AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
GOTO.COM, INC.,
ROY ACQUISITION CORP.
AND
CADABRA INC.
Dated as of November 19, 1999
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TABLE OF CONTENTS
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ARTICLE I THE MERGER.................................................................................................. 2
1.1 The Merger.......................................................................................... 2
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1.2 Effective Time...................................................................................... 2
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1.3 Effect of the Merger................................................................................ 2
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1.4 Articles of Incorporation; Bylaws................................................................... 2
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1.5 Directors and Officers.............................................................................. 3
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1.6 Merger Consideration................................................................................ 3
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1.7 Dissenting Shares for Holders of Company Capital Stock.............................................. 6
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1.8 Surrender of Certificates........................................................................... 6
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................. 9
2.1 Organization of the Company......................................................................... 9
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2.2 Company Capital Structure........................................................................... 9
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2.3 Subsidiaries....................................................................................... 10
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2.4 Authority.......................................................................................... 10
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2.5 Company Financial Statements....................................................................... 11
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2.6 No Undisclosed Liabilities......................................................................... 11
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2.7 No Changes......................................................................................... 11
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2.8 Tax and Other Returns and Reports.................................................................. 13
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2.9 Restrictions on Business Activities................................................................ 14
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2.10 Title to Properties; Absence of Liens and Encumbrances............................................. 14
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2.11 Intellectual Property.............................................................................. 15
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2.12 Agreements, Contracts and Commitments.............................................................. 17
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2.13 Interested Party Transactions...................................................................... 19
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2.14 Compliance with Laws............................................................................... 19
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2.15 Litigation......................................................................................... 19
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2.16 Insurance.......................................................................................... 20
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2.17 Minute Books....................................................................................... 20
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2.18 Environmental Matters.............................................................................. 20
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2.19 Brokers'and Finders'Fees; Third Party Expenses..................................................... 21
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2.20 Employee Matters and Benefit Plans................................................................. 21
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2.21 Officer Matters.................................................................................... 24
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2.22 Year 2000 Compliance............................................................................... 24
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2.23 Representations Complete........................................................................... 24
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................................................. 25
3.1 Organization, Standing and Power................................................................... 25
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3.2 Authority.......................................................................................... 25
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3.3 Capital Structure.................................................................................. 25
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3.4 SEC Documents; Parent Financial Statements......................................................... 26
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3.5 No Material Adverse Change......................................................................... 26
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3.6 Disclosure......................................................................................... 26
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ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME....................................................................... 27
4.1 Conduct of Business of the Company................................................................. 27
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4.2 No Solicitation.................................................................................... 29
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4.3 Conduct of Business of Parent...................................................................... 30
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ARTICLE V ADDITIONAL AGREEMENTS...................................................................................... 31
5.1 Fairness Hearing; Shareholder Approval............................................................. 31
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5.2 Nasdaq Listing..................................................................................... 31
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5.3 Access to Information.............................................................................. 31
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5.4 Confidentiality.................................................................................... 32
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5.5 Expenses........................................................................................... 32
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5.6 Public Disclosure.................................................................................. 32
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5.7 Consents........................................................................................... 32
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5.8 FIRPTA Compliance.................................................................................. 32
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5.9 Reasonable Efforts................................................................................. 32
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5.10 Notification of Certain Matters.................................................................... 33
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5.11 Affiliate Agreements............................................................................... 33
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5.12 Additional Documents and Further Assurances........................................................ 33
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5.13 Employee Benefits.................................................................................. 33
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5.14 Indemnification.................................................................................... 34
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5.15 Stock Options...................................................................................... 34
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ARTICLE VI CONDITIONS TO THE MERGER.................................................................................. 34
6.1 Conditions to Obligations of Each Party to Effect the Merger....................................... 34
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6.2 Additional Conditions to Obligations of the Company................................................ 34
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6.3 Additional Conditions to the Obligations of Parent and Merger Sub.................................. 35
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ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW....................................................... 36
7.1 Survival of Representations and Warranties......................................................... 36
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7.2 Escrow Arrangements................................................................................ 36
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER....................................................................... 43
8.1 Termination........................................................................................ 43
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8.2 Effect of Termination.............................................................................. 44
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8.3 Amendment.......................................................................................... 44
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8.4 Extension; Waiver.................................................................................. 44
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ARTICLE IX GENERAL PROVISIONS........................................................................................ 44
9.1 Notices............................................................................................ 44
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9.2 Interpretation..................................................................................... 46
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9.3 Counterparts....................................................................................... 46
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9.4 Entire Agreement; Assignment....................................................................... 46
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9.5 Severability....................................................................................... 46
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9.6 Other Remedies..................................................................................... 47
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9.7 Governing Law...................................................................................... 47
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9.8 Rules of Construction.............................................................................. 47
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9.9 Specific Performance............................................................................... 47
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9.10 Attorneys'Fees..................................................................................... 47
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of November 19, 1999 among GoTo.com, Inc., a Delaware
corporation ("Parent"), Roy Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), Cadabra Inc., a California
corporation (the "Company"), the undersigned escrow agent (the "Escrow Agent")
and Narinder P. Singh (the "Securityholder Agent") (the Escrow Agent and the
Securityholder Agent being parties with respect to Article VII hereof only).
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each Company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
options, warrants or other rights to acquire or receive shares of Company
Capital Stock shall be converted into the right to receive shares of voting
Common Stock of Parent ("Parent Common Stock").
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
E. As a material inducement for Parent to consummate the Merger,
certain key employees of the Company will enter into non-competition agreements
substantially in the form attached hereto as Exhibit A (the "Non-Competition
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Agreement") with Parent, each of which shall become effective as of the
Effective Time (as defined herein).
F. Concurrent with the execution and delivery of this Agreement, as a
material inducement to Parent to enter into this Agreement, certain affiliate
shareholders of the Company are executing and delivering shareholder support
agreements (the "Support Agreements"), substantially in the form attached hereto
as Exhibit B, to Parent.
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G. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law ("California
Law") and Delaware General Corporation Law ("Delaware Law"), Merger Sub shall be
merged with and into Company, the separate corporate existence of Merger Sub
shall cease and Company shall continue as the surviving corporation. The
surviving corporation after the Merger is sometimes referred to hereinafter as
the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated
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pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than two (2) business days
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California, unless another place or time is agreed to in writing by Parent and
the Company. The date upon which the Closing actually occurs is herein referred
to as the "Closing Date." On the Closing Date, the parties hereto shall cause
the Merger to be consummated by filing an Agreement of Merger (the "Agreement of
Merger") with the Secretaries of State of the States of California and Delaware,
in accordance with the relevant provisions of applicable law (the time of
acceptance by the Secretary of State of California of such filing being referred
to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in the applicable provisions of California Law and
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Articles of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with California Law and as provided in such Articles of
Incorporation."
(b) Unless otherwise determined by Parent prior to the Effective
Time, the Bylaws of the Company as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation at the Effective Time,
until thereafter amended in accordance with California Law and as provided in
the Articles of Incorporation of the Surviving Corporation and such Bylaws.
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1.5 Directors and Officers. Unless otherwise determined by Parent
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prior to the Effective Time, the directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, each to
hold the office of a director of the Surviving Corporation in accordance with
the provisions of California Law and the Articles of Incorporation and Bylaws of
the Surviving Corporation until their successors are duly elected and qualified.
The officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the provisions of the Bylaws of the Surviving Corporation.
1.6 Merger Consideration.
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(a) Certain Definitions. For purposes of this Agreement, the
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following terms shall have the following meanings:
"Aggregate Share Number" shall mean that number of shares of
Parent Common Stock equal to (i) $242,000,000 divided by (ii) the average
closing price of a share of Parent Common Stock for the thirty calendar days
prior to the Effective Time, as reported on the NASDAQ National Market (the "30-
Day Average Price"); provided, however, that if the 30-Day Average Price is
greater than $130.00, Aggregate Share Number shall mean 1,861,539 shares of
Parent Common Stock, and provided further, that if the 30-Day Average Price is
less than $40.00, Aggregate Share Number shall mean 6,050,000 shares of Parent
Common Stock.
"Company Capital Stock" shall mean shares of Company Common Stock,
Company Preferred Stock and any shares of other capital stock of Company.
"Company Common Stock" shall mean shares of common stock of
Company.
"Company Convertible Securities" shall mean the Company Options
and other rights (other than Company Preferred Stock) to acquire or receive
shares of Company Capital Stock.
"Company Options" shall mean all issued and outstanding options to
purchase or otherwise acquire Company Capital Stock (whether or not vested) held
by employees or directors of or consultants to Company (other than Company
Preferred Stock).
"Company Preferred Stock" shall mean shares of Company Series A
Preferred Stock and Company Series B Preferred Stock.
"Company Series A Preferred Stock" shall mean shares of Series A
Preferred Stock of Company.
"Company Series B Preferred Stock" shall mean shares of Series B
Preferred Stock of Company.
"Company Shareholders" shall mean holders of any shares of Company
Capital Stock immediately prior to the Effective Time.
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"Company Warrants" shall mean any outstanding warrants to purchase
shares of Company Common Stock.
"Escrow Amount" shall mean that number of shares of Parent Common
Stock equal to the Aggregate Share Number multiplied by 0.1.
"Exchange Ratio" shall mean a number of shares of Parent Common
Stock equal to the quotient obtained by dividing the Aggregate Share Number by
the Total Outstanding Shares.
"Knowledge" shall mean, with respect to Company or Parent, what is
within the actual knowledge of any of the officers of Company or Parent, as the
case may be.
"Per Share Cash Amount" shall mean an amount of cash equal to the
quotient obtained by dividing $8,000,000 by the Total Outstanding Shares.
"Total Outstanding Shares" shall mean the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time plus the aggregate number of shares of Company Common Stock issuable, with
or without the passage of time or satisfaction of other conditions, upon
exercise of or conversion of all Company Convertible Securities and Company
Preferred Stock outstanding immediately prior to the Effective Time.
(b) Shares to be Issued; Cash to be Issued; Effect on Capital
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Stock. The maximum number of shares of Parent Common Stock and cash to be issued
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(including Parent Common Stock to be reserved for issuance upon exercise of any
of the Company's options and warrants to be assumed by Parent) in exchange for
the acquisition by Parent of all outstanding Company Capital Stock and all
unexpired and unexercised options, warrants or other rights to acquire Company
Capital Stock shall be determined immediately prior to the Effective Time and
shall be equal to the Aggregate Share Number plus $8,000,000. Subject to the
terms and conditions of this Agreement, as of the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holder of any shares of the Company Capital Stock, the following shall occur:
(i) Effect on Company Capital Stock. Each share of Company
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Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any Dissenting Shares, as defined in Section 1.7 hereof and any
shares owned by Parent, Merger Sub or Company or any direct or indirect wholly-
owned subsidiary thereof) shall be canceled and extinguished and shall be
converted automatically into the right to receive, upon surrender of the
certificate representing such share of Company Capital Stock and upon the terms
and subject to conditions set forth below and throughout this Agreement, a
combination of (A) shares of Parent Common Stock equal to the Exchange Ratio and
(B) cash equal to the Per Share Cash Amount (collectively, the "Merger
Consideration").
(ii) Assumption of Company Options. Each outstanding Company
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Option issued pursuant to Company's 1998 Stock Plan (the "Option Plan") or
otherwise, whether vested or unvested, will be assumed by Parent in connection
with the Merger. Each Company Option so
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assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Option Plan and/or as
provided in the respective option agreements immediately prior to the Effective
Time (including, without limitation, any vesting schedule or repurchase rights),
except that (i) each Company Option will be exercisable for (A) that number of
whole shares of Parent Common Stock equal to the product of the number of shares
of Company Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(B) cash equal to the Per Share Cash Amount multiplied by the number of shares
of Company Common Stock that were issuable upon exercise of such Company Option,
and (ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Option will be equal to the
quotient determined by dividing the exercise price per share of Company Capital
Stock at which such Company Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. The
rights of first refusal with respect to Company Options issued under the Option
Plan, set forth in the form of option agreement, are hereby waived by the
Company and Parent as of the Effective Time.
(iii) Option Status. It is the intention of the parties
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hereto that the Company Options assumed by Parent following the Closing pursuant
to this Section 1.6 will, to the extent permitted by applicable law, qualify as
incentive stock options as defined in Section 422 of the Code, to the extent any
such Company Options qualified as incentive stock options immediately prior to
the Effective Time.
(iv) Assumption of Company Warrants. At the Effective Time,
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each outstanding Company Warrant will be assumed by Parent in connection with
the Merger. Each Company Warrant so assumed by Parent under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth in
Company Warrant immediately prior to the Effective Time, except that (i) each
Company Warrant will be exercisable for (A) that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(B) cash equal to the Per Share Cash Amount multiplied by the number of shares
of Company Common Stock that were issuable upon exercise of such Company
Warrant, and (ii) the per share exercise price for the shares of Parent Common
Stock issuable upon exercise of such assumed Company Warrant will be equal to
the quotient determined by dividing the exercise price per share of Company
Capital Stock at which such Company Warrant was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(v) Fractional Shares. No fractional share of Parent
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Common Stock shall be issued in the Merger. In lieu thereof, any fractional
share shall be paid in cash at the 30 Day Average Price.
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(vi) Cancellation of Parent-Owned and Company-Owned Stock.
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Each share of Company Capital Stock owned by Parent, Merger Sub, Company or any
direct or indirect wholly-owned subsidiary thereof immediately prior to the
Effective Time, shall be cancelled and extinguished without any conversion
thereof.
(vii) Capital Stock of Merger Sub. Each share of capital
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stock of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
1.7 Dissenting Shares for Holders of Company Capital Stock.
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(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has not
withdrawn or lost appraisal or dissenter rights for such shares in accordance
with California Law and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights ("Dissenting Shares"), shall not be
converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by California Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock shall effectively withdraw or lose
(through failure to perfect or otherwise) the right to appraisal, then, as of
the later of the Effective Time and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive the Merger Consideration as provided in Section 1.6 (and subject to the
provisions of Section 7.2 hereof), without interest thereon, upon surrender of
the certificate representing such shares.
(c) Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to California Law and
received by Company and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for appraisal under California Law.
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
Company or offer to settle or settle any such demands. Parent shall have full
recourse to the Escrow Fund (as defined in Section 7.2(a)) for the amount, if
any, paid by Company or Parent in respect of any Dissenting Shares in excess of
the Merger Consideration (with the Exchange Ratio being valued at the 30 Day
Average Price).
1.8 Surrender of Certificates.
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(a) Exchange Agent. The transfer agent of Parent (or another
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entity reasonably acceptable to Parent and Company and determined prior to the
Closing) shall serve as exchange agent (the "Exchange Agent") in the Merger.
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(b) Parent to Provide Parent Common Stock. Prior to the Closing,
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Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I the shares of Parent Common Stock and cash issuable to
Company Shareholders pursuant to Section 1.6 in exchange for outstanding shares
of Company Capital Stock, less the Escrow Amount which Parent shall deposit into
the Escrow Fund (as defined in Section 7.2(a) hereof) on behalf of the Company
Shareholders. The portion of the Escrow Amount contributed on behalf of each
Company Shareholder shall be in proportion to the aggregate number of shares of
Parent Common Stock each such Company Shareholder would otherwise be entitled to
receive in the Merger (excluding any shares of Parent Common Stock issuable upon
exercise of any assumed Company Options) by virtue of ownership of outstanding
shares of Company Capital Stock immediately prior to the Effective Time.
(c) Exchange Procedures. As soon as practicable following the
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Closing, Parent shall cause to be mailed to each Company Shareholder (i) a
letter of transmittal (which shall be in such form and contain such provisions
as Parent may reasonably specify and shall specify that delivery shall be
effected, and risk of loss and title to the certificates (the "Certificates")
which immediately prior to the Effective Time represent outstanding shares of
Company Capital Stock whose shares are converted into the right to receive such
Company Shareholder's pro rata portion of the Merger Consideration pursuant to
Section 1.6, shall pass, only upon delivery of the Certificates to the Exchange
Agent at the Closing) and (ii) instructions for use in effecting the surrender
at the Closing of the Certificates in exchange for certificates representing
such Company Shareholder's pro rata portion of the Merger Consideration. Upon
surrender of a Certificate at the Closing for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the Company Shareholder shall be entitled to
receive, and the Exchange Agent shall promptly deliver in exchange therefor, a
certificate representing the number of whole shares of Parent Common Stock (less
the number of shares of Parent Common Stock to be deposited in the Escrow Fund
on such holder's behalf pursuant to Section 1.8(b) and Article 7 hereof) and the
cash to which such holder is entitled pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled. As soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Article VII hereof, Parent shall cause to be distributed to the Escrow Agent
(as defined in Article VII) a certificate or certificates representing that
number of shares of Parent Common Stock equal to the Escrow Amount which shall
be registered in the name of the Escrow Agent. Such shares shall be beneficially
owned by the holders on whose behalf such shares were deposited in the Escrow
Fund and shall be available to compensate Parent as provided in Article VII.
Until so surrendered, each outstanding Certificate that, prior to the Effective
Time, represented shares of Company Capital Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Parent
Common Stock and cash into which such shares of Company Capital Stock shall have
been so converted, except that no interest shall accrue or be payable with
respect to the cash portion of the Merger Consideration.
(d) Distributions With Respect to Unexchanged Shares. No
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dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a
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record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock and cash issued in
exchange therefor, plus the amount of dividends or other distributions (without
interest) with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
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Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered.
(f) Lost, Stolen or Destroyed Certificates. In the event any
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Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the delivery by the holder thereof of an
affidavit of that fact by the holder thereof containing customary
indemnification provisions.
(g) No Liability. Notwithstanding anything to the contrary in
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this Section 1.8, neither Parent nor any party hereto shall be liable to a
holder of shares of Parent Common Stock or Company Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) No Further Ownership Rights in Company Capital Stock. The
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shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to be full satisfaction of all rights pertaining to shares of Company
Capital Stock outstanding prior to the Effective Time, and there shall be no
further registration of transfers on the records of Parent of shares of Company
Capital Stock that were outstanding prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Parent for any reason, they shall
be canceled and exchanged as provided in this Article I.
(i) Taking of Necessary Action; Further Action. If, at any time
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after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company, Parent and Merger Sub, the officers and directors of
Company, Parent and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company
represents and warrants to Parent and Merger Sub, subject to such exceptions as
are clearly disclosed in the disclosure letter (referencing the appropriate
section number) supplied by the Company to Parent (the "Company Disclosure
Letter") and dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would be material. The Company has
delivered a true and correct copy of its Articles of Incorporation and Bylaws,
each as amended to date, to Parent.
2.2 Company Capital Structure.
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(a) The authorized capital stock of the Company consists of
40,000,000 shares of authorized Common Stock, of which 3,598,750 shares are
issued and outstanding as of the date hereof, and 3,000,000 shares of authorized
Preferred Stock, 1,550,000 of which are designated Series A Preferred Stock, of
which 1,537,966 shares are issued and outstanding as of the date hereof and
1,450,000 of which are designated Series B Preferred Stock, of which 1,432,948
shares are issued and outstanding as of the date hereof. The Company Capital
Stock is held of record by the persons, with the addresses of record and in the
amounts set forth on Section 2.2(a) of the Company Disclosure Letter. All
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outstanding shares of Company Capital Stock are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of the Company or any agreement
to which the Company is a party or by which it is bound.
(b) The Company has reserved 2,750,000 shares of Common Stock for
issuance to directors, officers, employees and consultants pursuant to the
Option Plan, of which 350,000 shares are subject to outstanding, unexercised
options as of the date hereof and 1,793,250 shares remain available for future
grant as of the date hereof. The Company has reserved no shares of Common Stock
for issuance upon exercise of outstanding Company Options granted outside the
Option Plan. There are no outstanding Company Warrants as of the date hereof.
Section 2.2(b) of the Company Disclosure Letter sets forth for each outstanding
--------------
Company Option, the name of the holder of such option, the number of shares of
Common Stock subject to such option, the exercise price of such option and the
vesting schedule for such option, including the extent vested to the date hereof
and whether the exercisability of such option will be accelerated and become
exercisable by reason of the transactions contemplated by this Agreement. Except
for the Company Options described in Section 2.2(b) of the Company Disclosure
--------------
Letter, there are no options, warrants, calls, rights, commitments or agreements
of any character, written or oral, to which the Company is a party or by which
it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the
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<PAGE>
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. The holders of Company Options have been
or will be given, or shall have properly waived, any required notice prior to
the Merger, and all such rights will be terminated at or prior to the Effective
Time. As a result of the Merger, Parent will be the record and sole beneficial
owner of all capital stock of the Company and rights to acquire or receive such
capital stock.
2.3 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the requisite approval of the Merger
---------
and this Agreement by the Company's shareholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
shareholders to duly approve the Merger and this Agreement is a majority of the
outstanding shares of Company Common Stock and a majority of the outstanding
shares of Company Preferred Stock (collectively, the "Required Shares"). Company
Shareholders who hold the Required Shares have executed the Support Agreements.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger by the Company's shareholders. The Company's Board of Directors has
unanimously approved the Merger and this Agreement. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms. Subject
only to the approval of the Merger and this Agreement by the Company's
shareholders, the execution and delivery of this Agreement by the Company does
not, and, as of the Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
the Articles of Incorporation or Bylaws of the Company or (ii) any material
mortgage, indenture, lease, contract or other material agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party (so as not to trigger any Conflict) in connection with a material
mortgage, indenture, lease, contract or other material agreement is required by
or with respect to the Company in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Agreement of Merger with the California
Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (iii) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Section 2.4 of the Company Disclosure Letter.
-----------
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<PAGE>
2.5 Company Financial Statements. Section 2.5 of the Company
---------------------------- -----------
Disclosure Letter sets forth (i) the Company's unaudited financial statements
for the year ended December 31, 1998, and (ii) the Company's unaudited balance
sheet as of October 31, 1999 (the "Balance Sheet") and the related unaudited
statements of operations and cash flows for the ten-month period then ended ((i)
and (ii) collectively, the "Company Financials"). The Company Financials are
correct in all material respects and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other, subject to the
absence of notes and, in the case of the Balance Sheet, to normal recurring
year-end adjustments. The Company Financials present fairly the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject, in the case of the financial statements for
such ten-month period, to normal year-end adjustments, which such adjustments
will not be material in amount or significance. At no time has the Company
factored its accounts receivable or otherwise sold or transferred the right to
collect any of its accounts receivable. In addition, at no time has the Company,
or any assets of the Company, been placed into receivership or otherwise been
subject to any bankruptcy, insolvency or liquidation proceeding.
2.6 No Undisclosed Liabilities. The Company does not have any
--------------------------
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not required to be reflected in financial
statements in accordance with GAAP), which individually or in the aggregate, (i)
has not been reflected in the Balance Sheet, or (ii) has not arisen in the
ordinary course of the Company's business since the date of the Balance Sheet,
consistent with past practices.
2.7 No Changes. Since September 30, 1999 and until the date hereof,
----------
there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $50,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) event or condition that has or would be reasonably expected
to have a Material Adverse Effect (as defined in Section 9.2 hereof) on the
Company;
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<PAGE>
(g) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(h) revaluation by the Company of any of its assets;
(i) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(j) increase in the salary or other compensation payable or to
become payable to any of its officers or directors, or the declaration, payment
or commitment or obligation of any kind for the payment of a bonus or other
additional salary or compensation to any such person except as otherwise
contemplated by this Agreement;
(k) material sale, lease, license or other disposition of any of
the assets or properties of the Company, except in the ordinary course of
business as conducted on that date and consistent with past practices;
(l) amendment or termination (other than pursuant to its terms)
of any material contract, agreement or license to which the Company is a party
or by which it is bound;
(m) material loan by the Company to any person or entity,
incurring by the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(n) material waiver or release of any right or claim of the
Company, including any write-off or other compromise of any account receivable
of the Company;
(o) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable therefor,
or of any other of its securities other than the grant or exercise of stock
options in the ordinary course of business;
(p) change in pricing or royalties set or charged by the Company
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Intellectual Property (as defined in Section 2.11) to
the Company; or
(q) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (p) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
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<PAGE>
2.8 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement,
-------------------
"Tax" or, collectively, "Taxes," means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
----------------------
(i) The Company as of the Effective Time will have
prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
(ii) The Company as of the Effective Time: (A) will have
paid or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the Balance Sheet or accrued in the ordinary
course of business consistent with past practice, whether asserted or
unasserted, contingent or otherwise, and the Company has no Knowledge of any
basis for the assertion of any such liability attributable to the Company, its
assets or operations.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for all periods
since the date of Company's incorporation.
(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes.
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<PAGE>
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-
exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of the
Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
2.9 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably would be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) The Company owns no real property, nor has it ever owned any
real property. Section 2.10(a) of the Company Disclosure Letter sets forth a
--------------
list of all real property currently leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and the aggregate
annual rental and/or other fees payable under any such lease. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default on the part of the Company or event of default on
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<PAGE>
the part of the Company (or event which with notice or lapse of time, or both,
would constitute such a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials and except for liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
2.11 Intellectual Property.
---------------------
For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i)
all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing;
(iii) all copyrights, copyrights registrations and applications
therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and
applications therefor throughout the world; (v) all trade names,
logos, URLs, common law trademarks and service marks, trademark
and service mark registrations and applications therefor
throughout the world; (vi) all databases and data collections and
all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors; and (viii) any similar
or equivalent rights to any of the foregoing anywhere in the
world.
"Company Intellectual Property" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the
Company.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks,
applications to register trademarks, intent-to-use applications,
or other registrations or applications related to trademarks;
(iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is
the subject of an application, certificate, filing, registration
or other similar document issued, filed with, or recorded by any
state, government or other public legal authority.
"Company Registered Intellectual Property" means all of the
Registered Intellectual Property owned by, or filed in the
name of, the Company.
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<PAGE>
(a) No material Company Intellectual Property or product or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation restricting in any manner the use,
transfer, or licensing thereof by the Company, or which may affect the validity,
use or enforceability of such Company Intellectual Property.
(b) Section 2.11(b) of the Company Disclosure Letter is a
---------------
complete and accurate list of all Company Registered Intellectual Property and
specifies, where applicable, the jurisdictions in which each such item of
Company Registered Intellectual Property has been issued or registered or in
which an application for such issuance and registration has been filed,
including the respective registration or application numbers. As of the date
hereof, each material item of Company Registered Intellectual Property is valid
and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Registered Intellectual Property have been
made and all necessary documents, recordations and certificates in connection
with such Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, noted for the purposes of maintaining such Registered
Intellectual Property.
(c) The Company owns and has good and exclusive title to,
or has license (sufficient for the conduct of its business as currently
conducted and as currently proposed to be conducted) to, each material item of
Company Intellectual Property or other Intellectual Property used by the Company
free and clear of any lien or encumbrance (excluding licenses and related
restrictions); and the Company is the exclusive owner of all trademarks and
trade names used in connection with the operation or conduct of the business of
the Company, including the sale of any products or the provision of any services
by the Company.
(d) The Company owns exclusively, and has good title to,
all copyrighted works or which the Company otherwise expressly purports to own.
The Company owns exclusively, and has good title to, all source-code and object-
code used in or incorporated in the Company's products or services.
(e) To the extent that any material Intellectual Property
has been developed or created by a third party for the Company, the Company has
a written agreement with such third party with respect thereto and the Company
thereby either (i) has obtained ownership of, and is the exclusive owner of or
(ii) has obtained a license (sufficient for the conduct of its business as
currently conducted and as currently proposed to be conducted) to all such third
party's Intellectual Property in such work, material or invention by operation
of law or by valid assignment, to the fullest extent it is legally possible to
do so.
(f) The Company has not transferred ownership of, or
granted any exclusive license with respect to, any Intellectual Property that is
material to the Company Intellectual Property, to any third party.
(g) Section 2.11(g) of the Company Disclosure Letter lists
--------------
all material contracts, licenses and agreements to which the Company is a party
(i) with respect to the Company Intellectual Property licensed or transferred to
any third party (other than end-user licenses in the
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<PAGE>
ordinary course); or (ii) pursuant to which a third party has licensed or
transferred any material Intellectual Property to the Company.
(h) All material contracts, licenses and agreements relating to
Company Intellectual Property are in full force and effect. The consummation of
the transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. The Company is in material compliance with,
and has not materially breached any term any of such contracts, licenses and
agreements and, to the Knowledge of the Company, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of the Company's rights under such contracts, licenses and
agreements to the same extent the Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.
(i) The operation of the business of the Company as such
business currently is conducted, including the Company's design, development,
marketing and sale of the products or services of the Company (including with
respect to products and services currently under development) has not, does not
and will not infringe or misappropriate the Intellectual Property of any third
party or constitute unfair competition or trade practices under the laws of any
jurisdiction.
(j) The Company has not received notice from any third party
that the operation of the business of the Company or any act, product or service
of the Company, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(k) To the Knowledge of the Company, no person has or is
infringing or misappropriating, in any respect materially adverse to the
Company, any Company Intellectual Property.
(l) The Company has taken reasonable steps to protect the
Company's rights in the Company's confidential information and trade secrets
that it wishes to protect or any trade secrets or confidential information of
third parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality and invention assignment
agreement and all current and former employees and contractors of the Company
have executed such an agreement, except where the failure to do so is not
reasonably expected to be material to the Company.
2.12 Agreements, Contracts and Commitments.
-------------------------------------
(a) As of the date hereof, the Company does not have, is not a
party to nor is it bound by:
(i) any collective bargaining agreements,
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<PAGE>
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides material services to the Company,
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $15,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $25,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside of the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any construction contracts,
(xiv) any distribution, joint marketing or development
agreement,
(xv) any agreement pursuant to which the Company has
granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code,
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<PAGE>
(xvi) any agreement, arrangement, joint venture,
partnership, license or other relationship with any Governmental Entity whereby
the United States Government or any other Governmental Entity has an ownership
interest in or otherwise has the right to exploit in any manner any Company
Intellectual Property or any other assets of the Company, or
(xvii) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without penalty within thirty (30)
days.
(b) Except for such alleged breaches, violations and defaults
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, as are all noted in Section 2.12(b) of the
---------------
Disclosure Letter, the Company has not breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted under, any
of the terms or conditions of any material agreement, contract or commitment
required to be set forth on Section 2.12(a) of the Company Disclosure Letter or
---------------
Section 2.11(g) of the Company Disclosure Letter (any such agreement, contract
---------------
or commitment, a "Contract"). Each Contract is in full force and effect and is
not subject to any default thereunder of which the Company has Knowledge by any
party obligated to the Company pursuant thereto.
2.13 Interested Party Transactions. No officer, director or
-----------------------------
shareholder of the Company (nor any ancestor, sibling, descendant or spouse of
any of such persons, or any trust, partnership or corporation in which any of
such persons has or has had an interest), has or has had, directly or
indirectly, (i) an economic interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells, or
proposes to furnish or sell, (ii) an economic interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any contract or agreement set forth in Section
--------
2.12(a) of the Company Disclosure Letter or Section 2.11(g) of the Company
------- ---------------
Disclosure Letter; provided, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "economic interest in any entity" for purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied in all material
--------------------
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.15 Litigation. As of the date hereof, there is no action, suit or
----------
proceeding of any nature pending or to the Company's knowledge threatened
against the Company or its properties. There is no action, suit or proceeding of
any nature pending or, to the Company Knowledge, threatened against any of its
officers or directors, in their respective capacities as such. To the Company's
Knowledge, as of the date hereof, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors by or before any governmental entity. Section 2.15 of the Company
------------
Disclosure Letter sets forth, with respect to any pending or threatened action,
suit, proceeding or investigation as of the date hereof, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedy requested. To the Company's Knowledge, as of the date hereof, no
governmental entity has at any time challenged or questioned the legal right of
the Company to manufacture, offer or sell any of its products or services
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<PAGE>
in the present manner or style thereof. Nothing contained in this Section shall
limit any other representation and warranty made by the Company in this
Agreement.
2.16 Insurance. With respect to the insurance policies and fidelity
---------
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
------------
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and shareholders or actions by written consent since the time of incorporation
of the Company until the date hereof.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not operated any
------------------
underground storage tanks, and has no Knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company has at any time owned, operated, occupied or leased. The
Company has not released any amount of any substance that has been designated by
any Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean Air Act, as amended,
and the regulations promulgated pursuant to said laws (a "Hazardous Material").
No Hazardous Materials are present as a result of the actions or omissions of
the Company, or, to the Company's Knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
------------------------------
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
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(c) Permits. The Company currently holds all environmental
-------
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's Knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except as set
------------------------------------------------
forth on Section 2.19 of the Company Disclosure Letter, the Company has not
------------
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby. Section 2.19 of the
------------
Company Disclosure Letter sets forth the principal terms and conditions of any
agreement, written or oral, with respect to such fees. Section 2.19 of the
------------
Company Disclosure Letter also sets forth the Company's current reasonable
estimate of all Third Party Expenses (as defined in Section 5.5) expected to be
incurred by the Company in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby.
2.20 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of
-----------
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall apply
only to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean, for purposes of this Section
2.20, any other person or entity under common control with the Company within
the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan",
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any "Employee" (as defined below), and pursuant to
which the Company or any Affiliate has or may have any material liability
contingent or otherwise;
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<PAGE>
(iv) "Employee" shall mean any current, former, or retired
employee, officer or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan", as defined in Section 3(37)
of ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee
Plan which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA.
(b) Disclosure. Section 2.20(b) of the Company Disclosure Letter
---------- ---------------
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement. The Company does not have any plan or commitment, whether
legally binding or not, to establish any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement (except to
the extent required by law or to conform any such Company Employee Plan or
Employee Agreement to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by this Agreement), or
to enter into any Company Employee Plan or Employee Agreement, nor does it have
any intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent (i) correct
---------
and complete copies of all documents embodying or relating to each Company
Employee Plan and each Employee Agreement including all amendments thereto and
written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the three
most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan
or related trust; (iv) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (v) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination letters and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Company
Employee Plan; (vii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; and (viii) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in
------------------------
all material respects all obligations required to be performed by it under each
Company Employee Plan, and
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<PAGE>
each Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) as of the date hereof, there are no actions,
suits or claims pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; and (iv) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to the
Company, Parent or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (v) as of the date hereof,
there are no inquiries or proceedings pending or, to the knowledge of the
Company or any affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vi) neither the Company nor any Affiliate is subject
to any material penalty or tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or been
-------------------
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan provides, or
------------------------------
has any liability to provide, life insurance, medical or other employee benefits
to any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by statute.
(h) Effect of Transaction.
---------------------
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by the Company or
Parent or any of their respective affiliates with respect to any Employee will
be characterized as an "excess parachute payment", within the meaning of Section
280G(b)(1) of the Code.
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<PAGE>
(i) Employment Matters. The Company (i) is in compliance in all
------------------
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any material arrears of wages or any taxes or any material penalty
for failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments to
be made in the normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the best knowledge of the Company, threatened. The Company is not
involved in or, to the Knowledge of the Company, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in liability to the Company.
Neither the Company nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act which would,
individually or in the aggregate, directly or indirectly result in a liability
to the Company. The Company is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
2.21 Officer Matters. To the Company's Knowledge, no officer of the Company
---------------
has ever been convicted of a felony or been the subject of a governmental
investigation. To the Company's Knowledge, no company of which any officer of
the Company is or was an officer has ever been subject to any bankruptcy or
insolvency proceeding.
2.22 Year 2000 Compliance. As of the date hereof, to the Company's
--------------------
Knowledge the Company's products, services and internal systems have been
designed to ensure date and time entry recognition, calculations that
accommodate same century and multi-century formulas and date values, leap year
recognition and calculations, and date data interface values that reflect the
century. As of the date hereof, to the Company's Knowledge the Company's
products, services and internal systems manage and manipulate data involving
dates and times, including single century formulas and multi-century formulas,
and do not cause an abnormal ending scenario within the application or generate
incorrect values or invalid results involving such dates.
2.23 Representations Complete. As of the date hereof, none of the
------------------------
representations or warranties made by the Company (as modified by the Company
Disclosure Letter), nor any statement made in any schedule or certificate
furnished by the Company pursuant to this Agreement, or furnished in or in
connection with documents mailed or delivered to the shareholders of the Company
in connection with soliciting their consent to this Agreement and the Merger,
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at
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<PAGE>
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date hereof and as of the Closing Date, Parent and Merger Sub
represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Parent and
Merger Sub has the corporate power to own its properties operate and use its
assets and to carry on its business as now being conducted and is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each jurisdiction in which the failure to be so qualified would be material
to Parent and Merger Sub as a whole.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. No vote of the Parent's stockholders is required with
respect to the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. This Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes the valid
and binding obligations of Parent and Merger Sub, enforceable in accordance with
its terms. As of the Effective Times, the consummation of the transactions
contemplated by this Agreement will not Conflict with (i) any provision of the
Certificate of Incorporation or Bylaws of Parent, (ii) any agreement to which
Parent is a party that it has filed or that is required to be filed with the
Securities and Exchange Commission or (iii) any permit, license, judgment,
order, decree, statute, law, ordinance, rule or regulation of any Governmental
Entity applicable to Parent or its properties or assets, except such Conflicts
which would not result in a Material Adverse Effect on Parent.
3.3 Capital Structure.
-----------------
(a) As of the date hereof, the authorized stock of Parent consists of
(i) 200,000,000 shares of Common Stock, of which 45,532,469 shares were issued
and outstanding as of September 30, 1999, and 10,000,000 shares of Preferred
Stock, none of which was issued or outstanding as of September 30, 1999, and
(ii) options and warrants to purchase fewer than 2,600,000 shares of Parent
Common Stock as of September 30, 1999. The authorized capital stock of Merger
Sub consists of 1,000 shares of Common Stock, 1,000 shares of which, as of the
date hereof, are issued and outstanding and are held by Parent. All such shares
have been duly authorized, and all such issued and outstanding shares have been
validly issued, are fully paid and nonassessable.
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<PAGE>
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid, non-
assessable and issued in compliance with applicable federal and state securities
laws.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
------------------------------------------
made available to the Company true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") since June 17, 1999, all in the form so filed (all of the foregoing
being collectively referred to as the "SEC Documents"). As of their respective
filing dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act") or the
Securities Exchange Act of 1934 (the "Exchange Act") as the case may be, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, in any such case except to the extent corrected by a
document subsequently filed with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and present fairly the consolidated financial position of
Parent at the dates thereof and the consolidated results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal audit adjustments). As of the date hereof, there has been
no change in Parent accounting policies except as described in the notes to the
Parent Financial Statements; provided, however, the Parent may have restated or
may restate one or more of the Parent Financial Statements to reflect
acquisitions entered into subsequent to the respective dates thereof.
3.5 No Material Adverse Change. Since the date of the balance sheet
--------------------------
included in Parent's most recently filed report on Form 10-Q until the date
hereof, Parent has conducted its business in the ordinary course of business and
there has not occurred: (a) any material adverse effect on the business, assets
(including intangible assets), financial condition, capitalization or results of
operations of Parent ("Material Adverse Effect on Parent"); (b) any amendment or
change in the Certificate of Incorporation or Bylaws of Parent (other than
restatements of the Certificate of Incorporation which did not require
shareholders' approval) except as disclosed in the SEC Documents; or (c) any
damage to, destruction or loss of any assets of Parent (whether or not covered
by insurance) that materially and adversely affects the financial condition or
business of Parent.
3.6 Disclosure. No statement made or furnished by Parent to the Company or
----------
contained in the information regarding Parent in the Information Statement (or
any other document) prepared or provided by Parent for use in connection with
soliciting approval of the Merger by the Company's shareholders contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein not misleading in light of the
circumstances under which they were made.
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<PAGE>
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of
----------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use commercially reasonable efforts consistent with past practice and policies
to preserve intact its present business organization, keep available the
services of its present officers and key employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. The
Company shall promptly notify Parent of any event or occurrence or emergency not
in the ordinary course of its business, and any material event involving or
adversely affecting the Company or its business. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Parent:
(a) Enter into any transaction exceeding $100,000 or any commitment
or transaction of the type described in Section 2.12(a) hereof not in the
ordinary course of business;
(b) Transfer to any person or entity any rights to any Company
Intellectual Property (other than pursuant to end-user licenses in the ordinary
course of business) or enter into any agreement with respect to Company
Intellectual Property with any person or entity other than in the ordinary
course of business consistent with past practice;
(c) Terminate any employees other than for cause or encourage any
employees to resign from the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Disclosure Letter;
(e) Commence or settle any litigation;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor) except for (i)
repurchases of Company Capital Stock upon the termination of service of any
service providers of Company in accordance with the standard terms set forth in
the agreements governing such repurchases, all of which agreements have been
provided
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<PAGE>
or made available to Parent, (ii) conversion of Company Preferred Stock and
(iii) exercises or conversion of Company Convertible Securities;
(g) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Company Options or Warrants,
issue, sell, grant, contract to issue, grant or sell, or authorize the issuance,
delivery, sale or purchase of any shares of Company Capital Stock or securities
convertible into, or exercisable or exchangeable for, shares of Company Capital
Stock, or any securities, warrants, options or rights to purchase any of the
foregoing, except for (i) issuances of Company Capital Stock upon the exercise
thereof or upon exercise or conversion of Company Convertible Securities or
Company Preferred Stock outstanding as of the date of this Agreement and (ii)
issuances of Company Options in the ordinary course of business consistent with
past practice and in consultation with Parent, with an exercise price of fair
market value of Company Common Stock (considering the Merger Consideration and
the Merger), but in no event Company Options to purchase more than 25,000 shares
(in any one case) or 125,000 shares (in the aggregate);
(h) Cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(j) Sell, lease, license or otherwise dispose of any of the assets or
properties of Company which are not Company Intellectual Property other than in
the ordinary course of business and consistent with past practices, including
but not limited to the performance of obligations under contractual arrangements
listed on the Company Disclosure Letter existing as of the date hereof, or
create any security interest in such assets or properties;
(k) Grant any loan to any person or entity, incur any indebtedness or
guarantee any indebtedness, issue or sell any debt securities, guarantee any
debt securities of others, purchase any debt securities of others or amend the
terms of any outstanding agreements related to borrowed money, except for
advances to employees for travel and business expenses in the ordinary course of
business consistent with past practices;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any employee or consultant, except payments made pursuant to
standard written agreements outstanding as of the date hereof and disclosed on
Section 4.1(m) of the Company Disclosure Letter, or increase in the salary or
--------------
other compensation payable or to become payable by Company to any of its
officers, directors, employees or advisors, or declare, pay or make any
commitment or obligation of any kind for the payment by Company of a bonus or
other additional salary or compensation to any such person, or adopt or amend
any employee benefit plan or enter into any employment contract;
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<PAGE>
(m) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business and consistent with past practice;
(n) Take any action to accelerate the vesting schedule of any of the
outstanding Company Options or Company Capital Stock;
(o) Pay, discharge or satisfy, in an amount in excess of $30,000 (in
any one case) or $150,000 (in the aggregate) any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and in
a manner consistent with past practice;
(p) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Enter into any strategic alliance, affiliate agreement, data or
software licensing agreement (other than off-the-shelf, commercially-available,
shrink-wrap, inbound software (e.g., MS Word, Excel), or joint development or
joint marketing arrangement or agreement;
(r) Fail to pay or otherwise satisfy its monetary obligations as they
become due, except such as are being contested in good faith;
(s) Waive or commit to waive any rights with a value in excess of
$30,000 (in any one case) or $100,000 (in the aggregate);
(t) Cancel, materially amend or renew any insurance policy other than
in the ordinary course of business;
(u) Implement any Company Employee Plan;
(v) Alter, or enter into any commitment to alter, its interest in any
corporation, association, joint venture, partnership or business entity in which
the Company directly or indirectly holds any interest on the date hereof; or
(