schedule of Target Employees
\nAnnex 6.19 Form of Voting Agreement
\nAnnex 7.2(c) Form of Confidentiality and Inventions Agreement
\nAnnex 7.2(d) Form of Noncompetition Agreement
\nAnnex 7.2(e) Schedule of Target Employees
\nAnnex 7.2(g) Form of Fenwick & West Legal Opinion
\nAnnex 7.2(j) Form of Investor Representation Letter
\nAnnex 7.3(d) Form of GCW&F Legal Opinion<\/p>\n
<\/c><\/c><\/table>\n
iii<\/p>\n
5<\/p>\n
AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated as of June 18,
\n1998 by and among The Vantive Corporation, a Delaware corporation (“Buyer”),
\nRevo Acquisition Corporation, a Delaware corporation and a wholly-owned
\nsubsidiary of Buyer (“Sub”), and Wayfarer Communications, Inc., a California
\ncorporation (“Target”).<\/p>\n
Recitals<\/p>\n
WHEREAS, the Boards of Directors of Buyer, Sub and Target deem it
\nadvisable and in the best interests of each corporation and its respective
\nshareholders that Buyer and Target combine in order to advance the long-term
\nbusiness interests of Buyer and Target;<\/p>\n
WHEREAS, the combination of Buyer and Target shall be effected by the
\nterms of this Agreement through a transaction in which Sub will merge with and
\ninto Target, Target will become a wholly-owned subsidiary of Buyer and the
\nshareholders of Target will become stockholders of Buyer; and<\/p>\n
WHEREAS, for federal income tax purposes, the parties to this Agreement
\nintend, by approving resolutions authorizing this Agreement, to adopt this
\nAgreement as a plan of reorganization within the meaning of Section 368(a) of
\nthe Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
\nthereunder, and that the merger of Sub with and into Target shall qualify as a
\nreorganization within the meaning of Section 368(a) of the Code.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the respective
\nrepresentations, warranties, covenants and agreements set forth below, the
\nparties agree as follows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER<\/p>\n
Section 1.1 The Merger. Subject to the provisions of this Agreement and
\nin accordance with the California General Corporation Law (the “GCL”), Sub shall
\nbe merged with and into Target (the “Merger”). As a result of the Merger, the
\noutstanding shares of capital stock of Sub and Target shall be converted or
\ncanceled in the manner provided in Article II of this Agreement; the separate
\ncorporate existence of Sub shall cease; and Target shall be the surviving
\ncorporation in the Merger and shall become a subsidiary of Buyer (the “Surviving
\nCorporation”).<\/p>\n
Section 1.2 Closing; Effective Time of the Merger. The closing of the
\nMerger (the “Closing”) will take place at 10:00 a.m., Pacific Time, on a date to
\nbe specified by Buyer and Target (the “Closing Date”), which shall be no later
\nthan the second business day after satisfaction of all conditions set forth in
\nSections 7.1, 7.2(b) (other than the delivery of the officers’ certificate
\nreferred to therein) and 7.3(b) (other than the delivery of the officers’
\ncertificate referred to therein), provided that the other closing conditions set
\nforth in Article VII<\/p>\n
1<\/p>\n
6<\/p>\n
have been satisfied or waived, at the offices of Gray Cary Ware & Freidenrich
\nLLP, 400 Hamilton Avenue, Palo Alto, CA 94301, unless another date or place is
\nagreed to in writing by Buyer and Target. On, or as soon as practical after, the
\nClosing Date, an agreement of merger containing the substantive provisions of
\nthis Article I and Article II (the “Merger Agreement”) shall be duly signed by
\nTarget and Sub and shall be filed, together with certificates of officers of
\nTarget and Sub, with the Secretary of State of the State of California (the
\n“Secretary of State”). The Merger shall become effective upon the filing of the
\nMerger Agreement with the Secretary of State and the filing of a certificate of
\nmerger with the Secretary of State of the State of Delaware in accordance with
\nthe Delaware General Corporation Law (the “DGCL”) (the date and time of such
\nfiling being referred to herein as the “Effective Time”).<\/p>\n
Section 1.3 Effects of Merger.<\/p>\n
(a) At the Effective Time: (i) the separate existence of Sub
\nshall cease and Sub shall be merged with and into Target (ii) the Articles of
\nIncorporation of Target as in effect immediately prior to the Effective Time
\nshall be the Articles of Incorporation of the Surviving Corporation; and (iii)
\nthe Bylaws of Sub as in effect immediately prior to the Effective Time shall be
\nthe Bylaws of the Surviving Corporation. Sub and Target are sometimes referred
\nto herein as the “Constituent Corporations.”<\/p>\n
(b) From and after the Effective Time, (i) the Surviving
\nCorporation shall possess all the rights, privileges, immunities, powers and
\npurposes of each of the Constituent Corporations; (ii) all the property, real
\nand personal, including subscriptions to shares, causes of action and every
\nother asset of each of the Constituent Corporations, shall vest in the Surviving
\nCorporation without further act or deed; (iii) the Surviving Corporation shall
\nassume and be liable for all the liabilities, obligations and penalties of each
\nof the Constituent Corporations; and (iv) the Merger shall have the further
\neffects set forth in this Agreement and in the GCL and the DGCL.<\/p>\n
Section 1.4 Directors and Officers. The directors and officers of Sub
\nimmediately prior to the Effective Time shall be the initial directors and
\nofficers of the Surviving Corporation and shall hold office in accordance with
\nthe Articles of Incorporation and Bylaws of the Surviving Corporation, in each
\ncase until their respective successors are duly elected or appointed.<\/p>\n
ARTICLE II<\/p>\n
CONVERSION OF SECURITIES; MERGER CONSIDERATION<\/p>\n
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
\nvirtue of the Merger and without any action on the part of Buyer, Sub, Target or
\nthe holder of any shares of common stock, no par value per share, of Target
\n(“Target Common Stock”) or capital stock of Sub:<\/p>\n
2<\/p>\n
7<\/p>\n
(a) Capital Stock of Sub. Each issued and outstanding share of
\nthe capital stock of Sub shall be converted into and become one fully paid and
\nnonassessable share of common stock, $0.001 par value, of the Surviving
\nCorporation.<\/p>\n
(b) Cancellation of Treasury Shares and Buyer-Owned Stock. All
\nshares of Target Common Stock and\/or shares of preferred stock, no par value per
\nshare, of Target (“Target Preferred Stock” and, collectively with Target Common
\nStock, “Target Stock”) owned by Target as treasury shares or by Buyer, Sub or
\nany other wholly-owned subsidiary of Buyer shall be canceled and retired and
\nshall cease to exist, and no stock of Buyer or other consideration shall be
\ndelivered in exchange therefor.<\/p>\n
(c) Exchange Ratios for Target Stock. Subject to Section 2.2, all
\nshares of Target Stock shall be converted as follows:<\/p>\n
(i) Target Common Stock. Each issued and outstanding share of
\nTarget Common Stock (other than shares canceled in accordance with Section
\n2.1(b) and Dissenting Shares as defined in Section 2.1(e)) shall be converted
\ninto the right to receive 0.0006262 fully paid and nonassessable shares of
\ncommon stock, $0.001 par value, of Buyer (“Buyer Common Stock”). The foregoing
\nconversion ratio shall be subject to adjustment to reflect any stock split or
\nstock dividend with respect to Target Common Stock effected between the date of
\nthis Agreement and the Effective Time.<\/p>\n
(ii) Target Preferred Stock. Each issued and outstanding
\nshare of Target Preferred Stock (other than shares canceled in accordance with
\nSection 2.1(b) and Dissenting Shares as defined in Section 2.1(e)) shall be
\nconverted into the right to receive that number of shares of fully paid and
\nnonassessable Buyer Common Stock equal to the quotient obtained by dividing (A)
\nthe Pool of Shares (as defined below) for such share’s series, by (B) the total
\nnumber of then issued and outstanding shares of Target Preferred Stock in such
\nseries and the number of shares of such series subject to then outstanding
\nwarrants, with the quotient thereby obtained carried to seven (7) decimal
\nplaces. The foregoing conversion ratios shall be subject to the Post-Closing
\nAdjustment (as defined in Section 2.4(a)) and to adjustment to reflect any stock
\nsplit or stock dividend with respect to such series of Target Preferred Stock
\neffected between the date of this Agreement and the Effective Time.<\/p>\n
(iii) Definition of “Pool of Shares” for Each Series of
\nTarget Preferred Stock. The “Pool of Shares” with respect to each series of
\nTarget Preferred Stock shall mean the product of (A) 178,603 shares of Buyer
\nCommon Stock (which number of shares is calculated as set forth in Annex
\n2.1(c)(iii)) and (B) the ratio of the aggregate dollar liquidation preference of
\nsuch series (including outstanding shares and shares subject to outstanding
\nwarrants) as set forth in the Articles of Incorporation of Target to the
\naggregate dollar liquidation preference of all series of Target Preferred Stock
\n(including outstanding shares and shares subject to outstanding warrants) as set
\nforth in the Articles of Incorporation of Target (the product thereby obtained
\ncarried to four (4) decimal places).<\/p>\n
All such shares of Target Common Stock and Target Preferred Stock, when so
\nconverted, shall no longer be outstanding and shall automatically be canceled
\nand retired and shall cease to <\/p>\n
3<\/p>\n
8<\/p>\n
exist, and each holder of a certificate representing any such shares shall cease
\nto have any rights with respect thereto, except the right to receive the shares
\nof Buyer Common Stock to be issued in consideration therefor upon the surrender
\nof such certificate in accordance with this Article II.<\/p>\n
(d) Target Options and Warrants. At the Effective Time, (i) all
\nthen outstanding options to purchase Target Common Stock (“Target Options”) will
\nbe canceled by Target in accordance with the provisions of Section 6.12 and (ii)
\nall then outstanding warrants to purchase Target Stock (the “Target Warrants”)
\nwill be assumed by Buyer in accordance with the provisions of Section 6.13.<\/p>\n
(e) Dissenters’ Rights. Any shares of Target Stock held by
\nshareholders of Target who properly exercise and perfect the dissenters’
\nappraisal rights set forth in Chapter 13 of the GCL (“Dissenting Shares”) shall
\nnot be converted into the right to receive Buyer Common Stock but shall instead
\nbe converted into the right to receive such consideration as may be determined
\nto be due with respect to such Dissenting Shares pursuant to the provisions of
\nthe GCL. Target shall give Buyer prompt notice of any demand received by Target
\nfor appraisal of Target Stock, and Buyer shall have the right to control all
\nnegotiations and proceedings with respect to such demand. Target agrees that,
\nexcept with the prior written consent of Buyer or as required under the GCL, it
\nwill not voluntarily make any payment with respect to, or settle or offer to
\nsettle, any such demand for appraisal. Each holder of Dissenting Shares (a
\n“Dissenting Shareholder”) who, pursuant to the provisions of the GCL, becomes
\nentitled to payment of the value of shares of Target Stock shall receive payment
\ntherefor (but only after the value therefor shall have been agreed upon or
\nfinally determined pursuant to the provisions of the GCL). In the event that any
\nholder of shares of Target Stock fails to make an effective demand for payment
\nor otherwise loses his or her status as a Dissenting Shareholder, that holder
\nshall thereafter be entitled to the same rights to receive Buyer Common Stock
\nand any cash payment in lieu of fractional shares, in each case without interest
\nthereon, to which such Dissenting Shareholder would have been entitled to under
\nSection 2.1 and the Merger Agreement.<\/p>\n
(f) Certificate Legends. The shares of Buyer Common Stock to be
\nissued pursuant to this Article II shall not have been registered and shall be
\ncharacterized as “restricted securities” under the federal securities laws, and
\nunder such laws such shares may be resold without registration under the
\nSecurities Act of 1933, as amended (the “Securities Act”), only in certain
\nlimited circumstances. Each certificate evidencing shares of Buyer Common Stock
\nto be issued pursuant to this Article II shall bear the following legend:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
\n ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
\n THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
\n OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
\n WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION
\n OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT
\n SUCH REGISTRATION IS NOT REQUIRED.”<\/p>\n
4<\/p>\n
9<\/p>\n
Section 2.2 Exchange of Certificates. The procedures for exchanging
\noutstanding shares of Target Common Stock and Target Preferred Stock for Buyer
\nCommon Stock pursuant to the Merger are as follows:<\/p>\n
(a) Exchange Agent. Promptly after the Effective Time, Buyer
\nshall deposit with an exchange agent designated by Buyer (the “Exchange Agent”),
\nfor the benefit of the holders of shares of Target Stock, for exchange in
\naccordance with this Section 2.2, through the Exchange Agent, certificates
\nrepresenting the shares of Buyer Common Stock issuable pursuant to Section 2.1,
\nless the Escrow Shares (as defined in Section 2.3). The shares of Buyer Common
\nStock deposited with the Exchange Agent, together with any dividends or
\ndistributions with respect thereto, hereinafter shall be referred to as the
\n“Exchange Fund.”<\/p>\n
(b) Exchange Procedures. As soon as reasonably practicable after
\nthe Effective Time, the Exchange Agent shall mail to each holder of record of a
\ncertificate that immediately prior to the Effective Time represented outstanding
\nshares of Target Stock (a “Target Certificate”) (i) a letter of transmittal
\n(which shall specify that delivery shall be effected, and risk of loss and title
\nto the Target Certificates shall pass, only upon delivery of the Target
\nCertificates to the Exchange Agent and shall be in such form and have such other
\nprovisions as Buyer and Target may reasonably specify) and (ii) instructions for
\nuse in effecting the surrender of the Target Certificates in exchange for
\ncertificates representing shares of Buyer Common Stock (“Buyer Certificates”).
\nUpon surrender of a Target Certificate for cancellation to the Exchange Agent
\n(or such other agent or agents as may be appointed by Buyer), together with a
\nduly executed letter of transmittal, the holder of such Target Certificate shall
\nbe entitled to receive in exchange therefor a Buyer Certificate representing
\nthat number of whole shares of Buyer Common Stock which such holder has the
\nright to receive pursuant to the provisions of Section 2.1(c) less such
\nshareholder’s pro rata portion of the Escrow Shares, and the Target Certificate
\nso surrendered shall immediately be canceled. If any Target Certificate shall
\nhave been lost, stolen or destroyed, Buyer may, in its reasonable discretion and
\nas a condition precedent to the issuance of any certificate representing Buyer
\nCommon Stock, require the owner of such lost, stolen or destroyed Target
\nCertificate to provide an appropriate affidavit and to deliver a bond (in such
\nsum as Buyer may reasonably direct) as indemnity against any claim that may be
\nmade against Buyer or the Surviving Corporation with respect to such Target
\nCertificate (such affidavit and bond, if required, together an “Acceptable
\nAffidavit”). In the event of a transfer of ownership of Target Stock which is
\nnot registered in the transfer records of Target, a Buyer Certificate
\nrepresenting the proper number of shares of Buyer Common Stock may be issued to
\na transferee if the Target Certificate representing such Target Stock is
\npresented to the Exchange Agent, accompanied by all documents reasonably
\nrequired to evidence and effect such transfer and by evidence that any
\napplicable stock transfer taxes have been paid. Until surrendered as
\ncontemplated by this Section 2.2, each Target Certificate shall be deemed at any
\ntime after the Effective Time to represent only the right to receive upon such
\nsurrender a Buyer Certificate as contemplated by this Agreement.<\/p>\n
(c) Distributions with Respect to Unexchanged Shares. No
\ndividends or other distributions declared or made after the Effective Time with
\nrespect to Buyer Common Stock with a record date after the Effective Time shall
\nbe paid to the holder of any unsurrendered<\/p>\n
5<\/p>\n
10<\/p>\n
Target Certificate with respect to the shares of Buyer Common Stock represented
\nthereby until the holder of record of such Target Certificate shall surrender
\nsuch Target Certificate or, in the case of a lost, stolen or destroyed Target
\nCertificate, an Acceptable Affidavit. Subject to the effect of applicable laws,
\nfollowing surrender of any such Target Certificate or Acceptable Affidavit,
\nthere shall be paid to the record holder of the Buyer Certificates issued in
\nexchange therefor, without interest, (i) the amount of dividends or other
\ndistributions with a record date after the Effective Time previously paid with
\nrespect to such whole shares of Buyer Common Stock, and (ii) at the appropriate
\npayment date, the amount of dividends or other distributions with a record date
\nafter the Effective Time but prior to surrender and a payment date subsequent to
\nsurrender payable with respect to such whole shares of Buyer Common Stock.<\/p>\n
(d) No Further Ownership Rights in Target Stock. All shares of
\nBuyer Common Stock issued upon the surrender for exchange of shares of Target
\nStock in accordance with the terms hereof (including any cash paid pursuant to
\nsubsection (c) of this Section 2.2) shall be deemed to have been issued in full
\nsatisfaction of all rights pertaining to such shares of Target Stock, and there
\nshall be no further registration of transfers on the stock transfer books of the
\nSurviving Corporation of the shares of Target Stock which were outstanding
\nimmediately prior to the Effective Time. If, after the Effective Time, Target
\nCertificates or Acceptable Affidavits are presented to Buyer or the Surviving
\nCorporation for any reason, they shall be canceled and exchanged as provided in
\nthis Section 2.2.<\/p>\n
(e) No Fractional Shares. No certificate or scrip representing
\nfractional shares of Buyer Common Stock shall be issued upon the surrender for
\nexchange of Target Certificates, and such fractional share interests will not
\nentitle the owner thereof to vote or to any rights of a shareholder of Buyer.
\nNotwithstanding any other provision of this Agreement, (i) the number of shares
\nto be issued to each holder of shares of Target Common Stock exchanged pursuant
\nto the Merger who would otherwise have been entitled to receive a fraction of a
\nshare of Buyer Common Stock shall be rounded up to the nearest whole share and
\n(ii) the number of shares to be issued to each holder of Target Preferred Stock
\nexchanged pursuant to the Merger who would otherwise have been entitled to
\nreceive a fraction of a share of Buyer Common Stock shall be rounded to the
\nnearest whole integer.<\/p>\n
(f) Termination of Exchange Fund. Any portion of the Exchange
\nFund which remains undistributed to the shareholders of Target one year after
\nthe Effective Time shall be delivered to Buyer, upon demand, and any
\nshareholders of Target who have not previously complied with this Section 2.2
\nshall thereafter look only to Buyer for payment of their claim for Buyer Common
\nStock and any dividends or distributions with respect to Buyer Common Stock.<\/p>\n
(g) No Liability. Neither Buyer nor Target shall be liable to any
\nholder of shares of Target Stock or Buyer Common Stock, as the case may be, for
\nsuch shares (or dividends or distributions with respect thereto) delivered to a
\npublic official pursuant to any applicable abandoned property, escheat or
\nsimilar law.<\/p>\n
Section 2.3 Escrow. At the Closing, Buyer will deduct from the number of
\nshares of Buyer Common Stock deliverable to the holders of Target Preferred
\nStock (whether or not such <\/p>\n
6<\/p>\n
11<\/p>\n
holders also hold Target Common Stock) pursuant to Section 2.2(b), and will
\ndeposit into escrow (the “Escrow”) a certificate representing twenty-five
\npercent (25%) of the shares of Buyer Common Stock issuable in the Merger to such
\nholders with respect to the shares of Target Preferred Stock, on a pro rata
\nbasis, rounded down to the nearest whole share (the “Escrow Shares”). The Escrow
\nShares shall be held by Harris Trust and Savings Bank (or such other institution
\nas shall be agreed upon by Buyer and the Shareholder Representative (as defined
\nin Section 9.7)) as escrow agent (the “Escrow Agent”), in accordance with and
\nsubject to the provisions of an Escrow Agreement substantially in the form of
\nAnnex 2.3 (the “Escrow Agreement”). The Escrow Shares shall be held as (i) a
\nfund from which the Post-Closing Adjustment (as defined in Section 2.4(a)) may
\nbe deducted and (ii) collateral for the indemnification obligations under
\nArticle IX of the persons who were holders of Target Preferred Stock immediately
\nprior to the Effective Time.<\/p>\n
Section 2.4 Calculation and Payment of Post-Closing Adjustment.<\/p>\n
(a) Signing Date Balance Sheet, Closing Date Balance Sheet and
\nLiabilities Certificate. As soon as practicable, and no later than fifteen (15)
\ndays following the Effective Date, the Shareholder Representative, on behalf of
\nthe former Target shareholders, shall cause to be prepared and shall furnish to
\nBuyer (i) a balance sheet of Target as of the date hereof (the “Signing Date
\nBalance Sheet”) and (ii) a balance sheet of Target as of the Closing Date (the
\n“Closing Date Balance Sheet”). The Signing Date Balance Sheet and the Closing
\nDate Balance Sheet shall be prepared in accordance with generally accepted
\naccounting principals (“GAAP”) applied on a consistent basis, except for the
\nabsence of required footnotes, and shall be certified by the persons who
\nimmediately prior to the Effective Time served as the President and Chief
\nFinancial Officer of Target, each in their respective official capacity. The
\nSigning Date Balance Sheet and the Closing Date Balance Sheet shall be
\naccompanied by a certificate, certified by such persons (the “Liabilities
\nCertificate”), setting forth (i) a detailed schedule of all liabilities of
\nTarget reflected on the Signing Date Balance Sheet, and (ii) a calculation of
\nthe “Post-Closing Adjustment” which shall be the amount by which $4,675,000 is
\nexceeded by the amount of the liabilities of Target reflected on the Signing
\nDate Balance Sheet, including, without limitation, “Target’s Management Bonus
\nObligation” which shall be the amount on Annex 2.4(a), and Target Transaction
\nExpenses (as defined in Section 6.16) but excluding (A) any deferred liabilities
\nrelating to deferred revenue generated by Target’s dealings with Sumitomo
\nCorporation and Targetvision Inc., and (B) financial advisory fees of $225,000
\nincluded in the Target Transaction Expenses. Buyer and the Surviving Corporation
\nshall afford the Shareholder Representative and Target’s accountants access to
\nTarget’s books and records for the purpose of preparing the Signing Date Balance
\nSheet, the Closing Date Balance Sheet and the Liabilities Certificate and
\ncalculating the Post-Closing Adjustment.<\/p>\n
(b) Buyer’s Review and Approval. Buyer shall have fifteen (15)
\ndays after receipt of the Signing Date Balance Sheet, the Closing Date Balance
\nSheet and the Liabilities Certificate in which to give the Shareholder
\nRepresentative written notice of any objection <\/p>\n
7<\/p>\n
12<\/p>\n
(which notice shall specify the factual basis of such objection and the amount
\nat issue) to the Signing Date Balance Sheet, the Closing Date Balance Sheet, the
\nLiabilities Certificate or the proposed Post-Closing Adjustment. If Buyer does
\nnot timely object, the Shareholder Representative’s proposed Post-Closing
\nAdjustment shall be deemed to be binding on the parties for purposes of this
\nSection 2.4.<\/p>\n
(c) Dispute Resolution. If Buyer timely objects to the Signing
\nDate Balance Sheet, the Liabilities Certificate or the Shareholder
\nRepresentative’s proposed Post-Closing Adjustment, the Shareholder
\nRepresentative shall promptly meet with Buyer and attempt in good faith to reach
\na resolution of such disagreement. Any such dispute which is not resolved by the
\nShareholder Representative and Buyer and their respective accountants within
\nfifteen (15) days after delivery of notice of the dispute by Buyer shall, upon
\nwritten request of either the Shareholder Representative or Buyer delivered to
\nthe other party, be submitted for final resolution to an independent certified
\npublic accounting firm of national reputation selected jointly by Buyer’s
\nindependent certified public accountants and an independent certified public
\naccounting firm designated by the Shareholder Representative. Each party shall,
\nwithin five (5) business days after submission of such dispute, deliver to such
\naccounting firm the information such party wishes to have considered by such
\nfirm in making its determination. Such accounting firm shall present its
\ndetermination or resolution of any dispute within fifteen (15) days after
\nsubmission of such dispute to the firm. The determination of the Post-Closing
\nAdjustment by such accounting firm shall be binding on the parties for purposes
\nof this Section 2.4. The fees of such accounting firm shall be borne by the
\nparty whose position in the dispute with respect to the calculation of the
\nPost-Closing Adjustment is furthest from the final Post-Closing Adjustment as
\ndetermined by such accounting firm. Any such fees to be borne by Target shall
\nconstitute Target Transaction Expenses and shall be added to the Post-Closing
\nAdjustment.<\/p>\n
(d) Post-Closing Adjustment. Within five (5) business days
\nfollowing the determination of the Post-Closing Adjustment pursuant to Section
\n2.4(b) or 2.4(c), Buyer and the Shareholder Representative shall direct the
\nEscrow Agent to deliver out of the Escrow to Buyer the number of shares of Buyer
\nCommon Stock determined by dividing the amount of the Post-Closing Adjustment by
\n$31.9375.<\/p>\n
(e) Effect on Rights of Buyer. No acceptance by Buyer of the
\nClosing Date Balance Sheet or the Liabilities Certificate or any determination
\nof the Post-Closing Adjustment for purposes of this Section 2.4 shall constitute
\na waiver of any inaccuracies in the representations or warranties of Target
\ncontained in this Agreement or limit in any way Buyer’s right to assert claims
\nfor indemnification pursuant to Article IX, except with respect to any claim(s)
\nrelating to the amount of, or requiring adjustment of, the Post-Closing
\nAdjustment.<\/p>\n
8<\/p>\n
13<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF TARGET<\/p>\n
Except as set forth in the disclosure schedule (which disclosure
\nschedule shall be organized into numbered sections corresponding with the
\nsection numbers of this Agreement) delivered by Target to Buyer on or before the
\ndate of this Agreement and attached hereto as Annex 3 (the “Target Disclosure
\nSchedule”), Target represents and warrants to Buyer as follows:<\/p>\n
Section 3.1 Organization, Standing and Power; Qualification;
\nSubsidiaries. Target is a corporation duly organized, validly existing and in
\ngood standing under the laws of the State of California; has all requisite
\ncorporate power to own, lease and operate its properties and to carry on its
\nbusiness as currently being conducted and as currently proposed to be conducted;
\nis duly qualified to do business and is in good standing in each jurisdiction in
\nwhich the failure to be so qualified and in good standing would have a material
\nadverse effect on the business, assets (including intangible assets),
\nproperties, liabilities (contingent or otherwise), financial condition,
\noperations, or results of operation (a “Material Adverse Effect”) of Target; and
\nTarget does not directly or indirectly own any equity or similar interest in, or
\nany interest convertible or exchangeable or exercisable for any equity or
\nsimilar interest in, any corporation, partnership, joint venture or other
\nbusiness association or entity. Target has delivered true and correct copies of
\nthe Articles of Incorporation and Bylaws of Target, each as amended to date, to
\nBuyer. Target is not in violation of any of the provisions of its Articles of
\nIncorporation or Bylaws.<\/p>\n
Section 3.2 Target Capital Structure.<\/p>\n
(a) The authorized capital stock of Target consists of (i)
\n20,000,000 shares of Target Common Stock, of which 3,516,954 shares are issued
\nand outstanding and (ii) 8,801,708 shares of Target Preferred Stock, no par
\nvalue, of which: (A) 800,000 shares are designated as Series A Preferred Stock,
\nall 800,000 of which are issued and outstanding; (B) 400,000 shares are
\ndesignated as Series C Preferred Stock, all 400,000 of which are issued and
\noutstanding; (C) 2,161,308 shares are designated as Series D Preferred Stock,
\n2,142,308 of which are issued and outstanding; (D) 1,576,800 shares are
\ndesignated as Series E Preferred Stock, 1,576,800 of which are issued and
\noutstanding; and (E) 3,520,000 shares are designated as Series F Preferred
\nStock, 2,100,844 of which are issued and outstanding. The outstanding Target
\nStock is held of record by those persons set forth in Section 3.2 of the Target
\nDisclosure Schedule (which list sets forth the amount of Target Common Stock and
\nTarget Preferred Stock held by each such person and\/or entity). All outstanding
\nshares of Target Common Stock and Target Preferred Stock have been duly
\nauthorized and validly issued, are fully paid and nonassessable, were issued in
\ncompliance with state and federal securities laws, and are subject to no
\npreemptive rights or rights of first refusal created by statute, the Articles of
\nIncorporation or Bylaws of Target or any agreement to which Target is a party or
\nby which it is bound.<\/p>\n
9<\/p>\n
14<\/p>\n
(b) Except as set forth in Section 3.2(a) or Section 3.2 of the
\nTarget Disclosure Schedule, and except for the conversion rights of the holders
\nof the outstanding Target Preferred Stock, there are (i) no equity securities of
\nany class of Target or any securities exchangeable into or exercisable for such
\nequity securities issued, reserved for issuance, or outstanding and (ii) no
\noutstanding subscriptions, options, warrants, puts, calls, rights, or other
\ncommitments or agreements of any character to which Target is a party or by
\nwhich it is bound obligating Target to issue, deliver, sell, repurchase or
\nredeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
\nequity securities of Target or obligating Target to grant, extend, accelerate
\nthe vesting of, change the price of, or otherwise amend or enter into any such
\noption, warrant, call, right, commitment or agreement. Section 3.2 of the Target
\nDisclosure Schedule sets forth the names of all holders of Target Options and
\nTarget Warrants, together with the number of shares of Target Stock for which
\neach such option and warrant may be exercised, and the exercise price and
\nvesting schedule (including acceleration provisions, if any) for each such
\noption and warrant. There are no contracts, commitments or agreements relating
\nto voting, purchase or sale of Target capital stock (i) between or among Target
\nand any of its shareholders or the holders of any Target Options or Target
\nWarrants, or (ii) to Target’s knowledge, between or among any Target
\nshareholders or the holders of any Target Options or Target Warrants.<\/p>\n
Section 3.3 Authority; No Conflict; Required Filings and Consents.<\/p>\n
(a) Target has all requisite corporate power and authority to
\nenter into this Agreement and the other documents required to be executed and
\ndelivered by Target hereunder, including the Merger Agreement (collectively, the
\n“Target Transaction Documents”), and to consummate the transactions contemplated
\nhereby and thereby. The execution and delivery of this Agreement and the other
\nTarget Transaction Documents and the consummation of the transactions
\ncontemplated hereby and thereby have been duly authorized by all necessary
\ncorporate action on the part of Target, subject only to the approval of the
\nMerger by Target’s shareholders in accordance with the GCL. This Agreement and
\nthe other Target Transaction Documents have been duly executed and delivered by
\nTarget and constitute the valid and binding obligations of Target, enforceable
\nagainst Target in accordance with their respective terms, except as such
\nenforceability may be limited (i) by bankruptcy, insolvency, moratorium or other
\nsimilar laws affecting or relating to creditors’ rights generally and (ii)
\ngeneral principles of equity, regardless of whether asserted in a proceeding in
\nequity or at law and except for the need for Target to obtain shareholder
\napproval for the Merger.<\/p>\n
(b) The execution and delivery by Target of this Agreement and
\nthe other Target Transaction Documents do not, and the consummation of the
\ntransactions contemplated hereby and thereby will not, (i) conflict with, or
\nresult in any violation or breach of any provision of the Articles of
\nIncorporation or Bylaws of Target, (ii) result in any violation or breach of, or
\nconstitute (with or without notice or lapse of time, or both) a default under,
\nor give rise to a right of termination, cancellation or acceleration of any
\nmaterial obligation or loss of any material benefit under, any note, bond,
\nmortgage, indenture, lease, contract or other agreement or obligation to which
\nTarget is a party or by which Target or any of its properties or assets may be
\nbound, or (iii) conflict with or violate any permit, concession, franchise,
\nlicense, judgment, order, decree, statute, law, ordinance, rule or regulation
\napplicable to Target or any of its properties or<\/p>\n
10<\/p>\n
15<\/p>\n
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
\ndefaults, terminations, cancellations or accelerations which would not be
\nreasonably likely to have a Material Adverse Effect on Target or to interfere
\nwith the consummation by Target of its obligations under this Agreement and the
\nother Target Transaction Documents.<\/p>\n
(c) The outstanding shares of Target Common Stock and Target
\nPreferred Stock are the only shares of Target capital stock entitled to vote
\nwith respect to the Merger, and the approval of this Agreement by the holders of
\na majority of the issued and outstanding shares of Target Common Stock, voting
\nas a separate class, and by the holders of a majority of the issued and
\noutstanding shares of Target Preferred Stock, voting as a separate class, are
\nthe only approvals of Target shareholders required for the consummation of the
\nMerger, no other vote of any series or class of Target Stock being required. No
\nconsent, approval, order or authorization of, or registration, declaration or
\nfiling with, any Governmental Entity (as defined in Section 10.2) is required by
\nor with respect to Target in connection with the execution and delivery of this
\nAgreement or the other Target Transaction Documents or the consummation of the
\ntransactions contemplated hereby or thereby except for (i) the filing of the
\nMerger Agreement in accordance with the GCL, (ii) the filing of a certificate of
\nmerger in accordance with the DGCL, (iii) items described in Section 3.3 of the
\nTarget Disclosure Schedule, and (iv) such other consents, authorizations,
\nfilings, approvals and registrations which, if not obtained or made, would not
\nbe reasonably likely to have a Material Adverse Effect on Target or materially
\nand adversely affect the ability of Target to consummate the transactions
\ncontemplated by this Agreement in accordance with its terms.<\/p>\n
Section 3.4 Financial Statements. Target has delivered to Buyer copies
\nof (i) its audited financial statements as of, and for the years ended, December
\n31, 1995 and 1996, (ii) its unaudited financial statements as of, and for the
\nyear ended, December 31, 1997 and (iii) its interim financial statements as of,
\nand for the four-month period ended, April 30, 1998 (collectively, with the
\nTarget 1997 Audited Financials to be delivered pursuant to Section 6.18, the
\n“Target Financial Statements”). The Target Financial Statements have been, and
\nwill be, prepared in accordance with GAAP applied on a consistent basis
\nthroughout the periods involved, except (in the case of the unaudited financial
\nstatements) for the absence of required footnotes. The Target Financial
\nStatements present, and will present, fairly in all material respects the
\nfinancial position of Target as of the respective dates and the results of
\nTarget’s operations and cash flows for the periods indicated, except that the
\ninterim Target Financial Statements are subject to normal and recurring year-end
\naudit adjustments which will not be material in amount. Target maintains a
\nstandard system of accounting established and administered in accordance with
\nGAAP.<\/p>\n
Section 3.5 Absence of Liabilities. Target does not have any
\nliabilities, either accrued or contingent (whether or not required to be
\nreflected in financial statements in accordance with GAAP), and whether due or
\nto become due, except for (i) liabilities reflected on Target’s balance sheet as
\nof April 30, 1998 (“the Target Balance Sheet”), (ii) the $350,000 indebtedness
\nof Target to Buyer pursuant to that certain Promissory Note dated May 29, 1998,
\n(iii) liabilities incurred in the ordinary course of business that either are
\nnot required to be set forth on the Target Balance<\/p>\n
11<\/p>\n
16<\/p>\n
Sheet or were incurred thereafter, and (iv) other liabilities listed in Section
\n3.5 of the Target Disclosure Schedule.<\/p>\n
Section 3.6 Accounts Receivable. The accounts receivable shown on the
\nTarget Balance Sheet arose in the ordinary course of business and have been
\ncollected or will be collectible in the book amounts thereof, less an amount not
\nin excess of the allowance for doubtful accounts and returns provided for in the
\nTarget Balance Sheet. The accounts receivable of Target arising after the date
\nof the Target Balance Sheet and prior to the Closing Date arose, or will arise,
\nin the ordinary course of business and have been collected or will be
\ncollectible in the book amounts thereof, less allowances for doubtful accounts
\nand returns determined in accordance with the past practices of Target. None of
\nsuch accounts receivables is subject to any valid and material claim of offset
\nor recoupment or counterclaim, and Target has no knowledge of any specific facts
\nthat would be likely to give rise to any such claim; no material amount of such
\naccounts receivable are contingent upon the performance by Target of any
\nobligation; and no agreement for deduction or discount has been made with
\nrespect to any such accounts receivable.<\/p>\n
Section 3.7 Inventory. The inventories shown on the Target Balance
\nSheet, or thereafter acquired by Target, consist of items of a quantity and
\nquality usable or salable in the ordinary course of Target’s business. Since
\nApril 30, 1998, Target has continued to replenish inventories in a normal and
\ncustomary manner consistent with past practices. Target has not received notice
\nthat it will experience in the foreseeable future any difficulty in obtaining,
\nin the desired quantity and quality and at a reasonable price and upon
\nreasonable terms and conditions, the supplies or component products required for
\nthe manufacture, assembly or production of its products. The value at which
\ninventories are carried reflect the inventory valuation policy of Target, which
\nis consistent with its past practice and in accordance with GAAP. Due provision
\nhas been made on the books of Target, consistent with past practices, to provide
\nfor all slow-moving, obsolete, or unusable inventories at their estimated useful
\nor scrap values, and such inventory reserves are adequate to provide for such
\nslow-moving, obsolete or unusable inventory and inventory shrinkage.<\/p>\n
Section 3.8 Absence of Certain Changes or Events. Since December 31,
\n1997, Target has conducted its business in the ordinary course and in a manner
\nconsistent with past practices, and has not:<\/p>\n
(a) to its knowledge, suffered any event or occurrence that has
\nhad or could reasonably be expected to have a Material Adverse Effect on Target,
\nexcluding all events or occurrences that generally affect other companies in the
\nsoftware business;<\/p>\n
(b) suffered any damage, destruction or loss, whether covered by
\ninsurance or not, adversely affecting its properties or business;<\/p>\n
(c) granted any increase in the compensation payable or to become
\npayable by Target to its officers or employees;<\/p>\n
12<\/p>\n
17<\/p>\n
(d) declared, set aside or paid any dividend or made any other
\ndistribution on or in respect of the shares of its capital stock or declared any
\ndirect or indirect redemption, retirement, purchase or other acquisition of such
\nshares;<\/p>\n
(e) issued any shares of its capital stock or any warrants,
\nrights, or options for, or entered into any commitment relating to such capital
\nstock except for exercises of employee stock options.<\/p>\n
(f) made any change in the accounting methods or practices it
\nfollows, whether for general financial or tax purposes, or any change in
\ndepreciation or amortization policies or rates;<\/p>\n
(g) sold, leased, abandoned or otherwise disposed of any real
\nproperty or machinery, equipment or other operating property;<\/p>\n
(h) sold, assigned, transferred, licensed or otherwise disposed
\nof any patent, trademark, trade name, brand name, copyright (or pending
\napplication for any patent, trademark or copyright), invention, work of
\nauthorship, process, know-how, formula or trade secret or interest thereunder or
\nother material intangible asset, except for non-exclusive licenses which were
\ngranted in the ordinary course of business and in a manner consistent with past
\npractices;<\/p>\n
(i) entered into any material commitment or transaction
\n(including without limitation any borrowing or capital expenditure);<\/p>\n
(j) incurred any liability, except in the ordinary course of
\nbusiness and consistent with past practice;<\/p>\n
(k) permitted or allowed any of its property or assets to be
\nsubjected to any mortgage, deed of trust, pledge, lien, security interest or
\nother encumbrance of any kind, except for liens for current taxes not yet due
\nand purchase money security interests incurred in the ordinary course of
\nbusiness;<\/p>\n
(l) made any capital expenditure or commitment for additions to
\nproperty, plant or equipment individually in excess of $10,000 or in the
\naggregate in excess of $25,000;<\/p>\n
(m) paid, loaned or advanced any amount to, or sold, transferred
\nor leased any properties or assets to, or entered into any agreement or
\narrangement with any of its officers, directors or shareholders or any affiliate
\nof any of the foregoing, other than employee compensation and benefits and
\nadvances against or reimbursement of employment related business expenses
\nincurred in the ordinary course of business; or<\/p>\n
(n) agreed to take any action described in this Section 3.8 or
\nwhich to its knowledge would constitute a breach of any of the representations
\nor warranties of Target contained in this Agreement.<\/p>\n
Section 3.9 Taxes.<\/p>\n
13<\/p>\n
18<\/p>\n
(a) As used in this Agreement, the terms “Tax” and, collectively,
\n“Taxes” mean any and all federal, state and local taxes of any country,
\nassessments and other governmental charges, duties, impositions and liabilities,
\nincluding taxes based upon or measured by gross receipts, income, profits,
\nsales, use and occupation, and value added, ad valorem, transfer, franchise,
\nwithholding, payroll, recapture, employment, excise and property taxes, together
\nwith all interest, penalties and additions imposed with respect to such amounts
\nand any obligations under any agreements or arrangements with any other person
\nwith respect to such amounts and including any liability for taxes of a
\npredecessor entity.<\/p>\n
(b) Target has prepared and timely filed all returns, estimates,
\ninformation statements and reports required to be filed prior to the Closing
\nDate with any taxing authority (“Returns”) relating to any and all Taxes
\nconcerning or attributable to Target or its operations, and such Returns are
\ntrue and correct in all material respects.<\/p>\n
(c) Target, as of the Closing Date: (i) will have paid all Taxes
\nshown to be due and payable on such Returns covered by Section 3.9(b) and (ii)
\nwill have withheld with respect to its employees all Taxes required to be
\nwithheld.<\/p>\n
(d) There is no Tax deficiency outstanding or assessed or, to the
\nbest of Target’s knowledge, proposed against Target that is not reflected as a
\nliability on the Target Balance Sheet nor has Target executed any agreements or
\nwaivers extending any statute of limitations on or extending the period for the
\nassessment or collection of any Tax.<\/p>\n
(e) Target has no material liabilities for unpaid Taxes that have
\nnot been accrued for or reserved on the Target Balance Sheet, whether asserted
\nor unasserted, contingent or otherwise, except taxes accrued in the ordinary
\ncourse of Target’s business since the Target Balance Sheet.<\/p>\n
(f) Target is not a party to any tax-sharing agreement or similar
\narrangement with any other party, or any contractual obligation to pay any Tax
\nobligations of, or with respect to any transaction relating to, any other person
\nor to indemnify any other person with respect to any Tax.<\/p>\n
(g) Section 3.9 of the Target Disclosure Schedule sets forth (i)
\nthe date or dates through which the Internal Revenue Service (“IRS”) has
\nexamined the federal tax returns of Target and the date or dates through which
\nany foreign, state, local or other taxing authority has examined any other
\nReturns of Target, provided that Target knows of such examination or audit, (ii)
\na complete list of each year for which any federal, state, local or foreign tax
\nauthority has obtained or has requested an extension of the statute of
\nlimitations from Target, (iii) a list of each tax case of Target currently
\npending in audit, at the administrative appeals level or in litigation
\nand (iv) the date and issuing authority of each statutory notice of deficiency,
\nnotice of proposed assessment and revenue agent’s report issued to Target within
\nthe last twelve (12) months if such notice, assessment or report is known to
\nTarget. Except as set forth in Section 3.9 of the Target Disclosure Schedule, to
\nTarget’s knowledge neither the IRS nor any foreign, state, local or other taxing
\nauthority has, since Target’s inception, examined or is in the process of
\nexamining any federal, foreign, state, local or other tax returns of Target. To
\nthe knowledge of <\/p>\n
14<\/p>\n
19<\/p>\n
Target, neither the IRS nor any foreign, state, local or other taxing authority
\nis now asserting or threatening to assert any deficiency or claim for additional
\ntaxes (or interest thereon or penalties in connection therewith) except as set
\nforth on Section 3.9 of the Target Disclosure Schedule.<\/p>\n
(h) There is no contract, agreement, plan or arrangement to which
\nTarget is a party as of the date of this Agreement, including but not limited to
\nthe provisions of this Agreement or any transaction contemplated hereby,
\ncovering any employee or former employee of Target that, individually or
\ncollectively, that could give rise to the payment of any amount that would not
\nbe deductible pursuant to Sections 280(G), 404 or 162(m) of the Code.<\/p>\n
Section 3.10 Tangible Assets and Real Property.<\/p>\n
(a) Target owns or leases all tangible assets and properties
\nwhich are reasonably necessary for the conduct of its business as currently
\nconducted or which are reflected on the Target Balance Sheet or acquired since
\nthe date of the Target Balance Sheet (“the Material Tangible Assets”). The
\nMaterial Tangible Assets are in good operating condition and repair.<\/p>\n
(b) Target has good and marketable title to all Material Tangible
\nAssets that it owns, free and clear of all mortgages, liens, pledges, charges or
\nencumbrances of any kind or character, except for liens for current taxes not
\nyet due and payable and purchase money security interests.<\/p>\n
(c) Assuming the due execution and delivery thereof by the other
\nparties thereto, all leases of Material Tangible Assets to which Target is a
\nparty are in full force and effect and are valid, binding and enforceable in
\naccordance with their respective terms, except as such enforceability may be
\nlimited by (i) bankruptcy laws and other similar laws affecting creditors’
\nrights generally and (ii) general principles of equity, regardless of whether
\nasserted in a proceeding in equity or at law. True and correct copies of all
\nsuch leases have been provided to Buyer.<\/p>\n
(d) Target owns no real property. The Target Disclosure Schedule
\nsets forth a true and complete list of all real property leased by Target.
\nAssuming the due execution and delivery thereof by the other parties thereto,
\nall such real property leases are in full force and effect and are valid,
\nbinding and enforceable in accordance with their respective terms, except as
\nsuch enforceability may be limited by (i) bankruptcy laws and other similar laws
\naffecting creditors’ rights generally and (ii) general principles of equity,
\nregardless of whether asserted in a proceeding in equity or at law. True and
\ncorrect copies all such of real property leases have been provided to Buyer.<\/p>\n
15<\/p>\n
20<\/p>\n
Section 3.11 Intellectual Property.<\/p>\n
(a) Target owns, or is licensed or otherwise possesses legally
\nenforceable rights to use, all patents, trademarks, trade names, service marks,
\ncopyrights and mask works, and any applications for and registrations of such
\npatents, trademarks, trade names, service marks, copyrights and mask works, and
\nall processes, formulae, methods, schematics, technology, know-how, computer
\nsoftware programs or applications and tangible or intangible proprietary
\ninformation or materials that are material to the conduct of the business of
\nTarget as currently conducted (all of which are referred to as the “Target
\nIntellectual Property Rights”).<\/p>\n
(b) Section 3.11 of the Target Disclosure Schedule contains an
\naccurate and complete description of (i) all patents and patent applications and
\nall registered trademarks, trade names, service marks and copyrights included in
\nthe Target Intellectual Property Rights, including the jurisdictions in which
\neach such Target Intellectual Property Right has been issued or registered or in
\nwhich any such application for such issuance and registration has been filed,
\n(ii) all licenses, sublicenses, distribution agreements and other agreements to
\nwhich Target is a party and pursuant to which any person is granted rights with
\nrespect to any Target Intellectual Property Rights or has the right to
\nmanufacture, reproduce, market or exploit any product of Target (a “Target
\nProduct”) or any adaptation, translation or derivative work based on any Target
\nProduct or any portion thereof, (iii) all licenses, sublicenses and other
\nagreements to which Target is a party and pursuant to which Target is authorized
\nto use any third party technology, trade secret, know-how, process, patent,
\ntrademark or copyright, including software (“Licensed Intellectual Property”),
\nexcept for freely transferable “shrink wrap” software for which no royalties are
\ncurrently owed or in the future may be owed, (iv) all joint development
\nagreements to which Target is a party, and (v) all agreements with Governmental
\nEntities or other third parties pursuant to which Target has obtained funding
\nfor research and development activities.<\/p>\n
(c) Target is not, nor will it be as a result of the execution
\nand delivery of this Agreement or the performance of its obligations under this
\nAgreement, in breach of any license, sublicense or other agreement relating to
\nthe Target Intellectual Property Rights or Licensed Intellectual Property.<\/p>\n
(d) Target (i) has not received notice that it has been sued in
\nany suit, action or proceeding which involves a claim of infringement of any
\npatent, trademark, service mark, copyright, trade secret or other proprietary
\nright of any third party; (ii) has not received any communications alleging that
\nthe Company has violated, or by conducting its business as proposed, would
\nviolate any patent, trademark, service mark, copyright, trade secret or other
\nproprietary right of any third party; (iii) has no reason to believe that the
\nmanufacturing, marketing, licensing or sale of any Target Product or the
\nprovision of services in the course of Target’s business infringes any patent,
\ntrademark, service mark, copyright, trade secret or other proprietary right of
\nany third party; and (iv) has no knowledge of any claim challenging or
\nquestioning the validity or effectiveness of any license or agreement relating
\nto any Target Intellectual Property Rights or Licensed Intellectual Property.<\/p>\n
16<\/p>\n
21<\/p>\n
(e) All designs, drawings, specifications, source code, object
\ncode, documentation, flow charts and diagrams incorporating, embodying or
\nreflecting any Target Product at any stage of its development or created in the
\ncourse of providing services to customers of Target (the “Target Components”)
\nwere written, developed and created solely and exclusively by employees of
\nTarget without the assistance of any third party or were created by third
\nparties who assigned ownership of their rights with respect thereto to Target by
\nmeans of valid and enforceable agreements, copies of which have been provided to
\nBuyer. Target has at all times used commercially reasonable efforts to treat the
\nTarget Products and Target Components as containing trade secrets and has not
\ndisclosed or otherwise dealt with such items in such a manner as to cause the
\nloss of such trade secrets by their release into the public domain.<\/p>\n
(f) Each person currently or formerly employed by Target
\n(including independent contractors, if any) that has or had access to
\nconfidential information of Target has executed and delivered to Target a
\nconfidentiality and non-disclosure agreement in the form previously provided to
\nBuyer. Each person currently or formerly employed by Target (including
\nindependent contractors, if any) has executed and delivered to Target an
\ninventions agreement in the form previously provided to Buyer. To Target’s
\nknowledge, neither the execution or delivery of any such agreement, nor the
\ncarrying on of Target’s business as currently conducted and as currently
\nproposed to be conducted by any such person, as an employee or independent
\ncontractor, has conflicted or will conflict with or result in a breach of the
\nterms, conditions or provisions of, or constitute a default under, any contract,
\ncovenant or instrument under which any of such persons is obligated.<\/p>\n
Section 3.12 Bank Accounts. Section 3.12 of the Target Disclosure
\nSchedule sets forth the names and locations of all banks and other financial
\ninstitutions at which Target presently maintains accounts of any nature, the
\ntype of accounts maintained at each such institution and the names of all
\npersons authorized to draw thereon or make withdrawals therefrom.<\/p>\n
Section 3.13 Contracts.<\/p>\n
(a) Except as set forth in Section 3.13 of the Target Disclosure
\nSchedule, Target is not a party or subject to any agreement, obligation or
\ncommitment, written or oral:<\/p>\n
(i) that calls for any fixed and\/or contingent payment
\nor expenditure or any related series of fixed and\/or contingent payments or
\nexpenditures by or to Target totaling more than $25,000 in any calendar year;<\/p>\n
(ii) with agents, advisors, salesmen, sales
\nrepresentatives, independent contractors or consultants that are not cancelable
\nby it on no more than thirty (30) days’ notice and without liability, penalty or
\npremium;<\/p>\n
(iii) that restricts Target from carrying on anywhere in
\nthe world its business or any portion thereof as currently conducted;<\/p>\n
(iv) to provide funds to or to make any investment in
\nany other person or entity (in the form of a loan, capital contribution or
\notherwise);<\/p>\n
17<\/p>\n
22<\/p>\n
(v) with respect to obligations as guarantor, surety,
\nco-signer, endorser, co-maker, indemnitor or otherwise in respect of the
\nobligation of any other person or entity;<\/p>\n
(vi) for any line of credit, standby financing,
\nrevolving credit or other similar financing arrangement;<\/p>\n
(vii) with any distributor, original equipment
\nmanufacturer, value added remarketer or other person for the distribution of any
\nof the Target Products; or<\/p>\n
(viii) that is otherwise material to the business or
\nfinancial results of operations of Target.<\/p>\n
(b) To Target’s knowledge, no party to any contract, agreement or
\ninstrument described in Section 3.10(c), 3.10(d) or 3.13(a) has expressed its
\nintention to cancel, withdraw, modify or amend such contract, agreement or
\ninstrument.<\/p>\n
(c) Target is not in material default under or in material breach
\nor violation of, nor is there any valid basis for any claim of material default
\nby Target under, or material breach or violation by Target of, any contract,
\ncommitment or restriction to which Target is a party or by which Target or any
\nof its properties or assets is bound or affected. To Target’s knowledge, no
\nother party is in material default under or in material breach or violation of,
\nnor, to Target’s knowledge, is there any valid basis for any claim of material
\ndefault by any other party under, or any material breach or violation by any
\nother party of, any contract, commitment, or restriction to which Target is a
\nparty or by which Target or any of its properties or assets is bound or
\naffected.<\/p>\n
Section 3.14 Labor Difficulties. Target is not engaged in any unfair
\nlabor practice or in violation of any applicable laws respecting employment,
\nemployment practices or terms and conditions of employment. There is no unfair
\nlabor practice complaint against Target pending, or to Target’s knowledge
\nthreatened, before any Governmental Entity. There is no strike, labor dispute,
\nslowdown, or stoppage pending, or to Target’s knowledge threatened, against
\nTarget. To Target’s knowledge, Target is not now and has never been subject to
\nany union organizing activities. Target has never experienced any work stoppage
\nor other labor difficulty. To Target’s knowledge, except as set forth in Section
\n3.14 of the Target Disclosure Schedule, no Target employees intend to leave
\ntheir employment, whether as a result of the transactions contemplated by this
\nAgreement or otherwise.<\/p>\n
Section 3.15 Trade Regulation. Target has not terminated its
\nrelationship with or refused to ship Target Products to any dealer, distributor,
\nthird party marketing entity or customer which had theretofore paid or been
\nobligated to pay Target in excess of $10,000 over any consecutive twelve (12)
\nmonth period. To Target’s knowledge, all of the prices charged by Target in
\nconnection with the marketing or sale of any Target products or services have
\nbeen in compliance with all applicable laws and regulations. No claims have been
\nasserted or, to Target’s knowledge, threatened against Target with respect to
\nthe wrongful termination of any dealer, distributor or any other marketing
\nentity, discriminatory pricing, price fixing, unfair competition, false
\nadvertising, or any other material violation of any laws or regulations relating<\/p>\n
18<\/p>\n
23<\/p>\n
to anti-competitive practices or unfair trade practices of any kind, and, to
\nTarget’s knowledge, no specific situation, set of facts, or occurrence provides
\nany basis for any such claim.<\/p>\n
Section 3.16 Environmental Matters.<\/p>\n
(a) No material amount of any substance that has been designated
\nby applicable law or regulation to be radioactive, toxic, hazardous or otherwise
\na danger to health or the environment (a “Hazardous Material”), excluding
\noffice, janitorial and other supplies held in very limited quantities, is
\npresent, as a result of the actions of Target or, to Target’s knowledge, as a
\nresult of any actions of any third party or otherwise, in, on or under any
\nproperty, including the land and the improvements, ground water and surface
\nwater, that Target has at any time owned, operated, occupied or leased. To
\nTarget’s knowledge, no underground storage tanks are present under any property
\nthat Target has at any time owned, operated, occupied or leased.<\/p>\n
(b) At no time has Target transported, stored, used,
\nmanufactured, disposed of, released or exposed its employees or others to
\nHazardous Materials in violation of any law, rule, regulation or treaty
\npromulgated by any Governmental Entity (collectively, “Hazardous Materials
\nActivities”).<\/p>\n
(c) Target currently holds all environmental approvals, permits,
\nlicenses, clearances and consents (the “Environmental Permits”) necessary for
\nthe conduct of its business as such businesses is currently being conducted.<\/p>\n
(d) No action, proceeding, writ, injunction or claim is pending
\nor, to the best of Target’s knowledge, threatened concerning any Environmental
\nPermit or any Hazardous Materials Activity of Target. Target is not aware of any
\nfact or circumstance which could involve Target in any material environmental
\nlitigation or impose upon Target any material liability concerning Hazardous
\nMaterials Activities.<\/p>\n
Section 3.17 Employee Benefit Plans.<\/p>\n
(a) Section 3.17 of the Target Disclosure Schedule lists (i) all
\nemployee benefit plans (as defined in Section 3(3) of the Employee Retirement
\nIncome Security Act of 1974, as amended) (“ERISA”), (ii) all bonus, stock
\noption, stock purchase, incentive, deferred compensation, supplemental
\nretirement, severance and other similar employee benefit plans, and (iii) all
\nunexpired severance agreements, written or otherwise, for the benefit of, or
\nrelating to, any current or former employee of Target or any trade or business
\n(whether or not incorporated) which is a member or which is under common control
\nwith Target within the meaning of Section 414 of the Code (“Target’s Controlled
\nGroup”) (together, the “Target Employee Plans”).<\/p>\n
(b) With respect to each Target Employee Plan, Target has
\nprovided to Buyer true and correct copies of (i) all documents enbodying such
\nTarget Employee Plan, including all amendments thereto, and (ii) each trust
\nagreement, group annuity contract and other agreement, if any, relating to such
\nTarget Employee Plan.<\/p>\n
19<\/p>\n
24<\/p>\n
(c) With respect to the Target Employee Plans, individually and
\nin the aggregate, no event has occurred, and to the best of Target’s knowledge,
\nthere exists no condition or set of circumstances in connection with which
\nTarget could be subject to any material liability.<\/p>\n
(d) With respect to the Target Employee Plans, individually and
\nin the aggregate, there are no funded benefit obligations for which
\ncontributions have not been made or properly accrued and there are no unfunded
\nbenefit obligations which have not been accounted for by reserves on the
\nfinancial statements or books of Target.<\/p>\n
(e) Target is not a party to any oral or written (i) union or
\ncollective bargaining agreement, (ii) agreement with any officer or other key
\nemployee of Target, the benefits of which are contingent, or the terms of which
\nare materially altered, upon the occurrence of a transaction involving Target of
\nthe nature contemplated by this Agreement, (iii) agreement with any officer of
\nTarget providing any term of employment or compensation guarantee extending for
\na period longer than six months from the date hereof or for the payment of
\ncompensation in excess of $60,000 per annum, or (iv) agreement or plan,
\nincluding any stock option plan, stock appreciation right plan, restricted stock
\nplan or stock purchase plan, any of the benefits of which will be increased, or
\nthe vesting of the benefits of which will be accelerated, by the occurrence of
\nany of the transactions contemplated by this Agreement or the value of any of
\nthe benefits of which will be calculated on the basis of any of the transactions
\ncontemplated by this Agreement.<\/p>\n
(f) Target has performed in all material respects all obligations
\nrequired to be performed by it under, is not in material default or violation
\nof, and has no knowledge of any default or violation by any other party to, each
\nTarget Employee Plan, and each Target Employee Plan has been established and
\nmaintained in all material respects in accordance with its terms and in
\ncompliance in all material respects with all applicable laws, statutes, orders,
\nrules and regulations, including but not limited to applicable provisions of
\nERISA and the Code. Each Target Employee Plan intended to qualify under Section
\n401(a) of the Code and each trust intended to qualify under Section 501(a) of
\nthe Code has either received a favorable determination letter from the IRS with
\nrespect to such plan as to its qualified status under the Code, including all
\namendments to the Code effected by the Tax Reform Act of 1986 and subsequent
\nlegislation, or has remaining a period of time under applicable Treasury
\nregulations or IRS pronouncements in which to apply for such a determination
\nletter and make any amendments necessary to obtain a favorable determination. No
\n“prohibited transaction,” within the meaning of Section 4975 of the Code or
\nSections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
\nERISA, has occurred with respect to any Target Employee Plan. There are no
\nactions, suits or claims pending, or, to the knowledge of Target, threatened or
\nreasonably anticipated (other than routine claims for benefits) against any
\nTarget Employee Plan or against the assets of any Target Employee Plan. Each
\nTarget Employee Plan can be amended, terminated or otherwise discontinued in
\naccordance with its terms, without liability to Buyer, Target or any of its
\naffiliates (other than ordinary administration expenses typically incurred in a
\ntermination event). There are no audits, inquiries or proceedings pending or, to
\nthe knowledge of Target, threatened by the IRS or the U.S. Department of Labor
\nwith respect to any Target Employee Plan. Neither Target nor any affiliate of
\nTarget is subject to any penalty or tax with<\/p>\n
20<\/p>\n
25<\/p>\n
respect to any Target Employee Plan under Section 402(i) of ERISA or Sections
\n4975 through 4980 of the Code. Each Target Employee Plan which is a group health
\nplan (within the meaning of Section 5000(b)(1) of the Code) and subject to the
\nConsolidated Omnibus Reconciliation Act of 1985, as amended (“COBRA”), has been
\nmaintained in all material respects in compliance with its terms and conditions
\nand has complied in all material respects with the Code and ERISA, including the
\ncontinuation coverage requirements of COBRA, and such plan is not subject to any
\ndamages, penalties, or excise taxes arising out of or in connection with COBRA.
\nNeither Target nor any member of Target’s Controlled Group is or could be liable
\nfor an excise tax under Section 4980 B of the Code in connection with any
\nemployee plan maintained by a member of Target’s Controlled Group.<\/p>\n
(g) Target does not now, nor has it ever, maintained,
\nestablished, sponsored, participated in, or contributed to, any pension plan
\nwithin the meaning of Section 3(2) of ERISA which is subject to Title IV of
\nERISA or Section 412 of the Code. At no time has Target contributed to or been
\nrequested to contribute to any multiemployer plan as defined in Section 3(37) of
\nERISA.<\/p>\n
Section 3.18 Compliance with Laws. Target has complied in all material
\nrespects with, is not in material violation of, and has not received any notices
\nof violation with respect to, any statute, law or regulation applicable to the
\nownership or operation of its business, including, without limitation, United
\nStates statutes, laws and regulations governing the license and delivery of
\ntechnology and products abroad by persons subject to the jurisdiction of the
\nUnited States.<\/p>\n
Section 3.19 Employees and Consultants. Section 3.19 of the Target
\nDisclosure Schedule contains a list of the names of all present employees and
\nconsultants of Target, their salaries or wages, other compensation and dates of
\nemployment and positions.<\/p>\n
Section 3.20 Litigation. There is no action, suit, proceeding, claim,
\narbitration or investigation pending before any agency, court or tribunal, or to
\nTarget’s knowledge, threatened, against Target or any of its properties or
\nofficers or directors (in their capacities as such). There is no judgment,
\ndecree or order against Target or, to Target’s knowledge, any of its directors
\nor officers (in their capacities as such) that could prevent, enjoin or
\nmaterially alter or delay any of the transactions contemplated by this
\nAgreement, or that could reasonably be expected to have a Material Adverse
\nEffect on Target.<\/p>\n
Section 3.21 Restrictions on Business Activities. There is no agreement,
\njudgment, injunction, order or decree binding upon Target which has or could
\nreasonably be expected to have the effect of prohibiting or materially impairing
\nany current business practice of Target, any acquisition of property by Target,
\nor the conduct of business by Target as currently conducted or as currently
\nproposed to be conducted.<\/p>\n
Section 3.22 Governmental Authorization. Target has obtained each
\ngovernmental consent, license, permit, grant or other authorization of a
\nGovernmental Entity that is required for the operation of the business of Target
\nas currently conducted (collectively, the “Target Authorizations”), and all such
\nTarget Authorizations are in full force and effect.<\/p>\n
21<\/p>\n
26<\/p>\n
Section 3.23 Insurance. Section 3.23 of the Target Disclosure Schedule
\ncontains a list and description of all insurance policies of Target. There is no
\nmaterial claim pending under any of such policies as to which coverage has been
\nquestioned, denied or disputed by the underwriters of such policies. All
\npremiums due and payable under all such policies have been paid, and Target is
\notherwise in compliance with the terms of such policies. Target has no knowledge
\nof any threatened termination of, or material premium increase with respect to,
\nany of such policies.<\/p>\n
Section 3.24 Indemnification Claims. Section 3.24 of the Target
\nDisclosure Schedule sets forth a list of all persons who are parties to
\ndirector, officer and\/or employee indemnification agreements with Target (the
\n“Indemnification Agreements”). Except as set forth in Section 3.24 of the Target
\nDisclosure Schedule, there are no outstanding claims under any of the
\nIndemnification Agreements or under any indemnification rights granted pursuant
\nto the Articles of Incorporation or Bylaws of Target (as currently in effect);
\nand to Target’s knowledge, there are no facts or circumstances that either now,
\nor with the passage of time, could reasonably be expected to provide a basis for
\na claim under any such Indemnification Agreement or under any indemnification
\nrights granted pursuant to the Articles of Incorporation or Bylaws of Target.<\/p>\n
Section 3.25 No Brokers. Except as set forth in Section 3.25 of the
\nTarget Disclosure Schedule, Target is not obligated for the payment of fees or
\nexpenses of any broker, finder or other person in connection with the
\norigination, negotiation or execution of this Agreement or the other Target
\nTransaction Documents or any transaction contemplated hereby or thereby. Target
\nagrees to indemnify and hold Buyer and its affiliates harmless from and against
\nany and all claims, liabilities or obligations with respect to any such fees,
\ncommissions or expenses.<\/p>\n
Section 3.26 Real Property Holding Corporation. Target is not a “United
\nStates real property holding corporation” within the meaning of Section
\n897(c)(2) of the Code.<\/p>\n
Section 3.27 Payments Resulting from Mergers. Neither the consummation
\nnor announcement of any transaction contemplated by this Agreement will (either
\nalone or upon the occurrence of any additional or further acts or events) result
\nin any material payment (whether of severance pay or otherwise) becoming due
\nfrom Target to any director, officer, employee or former employee thereof under
\n(i) any management, employment, deferred compensation, severance (including any
\npayment, right or benefit resulting from a change in control), bonus or other
\ncontract for personal services with any officer, director or employee or any
\nplan, agreement or understanding similar to any of the foregoing, or any “rabbi
\ntrust” or similar arrangement, or (ii) material benefit under any Target
\nEmployee Plan being established or becoming accelerated, vested or payable.<\/p>\n
Section 3.28 Interested Party Transactions. To the knowledge of Target,
\nno director, officer or shareholder of Target has any interest in (i) any
\nmaterial equipment or other property or asset, real or personal, tangible or
\nintangible, including, without limitation, any of the Target Intellectual
\nProperty Rights, used in connection with or pertaining to the business of
\nTarget, (ii) any creditor, supplier, customer, manufacturer, agent,
\nrepresentative, or distributor of any of the Target Products, (iii) any entity
\nthat competes with Target, or with which Target is affiliated <\/p>\n
22<\/p>\n
27<\/p>\n
or has a business relationship, or (iv) any agreement, obligation or commitment,
\nwritten or oral, to which Target is a party; provided, however, that no such
\nperson shall be deemed to have any interest described in clauses (i) through
\n(iv) of this Section 3.28 solely by virtue of such person’s ownership of less
\nthan five percent (5%) of the outstanding stock or debt securities of any
\npublicly held company, the stock or debt securities of which are traded on a
\nrecognized stock exchange or on any of the Nasdaq Stock Markets.<\/p>\n
Section 3.29 No Existing Discussions. As of the date hereof, Target is
\nnot engaged, directly or indirectly, in any discussions or negotiations with any
\nother party with respect to an Acquisition Proposal (as defined in Section 6.1).<\/p>\n
Section 3.30 Corporate Documents. Target has furnished to Buyer, or its
\nrepresentatives, for its examination (i) its minute book containing all records
\nrequired to be set forth of all proceedings, consents, actions, and meetings of
\nthe shareholders, the Board of Directors and any committees thereof and (ii) all
\npermits, orders, and consents issued by any Governmental Entity with respect to
\nTarget. The corporate minute books and other corporate records of Target are
\ncomplete and accurate in all material respects, and the signatures appearing on
\nall documents contained therein are the true signatures of the persons
\npurporting to have signed the same. All actions reflected in such books and
\nrecords were duly and validly taken in compliance with the laws of the
\napplicable jurisdiction. Target has delivered or made available to Buyer or its
\nrepresentatives true and complete copies of all documents which are referred to
\nin this Article III or in the Target Disclosure Schedule.<\/p>\n
Section 3.31 No Misrepresentation. No representation or warranty by
\nTarget in this Agreement, and no statement, certificate or schedule furnished or
\nto be furnished by or on behalf of Target pursuant to this Agreement, when taken
\ntogether, contains any untrue statement of a material fact or omits to state a
\nmaterial fact required to be stated therein or necessary in order to make such
\nstatements, in light of the circumstances under which they were made, not
\nmisleading.<\/p>\n
ARTICLE IV<\/p>\n
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB<\/p>\n
Except as set forth in the disclosure schedule delivered by Buyer to
\nTarget on or before the date of this Agreement and attached hereto as Annex 4
\n(the “Buyer Disclosure Schedule”), or in the Buyer SEC Reports (as defined in
\nSection 4.4), Buyer and Sub represent and warrant to Target as follows:<\/p>\n
Section 4.1 Organization. Each of Buyer, Sub and Buyer’s other
\nSubsidiaries (as defined in Section 10.2) is a corporation duly organized,
\nvalidly existing and in good standing under the laws of the jurisdiction of its
\nincorporation, has all requisite corporate power to own, lease and operate its
\nproperty and to carry on its business as now being conducted and as proposed to
\nbe conducted, and is duly qualified to do business and is in good standing as a
\nforeign corporation in each jurisdiction in which the failure to be so qualified
\nwould have a Material Adverse Effect on Buyer and its Subsidiaries, taken as a
\nwhole, or on Sub alone.<\/p>\n
23<\/p>\n
28<\/p>\n
Section 4.2 Buyer Capital Structure.<\/p>\n
(a) The authorized capital stock of Buyer consists of 50,000,000
\nshares of Buyer Common Stock, $0.001 par value, and 2,000,000 shares of
\npreferred stock, $0.001 par value (“Buyer Preferred Stock”). As of June 9, 1998:
\n(i) 25,839,855 shares of Buyer Common Stock were issued and outstanding, all of
\nwhich are duly authorized, validly issued, fully paid and nonassessable; (ii) no
\nshares of Buyer Common Stock were held in the treasury of Buyer or by
\nSubsidiaries of Buyer; (iii) approximately 3,059,987 shares of Buyer Common
\nStock were reserved for future issuance pursuant to stock options granted and
\noutstanding under Buyer’s stock option plans (the “Buyer Option Plans”) and
\nrights outstanding under Buyer’s employee stock purchase plan (the “Buyer
\nPurchase Plan”) and (iv) 1,645,600 shares of Buyer Common Stock were reserved
\nfor issuance upon conversion of Buyer’s outstanding 4 3\/4% convertible
\nsubordinated notes due 2002. As of the date of this Agreement, none of the
\nshares of Buyer Preferred Stock are issued and outstanding. The authorized
\ncapital stock of Sub consists of 1,000 shares of common stock, par value $0.001
\nper share (“Sub Common Stock”), of which one hundred 100 shares are or will be
\nissued and outstanding as of the Closing Date. All of the outstanding shares of
\ncapital stock of Sub are duly authorized, validly issued, fully paid and
\nnonassessable, and all such shares are owned by Buyer free and clear of all
\nsecurity interests, liens, claims, pledges, agreements, limitations on Buyer’s
\nvoting rights, charges or other encumbrances of any nature.<\/p>\n
(b) Except as set forth in Section 4.2(a) or as reserved for
\nfuture grants of options under the Buyer Option Plans or the Buyer Purchase
\nPlan, there are (i) no equity securities of any class of Buyer, or any security
\nexchangeable into or exercisable for such equity securities, issued, reserved
\nfor issuance or outstanding and (ii) no options, warrants, equity securities,
\ncalls, rights, commitments or agreements of any character to which Buyer is a
\nparty or by which it is bound obligating Buyer to issue, deliver or sell, or
\ncause to be issued, delivered or sold, additional shares of capital stock of
\nBuyer or obligating Buyer to grant, extend, accelerate the vesting of or enter
\ninto any such option, warrant, equity security, call, right, commitment or
\nagreement. To the knowledge of Buyer, there are no voting trusts, proxies or
\nother agreements or understandings with respect to the shares of capital stock
\nof Buyer.<\/p>\n
(c) The shares of Buyer Common Stock to be issued pursuant to the
\nMerger, when issued, will be duly authorized, validly issued, fully paid, and
\nnonassessable, and free of and not subject to any preemptive rights or rights of
\nfirst refusal and (subject to the accuracy of representations and warranties to
\nbe obtained from Target shareholders) will be issued in compliance with all
\nstate and federal securities laws.<\/p>\n
Section 4.3 Authority; No Conflict; Required Filings and Consents.<\/p>\n
(a) Buyer and Sub have all requisite corporate power and
\nauthority to enter into this Agreement and the other documents required to be
\nexecuted and delivered by Buyer or Sub hereunder (collectively, the “Buyer
\nTransaction Documents”) and to consummate the transactions contemplated hereby
\nand thereby. The execution and delivery of this Agreement and the other Buyer
\nTransaction Documents and the consummation of the transactions<\/p>\n
24<\/p>\n
29<\/p>\n
contemplated hereby and thereby have been duly authorized by all necessary
\ncorporate action on the part of Buyer and Sub, respectively. This Agreement and
\nthe Buyer Transaction Documents to which they are parties have been duly
\nexecuted and delivered by Buyer and Sub and constitute the valid and binding
\nobligations of Buyer and Sub, respectively, enforceable in accordance with their
\nterms, except as such enforceability may be limited by (i) bankruptcy laws and
\nother similar laws affecting creditors’ rights generally and (ii) general
\nprinciples of equity, regardless of whether asserted in a proceeding in equity
\nor at law.<\/p>\n
(b) The execution and delivery by Buyer and Sub of this Agreement
\nand the other Buyer Transaction Documents do not, and the consummation of the
\ntransactions contemplated hereby or thereby will not, (i) conflict with, or
\nresult in any violation or breach of any provision of the Certificate of
\nIncorporation or Bylaws of Buyer or Sub, (ii) result in any violation or breach
\nof, or constitute (with or without notice or lapse of time, or both) a default,
\nor give rise to a right of termination, cancellation or acceleration of any
\nobligation or loss of any material benefit under, any note, bond, mortgage,
\nindenture, lease, contract or other agreement, instrument or obligation to which
\nBuyer or Sub is a party or by which either of them or any of their properties or
\nassets may be bound, or (iii) conflict with or violate any permit, concession,
\nfranchise, license, judgment, order, decree, statute, law, ordinance, rule or
\nregulation applicable to Buyer or Sub or any of its or their properties or
\nassets, except in the case of (ii) and (iii) for any such conflicts, violations,
\ndefaults, terminations, cancellations or accelerations which would not be
\nreasonably likely to have a Material Adverse Effect on Buyer and its
\nSubsidiaries, taken as a whole, and that would not interfere with the
\nconsummation by Buyer or Sub of its obligations under this Agreement and the
\nother Buyer Transaction Documents.<\/p>\n
(c) The outstanding shares of Sub Common Stock are the only
\nshares of Sub capital stock entitled to vote with respect to the Merger, and the
\napproval of this Agreement by the holders of a majority of the issued and
\noutstanding shares of Sub Common Stock is the only approval of Sub shareholders
\nrequired for the consummation of the Merger. No consent, approval, order or
\nauthorization of, or registration, declaration or filing with, any Governmental
\nEntity is required by or with respect to Buyer or any of its subsidiaries in
\nconnection with the execution and delivery of this Agreement or the other Buyer
\nTransaction Documents or the consummation of the transactions contemplated
\nhereby or thereby, except for (i) the filing of the Merger Agreement in
\naccordance with the CGL, (ii) the filing of a certificate of merger in
\naccordance with the DGCL, (iii) such consents, approvals, orders,
\nauthorizations, registrations, declarations and filings as may be required under
\napplicable federal and state securities laws and the laws of any foreign
\ncountry, and (iv) such other consents, authorizations, filings, approvals and
\nregistrations which, if not obtained or made, would not be reasonably likely to
\nhave a Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole,
\nor on Sub alone.<\/p>\n
Section 4.4 SEC Filings; Financial Statements.<\/p>\n
(a) Buyer has filed and made available to Target all forms,
\nreports and documents required to be filed by Buyer with the SEC since December
\n31, 1995 other than registration statements on Form S-8 (collectively, the
\n“Buyer SEC Reports”). The Buyer SEC Reports (i) at the time filed, complied in
\nall material respects with the applicable requirements of<\/p>\n
25<\/p>\n
30<\/p>\n
the Securities Act and the Securities Exchange Act of 1934, as amended (the
\n“Exchange Act”), as the case may be, and (ii) did not at the time they were
\nfiled (or if amended or superseded by a filing prior to the date of this
\nAgreement, then on the date of such filing) contain any untrue statement of a
\nmaterial fact or omit to state a material fact required to be stated in such
\nBuyer SEC Reports or necessary in order to make the statements in such Buyer SEC
\nReports, in the light of the circumstances under which they were made, not
\nmisleading. None of Buyer’s Subsidiaries is required to file any forms, reports
\nor other documents with the SEC.<\/p>\n
(b) Each of the consolidated financial statements (including, in
\neach case, any related notes) contained in the Buyer SEC Reports, including any
\nBuyer SEC Reports filed after the date of this Agreement until the Closing,
\ncomplied or will comply as to form in all material respects with the applicable
\npublished rules and regulations of the SEC with respect thereto, was or will be
\nprepared in accordance with GAAP applied on a consistent basis throughout the
\nperiods involved (except as may be indicated in the notes to such financial
\nstatements or, in the case of unaudited statements, as permitted by Form 10-Q
\npromulgated by the SEC) and fairly presented or will present in all material
\nrespects the consolidated financial position of Buyer and its Subsidiaries as of
\nthe respective dates and the consolidated results of its operations and cash
\nflows for the periods indicated, except that the unaudited interim financial
\nstatements do not contain notes and were or are subject to normal and recurring
\nyear-end adjustments which were not or are not expected to be material in
\namount. The unaudited consolidated balance sheet of Buyer as of March 31, 1998
\nis referred to herein as the “Buyer Balance Sheet.”<\/p>\n
(c) The Buyer SEC Reports, this Agreement, the exhibits and
\nschedules hereto, and any certificates or documents to be delivered to Target
\npursuant to this Agreement, when taken together, do not contain any untrue
\nstatement of a material fact or omit to state any material fact necessary in
\norder to make the statements contained herein and therein, in light of the
\ncircumstances under which such statements were made, not misleading.<\/p>\n
Section 4.5 Absence of Undisclosed Liabilities. Except as disclosed in
\nwriting to Target or as otherwise disclosed in the Buyer SEC Reports, Buyer and
\nits Subsidiaries do not have any liabilities, either accrued or contingent
\n(whether or not required to be reflected in financial statements in accordance
\nwith GAAP), and whether due or to become due, which individually or in the
\naggregate would be reasonably likely to have a Material Adverse Effect on Buyer
\nand its Subsidiaries, taken as a whole, or on Sub alone other than (i)
\nliabilities reflected in the Buyer Balance Sheet, (ii) liabilities specifically
\ndescribed in this Agreement, and (iii) normal or recurring liabilities incurred
\nsince March 31, 1998, in the ordinary course of business consistent with past
\npractices.<\/p>\n
Section 4.6 Absence of Certain Changes or Events. Since March 31, 1998,
\nBuyer has conducted its business only in the ordinary course and in a manner
\nconsistent with past practice and, since such date, there has not been: (i) any
\nevent or occurrence that has had a Material Adverse Effect on Buyer and its
\nSubsidiaries, taken as a whole, or on Sub alone; (ii) any damage, destruction or
\nloss (whether or not covered by insurance) with respect to Buyer having a
\nMaterial Adverse Effect on Buyer and its Subsidiaries, taken as a whole, or on
\nSub alone; (iii) any material change by Buyer in its accounting methods,
\nprinciples or practices to which Target has<\/p>\n
26<\/p>\n
31<\/p>\n
not previously consented in writing; or (iv) any revaluation by Buyer of any of
\nits assets having a Material Adverse Effect on Buyer and its Subsidiaries, taken
\nas a whole, or on Sub alone.<\/p>\n
Section 4.7 Interim Operations of Sub. Sub was formed solely for the
\npurpose of engaging in the transactions contemplated by this Agreement, has
\nengaged in no other business activities and has conducted its operations only as
\ncontemplated by this Agreement.<\/p>\n
Section 4.8 Litigation. There is no action, suit, proceeding, claim,
\narbitration or investigation pending, or to the knowledge of Buyer, threatened,
\nagainst Buyer or Sub which is reasonably likely to have a Material Adverse
\nEffect on Buyer and its subsidiaries, taken as a whole, or on Sub alone, or
\nwhich in any manner challenges or seeks to prevent, enjoin, alter or materially
\ndelay any of the transactions contemplated by this Agreement.<\/p>\n
ARTICLE V<\/p>\n
CONDUCT OF BUSINESS<\/p>\n
Section 5.1 Covenants of Target by Target. During the period from the
\ndate of this Agreement and continuing until the earlier of the termination of
\nthis Agreement or the Effective Time, Target agrees (except to the extent that
\nBuyer shall otherwise consent or request, in each case in writing) to carry on
\nits business in the usual, regular and ordinary course in substantially the same
\nmanner as previously conducted, to pay its debts and taxes when due, subject to
\ngood faith disputes over such debts or taxes, to pay or perform its other
\nobligations when due, and, to the extent consistent with such business, to use
\nall reasonable efforts consistent with past practices and policies to (i)
\npreserve intact its present business organization, (ii) keep available the
\nservices of its present officers and key employees; provided, however, that with
\nthe prior written consent of Buyer, which shall not be unreasonably withheld,
\nTarget may reduce its workforce, so long as Target does not terminate any
\nofficer or key employee listed on Annex 6.13, which officers and key employees
\nBuyer desires to retain after the Effective Time, and (iii) preserve its
\nrelationships with customers, suppliers, distributors, licensors, licensees and
\nothers having business dealings with it. Target shall promptly notify Buyer of
\nany event or occurrence not in the ordinary course of business of Target where
\nsuch event or occurrence would result in a breach of any covenant of Target set
\nforth in this Agreement or cause any representation or warranty of Target set
\nforth in this Agreement to be untrue as of the date of, or giving effect to,
\nsuch event or occurrence. Except as expressly contemplated by this Agreement,
\nTarget shall not, without the prior written consent of Buyer:<\/p>\n
(a) transfer or license to any person or entity or otherwise
\nextend, amend or modify any rights to the Target Intellectual Property Rights
\nother than in the ordinary course of business consistent with past practices;<\/p>\n
27<\/p>\n
32<\/p>\n
(b) declare or pay any dividends on or make any other
\ndistributions (whether in cash, stock or property) in respect of any of its
\ncapital stock, or split, combine or reclassify any of its capital stock or issue
\nor authorize the issuance of any other securities in respect of, in lieu of or
\nin substitution for shares of its capital stock, or purchase or otherwise
\nacquire, directly or indirectly, any shares of its capital stock except from
\nformer employees, directors and consultants in accordance with agreements
\nproviding for the repurchase of shares in connection with any termination of
\nservice by such party;<\/p>\n
(c) issue, deliver or sell or authorize or propose the issuance,
\ndelivery or sale of, any shares of its capital stock or securities convertible
\ninto shares of its capital stock, or subscriptions, rights, warrants or options
\nto acquire, or other agreements or commitments of any character obligating it to
\nissue any such shares or other convertible securities (except upon the exercise
\nor conversion of securities outstanding on the date of this Agreement);<\/p>\n
(d) acquire or agree to acquire by merging or consolidating with,
\nor by purchasing a substantial equity interest in or substantial portion of the
\nassets of, or by any other manner, any business or any corporation, partnership
\nor other business organization or division, or otherwise acquire or agree to
\nacquire any assets other than acquisitions involving aggregate consideration of
\nnot more than $10,000 and inventory purchased in the ordinary course of business
\nconsistent with past practices;<\/p>\n
(e) sell, lease, license or otherwise dispose of any of its
\nproperties or assets except for transactions entered into in the ordinary course
\nof business consistent with past practice;<\/p>\n
(f) take any action to: (i) increase or agree to increase the
\ncompensation payable or to become payable to its officers or employees, (ii)
\ngrant any severance or termination pay to, or enter into any employment or
\nseverance agreements with, any officer or employee, (iii) enter into any
\ncollective bargaining agreement, or (iv) establish, adopt, enter into or amend
\nin any material respect any bonus, profit sharing, thrift, compensation, stock
\noption, restricted stock, pension, retirement, deferred compensation,
\nemployment, termination, severance or other plan, trust, fund, policy or
\narrangement for the benefit of any directors, officers or employees;<\/p>\n
(g) revalue any of its assets, including writing down the value
\nof inventory or writing off notes or accounts receivable other than in the
\nordinary course of business;<\/p>\n
(h) incur any indebtedness for borrowed money or guarantee any
\nsuch indebtedness or issue or sell any debt securities or warrants or rights to
\nacquire any debt securities or guarantee any debt securities of others, other
\nthan indebtedness incurred under outstanding lines of credit in the ordinary
\ncourse of business consistent with past practice;<\/p>\n
(i) amend or propose to amend its Articles of Incorporation or
\nBylaws;<\/p>\n
(j) incur or commit to incur any individual capital expenditure
\nother than the existing commitments set forth in the Target Disclosure Schedule;<\/p>\n
28<\/p>\n
33<\/p>\n
(k) enter into or amend any agreements pursuant to which any
\nthird party is granted exclusive marketing or manufacturing rights with respect
\nto any Target Product;<\/p>\n
(l) amend or terminate any material contract, agreement or
\nlicense to which it is a party except in the ordinary course of business;<\/p>\n
(m) waive or release any material right or claim, except in the
\nordinary course of business; provided, however, that Target shall not be
\nrequired under this clause (m) to exercise any right of repurchase it may have
\nto reacquire shares of Target Stock held by directors, officers, employees or
\nconsultants who terminate their employment with the Target;<\/p>\n
(n) initiate any litigation or arbitration proceeding;<\/p>\n
(o) accelerate, amend or change the period of exercisability of
\nany options or restricted stock granted to employees of Target or authorize cash
\npayments in exchange for any options granted under any of such plans; provided,
\nhowever, Target may adopt procedures for acceleration of vesting of all
\noutstanding options and awards under its 1997 Equity Incentive Plan on terms
\nconsistent with the existing provisions of such Plan;<\/p>\n
(p) compromise or otherwise settle or adjust any assertion or
\nclaim of a deficiency in taxes (or interest thereon or penalties in connection
\ntherewith), extend the statute of limitations with any tax authority or file any
\npleading in court in any tax litigation or any appeal from an asserted
\ndeficiency;<\/p>\n
(q) change any of Target’s accounting policies and practices,
\nexcept such changes as may be required in the reasonable opinion of Target’s
\nmanagement to respond to economic or market conditions or as may be required by
\nthe rules of the Institute of Certified Public Accountants or Financial
\nAccounting Standards Board or by applicable governmental authorities;<\/p>\n
(r) change its personnel policies;<\/p>\n
(s) grant any person a power of attorney or similar authority; or<\/p>\n
(t) agree in writing or otherwise to take, any of the actions
\ndescribed in subsections (a) through (s) above, or any action which is
\nreasonably likely to make any of its representations or warranties contained in
\nthis Agreement untrue or incorrect in any material respect on the date made (to
\nthe extent so limited) or as of the Effective Time.<\/p>\n
Section 5.2 Cooperation. Subject to compliance with applicable law, from
\nthe date hereof until the Effective Time, each of Buyer and Target shall confer
\non a regular and frequent basis with one or more representatives of the other
\nparty to report operational matters of materiality and the general status of
\nongoing operations and shall promptly provide the other party or its counsel
\nwith copies of all filings made by such party with any Governmental Entity
\nwhether or not in connection with this Agreement, the Merger and the other
\ntransactions contemplated hereby.<\/p>\n
29<\/p>\n
34
\n ARTICLE VI<\/p>\n
ADDITIONAL COVENANTS AND AGREEMENTS<\/p>\n
Section 6.1 No Solicitation.<\/p>\n
(a) From and after the date of this Agreement until the earlier
\nof the termination of this Agreement or the Effective Time, Target shall not,
\ndirectly or indirectly through any officer, director, employee, representative
\nor agent of Target or otherwise, (i) solicit, initiate, or encourage any
\ninquiries or proposals that constitute, or could reasonably be expected to lead
\nto, a proposal or offer for a merger, consolidation, share exchange, business
\ncombination, sale of all or substantially all assets, sale of shares of capital
\nstock (including without limitation by way of a tender offer) or similar
\ntransactions involving Target other than the transactions contemplated by this
\nAgreement (any of the foregoing inquiries or proposals being referred to in this
\nAgreement as an “Acquisition Proposal”), (ii) engage or participate in
\nnegotiations or discussions concerning, or provide any non-public information to
\nany person or entity relating to, any Acquisition Proposal, or (iii) agree to,
\nenter into, accept, approve or recommend any Acquisition Proposal.<\/p>\n
(b) Target shall notify Buyer immediately (and no later than 24
\nhours) after receipt by Target (or its advisors) of any Acquisition Proposal or
\nany request for nonpublic information in connection with an Acquisition Proposal
\nor for access to the properties, books or records of Target by any person or
\nentity that informs Target that it is considering making, or has made, an
\nAcquisition Proposal. Such notice shall be made orally and in writing and shall
\nindicate in reasonable detail the identity of the offeror and the terms and
\nconditions of such proposal, inquiry or contact.<\/p>\n
Section 6.2 Approval of Shareholders. Target shall promptly after the
\ndate hereof take all action necessary in accordance with the law of the State of
\nCalifornia and its Articles of Incorporation to seek the approval of the Merger
\nby Target shareholders as soon as possible. As promptly as practicable after the
\nexecution of this Agreement, subject to the review and approval of Buyer, Target
\nshall prepare and, after receiving the authorization of Buyer, distribute an
\ninformation statement (the “Information Statement”) to its shareholders for the
\npurpose of soliciting approval of the Merger by the Target shareholders. The
\nInformation Statement shall include the recommendation of the Board of Directors
\nof Target in favor of the Merger and this Agreement. Target and Buyer represent
\nand warrant to the other that the respective information supplied by Target and
\nBuyer for inclusion in the Information Statement to be sent to the shareholders
\nof Target shall not, on the date the Information Statement is first mailed to
\nthe shareholders of Target, or at the Effective Time, contain any statement
\nwhich, at such time and in light of the circumstances under which it was made,
\nis false or misleading with respect to any material fact, or omit to state any
\nmaterial fact necessary in order to make the statements made in the Information
\nStatement not false or misleading, or omit to state any material fact necessary
\nto correct any statement in any earlier communication to the Target shareholders
\nwhich has become false or misleading. If at any time prior to the Effective Time
\nany event relating to Target or any of its Affiliates, officers or directors
\nshould be discovered by Target which should be set forth in a supplement to the
\nInformation Statement, Target shall promptly inform Buyer. If at any time prior
\nto the Effective Time any event relating to Buyer or any of its officers or
\ndirectors should be discovered by Buyer which should be set forth in <\/p>\n
30<\/p>\n
35<\/p>\n
a supplement to the Information Statement, Buyer shall promptly inform Target.
\nFrom the date of this Agreement until the earlier of the termination of this
\nAgreement or the Effective Time, Buyer shall deliver to Target, promptly after
\ntheir filing with the SEC, each Buyer SEC Report, including without limitation
\neach report on Form 8-K filed by Buyer. Whenever any event occurs which is
\nrequired to be set forth in an amendment or supplement to the Information
\nStatement, Target shall promptly inform Buyer of such occurrence and cooperate
\nin mailing to shareholders of Target, such amendment or supplement. Target shall
\ntake all other action necessary or advisable to secure the vote or consent of
\nshareholders required to effect the Merger.<\/p>\n
Section 6.3 Consents. Each of Buyer and Target shall use all reasonable
\nefforts to obtain all necessary consents, waivers and approvals under its
\nrespective material agreements, contracts, licenses and leases as may be
\nnecessary or advisable to consummate the Merger and the other transactions
\ncontemplated by this Agreement.<\/p>\n
Section 6.4 Access to Information. Upon reasonable notice, Target shall
\nafford to the officers, employees, accountants, counsel and other
\nrepresentatives of Buyer, reasonable access, during normal business hours during
\nthe period prior to the earlier of the termination of this Agreement or the
\nEffective Time, to all its properties, books, contracts, commitments and records
\nand, during such period, Target shall furnish promptly to Buyer (i) a copy of
\neach report, schedule, registration statement and other document filed by it
\nwith or received by it from any Governmental Entity and (ii) all other
\ninformation concerning its business, properties and personnel as Buyer may
\nreasonably request. No information or knowledge obtained in any investigation
\npursuant to this Section 6.4 shall affect or be deemed to modify any
\nrepresentation or warranty contained in this Agreement or the conditions to the
\nobligations of the parties to consummate the Merger. Buyer shall ensure that
\neach person receiving such access to Target information or properties, or
\nrequesting documents as provided herein, shall be bound by the Joint
\nConfidentiality Agreement by and between Buyer and Target dated June 18, 1998,
\npertaining to the use and disclosure of such Target information.<\/p>\n
Section 6.5 Legal Conditions to Merger. Each of Buyer and Target will
\ntake all reasonable actions necessary to comply promptly with all legal
\nrequirements which may be imposed on itself with respect to the Merger (which
\nactions shall include, without limitation, furnishing all information in
\nconnection with approvals of or filings with any Governmental Entity) and will
\npromptly cooperate with and furnish information to each other in connection with
\nany such requirements imposed upon either of them in connection with the Merger.
\nEach of Buyer and Target will take all reasonable actions necessary to obtain
\n(and will cooperate with each other in obtaining) any consent, authorization,
\norder or approval of, or any exemption by, any Governmental Entity or other
\nthird party, required to be obtained or made by Target, Buyer or Sub in
\nconnection with the Merger or the taking of any action contemplated thereby or
\nby this Agreement.<\/p>\n
31<\/p>\n
36<\/p>\n
Section 6.6 Public Disclosure. Except with the prior written consent of
\nBuyer, Target shall issue no press release or other public statement with
\nrespect to the Merger or this Agreement. Prior to the Effective Time, Buyer
\nshall not make, or cause to be made, any press release or public announcement in
\nrespect of this Agreement or the transaction contemplated hereby without prior
\nconsultation with Target, subject to Buyer’s obligations to comply with
\napplicable securities laws and NASD listing requirements.<\/p>\n
Section 6.7 Nasdaq National Market Listing. Buyer agrees to file with
\nthe Nasdaq National Market (the “NNM”) prior to the Effective Time a
\nNotification Form for Listing of Additional Shares with respect to shares of
\nBuyer Common Stock issuable, and those required to be reserved for issuance, in
\nconnection with the Merger, upon official notice of issuance.<\/p>\n
Section 6.8 Tax-Free Reorganization. Buyer and Target shall each use its
\nbest efforts to cause the Merger to be treated as a reorganization within the
\nmeaning of Section 368(a) of the Code.<\/p>\n
Section 6.9 Tax Certificates. Buyer and Target each agree to deliver an
\nexecuted tax certificate to the other and its counsel in the form attached
\nhereto as Annex 6.9, which certificate makes certain representations and
\nwarranties regarding the intended tax-free nature of the Merger and Buyer’s
\nintentions regarding the conduct of the business of the Surviving Corporation
\nfollowing the Merger.<\/p>\n
Section 6.10 Indemnification.<\/p>\n
(a) From and after the Effective Time, Buyer agrees that it will
\nfulfill and honor and will cause the Surviving Corporation to fulfill and honor
\nin all respects the obligations of Target pursuant to any indemnification
\nprovisions contained in Target’s Articles of Incorporation or Bylaws with
\nrespect to Target’s respective directors and officers (the “Target Indemnified
\nParties”) existing prior to the date hereof. From and after the Effective Time,
\nsuch obligations shall be the joint and several obligations of Buyer and the
\nSurviving Corporation and, by executing this Agreement, Buyer hereby assumes
\nsuch obligations. The Articles of Incorporation and Bylaws of the Surviving
\nCorporation will contain the provisions with respect to indemnification and
\nelimination of liability for monetary damages set forth in the Articles of
\nIncorporation and Bylaws of Target, which provisions will not be amended,
\nrepealed or otherwise modified from the Effective Time in any manner that would
\nadversely affect the rights thereunder of individuals who, immediately prior to
\nthe Effective Time, were directors, officers, employees or agents of Target,
\nunless such modification is required by law.<\/p>\n
(b) In the event of any claim, action, suit, proceeding or
\ninvestigation to which paragraph (a) applies, (i) any counsel retained by the
\nTarget Indemnified Parties from any period after the Effective Time will be
\nreasonably satisfactory to the Surviving Corporation and Buyer, (ii) subject to
\nthe provisions, of Target’s Articles of Incorporation and Bylaws, and applicable
\nlaw, after the Effective Time, the Surviving Corporation or Buyer will pay the
\nreasonable fees and expenses of such counsel, promptly after statements therefor
\nare received and (iii) the<\/p>\n
32<\/p>\n
37<\/p>\n
Surviving Corporation and Buyer will cooperate in the defense of any matter;
\nprovided, however, that neither Buyer nor the Surviving Corporation will be
\nliable for any settlement effected without the Surviving Corporation’s or
\nBuyer’s written consent (which consent will not be unreasonably withheld); and
\nprovided, further, that, in the event that any claim or claims for
\nindemnification are asserted or made, all rights to indemnification in respect
\nof any such claim or claims will continue until the disposition of any and all
\nsuch claims. The Target Indemnified Parties as a group may retain only one law
\nfirm (in addition to local counsel) to represent them with respect to any single
\naction unless there is, under applicable standards of professional conduct, a
\nconflict on any significant issue between the positions of any two or more
\nTarget Indemnified Parties.<\/p>\n
(c) This Section 6.10 will survive any termination of this
\nAgreement and the consummation of the Merger at the Effective Time, is intended
\nto benefit Target, the Surviving Corporation and the persons who are or were
\ndirectors or officers of Target on or prior to the Effective Time, and will be
\nbinding on all successors and assigns of the Surviving Corporation.<\/p>\n
Section 6.11 Additional Agreements; Reasonable Efforts. Subject to the
\nterms and conditions of this Agreement, each of the parties agrees to use all
\nreasonable efforts to take, or cause to be taken, all action and to do, or cause
\nto be done, all things necessary, proper or advisable under applicable laws and
\nregulations to consummate and make effective the transactions contemplated by
\nthis Agreement, including cooperating fully with the other party, including by
\nprovision of information. In case at any time after the Effective Time any
\nfurther action is necessary or desirable to carry out the purposes of this
\nAgreement or to vest the Surviving Corporation with full title to all
\nproperties, assets, rights, approvals, immunities and franchises of either of
\nthe Constituent Corporations, the proper officers and directors of each party to
\nthis Agreement shall take all such necessary action.<\/p>\n
Section 6.12 Stock Options.<\/p>\n
(a) At the Effective Time, each outstanding Target Option which
\nis unexercised, whether vested or unvested, shall be canceled by Target in
\naccordance with the provisions of Target’s 1995 Stock Option Plan.<\/p>\n
(b) Buyer agrees that, at the Effective Time, it shall
\nirrevocably offer to grant options to purchase an aggregate of at least 211,500
\nshares of Buyer Common Stock to the persons, and in the share amounts, listed on
\nAnnex 6.12 (the “New Options”). Buyer shall take all corporate action necessary
\nto reserve for issuance a sufficient number of shares of Buyer Common Stock to
\nenable the exercise of the New Options in full. Buyer agrees that the Buyer
\nCommon Stock issuable with respect to the New Options shall have been registered
\nprior to the Effective Time, or as promptly as practicable (and in any event no
\nlater than thirty (30) days after the Effective Time) shall be registered,
\npursuant to a registration statement on Form S-8.<\/p>\n
Section 6.13 Target Warrants. At the Effective Time, each outstanding
\nTarget Warrant shall be deemed to constitute a warrant (an “Assumed Warrant”) to
\nacquire, on the same terms and conditions as were applicable under the Target
\nWarrant, such number of shares of Buyer Common Stock as the holder of such
\nTarget Warrant would have been entitled to receive <\/p>\n
33<\/p>\n
38<\/p>\n
pursuant to the Merger (giving effect to the Post-Closing Adjustment) had such
\nholder exercised such Target Warrant in full immediately prior to the Effective
\nTime (rounded down to the nearest whole share), at a price per share (rounded up
\nto the nearest whole cent) equal to (i) the aggregate exercise price per share
\nof Target Stock purchasable pursuant to such Target Warrant immediately prior to
\nthe Effective Time divided by (ii) the number of full shares of Buyer Common
\nStock deemed purchasable pursuant to such Assumed Warrant in accordance with the
\nforegoing.<\/p>\n
Section 6.14 Stock Grants.<\/p>\n
(a) Buyer agrees that, at the Effective Time, it shall
\nirrevocably (i) grant an aggregate of 39,865 shares of Buyer Common Stock (the
\n“Stock Grants”) and (ii) pay cash bonuses (the “Cash Bonuses”) to the persons,
\nand in the share and dollar amounts, listed and described on Annex 6.14.<\/p>\n
(b) Buyer shall take all corporate action necessary to reserve
\nfor issuance a sufficient number of shares of Buyer Common Stock to enable the
\nissuance of the Stock Grants in full. Buyer agrees that the Buyer Common Stock
\nissuable in the Stock Grants shall have been registered prior to the Effective
\nTime, or as promptly as practicable (and in any event no later than thirty (30)
\ndays after the Effective Time) shall be registered, pursuant to a registration
\nstatement on Form S-8.<\/p>\n
Section 6.15 Registration of Buyer Common Stock.<\/p>\n
(a) Buyer shall use all reasonable efforts to cause the Buyer
\nCommon Stock issued in exchange for Target Stock and Buyer Common Stock issuable
\nupon exercise of the Target Warrants (collectively, “Registrable Buyer Common
\nStock”) to be registered under the Securities Act so as to permit the resale
\nthereof, and in connection therewith shall prepare and file with the SEC within
\nforty five (45) days following the Closing, and shall use all reasonable efforts
\nto cause to become effective no later than ninety (90) days following the
\nClosing, a registration statement (the “Registration Statement”) on Form S-3 or
\non such other form as is then available under the Securities Act covering such
\nBuyer Common Stock; provided, however, that each holder of such Buyer Common
\nStock shall provide all such information and materials to Buyer and take all
\nsuch action as may be required in order to permit Buyer to comply with all
\napplicable requirements of the SEC and to obtain any desired acceleration of the
\neffective date of such Registration Statement. Such provision of information and
\nmaterials is a condition precedent to the obligations of Buyer pursuant to this
\nSection 6.15. Buyer shall not be required to effect more than one (1)
\nregistration under this Section 6.15. The offering made pursuant to such
\nregistration shall not be underwritten.<\/p>\n
(b) Notwithstanding the provisions of Section 6.15(a), Buyer
\nshall be entitled to a one-time postponement of the declaration of effectiveness
\nof the Registration Statement prepared and filed pursuant to Section 6.15(a) for
\na period of time up to forty-five (45) calendar days after the deadline therefor
\nset forth in Section 6.15(a), if the Board of Directors of Buyer, acting in good
\nfaith, determines that there exists material nonpublic information about Buyer
\nwhich the Board does not wish to disclose in a registration statement, which
\ninformation would <\/p>\n
34<\/p>\n
39<\/p>\n
otherwise be required by the Securities Act to be disclosed in the Registration
\nStatement to be filed pursuant to Section 6.15(a) above.<\/p>\n
(c) Subject to the limitations of Section 6.15(b), Buyer shall:
\n(i) prepare and file with the SEC the Registration Statement in accordance with
\nSection 6.15(a) with respect to the shares of Registrable Buyer Common Stock and
\nshall use all reasonable efforts to cause the Registration Statement to become
\neffective as promptly as practicable after filing and to keep the Registration
\nStatement effective until the earlier of (A) one (1) year after the Effective
\nTime or (B) such time as the shares of Registrable Buyer Common Stock can be
\nsold without compliance with the registration requirements of the Securities
\nAct; (ii) prepare and file with the SEC such amendments and supplements to the
\nRegistration Statement and the prospectus used in connection therewith as may be
\nnecessary to comply with the provisions of the Securities Act with respect to
\nthe sale or other disposition of all securities proposed to be registered in the
\nRegistration Statement during such period; and (iii) furnish to each holder of
\nRegistrable Buyer Common Stock such number of copies of any prospectus
\n(including any preliminary prospectus and any amended or supplemented
\nprospectus) in conformity with the requirements of the Securities Act, and such
\nother documents, as each such holder may reasonably request in order to effect
\nthe offering and sale of the shares of such Registrable Buyer Common Stock, but
\nonly so long as Buyer shall be required under the provisions hereof to cause the
\nRegistration Statement to remain effective.<\/p>\n
(d) Notwithstanding any other provision of this Section 6.15 but
\nsubject to Section 6.15(e), Buyer shall have the right at any time to require
\nthat all holders suspend open market offers and sales of Registrable Buyer
\nCommon Stock whenever, and for so long as, in the reasonable judgment of Buyer
\nin good faith after consultation with counsel, there is or may be in existence
\nmaterial undisclosed information or events with respect to Buyer (the
\n“Suspension Right”). In the event Buyer exercises the Suspension Right, such
\nsuspension will continue for the period of time reasonably necessary for
\ndisclosure to occur at a time that is not materially detrimental to Buyer and
\nits stockholders or until such time as the information or event is no longer
\nmaterial, each as determined in good faith by Buyer after consultation with
\ncounsel. Buyer will use all reasonable efforts to limit the length of any such
\nsuspension to thirty (30) calendar days or less.<\/p>\n
(e) If any holder of Registrable Buyer Common Stock shall propose
\nto sell any Registrable Buyer Common Stock pursuant to the Registration
\nStatement, it shall notify the General Counsel of Buyer of its intent to do so
\n(including the proposed manner and timing of all sales) at least three (3) full
\ntrading days prior to such sale, and the provision of such notice to Buyer shall
\nconclusively be deemed to reestablish and reconfirm an agreement by such holder
\nto comply with the registration provisions set forth in this Agreement. Unless
\notherwise specified in such notice, such notice shall be deemed to constitute a
\nrepresentation that any information previously supplied by such holder expressly
\nfor inclusion in the Registration Statement (as such information may have been
\nsuperseded by information provided subsequently) is accurate as of the date of
\nsuch notice. At any time within such three (3) trading day period, Buyer may
\nrefuse to permit such holder to resell any Registrable Buyer Common Stock
\npursuant to the Registration Statement; provided, however, that in order to
\nexercise this right, Buyer must deliver a certificate <\/p>\n
35<\/p>\n
40<\/p>\n
in writing to such holder to the effect that a delay in such sale is necessary
\nbecause a sale pursuant to the Registration Statement in its then current form
\nwithout the addition of material, non-public information about Buyer could
\nconstitute a violation of the federal securities laws; and provided further,
\nthat Buyer will use all reasonable efforts to limit any such delay to as short a
\nperiod as practicable and agrees to notify such holder promptly upon termination
\nof the suspension. Notwithstanding anything to the contrary in this Agreement,
\nBuyer will ensure that in any event such holders of Registrable Buyer Common
\nStock shall have at least thirty (30) trading days (prorated for partial
\nquarters) available to sell Buyer Common Stock during each calendar quarter (or
\nportion thereof) after the effectiveness of the Registration Statement until the
\nfirst anniversary of the Effective Time. For any offer or sale of any of
\nRegistrable Buyer Common Stock by a holder of Registrable Buyer Common Stock in
\na transaction that is not exempt under the Securities Act, the holder, in
\naddition to complying with any other federal securities laws, shall deliver a
\ncopy of the final prospectus (or amendment of or supplement to such prospectus)
\nof Buyer covering the Registrable Buyer Common Stock in the form furnished to
\nsuch holder by Buyer to the purchaser of any of the Registrable Buyer Common
\nStock on or before the settlement date for the purchase of such Registrable
\nBuyer Common Stock.<\/p>\n
(f) Buyer will indemnify each holder of Registrable Buyer Common
\nStock, each of its officers and directors and partners, and each person
\ncontrolling such holder within the meaning of Section 15 of the Securities Act
\nagainst all expenses, claims, losses, damages or liabilities (or actions in
\nrespect thereof), including any of the foregoing incurred in settlement of any
\nlitigation, commenced or threatened, arising out of or based on any untrue
\nstatement (or alleged untrue statement) of a material fact contained in any
\nregistration statement, prospectus, preliminary prospectus, offering circular or
\nother document, or any amendment or supplement thereto, incident to any
\nregistration, qualification or compliance effected pursuant to this Section
\n6.15, or based on any omission (or alleged omission) to state therein a material
\nfact required to be stated therein or necessary to make the statements therein,
\nin light of the circumstances in which they were made, not misleading, or any
\nviolation or any alleged violation by Buyer of any rule or regulation
\npromulgated under the Securities Act or the Exchange Act in connection with any
\nsuch registration, qualification or compliance, and Buyer will reimburse each
\nsuch holder, each of its officers and directors, and each person controlling
\nsuch holder, each such underwriter and each person who controls any such
\nunderwriter, for any legal and any other expenses reasonably incurred in
\nconnection with investigating, preparing or defending any such claim, loss,
\ndamage, liability or action, as such expenses are incurred; provided, however,
\nthat Buyer will not be liable in any such case to the extent that any such
\nclaim, loss, damage, liability or expense arises out of or is based on any
\nuntrue statement or omission or alleged untrue statement or omission, made in
\nreliance upon and in conformity with written information furnished to Buyer by
\nsuch holder or controlling person for use therein.<\/p>\n
(g) Each holder of Registrable Buyer Common Stock will, if
\nRegistrable Buyer Common Stock held by such holder is included in the securities
\nas to which such registration is being effected, indemnify Buyer, each of its
\ndirectors and officers, each person who controls Buyer within the meaning of
\nSection 15 of the Securities Act, and each other such holder of Registrable
\nBuyer Common Stock, each of its officers and directors and each person
\ncontrolling such holder within the meaning of Section 15 of the Securities Act,
\nagainst all claims, <\/p>\n
36<\/p>\n
41<\/p>\n
losses, damages and liabilities (or actions in respect thereof) arising out of
\nor based on any untrue statement (or alleged untrue statement) of a material
\nfact contained in any such registration statement, prospectus, offering circular
\nor other document, or any omission (or alleged omission) to state therein a
\nmaterial fact required to be stated therein or necessary to make the statements
\ntherein not misleading, and will reimburse Buyer, such other holders of
\nRegistrable Buyer Common Stock, directors, officers, persons or control persons
\nfor any legal or any other expenses reasonably incurred in connection with
\ninvestigating or defending any such claim, loss, damage, liability or action, as
\nsuch expenses are incurred, in each case to the extent, but only to the extent,
\nthat such untrue statement (or alleged untrue statement) or omission (or alleged
\nomission) is made in such registration statement, prospectus, offering circular
\nor other document in reliance upon and in conformity with written information
\nfurnished to Buyer by such holder for use therein.<\/p>\n
(h) Each party entitled to indemnification under Section 6.15(f)
\nor 6.15(g) (for purposes of this Section 6.15, the “Indemnified Party”) shall
\ngive notice to the party required to provide indemnification (for purposes of
\nthis Section 6.15, the “Indemnifying Party”) promptly after such Indemnified
\nParty has actual knowledge of any claim as to which indemnity may be sought, and
\nshall permit the Indemnifying Party to assume the defense of any such claim or
\nany litigation resulting therefrom, provided that counsel for the Indemnifying
\nParty, who shall conduct the defense of such claim or litigation, shall be
\napproved by the Indemnified Party (whose approval shall not unreasonably be
\nwithheld), and the Indemnified Party may participate in such defense at such
\nparty’s expense; provided, however, that an Indemnified Party (together with all
\nother Indemnified Parties which may be represented without conflict by one
\ncounsel) shall have the right to retain one separate counsel, with the fees and
\nexpenses to be paid by the Indemnifying Party, if representation of such
\nIndemnified Party by the counsel retained by the Indemnifying Party would be
\ninappropriate due to differing or potentially differing interests between such
\nIndemnified Party and any other party represented by such counsel in such
\nproceeding. The failure of any Indemnified Party to give notice as provided
\nherein shall not relieve the Indemnifying Party of its obligations under Section
\n6.15(f) or 6.15(g) unless the failure to give such notice is materially
\nprejudicial to an Indemnifying Party’s ability to defend such action. No
\nIndemnifying Party, in the defense of any such claim or litigation, shall,
\nexcept with the consent of each Indemnified Party, consent to entry of any
\njudgment or enter into any settlement which does not include as an unconditional
\nterm thereof the giving by the claimant or plaintiff to such Indemnified Party
\nof a release from all liability in respect to such claim or litigation.<\/p>\n
(i) Buyer shall pay all of the out-of-pocket expenses, other than
\nunderwriting discounts and commissions, if any, incurred in connection with any
\nregistration of Registrable Buyer Common Stock pursuant to this Section 6.15,
\nincluding, without limitation, all registration and filing fees, printing
\nexpenses, transfer agents’ and registrars’ fees, and the reasonable fees and
\ndisbursements of Buyer’s outside counsel and independent accountants.<\/p>\n
Section 6.16 Expenses. The parties shall each pay their own legal,
\naccounting and financial advisory fees and other out-of-pocket expenses related
\nto the negotiation, preparation and carrying out of this Agreement and the
\ntransactions herein contemplated. In the event the <\/p>\n
37<\/p>\n
42<\/p>\n
Merger is consummated, all legal, accounting and financial advisory fees and
\nother out-of-pocket expenses incurred by Target relating to the negotiation,
\npreparation and carrying out of this Agreement and the transactions herein
\ncontemplated, (including the termination of the Target 401(k) Plan) and, in all
\ncases, including such expenses incurred between the date hereof and the Closing
\nDate (the “Target Transaction Expenses”) shall be borne by the Surviving
\nCorporation, subject to the Post-Closing Adjustment pursuant to Section 2.4.<\/p>\n
Section 6.17 Employee Arrangements.<\/p>\n
(a) Buyer shall offer, or cause the Surviving Corporation to
\noffer, employment with the Surviving Corporation after the Closing to all of the
\nemployees of Target listed on Annex 6.17 hereto. All such Target employees
\naccepting employment with the Surviving Corporation shall be eligible for
\nsubstantially similar employee benefits, on substantially similar terms, as
\nother employees of Buyer of comparable rank and length of service. In
\ndetermining eligibility for benefits which depend on length of service, Buyer
\nshall provide each such Target employee with full credit for the period of such
\nemployee’s service with Target (other than with respect to options, if any,
\ngranted by Buyer to such Target employees). Except as set forth in this Section
\n6.17, the terms of employment of such Target employees shall be determined by
\nagreement of Buyer (or the Surviving Corporation, as the case may be) and each
\nsuch employee, provided that such terms of employment include (i) the New
\nOptions and Cash Bonuses set forth as provided in Section 6.12 and (ii) the
\nStock Grants as set forth in Section 6.14.<\/p>\n
(b) Buyer shall offer, or cause the Surviving Corporation to
\noffer, continued group health coverage pursuant to COBRA to those individuals
\nreceiving COBRA coverage through Target Employee Plans immediately prior to the
\nClosing. With respect to those employees of Target who participate immediately
\nprior to the Closing in Target Employee Plans (and any dependents of such
\nemployees that participate in Target Employee Plans) that are not offered or do
\nnot accept employment with the Surviving Corporation, Buyer shall offer, or
\ncause the Surviving Corporation to offer, COBRA coverage to such individuals and
\ntheir covered dependents.<\/p>\n
Section 6.18 Target 1997 Audited Financials. Target will cause an audit
\nto be conducted of Target’s financial statements for the year ended December 31,
\n1997 and, as promptly as practicable following the date of this Agreement shall
\ndeliver to Buyer Target’s balance sheet as of December 31, 1997 and its
\nstatements of operations, shareholders’ equity and cash flows for the year then
\nended, audited and reported upon by its independent certified public accountants
\n(the “Target 1997 Audited Financials”).<\/p>\n
Section 6.19 Voting Agreements. Target shall cause each of Edward Colby,
\nPhilipp Beisel, Greg Seitz, Sequoia Capital VII, Sequoia Technology Partners VI,
\nSequoia XXIV, Sequoia 1995, Sequoia 1997, SQP 1997, Hummer Winblad, Venture
\nPartners II, L.P., Hummer Winblad Technology Fund II, L.P., Hummer Winblad
\nTechnology Fund II (A), L.P., Bay Partners SBIC, Bayview Investors, Ltd., and RS
\n& Co. IV, L.P., to execute and deliver to Buyer, on or before the date of this
\nAgreement, voting agreements and irrevocable proxies in the forms <\/p>\n
38<\/p>\n
43<\/p>\n
annexed hereto as Annex 6.19 (the “Voting Agreements”), agreeing, among other
\nthings, to vote in favor of the Merger. Such directors, officers, affiliates and
\nother shareholders will own, in the aggregate, no less than fifty percent (50%)
\nof the voting power of each of the outstanding Target Common Stock and Target
\nPreferred Stock as of the date of this Agreement.<\/p>\n
Section 6.20 Target 401(k) Plan. Target shall take all actions necessary
\nto ratify the adoption of Target’s 401(k) Plan (the “Target 401(k) Plan”) and
\nall amendments thereto prior to the Closing. Target shall take all actions
\nnecessary to terminate the Target 401(k) Plan prior to the Closing. If annual
\nreturns have not been filed for the Target 401(k) Plan for any years for which
\nsuch returns are required to be filed, Target shall file such returns under the
\nU.S. Department of Labor’s Delinquent Filer Voluntary Compliance Program.
\nPenalties required to be paid under such program shall be treated as a liability
\nof Target and shall be set forth on the Liabilities Certificate for purposes of
\ndetermining the Post-Closing Adjustment under Section 2.4.<\/p>\n
Section 6.21 Notification of Certain Matters. Target shall give prompt
\nnotice to Buyer, and Buyer and Sub shall give prompt notice to Target, of the
\noccurrence, or failure to occur, of any event, which occurrence or failure to
\noccur, if uncured, would be likely to cause the failure of any of the conditions
\nset forth in Article VII of this Agreement.<\/p>\n
ARTICLE VII<\/p>\n
CONDITIONS TO MERGER<\/p>\n
Section 7.1 Conditions to Each Party’s Obligation to Effect the Merger.
\nThe respective obligations of each party to this Agreement to effect the Merger
\nshall be subject to the satisfaction prior to the Closing Date of the following
\nconditions:<\/p>\n
(a) Shareholder Approval. This Agreement and the Merger shall
\nhave been approved and adopted by the requisite vote of the holders of
\noutstanding shares of Target Common Stock and Target Preferred Stock, as
\nrequired by Target’s Articles of Incorporation and the CGL.<\/p>\n
(b) Governmental Approvals. All authorizations, consents, orders
\nor approvals of, or declarations or filings with, or expirations of waiting
\nperiods imposed by, any Governmental Entity shall have been obtained or filed,
\nor shall have occurred as the case may be.<\/p>\n
(c) No Injunctions or Restraints; Illegality. No temporary
\nrestraining order, preliminary or permanent injunction or other order issued by
\nany court of competent jurisdiction or other legal or regulatory restraint or
\nprohibition preventing the consummation of the Merger or limiting or restricting
\nBuyer’s conduct or operation of the business of Buyer or Target after the Merger
\nshall have been issued, nor shall any proceeding brought by a domestic
\nadministrative agency or commission or other domestic Governmental Entity,
\nseeking any of the foregoing be pending; nor shall there be any action taken, or
\nany statute, rule, regulation or order enacted, entered, enforced or deemed
\napplicable to the Merger which makes the consummation of the Merger illegal or
\nprevents or prohibits the Merger.<\/p>\n
39<\/p>\n
44<\/p>\n
Section 7.2 Additional Conditions to Obligations of Buyer and Sub. The
\nobligations of Buyer and Sub to effect the Merger are subject to the
\nsatisfaction of each of the following additional conditions, any of which may be
\nwaived in writing exclusively by Buyer and Sub:<\/p>\n
(a) Representations and Warranties. The representations and
\nwarranties of Target set forth in this Agreement shall be true and correct in
\nall material respects as of the date of this Agreement and as of the Closing
\nDate as though made on and as of the Closing Date, except for changes
\ncontemplated by this Agreement, and Buyer shall have received a certificate
\nsigned on behalf of Target by an executive officer of Target to such effect.<\/p>\n
(b) Performance Obligations. Target shall have performed in all
\nmaterial respects all obligations required to be performed by it under this
\nAgreement at or prior to the Closing Date, and Buyer shall have received a
\ncertificate signed on behalf of Target by an executive officer of Target to such
\neffect.<\/p>\n
(c) Confidentiality and Inventions Agreements. Buyer shall have
\nreceived confidentiality and inventions assignment agreements signed by each
\ncurrent Target employee that has or had access to confidential information of
\nTarget in substantially the form of Annex 7.2(c), and each such agreement shall
\nbe in full force and effect.<\/p>\n
(d) Non-Competition Agreements. Buyer shall have received from
\neach of Philipp Beisel and Greg Seitz, a Non-Competition Agreement in
\nsubstantially the form of Annex 7.2(d).<\/p>\n
(e) Target Employees. Buyer shall be satisfied, in its sole
\ndiscretion, that (i) all of the employees identified as Key Employees on Annex
\n7.2(e) and (ii) not less than eighty five percent (85%) of the other Target
\nemployees listed on Annex 7.2(e) are ready, willing and able to remain employed
\nby Buyer or the Surviving Corporation after the Effective Time on terms
\nreasonably satisfactory to Buyer.<\/p>\n
(f) Tax Opinion. Buyer shall have received the opinion of Gray
\nCary Ware & Freidenrich LLP, counsel to Buyer, to the effect that the Merger
\nwill be treated for federal income tax purposes as a reorganization within the
\nmeaning of Section 368(a) of the Code. Such opinion shall be substantially
\nsimilar to that delivered pursuant to Section 7.3(c).<\/p>\n
(g) Legal Opinion. Buyer shall have received a legal opinion from
\nFenwick & West LLP, counsel to Target, substantially in the form of Annex
\n7.2(g).<\/p>\n
(h) No Material Adverse Effect. Since April 30, 1998, there shall
\nhave been no event or occurrence that had or could reasonably be expected to
\nhave a Material Adverse Effect on Target.<\/p>\n
(i) Third-Party Consents and Waivers. Target shall have provided
\nall notices to third parties, and shall have received all third-party consents
\nor waivers required in connection with the consummation of the transactions
\ncontemplated by this Agreement under any contract <\/p>\n
40<\/p>\n
45<\/p>\n
set forth (or required to be set forth) in Section 3.4 of the Target Disclosure
\nSchedule or required to be obtained pursuant to Section 6.3.<\/p>\n
(j) Investor Representation Letters. Buyer shall have received an
\nexecuted Investor Representation Letter in the form of Annex 7.2(j) from each
\nperson and entity that is to receive Buyer Common Stock or Assumed Warrants in
\nthe Merger.<\/p>\n
(k) Dissenting Shares. Holders of Target Stock entitled to
\nreceive not more than five percent (5%) of all of the Buyer Common Stock
\nissuable in the Merger shall have elected, or shall be eligible to elect, to
\nhave their shares treated as Dissenting Shares under Section 2.1(e).<\/p>\n
(l) Target 1997 Audited Financials. Target shall have delivered
\nthe Target 1997 Audited Financials to Buyer.<\/p>\n
(m) Target 401(k) Plan. Target shall have taken all actions
\nnecessary to terminate the Target 401(k) Plan prior to the Closing.<\/p>\n
(n) Miscellaneous Agreements. Target shall have taken all actions
\nnecessary to terminate (i) the Second Amended & Restated Co-Sale Agreement dated
\nJuly 31, 1997 by and between Target and various Target shareholders and (ii) the
\nFifth Amended and Restated Investor’s Rights Agreement dated July 31, 1997.<\/p>\n
(o) Target 401(k) Plan. Target shall have taken all actions
\nnecessary to ratify the adoption of the Target 401(k) Plan and all amendments
\nthereto prior to the Closing. Target shall have taken all actions necessary to
\nterminate the Target 401(k) Plan prior to the Closing.<\/p>\n
Section 7.3 Additional Conditions to Obligations of Target. The
\nobligation of Target to effect the Merger is subject to the satisfaction of each
\nof the following additional conditions, any of which may be waived, in writing,
\nexclusively by Target:<\/p>\n
(a) Representations and Warranties. The representations and
\nwarranties of Buyer and Sub set forth in this Agreement shall be true and
\ncorrect in all material respects as of the date of this Agreement and as of the
\nClosing Date as though made on and as of the Closing Date, except for changes
\ncontemplated by this Agreement, and Target shall have received a certificate
\nsigned on behalf of Buyer by an executive officer of Buyer to such effect.<\/p>\n
(b) Performance Obligations. Buyer and Sub shall have performed
\nin all material respects all obligations required to be performed by them under
\nthis Agreement at or prior to the Closing Date, and Target shall have received a
\ncertificate signed on behalf of Buyer by an executive officer of Buyer to such
\neffect.<\/p>\n
(c) Tax Opinion. Target shall have received the opinion of
\nFenwick & West LLP, counsel to Target, to the effect that the Merger will be
\ntreated for federal income tax purposes as a reorganization within the meaning
\nof Section 368(a) of the Code. Such opinion shall be substantially similar to
\nthat delivered pursuant to Section 7.2(f).<\/p>\n
41<\/p>\n
46<\/p>\n
(d) Legal Opinion. Target shall have received a legal opinion
\nfrom Gray Cary Ware & Freidenrich LLP, counsel to Buyer, substantially in the
\nform of Annex 7.3(d).<\/p>\n
(e) Nasdaq National Market Listing. Buyer shall have filed with
\nthe NNM prior to the Effective Time a Notification Form for Listing of
\nAdditional Shares with respect to the shares of Buyer Common Stock issuable, and
\nthose reserved for future issuance, in connection with the Merger, upon official
\nnotice of issuance.<\/p>\n
ARTICLE VIII<\/p>\n
TERMINATION AND AMENDMENT<\/p>\n
Section 8.1 Termination. This Agreement may be terminated at any time
\nprior to the Effective Time (with respect to Sections 8.1(b) through 8.1(f), by
\nwritten notice by the terminating party to the other party), whether before or
\nafter approval of the matters presented in connection with the Merger by the
\nshareholders of Target:<\/p>\n
(a) by mutual written consent duly authorized by the Board of
\nDirectors of Buyer and Target;<\/p>\n
(b) by either Buyer or Target if the Merger shall not have been
\nconsummated by June 30, 1998 (provided that the right to terminate this
\nAgreement under this Section 8.1(b) shall not be available to any party whose
\nfailure to fulfill any material obligation under this Agreement has been the
\ncause of or resulted in the failure of the Merger to occur on or before such
\ndate);<\/p>\n
(c) by either Buyer or Target, if a court of competent
\njurisdiction or other Governmental Entity shall have issued a nonappealable
\nfinal order, decree or ruling or taken any other action, in each case having the
\neffect of permanently restraining, enjoining or otherwise prohibiting the
\nMerger, except, if the party relying on such order, decree or ruling or other
\naction has not materially complied with its obligations under Article VI of this
\nAgreement;<\/p>\n
(d) by Target, if there has been a material breach of any
\nrepresentation, warranty, covenant or agreement on the part of Buyer or Sub,
\nwhich breach shall not have been cured within ten (10) business days following
\nreceipt by the breaching party of written notice of such breach from Target;<\/p>\n
(e) by Buyer, if there has been a material breach of any
\nrepresentation, warranty, covenant or agreement on the part of Target, which
\nbreach shall not have been cured within ten (10) business days following receipt
\nby the breaching party of written notice of such breach from Buyer; or<\/p>\n
(f) by Buyer, if for any reason Target shareholders fail to
\napprove this Agreement and the transactions contemplated hereby by June 30,
\n1998.<\/p>\n
42<\/p>\n
47<\/p>\n
Section 8.2 Effect of Termination. In the event of termination of this
\nAgreement as provided in Section 8.1, there shall be no liability or obligation
\non the part of Buyer, Target, Sub or their respective officers, directors,
\nshareholders or Affiliates, except (a) as set forth in Section 8.3 and (b) to
\nthe extent that such termination results from the intentional breach by a party
\nof any of its representations, warranties or covenants set forth in this
\nAgreement; provided that, the provisions of Sections 6.6, 6.16 and 8.3 shall
\nremain in full force and effect and survive any termination of this Agreement.<\/p>\n
Section 8.3 Fees and Expenses.<\/p>\n
(a) If (i) the Merger is consummated or (ii) this Agreement is
\nterminated other than as described in Section 8.3(b), all costs and expenses
\nincurred in connection with this Agreement and the transactions contemplated
\nhereby shall be paid in accordance with Section 6.16.<\/p>\n
(b) If this Agreement is terminated by Buyer as provided in
\nSections 8.1(e) or 8.1(f) (but only to the extent there has not been (i) a
\nmaterial breach of this Agreement by Buyer that has not been cured within ten
\n(10) business days following receipt by Buyer of written notice of such breach
\nfrom Target, or (ii) an event or occurrence that has a Material Adverse Effect
\non Buyer), Target shall pay to Buyer, within five (5) business days after
\nreceipt of a written request therefor, in same day funds, an amount equal to all
\ncosts and expenses reasonably incurred by Buyer in connection with this
\nAgreement and the transactions contemplated hereby, including all reasonable
\nlegal, accounting, financial advisory and other professional and service fees
\nand expenses.<\/p>\n
(c) If this Agreement is terminated by Target as provided in
\nSection 8.1(d) (but only to the extent there has not been (i) a material breach
\nof this Agreement by Target that has not been cured within ten (10) business
\ndays following receipt by Target of written notice of such breach from Buyer, or
\n(ii) an event or occurrence that has a Material Adverse Effect on Target), Buyer
\nshall pay to Target, within five (5) business days of the receipt of a written
\nrequest therefor, in same day funds, an amount equal to all costs and expenses
\nreasonably incurred by Target in connection with this Agreement and the
\ntransactions contemplated hereby, including all reasonable legal, accounting,
\nfinancial advisory and other professional and service fees and expenses.<\/p>\n
Section 8.4 Amendment. This Agreement may be amended by the parties
\nhereto, by action taken or authorized by their respective Boards of Directors,
\nat any time before or after approval of the matters presented in connection with
\nthe Merger by the shareholders of Target, but, after any such approval, no
\namendment shall be made which by law requires further approval by such
\nshareholders without such further approval. This Agreement may not be amended
\nexcept by an instrument in writing signed on behalf of each of the parties
\nhereto.<\/p>\n
Section 8.5 Extension; Waiver. At any time prior to the Effective Time,
\nthe parties hereto, by action taken or authorized by their respective Boards of
\nDirectors, may, to the extent legally allowed, (i) extend the time for the
\nperformance of any of the obligations or other acts of the other parties hereto,
\n(ii) waive any inaccuracies in the representations and warranties <\/p>\n
43<\/p>\n
48<\/p>\n
contained herein or in any document delivered pursuant hereto and (iii) waive
\ncompliance with any of the agreements or conditions contained herein. Any
\nagreement on the part of a party hereto to any such extension or waiver shall be
\nvalid only if set forth in a written instrument signed on behalf of such party.<\/p>\n
ARTICLE IX<\/p>\n
ESCROW AND INDEMNIFICATION<\/p>\n
Section 9.1 Survival of Representations, Warranties, Covenants and
\nAgreements. The representations, warranties, covenants and agreements of Target
\ncontained in this Agreement or any instrument delivered pursuant to this
\nAgreement shall survive the Closing Date and shall continue in full force and
\neffect until the second anniversary of the Closing Date (the “Termination
\nDate”).<\/p>\n
Section 9.2 Indemnification by Target Shareholders.<\/p>\n
(a) Subject to the terms and conditions contained in this Article
\nIX, the holders of Target Preferred Stock outstanding immediately prior to the
\nEffective Time (the “Indemnifying Shareholders”) shall jointly and severally
\nindemnify, defend and hold harmless Buyer, its shareholders, officers,
\ndirectors, employees and attorneys, all Subsidiaries and affiliates of Buyer,
\nand the respective officers, directors, employees and attorneys of such entities
\n(all such persons and entities being collectively referred to as the “Buyer
\nGroup”) from, against, for and in respect of any and all claims, losses,
\nliabilities, damages, costs and expenses (including reasonable legal fees and
\nexpenses and expenses of investigation and defense) which any member of the
\nBuyer Group may sustain or incur (collectively, “Buyer Losses”) which are caused
\nby or arise out of any inaccuracy in or breach of any of the representations,
\nwarranties, covenants or agreements made by Target in this Agreement, the Target
\nDisclosure Schedule or any officer certificate delivered pursuant to Section 7.2
\nor which relate to either the failure to file annual returns for the Target
\n401(k) Plan for the year 1994 or the failure to properly adopt the Target 401(k)
\nPlan and any amendments thereto in a form complying with the applicable
\nrequirement of the Code.<\/p>\n
(b) Anything in this Agreement to the contrary notwithstanding,
\nnone of the Indemnifying Shareholders shall be liable for indemnification under
\nthis Section 9.2 until the aggregate of all Buyer Losses for which indemnity is
\nclaimed exceeds $50,000, in which case Buyer shall be entitled to
\nindemnification for the full amount of the indemnification including the first
\n$50,000.<\/p>\n
(c) The obligation of the Indemnifying Shareholders to indemnify
\nmembers of the Buyer Group for a Buyer Loss under this Article IX is subject to
\nthe condition that the Shareholder Representative (as defined in Section 9.7)
\nshall have received an Indemnification Claim (as defined in Section 9.3(b)) for
\nsuch Buyer Loss on or before the Termination Date.<\/p>\n
44<\/p>\n
49<\/p>\n
(d) The amount of Buyer Losses in respect to any Indemnity Claim
\nshall be reduced by the amount of any insurance payment received by Buyer or the
\nSurviving Corporation in compensation for such Buyer Losses.<\/p>\n
(e) The provisions of Sections 9.2(b) and (c) and Section 9.6
\nshall not limit, in any manner, any remedy at law or in equity to which any
\nmember of the Buyer Group shall be entitled against Target or any shareholder or
\nformer shareholder of Target as a result of fraud or intentional
\nmisrepresentation by Target, any Target shareholder or any of their respective
\nrepresentatives or agents.<\/p>\n
Section 9.3 Procedures for Indemnification.<\/p>\n
(a) As used in this Article IX, the term “Indemnitee” means the
\nmember or members of the Buyer Group seeking indemnification hereunder.<\/p>\n
(b) A claim for indemnification hereunder (an “Indemnification
\nClaim”) shall be made by Indemnitee by delivery of a written notice to the
\nShareholder Representative with a copy to the Escrow Agent. The Indemnification
\nClaim shall specify the basis on which indemnification is sought in reasonable
\ndetail (and shall include relevant documentation related to the Indemnification
\nClaim), the amount of the asserted Buyer Losses and, in the case of a Third
\nParty Claim (as defined in Section 9.4), shall contain (by attachment or
\notherwise) such other information as Indemnitee shall have concerning such Third
\nParty Claim.<\/p>\n
(c) If the Indemnification Claim involves a Third Party Claim,
\nthe procedures set forth in Section 9.4 shall be observed by Indemnitee and
\nIndemnitor.<\/p>\n
Section 9.4 Defense of Third Party Claims. Should any claim be made or
\nany suit or proceeding instituted by a third party against an Indemnitee which,
\nif prosecuted successfully, would be a matter for which such Indemnitee would be
\nentitled to indemnification under this Article IX (a “Third Party Claim”), the
\nobligations and liabilities of the parties hereunder with respect to such Third
\nParty Claim shall be subject to the following terms and conditions:<\/p>\n
(a) Indemnitee shall give the Shareholder Representative written
\nnotice of any such claim promptly after receipt by Indemnitee of notice thereof,
\nand the Shareholder Representative may undertake control of the defense thereof
\nby counsel of its own choosing reasonably acceptable to Indemnitee. Indemnitee
\nmay participate in the defense through its own counsel at its own expense. The
\nassumption of the defense of any Third Party Claim by the Shareholder
\nRepresentative shall be an acknowledgment by the Indemnifying Shareholders that
\nsuch Third Party Claim is subject to indemnification under the provisions of
\nthis Article IX and that such provisions are binding on the Indemnifying
\nShareholders. If, however, the Shareholder Representative fails or refuses to
\nundertake the defense of such Third Party Claim within ten (10) days after
\nwritten notice of such claim has been delivered to the Shareholder
\nRepresentative by Indemnitee, Indemnitee shall have the right to undertake the
\ndefense, compromise and, subject to Section 9.5, settlement of such Third Party
\nClaim with counsel of its own choosing. Failure of Indemnitee to furnish written
\nnotice to Indemnitor of a Third Party Claim shall not release the <\/p>\n
45<\/p>\n
50<\/p>\n
Indemnifying Shareholders from their obligations hereunder, except to the extent
\nthe Indemnifying Shareholders are prejudiced by such failure.<\/p>\n
(b) Indemnitee and the Indemnifying Shareholders shall cooperate
\nwith each other in all reasonable respects in connection with the defense of any
\nThird Party Claim, including making available records relating to such claim and
\nfurnishing employees of Indemnitee as may be reasonably necessary for the
\npreparation of the defense of any such Third Party Claim or for testimony as
\nwitness in any proceeding relating to such claim.<\/p>\n
Section 9.5 Settlement of Third Party Claims. Unless the Shareholder
\nRepresentative has failed to fulfill his obligations under Section 9.4, no
\nsettlement by Indemnitee of a Third Party Claim shall be made without the prior
\nwritten consent by the Shareholder Representative which consent shall not be
\nunreasonably withheld or delayed. If the Shareholder Representative has assumed
\nthe defense of a Third Party Claim as contemplated by Section 9.4(a), no
\nsettlement of such Third Party Claim may be made by the Indemnifying
\nShareholders without the prior written consent by or on behalf of Indemnitee,
\nunless such settlement includes a complete release of all claims against
\nIndemnitee.<\/p>\n
Section 9.6 Resolution of Indemnification Claims.2 Any Indemnification
\nClaim received by the Shareholder Representative pursuant to Section 9.3 above
\nwill be resolved as follows:<\/p>\n
(a) To provide a fund against which members of the Buyer Group
\nmay assert Indemnification Claims under this Article IX, the Escrow Shares shall
\nbe withheld and deposited into the Escrow in accordance with the provisions of
\nSection 2.3. The Escrow Shares so deposited shall be held and distributed in
\naccordance with the Escrow Agreement.<\/p>\n
(b) Subject to the provisions of Section 9.2(e), all
\nIndemnification Claims shall be made in accordance with this Article IX and the
\nEscrow Agreement against the Escrow Fund, and no claim for indemnification shall
\nbe asserted against any Indemnifying Shareholder or any other former shareholder
\nof Target.<\/p>\n
(c) In the event that the Shareholder Representative gives
\nwritten notice contesting all, or a portion of, an Indemnification Claim to
\nIndemnitee (a “Contested Claim”) within thirty (30) days after receipt of such
\nIndemnification Claim, the matter will be settled by binding arbitration
\npursuant to Section 9.6(d), unless otherwise agreed by Indemnitor and
\nIndemnitee. The final decision of the arbitrator shall be furnished to the
\nShareholder Representative and Indemnitee in writing and will constitute a
\nconclusive determination of the issue in question, binding upon the Indemnifying
\nShareholders and Indemnitee and shall not be contested or appealed by any of
\nthem.<\/p>\n
(d) Any Contested Claim shall be settled by arbitration at a
\nmutually agreeable location in Santa Clara, California and, except as herein
\nspecifically stated, in accordance with the commercial arbitration rules of the
\nAmerican Arbitration Association (the “AAA Rules”) then in effect. However, in
\nall events, these arbitration provisions shall govern over any conflicting rules
\nwhich may now or hereafter be contained in the AAA Rules. Any <\/p>\n
46<\/p>\n
51<\/p>\n
judgment upon the award rendered by the arbitrator may be entered in any court
\nhaving jurisdiction over the subject matter thereof. The arbitrator shall have
\nthe authority to grant any equitable and legal remedies that would be available
\nin any judicial proceeding instituted to resolve a Contested Claim.<\/p>\n
Section 9.7 Shareholder Representative.<\/p>\n
(a) Authority. For the purposes of this Agreement the holders of
\nTarget Preferred Stock, without any further action on the part of any such
\nshareholder, shall be deemed to have consented to the appointment of Philipp
\nBeisel as the representative of such shareholders (the “Shareholder
\nRepresentative”), as the attorney-in-fact for and on behalf of each such
\nshareholder, and the taking by the Shareholder Representative of any and all
\nactions and the making of any decisions required or permitted to be taken by
\nthem under this Agreement or the Escrow Agreement, including, without
\nlimitation, the exercise of the power to (i) execute the Escrow Agreement, (ii)
\nprepare, or cause to be prepared, and deliver to Buyer the Signing Date Balance
\nSheet, the Closing Date Balance Sheet and the Liabilities Certificate, (iii)
\nnegotiate and agree with Buyer on the amount of the Post-Closing Adjustment,
\n(iv) receive or give any notice on behalf of the Indemnifying Shareholders
\npursuant to this Agreement or the Escrow Agreement, (v) authorize delivery to
\nBuyer of the Escrow Shares, or any portion thereof, in satisfaction of
\nIndemnification Claims, (vi) agree to, negotiate, enter into settlements and
\ncompromises of, and demand arbitration and comply with orders of courts and
\nawards of arbitrators with respect to, such Indemnification Claims, and (vii)
\ntake all other actions necessary in the judgment of the Shareholder
\nRepresentative for the accomplishment of the foregoing and all of the other
\nterms, conditions and limitations of this Agreement and the Escrow Agreement.
\nAccordingly, the Shareholder Representative has the authority and power
\nconferred by this Agreement to act on behalf of each holder of Target Preferred
\nStock and each Indemnifying Shareholder with respect to this Agreement and the
\nEscrow Agreement and the disposition, settlement or other handling of all
\nclaims, rights or obligations arising from and taken pursuant to this Agreement
\nor the Escrow Agreement. Such shareholders will be bound by all actions taken by
\nthe Shareholder Representatives in connection with this Agreement and the Escrow
\nAgreement, and Buyer shall be entitled to rely on any action or decision of the
\nShareholder Representative as the action or decision of each holder of Target
\nPreferred Stock and each Indemnifying Shareholder.<\/p>\n
(b) Standard of Conduct. Neither the Shareholder Representative
\nnor any of his agents shall be liable to any holder of Target Preferred Stock or
\nany Indemnifying Shareholder for any error of judgment, act done or omitted by
\nhim, or mistake of fact or law in connection with his services pursuant to
\nSection 9.7, unless caused by his own gross negligence or willful misconduct. In
\ntaking any action or refraining from taking any action whatsoever the
\nShareholder Representative shall be protected in relying upon any notice, paper
\nor other document reasonably believed by him to be genuine, or upon any evidence
\nreasonably deemed by him to be sufficient. The Shareholder Representative shall
\nnot be required to take any action which is contrary to this Agreement, the
\nEscrow Agreement or applicable law. The Shareholder Representative may consult
\nwith counsel in connection with his duties and shall be fully protected in any
\nact taken, suffered or permitted by him in good faith in accordance with the<\/p>\n
47<\/p>\n
52<\/p>\n
advice of counsel. In connection with his services under Section 9.7, the
\nShareholder Representative shall not be responsible for determining or verifying
\nthe authority of any person acting or purporting to act on behalf of any party
\nto this Agreement.<\/p>\n
(c) Indemnification of the Shareholder Representative. Each
\nIndemnifying Shareholder shall indemnify the Shareholder Representative, ratably
\nin accordance with the value of the shares of Buyer Common Stock received by
\nsuch shareholder in the Merger, for any and all liabilities, obligations,
\nlosses, damages, penalties, actions, judgments, suits, costs, expenses or
\ndisbursements of any kind or nature whatsoever which may at any time be imposed
\non, incurred by or asserted against the Shareholder Representative in any way
\nrelating to or arising out of this Agreement or any documents contemplated by or
\nreferred to herein or therein or the transactions contemplated hereby or thereby
\nor the enforcement of any of the terms hereof or thereof or of any such other
\ndocuments; provided, however, that no such shareholder shall be liable for any
\nof the foregoing to the extent they arise from the Shareholder Representative’s
\ngross negligence or willful misconduct. The Shareholder Representative shall be
\nfully justified in refusing to take or to continue to take any action hereunder
\nunless it shall first be indemnified to its reasonable satisfaction by such
\nshareholder against any and all liability and expense which may be incurred by
\nit by reason of taking or continuing to take any such action.<\/p>\n
(d) Resignation or Removal of the Shareholder Representative.
\nSubject to the appointment and acceptance of a successor Shareholder
\nRepresentative as provided below, the Shareholder Representative may resign at
\nany time thirty (30) days subsequent to giving notice thereof to all
\nIndemnifying Shareholders, Buyer and the Escrow Agent, and the Shareholder
\nRepresentative may be removed at any time with or without cause by action of the
\nIndemnifying Shareholders who represent a majority of the shares of all
\nIndemnifying Shareholders. Upon any such resignation or removal, Indemnifying
\nShareholders representing a majority of the shares of the Indemnifying
\nShareholders shall have the right to appoint a successor Shareholder
\nRepresentative, which Shareholder Representative shall be reasonably acceptable
\nto Buyer. If no successor Shareholder Representative shall have been appointed
\nby Indemnifying Shareholders and accepted such appointment within twenty (20)
\ndays after the retiring Shareholder Representative gives notice of resignation
\nor the Shareholder Representative’s removal, then the retiring or removed
\nShareholder Representative may appoint a successor which shall be reasonably
\nacceptable to Buyer. Upon the acceptance of any appointment as Shareholder
\nRepresentative hereunder, such successor Shareholder Representative shall
\nthereupon succeed to and become vested with all the rights, powers, privileges
\nand duties of the retiring or removed Shareholder Representative, and the
\nretiring or removed Shareholder Representative shall be discharged from its
\nduties and obligations hereunder. After any retiring Shareholders
\nRepresentative’s resignation or removal hereunder as the Shareholder
\nRepresentative, the provisions of this Section 9.7 shall continue in effect for
\nits benefit in respect of any actions taken or omitted to be taken by it while
\nhe was acting as the Shareholder Representative.<\/p>\n
(e) Individual Capacity. The Shareholder Representative, to the
\nextent he is an Indemnifying Shareholder, shall have the same rights and powers
\nunder this Agreement as any other Indemnifying Shareholder and may exercise the
\nsame as though he were not the <\/p>\n
48<\/p>\n
53<\/p>\n
Shareholder Representative, and the term “Indemnitor,” as used in this Article
\nIX, shall refer to the Shareholder Representative in his capacity as such.<\/p>\n
ARTICLE X<\/p>\n
GENERAL PROVISIONS<\/p>\n
Section 10.1 Notices. All notices and other communications hereunder
\nshall be in writing and shall be deemed given if delivered personally or by
\ncommercial overnight delivery service, or mailed by registered or certified mail
\n(return receipt requested) or sent via facsimile (with confirmation of receipt)
\nto the parties at the following addresses (or at such other address for a party
\nas shall be specified by like notice):<\/p>\n
(a) if to Buyer of Sub, to:<\/p>\n
The Vantive Corporation
\n 2455 Augustine Drive
\n Santa Clara, CA 95054
\n Attention: President and Chief Executive Officer
\n Fax: (408) 982-5711<\/p>\n
with a copy to:<\/p>\n
Gray Cary Ware & Freidenrich LLP
\n 400 Hamilton Ave.
\n Palo Alto, CA 94301
\n Attention: Dennis C. Sullivan, Esq.
\n Fax: (650) 327-3699<\/p>\n
(b) if to Target, to<\/p>\n
Wayfarer Communications, Inc.
\n 2041 Landings Drive
\n Mountain View, CA 94043<\/p>\n
Attention: President and Chief Executive Officer
\n Fax: (650) 426-2038<\/p>\n
with a copy to:<\/p>\n
Fenwick & West LLP
\n 2 Palo Alto Square
\n Palo Alto, CA 94306
\n Attention: Dennis R. DeBroeck, Esq.<\/p>\n
49<\/p>\n
54<\/p>\n
Fax: (650) 494-1417<\/p>\n
(c) If to the Shareholder Representative, to:<\/p>\n
Mr. Philipp Beisel
\n Wayfarer Communications, Inc.
\n 2041 Landings Drive
\n Mountain View, CA 94043
\n Fax: (650) 426-2038<\/p>\n
with a copy to:<\/p>\n
Fenwick & West LLP
\n 2 Palo Alto Square
\n Palo Alto, CA 94306
\n Attention: Dennis R. DeBroeck, Esq.
\n Fax: (650) 494-1417<\/p>\n
Section 10.2 Interpretation. When a reference is made in this Agreement
\nto an Article or Section, such reference shall be to an Article or Section of
\nthis Agreement unless otherwise indicated. The words “include,” “includes” and
\n“including” when used herein shall be deemed in each case to be followed by the
\nwords “without limitation.” The phrases “the date of this Agreement,” “the date
\nhereof,” and terms of similar import, unless the context otherwise requires,
\nshall be deemed to refer to the first date written above. The table of contents
\nand headings contained in this Agreement are for reference purposes only and
\nshall not affect in any way the meaning or interpretation of this Agreement. In
\ndetermining whether a Material Adverse Effect exists with respect to a party,
\nmateriality shall be determined on the basis of the applicable party and all of
\nits Subsidiaries, taken together as a whole, and not on the basis of the party
\nor any single Subsidiary alone. Reference to a party’s “knowledge” mean actual
\nknowledge after reasonable inquiry of such party’s directors, officers, and
\nother management-level employees who could reasonably be expected to have
\nknowledge of such matters. As used in this Agreement, the term “Governmental
\nEntity” means any (i) nation, state, commonwealth, province, territory, county,
\nmunicipality, district or other jurisdiction of any nature; (ii) federal, state,
\nlocal, municipal, foreign or other government; or (iii) governmental or
\nquasi-governmental authority of any nature (including any governmental division,
\ndepartment, agency, commission, official, organization, and any court or other
\ntribunal), and the term “Subsidiary” means, with respect to any party, any
\ncorporation, at least a majority of the securities or other interests having by
\ntheir terms ordinary voting power to elect a majority of the board of directors
\nor others performing similar functions with respect to such corporation or other
\norganization is directly or indirectly owned or controlled by such party or by
\nany one or more of its Subsidiaries, or by such party and one or more of its
\nSubsidiaries.<\/p>\n
50<\/p>\n
55<\/p>\n
Section 10.3 Counterparts. This Agreement may be executed in one or more
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each of
\nthe parties and delivered to the other parties, it being understood that all
\nparties need not sign the same counterpart.<\/p>\n
Section 10.4 Severability. In the event that any provision of this
\nAgreement, or the application thereof, becomes or is declared by a court of
\ncompetent jurisdiction to be illegal, void or unenforceable, the remainder of
\nthis Agreement will continue in full force and effect and the application of
\nsuch provision to other persons or circumstances will be interpreted so as
\nreasonably to effect the intent of the parties hereto. The parties further agree
\nto replace such void or unenforceable provision of this Agreement with a valid
\nand enforceable provision that will achieve, to the extent possible, the
\neconomic, business and other purposes of such void or unenforceable provision.<\/p>\n
Section 10.5 Entire Agreement. This Agreement (including the documents
\nand the instruments referred to herein) constitutes the entire agreement and
\nsupersedes all prior agreements and understandings, both written and oral, among
\nthe parties with respect to the subject matter hereof.<\/p>\n
Section 10.6 Governing Law. This Agreement shall be governed and
\nconstrued in accordance with the laws of the State of Delaware without regard to
\nany applicable conflicts of law.<\/p>\n
Section 10.7 Assignment. Neither this Agreement nor any of the rights,
\ninterests or obligations hereunder shall be assigned by any of the parties
\nhereto (whether by operation of law or otherwise) without the prior written
\nconsent of the other parties. Subject to the preceding sentence, this Agreement
\nwill be binding upon, inure to the benefit of and be enforceable by the parties
\nand their respective successors and assigns.<\/p>\n
Section 10.8 Third Party Beneficiary. Nothing contained in this
\nAgreement is intended to confer upon any person other than the parties hereto
\nand their respective successors and permitted assigns, any rights, remedies or
\nobligations under, or by reason of this Agreement, except that the persons who
\nare holders of Target Stock or Target Warrants immediately prior to the
\nEffective Time of the Merger (and their successors and assigns) are express
\nintended third party beneficiaries of Articles I and II, Section 6.10, 6.11,
\n6.12, 6.13, 6.14, 6.15, Article IX, and, to the extent relevant to any of the
\nforegoing, this Article X and as such are entitled to rely on the provisions
\nhereof as if a party hereto.<\/p>\n
[Remainder of Page Intentionally Left Blank]<\/p>\n
51<\/p>\n
56<\/p>\n
IN WITNESS WHEREOF, each of Buyer, Sub and Target has caused this
\nAgreement to be signed by its respective officer thereunto duly authorized as of
\nthe date first written above.<\/p>\n
THE VANTIVE CORPORATION WAYFARER COMMUNICATIONS, INC.<\/p>\n
By: By:
\n ——————————– ——————————–
\nTitle: Title:
\n —————————– —————————–<\/p>\n
REVO ACQUISITION CORPORATION<\/p>\n
By:
\n ——————————–
\nTitle:
\n —————————–<\/p>\n
52<\/p>\n
57
\n ANNEX 2.1(c)(iii)<\/p>\n
CALCULATION OF “POOL OF SHARES”<\/p>\n
\n
\nTotal Number of Shares of Buyer Common Stock 187,867
\nto be exchanged for Target Stock<\/p>\nLess Number of Shares of Buyer Common Stock (2,219)
\nexchanged for Target Common Stock<\/p>\n
Less Number of Shares of Buyer Common Stock (7,045)
\nequal to one-half of the DLJ Advisory Fees (i.e.,
\n$225,000) divided by 31.9375<\/p>\n
– —————————————- —————-<\/p>\n
Pool of Shares 178,603<\/p>\n
<\/c><\/table>\n
58<\/p>\n
ANNEX 2.3<\/p>\n
FORM OF ESCROW AGREEMENT<\/p>\n
59
\n ESCROW AGREEMENT<\/p>\n
THIS ESCROW AGREEMENT is made and entered into as of June 30, 1998 by
\nand among The Vantive Corporation, a Delaware corporation (“Buyer”), Harris
\nTrust and Savings Bank (the “Escrow Agent”) and Philipp Beisel (the “Shareholder
\nRepresentative”) for and on behalf of holders of Preferred Stock (the
\n“Indemnifying Shareholders”) of Wayfarer Communications, Inc., a California
\ncorporation (“Revo”).<\/p>\n
R E C I T A L S<\/p>\n
A. Pursuant to that certain Agreement and Plan of Reorganization dated
\nas of June 18, 1998 (the “Plan of Reorganization”), Buyer will issue to the
\nIndemnifying Shareholders shares of Buyer Common Stock, $0.001 par value (“Buyer
\nCommon Stock”), pursuant to the merger (the “Merger”) of Revo Acquisition
\nCorporation, a Delaware corporation and wholly-owned subsidiary of Buyer
\n(“Sub”), with and into Revo;<\/p>\n
B. Pursuant to Section 2.4 of the Plan of Reorganization, a Post-Closing
\nAdjustment (as defined therein) will be made with respect to the number of
\nshares of Buyer Common Stock issuable to the Indemnifying Shareholders in the
\nMerger;<\/p>\n
C. Pursuant to Article IX of the Plan of Reorganization, the
\nIndemnifying Shareholders have agreed to indemnify Buyer and other members of
\nthe Buyer Group (as defined therein) with respect to inaccuracies in or breaches
\nof representations, warranties or covenants made by Revo in the Plan of
\nReorganization and certain other matters; and<\/p>\n
D. In accordance with the Plan of Reorganization, the parties desire to
\nestablish an escrow for the purpose of providing a fund (i) from which the
\nPost-Closing Adjustment may be deducted and (ii) against which Buyer (on behalf
\nof itself and other members of the Buyer Group) may seek indemnification from
\nthe Indemnifying Shareholders under the Plan of Reorganization.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing premises and the
\nmutual obligations herein, the parties agree as follows:<\/p>\n
1. Establishment of Escrow. On the date hereof or as soon thereafter
\nas practicable, Buyer shall deliver to the Escrow Agent for deposit into escrow
\n(the “Escrow”) certificates representing an aggregate of 44,076 shares of Buyer
\nCommon Stock otherwise distributable to the Indemnifying Shareholders in the
\nMerger (the “Escrow Shares”). The Escrow Shares so delivered to the Escrow Agent
\nand any other securities, cash or other property from time to time held by the
\nEscrow Agent pursuant to the terms hereof is herein referred to as the “Escrow
\nFund.” The Escrow Agent agrees to accept the Escrow Shares and to hold the
\nEscrow Fund in escrow subject to the terms and conditions of this Escrow
\nAgreement.<\/p>\n
1<\/p>\n
60<\/p>\n
2. Maintenance of the Escrow. The Escrow Agent shall establish a
\nseparate account for each Indemnifying Shareholder showing the number of Escrow
\nShares and the amount and type of other property, if any, held in the Escrow for
\nsuch Indemnifying Shareholder on the basis of a list of the Indemnifying
\nShareholders’ respective ownership percentage provided to the Escrow Agent by
\nthe Shareholder Representative. The Escrow Agent shall maintain records showing
\neach Indemnifying Shareholder’s Proportionate Interest (as defined below) in the
\nEscrow Fund and shall adjust each Indemnifying Shareholder’s account to reflect
\ndistributions from, and additions or substitutions to, the property held for the
\naccount of such Indemnifying Shareholder in the Escrow so that, at all times,
\neach Indemnifying Shareholder’s Proportionate Interest in the Escrow Fund shall
\nbe maintained. For purposes of this Escrow Agreement, each Indemnifying
\nShareholder’s “Proportionate Interest” in the Escrow Fund as of a specific date
\nshall be equal to the percentage that the value of the Escrow Shares and other
\nproperty held for the account of such Indemnifying Shareholder in the Escrow
\nbears to the value of all property held for the account of all Indemnifying
\nShareholders in the Escrow as of such date. For purposes of the provisions of
\nthis Escrow Agreement relating to indemnification and claims, the Escrow Shares
\nshall be deemed to have a value equal to the average closing sale price of Buyer
\nCommon Stock (as quoted on the Nasdaq National Market and reported in The Wall
\nStreet Journal) for the ten (10) trading days next preceding the date of a
\nvaluation. The Escrow Agent is hereby granted the power to effect any transfer
\nof Escrow Shares required by this Agreement. Buyer shall cooperate with the
\nEscrow Agent in promptly issuing, or causing its transfer agent to promptly
\nissue, such stock certificates as shall be required to effect such transfers.
\nAll Escrow Shares and any other securities from time to time held in the Escrow
\nFund shall be registered in the name of the Escrow Agent or its nominee.<\/p>\n
3. Shareholder Representative. From and after the establishment of
\nthe Escrow as provided in Section 1 hereof, the Indemnifying Shareholders shall
\nbe represented by the Shareholder Representative, or, upon written notice to the
\nEscrow Agent, by his successor appointed in accordance with Section 9.7 of the
\nPlan of Reorganization, who shall have the duties and authority set forth in
\nsaid section.<\/p>\n
4. Dividends, Voting and Rights of Ownership. Except for tax-free
\ndividends paid in stock declared with respect to the Escrow Shares pursuant to
\nSection 305(a) of the Internal Revenue Code of 1986, as amended (the “Code’),
\nwhich shall be treated in the manner set forth in Section 1 hereof, any cash
\ndividends, dividends payable in securities or other distributions of any kind
\nmade in respect of the Escrow Shares will be distributed currently to the
\nIndemnifying Shareholders and, if distributed to the Escrow Agent, shall
\npromptly be paid over to the Indemnifying Shareholders. Each Indemnifying
\nShareholder will have voting rights with respect to the Escrow Shares deposited
\nin the Escrow with respect to such Indemnifying Shareholder so long as such
\nEscrow Shares are held in the Escrow, and Buyer shall take all reasonable steps
\nnecessary to allow the exercise of such rights. The Escrow Agent shall forward
\nto the Shareholder Representative all voting materials and proxies received by
\nthe Escrow Agent. In the event an Indemnifying Shareholder elects to vote, it
\nshall direct the Escrow Agent in writing to do so. In the absence of such
\ndirection, the Escrow Agent shall have no duty or obligation to vote with
\nrespect to any of the Escrow Shares. While the Escrow Shares remain in the
\nEscrow Agent’s possession pursuant to this Escrow Agreement, the Indemnifying
\nShareholders will <\/p>\n
2<\/p>\n
61<\/p>\n
retain and will be entitled to exercise all other incidents of ownership of the
\nEscrow Shares which are not inconsistent with the terms and conditions of this
\nEscrow Agreement. Subject to the rights of Buyer and the other members of the
\nBuyer Group under the Plan of Reorganization and this Escrow Agreement, all
\nbeneficial interest in the Escrow Fund shall be the property of the Indemnifying
\nShareholders from and after the Closing, and Buyer shall have no interest
\ntherein. None of the rights of the Indemnifying Shareholders hereunder shall be
\ntransferable except as otherwise provided by law. Each of the Indemnifying
\nShareholders shall be obligated for all federal, state or local taxes applicable
\nto such Indemnifying Shareholder’s interest in the Escrow Fund.<\/p>\n
5. Post-Closing Adjustment.<\/p>\n
(a) Within five (5) business days following the determination of
\nthe Post-Closing Adjustment pursuant to Section 2.4(b) or 2.4(c) of the Plan of
\nReorganization, Buyer and the Shareholder Representative shall give written
\nnotice to the Escrow Agent directing the Escrow Agent to deliver out of the
\nEscrow to Buyer the number of Escrow Shares determined by dividing the amount of
\nthe Post-Closing Adjustment by $31.9375, rounded to the nearest whole share.<\/p>\n
(b) Within ten (10) business days following delivery of such
\nnotice, the Escrow Agent will (i) deliver out of the Escrow to Buyer the number
\nof Escrow Shares specified in Section 5(a) hereof and (ii) deliver out of the
\nEscrow to the Indemnifying Shareholders (in accordance with their Proportionate
\nInterests) the number of Escrow Shares remaining in the Escrow after the
\ndistribution specified in clause (i) above, to the extent such remaining Escrow
\nShares exceed (A) 35,261, plus (B), the number of whole Escrow Shares having an
\naggregate value at the time of such delivery most nearly equal to the amount of
\nany then pending Indemnification Claims (as defined in and asserted pursuant to
\nSection 6 hereof), and expenses reasonably estimated by Buyer to be necessary
\nfor the disposition of all such Indemnification Claims.<\/p>\n
6. Claims for Indemnification; Disposition Thereof.<\/p>\n
(a) If an Indemnitee (as defined in the Plan of Reorganization)
\nshall, during the term of this Escrow Agreement, have any claim for
\nindemnification pursuant to Article IX of the Plan of Reorganization
\n(“Indemnification Claim”), such Indemnitee or Buyer shall promptly deliver to
\nthe Shareholder Representative and the Escrow Agent written notice of such an
\nIndemnification Claim in accordance with Section 9.3(b) of the Plan of
\nReorganization.<\/p>\n
(b) If the Shareholder Representative shall not have notified
\nBuyer and the Escrow Agent in writing objecting to the delivery of any of the
\nEscrow Fund out of the Escrow to Buyer for application to such notice of Claim
\nwithin thirty (30) calendar days after delivery of notice of such
\nIndemnification Claim, the Escrow Agent shall, as promptly as practicable
\nfollowing the expiration of such period, deliver out of the Escrow to Buyer the
\nnumber of whole Escrow Shares and\/or other property then held in the Escrow
\nhaving an aggregate value at the time of such delivery most nearly equal to the
\namount of such Indemnification Claim.<\/p>\n
3<\/p>\n
62<\/p>\n
(c) If the Shareholder Representative gives written notice to the
\nEscrow Agent and Buyer objecting to the delivery of any of the Escrow Fund out
\nof the Escrow to Buyer for application to an Indemnification Claim (a “Contested
\nClaim”) within the 30-day period specified in Section 6(b) hereof, the Escrow
\nAgent shall make no delivery to Buyer out of the Escrow Fund with respect to
\nsuch Contested Claim until the rights of the Indemnifying Shareholders and the
\nIndemnitee with respect thereto have been agreed upon between the Shareholder
\nRepresentative and Buyer or until such rights are finally determined by
\narbitration pursuant to Section 14 hereof. If the arbitrator in such proceeding
\nshall determine that the Escrow Fund, or any part thereof, is to be delivered
\nout of the Escrow to Buyer to satisfy such Contested Claim, the Escrow Agent
\nshall, as promptly as practicable following receipt of such determination,
\ndeliver out of the Escrow to Buyer the number of whole Escrow Shares and\/or
\nother property then held in the Escrow having an aggregate value most nearly
\nequal to the amount determined by such arbitrator .<\/p>\n
(d) All Indemnitees wishing to assert substantially similar
\nclaims against the Escrow must assert such claims in the same Indemnification
\nClaim and in the same arbitration proceeding. A decision or result with respect
\nto any Indemnification Claim asserted by an Indemnitee will be final, binding
\nand conclusive upon all Indemnitees with respect to any substantially similar
\nIndemnification Claims of such Indemnitees asserted or to be asserted against
\nthe Escrow.<\/p>\n
7. Distribution of Escrow Fund; Termination of Escrow. The portion
\nof the Escrow Fund not previously distributed in accordance with the terms of
\nSection 5 and Section 6 hereof shall be held by the Escrow Agent until ten (10)
\nbusiness days following the second anniversary of this Escrow Agreement (the
\n“Release Date”), at which time it shall be delivered to the Indemnifying
\nShareholders in accordance with their Proportionate Interests. Notwithstanding
\nthe foregoing, there shall be retained in the Escrow the lesser of (i) the
\nnumber of Escrow Shares and other property then held in the Escrow having an
\naggregate value equal to 100% of the amount of all pending Indemnification
\nClaims asserted pursuant to Section 6 hereof and expenses reasonably estimated
\nby Buyer to be necessary for the disposition of all such Indemnification Claims,
\nand (ii) the entire remaining Escrow Fund. The Escrow Fund not so distributed
\nshall be retained by the Escrow Agent until all such pending Indemnification
\nClaims are resolved and the remaining Escrow Fund deliverable to any Buyer as a
\nresult thereof, if any, shall have been delivered to Buyer. Thereafter, the
\nEscrow Agent shall, as promptly as practicable, deliver the remaining Escrow
\nFund to the Indemnifying Shareholders in accordance with their Proportionate
\nInterests.<\/p>\n
8. Term of Escrow Agreement. This Escrow Agreement shall terminate
\nupon the distribution by the Escrow Agent of all property held in the Escrow
\nFund.<\/p>\n
9. Fees of the Escrow Agent. Buyer and the Shareholder
\nRepresentative (on behalf of the Indemnifying Shareholders) agree, jointly and
\nseverally to pay to the Escrow Agent a fee according to the fee schedule
\nattached as Schedule I hereto and all of the expenses of the Escrow Agent,
\nincluding expenses related to the indemnity provided in Section 12 hereof. To
\nthe extent <\/p>\n
4<\/p>\n
63<\/p>\n
such fees and expenses are not paid by Buyer, they may paid from the Escrow Fund
\nafter ten (10) days written notice from the Escrow Agent to Buyer and the
\nShareholder Representative. As between themselves, Buyer and the Shareholder
\nRepresentative (on behalf of the Indemnifying Shareholders) agree that: (i) all
\nfees and expenses payable to the Escrow Agent will be paid in the first instance
\nby Buyer as and when they became payable; (ii) the normal and usual fees and
\nexpenses of administering the Escrow and the distribution made pursuant to
\nSection 5 hereof shall be borne by Buyer; and (iii) all fees and expenses
\nassociated with the administration of any Indemnification Claim shall be borne
\nby the Indemnifying Shareholders and shall be recoverable by Buyer out of the
\nEscrow as a part of such Indemnification Claim.<\/p>\n
10. Liability of the Escrow Agent. In performing any of its duties
\nunder this Escrow Agreement, the Escrow Agent shall not be liable to any party
\nfor damages, losses or expenses, except in the event of gross negligence or
\nwillful misconduct on its part. The Escrow Agent shall not incur any such
\nliability for (i) any act or failure to act made or omitted in good faith, or
\n(ii) any action taken or omitted in reliance upon any instrument, including any
\nwritten statement or affidavit provided for in this Escrow Agreement that the
\nEscrow Agent shall in good faith believe to be genuine; nor will the Escrow
\nAgent be liable or responsible for forgeries, fraud, impersonations, or
\ndetermining the scope of any agent’s authority. In addition, the Escrow Agent
\nmay consult with legal counsel of its choice in connection with its duties under
\nthis Agreement and shall be fully protected in any act taken, suffered, or
\npermitted by it in good faith in accordance with the advice of counsel. The
\nEscrow Agent is not responsible for determining and verifying the authority of
\nany person acting or purporting to act on behalf of any party to this Escrow
\nAgreement. The Escrow Agent undertakes to perform such duties as are
\nspecifically set forth in this Escrow Agreement, and the Escrow Agent shall not
\nbe liable except for the performance of such duties as are specifically set
\nforth in this Escrow Agreement. No implied covenants or obligations shall be
\nread into this Escrow Agreement against the Escrow Agent.<\/p>\n
11. Controversies. If any controversy arises between the parties to
\nthis Escrow Agreement, or with any other party, concerning the subject matter of
\nthe Escrow, its terms or conditions, the Escrow Agent will not be required to
\ndetermine the controversy or to take any action regarding it. The Escrow Agent
\nmay hold all documents and funds and may wait for settlement of any such
\ncontroversy by final appropriate legal proceedings or other means as, in the
\nEscrow Agent’s discretion, it may require, despite what may be set forth
\nelsewhere in this Escrow Agreement. In such event, the Escrow Agent will not be
\nliable for interest or damage. Furthermore, the Escrow Agent may at its option,
\nfile an action of interpleader requiring the parties to answer and litigate any
\nclaims and rights among themselves. The Escrow Agent is authorized to deposit
\nwith the clerk of the court all documents and funds held in the Escrow, except
\nall costs, expenses, charges and reasonable attorneys’ fees incurred by it due
\nto the interpleader action and which the parties jointly and severally agree to
\npay. Upon initiating such action, the Escrow Agent shall be fully released and
\ndischarged of and from all obligations and liability imposed by the terms of the
\nEscrow.<\/p>\n
12. Indemnification of Escrow Agent. Buyer and the Indemnifying
\nShareholders and their respective successors and assigns agree jointly and
\nseverally to indemnify and hold the Escrow Agent harmless against any and all
\nlosses, claims, damages, liabilities and expenses,<\/p>\n
5<\/p>\n
64<\/p>\n
including reasonable costs of investigation, counsel fees, including allocated
\ncosts of in-house counsel, and disbursements that may be imposed on the Escrow
\nAgent, or incurred by it in connection with the performance of its duties under
\nthis Escrow Agreement, including but not limited to any arbitration or
\nlitigation arising from this Escrow Agreement or involving its subject matter.
\nThe costs and expenses of enforcing this right of indemnification shall be paid
\nby Buyer and the Indemnifying Shareholders, provided, however, that the Buyer
\nand the Indemnifying Shareholders shall not pay such costs and expenses to the
\nextent that the Escrow Agent is judicially determined to have been negligent or
\nacted with willful misconduct. This right of indemnification shall survive the
\ntermination of this Escrow Agreement, and the removal or resignation of the
\nEscrow Agent. Nothing contained in this Section 12 shall impair the rights of
\nthe Indemnifying Shareholders and Buyer, as between themselves, including
\nwithout limitation, their rights to enforce the provisions of Section 9 hereof
\nwith respect to the allocation of the Escrow Agent’s fees.<\/p>\n
13. Resignation of Escrow Agent. The Escrow Agent may resign at any
\ntime upon giving at least thirty (30) days written notice to the other parties;
\nprovided, however, that no such resignation shall become effective until the
\nappointment of a successor Escrow Agent which shall be accomplished as follows:
\nBuyer and the Shareholder Representative shall use their best efforts to agree
\non a successor Escrow Agent within thirty (30) days after receiving such notice.
\nIf the parties fail to agree on a successor Escrow Agent within such time, the
\nEscrow Agent may, at the expense of Buyer and the Shareholder Representative,
\npetition any court of competent jurisdiction for the appointment of a successor
\nEscrow Agent authorized to do business in the State of California and, in such
\nevent, shall give written notice to the other parties of such appointment. The
\nsuccessor Escrow Agent shall execute and deliver to the Escrow Agent an
\ninstrument accepting such appointment, and the successor Escrow Agent shall,
\nwithout further acts, be vested with all the estates, property rights, powers,
\nand duties of the predecessor Escrow Agent as if originally named as Escrow
\nAgent herein. The predecessor Escrow Agent then shall be discharged from any
\nfurther duties and liability under this Escrow Agreement.<\/p>\n
14. Arbitration.<\/p>\n
(a) Each Contested Claim will be settled by binding arbitration
\npursuant to Section 9.6(d) of the Plan of Reorganization unless otherwise agreed
\nby the Shareholder Representative and Buyer. Any portion of a Contested Claim
\nwhich is not contested shall be resolved as set forth in Section 6(b) hereof.
\nThe final decision of the arbitrator shall be furnished to the Escrow Agent, the
\nShareholder Representative and Buyer in writing and will constitute a conclusive
\ndetermination of the issue in question, binding upon Revo, the Indemnifying
\nShareholders and Buyer and shall not be contested or appealed by any of them.
\nAfter notice that the Indemnification Claim is contested by the Shareholder
\nRepresentative, the Escrow Agent will continue to hold in the Escrow Fund Escrow
\nShares and\/or other property having a value sufficient to cover such Contested
\nClaim, as determined pursuant to Section 2 hereof (notwithstanding the
\noccurrence of the Release Date), until the earlier of the receipt by the Escrow
\nAgent of (i) a settlement agreement executed by Buyer and the Shareholder
\nRepresentative setting forth a resolution of such Contested Claim, or (ii)
\nreceipt of a copy of the final award of the arbitrator with respect to such
\nContested Claim.<\/p>\n
6<\/p>\n
65<\/p>\n
(b) The number of Escrow Shares to be delivered upon resolution
\nof a Contested Claim shall be equal to (i) the aggregate dollar amount of the
\nContested Claim as determined pursuant to this Section 14 divided by (ii) the
\nvalue of the Escrow Shares, as determined pursuant to Section 2 hereof, as of
\nthe date of such determination.<\/p>\n
15. Miscellaneous.<\/p>\n
(a) Assignment; Binding upon Successors and Assigns. None of the
\nparties hereto may assign any of its rights or obligations hereunder without the
\nprior written consent of the other parties. This Escrow Agreement will be
\nbinding upon and inure to the benefit of the parties hereto and their respective
\nsuccessors and permitted assigns.<\/p>\n
(b) Severability. If any provision of this Escrow Agreement, or
\nthe application thereof, shall for any reason and to any extent be held to be
\ninvalid or unenforceable, the remainder of this Escrow Agreement and the
\napplication of such provision to other persons or circumstances shall be
\ninterpreted so as best to reasonably effect the intent of the parties hereto.
\nThe parties further agree to replace such invalid or unenforceable provision of
\nthis Escrow Agreement with a valid and enforceable provision which will achieve,
\nto the extent possible, the economic, business and other purposes of the invalid
\nor unenforceable provision.<\/p>\n
(c) Entire Agreement. This Escrow Agreement, the Exhibits hereto,
\nthe documents referenced herein, and the exhibits thereto, constitute the entire
\nunderstanding and agreement of the parties hereto with respect to the subject
\nmatter hereof and thereof and supersede all prior and contemporaneous agreements
\nor understandings, inducements or conditions, express or implied, written or
\noral, between the parties with respect hereto and thereto. The express terms
\nhereof control and supersede any course of performance or usage of the trade
\ninconsistent with any of the terms hereof.<\/p>\n
(d) Notices. No notice or other communication shall be deemed
\ngiven unless sent in the manner, and to the persons, specified in this Section
\n15(d). All notices and other communications hereunder will be in writing and
\nwill be deemed given (i) upon receipt if delivered personally (or if mailed by
\nregistered or certified mail), (ii) the day after dispatch if sent by overnight
\ncourier, or (iii) upon dispatch if transmitted by facsimile (and confirmed by a
\ncopy delivered in accordance with clause (i) or (ii)), addressed to the parties
\nat the following addresses:<\/p>\n
7<\/p>\n
66<\/p>\n
To the Escrow Agent: Harris Trust and Savings Bank
\n 311 West Monroe Street, 12th Floor
\n Chicago, Illinois 60606
\n Attn: Escrow Division\/Marianne Tinerella
\n Phone: 312-461-2420
\n Fax: 312-461-3525<\/p>\n
To Vantive: The Vantive Corporation
\n 2455 Augustine Drive
\n Santa Clara, California 95054
\n Attn: General Counsel
\n Phone: 408-367-4660
\n Fax: 408-982-5711<\/p>\n
with a copy to: Gray Cary Ware & Freidenrich
\n 400 Hamilton Avenue
\n Palo Alto, California 94301
\n Attn: Dennis C. Sullivan, Esq.
\n Phone: 650-833-2245
\n Fax: 650-327-3699<\/p>\n
To the Shareholder Representative: Philipp Beisel
\n Wayfarer Communications, Inc.
\n 2041 Landings Drive
\n Mountain View, CA 94043
\n Phone: 650-426-2080
\n Fax: 650-426-2038<\/p>\n
with a copy to: Fenwick & West
\n Two Palo Alto Square, 4th Floor
\n Palo Alto, CA 94306
\n Attn: Dennis R. DeBroeck, Esq.
\n Phone: 650-494-0600
\n Fax: 650-494-1417<\/p>\n
Any party may change its address for such communications by giving notice
\nthereof to the other parties.<\/p>\n
(e) Other Remedies. Except as otherwise provided herein, any and
\nall remedies herein expressly conferred upon a party shall be deemed cumulative
\nwith and not exclusive of any other remedy conferred hereby or by law on such
\nparty, and the exercise of any one remedy shall not preclude the exercise of any
\nother.<\/p>\n
(f) Amendment and Waivers. Any term or provision of this Escrow
\nAgreement may be amended, and the observance of any term of this Escrow
\nAgreement may be <\/p>\n
8<\/p>\n
67<\/p>\n
waived (either generally or in a particular instance and either retroactively or
\nprospectively) only by a writing signed by the party to be bound thereby. The
\nwaiver by a party of any breach hereof for default in payment of any amount due
\nhereunder or default in the performance hereof shall not be deemed to constitute
\na waiver of any other default or any succeeding breach or default.<\/p>\n
(g) Further Assurances. Each party agrees to cooperate fully with
\nthe other parties and to execute such further instruments, documents and
\nagreements and to give such further written assurances, as may be reasonably
\nrequested by any other party to better evidence and reflect the transactions
\ndescribed herein and contemplated hereby and to carry into effect the intents
\nand purposes of this Escrow Agreement.<\/p>\n
(h) Absence of Third Party Beneficiary Rights. No provisions of
\nthis Escrow Agreement are intended, nor shall be interpreted, to provide or
\ncreate any third party beneficiary rights or any other rights of any kind in any
\nclient, customer, affiliate, shareholder, partner of any party hereto or any
\nother person or entity unless specifically provided otherwise herein, and,
\nexcept as so provided, all provisions hereof shall be solely between the parties
\nto this Escrow Agreement.<\/p>\n
(i) Governing Law. It is the intention of the parties hereto that
\nthe internal laws of the State of California (irrespective of its choice of law
\nprinciples) shall govern the validity of this Escrow Agreement, the construction
\nof its terms, and the interpretation and enforcement of the rights and duties of
\nthe parties hereto.<\/p>\n
(j) Counterparts. This Escrow Agreement may be executed in any
\nnumber of counterparts, each of which shall constitute an original and all of
\nwhich together shall constitute one and the same instrument.<\/p>\n
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]<\/p>\n
9<\/p>\n
68<\/p>\n
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
\ndate first set forth above.<\/p>\n
THE VANTIVE CORPORATION<\/p>\n
By:
\n ——————————–
\nTitle:
\n —————————–<\/p>\n
HARRIS TRUST AND SAVINGS BANK,
\nas Escrow Agent<\/p>\n
By:
\n ——————————–
\nTitle:
\n —————————–<\/p>\n
SHAREHOLDER REPRESENTATIVE:<\/p>\n
– ———————————–
\nPhilipp Beisel<\/p>\n
10<\/p>\n
69<\/p>\n
Appendix I<\/p>\n
Schedule of Fees
\n as Escrow Agent
\n for
\n Vantive Corporation and Philipp Beisel
\n on behalf of Preferred Stock Shareholders of Wayfarer Communications, Inc.<\/p>\n
\n
\nAcceptance Fee………………………………………………………$ 1,500
\no in-house legal review of escrow document
\no administrative review of documents
\no establishment of appropriate accounts
\no participation in pre-closing and closing<\/p>\nAnnual Administration Fee…………………………………………….$ 2,500
\no routine administrative functions under the agreement
\no custody of investments<\/p>\n
Activity Fees
\no deposit, delivery of securities (per event) ……………………$ 35
\no deposit of funds ……………………………………………$ 20
\no disbursements (checks, wires, etc.) …………………………..$ 20
\no international wires …………………………………………$ 40
\no purchases, sales of individual securities (per event) …………..$ 100
\no investment in selected money market mutual funds ………………….No Charge
\no asset\/transaction report (per statement) ………………………$ 10<\/p>\n
<\/c><\/table>\n
Out-of-Pocket<\/p>\n
Additionally, the cost of items that can be directly allocated such as
\npostage, telephone, overnight delivery, etc. incurred during the routine
\nadministration of the agreement will be billed separately.<\/p>\n
Acceptance of the appointment as escrow agent is contingent upon our mutual
\nagreement to and execution of an escrow document.<\/p>\n
This schedule applies to Escrow Agent appointments requiring the usual amount of
\nresponsibility, time and attention. Fees are subject to reasonable adjustment as
\nchanges in laws, procedures, or costs of doing business demand. If in any
\nspecific situation, the agent’s duties and responsibilities are greater than
\ncustomary or additional work becomes necessary because of the imposition of
\ngovernmental legislation or regulation, we reserve the right to adjust our fees.
\nFees for services not specifically covered in this schedule will be assessed in
\nan amount commensurate with the services rendered. The acceptance fee and first
\nyear’s administration fee are billed at closing.<\/p>\n
11<\/p>\n
70<\/p>\n
ANNEX 2.4(a)<\/p>\n
TARGET’S MANAGEMENT BONUS OBLIGATION<\/p>\n
\n
\n J. Laing $ 191,667
\n R. Patterson $ 116,667
\n M. Seifert $ 133,333
\n R. Schoettle $ 58,333
\n ———–
\n Total $ 500,000<\/p>\n<\/c><\/table>\n
71<\/p>\n
ANNEX 3<\/p>\n
TARGET DISCLOSURE SCHEDULE<\/p>\n
72<\/p>\n
ANNEX 4<\/p>\n
BUYER DISCLOSURE SCHEDULE<\/p>\n
73<\/p>\n
ANNEX 6.9<\/p>\n
FORM OF TAX CERTIFICATES<\/p>\n
74<\/p>\n
ANNEX 6.12<\/p>\n
SCHEDULE OF NEW OPTION GRANTS<\/p>\n
75<\/p>\n
ANNEX 6.14<\/p>\n
SCHEDULE OF STOCK GRANTS AND CASH BONUSES<\/p>\n
76<\/p>\n
ANNEX 6.17<\/p>\n
SCHEDULE OF TARGET EMPLOYEES<\/p>\n
77<\/p>\n
ANNEX 6.19<\/p>\n
FORM OF VOTING AGREEMENT<\/p>\n
78
\n VOTING AGREEMENT<\/p>\n
THIS VOTING AGREEMENT is made and entered into as of June ___, 1998 by
\nand between The Vantive Corporation, a Delaware corporation (the “Company”), and
\nthe undersigned shareholder (the “Shareholder”) of Wayfarer Communications,
\nInc., a California corporation (“Wayfarer”).<\/p>\n
RECITALS<\/p>\n
A. Concurrently with the execution of this Agreement, the Company,
\nWayfarer and Revo Acquisition Corporation, a Delaware corporation and a
\nwholly-owned subsidiary of the Company (“Sub”), have entered into an Agreement
\nand Plan of Reorganization dated as of June ___, 1998 (the “Reorganization
\nAgreement”), providing for the merger of Sub with and into Wayfarer (the
\n“Merger”) pursuant to which Wayfarer will become a wholly-owned subsidiary of
\nthe Company;<\/p>\n
B. The Shareholder is the beneficial holder of record of the number of
\nshares of the outstanding Common Stock and\/or Preferred Stock of Wayfarer as is
\nindicated on the final page of this Agreement (the “Shares”);<\/p>\n
C. In connection with the Merger, the Company will acquire the
\nShareholder’s entire equity interest in Wayfarer and the Shareholder will
\nreceive in exchange an equity interest in the Company; and<\/p>\n
D. In consideration of and to induce the execution of the Reorganization
\nAgreement by the Company, the Shareholder is willing to agree not to sell or
\notherwise dispose of any shares of Wayfarer stock held by the Shareholder and to
\nvote the Shares so as to facilitate consummation of the Merger, as more fully
\nset forth in this Agreement.<\/p>\n
NOW, THEREFORE, in consideration of the premises and the mutual
\ncovenants and agreements contained herein, the parties agree as follows:<\/p>\n
1. Agreement to Retain Shares. The Shareholder agrees not to transfer,
\npledge, sell, exchange or offer to transfer or sell or otherwise dispose of or
\nencumber any of the Shares at any time prior to the Expiration Date, as defined
\nherein. The “Expiration Date” shall mean the earlier of (i) the date and time on
\nwhich the Merger shall become effective in accordance with the terms and
\nprovisions of the Reorganization Agreement or (ii) the date on which the
\nReorganization Agreement shall be terminated pursuant to Article VIII of the
\nReorganization Agreement.<\/p>\n
2. Agreement to Vote Shares. At any meeting of the Wayfarer shareholders
\ncalled with respect to any of the following, and at any adjournment thereof, and
\nwith respect to any written consent solicited with respect to any of the
\nfollowing, the Shareholder agrees to vote the Shares: (i) in favor of approval
\nof the Reorganization Agreement and the Merger and any matter which would, or
\ncould reasonably be expected to, facilitate the Merger and (ii) against approval<\/p>\n
1<\/p>\n
79<\/p>\n
of any proposal made in opposition to or competition with consummation of the
\nMerger and the Reorganization Agreement, against any other merger,
\nconsolidation, sale of assets or reorganization with any other party, against
\nany recapitalization, liquidation, or winding up of Wayfarer and against any
\nother matter which would, or could reasonably be expected to, prohibit or
\ndiscourage the Merger (each of the foregoing is referred to as an “Opposing
\nProposal”). The Shareholder, as the holder of voting stock of Wayfarer agrees to
\nbe present, in person or by proxy, at all meetings of shareholders of Wayfarer
\nheld prior to the Expiration Date so that all Shares are counted for the
\npurposes of determining the presence of a quorum at such meetings. This
\nAgreement is intended to bind the Shareholder only with respect to the specific
\nmatters set forth herein, and shall not prohibit the Shareholder from acting in
\naccordance with his fiduciary duties as an officer or director of Wayfarer.<\/p>\n
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
\nthe Shareholder agrees to deliver to the Company a proxy in the form attached
\nhereto as Annex A (the “Proxy”), which shall be irrevocable to the extent
\nprovided therein; provided that the Proxy shall be revoked upon termination of
\nthis Agreement in accordance with its terms.<\/p>\n
4. Additional Purchases. For purposes of this Agreement, the term
\n“Shares” shall include any shares of Wayfarer capital stock which the
\nShareholder purchases or otherwise acquires after the execution of this
\nAgreement and prior to the Expiration Date.<\/p>\n
5. Representations, Warranties and Covenants of the Shareholder. The
\nShareholder hereby represents, warrants and covenants to the Company the
\nfollowing:<\/p>\n
5.1 Ownership of Shares. Except as specifically described on Annex B
\nto this Agreement, the Shareholder (i) is the holder and beneficial owner of the
\nShares, which at the date hereof are, and at all times until the Expiration Date
\nwill be, free and clear of any liens, claims, options, charges or other
\nencumbrances, (ii) does not beneficially own any shares of stock of Wayfarer
\nother than the Shares and (iii) has full power and authority to make, enter
\ninto, deliver and carry out the terms of this Agreement and the Proxy.<\/p>\n
5.2 Validity; No Conflict. This Agreement constitutes the legal,
\nvalid and binding obligation of the Shareholder. Neither the execution of this
\nAgreement by the Shareholder nor the consummation of the transactions
\ncontemplated hereby will result in a breach or violation of the terms of any
\nagreement by which the Shareholder is bound or of any decree, judgment, order,
\nlaw or regulation now in effect of any court or other governmental body
\napplicable to the Shareholder.<\/p>\n
5.3 No Voting Trusts and Agreements. Between the date of this
\nAgreement and the Expiration Date, the Shareholder will not, and will not permit
\nany entity under the Shareholder’s control to, deposit any shares of Wayfarer
\ncapital stock held by the Shareholder or such entity in a voting trust or
\nsubject any shares of Wayfarer capital stock held by the Shareholder or such
\nentity to any arrangement or agreement with respect to the voting of such shares
\nof capital stock, other than agreements entered into with the Company.<\/p>\n
2<\/p>\n
80<\/p>\n
5.4 No Proxy Solicitations. Between the date hereof and the
\nExpiration Date, the Shareholder will not, and will not permit any entity under
\nthe Shareholder’s control to, (i) solicit proxies or become a participant in a
\n“solicitation” (as such term is defined in Rule 14a-11 under the Securities
\nExchange Act of 1934, as amended (the “Exchange Act”)), with respect to an
\nOpposing Proposal or otherwise encourage or assist any party in taking or
\nplanning any action which would compete with, restrain or otherwise serve to
\ninterfere with or inhibit the timely consummation of the Merger in accordance
\nwith the terms of the Reorganization Agreement, (ii) initiate a shareholders’
\nvote or action by written consent of Wayfarer shareholders or (iii) become a
\nmember of a “group” (as such term is used in Section 13(d) of the Exchange Act)
\nwith respect to any voting securities of Wayfarer with respect to an Opposing
\nProposal.<\/p>\n
6. Representations, Warranties and Covenants of the Company. The Company
\nrepresents, warrants and covenants to the Shareholder as follows:<\/p>\n
6.1 Due Authorization. This Agreement has been authorized by all
\nnecessary corporate action on the part of the Company and has been duly executed
\nby a duly authorized officer of the Company.<\/p>\n
6.2 Validity; No Conflict. This Agreement constitutes the legal,
\nvalid and binding obligation of the Company. Neither the execution of this
\nAgreement by the Company nor the consummation of the transactions contemplated
\nhereby will result in a breach or violation of the terms of any agreement by
\nwhich the Company is bound or of any decree, judgment, order, law or regulation
\nnow in effect of any court or other governmental body applicable to the Company.<\/p>\n
7. Additional Documents. The Shareholder and the Company hereby covenant
\nand agree to execute and deliver any additional documents necessary or
\ndesirable, in the reasonable opinion of the Company’s legal counsel or the
\nShareholder, as the case may be, to carry out the intent of this Agreement.<\/p>\n
8. Consent and Waiver. The Shareholder hereby gives any consent or
\nwaivers that are reasonably required for the consummation of the Merger under
\nthe terms of any agreement to which the Shareholder is a party or pursuant to
\nany other rights the Shareholder may have.<\/p>\n
9. Miscellaneous.<\/p>\n
9.1 Severability. If any term, provision, covenant or restriction of
\nthis Agreement is held by a court of competent jurisdiction to be invalid, void
\nor unenforceable, the remainder of the terms, provisions, covenants and
\nrestrictions of this Agreement shall remain in full force and effect and shall
\nin no way be affected, impaired or invalidated.<\/p>\n
9.2 Binding Effect and Assignment. This Agreement and all of the
\nprovisions hereof shall be binding upon and inure to the benefit of the parties
\nhereto and their respective successors and permitted assigns, but, except as
\notherwise specifically provided herein, neither <\/p>\n
3<\/p>\n
81<\/p>\n
this Agreement nor any of the rights, interests or obligations of the parties
\nhereto may be assigned by any of the parties without the prior written consent
\nof the other.<\/p>\n
9.3 Amendments and Modifications. This Agreement may not be modified,
\namended, altered or supplemented except upon the execution and delivery of a
\nwritten agreement executed by the parties hereto.<\/p>\n
9.4 Specific Performance: Injunctive Relief. The parties hereto
\nacknowledge that the Company will be irreparably harmed and that there will be
\nno adequate remedy at law for a violation of any of the covenants or agreements
\nof the Shareholder set forth herein. Therefore, it is agreed that, in addition
\nto any other remedies which may be available to the Company upon such violation,
\nthe Company shall have the right to enforce such covenants and agreements by
\nspecific performance, injunctive relief or by any other means available to it at
\nlaw or in equity.<\/p>\n
9.5 Notices. All notices, requests, claims, demands and other
\ncommunications hereunder shall be in writing and sufficient if delivered in
\nperson, by commercial overnight courier service, by confirmed telecopy, or sent
\nby mail (registered or certified mail, postage prepaid, return receipt
\nrequested) to the respective parties as follows:<\/p>\n
If to the Company: The Vantive Corporation
\n 2455 Augustine Drive
\n Santa Clara, CA 95054
\n Attn: General Counsel
\n Telecopy No.: 408-982-5738
\n Telephone No.: 408-982-5700<\/p>\n
If to Shareholder: To the address for notice set forth on the
\n last page hereof.<\/p>\n
With a copy to: Wayfarer Communications, Inc.
\n 2041 Landings Drive
\n Mountain View, CA 94043
\n Attn: President
\n Telecopy No.:
\n Telephone No.:<\/p>\n
or to such other address as either party may have furnished to the other in
\nwriting in accordance herewith, except that notices of change of address shall
\nonly be effective upon receipt.<\/p>\n
9.6 Governing Law. This Agreement shall be governed by, construed and
\nenforced in accordance with the laws of the State of California without giving
\neffect to principles of conflicts of law.<\/p>\n
4<\/p>\n
82<\/p>\n
9.7 Entire Agreement. This Agreement contains the entire
\nunderstanding of the parties in respect of the subject matter hereof, and
\nsupersedes all prior negotiations and understandings between the parties with
\nrespect to such subject matter.<\/p>\n
9.8 Counterparts. This Agreement may be executed in counterparts,
\neach of which shall be an original, but all of which together shall constitute
\none and the same agreement.<\/p>\n
9.9 Effect of Headings. This section headings herein are for
\nconvenience only and shall not affect the construction or interpretation of this
\nAgreement.<\/p>\n
10. Termination. Notwithstanding anything else in this Agreement, this
\nAgreement and the Proxy, and all obligations of the Shareholder under either of
\nthem, shall automatically terminate as of the Expiration Date.<\/p>\n
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
\nexecuted on the day and year first above written.<\/p>\n
THE VANTIVE CORPORATION<\/p>\n
By:
\n ————————————–<\/p>\n
SHAREHOLDER<\/p>\n
By:
\n ————————————–<\/p>\n
Shareholder’s Address for Notice:<\/p>\n
—————————————-<\/p>\n
—————————————-<\/p>\n
—————————————-<\/p>\n
Shares beneficially owned:<\/p>\n
______________ shares of Common Stock<\/p>\n
______________ shares of Preferred Stock<\/p>\n
5<\/p>\n
83<\/p>\n
ANNEX A<\/p>\n
IRREVOCABLE PROXY<\/p>\n
The undersigned shareholder of Wayfarer Communications, Inc., a
\nCalifornia corporation (“Wayfarer”), hereby irrevocably appoints and constitutes
\nthe members of the Board of Directors of The Vantive Corporation, a Delaware
\ncorporation (“Vantive”), and each of them (the “Proxyholders”), the agents and
\nproxies of the undersigned, with full power of substitution and resubstitution,
\nto the full extent of the undersigned’s rights with respect to the shares of
\ncapital stock of Wayfarer beneficially owned by the undersigned, which shares
\nare listed below (the “Shares”), and any and all other shares or securities
\nissued or issuable in respect thereof on or after the date hereof and prior to
\nthe date this proxy terminates, to vote the Shares as follows:<\/p>\n
The agents and proxies named above are empowered at any time prior to
\n termination of this proxy to exercise all voting and other rights
\n (including, without limitation, the power to execute and deliver written
\n consents with respect to the Shares) of the undersigned at every annual,
\n special or adjourned meeting of Wayfarer shareholders, and in every
\n written consent in lieu of such a meeting, or otherwise,<\/p>\n
1. In favor of approval of that certain Agreement and Plan of
\n Reorganization dated as of June ___, 1998 by and among Vantive,
\n Wayfarer, and Revo Acquisition Corporation, a California corporation and
\n a wholly-owned subsidiary of The Vantive Corporation (the
\n “Reorganization Agreement”), and the Merger (as defined in the
\n Reorganization Agreement), and any matter which would, or could
\n reasonably be expected to, facilitate the Merger, and<\/p>\n
2. Against (i) approval of any proposal made in opposition to or
\n competition with consummation of the Merger and the Reorganization
\n Agreement, (ii) any other merger, consolidation, sale of assets or
\n reorganization involving Wayfarer and with any party, (iii) any
\n recapitalization, liquidation, or winding up of Wayfarer and (iv) any
\n other matter which would, or could reasonably be expected to, prohibit
\n or discourage the Merger.<\/p>\n
The Proxyholders may not exercise this proxy on any other matter. The
\nundersigned shareholder may vote the Shares on all such other matters.<\/p>\n
The proxy granted by the Shareholder to the Proxyholders hereby is
\ngranted as of the date of this Agreement in order to secure the obligations of
\nthe Shareholders set forth in Section 2 of the Voting Agreement, and is
\nirrevocable and coupled with an interest in such obligations and in the
\ninterests in Wayfarer to be purchased and sold pursuant to the Reorganization
\nAgreement. This proxy will terminate upon the termination of the Voting
\nAgreement in accordance with its terms.<\/p>\n
6<\/p>\n
84<\/p>\n
Upon the execution hereof, all prior proxies given by the undersigned
\nwith respect to the Shares and any and all other shares or securities issued or
\nissuable in respect thereof on or after the date hereof are hereby revoked and
\nno subsequent proxies will be given until such time as this proxy shall be
\nterminated in accordance with its terms.<\/p>\n
Any obligation of the undersigned hereunder shall be binding upon the
\nsuccessors and assigns of the undersigned. The undersigned shareholder
\nauthorizes the Proxyholders to file this proxy and any substitution or
\nrevocation of substitution with the Secretary of Revo and with any Inspector of
\nElections at any meeting of the shareholders of Revo.<\/p>\n
This proxy is irrevocable and shall survive the insolvency, incapacity,
\ndeath or liquidation of the undersigned.<\/p>\n
Dated: June ___, 1998<\/p>\n
Signature of Shareholder: _____________________________<\/p>\n
Print name of Shareholder: _____________________________<\/p>\n
Shares beneficially owned:<\/p>\n
_________ shares of Common Stock<\/p>\n
_________ shares of Preferred Stock<\/p>\n
7<\/p>\n
85<\/p>\n
ANNEX B<\/p>\n
EXCEPTIONS TO OWNERSHIP OF SHARES<\/p>\n
8<\/p>\n
86<\/p>\n
ANNEX 7.2(c)<\/p>\n
FORM OF CONFIDENTIALITY AND INVENTIONS AGREEMENT<\/p>\n
87<\/p>\n
ANNEX 7.2(d)<\/p>\n
FORM OF NONCOMPETITION AGREEMENT<\/p>\n
88<\/p>\n
NONCOMPETITION AGREEMENT<\/p>\n
THIS NONCOMPETITION AGREEMENT is made and entered into this 8th day of
\nJune, 1998, by and between , an individual (“Shareholder”), and The Vantive
\nCorporation, a Delaware corporation (“Buyer”). For the purposes of this
\nAgreement, “Buyer” shall be deemed to include Buyer and its majority owned
\ndirect and indirect subsidiaries that operate the Business of Wayfarer (as
\nhereinafter defined) during the term of this Agreement.<\/p>\n
RECITALS<\/p>\n
A. Wayfarer Communications, Inc., a California corporation (“Wayfarer”),
\nis engaged throughout the United States of America and the world. Wayfarer is in
\nthe business of providing client\/server software that extracts and filters
\ntop-line business content in real-time for enterprise desktops (the “Business of
\nWayfarer”);<\/p>\n
B. Pursuant to that certain Agreement and Plan of Reorganization (the
\n“Reorganization Agreement”) dated June 17, 1998 by and among Buyer, Revo
\nAcquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
\nBuyer (“Sub”), and Wayfarer, Buyer is acquiring Wayfarer through a merger of Sub
\nwith and into Wayfarer (the “Merger”). After the Merger becomes effective, the
\nseparate existence of Sub shall cease, and Wayfarer, as the surviving
\ncorporation in the Merger, shall continue its corporate existence under the laws
\nof the State of California and will continue to operate the Business of Wayfarer
\nas a wholly-owned subsidiary of Buyer;<\/p>\n
C. Shareholder is the beneficial owner of shares of capital stock of
\nWayfarer and is a key employee or officer of Wayfarer;<\/p>\n
D. Shareholder has been actively involved in the design, development
\nand\/or marketing of Wayfarer’s products, including the management of a key
\nfunction within Wayfarer; and<\/p>\n
E. In consideration of and as an inducement to Buyer and Sub to
\nconsummate the Merger, Shareholder, intending to be bound hereby, has agreed to
\nexecute this Agreement.<\/p>\n
NOW, THEREFORE, the parties agree as follows:<\/p>\n
1. Covenant Not to Compete. Shareholder agrees that, for a period of one
\n(1) year from the Effective Time of the Merger (as defined in the Reorganization
\nAgreement) and for so long thereafter as he is employed by or serves as a
\nconsultant to Buyer, or such shorter period ending upon Shareholder’s
\ntermination of employment from the Company without “Cause” or <\/p>\n
1<\/p>\n
89<\/p>\n
because of “Certain Reasons” (as defined in Section 1(d) and 1(e) hereof,
\nrespectively) (the “Noncompetition Period”), he will not:<\/p>\n
(a) engage directly or indirectly in Competition;<\/p>\n
(b) directly or indirectly be or become an officer, director,
\nshareholder, owner, partner, promoter, employee, agent, consultant, licensor or
\njoint venturer, of, for or to, or otherwise be or become associated with or
\nacquire or hold (of record, beneficially or otherwise) any direct or indirect
\ninterest in, any Person that engages directly or indirectly in Competition,
\nexcept that Shareholder may be or become an employee, consultant, agent,
\nlicensor or sublicensor of, for or to, or otherwise be or become associated
\nwith, such Person if Shareholder’s actual services rendered or activity in
\nconnection with such Person do not reasonably relate to a Competing Product or
\nCompeting Service; or<\/p>\n
(c) request or advise any of the customers, suppliers or other
\nbusiness contacts of Wayfarer with which Shareholder had contact while employed
\nby Wayfarer to withdraw, curtail, cancel or not increase their business with
\nWayfarer. Notwithstanding the foregoing, Shareholder is permitted to own as a
\npassive investor up to a three (3%) interest in any publicly traded entity.
\nShareholder agrees to notify Buyer in writing of each employment or consulting
\nposition he accepts during the Noncompetition Period (including the name and
\naddress of the hiring party) and will, upon request by Buyer, describe in
\nreasonable detail the nature of his duties in each such position.<\/p>\n
(d) “Cause” shall mean Shareholder’s:<\/p>\n
(i) failure to perform such assigned duties and
\nresponsibilities as shall be consistent with the duties and responsibilities of
\nan employee of Wayfarer in a similar job position after receipt of a written
\nnotice of specific deficiencies consistent with Buyer’s performance review
\npolicies in effect at such time and a reasonable period not to exceed thirty
\n(30) days for Shareholder to cure any such deficiencies;<\/p>\n
(ii) engaging in gross negligence or willful misconduct
\nwhich is or is likely to be materially injurious to Wayfarer;<\/p>\n
(iii) committing a felony, an act of fraud against, or the
\nmisappropriation of property belonging to Wayfarer; or<\/p>\n
(iv) breaching in any material respect the terms of any
\nemployment agreement or any confidential or proprietary information agreement
\nbetween Shareholder and Wayfarer or Buyer; and<\/p>\n
2<\/p>\n
90<\/p>\n
(v) a majority vote of the Board of Directors of Buyer
\nauthorizes a for Cause termination after the occurrence of any of the events
\ndescribed in clauses (i), (ii), (iii) or (iv) as set forth above.<\/p>\n
(e) “Certain Reasons” shall mean (i) a reduction in cash compensation
\n(exclusive of bonuses) or a material reduction in benefits, except as part of a
\nsalary or benefit reduction program by Buyer that is applicable generally to
\nemployees of Shareholder’s level, (ii) assignment to a position materially not
\ncommensurate with Shareholder’s training and abilities, or (iii) relocation of
\nShareholder’s workplace to any place more than fifty miles from Mountain View,
\nCalifornia, provided, in each case, that Shareholder has given Buyer written
\nnotice of Shareholder’s intention to terminate for Certain Reasons, citing the
\nCertain Reasons, and Wayfarer has not cured the Certain Reasons within thirty
\n(30) days after receipt of such notice.<\/p>\n
(f) “Competing Product” means client\/server software that extracts
\nand filters top-line business content in real time for enterprise desktops or
\nany other product that is substantially the same as, is based upon or competes
\nin any material respect with such products.<\/p>\n
(g) “Competing Service” means any: (i) activities relating to the
\ndevelopment, marketing and\/or distribution of Competing Products carried on by
\nany business worldwide which competes with the Business of Wayfarer; (ii)
\nservice that has been provided, performed or offered by or on behalf of Wayfarer
\nat any time on or prior to the date of this Noncompetition Agreement; (iii)
\nservice that facilitates, supports or otherwise relates to the design,
\ndevelopment, marketing, promotion, sale, supply distribution, resale,
\ninstallation, support, maintenance, license or sublicense of any Competing
\nProduct; or (iv) service that is substantially the same as, is based upon or
\ncompetes in any material respect with any service referred to in clause (i),
\n(ii) or (iii) of this sentence.<\/p>\n
(h) “Competition”: a Person shall be deemed to be engaged in
\n“Competition” if: (a) such Person is engaged in the design, development,
\nmarketing, promotion, sale, supply, distribution, resale, installation, support,
\nmaintenance, license or sublicense of any Competing Product; or (b) such Person
\nis engaged in providing, performing or offering any Competing Service.
\nReferences to engaging directly or indirectly in Competition include (without
\nprejudice to the generality of that expression) references to acting alone or
\njointly with or by means of any other Person.<\/p>\n
(i) “Person” means any: (i) individual; (ii) corporation, general
\npartnership, limited partnership, limited liability partnership, trust, company
\n(including any limited liability company or joint stock company) or other
\norganization or entity; or (iii) governmental body or authority.<\/p>\n
2. Covenant Not to Hire. During the Noncompetition Period,
\nShareholder agrees that he will not directly or indirectly hire or attempt to
\nhire, whether as an employee, consultant<\/p>\n
3<\/p>\n
91<\/p>\n
or otherwise, any person who at such time is, or who at any time in the six (6)
\nmonth period prior to such time had been, employed by Buyer or Wayfarer.<\/p>\n
3. Nondisruption; Other Matters. During the Noncompetition Period,
\nShareholder agrees that he will not directly or indirectly interfere with,
\ndisrupt or attempt to disrupt any past, present or prospective relationship,
\ncontractual or otherwise, between Buyer or Wayfarer, on the one hand, and any of
\ntheir respective customers, suppliers or employees, on the other hand.<\/p>\n
4. Equitable Relief. Shareholder acknowledges and agrees that
\nBuyer’s remedies at law for breach of any of the provisions of this Agreement
\nwould be inadequate and, in recognition of this fact, Shareholder agrees that,
\nin the event of such breach, in addition to any remedies at law it may have,
\nBuyer, without posting any bond, shall be entitled to obtain equitable relief in
\nthe form of specific performance, a temporary restraining order, a temporary or
\npermanent injunction or any other equitable remedy that may be available.
\nShareholder further acknowledges that should Shareholder violate any of the
\nprovisions of this Agreement, it will be difficult to determine the amount of
\ndamages resulting to Buyer and that in addition to any other remedies it may
\nhave, Buyer shall be entitled to temporary and permanent injunctive relief
\nwithout the necessity of proving damages.<\/p>\n
5. Acknowledgment. Each of Shareholder and Buyer acknowledges and
\nagrees that the covenants and agreements contained in this Agreement have been
\nnegotiated in good faith by the parties, are reasonable and are not more
\nrestrictive or broader than necessary to protect the interests of the parties
\nthereto, and would not achieve their intended purpose if they were on different
\nterms or for periods of time shorter than the periods of time provided herein or
\napplied in more restrictive geographical areas than are provided herein. Each
\nparty further acknowledges that Buyer would not enter into the Reorganization
\nAgreement and the transactions contemplated thereby in the absence of the
\ncovenants and agreements contained in this Agreement and that such covenants and
\nagreements are essential to protect the value of Wayfarer to Buyer.<\/p>\n
6. Separate Covenants. The covenants contained in this Agreement
\nshall be construed as a series of separate covenants, one for each of the
\ncounties in each of the states of the United States of America one for each
\nprovince of Canada, and one for each country outside the United States and
\nCanada.<\/p>\n
7. Severability. The parties agree that construction of this
\nAgreement shall be in favor of its reasonable nature, legality and
\nenforceability, and that any construction causing unenforceability shall yield
\nto a construction permitting enforceability. It is agreed that the
\nnoncompetition, nonsolicitation, and nonhiring covenants and provisions of this
\nAgreement are severable, and that if any single covenant or provision or
\nmultiple covenants or provisions should be found unenforceable, the entire
\nAgreement and remaining covenants and provisions shall not fail but shall be
\nconstrued as enforceable without any severed covenant or provision in accordance
\nwith the tenor of this Agreement. The parties specifically agree that no
\ncovenant or <\/p>\n
4<\/p>\n
92<\/p>\n
provision of this Agreement shall be invalidated because of overbreadth insofar
\nas the parties acknowledge the scope of the covenants and provisions contained
\nherein to be reasonable and necessary for the protection of Buyer and Wayfarer
\nand not unduly restrictive upon Shareholder. However, should a court or any
\nother trier of fact or law determine not to enforce any covenant or provision of
\nthis Agreement as written due to overbreadth, then the parties agree that said
\ncovenant or provision shall be enforced to the extent reasonable, with the court
\nor such trier to make any necessary revisions to said covenant or provision to
\npermit its enforceability.<\/p>\n
8. Not an Employment Agreement. This Agreement is not, and nothing
\nin this Agreement shall be construed as, an agreement to provide employment to
\nShareholder.<\/p>\n
9. Governing Law. This Agreement is made under and shall be governed
\nby, construed in accordance with and enforced under the internal laws of the
\nState of California. All disputes arising under this Agreement shall be brought
\nin the federal and state courts located in Santa Clara County, California, as
\npermitted by law, and each of the parties hereby consents to the personal
\njurisdiction, service of process and venue of such courts.<\/p>\n
10. Entire Agreement. This Agreement, together with the
\nReorganization Agreement, constitutes and contains the entire agreement and
\nunderstanding concerning the subject matter addressed herein between the
\nparties, and supersedes and replaces all prior negotiations and all agreements
\nproposed or otherwise, whether written or oral, concerning the subject matter
\nhereof, and the parties hereto have made no agreements, representations or
\nwarranties relating to the subject matter of this Agreement that are not set
\nforth herein or in the Reorganization Agreement.<\/p>\n
11. Notices. Any notice or other communication under this Agreement
\nshall be in writing, signed by the party making the same, and shall be delivered
\npersonally or sent by certified or registered mail, postage prepaid, addressed
\nas follows:<\/p>\n
If to Shareholder:
\n ——————————-<\/p>\n
——————————-<\/p>\n
——————————-<\/p>\n
If to Buyer: The Vantive Corporation
\n 2455 Augustine Drive
\n Santa Clara, CA 95054
\n Attn: General Counsel<\/p>\n
with a copy to: Gray Cary Ware & Freidenrich LLP
\n 400 Hamilton Avenue
\n Palo Alto, CA 94301-1825
\n Attn: Dennis C. Sullivan, Esq.<\/p>\n
5<\/p>\n
93<\/p>\n
or to such other address as may hereafter be designated by either party hereto.
\nAll such notices shall be deemed given on the date personally delivered or
\nmailed.<\/p>\n
12. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
\nIRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
\nARISING OUT OF OR RELATED TO THIS AGREEMENT.<\/p>\n
13. Amendments; No Waiver.<\/p>\n
(a) No amendment or modification of this Agreement shall be
\ndeemed effective unless made in writing and signed by the parties hereto.<\/p>\n
(b) No term or condition of this Agreement shall be deemed to
\nhave been waived, nor shall there be any estoppel to enforce any provision of
\nthis Agreement, except by a statement in writing signed by the party against
\nwhom enforcement of the waiver or estoppel is sought. Any written waiver shall
\noperate only as to the specific term or condition waived and shall not
\nconstitute a waiver of such term or condition for the future or as to any act
\nother than that specifically waived.<\/p>\n
14. Assignment. This Agreement may be assigned by Buyer to any
\naffiliate of Buyer or to any nonaffiliate of Buyer that shall succeed to the
\nbusiness and assets of Buyer, Wayfarer and the Business of Wayfarer. In the
\nevent of any such assignment, Buyer shall cause such affiliate or nonaffiliate,
\nas the case may be, to assume the obligations of Buyer hereunder, by a written
\nagreement addressed to Shareholder, concurrently with any assignment with the
\nsame effect as if such assignee were “Buyer” hereunder. This Agreement is
\npersonal to Shareholder, and Shareholder may not assign any rights or delegate
\nany responsibilities hereunder.<\/p>\n
15. Headings. The headings of paragraphs in this Agreement are solely
\nfor convenience of reference and shall not control the meaning or interpretation
\nof any provision of this Agreement.<\/p>\n
16. Counterparts. This Agreement may be executed in counterparts,
\neach of which shall be an original, with the same effect as if the signatures
\nthereto and hereto were upon the same instrument.<\/p>\n
6<\/p>\n
94<\/p>\n
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
\nof the date first written above.<\/p>\n
———————————–
\n [Shareholder]<\/p>\n
THE VANTIVE CORPORATION<\/p>\n
By:
\n ——————————–
\n Title:
\n ——————————<\/p>\n
7<\/p>\n
95<\/p>\n
ANNEX 7.2(e)<\/p>\n
SCHEDULE OF TARGET EMPLOYEES<\/p>\n
96<\/p>\n
ANNEX 7.2(g)<\/p>\n
FORM OF FENWICK & WEST LEGAL OPINION<\/p>\n
97<\/p>\n
ANNEX 7.2(j)<\/p>\n
FORM OF INVESTOR REPRESENTATION LETTER<\/p>\n
98<\/p>\n
ANNEX 7.3(d)<\/p>\n
FORM OF GCW&F LEGAL OPINION<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[9222],"corporate_contracts_industries":[9513],"corporate_contracts_types":[9622,9626],"class_list":["post-43217","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-vantive-corp","corporate_contracts_industries-technology__software","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43217"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43217"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43217"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}