AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NETSELECT, INC.,
AVENUE ACQUISITION CORPORATION
AND
SPRINGSTREET, INC.
Dated as of May 19, 1999
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TABLE OF CONTENTS
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ARTICLE 1. The Merger................................................................................................ 2
1.1 The Merger......................................................................................... 2
1.2 Effective Time..................................................................................... 2
1.3 Effect of the Merger............................................................................... 2
1.4 Articles of Incorporation; Bylaws.................................................................. 2
1.5 Directors and Officers............................................................................. 3
1.6 Merger Consideration............................................................................... 3
1.7 Dissenting Shares for Holders of Street Capital Stock.............................................. 6
1.8 Surrender of Certificates.......................................................................... 7
ARTICLE 2. Representations and Warranties of Street.................................................................. 9
2.1 Organization of Street............................................................................. 10
2.2 Street Capital Structure........................................................................... 10
2.3 Obligations With Respect to Capital Stock.......................................................... 12
2.4 Authority; Non-Contravention....................................................................... 12
2.5 Street Financial Statements........................................................................ 14
2.6 Absence of Certain Changes or Events............................................................... 14
2.7 Taxes.............................................................................................. 14
2.8 Title to Properties; Absence of Liens and Encumbrances............................................. 16
2.9 Intellectual Property.............................................................................. 17
2.10 Compliance; Permits; Restrictions.................................................................. 19
2.11 Litigation......................................................................................... 20
2.12 Brokers' and Finders' Fees......................................................................... 20
2.13 Interested Party Transactions...................................................................... 20
2.14 Employee Benefit Plans............................................................................. 21
2.15 Environmental Matters.............................................................................. 24
2.16 Year 2000 Compliance............................................................................... 25
2.17 Agreements, Contracts and Commitments.............................................................. 26
2.18 Board Approval..................................................................................... 27
2.19 Insurance.......................................................................................... 27
ARTICLE 3. Representations and Warranties of Select and Sub.......................................................... 28
3.1 Organization of Select............................................................................. 28
3.2 Select Capital Structure........................................................................... 28
3.3 Obligations With Respect to Capital Stock.......................................................... 29
3.4 Authority; Non-Contravention....................................................................... 30
3.5 Select Financial Statements........................................................................ 31
3.6 Absence of Certain Changes or Events............................................................... 31
3.7 Taxes.............................................................................................. 32
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3.8 Title to Properties; Absence of Liens and Encumbrances............................................. 33
3.9 Intellectual Property.............................................................................. 33
3.10 Compliance; Permits; Restrictions.................................................................. 35
3.11 Litigation......................................................................................... 36
3.12 Brokers' and Finders' Fees......................................................................... 36
3.13 Environmental Matters.............................................................................. 36
3.14 Year 2000 Compliance............................................................................... 37
3.15 Agreements, Contracts and Commitments.............................................................. 37
3.16 Employee Benefit Plans............................................................................. 37
3.17 Board Approval..................................................................................... 38
ARTICLE 4. Conduct Prior to the Effective Time....................................................................... 38
4.1 Conduct of Business of Street...................................................................... 38
4.2 Street Non-Solicitation............................................................................ 40
ARTICLE 5. Additional Agreements..................................................................................... 42
5.1 Fairness Hearing; Shareholder Approval............................................................. 42
5.2 Restrictions on Transfer........................................................................... 43
5.3 Access to Information.............................................................................. 44
5.4 Confidentiality.................................................................................... 44
5.5 Expenses........................................................................................... 45
5.6 Public Disclosure.................................................................................. 45
5.7 Consents........................................................................................... 45
5.8 FIRPTA Compliance.................................................................................. 45
5.9 Reasonable Efforts................................................................................. 45
5.10 Notification of Certain Matters.................................................................... 45
5.11 Directors' and Officers' Indemnification........................................................... 46
5.12 Cooperation of Independent Accountants............................................................. 46
5.13 Termination of 401(k) Plan......................................................................... 47
5.14 Information Supplied............................................................................... 47
ARTICLE 6. Conditions to the Merger.................................................................................. 48
6.1 Conditions to Obligations of Each Party to Effect the Merger....................................... 48
6.2 Conditions to Obligations of Select and Sub........................................................ 49
6.3 Conditions to the Obligations of Street............................................................ 50
ARTICLE 7. Survival of Representations and Warranties; Escrow........................................................ 51
7.1 Survival of Representations and Warranties......................................................... 51
7.2 Escrow Arrangements................................................................................ 51
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ARTICLE 8. Termination, Amendment and Waiver......................................................................... 58
8.1 Termination........................................................................................ 58
8.2 Effect of Termination.............................................................................. 60
8.3 Amendment.......................................................................................... 60
8.4 Extension; Waiver.................................................................................. 60
ARTICLE 9. General Provisions........................................................................................ 60
9.1 Notices............................................................................................ 60
9.2 Interpretation..................................................................................... 62
9.3 Counterparts....................................................................................... 62
9.4 Entire Agreement; Assignment....................................................................... 62
9.5 Severability....................................................................................... 62
9.6 Other Remedies..................................................................................... 62
9.7 Governing Law...................................................................................... 62
9.8 Rules of Construction.............................................................................. 63
9.9 Attorneys'Fees..................................................................................... 63
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Exhibit A Form of Non-Competition and Employment Agreement
Exhibit B Form of Restated Certificate of Incorporation
Exhibit C Form of Marcus & Millichap Letter Agreement Amendment
Exhibit D Street Schedules
Exhibit E Select Schedules
Exhibit F Schedules to Merger Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of May 19, 1999 by and among NetSelect, Inc., a Delaware
corporation ("Select"), Avenue Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Select ("Sub"), SpringStreet, Inc., a
California corporation ("Street") and, with respect to Article 7 only, Jay Hoag,
as Securityholder Agent, and U.S. Bank Trust, N.A. as Escrow Agent.
RECITALS
A. The Boards of Directors of each of Select, Sub and Street believe it is
in the best interests of each company and the shareholders of each company that
Select acquire Street through the statutory merger of Sub with and into Street
(the "Merger") with Street being the surviving corporation in the Merger and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding shares of capital stock of Street (other than Dissenting Shares, as
defined in Section 1.7(a) herein and any shares owned by Select) and all
options, warrants and other rights to acquire any shares of capital stock of
Street shall be converted into the right to receive shares of capital stock of
Select.
C. A portion of the shares of capital stock of Select otherwise issuable
by Select in connection with the Merger shall be placed in escrow and held by
the Escrow Agent pursuant to the escrow agreement set forth in Article 7 hereof
and the release of such shares shall be contingent upon certain events and
conditions as set forth in Article 7.
D. It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
E. As a material inducement for Select to consummate the Merger, certain
key employees of Street will enter into a non-competition and employment
agreement in the form attached hereto as Exhibit A (the "Non-Competition and
Employment Agreement") with Select, 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 Select to enter into this Agreement, certain shareholders
of Street are executing and delivering voting agreements (the "Shareholder
Support Agreements") to Select.
G. Street on the one hand, and Select and Sub on the other hand, desire to
make certain representations, warranties, covenants 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,
the parties agree as follows:
ARTICLE 1.
The Merger
The Merger. At the Effective Time (as defined in Section 1.2) and subject
to and upon the terms and conditions of this Agreement and the applicable
provisions of the California Corporations Code ("California Law") and the
Delaware General Corporation Law ("Delaware Law"), Sub shall be merged with and
into Street, the separate corporate existence of Sub shall cease and Street
shall continue as the surviving corporation. The surviving corporation after the
Merger is sometimes referred to hereinafter as the "Surviving Corporation."
Effective Time. Unless this Agreement is earlier terminated 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 6, 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 Select and Street. 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 "Merger Agreement") and
any other required instruments with the Secretary of State of the State of
California and the Secretary of State of the State of Delaware, in accordance
with the relevant provisions of applicable law (the later of the time of
acceptance of such filing by the Secretary of State of the State of California
or the Secretary of State of the State of Delaware of such filing being referred
to herein as the "Effective Time").
Effect of the Merger. At the Effective Time, the effect of the 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
Street and Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Street and Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by Select prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation (with such changes
as may be required by California Law) of Sub 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; provided, however, that at the
Effective Time, Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended and restated in its entirety to read as follows:
"The name of the corporation is SpringStreet, Inc."
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(b) Unless otherwise determined by Select prior to the Effective
Time, the Bylaws of Sub 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.
Directors and Officers. Unless otherwise determined by Select prior to the
Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of 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 Street 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
(a) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Common Exchange Ratio" shall mean a number equal to the quotient
obtained by dividing (x) the Net Consideration Share Number by (y) the Total
Outstanding Shares less the aggregate number of outstanding shares of Street
Series C Preferred Stock immediately prior to the Effective Time (with the
result rounded to four decimal places and .5 being rounded up).
"Consideration Shares" shall mean the number of shares of Select
Common Stock and Select Series H Preferred Stock issuable to the Street
Shareholders pursuant to Section 1.6(b) hereof.
"Escrow Amount" shall mean that number of shares of Select Common
Stock and Select Series H Preferred Stock equal to ten percent (10%) of the
number of shares of Select Common Stock and Select Series H Preferred Stock
otherwise issuable to the Street Shareholders pursuant to Section 1.6(b) hereof.
"Exchange Ratios" shall mean Common Exchange Ratio, Preferred Exchange
Ratio and Series C Exchange Ratio.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Knowledge" shall mean, with respect to Street or Select, what is
within the actual knowledge of any of the officers of Street or Select, as the
case may be.
"Net Consideration Share Number" shall mean 1,538,963.
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"Material Adverse Effect" shall mean any change, event or effect that
is materially adverse to the consolidated business, assets (including intangible
assets), financial condition or results of operations of Street or Select, as
applicable.
"Preferred Exchange Ratio" shall mean a number equal to the quotient
of (x) the Common Exchange Ratio, divided by (y) 2 (with the result rounded to
four decimal places and .5 being rounded up).
"Select Common Stock" shall have the meaning ascribed to it in Section
3.2 hereof.
"Select Series H Preferred Stock" shall mean the Series H Preferred
Stock of Select with the rights, preferences, privileges and restrictions set
forth on Exhibit B hereto (the "Restated Certificate").
"Series C Exchange Ratio" shall mean .0623.
"Street Capital Stock" shall mean shares of Street Common Stock,
Street Preferred Stock and any shares of other capital stock of Street.
"Street Common Stock" shall mean shares of common stock of Street.
"Street Convertible Securities" shall mean the Street Options and
other rights (other than Street Preferred Stock) to acquire or receive shares of
Street Capital Stock.
"Street Options" shall mean all issued and outstanding options to
purchase or otherwise acquire Street Capital Stock (whether or not vested) held
by officers, employees or directors of or consultants to Street (other than
Street Preferred Stock).
"Street Preferred Stock" shall mean shares of Street Series A
Preferred Stock, Street Series B Preferred Stock, Street Series C Preferred
Stock and Street Series D Preferred Stock.
"Street Series A Preferred Stock" shall mean shares of Series A
Preferred Stock of Street.
"Street Series B Preferred Stock" shall mean shares of Series B
Preferred Stock of Street.
"Street Series C Preferred Stock" shall mean shares of Series C
Preferred Stock of Street.
"Street Series D Preferred Stock" shall mean shares of Series D
Preferred Stock of Street.
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"Street Shareholders" shall mean holders of any shares of Street
Capital Stock immediately prior to the Effective Time.
"Total Outstanding Shares" shall mean the aggregate number of shares
of Street Common Stock outstanding immediately prior to the Effective Time,
including Street Common Stock issuable upon the exercise of Street Options plus
the aggregate number of shares of Street Common Stock issuable, with or without
the passage of time or satisfaction of other conditions, upon exercise of or
conversion of all Street Convertible Securities and Street Preferred Stock
outstanding immediately prior to the Effective Time.
(b) Effect on Street Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Street or the Street
Shareholders, each share of Street 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 Select, Sub or Street 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 shares of Street Capital
Stock and upon the terms and subject to conditions set forth below and
throughout this Agreement, including, without limitation, Sections 1.6(f), (g)
and (h) hereof and the escrow provisions set forth in Article 7 and/or described
in Section 1.8(b) hereof, (i) in the case of each share of Street Common Stock,
a number of shares of Select Common Stock equal to the Common Exchange Ratio,
(ii) and the case of each share of Street Preferred Stock (other than Street
Series C Preferred Stock), a number of shares of Select Series H Preferred Stock
equal to the Preferred Exchange Ratio and (iii) in the case of each share of
Street Series C Preferred Stock, a number of shares of Select Series H Preferred
Stock equal to the Series C Exchange Ratio.
(c) Assumption of Street Options. At the Effective Time, each
outstanding Street Option issued pursuant to Street's 1997 Incentive Stock Plan
(the "Street Option Plan") or otherwise, whether vested or unvested, will be
assumed by Select in connection with the Merger. Each Street Option so assumed
by Select under this Agreement shall continue to have, and be subject to, the
same terms and conditions set forth in the Street 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 Street Option will be exercisable for that number of whole
shares of Select Common Stock equal to the product of the number of shares of
Street Common Stock that were issuable upon exercise of such Street Option
immediately prior to the Effective Time multiplied by the Common Stock Exchange
Ratio, rounded down to the nearest whole number of shares of Select Common Stock
and (ii) the per share exercise price for the shares of Select Common Stock
issuable upon exercise of such assumed Street Option will be equal to the
quotient determined by dividing the exercise price per share of Street Capital
Stock at which such Street Option was exercisable immediately prior to the
Effective Time by the Common Stock Exchange Ratio, rounded up to the nearest
whole cent.
(d) Option Status. It is the intention of the parties hereto that the
Street Options assumed by Select following the Closing pursuant to this Section
1.6 will, to the extent permitted by
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applicable law, qualify as incentive stock options as defined in Section 422 of
the Code, to the extent any such Street Options qualified as incentive stock
options immediately prior to the Effective Time.
(e) Withholding Taxes. Any number of shares of Select Common Stock
and/or Select Series H Preferred Stock issuable pursuant to Section 1.6(b) shall
be subject to, and reduced by, the amount of any state, federal and foreign
withholding taxes incurred (and not previously paid by or on behalf of Street)
in connection with the acquisition of Street Capital Stock upon the exercise of
Street Options, the acceleration of vesting of any Street Capital Stock or
Street Options, or the payment of a bonus in the form of Street Capital Stock,
if any.
(f) Fractional Shares. No fractional share of Select Common Stock or
Select Series H Preferred Stock shall be issued in the Merger. In lieu thereof,
any fractional share shall be rounded to the nearest whole share of Select
Common Stock or Select Series H Preferred Stock (with .5 being rounded up).
(g) Cancellation of Select-owned and Street-owned Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
any of the parties hereto, each share of Street Capital Stock owned by Select,
Sub, Street or any direct or indirect wholly-owned subsidiary thereof
immediately prior to the Effective Time, shall be cancelled and extinguished
without any conversion thereof.
(h) Capital Stock of Sub. At the Effective Time, by virtue of the
Merger and without any action on the part of any of the parties hereto, each
share of capital stock of 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 Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(a) Adjustment of the Exchange Ratios. In the event that, prior to
the Effective Time, any stock split, combination, reclassification or stock
dividend with respect to the Select Common Stock and/or Select Series H
Preferred Stock, any change or conversion of Select Common Stock and/or Select
Series H Preferred Stock into other securities or any other dividend or
distribution with respect to the Select Common Stock and/or Select Series H
Preferred Stock should occur or, if a record date with respect to any of the
foregoing should occur, appropriate and proportionate adjustments shall be made
to the Common Exchange Ratio, Preferred Exchange Ratio and Series C Exchange
Ratio, as the case may be, and thereafter all references to the affected
Exchange Ratio(s) shall be deemed to be as so adjusted.
Dissenting Shares for Holders of Street Capital Stock.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Street Capital Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with California Law and
who, as of the Effective Time, has not effectively
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withdrawn or lost such appraisal rights ("Dissenting Shares"), shall not be
converted into or represent a right to receive Select Common Stock and/or Select
Series H Preferred Stock, as the case may be, 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 Street Capital Stock who demands appraisal of such shares under
California Law 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 Select Common Stock
and/or Select Series H Preferred Stock, as the case may be, 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) Street shall give Select (i) prompt notice of any written demands
for appraisal of any shares of Street Capital Stock, withdrawals of such
demands, and any other instruments served pursuant to California Law and
received by Street and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for appraisal under California Law.
Street shall not, except with the prior written consent of Select, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
Street or offer to settle or settle any such demands.
Surrender of Certificates.
(d) Exchange Agent. The Secretary of Select shall serve as exchange
agent (the "Exchange Agent") in the Merger.
(e) Select to Provide Select Common Stock and Select Series H
Preferred Stock. Prior to the Closing, Select shall make available to the
Exchange Agent for exchange in accordance with this Article 1 the shares of
Select Common Stock and Select Series H Preferred Stock issuable to Street
Shareholders pursuant to Section 1.6 in exchange for outstanding shares of
Street Capital Stock, less the Escrow Amount which Select shall deposit into the
Escrow Fund (as defined in Section 7.2(a) hereof) on behalf of the Street
Shareholders. The portion of the Escrow Amount contributed on behalf of each
Street Shareholder shall be in proportion to the aggregate number of shares of
Select Common Stock and/or Select Series H Preferred Stock, as the case may be,
each such Street Shareholder would otherwise be entitled to receive in the
Merger (excluding any shares of Select Common Stock issuable upon exercise of
any assumed Street Options) by virtue of ownership of outstanding shares of
Street Capital Stock immediately prior to the Effective Time.
(f) Exchange Procedures. As soon as practicable following the Closing
Date, Select shall cause to be mailed to each Street Shareholder (i) a letter of
transmittal (which shall be in such form and contain such provisions as Select
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 Street
Capital Stock whose shares are
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converted into the right to receive such Street Shareholder's pro rata portion
of the Consideration Shares 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 Street Shareholder's
pro rata portion of the Consideration Shares. 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 Select, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the Street Shareholder shall be entitled to receive, and the Exchange Agent
shall promptly deliver in exchange therefor, a certificate bearing the legend
set forth in Section 5.2 hereof representing the number of whole shares equal to
the Consideration Shares (less the number of shares of Select Common Stock
and/or Select Series H Preferred Stock, as the case may be, to be deposited in
the Escrow Fund on such holder's behalf pursuant to Section 1.8(b) and Article 7
hereof) 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 Closing Date, and subject to and in accordance with the provisions of
Article 7 hereof, Select shall cause to be distributed to the Escrow Agent (as
defined in Article 7) a certificate or certificates representing that number of
shares of Select Common Stock and Select Series H Preferred Stock equal to the
Escrow Amount which shares 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
Select as provided in Article 7. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Street
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 Select Common Stock and/or Select
Series H Preferred Stock, as the case may be, into which such shares of Street
Capital Stock shall have been so converted.
(g) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Select Common Stock or the Select Series H Preferred Stock, as the case may be,
with a record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Select Common Stock
and/or Select Series H Preferred 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 Select
Common Stock and/or Select Series H Preferred Stock, as the case may be, 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 Select Common Stock and/or Select Series H
Preferred Stock.
(h) Transfers of Ownership. If any certificate for shares of Select
Common Stock and/or Select Series H Preferred 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 Select
or any agent
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designated by it any transfer or other taxes required by reason of the issuance
of a certificate for shares of Select Common Stock and/or Select Series H
Preferred Stock, as the case may be, in any name other than that of the
registered holder of the Certificate surrendered.
(i) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Street 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.
(j) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither Select nor any party hereto shall be liable to a holder of
shares of Select capital stock and/or Street Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(k) No Further Ownership Rights in Street Capital Stock. The shares
of Select Common Stock and Select Series H Preferred Stock issued in accordance
with the terms hereof shall be deemed to be full satisfaction of all rights
pertaining to shares of Street Capital Stock outstanding prior to the Effective
Time, and there shall be no further registration of transfers on the records of
Select of shares of Street Capital Stock that were outstanding prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
Select for any reason, they shall be canceled and exchanged as provided in this
Article 1.
(l) Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. Each party has consulted with its own tax advisers with
respect to the tax consequences of the Merger.
(m) Taking of Necessary Action; Further Action. If, at any time 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 Street, Select and Sub, the officers and directors of Street,
Select and Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF STREET
As of the date hereof and as of the Closing Date, Street represents and
warrants to Select and Sub, subject to the exceptions specifically disclosed in
writing in the disclosure letter and supplied
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by Street to Select dated as of the date hereof and certified by a duly
authorized officer of Street (the "Street Schedules"), as follows:
Organization of Street.
(a) Street has no subsidiaries and Street owns no capital stock of,
or any equity interest of any nature in, any other entity, except for passive
investments in equity interests of public companies as part of the cash
management program of Street. Street has not agreed and is not obligated to
make, nor bound by any written, oral or other agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature, as in effect as of the date hereof or
as may hereinafter be in effect ("Contract") under which Contract it may become
obligated to make, any future investment in or capital contribution to any other
entity. Street has not, at any time, been a general partner of any general
partnership, limited partnership or other entity.
(b) Street is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound.
(c) Street is qualified to do business as a foreign corporation, and
is in good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification and where the failure to so qualify would
have a Material Adverse Effect (as defined in Section 1.6(a)) on Street.
(d) Street has delivered or made available to Select a true and
correct copy of the Articles of Incorporation and Bylaws of Street, each as
amended to date (collectively, the "Street Charter Documents"), and each such
instrument is in full force and effect. Street is not in violation of any of the
provisions of the Street Charter Documents.
(e) Street has delivered or made available to Select all proposed or
considered amendments to Street Charter Documents.
Street Capital Structure.
(a) The authorized capital stock of Street consists of: (i)
25,000,000 shares of Street Common Stock, of which 1,298,374 shares are
outstanding as of April 22, 1999; and (ii) 15,277,136 shares of Street Preferred
Stock, of which 14,554,062 shares are outstanding as of the date of this
Agreement. The Street Preferred Stock is designated as follows: (i) 3,750,000
shares of Street Series A Preferred Stock, all of which are outstanding as of
the date of this Agreement; (ii) 3,684,210 shares of Street Series B Preferred
Stock, all of which are outstanding as of the date of
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this Agreement; (iii) 4,689,080 shares of Street Series C Preferred Stock, all
of which are outstanding as of the date of this Agreement; and (iv) 3,153,846
shares of Street Series D Preferred Stock, 2,430,772 of which are outstanding as
of the date of this Agreement. All of the outstanding shares of capital stock of
Street have been duly authorized and validly issued, and are fully paid and
nonassessable. As of the date of this Agreement, there are no shares of Street
Common Stock held in treasury by Street. Upon consummation of the Merger, (A)
the shares of Select Common Stock and Select Series H Preferred Stock issued in
exchange for any shares of Street Capital Stock that are subject to a Contract
pursuant to which Street has the right to repurchase, redeem or otherwise
reacquire any shares of Street Capital Stock will, without any further act of
Select, Street or any other person, become subject to the restrictions,
conditions and other provisions contained in such Contract (subject to the
provisions thereof as in effect on the date hereof) and (B) Select will
automatically succeed to and become entitled to exercise Street's rights and
remedies under any such Contract.
(b) As of April 22, 1999: (i) 2,226,279 shares of Street Common Stock
are subject to issuance pursuant to outstanding options to purchase Street
Common Stock under the Street Option Plan or otherwise; and (ii) 150,347 shares
of Street Common Stock are reserved for future issuance under the Street Option
Plan. Part 2.2(b) of the Street Schedules sets forth the following information
with respect to each Street Option outstanding as of the date of this Agreement:
(i) the name and address of the optionee and optionee's position at Street; (ii)
the number of shares of Street Common Stock subject to such Street Option; (iii)
the exercise price of such Street Option; (iv) the date on which such Street
Option was granted; (v) the applicable vesting schedule; (vi) the date on which
such Street Option expires; and (vii) whether the exercisability of such option
will be accelerated in any way by the transactions contemplated by this
Agreement, and indicates the extent of any such acceleration. Street has made
available to Select accurate and complete copies of all stock option plans
pursuant to which Street has granted stock options that are currently
outstanding and the form of all stock option agreements evidencing such options.
All shares of Street Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. Except as set forth in Part 2.2(b)(i) of the Street
Schedules, there are no commitments or agreements of any character to which
Street is bound obligating Street to accelerate the vesting of any Street Option
as a result of the Merger or the transactions contemplated by this Agreement.
(c) All outstanding shares of Street Capital Stock and all
outstanding Street Options have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements (as
defined below) and (ii) all requirements set forth in applicable Contracts. For
the purposes of this Agreement, "Legal Requirements" means any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity (as defined
below).
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Obligations With Respect to Capital Stock.
Except as set forth Section 2.2(b) hereof and in Part 2.3 of the Street
Schedules, there are no equity securities, partnership interests or similar
ownership interests of any class of any Street equity security, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities Street owns free and
clear of all claims and Encumbrances (as defined below), as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of Street,
or any security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. For the purposes of this Agreement
"encumbrances" means any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, claim, infringement, interference, option, right of first
refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset). Except as set forth in Part 2.3 of the
Street Schedules or as set forth in Section 2.2 hereof, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Street is a party or by
which it is bound obligating Street to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Street or obligating
Street to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement and as set forth in Part 2.3 of the Street Schedules, there are no
registration rights and there is, except for the Shareholder Support Agreements,
no voting trust, proxy, rights plan, antitakeover plan or other agreement or
understanding to which Street is a party or by which it is bound with respect to
any equity security of any class of Street.
Authority; Non-Contravention.
(a) Street has all requisite corporate power and authority to enter
into this Agreement and to consummate the 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 Street, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Street's
shareholders and the filing of the Merger Agreement pursuant to California Law.
The affirmative vote of the holders of (i) a majority of each series of Street
Preferred Stock, each voting separately as a single class, (ii) sixty percent
(60%) of Street Preferred Stock voting together as a single class, (iii) a
majority of Street Common Stock voting together as a single class and (iv) a
majority of Street Common Stock and
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Street Preferred Stock voting together as a single class, is required to approve
and adopt this Agreement and approve the Merger. The vote of the shares of
Street Capital Stock in accordance with the terms of the Shareholder Support
Agreements, is sufficient for Street Shareholders to approve and adopt this
Agreement and approve the Merger. This Agreement has been duly executed and
delivered by Street and, assuming due execution and delivery by Select and Sub,
constitutes a valid and binding obligation of Street, enforceable against Street
in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by Street does not, and the performance
of this Agreement by Street will not, (i) conflict with or violate the Street
Charter Documents, subject to obtaining the approval and adoption of this
Agreement and the approval of the Merger by Street's shareholders as
contemplated in Section 5.1, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Street or by which Street or
any of its respective properties is bound or affected, subject to compliance
with the requirements set forth in Section 2.4(b) below or (iii) result in any
material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
impair Street's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a material lien or Encumbrance on
any of the material properties or assets of Street or any of its subsidiaries
pursuant to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, concession, or other instrument or obligation
to which Street or any of its subsidiaries is a party or by which Street or any
of its subsidiaries or its or any of their respective assets are bound or
affected. Part 2.4(b) of the Street Schedules lists all consents, waivers and
approvals under any of Street's or any of its subsidiaries' agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate not obtained, would result in a material loss of benefits to
Street, Select or the Surviving Corporation as a result of the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required to be obtained or made by Street in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Merger Agreement with the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, including obtaining the California Permit (as
defined in Section 5.1(a)), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws, and the
securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Select, Sub or Street or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger.
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Street Financial Statements.
Part 2.5 of the Street Schedules sets forth Street's audited balance sheet
as of December 31, 1998 and the related audited statements of income and cash
flow for the period from Street's inception to December 31, 1998 (the "Street
Audited Financials") and Street's unaudited balance sheet as of March 31, 1999
(the "Street Current Balance Sheet") and the related unaudited statements of
income and cash flow for the three months then ended (the "Street Unaudited
Financials" and, together with the Street Audited Financials, the "Street
Financials"). The Street Financials are correct in all material respects and
have been prepared in accordance with GAAP, applied on a basis consistent
throughout the periods indicated and consistent with each other except as may be
indicated therein. The Street Financials present fairly the financial
condition, operating results and cash flows of Street as of the dates and during
the periods indicated therein, subject in the case of the Street Unaudited
Financials, to normal year-end adjustments, which will not be material in amount
or significance.
Absence of Certain Changes or Events.
Since the date of the Street Current Balance Sheet until the date hereof
there has not been: (i) any Material Adverse Effect on Street, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Street Capital Stock,
or any purchase, redemption or other acquisition by Street of any of Street's
capital stock or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Street
Capital Stock, (iv) any granting by Street of any increase in compensation or
fringe benefits, except for normal increases of cash compensation in the
ordinary course of business consistent with past practice, or any payment by
Street of any bonus, except for bonuses made in the ordinary course of business
consistent with past practice, or any granting by Street of any increase in
sever ance or termination pay or any entry by Street into any currently
effective employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Street of the
nature contemplated hereby, (v) entry by Street into any licensing or other
agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 2.9) other than licenses in the
ordinary course of business consistent with past practice, (vi) any material
change by Street in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP or (vii) any revaluation by Street of any
of its assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable other than in
the ordinary course of business and consistent with past practice.
Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges,
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duties, impositions and liabilities relating to taxes, 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) Street has timely filed all federal, state, local and
foreign returns, estimates, information statements and reports ("Returns")
relating to Taxes required to be filed by Street with any Tax authority, except
such Returns which are not material to Street. Street has paid all Taxes shown
to be due on such Returns.
(ii) Street as of the Effective Time will have withheld
all federal and state income taxes, Taxes pursuant to the Federal Insurance
Contribution Act ("FICA"), Taxes pursuant to the Federal Unemployment Tax Act
("FUTA") and other Taxes required to be withheld.
(iii) Street has not been delinquent in the payment of any
Tax nor is there any material Tax deficiency outstanding, proposed or assessed
against Street, nor has Street executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
material Tax.
(iv) No audit or other examination of any Return of Street
by any Tax authority is presently in progress, nor has Street been notified of
any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by Street
has been proposed in writing formally or informally by any Tax authority to
Street or any of its representatives.
(vi) Street has no liability for unpaid Taxes which has
not been accrued for or reserved on the Street Current Balance Sheet, whether
asserted or unasserted, contingent or otherwise, which is material to Street,
other than any liability for unpaid Taxes that may have accrued since the date
of the Street Current Balance Sheet in connection with the operation of the
business of Street in the ordinary course.
(vii) There is no contract, agreement, plan or arrangement
to which Street is a party as of the date of this Agreement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of Street that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code.
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(viii) Street 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 Street.
(ix) Street is not a party to or has any obligation under
any tax-sharing, tax indemnity or tax allocation agreement or arrangement.
(x) Except as may be required as a result of the Merger,
Street has not been and will not be required to include any adjustment in
taxable income for any Tax period (or portion thereof) pursuant to Section 481
or Section 263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods employed
prior to the Closing.
(xi) None of Street's assets are tax-exempt use property
within the meaning of Section 168(h) of the Code.
(xii) Part 2.7 of Street Schedules lists (A) any foreign
Tax holidays, (B) any inter-Street transfer pricing agreements, or other
arrangements that have been established by Street with any Tax authority and (C)
any expatriate programs or policies affecting Street.
Title to Properties; Absence of Liens and Encumbrances.
(a) Part 2.8(a)(i) of the Street Schedules lists all real property
leases to which Street is a party as of the date of this Agreement and each
amendment thereto that is in effect as of the date of this Agreement. 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 or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
material claim. Other than the leaseholds created under the real property leases
identified in Part 2.8(a)(i) of the Street Schedules, Street owns no interest in
real property.
(b) Street 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, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens"), except as reflected in
the Street Financials and except for liens for taxes not yet due and payable,
statutory liens and such Liens or other 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.
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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, however denominated, throughout the
world and (viii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
"Street Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Street.
"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 document
issued, filed with, or recorded by any state, government or other
public legal authority.
"Street Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Street.
(a) No material Street Intellectual Property or product or service of
Street is subject to any proceeding or outstanding decree, order, judgment,
agreement or stipulation restricting in any manner the use, transfer, or
licensing thereof by Street, or which may affect the validity, use or
enforceability of such Street Intellectual Property.
(b) Part 2.9(b) of the Street Schedules is a complete and accurate
list of all Street Registered Intellectual Property as of the date hereof and
specifies, where applicable, the jurisdictions in which each such item of Street
Registered Intellectual Property has been issued or
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registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers. Each
material item of Street 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, as the case may be, for the purposes of maintaining such
Registered Intellectual Property.
(c) Street 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 Street
Intellectual Property or other Intellectual Property used by Street free and
clear of any lien or encumbrance (excluding licenses and related restrictions);
and Street is the exclusive owner of all trademarks and trade names used in
connection with the operation or conduct of the business of Street, including
the sale of any products or the provision of any services by Street.
(d) Street owns exclusively, and has good title to, all copyrighted
works that are Street products or which Street otherwise expressly purports to
own.
(e) To the extent that any material Intellectual Property has been
developed or created by a third party for Street, Street has a written agreement
with such third party with respect thereto and Street 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) Street has not transferred ownership of, or granted any exclusive
license with respect to, any Intellectual Property that is or was material to
Street Intellectual Property, to any third party.
(g) The Street Schedules list all material contracts, licenses and
agreements to which Street is a party as of the date hereof (i) with respect to
Street Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course); or (ii) pursuant to which a
third party has licensed or transferred any material Intellectual Property to
Street.
(h) All material contracts, licenses and agreements relating to
Street 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. Street is in material compliance with, and
has not materially breached any term any of such contracts, licenses and
agreements and, to the Knowledge of Street, 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.
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Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Street's rights under such contracts, licenses and agreements to
the same extent Street 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 Street
would otherwise be required to pay.
(i) The operation of the business of Street as such business
currently is conducted, including Street's design, development, manufacture,
marketing and sale of the products or services of Street (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 in
any respect adverse to such party (including, without limitation, United States
Patent Nos. 5,032,989 and 4,870,576) or constitute unfair competition or trade
practices under the laws of any jurisdiction.
(j) Street has not received notice from any third party that the
operation of the business of Street or any act, product or service of Street,
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 Street, no person has or is infringing or
misappropriating, in any respect materially adverse to Street, any Street
Intellectual Property.
(l) Street has taken reasonable steps to protect Street's rights in
Street's confidential information and trade secrets that it wishes to protect or
any trade secrets or confidential information of third parties provided to
Street, and, without limiting the foregoing, Street 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 Street have executed such an agreement,
except where the failure to do so is not reasonably expected to be material to
Street.
Compliance; Permits; Restrictions.
(a) Street is not in any material respect, in conflict with, or in
default or in violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Street or by which Street or any of its respective
properties is bound or affected or (ii) any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Street is a party or by which Street or any of
its respective properties is bound or affected, except for conflicts, violations
and defaults that (individually or in the aggregate) would not cause Street to
lose any material benefit or incur any material liability. No investigation or
review by any Governmental Entity is pending or, to Street's Knowledge, has been
threatened against Street, nor, to Street's Knowledge, has any Governmental
Entity indicated an intention to conduct an investigation of Street. There is
no material agreement, judgment, injunction, order or decree binding upon Street
which has or would reasonably be expected to have the effect of prohibiting or
materially impairing
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any business practice of Street or Select, any acquisition of material property
by Street or the conduct of business by Street as currently conducted.
(b) Street holds, to the extent legally required, all permits,
licenses, variances, exemptions, orders and approvals from Governmental Entities
that are material to and required for the operation of the business of Street as
currently conducted (collectively, the "STREET PERMITS"). Street is in
compliance in all material respects with the terms of the Street Permits, except
where the failure to be in compliance with the terms of the Street Permits would
not be material to Street or Select.
Litigation.
Except as disclosed in Part 2.11 of the Street Schedules, there are no
claims, suits, actions or proceedings pending or, to the Knowledge of Street,
threatened against, relating to or affecting Street, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which would reasonably be
expected, either singularly or in the aggregate with all such claims, suits,
actions or proceedings, to be material and adverse to Street. No Governmental
Entity has at any time challenged or questioned in a writing delivered to Street
the legal right of Street to design, manufacture, offer or sell any of its
products or services in the present manner or style thereof. As of the date
hereof, to the Knowledge of Street, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that will, or that would reasonably
be expected to, cause or provide a bona fide basis for a director or executive
officer of Street to seek indemnification from Street.
Brokers' and Finders' Fees.
Street 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.
Interested Party Transactions.
Other than as set forth in Part 2.13 of the Street Schedules, no officer or
director of Street (nor, to the Knowledge of Street, any shareholder of Street
or any ancestor (up to once removed), sibling, descendant (up to once removed),
spouse, parent, subsidiary or other affiliate of any officer, director or
shareholder, 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)
any material interest in any entity that furnished or sold, or furnishes or
sells, services, products or technology that Street furnishes or sells, or
proposes to furnish or sell, (ii) any material interest in any entity that
purchases from or sells or furnishes to Street any goods or services or (iii) a
material beneficial interest in any Contract other than employment or consulting
agreements with officers of Street and indemnification agreements with directors
and officers of Street, in each case previously provided or made available to
Select;
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provided, however, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation and no more than
percent (5%) of the outstanding equity of any other entity shall not be deemed a
material "interest in any entity" for purposes of this Section 2.13.
Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate"
set forth in Section 2.14(a)(i) below (which definition shall apply only to this
Section 2.14), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with Street within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Street Employee Plan" shall mean 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 written or unwritten or otherwise, funded or unfunded,
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 Street or any Affiliate for the benefit of any
Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the United States Department of
Labor;
(v) "Employee" shall mean any current, former, or retired
employee, officer, or director of Street or any Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between Street or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(ix) "International Employee Plan" shall mean each Street
Employee Plan that has been adopted or maintained by Street, whether informally
or formally, for the benefit of Employees outside the United States;
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(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any multiemployer
plan as defined in Section 4001(a)(3) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "Pension Plan" shall mean each Street Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Part 2.14(b) of the Street Schedules contains an
accurate and complete list of each Street Employee Plan and each Employee
Agreement. Street does not have any plan or commitment to establish any new
Street Employee Plan, to modify any Street Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Street Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Select in writing, or as required by this
Agreement), or to enter into any Street Employee Plan or Employee Agreement, nor
does it have any intention or commitment to do any of the foregoing.
(c) Documents. Street has provided or made available to Select: (i)
correct and complete copies of all documents embodying to each Street 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 Street Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Street Employee Plan or related trust; (iv) if Street Employee Plan is
funded, the most recent annual and periodic accounting of Street Employee Plan
assets; (v) the most recent summary plan description together with the summary
of material modifications thereto, if any, required under ERISA with respect to
each Street Employee Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and rulings relating to Street Employee Plans and copies of
all applications and correspondence to or from the IRS or the DOL with respect
to any Street Employee Plan; (vii) all material written agreements and contracts
relating to each Street Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Employee or Employees
relating to any Street Employee Plan and any proposed Street 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 Street; (ix) all COBRA
forms and related notices; and (x) all registration statements and prospectuses
prepared in connection with each Street Employee Plan.
(d) Employee Plan Compliance. (i) Street has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no
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Knowledge of any default or violation by any other party to each Street Employee
Plan, and each Street 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) each Street Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination letter
from the IRS with respect to each such Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination; (iii) no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA or 4975 of the Code, has occurred with respect to any
Street Employee Plan; (iv) there are no actions, suits or claims pending, or, to
the Knowledge of Street, threatened or reasonably anticipated (other than
routine claims for benefits) against any Street Employee Plan or against the
assets of any Street Employee Plan; (v) each Street Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Select, Street or any of its
Affiliates (other than ordinary administration expenses typically incurred in a
termination event); (vi) there are no audits, inquiries or proceedings pending
or, to the Knowledge of Street or any Affiliates, threatened by the IRS or DOL
with respect to any Street Employee Plan; and (vii) neither Street nor any
Affiliate is subject to any penalty or tax with respect to any Street Employee
Plan under Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plans. Street does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Street contributed to or been
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Street Employee Plan provides,
or has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and Street has never represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by statute.
(h) Neither Street nor any Affiliate has, prior to the Effective
Time, and in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA or any similar provisions of
state law applicable to its Employees.
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(i) Effect of Transaction. 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 Street Employee Plan or Employee Agreement 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.
(j) Employment Matters. Street: (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
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any material 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). There are no pending,
threatened or reasonably anticipated claims or actions against Street under any
worker's compensation policy or long-term disability policy. To Street's
Knowledge, no employee of Street has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee being employed by Street and disclosing to Street or
using trade secrets or proprietary information of any other person or entity.
(k) Labor. No work stoppage or labor strike against Street is
pending, threatened or reasonably anticipated. Street has no Knowledge of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
Knowledge of Street, threatened or reasonably anticipated relating to any 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 any material liability to Street. Street has not engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. Street 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 Street.
(l) International Employee Plan. Street does not now, nor has it ever
had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to Street, no underground storage tanks and no amount of any substance
that has been designated by any
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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, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
(a "Hazardous Material") are present, as a result of the actions of Street or
any affiliate of Street, or, to Street'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 Street
or any of its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
material liability to Street (in any individual case or in the aggregate) (i)
Street 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 Closing Date and (ii) Street has not disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"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.
(c) Permits. Street holds all environmental approvals, permits,
licenses, clearances and consents (the "Street Environmental Permits") necessary
for the conduct of Street's and its subsidiaries' Hazardous Material Activities
and other businesses of Street and its subsidiaries as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to the
Knowledge of Street, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against Street or any of its subsidiaries in a writing delivered to Street
concerning any Street Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of Street. Street has no Knowledge of any fact or
circumstance which would involve Street in any environmental litigation or
impose upon Street any material environmental liability.
Year 2000 Compliance.
Except as disclosed in Part 2.16 of the Street Schedules, Street's products
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. Street's products and internal
systems manage and manipulate data involving dates and times, including single
century formulas
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multi-century formulas, and do not cause an abnormal ending scenario within the
application or generate incorrect values or invalid results involving such
dates.
Agreements, Contracts and Commitments.
Except as otherwise set forth in Part 2.17 of the Street Schedules, as of
the date hereof Street is not a party to or bound by:
(a) any employment or consulting agreement, contract or commitment
currently in force with any officer or director or higher level employee or
member of Street's Board of Directors, other than those that are terminable by
Street or any of its subsidiaries on no more than thirty (30) days' notice
without liability or financial obligation, except to the extent general
principles of wrongful termination law may limit Street's ability to terminate
employees at will;
(b) any agreement of indemnification or any guaranty by Street
currently in force other than any agreement of indemnification entered into in
connection with the sale or license of software products in the ordinary course
of business;
(c) any agreement, contract or commitment containing any covenant
currently in force limiting in any respect the right of Street to engage in any
line of business or to compete with any person or granting any exclusive
distribution rights;
(d) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by Street after the date of this Agreement of
a material amount of assets not in the ordinary course of business or pursuant
to which Street has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than Street's
subsidiaries;
(e) any joint marketing or development agreement currently in force
under which Street or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of ninety (90) days or less, or any
material agreement pursuant to which Street has continuing material obligations
to jointly develop any intellectual property that will not be owned, in whole or
in part, by Street and which may not be canceled without penalty upon notice of
ninety (90) days or less;
(f) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology that is
material to Street;
(g) any agreement or plan currently in force, including, without
limitation, any stock option plan, stock appreciation right 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;
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(h) any agreement, contract or commitment currently in force to sell
or distribute any Street products, service or technology except agreements with
distributors or sales representatives in the normal course of business
cancelable without penalty upon notice of ninety (90) days or less and
substantially in the form previously provided or made available to Select;
(i) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments currently in force
relating to the borrowing of money or extension of credit;
(j) any settlement agreement entered into within two (2) years prior
to the date of this Agreement; or
(k) any other agreement, contract or commitment that has a value of
$25,000 or more individually.
Neither Street, nor to Street's Knowledge any other party to a material
Contract, is in breach, violation or default under, and Street has not received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any material Contract to which Street is bound,
in such a manner as would permit any other party to cancel or terminate any such
material Contract, or would permit any other party to seek material damages or
other remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
Board Approval.
The Board of Directors of Street has, as of the date of this Agreement, (i)
determined that the Merger is fair to, and in the best interests of Street and
the Street Shareholders, (ii) approved and deemed advisable, subject to
shareholder approval, this Agreement and the transactions contemplated hereby
and (iii) determined to recommend that the Street Shareholders approve and adopt
this Agreement and approve the Merger.
Insurance.
Street maintains insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of Street (collectively, the "Insurance Policies") which are of the type and in
amounts customarily carried by persons conducting businesses similar to those of
Street. There is no material claim by Street pending under any of the material
Insurance Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds.
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ARTICLE 3.
Representations and Warranties of Select and Sub
As of the date hereof and as of the Closing Date, Select and Sub represent
and warrant to Street, subject to the exceptions specifically disclosed in
writing in the disclosure letter and referencing a specific representation
supplied by Select and Sub to Street dated as of the date hereof and certified
by a duly authorized officer of Select (the "SELECT SCHEDULES"), as follows:
Organization of Select.
(a) Except as set forth on Part 3.1(a) of the Select Schedules, Select
does not own any capital stock of, or any equity interest of any nature in, any
other entity, except for passive investments in equity interests of public
companies as part of the cash management program of Select. Select has not
agreed and is not obligated to make, nor bound by any contract under which
contract it may become obligated to make, any future investment in or capital
contribution to any other entity. Select has not, at any time, been a general
partner of any general partnership, limited partnership or other entity.
(b) Select and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of Select and its subsidiaries is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect on Select.
(d) Select has delivered or made available to Street a true and
correct copy of the Certificate of Incorporation and Bylaws of Select and
similar governing instruments of each of its subsidiaries, each as amended to
date (collectively, the "Select Charter Documents"), and each such instrument is
in full force and effect. Select is not in violation of any of the provisions
of Select Charter Documents.
(e) Select has delivered or made available to Street all proposed or
considered amendments to Select Charter Documents.
Select Capital Structure.
(a) The authorized capital stock of Select consists of: (i)
90,000,000 shares of Common Stock ("Select Common Stock"), of which 8,479,580
shares have been issued and are
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outstanding as of April 22, 1999; and (ii) 10,000,000 shares of Preferred Stock
("Select Preferred Stock"), of which 5,288,163 shares have been issued and are
outstanding as of the date of this Agreement. The Select Preferred Stock is
designated as follows: (i) 1,378,000 shares of Series A Preferred Stock, all of
which are outstanding as of the date of this Agreement.; (ii) 190,336 shares of
Series B Preferred Stock, all of which are outstanding as of the date of this
Agreement.; (iii) 614,374 shares of Series C Preferred Stock, all of which are
outstanding as of the date of this Agreement.; (iv) 681,201 shares of Series D
Preferred Stock, all of which are outstanding as of the date of this Agreement.;
(v) 325,000 shares of Series E Preferred Stock, all of which are outstanding as
of the date of this Agreement.; (vi) 2,100,000 shares of Series F Preferred
Stock, 1,758,297 of which are outstanding as of the date of this Agreement.; and
(vii) 340,955 shares of Series G Preferred Stock, all of which are outstanding
as of the date of this Agreement. All of the outstanding shares of Select Common
Stock and Select Preferred Stock have been duly authorized and validly issued,
and are fully paid and nonassessable. Part 3.2(b) of the Select Schedules sets
forth information regarding outstanding warrants and other outstanding rights to
purchase Select Common Stock and Select Preferred Stock.
(b) As of April 22, 1999: (i) 1,634,266 shares of Select Common Stock
are subject to issuance pursuant to outstanding options to purchase Common Stock
under Select's stock option plans; and (ii) 541,000 shares of Common Stock are
reserved for future issuance under Select's stock option plans. (Stock options
granted by Select pursuant to Select's stock option plans are referred to in
this Agreement as "Select Options"). Select has made available to Street
accurate and complete copies of all stock option plans pursuant to which Select
has granted stock options that are currently outstanding and the form of all
stock option agreements evidencing such options. All shares of Select Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable.
(c) All outstanding shares of Select Common Stock and Select Preferred
Stock, all outstanding Select Options, and all outstanding shares of capital
stock of each subsidiary of Select have been issued and granted in compliance
with (i) all applicable securities laws and other applicable Legal Requirements
and (ii) all requirements set forth in applicable Contracts.
Obligations With Respect to Capital Stock.
Except as set forth in Section 3.2 above and in Part 3.3 of the Select
Schedules, there are no equity securities, partnership interests or similar
ownership interests of any class of Select equity security, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except for securities Select owns free and clear of
all claims and Encumbrances, directly or indirectly through one or more
subsidiaries, and except for shares of capital stock or other similar ownership
interests of certain subsidiaries of Select that are owned by certain nominee
equity holders as required by the applicable law of the jurisdiction of
organization of such subsidiaries (which shares or other interests do not
materially affect Select's control of such subsidiaries), there are no
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equity securities, partnership interests or similar ownership interests of any
class of equity security of any subsidiary of Select, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Section 3.2 above and in Part
3.3 of the Select Schedules, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Select or any of its subsidiaries is a party or by which it is bound
obligating Select or any of its subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Select or any of its
subsidiaries or obligating Select or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement and except as set forth in
Part 3.3 of the Select Schedules, there are no registration rights and there is
no voting trust, proxy, rights plan, antitakeover plan or other agreement or
understanding to which Select is a party or by which it is bound with respect to
any equity security of any class of Select or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries.
Authority; Non-Contravention.
(a) Select has all requisite corporate power and authority to enter
into this Agreement and to consummate the 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 Select and its subsidiaries, subject only to the
filing of the Merger Agreement and Restated Certificate (as defined below)
pursuant to California Law and Delaware Law, as applicable. This Agreement has
been duly executed and delivered by Select and Sub, assuming execution and
delivery by Street, constitutes a valid and binding obligation of Select and
Sub, enforceable against Select and Sub in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by Select
and Sub do not, and the performance of this Agreement by Select and Sub will
not, (i) conflict with Select Charter Documents or the Charter Documents of its
subsidiaries, subject to obtaining the approval of the Select stockholders of
the Restated Certificate as required by the Select Charter Documents and
applicable law, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Select or any of its subsidiaries or by which
Select or any of its subsidiaries or any of their respective properties are
bound or affected, subject to compliance with the requirements set forth in
Section 3.4(b) below or (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or impair Select's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or Encumbrance on any of the material properties or
assets of Select or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease,
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license, permit, franchise, concession, or other instrument or obligation to
which Select or any of its subsidiaries is a party or by which Select or any of
its subsidiaries or its or any of their respective assets are bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity, is required to be obtained
or made by Select or any of its subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the Merger, except for (i)
the filing of the Merger Agreement with the Secretary of State of the State of
California and the Secretary of State of the State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal, foreign and state
securities (or related) laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") and the securities or antitrust laws of any
foreign country and (iii) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to Select or have a material adverse effect on the ability of the parties hereto
to consummate the Merger.
Select Financial Statements.
Part 3.5 of the Select Schedules sets forth Select's unaudited consolidated
balance sheet as of December 31, 1998 and the related consolidated unaudited
statements of operations and cash flow for the twelve month period ended
December 31, 1998 (the "Select Year-End Financials") and Select's unaudited
balance sheet as of March 31, 1999 (the "Select Current Balance Sheet") and the
related unaudited statements of operations and cash flow for the three months
then ended (together with the Select Year-End Financials, the "Select
Financials"). The Select Financials are correct in all material respects and
have been prepared in accordance with GAAP, applied on a basis consistent
throughout the periods indicated and consistent with each other except as may be
indicated therein. The Select Financials present fairly the financial
condition, operating results and cash flows of Select as of the dates and during
the periods indicated therein, subject to normal year-end adjustments, which
will not be material in amount or significance.
Absence of Certain Changes or Events.
Since the date of Select Current Balance Sheet until the date hereof there
has not been: (i) any Material Adverse Effect on Select , (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Select's or any of its
subsidiaries' capital stock, or any purchase, redemption or other acquisition by
Select of any of Select's capital stock or any other securities of Select or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Select's
or any of its subsidiaries' capital stock, (iv) any granting by Select or any of
its subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by Select or any of its
subsidiaries
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of any bonus, except for bonuses made in the ordinary course of business
consistent with past practice, or any granting by Select or any of its
subsidiaries of any increase in severance or termination pay or any entry by
Select or any of its subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving Select of the nature contemplated
hereby, (v) any material change by Select in its accounting methods, principles
or practices, except as required by concurrent changes in GAAP or (vi) any
revaluation by Select or any of its subsidiaries of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business.
Taxes.
(a) Tax Returns and Audits.
(i) Select and each of its subsidiaries have timely filed
all Returns relating to Taxes required to be filed by Select and each of its
subsidiaries with any Tax authority, except such Returns which are not material
to Select, and have paid all Taxes shown to be due on such Returns.
(ii) Select and each of its subsidiaries as of the
Effective Time will have withheld all federal and state income taxes, Taxes
pursuant to FICA, Taxes pursuant to the FUTA and other Taxes required to be
withheld.
(iii) Neither Select nor any of its subsidiaries has been
delinquent in the payment of any Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Select or any of its subsidiaries, nor
has Select or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any material Tax.
(iv) No audit or other examination of any Return of Select
or any of its subsidiaries by any Tax authority is presently in progress, nor
has Select or any of its subsidiaries been notified of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed by Select
or any of its subsidiaries has been proposed in writing formally or informally
by any Tax authority to Select or any of its subsidiaries or any representative
thereof.
(vi) Neither Select nor any of its subsidiaries has any
liability for unpaid Taxes which has not been accrued for or reserved on Select
Balance Sheet, whether asserted or unasserted, contingent or otherwise, which is
material to Select, other than any liability for unpaid Taxes that may have
accrued since the date of Select Balance Sheet in connection with the operation
of the business of Select and its subsidiaries in the ordinary course.
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(vii) There is no contract, agreement, plan or arrangement
to which Select is a party as of the date of this Agreement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of Select or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) Neither Select nor any of its subsidiaries has 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 Select.
(ix) Neither Select nor any of its subsidiaries is party
to or has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(x) Except as may be required as a result of the Merger,
Select and its subsidiaries have not been and will not be required to include
any adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Closing.
(xi) None of Select's or its subsidiaries' assets are tax
exempt use property within the meaning of Section 168(h) of the Code.
Title to Properties; Absence of Liens and Encumbrances.
All of Select's and its subsidiaries' current leases with respect to
real property 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 or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
material claim. Other than the leaseholds created under real property leases,
and neither Select nor its subsidiaries owns any interest in real property.
(b) Select and each of its subsidiaries 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, except as reflected
in Select Financials and except for liens for taxes not yet due and payable,
statutory liens and such Liens or other 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.
Intellectual Property. For the purposes of this Agreement, the following
terms have the following definitions:
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"Select Intellectual Property" means any Intellectual Property that is
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owned by, or exclusively licensed to, Select or its subsidiaries.
"Select Registered Intellectual Property" means all of the Registered
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Intellectual Property owned by, or filed in the name of, Select or its
subsidiaries.
(a) No material Select Intellectual Property or product or service of
Select or its subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Select or its subsidiaries, or which would
affect the validity, use or enforceability of such Select Intellectual Property.
(b) Each material item of Select 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, as the case may be, for the purposes of maintaining such
Registered Intellectual Property.
(c) Select or its subsidiaries 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
Select Intellectual Property or Intellectual Property used by Select or its
subsidiaries free and clear of any lien or encumbrance (excluding licenses and
related restrictions); and Select or its sub