-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QVASYSZmUXNuW//QwRTy6i9VzvekvAh4SfUmI7niawa93rjYbevZibyWS4L8yFaO jcX1hKnElbWBgFpJT7xK2g== 0001012870-99-003155.txt : 19990914 0001012870-99-003155.hdr.sgml : 19990914 ACCESSION NUMBER: 0001012870-99-003155 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990831 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRITICAL PATH INC CENTRAL INDEX KEY: 0001060801 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 911788300 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-25331 FILM NUMBER: 99710592 BUSINESS ADDRESS: STREET 1: 320 FIRST STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 6502334512 MAIL ADDRESS: STREET 1: 320 FIRST STREET CITY: SAN FRNACISCO STATE: CA ZIP: 94105 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 August 31, 1999 Date of Report (date of earliest event reported) CRITICAL PATH, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) California 000-25331 91-1788300 - ---------------------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.) incorporation or organization)
320 First Street San Francisco, California 94105 (Address of principal executive offices) Registrant's telephone number, including area code: (415) 808-8800 N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) ================================================================================ Item 2. Acquisition or Disposition of Assets ------------------------------------ On August 31, 1999, Critical Path, Inc. ("Critical Path") completed its acquisition of Amplitude Software Corp. ("Amplitude") pursuant to the terms of the Agreement and Plan of Reorganization dated June 22, 1999, among Critical Path, Amplitude and Apollo Acquisition Corp., a wholly-owned subsidiary of Critical Path ("Merger Sub"). Pursuant to the terms of the Reorganization Agreement, Amplitude merged with and into Merger Sub and became a wholly-owned subsidiary of Critical Path. In addition, each issued and outstanding share of Amplitude common stock was converted into the right to receive shares of Critical Path common stock at an exchange ratio of 0.135186988 and $1.69856780 in cash. Each issued and outstanding share of Amplitude Series A Preferred Stock was converted into the right to receive shares of Critical Path common stock at an exchange ratio of 0.13685308 and $1.69856780 in cash. Each issued and outstanding share of Amplitude Series B Preferred Stock was converted into the right to receive shares of Critical Path common stock at an exchange ratio of 0.14907106 and $1.69856780 in cash. Each issued and outstanding share of Amplitude Series B-1 Preferred Stock was converted into the right to receive shares of Critical Path common stock at an exchange ratio of 0.15328904 and $1.69856780 in cash. Each issued and outstanding share of Amplitude Series C Preferred Stock was converted into the right to receive shares of Critical Path common stock at an exchange ratio of 0.16156672 and $1.69856780 in cash. Each issued and outstanding share of Amplitude Series D Preferred Stock was converted into the right to receive shares of Critical Path common stock at an exchange ratio of 0.17767224 and $1.69856780 in cash. Critical Path assumed 3,203,534 outstanding options to acquire Amplitude common stock as options to acquire Critical Path common stock, on the same terms as the original option, adjusted to reflect the Option exchange ratio of 0.182353049339. Critical Path issued 4,107,310 shares of Critical Path common stock in the merger and, in addition, assumed options that can be exercised for approximately 584,174 shares of Critical Path common stock. The exchange ratios were determined through negotiations between the managements of Critical Path and Amplitude, and were approved by their respective boards of directors on June 22, 1999. Amplitude shareholders approved the Merger through written consents to action in lieu of a stockholder meeting dated as of August 27, 1999. Item 7. Financial Statements and Exhibits --------------------------------- (a) Financial Statements The financial statements are unavailable as of the date of this filing. Such information will be filed on or before the sixtieth day following the filing date of this Current Report on Form 8-K. (b) Pro Forma Financial Information The pro forma financial information is unavailable as of the date of this filing. Such information will be filed on or before the sixtieth day following the filing date of this Current Report on Form 8-K. (c) Exhibits 2.1 Agreement and Plan of Reorganization, dated June 22, 1999, among Critical Path Inc., Amplitude Software Corp. and Apollo Acquisition Corp. 99.1 Press Release by Critical Path, Inc., dated August 31, 1999, announcing completion of the acquisition. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 13, 1999 CRITICAL PATH, INC. /s/ David A. Thatcher --------------------------------------------------- David A. Thatcher Executive Vice President and Chief Financial Officer CRITICAL PATH, INC. EXHIBIT INDEX TO FORM 8-K Dated August 31, 1999 Exhibit 2.1 Agreement and Plan of Reorganization, dated June 22, 1999, among Critical Path Inc., Amplitude Software Corp. and Apollo Acquisition Corp. 99.1 Press Release by Critical Path, Inc., dated August 31, 1999, announcing completion of the acquisition. EX-2.1 2 AGREEMENT AND PLAN OF REORGANIZATION Exhibit 2.1 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and --------- entered into as of June 22, 1999, among Critical Path, Inc., a California corporation ("Parent"), Apollo Acquisition Corp., a California corporation and a ------ wholly-owned subsidiary of Parent ("Merger Sub"), and Amplitude Software Corp., ---------- a California corporation (the "Company"). ------- RECITALS A. The Boards of Directors of each of the Company, Parent and Merger Sub believe it is in the best interests of each company and their respective shareholders that Parent acquire the Company through the statutory merger of the Company with and into Merger Sub (the "Merger") and, in furtherance thereof, ------ have approved the Merger. B. Pursuant to the Merger, among other things, and subject to the terms and conditions of this Agreement, all of the issued and outstanding shares of capital stock of the Company ("Company Capital Stock") and all outstanding --------------------- options and other rights to acquire or receive shares of Company Capital Stock shall be converted into the shares of or right to receive shares of Common Stock of Parent ("Parent Common Stock"). ------------------- C. Concurrently with the execution of this Agreement, and as a condition and inducement to Parent's willingness to enter into this Agreement, certain affiliates of the Company are entering into Voting Agreements in substantially the form attached hereto as Exhibit A (the "Voting Agreement"). --------- ---------------- D. A portion of the shares of Parent Common Stock otherwise issuable by Parent in connection with the Merger shall be placed in escrow by Parent, the release of which amount shall be contingent upon certain events and conditions. E. The parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). ---- F. The parties intend for the Merger to be accounted for financial accounting purposes as a purchase. NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, intending to be legally bound hereby the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. At the Effective Time (as defined in Section 1.2) and ---------- subject to and upon the terms and conditions of this Agreement and the applicable provisions of the California General Corporation Law (the "CGCL"), ---- the Company shall be merged with and into Merger Sub, the separate corporate existence of the Company shall cease and Merger Sub shall continue as the surviving corporation and as a wholly-owned subsidiary of Parent. Merger Sub as the surviving corporation after the Merger is hereinafter sometimes referred to as the "Surviving Corporation". --------------------- 1.2 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 five (5) business days, following satisfaction or waiver of the conditions set forth in Article VI, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California, unless another place or time is agreed to by Parent and the Company. The date upon which the Closing actually occurs is herein referred to as the "Closing ------- Date". On the Closing Date, the parties hereto shall cause the Merger to be - ---- consummated by filing an Agreement of Merger with the California Secretary of State (the "Agreement of Merger"), in accordance with the relevant provisions of ------------------- applicable law. The date and time the Merger becomes effective in accordance with the provisions of the CGCL is the "Effective Time". -------------- 1.3 Effect of the Merger. At the Effective Time, the effect of the -------------------- Merger shall be as provided in the applicable provisions of the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. 1.4 Articles of Incorporation; Bylaws. --------------------------------- (a) Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time, the Articles of Incorporation of Merger Sub shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Articles of Incorporation. (b) The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended. 1.5 Directors and Officers. The director(s) of Merger Sub immediately ---------------------- prior to the Effective Time shall be the initial director(s) of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Bylaws of the Surviving Corporation. 1.6 Maximum Shares to Be Issued; Effect on Capital Stock. No adjustment ---------------------------------------------------- shall be made in the number of shares of Parent Common Stock issued in the Merger as a result of any cash proceeds received by the Company from the date hereof to the Closing Date pursuant to the exercise of options to acquire Company Capital Stock. Subject to the terms and conditions of this Agreement, as of the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holder of any shares of the Company Capital Stock, the following shall occur: -2- (a) Conversion of Company Common Stock. Each share of Common Stock of ---------------------------------- the Company ("Company Common Stock") issued and outstanding immediately prior to -------------------- the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the extent provided in Section 1.7(a)) will be canceled and extinguished and be converted automatically into: (i) that number of shares of Parent Common Stock as is equal to the Stock Ratio to Common Holders (as defined in paragraph (h) below), and (ii) cash equal to the Cash Rate to Common Holders (as defined in paragraph (h) below). (b) Conversion of Company Preferred Stock. Each share of Series A ------------------------------------- Preferred Stock of the Company ("Series A Preferred"), Series B Preferred Stock ------------------ of the Company ("Series B Preferred"), Series B-1 Preferred Stock of the Company ------------------ ("Series B-1 Preferred"), Series C Preferred Stock of the Company ("Series C -------------------- -------- Preferred") and Series D Preferred Stock of the Company ("Series D Preferred" - --------- ------------------ and together with the Series A Preferred, the Series B Preferred, the Series B-1 Preferred and the Series C Preferred, the "Company Preferred") issued and ----------------- outstanding immediately prior to the Effective Time (other than any shares of Company Preferred that are converted into shares of Company Common Stock immediately prior to the Effective Time, any shares of Company Preferred to be canceled pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the extent provided in Section 1.7(a)) will be canceled and extinguished and be converted automatically into: (1) that number of shares of Parent Common Stock as is equal to the quotient obtained by dividing (x) the Liquidation Preference of such Series of Company Preferred Stock, as specified in the Company's Articles of Incorporation immediately prior to the Effective Time by (y) the Actual Parent Stock Price (as defined in paragraph (h) below); (2) that number of shares of Parent Common Stock as is equal to the product obtained by multiplying (x) the Stock Ratio to Common Holders (as defined in paragraph (h) below) by (y) the number of shares of Company Common Stock into which such share of Company Preferred would convert pursuant to an automatic conversion as described in the Company's Articles of Incorporation immediately prior to the Effective Time; and (3) cash equal to the product obtained by multiplying (x) the Cash Rate to Common Holders (as defined in paragraph (h) below) by (y) the number of shares of Company Common Stock into which such share of Company Preferred would convert pursuant to an automatic conversion as described in the Company's Articles of Incorporation immediately prior to the Effective Time. (c) Cancellation of Parent-Owned and Company-Owned Stock. Each share ---------------------------------------------------- of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct or indirect wholly-owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof. -3- (d) Stock Options. At the Effective Time, all options to purchase ------------- Company Common Stock then outstanding under the Company's 1996 Stock Plan (the "Option Plan"), or otherwise, shall be assumed by Parent in accordance with - ------------ provisions described below. (i) At the Effective Time, each outstanding option to purchase shares of Company Common Stock (each a "Company Option") under the Option Plan -------------- or otherwise, whether vested or unvested, shall be, in connection with the Merger, assumed by Parent. Each Company Option so assumed by Parent under this Agreement shall continue to have, and be subject to, the same terms and conditions set forth in the Option Plan and/or as provided in the respective option agreements governing such Company Option immediately prior to the Effective Time, except that (A) such Company Option shall be exercisable for that number of whole shares of Parent Common Stock equal to the product of the number of shares of Company Common Stock that were issuable upon exercise of such Company Option immediately prior to the Effective Time multiplied by the Stock Ratio to Option Holders (as defined in paragraph (h) below), rounded down to the nearest whole number of shares of Parent Common Stock and (B) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such assumed Company Option shall be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Company Option was exercisable immediately prior to the Effective Time by the Stock Ratio to Option Holders, rounded up to the nearest whole cent. (ii) It is the intention of the parties that the Company Options assumed by Parent qualify following the Effective Time as incentive stock options as defined in Section 422 of the Code to the extent the Company Options qualified as incentive stock options immediately prior to the Effective Time. (iii) Promptly following the Effective Time, Parent will issue to each holder of an outstanding Company Option a document evidencing the foregoing assumption of such Company Option by Parent. (e) Capital Stock of Merger Sub. Each share of Common Stock of Merger --------------------------- Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation. (f) Adjustments to Exchange Ratio. The Stock Ratio to Common Holders, ----------------------------- the Stock Ratio to Option Holders and the number of shares of Parent Common Stock issuable pursuant to Section 1.6(b)(1) shall be adjusted to reflect fully the effect of any stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into Parent Common Stock or Company Capital Stock), reorganization, recapitalization or other like change with respect to Parent Common Stock or Company Capital Stock occurring or with a record date after the date hereof and prior to the Effective Time. (g) Fractional Shares. No fraction of a share of Parent Common Stock ----------------- will be issued, but in lieu thereof, each holder of shares of Company Capital Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock -4- to be received by such holder) shall be entitled to receive from Parent an amount of cash (rounded to the nearest whole cent) equal to the product of (i) such fraction, multiplied by (ii) the Actual Parent Stock Price. (h) Definitions. ----------- (i) Actual Parent Stock Price. The "Actual Parent Stock ------------------------- Price" shall mean the average closing price of a share of Parent Common Stock for the ten (10) consecutive trading days ending on the second trading day immediately prior to the Closing Date, as reported on the Nasdaq National Market. (ii) Collared Parent Stock Price. The "Collared Parent Stock --------------------------- Price" shall mean the Actual Parent Stock Price; provided, however, that (A) if the Actual Parent Stock Price as calculated above is less than $30, then the Collared Parent Stock Price shall be $30; and (B) if the Actual Parent Stock Price as calculated above is greater than $80, then the Collared Parent Stock Price shall be $80. (iii) Liquidation Preference Set-Aside. The "Liquidation -------------------------------- Preference Set-Aside" shall mean the sum obtained by adding, for each of the Company's Preferred Stock Series A, B, B-1, C, and D, the product obtained by multiplying (x) the number of shares of such Series of Company Preferred Stock outstanding immediately prior to the Effective Time by (y) the Liquidation Preference of such Series of Company Preferred Stock, as specified in the Company's Articles of Incorporation. (iv) Adviser Fees Set-Aside. The "Adviser Fees Set-Aside" ---------------------- shall mean the amount by which the fees payable to the Company's financial advisors at the closing in connection with the Merger exceeds $2,715,000. (v) Cash Consideration Value. The "Cash Consideration Value" ------------------------ shall mean $45,000,000. (vi) Stock Consideration Value. The "Stock Consideration ------------------------- Value" shall mean the difference obtained by subtracting (A) the sum obtained by adding (w) the Adviser Fees Set-Aside and (x) the Liquidation Preference Set- Aside from (B) the product obtained by multiplying (y) $170,000,000 by (z) the quotient obtained by dividing (1) the Actual Parent Stock Price by (2) the Collared Parent Stock Price. (vii) Consideration Value for Common Equivalents. The ------------------------------------------ "Consideration Value for Common Equivalents" shall mean the sum obtained by adding (x) the Cash Consideration Value and (y) the Stock Consideration Value. (viii) Outstanding Total Amount. The "Outstanding Total Amount" ------------------------ shall mean the sum obtained by adding (x) the Outstanding Common Amount, (y) the Outstanding Option Amount, and (z) the Outstanding Dissent-Eligible Amount. (ix) Outstanding Dissent-Eligible Amount. The "Outstanding ----------------------------------- Dissent-Eligible Amount" shall mean the amount by which (A) the aggregate number of shares of Company Common Stock and Company Preferred Stock (counting each share of Company Preferred Stock as that number of shares of Company Common Stock into which such share of Company Preferred Stock would convert pursuant to an automatic conversion as described in the Company's Articles of Incorporation immediately prior to the -5- Effective Time) which are eligible under CGCL to exercise dissenter's rights exceeds (B) the product obtained by multiplying (x) one-tenth (0.1) by (y) the number of shares of Company Common Stock and Company Preferred Stock (counting each share of Company Preferred Stock as that number of shares of Company Common Stock into which such share of Company Preferred Stock would convert pursuant to an automatic conversion as described in the Company's Articles of Incorporation immediately prior to the Effective Time) outstanding immediately prior to the Effective Time. (x) Outstanding Common Amount. The "Outstanding Common ------------------------- Amount" shall mean the difference obtained by subtracting (x) the Outstanding Dissent-Eligible Amount from (y) the number of shares of Company Common Stock and Company Preferred Stock (counting each share of Company Preferred Stock as that number of shares of Company Common Stock into which such share of Company Preferred Stock would convert pursuant to an automatic conversion as described in the Company's Articles of Incorporation immediately prior to the Effective Time) outstanding immediately prior to the Effective Time. (xi) Outstanding Option Amount. The "Outstanding Option ------------------------- Amount" the exercise of all outstanding options to acquire shares of Company Common Stock immediately prior to the Effective Time. (xii) Cash Consideration for Dissent-Eligible Holders. The ----------------------------------------------- "Cash Consideration for Dissent-Eligible Holders" shall mean the product obtained by multiplying (x) the Consideration Value for Common Equivalents by (y) the quotient obtained by dividing (A) the Outstanding Dissent-Eligible Amount by (B) the Outstanding Total Amount. (xiii) Stock Consideration for Option Holders. The "Stock (x) -------------------------------------- the Consideration Value for Common Equivalents by (y) the quotient obtained by dividing (A) the Outstanding Option Amount by (B) the Outstanding Total Amount. (xiv) Cash Consideration for Common Holders. The "Cash ------------------------------------- Consideration for Common Holders" shall mean the difference obtained by subtracting (x) the Cash Consideration for Dissent-Eligible Holders from (y) the Cash Consideration Value. (xv) Stock Consideration for Common Holders. The "Stock -------------------------------------- Consideration for Common Holders" shall mean the difference obtained by subtracting (x) the Stock Consideration for Option Holders from (y) the Stock Consideration Value. (xvi) Cash Rate to Common Holders. The "Cash Rate to Common --------------------------- Holders" shall mean the quotient obtained by dividing (x) Cash Consideration for Common Holders by (y) the Outstanding Common Amount. (xvii) Stock Ratio to Option Holders. The "Stock Ratio to Option ----------------------------- Holders" shall mean the quotient obtained by dividing (x) Stock Consideration for Option Holders by (y) the product obtained by multiplying (A) the Outstanding Option Amount by (B) the Actual Parent Stock Price. -6- (xviii) Stock Ratio to Common Holders. The "Stock Ratio to ----------------------------- Common Holders" shall mean the quotient obtained by dividing (x) Stock Consideration for Common Holders by (y) the product obtained by multiplying (A) the Outstanding Common Amount by (B) the Actual Parent Stock Price. (xix) Escrow Amount. The "Escrow Amount" shall be a number of ------------- shares of Parent Common Stock obtained by dividing (A) ten percent of the Consideration Value for Common Equivalents by (B) the Actual Parent Stock Price. 1.7 Dissenting Shares. ----------------- (a) Notwithstanding any provision of this Agreement to the contrary, any shares of Company Capital Stock held by a holder who has demanded and perfected appraisal or dissenters' rights for such shares in accordance with the CGCL and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be ----------------- converted into or represent Parent Common Stock pursuant to Section 1.6, but the holder thereof shall only be entitled to such rights as are granted by the CGCL. (b) Notwithstanding the provisions of subsection (a), if any holder of shares of Company Capital Stock who demands appraisal of such shares under the CGCL 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 Parent Common Stock and cash, including cash for fractional shares, as provided in Section 1.6, without interest thereon. (c) The Company shall give Parent (i) prompt notice of any written demands for appraisal of any shares of Company Capital Stock, withdrawals of such demands, and any other instruments served pursuant to the CGCL and received by the Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the CGCL. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal of capital stock of the Company or offer to settle or settle any such demands. 1.8 Surrender of Certificates. ------------------------- (a) Exchange Agent. Prior to the Effective Time, Parent shall -------------- designate a bank or trust company reasonably acceptable to the Company to act as exchange agent (the "Exchange Agent") in the Merger. -------------- (b) Parent to Provide Common Stock and Cash. Promptly after the --------------------------------------- Effective Time, Parent shall make available to the Exchange Agent for exchange in accordance with this Article I, the aggregate number of shares of Parent Common Stock issuable pursuant to Sections 1.6 in exchange for outstanding shares of Company Capital Stock; provided that, on behalf of the holders of Company Capital Stock, Parent shall deposit into an escrow account a number of shares of Parent Common Stock equal to the Escrow Amount out of the aggregate number of shares of Parent Common Stock otherwise issuable pursuant to Section 1.6. The portion of the Escrow Amount contributed on behalf of each holder of Company Capital Stock (other than holders of Dissenting Shares on whose behalf no shares will be deposited into the escrow -7- account) shall be in proportion to the aggregate number of shares of Parent Common Stock which such holder would otherwise be entitled to receive under Sections 1.6(a), 1.6(b)(2), and 1.6(b)(3) by virtue of ownership of outstanding shares of Company Capital Stock. Promptly after the Effective Time, Parent shall make available to the Exchange Agent for exchange in accordance with this Article I, the aggregate amount of cash issuable pursuant to Section 1.6 in exchange for outstanding shares of Company Capital Stock. (c) Exchange Procedures. Promptly after the Effective Time, Parent ------------------- shall cause to be mailed to each holder of record of a certificate or certificates (the "Certificates") which immediately prior to the Effective Time ------------ represented outstanding shares of Company Capital Stock whose shares were converted into shares of Parent Common Stock and cash pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for cash and certificates representing shares of Parent Common Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor cash and a certificate representing the number of whole shares of Parent Common Stock (less the number of shares of Parent Common Stock, if any, to be deposited in the Escrow Fund (as defined in Section 7.5 below) on such holder's behalf pursuant to Section 7.5 hereof), plus cash in lieu of fractional shares in accordance with Section 1.6, to which such holder is entitled pursuant to Section 1.6, and the Certificate so surrendered shall forthwith be canceled. As soon as practicable after the Effective Time, and subject to and in accordance with the provisions of Article VII hereof, Parent shall cause to be distributed to the Escrow Agent a certificate or certificates representing that number of shares of Parent Common Stock equal to the Escrow Amount which shall be registered in the name of the Escrow Agent. Notwithstanding the provisions contained in Section 1.6(g), any fractional share that would otherwise result from the issuance of a certificate representing the shares of Parent Common Stock to be deposited into escrow pursuant to Article VII hereof shall be rounded down to the nearest whole share and any fraction of a share that would otherwise result from the issuance of a certificate representing the remaining shares of Parent Common Stock which each such shareholder would otherwise be entitled to receive under Section 1 by virtue of ownership of outstanding shares of Company Common Stock shall be rounded up to the nearest whole share. Such shares shall be owned beneficially and of record by the holders on whose behalf such shares were deposited in the Escrow Fund and shall be available to compensate Parent as provided in Article VII. Until so surrendered, each outstanding Certificate that, prior to the Effective Time, represented shares of Company Capital Stock will be deemed from and after the Effective Time, for all corporate purposes, other than the payment of dividends, to evidence the ownership of the number of full shares of Parent Common Stock into which such shares of Company Capital Stock shall have been so converted and the right to receive an amount in cash in lieu of the issuance of any fractional shares in accordance with Section 1.6. Parent shall use its reasonable efforts to cause the Exchange Agent to issue to each Company shareholder (each a "Shareholder") the Parent Common Stock and to pay the cash payable pursuant to Section 1.6 within 5 business days after the Exchange Agent receives all documents necessary to effect such exchange, properly completed, guaranteed and presented for transfer, from each such Shareholder. (d) Distributions With Respect to Unexchanged Shares. No dividends or ------------------------------------------------ other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date -8- after the Effective Time will be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby until the holder of record of such Certificate shall surrender such Certificate. Subject to applicable law, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock. (e) Transfers of Ownership. If any certificate for shares of Parent ---------------------- Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will have paid to Parent or any agent designated by it any transfer or other taxes required by reason of the issuance of a certificate for shares of Parent Common Stock in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of Parent or any agent designated by it that such tax has been paid or is not payable. (f) No Liability. Notwithstanding anything to the contrary in this ------------ Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party hereto shall be liable to a holder of shares of Parent Common Stock or Company Capital Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. 1.9 No Further Ownership Rights in Company Capital Stock. All shares of ---------------------------------------------------- Parent Common Stock issued upon the surrender for exchange of shares of Company Capital Stock in accordance with the terms hereof (including any cash paid in respect thereof) shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Capital Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Capital Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I. 1.10 Lost, Stolen or Destroyed Certificates. In the event any -------------------------------------- certificates evidencing shares of Company Capital Stock shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed certificates, upon the making of an affidavit of that fact by the holder thereof, such shares of Parent Common Stock and cash for fractional shares, if any, as may be required pursuant to Section 1.6; provided, however, that Parent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent or the Exchange Agent with respect to the certificates alleged to have been lost, stolen or destroyed. 1.11 Tax and Accounting Consequences. It is intended by the parties ------------------------------- hereto that the Merger shall (i) constitute a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and ---- (ii) be accounted for financial reporting purposes as a purchase. The parties to this Agreement hereby adopt this Agreement as a "plan of reorganization" within the meaning of Sections -9- 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. No party to this Agreement shall take any action inconsistent with such treatment. 1.12 Taking of Necessary Action; Further Action. If, at any time after ------------------------------------------ the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action. ARTICLE II REPRESENTATIONS OF THE COMPANY The Company hereby makes the following representations to Parent and Merger Sub, subject to such exceptions as are specifically disclosed in the disclosure schedules (referencing the appropriate section number) supplied by the Company to Parent (the "Company Schedules") and dated as of the date hereof. Any ----------------- information disclosed on the Company Schedules under any section number set forth therein shall be deemed to be disclosed and incorporated into any other section under the Company Schedules where such disclosure would on its face reasonably be deemed to apply. 2.1 Organization of the Company. The Company is a corporation duly --------------------------- organized, validly existing and in good standing under the laws of the State of California. The Company has the corporate power to own its properties and to carry on its business as now being conducted. The Company is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the business, assets (including intangible assets), financial condition or results of operations of the Company; provided, however, that in no event shall any of the following constitute a Material Adverse Effect: (i) any effects, changes, events, circumstances or conditions (including, without limitation, litigation, delays in customer orders, a reduction in sales, a disruption in business relationships or a loss of employees) resulting from the announcement or pendency of any of the transactions contemplated by this Agreement; and (ii) any effects, changes, events, circumstances or conditions taken by the Company that were necessary for the Company to comply with the terms of this Agreement (hereinafter a material adverse effect on the business, assets (including intangible assets), financial condition or results of operations of the Company, as modified by the proviso contained in this sentence is referred to as a "Material Adverse Effect"). The Company has delivered a true, correct and - ------------------------ complete copy of its Articles of Incorporation and Bylaws, each as amended to date, to Parent. 2.2 Company Capital Structure. ------------------------- (a) The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock, of which 4,802,394 shares are issued and outstanding, and 21,550,772 shares of Company Preferred Stock. The authorized Company Preferred Stock consists of 2,500,000 shares of Series A Preferred, all of which are issued and outstanding as of the date of this Agreement, 5,327,693 shares of Series B Preferred, all of which are issued and outstanding as of the date of this Agreement, 1,573,029 shares -10- of Series B-1 Preferred, all of which are issued and outstanding as of the date of this Agreement, 5,150,000 shares of Series C Preferred, of which 5,056,108 shares are issued and outstanding as of the date of this Agreement and 7,000,000 shares of Series D Preferred Stock, of which 6,727,614 shares are issued and outstanding as of the date of this Agreement. The Company Capital Stock is held by the persons in the amounts set forth on Schedule 2.2(a). All outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Articles of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or by which it is bound. (b) The Company has reserved 4,500,000 shares of Common Stock for issuance to employees and consultants pursuant to the Option Plan, of which 3,460,964 shares are subject to outstanding, unexercised options as of the date of this Agreement and 248,643 shares remain available for future grant as of the date of this Agreement. Schedule 2.2(b) sets forth for each Company Option outstanding as of the date of this Agreement the name of the holder of such option, the domicile address of such holder, the number of shares of Common Stock subject to such option, the exercise price of such option and the vesting schedule for such option, including the extent vested to date and whether the exercisability of such option will be accelerated and become exercisable by the transactions contemplated by this Agreement. Except for the Company Options described in Schedule 2.2(b), as of the date of this Agreement there are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which the Company is a party or by which it is bound obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company. Except for the Company Options described in Schedule 2.2(b), as of the date of this Agreement, there are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which the Company is a party or by which it is bound obligating the Company to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. The holders of Company Options have been or will be given, or shall have properly waived, any required notice prior to the Merger and all such rights will be terminated at or prior to the Effective Time. As a result of the Merger, Parent will be the record and sole beneficial owner of all Company Capital Stock and rights to acquire or receive Company Capital Stock. 2.3 Subsidiaries. The Company does not have and has never had any ------------ subsidiaries or affiliated companies and does not otherwise own and has never otherwise owned any shares of capital stock or any interest in, or control, directly or indirectly, any other corporation, partnership, association, joint venture or other business entity. 2.4 Authority. Subject only to the approval of the Merger and this --------- Agreement by the Shareholders, the Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The vote required of the Shareholders to duly approve the Merger and this Agreement is a majority of the outstanding shares of Company Common Stock and a majority of the outstanding shares of Company Preferred. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject only to the approval of the Merger by the Shareholders. The Company's Board of Directors has unanimously approved the Merger and this Agreement. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. Except as set -11- forth on Schedule 2.4, subject only to the approval of the Merger and this Agreement by the Shareholders, the execution and delivery of this Agreement by the Company does not, and, as of the Effective Time, the performance by the Company of its obligations under this Agreement will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict") (i) any provision of the Articles of Incorporation or Bylaws of the -------- Company or (ii) any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or its properties or assets. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other federal, state, county, local or foreign governmental authority, instrumentality, agency or commission ("Governmental Entity") or any ------------------- third party (so as not to trigger any Conflict), is required at or prior to the Effective Time by or with respect to the Company in connection with the Company's execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) the filing of the Agreement of Merger with the California Secretary of State, (ii) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, (iii) expiration or early termination of the applicable waiting period under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and ------- (iv) such other consents, waivers, authorizations, filings, approvals and registrations which are set forth on Schedule 2.4. 2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's ---------------------------- audited balance sheet as of December 31, 1998 (the "Balance Sheet") and the ------------- related audited statements of operations and cash flows for the twelve-month period then ended and the Company's unaudited balance sheet dated as of March 31, 1999 and the unaudited statements of operations and cash flows for the three-month period ended March 31, 1999 (collectively, the "Company ------- Financials"). The Company Financials have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a basis consistent ---- throughout the periods indicated and consistent with each other. The Company Financials present fairly the financial condition and operating results of the Company as of the dates and during the periods indicated therein, subject, in the case of the unaudited financial statements, to the absence of footnotes normal year-end adjustments, which will not be material in amount or significance. 2.6 No Undisclosed Liabilities. Other than (i) as set forth on the -------------------------- Balance Sheet or (ii) as has arisen in the ordinary course of the Company's business since December 31, 1998, consistent with past practices, the Company does not have any liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles) which either individually or in the aggregate exceeds $125,000 (it being understood that the representations contained in this Section 2.6 are not intended to expand the scope of any representation (including the representation contained in Section 2.11(m)) contained elsewhere in this Agreement). 2.7 No Changes. From March 31, 1999 to the date of this Agreement, there ---------- has not been, occurred or arisen any: -12- (a) transaction by the Company except in the ordinary course of business and consistent with past practices; (b) amendments or changes to the Articles of Incorporation or Bylaws of the Company; (c) capital expenditure or commitment by the Company of $100,000 in any individual case or $500,000 in the aggregate; (d) destruction of, damage to or loss of any material assets, business or customer of the Company (whether or not covered by insurance); (e) labor trouble or claim of wrongful discharge or other unlawful labor practice; (f) change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by the Company; (g) revaluation by the Company of any of its assets; (h) declaration, setting aside or payment of a dividend or other distribution with respect to the capital stock of the Company, or any direct or indirect redemption, purchase or other acquisition by the Company of any of its capital stock; (i) sale, lease, license or other disposition of any of the assets or properties of the Company, except in the ordinary course of business and consistent with past practices; (j) amendment or termination of any material contract, agreement or license to which the Company is a party or by which it is bound; (k) loan by the Company to any person or entity, incurring by the Company of any indebtedness, guaranteeing by the Company of any indebtedness, issuance or sale of any debt securities of the Company or guaranteeing of any debt securities of others except for advances to employees for travel and business expenses in the ordinary course of business, consistent with past practices and except for advances under the Company's existing revolving credit agreement (which agreement has not been amended since December 31, 1998); (l) waiver or release of any right or claim of the Company, including any write-off or other compromise of any account receivable of the Company; (m) commencement or notice or to the Company's knowledge threat of commencement of any lawsuit or proceeding against or investigation of the Company or its affairs; (n) notice of any claim of ownership by a third party of the Company's Intellectual Property (as defined in Section 2.11 below) or of infringement by the Company of any third party's Intellectual Property rights; -13- (o) issuance or sale by the Company of any of its shares of capital stock, or securities exchangeable, convertible or exercisable therefor, or of any other of its securities, except for options granted in the ordinary course of business and Company Common Stock issued upon the exercise of options; (p) change in pricing or royalties charged by the Company to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Intellectual Property to the Company; (q) event or condition of any character that has or would be reasonably expected to have a Material Adverse Effect on the Company; or (r) agreement by the Company or any officer or employees thereof to do any of the things described in the preceding clauses (a) through (r) (other than negotiations with Parent and its representatives regarding the transactions contemplated by this Agreement). 2.8 Tax and Other Returns and Reports. --------------------------------- (a) Definition of Taxes. For the purposes of this Agreement, "Tax" ------------------- --- or, collectively, "Taxes", means any and all federal, state, local and foreign ----- taxes, assessments and other governmental charges, duties and impositions, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity. (b) Tax Returns and Audits. ---------------------- (i) The Company as of the Effective Time will have prepared and filed all required federal, state, local and foreign returns, estimates, information statements and reports ("Returns") relating to any and all Taxes concerning or attributable to the Company or its operations and such Returns are true and correct and have been completed in accordance with applicable law. (ii) The Company as of the Effective Time: (A) will have paid or accrued all Taxes it is required to pay or accrue and (B) will have withheld with respect to its employees all federal and state income taxes, FICA, FUTA and other Taxes required to be withheld. (iii) To the Company's knowledge, there is no Tax deficiency outstanding, proposed or assessed against the Company, nor has the Company executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax. (iv) To the Company's knowledge, no audit or other examination of any Return of the Company is in progress as of the date of this Agreement, nor has the Company been notified as of or prior to the date of this Agreement of any request for such an audit or other examination. -14- (v) The Company has no knowledge of any basis for the assertion of any liabilities for unpaid federal, state, local or foreign Taxes which have not been accrued or reserved against on the Balance Sheet whether asserted or unasserted, contingent or otherwise attributable to the Company, its assets or operations. (vi) The Company has provided to Parent copies of all federal and state income and all state sales and use Tax Returns for all periods since the date of Company's incorporation. (vii) There are (and as of immediately following the Closing there will be) no liens, pledges, charges, claims, security interests or other encumbrances of any sort ("Liens") on the assets of the Company relating to or ----- attributable to Taxes. (viii) The Company has no knowledge of any basis for the assertion of any claim relating or attributable to Taxes which, if adversely determined, would result in any Lien on the assets of the Company. (ix) None of the Company's assets are treated as "tax-exempt use property" within the meaning of Section 168(h) of the Code. (x) As of the Effective Time, there will not be any contract, agreement, plan or arrangement to which the Company is a party, including but not limited to the provisions of this Agreement, covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Section 280G or 162 of the Code. (xi) The Company has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company. (xii) The Company is not a party to a tax sharing or allocation agreement nor does the Company owe any amount under any such agreement. (xiii) The Company is not, and has not been at any time, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. 2.9 Restrictions on Business Activities. There is no agreement ----------------------------------- (noncompete or otherwise), commitment, judgment, injunction, order or decree to which the Company is a party or otherwise binding upon the Company which has had or reasonably could be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property (tangible or intangible) by the Company or the conduct of business by the Company. Without limiting the foregoing, the Company has not entered into any agreement under which the Company is restricted from selling, licensing or otherwise distributing any of its products to any class of customers, in any geographic area, during any period of time or in any segment of the market. -15- 2.10 Title to Properties; Absence of Liens and Encumbrances. ------------------------------------------------------ (a) The Company owns no real property, nor has it ever owned any real property. Schedule 2.10(a) sets forth a list of all real property currently, or at any time in the past, leased by the Company, the name of the lessor and the date of the lease and each amendment thereto and, with respect to any current lease, the aggregate annual rental and/or other fees payable under any such lease. All such current leases are in full force and effect and enforceable by the Company and there is not, under any of such leases, any existing default by the Company (or to the Company's knowledge, by the other party to such lease) or event of default (or event which with notice or lapse of time, or both, would constitute such a default). (b) The Company has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used or held for use in its business, free and clear of any Liens (as defined in Section 2.8(b)(vii)), except as reflected in the Company Financials and except for liens for Taxes not yet due and payable, municipal and zoning ordinances, easements for public utilities and such imperfections of title and encumbrances, if any, which are not material in character, amount or extent, and which do not materially detract from the value, or materially interfere with the present use, of the property subject thereto or affected thereby. 2.11 Intellectual Property. --------------------- (a) For the purposes of this Section 2.11, 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 and foreign patents and utility models and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries ("Patents); (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 embodying or evidencing any of the foregoing; (iii) all copyrights, copyrights registrations and applications therefor and all other rights corresponding thereto throughout the world ("Copyrights"); (iv) all mask works, mask work registrations and ---------- applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology ("Maskworks"); (v) --------- all industrial designs and any registrations and applications therefor throughout the world; (vi) all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world ("Trademarks"); (vii) all databases and data collections and all ---------- rights therein throughout the world; and (viii) all computer software including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded; (ix) all World Wide Web addresses, sites and domain names; and (x) any similar, corresponding or equivalent rights to any of the foregoing anywhere in the world. -16- "Business" means the business of the Company, including the manufacture, -------- use, licensing, distribution and sale of any products or technology or the provision of any services by the Company, as currently conducted, as conducted since the inception of the Company. "Company Intellectual Property" shall mean any Intellectual Property that ----------------------------- is owned by or licensed to the Company. "Registered Intellectual Property" shall mean all United States, -------------------------------- international and foreign: (i) Patents, including applications therefor; (ii) registered Trademarks, applications to register Trademarks, including intent-to-use applications, or other registrations or applications related to Trademarks; (iii) Copyrights registrations and applications to register Copyrights; (iv) Mask Work registrations and applications to register Mask Works; and (v) any other Company Intellectual Property owned by the Company that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public legal authority at any time. (b) Schedule 2.11(b) lists all Registered Intellectual Property in ---------------- whole or in part owned by or filed in the name of the Company (the "Company ------- Registered Intellectual Property"). - -------------------------------- (c) Each item of Company Intellectual Property owned by the Company, including all Company Registered Intellectual Property listed on Schedule 2.11(b), is free and clear of any encumbrance, including any lien or security interest other than (i) Liens for Taxes not yet due and payable and (ii) end- user licenses granted by the Company pursuant to its standard form of end-user license, a copy of which is attached to Schedule 2.11(c) (it being understood ---------------- that nothing in this subsection shall be deemed to constitute a representation or warranty as to any matter covered by subsection "(m)" or any other subsection of Section 2.11). (d) The Company owns exclusively, and has good title to, all copyrighted works that are software products of the Company or other works of authorship that the Company otherwise purports to own, except for those items owned by third parties or material portions of freeware set forth on Schedule -------- 2.11(d) and except for immaterial portions of freeware (which are not required - ------- to be listed on Schedule 2.11(d)) (it being understood that nothing in this subsection shall be deemed to constitute a representation or warranty as to any matter covered by subsection "(m)" or any other subsection of Section 2.11). (e) Except for end-user licenses granted by the Company pursuant to its standard form of end-user license, the Company has not transferred ownership of, or granted any license of or right to use, any Intellectual Property that is, or was, Company Intellectual Property, to any other person. (f) The Company Intellectual Property constitutes all the Intellectual Property used in and/or necessary to the conduct of the Business as currently conducted including (i) the making, using, selling, marketing, or importing of any product or device, (ii) the practice of any process, (iii) the offering or performance of any service, or (iv) the copying, display, performance, distribution, creation of derivative works of, or the exploitation of any device or work (it being understood that nothing in this subsection shall be deemed to constitute a representation or warranty as to any matter covered by subsection "(m)" or any other subsection of Section 2.11). -17- (g) The contracts, licenses and agreements listed on Schedule 2.11(g) ---------------- include all material contracts, licenses and agreements (other than object code end-user licenses available to the general public) pursuant to which any Person, including any Affiliate of Company, has licensed any Intellectual Property to the Company. (h) The contracts, licenses and agreements listed on Schedule 2.11(h) ---------------- include all material contracts, licenses and agreements pursuant to which the Company has licensed or transferred to any third person or any Affiliate of the Company any material Company Intellectual Property other than end-user licenses granted by the Company pursuant to its standard form of end-user license. (i) The consummation of the transactions contemplated by this Agreement will not cause or obligate the Company (i) to grant to any third party any rights or licenses with respect to any Intellectual Property of the Company, or (ii) pay any royalties or other amounts in excess of those being paid by the Company prior to the Closing. (j) Schedule 2.11(j) lists all agreements, licenses and contracts ---------------- pursuant to which Company has agreed to indemnify, hold harmless, or otherwise agree to be liable for any losses cost or damages of, a third party with respect to any Intellectual Property or product or service of Company. (k) As of the Closing Date, all material Company Intellectual Property, including any item thereof, will be fully, transferable, alienable or licensable by, the Company without restriction and without payment of any kind to any third party. (l) The consummation of the transactions contemplated by this Agreement will not result in the loss of, or otherwise adversely affect, any ownership rights of Company in any Company Intellectual Property or result in the breach or termination of any license, contract or agreement to which Company is a party respecting any material Company Intellectual Property. (m) To the Company's knowledge, the operation of the Business, including (i) the making, using, selling, marketing, or importing of any product or device, (ii) the practice of any process, (iii) the offering or performance of any service, or (iv) the copying, distribution, performance, display, creation of derivative works of, or the exploitation of any device or work, does not infringe or misappropriate the Intellectual Property of any person, violate the rights of any person, or constitute unfair competition or trade practices under the laws of any jurisdiction, and the Company has not received written notice from any person claiming that such operation or any act, product, technology or service of the Business infringes or misappropriates the Intellectual Property of any person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor is the Company aware of any factual basis therefor). To the Company's knowledge, the (i) making, using, selling, marketing, or importing of any product or device currently under development by the Company, (ii) practice of any process currently under development by the Company, (iii) offering or performance of any service currently under development by the Company, or (iv) copying, distribution, performance, display, creation of derivative works of, or the exploitation of any device or work currently under development by the Company, does not, and will not when done in connection with the Business as conducted in substantially the same manner following the Closing by Buyer, infringe or misappropriate the Intellectual Property of any person, violate the rights of any person, or constitute unfair competition or trade practices under the laws of any jurisdiction, and the Company has not -18- received written notice from any person claiming that such operation or any act, product, technology or service misappropriates the Intellectual Property of any person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor is the Company aware of any basis therefor). The foregoing sentence shall not apply to any product, device, process, service or work that was developed by the Company after the date of this Agreement. Without limiting the foregoing, the Company has not misappropriated the trade secrets of, or, to the Company's knowledge, infringed the Copyright or Maskwork of any third party. (n) There are no contracts, licenses or agreements between the Company and any other person with respect to Company Intellectual Property under which there is any litigation or other legal proceeding known to the Company regarding the scope of such agreement, or performance under such contract, license or agreement including with respect to any payments to be made or received by the Company thereunder. (o) To the knowledge of the Company, no person is infringing or misappropriating any Company Intellectual Property owned by the Company. (p) No Company Intellectual Property owned by the Company and, to the Company's knowledge without investigation, no product, technology or service of the Business, is subject to any proceeding or outstanding decree, order, judgment, or stipulation that restricts in any manner the use, transfer or licensing thereof by the Company or may affect the validity, use or enforceability of such Company Intellectual Property. (q) Schedule 2.11(q) lists all action, including the payment of any ---------------- fees and response to Patent Office actions, that must, or should be performed by, or on behalf of, the Company in the ninety-day period following the Closing Date, with respect to any application for, perfection of, preservation of, or continuation of any Patent rights of Company with respect to any Company Intellectual Property. (r) The Company has not claimed small business status, or other particular status in the application for any Registered Company Intellectual Property which claim of status was not at the time made, or which has since become inaccurate or false or that will no longer be true and accurate as a result of the Closing. (s) Except for those items owned by third parties or material portions of freeware set forth on Schedule 2.11(s) and except for immaterial portions of ---------------- freeware (which are not required to be listed on Schedule 2.11(s), all software products of the Company were written and created solely by either (i) employees of the Company acting within the scope of their employment or (ii) by third parties who have validly assigned all of their rights, including Intellectual Property rights in such products to the Company, and no third party owns any Intellectual Property rights to such software products. (t) The Company has no knowledge of any facts or circumstances that would render any Company Intellectual Property owned by the Company invalid or unenforceable. Without limiting the foregoing, Company knows of no information, materials, facts, or circumstances, including any information or fact that would constitute prior art, that would render any of the Company Registered Intellectual Property invalid or unenforceable, or would adversely effect any pending application for any Company Registered Intellectual Property and the Company has not misrepresented, or failed to disclose, and is not aware of any -19- misrepresentation or failure to disclose, any fact or circumstances in any application for any Company Register Intellectual Property that would constitute fraud or a material misrepresentation with respect to such application or that would otherwise effect the validity or enforceability of any Company Registered Intellectual Property. (u) The Company has taken all steps reasonable and customary under the circumstances to protect the confidentiality and trade secret status of any material confidential information of the Company and knows of no instance in which a third party has had access to the material confidential information of the Company for which it could be claimed that the Company has failed to protect the confidentiality of any material Confidential Information of the Company. (v) All employees of the Company who have contributed to the development of the Company Intellectual Property owned by the Company have entered into valid and binding agreements with the company sufficient to vest title in the Company of all Intellectual Property created by such employee in the scope of his or her employment with the Company. 2.12 Agreements, Contracts and Commitments. As of the date of this ------------------------------------- Agreement, the Company is not a party to nor is it bound by: (i) any collective bargaining agreements, (ii) any agreements or arrangements that contain any severance pay or similar post-employment liabilities or obligations, (iii) any bonus, deferred compensation, pension, profit sharing or retirement plans, or any other employee benefit plans or arrangements, (iv) any employment or consulting agreement with an employee or individual consultant or salesperson or consulting or sales agreement with a firm or other organization, (v) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, (vi) any fidelity or surety bond or completion bond, (vii) any lease of personal property involving annual payments by the Company in any individual case in excess of $50,000, (viii) other than pursuant to the Company's standard end-user license agreement (which is attached to the disclosure schedule), any agreement pursuant to which the Company is obligated to provide indemnification or guaranty the indebtedness or liabilities of third parties, -20- (ix) any agreement containing any covenant limiting the freedom of the Company to engage in any line of business or to compete with any person, (x) any agreement relating to capital expenditures and involving payments required to be made by the Company after the date of this Agreement in excess of $100,000, (xi) any agreement relating to the disposition or acquisition by the Company after the date of this Agreement of assets or any interest in any business enterprise outside the ordinary course of the Company's business, (xii) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money by or extension of credit by or to the Company, including guaranties referred to in clause (viii) hereof, (xiii) any purchase order or contract for the purchase of raw materials (not including in-license of technology) involving $50,000 or more, (xiv) any construction contracts, (xv) any distribution, joint marketing or development agreement which cannot be canceled without penalty upon notice of sixty (60) days or less, (xvi) any agreement pursuant to which the Company has granted or may grant in the future, to any party a source-code license or option or other right to use or acquire source-code, or (xvii) any other agreement that involves payments by the Company of $100,000 or more; or (xviii) any other agreement that is not cancelable without penalty of $25,000 or more within thirty (30) days. The Company is not in breach, violation or default under, and the Company has not between December 31, 1998 and the date of this Agreement received any written notice that it has breached, violated or defaulted under, any of the terms or conditions of any agreement, contract or commitment required to be set forth on Schedule 2.12 or Schedule 2.11 (any such agreement, contract or commitment, a "Contract") (except for notices relating to breaches, violations -------- or defaults that have been cured or corrected in all material respects). Each Contract is in full force and effect and is not subject to any default thereunder of which the Company has knowledge by any party obligated to the Company pursuant thereto. Schedule 2.12(c) identifies each Contract that requires a consent, waiver or approval to preserve all rights of, and benefits to, the Surviving Corporation under such Contract as a result of entering into this Agreement or effecting the Merger or the other transactions contemplated by this Agreement (each a "Required Consent"). ---------------- 2.13 Interested Party Transactions. To the Company's knowledge, no ----------------------------- officer or director of the Company (nor any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an economic interest), has or has had, directly or -21- indirectly, (i) an economic interest in any entity which furnished or sold, or furnishes or sells, services or products that the Company furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in any entity that purchases from, or sells or furnishes to, the Company, any goods or services or (iii) a beneficial interest in any contract or agreement set forth in Schedule 2.12(a) or Schedule 2.11; provided, that (x) ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an "economic interest in any entity" for purposes of this Section 2.13. 2.14 Compliance with Laws. The Company has complied in all material -------------------- respects with, is not in material violation of, and has not received any notices of violation with respect to, any foreign, federal, state or local statute, law or regulation. 2.15 Litigation. There is no action, suit or proceeding of any nature ---------- pending or to the Company's knowledge threatened against the Company, its properties or any of its officers or directors, in their respective capacities as such. To the Company's knowledge, there is no investigation pending or threatened against the Company, its properties or any of its officers or directors by or before any governmental entity. No governmental entity has at any time challenged or questioned the legal right of the Company to manufacture, offer or sell any of its products in the present manner or style thereof. 2.16 Insurance. With respect to the insurance policies and fidelity bonds --------- covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company, there is no claim by the Company pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). The Company has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. 2.17 Minute Books. The minute books of the Company provided to counsel ------------ for Parent are the only minute books of the Company and contain a reasonably accurate summary of all meetings of directors (or committees thereof) and shareholders or actions by written consent since the time of incorporation of the Company. 2.18 Environmental Matters. --------------------- (a) Hazardous Material. The Company has not: (i) operated any ------------------ underground storage tanks, and has no knowledge of the existence, at any time, of any underground storage tank (or related piping or pumps), at any property that the Company has at any time owned, operated, occupied or leased; or (ii) released any amount of any substance that has been designated by any Governmental Entity or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, 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, the Federal Water Pollution Control Act, as amended, the Clean Air Act, as amended, and the regulations promulgated pursuant to said laws, (a "Hazardous Material"). No ------------------ Hazardous Materials are present, as a result of the deliberate actions or omissions of the -22- Company, or, to the Company's knowledge, as a result of any actions of any third party or otherwise, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that the Company has at any time owned, operated, occupied or leased. (b) Hazardous Materials Activities. The Company has not transported, ------------------------------ stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any law in effect on or before the Closing Date, nor has the Company disposed of, transported, sold, or manufactured any product containing a Hazardous Material (any or all of the foregoing being collectively referred to as "Hazardous Materials Activities") in ------------------------------ violation of any rule, regulation, treaty or statute promulgated by any Governmental Entity in effect prior to or as of the date hereof to prohibit, regulate or control Hazardous Materials or any Hazardous Material Activity. (c) Permits. The Company currently holds all environmental approvals, ------- permits, licenses, clearances and consents (the "Environmental Permits") --------------------- necessary for the conduct of the Company's Hazardous Material Activities and other businesses of the Company as such activities and businesses are currently being conducted. (d) Environmental Liabilities. No action, proceeding, revocation ------------------------- proceeding, amendment procedure, writ, injunction or claim is pending, or to the Company's knowledge, threatened concerning any Environmental Permit, Hazardous Material or any Hazardous Materials Activities of the Company. The Company is not aware of any fact or circumstance which would reasonably be likely to involve the Company in any environmental litigation or impose upon the Company any environmental liability. 2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has not ------------------------------------------------ incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. Schedule 2.19 sets forth the principal terms and conditions of any agreement, written or oral, with respect to such fees. Schedule 2.19 sets forth the Company's reasonable estimate as of the date of this Agreement of all Third Party Expenses (as defined in Section 5.4) expected to be incurred by the Company in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby. 2.20 Employee Matters and Benefit Plans. ---------------------------------- (a) Definitions. With the exception of the definition of "Affiliate" ----------- set forth in Section 2.20(a)(i) below (such definition shall only apply to this Section 2.20), 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 the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder; (ii) "ERISA" shall mean the Employee Retirement Income ----- Security Act of 1974, as amended; -23- (iii) "Company Employee Plan" shall refer to any plan, program, --------------------- policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, performance awards, stock or stock- related awards, fringe benefits or other employee benefits or remuneration of any kind, whether formal or informal, funded or unfunded and whether or not legally binding, including without limitation, each "employee benefit plan", within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any Affiliate for the benefit of any "Employee" (as defined below), and pursuant to which the Company or any Affiliate has or would reasonably be expected to have any material liability contingent or otherwise; (iv) "Employee" shall mean any current, former, or retired -------- employee, officer, or director of the Company or any Affiliate; (v) "Employee Agreement" shall refer to each management, ------------------ employment, severance, consulting, relocation, repatriation, expatriation, visa, work permit or similar agreement or contract between the Company or any Affiliate and any Employee or consultant; (vi) "IRS" shall mean the Internal Revenue Service --- (vii) "Multiemployer Plan" shall mean any "Pension Plan" (as ------------------ defined below) which is a "multiemployer plan", as defined in Section 3(37) of ERISA; and (viii) "Pension Plan" shall refer to each Company Employee Plan ------------ which is an "employee pension benefit plan", within the meaning of Section 3(2) of ERISA. (b) Schedule. Schedule 2.20(b) contains an accurate and complete list -------- of each Company Employee Plan and each Employee Agreement in existence on or prior to the date of this Agreement, together with a schedule of all liabilities, whether or not accrued, under each such Company Employee Plan or Employee Agreement except for liabilities under consulting contracts previously supplied to Parent. The Company does not have any plan or commitment, whether legally binding or not, to establish any new Company Employee Plan or Employee Agreement, to modify any Company Employee Plan or Employee Agreement (except to the extent required by law or to conform any such Company Employee Plan or Employee Agreement to the requirements of any applicable law, in each case as previously disclosed to Parent in writing, or as required by this Agreement), or to enter into any Company Employee Plan or Employee Agreement, nor does it have any intention or commitment to do any of the foregoing. (c) Documents. The Company has provided to Parent (i) correct and --------- complete copies of all documents embodying or relating to each Company Employee Plan and each Employee Agreement including all amendments thereto and written interpretations thereof; (ii) the most recent annual actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the three most recent annual reports (Series 5500 and all schedules thereto), if any, required under ERISA or the Code in connection with each Company Employee Plan or related trust; (iv) if the Company Employee Plan is funded, the most recent annual and periodic accounting of Company Employee Plan assets; (v) the most recent summary plan description together with the most recent summary of material modifications, if any, required under ERISA with respect to each Company Employee Plan; (vi) all IRS determination letters and rulings relating to Company Employee Plans and copies of all applications and correspondence to or from the IRS or the -24- Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all --- communications material to any Employee or Employees relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any material liability to the Company; and (viii) all registration statements and prospectuses prepared in connection with each Company Employee Plan. (d) Employee Plan Compliance. (i) The Company has performed in all ------------------------ material respects all obligations required to be performed by it under each Company Employee Plan and each Company Employee Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA or the Code; (ii) no "prohibited transaction", within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any Company Employee Plan; (iii) there are no actions, suits or claims pending, or, to the knowledge of the Company, threatened or anticipated (other than routine claims for benefits) against any Company Employee Plan or against the assets of any Company Employee Plan; and (iv) each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to the Company, Parent or any of its Affiliates (other than ordinary administration expenses and other liabilities typically incurred in a termination event); (v) there are no inquiries or proceedings pending or, to the knowledge of the Company, threatened by the IRS or DOL with respect to any Company Employee Plan; and (vi) neither the Company nor any Affiliate is subject to any penalty or tax with respect to any Company Employee Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code. (e) Pension Plans. The Company does not now, nor has it ever, ------------- maintained, established, sponsored, participated in, or contributed to, any Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. (f) Multiemployer Plans. At no time has the Company contributed to or ------------------- been requested to contribute to any Multiemployer Plan. (g) No Post-Employment Obligations. No Company Employee Plan ------------------------------ provides, or has any liability to provide, life insurance, medical or other employee benefits to any Employee upon his or her retirement or termination of employment for any reason, except as may be required by statute, and the Company has never represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) would be provided with life insurance, medical or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by statute. (h) Effect of Transaction. --------------------- (i) The execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Plan, Employee Agreement, trust or loan as in effect prior to the Closing that will or could reasonably be expected to result in any payment (whether of severance pay -25- or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee. (ii) No payment or benefit which will or may be made by the Company or Parent or any of their respective affiliates in connection with the Merger with respect to any Employee will be characterized as an "excess parachute payment", within the meaning of Section 280G(b)(1) of the Code. (i) Employment Matters. The Company (i) is in compliance in all ------------------ material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees; (ii) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Employees; (iii) is not liable for any 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 payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). (j) Labor. No work stoppage or labor strike against the Company is ----- pending or, to the knowledge of the Company, threatened. The Company is not involved in or, to the knowledge of the Company, threatened with, any labor dispute, grievance, or litigation relating to labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in liability to the Company. The Company has not engaged in any unfair labor practices within the meaning of the National Labor Relations Act which would, individually or in the aggregate, directly or indirectly result in a liability to the Company. The Company is not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Company. (k) Schedule 2.20 sets forth as of the date of this Agreement, the salary or other compensation payable or to become payable by the Company to any of its officers, directors or employees or the commitment or obligation of any kind for the payment, by the Company, of a bonus or other additional salary or compensation to any such person except as otherwise contemplated by this Agreement; 2.2 Year 2000 Compliance. All computer-related products and services of -------------------- the Company and each of its subsidiaries fully comply with the Year 2000 Qualification Requirements. "Year 2000 Qualification Requirements" means that all computer-related products of the Company and each of its subsidiaries (i) have been reviewed to confirm that they store, process (including sorting and performing mathematical operations, calculations and computations), input and output data containing date and information correctly regardless of whether the date contains dates and times before, on or after January 1, 2000, (ii) with the exception of those items set forth on Schedule 2.21, 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, (iii) with the exception of those items set forth on Schedule 2.21, accurately manage ------------- and manipulate data involving dates and times, including single century formulas and multi-century formulas, and will not cause -26- an abnormal ending scenario within the application or generate incorrect values or invalid results involving such dates, (iv) with the exception of those items set forth on Schedule 2.21, accurately process any date rollover, and (v) with ------------- the exception of those items set forth on Schedule 2.21, accept and respond to ------------- two-digit year date input in a manner that resolves any ambiguities as to the century. No representation is made, however, with respect to any failure of the Company's products or services to meet the Year 2000 Qualification Requirements due to (a) mistakes made by the user in inputting the date or date data, (b) use of the Company's products or services on any operating system or hardware platform other than the platforms that such products or services were designed to run on, (c) any errors or other defects in the operating system or hardware platform, or other software or hardware products, used with the Company's products or services, or (d) use of the Company's products or services for any purpose other than the purposes for which such products or services are intended to be used as reflected in the user manuals provided by the Company along with such products and services. "Constituent Component" means all software (including operating systems, programs, packages and utilities), firmware, hardware, networking components, and peripherals provided as part of the configuration. To the Company's knowledge, all of the Company's internal computer systems and each Constituent Component (as defined above) of those systems fully comply with the Year 2000 System Qualification Requirements. "Year 2000 System Qualification Requirements" means that the internal computer systems and each Constituent Component (as defined above) of those systems have been reviewed to confirm that they store, process (including sorting and performing mathematical operations, calculations and computations), input and output data containing date and information correctly regardless of whether the date contains dates and times before, on or after January 1, 2000. 2.2 Representations Complete. To the Company's knowledge, none of the ------------------------ representations or warranties made by the Company (as modified by the Company Schedules), nor any statement made in any Schedule or certificate furnished by the Company pursuant to this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Parent and Merger Sub represent and warrant to the Company as follows: 3.1 Organization, Standing and Power. Parent is a corporation duly -------------------------------- organized, validly existing and in good standing under the laws of the State of California. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of California. Each of Parent and Merger Sub has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the ability of Parent and Merger Sub to consummate the transactions contemplated hereby. 3.2 Authority. Parent and Merger Sub have all requisite corporate power --------- and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by -27- all necessary corporate action on the part of Parent and Merger Sub. This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes the valid and binding obligations of Parent and Merger Sub, enforceable in accordance with its terms. The execution and delivery of this Agreement by Parent and Merger Sub does not, and, as of the Effective Time, the performance by Parent and Merger Sub of their obligations under this Agreement will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict") (i) any provision of the Articles -------- of Incorporation or Bylaws of Parent or Merger Sub or (ii) any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or Merger Sub or their properties or assets. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any third party (so as not to trigger any Conflict), is required at or prior to the Effective Time by or with respect to the Parent and Merger Sub in connection with the execution and delivery of this Agreement by Parent and Merger Sub or the consummation of the transactions contemplated hereby, except for (i) the filing of the Agreement of Merger with the California Secretary of State, (ii) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, (iii) expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iv) receipt of the California Permit (as defined ------- in Section 5.1 below). 3.3 Capital Structure. ----------------- (a) The authorized stock of Parent consists of 150,000,000 shares of Common Stock, of which 38,124,532 shares were issued and outstanding as of June 7, 1999, and 5,000,000 shares of Preferred Stock, none of which is issued or outstanding as of June 7, 1999. The authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock, 1,000 shares of which, as of the date hereof, are issued and outstanding and are held by Parent. All such shares have been duly authorized, and all such issued and outstanding shares have been validly issued, are fully paid and nonassessable and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof. (b) Parent has reserved 12,288,741 shares of Common Stock for issuance to employees and consultants pursuant to the 1998 Stock Option Plan ("Parent ------ Option Plan"), of which 9,728,283 shares are subject to outstanding, unexercised - ----------- options as of March 31, 1999. Parent has issued warrants that may be exercised for 2,782,288 shares of Parent Common Stock as of March 31, 1999. Except for the Parent Options and warrants described in Schedule 3.3(b), as of March 31, 1999, there were no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which Parent is a party or by which it is bound obligating the Parent to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. (c) The shares of Parent Common Stock to be issued pursuant to the Merger will, when issued in accordance with the terms of this Agreement, be duly authorized, validly issued, fully paid and nonassessable. 3.4 SEC Documents; Parent Financial Statements. Parent has furnished or ------------------------------------------ made available to the Company true and complete copies of all reports or registration statements filed by it with the U.S. -28- Securities and Exchange Commission (the "SEC")for all periods subsequent to --- March 31, 1998, all in the form so filed (all of the foregoing being collectively referred to as the "SEC Documents"). As of their respective filing ------------- dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading, except to the extent corrected by a subsequently filed document with the SEC. The financial statements of Parent, including the notes thereto, included in the SEC Documents (the "Parent Financial Statements") comply as to form in all --------------------------- material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles consistently applied (except as may be indicated in the notes thereto) and present fairly the consolidated financial position of Parent at the dates thereof and of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal audit adjustments). 3.5 Merger Sub. Merger Sub has been formed solely for the purpose of ---------- executing and delivering this Agreement and consummating the transactions contemplated hereby. Since the date of its incorporation, Merger Sub has neither engaged in or transacted any business or activity of any nature whatsoever other than activities related to its corporate organization and the execution and delivery of this Agreement. Merger Sub has no assets or properties or debts, liabilities or obligations of any kind whatsoever, and other than this Agreement, is not a party to any contract, agreement or undertaking of any nature. The authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock, of which 1,000 shares are issued and outstanding. All of the issued and outstanding shares of Merger Sub Common Stock are owned of record and beneficially by Parent, free and clear of any encumbrance. ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME 4.1 Conduct of Business of the Company. During the period from the date ---------------------------------- of this Agreement and continuing until the earlier of (i) the termination of this Agreement and (ii) the Effective Time, the Company agrees (except to the extent that Parent shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed, except as contemplated by this Agreement) to carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, to use all reasonable efforts consistent with past practice to pay its debts and Taxes when due and to pay or perform other obligations when due, and, to the extent consistent with such business, to use all reasonable efforts consistent with past practice and policies to preserve intact its present business organization, keep available the services of its present officers and key employees and preserve their relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, all with the goal of preserving unimpaired its goodwill and ongoing businesses at the Effective Time. The Company shall use all reasonable efforts to promptly notify Parent of any event or occurrence or emergency not in the ordinary course of its business, and any material event involving the Company or its business. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement and the Effective Time, except as expressly contemplated by this Agreement or disclosed in Schedule 4.1, the -29- Company shall not, without the prior written consent of Parent during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement and the Effective Time (which consent shall not be unreasonably withheld or delayed): (a) Transfer to any person or entity any rights to the Company Intellectual Property (other than pursuant to end-user licenses granted by the Company pursuant to its standard form of end-user license or end-user licenses granted by the Company consistent with past practice); (b) Enter into or amend any agreements pursuant to which any other party is granted marketing, distribution or similar rights of any type or scope with respect to any products of the Company; (c) Amend or otherwise modify (or agree to do so), except in the ordinary course of business, or violate the terms of, in a manner that would result in material liability to the Company, any of the agreements set forth or described in the Company Schedules; (d) Commence any litigation; (e) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock (or options, warrants or other rights exercisable therefor) other than repurchases made in accordance with agreements referred to on the Company Schedules; (f) Other than (1) repurchases made in accordance with agreements referred to on the Company Schedules, (2) the granting of stock options in the ordinary course of business, consistent with past practice, or (3) the issuance of shares of Company Capital Stock upon exercise or conversion of presently outstanding Company Options, Company Options granted in the future in accordance with this Section 4.1, or currently outstanding shares of Company Preferred Stock, issue, grant, deliver or sell or authorize or propose the issuance, grant, delivery or sale of, or purchase or propose the purchase of, any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities; (g) Cause or permit any amendments to its Articles of Incorporation or Bylaws; (h) Acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof; (i) Acquire or agree to acquire any assets in an amount in excess of $25,000 in the case of a single transaction or in excess of $125,000 in the aggregate in any 30-day period; (j) Sell, lease, license or otherwise dispose of any of its properties or assets, except in the ordinary course of business; -30- (k) Except pursuant to its existing credit agreements with Silicon Valley Bank, incur any indebtedness for borrowed money or guarantee any such indebtedness outside the ordinary course of business or issue or sell any debt securities of the Company or guarantee any debt securities of others; (l) Grant any severance or termination pay (i) to any director or officer or (ii) to any other employee, except payments made pursuant to standard written agreements previously disclosed to Parent on the Company Disclosure Schedules; (m) Adopt or amend any employee benefit plan, or enter into any employment contract, pay or agree to pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates of its employees or, except in the ordinary course of business consistent with past practices, extend employment offers; (n) Revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (o) Pay, discharge or satisfy, in an amount in excess of $25,000 (in any one case) or $125,000 (in the aggregate), any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business of: (A) liabilities reflected or reserved against in the Company Financial Statements (or the notes thereto), (B) liabilities that arose or arise in the ordinary course of business consistent with past practice since March 31, 1999, (C) expenses consistent with the provisions of this Agreement incurred in connection with any transaction contemplated and permitted hereby, or (D) liabilities or obligations that are identified in the agreements referred to in the Company Schedules, provided that the Company give prior notice to Parent of any payment under this Section 4.1(o)(D); (p) Make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (q) Enter into any strategic alliance, development or joint marketing agreement; or (r) Take, or agree in writing or otherwise to take, any of the actions described in Sections 4.1(a) through (q) above, or any other action that would prevent the Company from performing or cause the Company not to perform its covenants hereunder. 4.2 No Solicitation. Until the earlier of (i) the Effective Time and (ii) --------------- the date of termination of this Agreement pursuant to the provisions of Section 8.1 hereof, the Company will not (nor will the Company permit any of the Company's officers, directors, agents, representatives or affiliates to) directly or indirectly, take any of the following actions with any party other than Parent and its designees: (a) solicit, conduct discussions with or engage in negotiations with any person, relating to the possible acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise) or any material portion of its capital stock or assets, (b) provide information with respect to it to any person, other than Parent, relating to the possible acquisition of the Company (whether by way of merger, purchase of -31- capital stock, purchase of assets or otherwise) or any material portion of its capital stock or assets, (c) enter into an agreement with any person, other than Parent, providing for the acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise) or any material portion of its capital stock or assets or (d) make or authorize any statement, recommendation or solicitation in support of any possible acquisition of the Company (whether by way of merger, purchase of capital stock, purchase of assets or otherwise) or any material portion of its capital stock or assets by any person, other than by Parent. In addition to the foregoing, if the Company receives prior to the Effective Time or the termination of this Agreement any offer or proposal relating to any of the above, the Company shall immediately notify Parent thereof, including information as to the identity of the offeror or the party making any such offer or proposal and the specific terms of such offer or proposal, as the case may be, and such other information related thereto as Parent may reasonably request. 4.3 Conduct of Business by Parent. Until the earlier of (i) the ----------------------------- Effective Time and (ii) the date of termination of this Agreement pursuant to the provisions of Section 8.1 hereof, Parent will not take any action that would materially delay the consummation of the transactions contemplated by this Agreement. ARTICLE V ADDITIONAL AGREEMENTS 5.1 California Permit; Shareholder Meeting. -------------------------------------- (i) As promptly as practicable (and in any event within ten business days) after the execution of this Agreement, Parent shall prepare the necessary documents and Parent shall apply to obtain a permit (a "California Permit") from ----------------- the California Commissioner of Corporations (after a hearing before such Department) pursuant to Section 25121 of the California Corporate Securities Law of 1968, so that the issuance of the Parent Common Stock in the Merger shall be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), by virtue of the exemption from registration contained in - --------------- Section 3(a)(10) thereof. The Company shall cooperate with, and provide information to, Parent in connection with Parent's application for the California Permit. The Company and Parent will respond to any comments from the California Commissioner of Corporations and use their reasonable best efforts to have the California Permit granted as soon as practicable after such filing. As promptly as practicable after the date of this Agreement, Parent shall prepare and make such filings as are required under applicable Blue Sky laws relating to the transactions contemplated by this Agreement. None of the information supplied by the Company to Parent in connection with the California Permit application or any other document prepared to comply with federal or state securities laws shall contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading (ii) As promptly as practicable after the receipt of a California Permit, the Company shall submit this Agreement and the transactions contemplated hereby, including without limitation the Merger, to the Company shareholders for approval and adoption as provided by the CGCL and the Company's Articles of Incorporation and Bylaws. The information submitted to the Shareholders shall be subject to review and approval by Parent and shall include information regarding the Company, the terms of -32- the Merger and this Agreement and the unanimous recommendation of the Board of Directors of the Company in favor of the Merger, this Agreement and the transactions contemplated hereby. (iii) If for any reason the California Permit is not issued or if the exemption provided by Section 3(a)(10) of the Securities Act is not available with respect to the issuance of the Parent Common Stock in connection with the Merger, then Parent shall as soon as practicable, prepare and file with the SEC a Form S-4 Registration Statement (the "Form S-4 Registration Statement") with respect to the issuance of the Parent Common Stock in connection with the Merger. Each of the Company and Parent shall use all reasonable efforts to have the Form S-4 Registration Statement declared effective under the Securities Act as promptly as practicable after such filing. The Company will use its reasonable efforts to cause the proxy statement included in the Form S-4 Registration Statement to be mailed to the Shareholders as promptly as practicable after the Form S-4 Registration Statement is declared effective under the Securities Act, and to call and hold a meeting of the Shareholders to vote on a proposal to adopt and approve this Agreement and the transactions contemplated hereby, including without limitation the Merger. 5.2 Access to Information. Subject to any applicable contractual --------------------- confidentiality obligations (which the Company shall use its reasonable efforts to cause to be waived) each party shall afford the others and its accountants, counsel and other representatives, reasonable access during normal business hours during the period prior to the Effective Time to (a) all of its properties, books, contracts, agreements and records, and (b) all other information concerning the business, properties and personnel (subject to restrictions imposed by applicable law) of it as the others may reasonably request. No information or knowledge obtained in any investigation pursuant to this Section 5.2 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Merger. 5.3 Confidentiality. Each of the parties hereto hereby agrees to and --------------- reaffirms the terms and provisions of the Mutual Confidential Disclosure Agreement between Parent and the Company dated as of March 5, 1999. 5.4 Expenses. Whether or not the Merger is consummated, all fees and -------- expenses incurred in connection with the Merger including, without limitation, all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties ("Third Party Expenses") incurred by a party in -------------------- connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, shall be the obligation of the respective party incurring such fees and expenses (it being understood that (a) Third Party Expenses of the Company will include, without limitation, all fees and expenses payable to Broadview International LLC and Cooley Godward LLP in connection with their representation of the Company with respect to the Merger, and (b) if the Closing occurs, the Third Party Expenses referred to in paragraph (a) of this sentence will be paid by Parent or the Surviving Corporation, and not by the Shareholders). 5.5 Public Disclosure. Upon execution and delivery of this Agreement by ----------------- the parties hereto, Parent and the Company shall release a jointly prepared announcement describing the Merger. Except as aforesaid, unless otherwise required by law (including, without limitation, securities laws) or, as to Parent, by the rules and regulations of the National Association of Securities Dealers, Inc., prior to the Effective Time, -33- no disclosure (whether or not in response to an inquiry) of the subject matter of this Agreement shall be made by any party hereto unless approved by Parent and the Company prior to release, provided that such approval shall not be unreasonably withheld. 5.6 Consents. The Company shall use its reasonable efforts to obtain the -------- consents, waivers and approvals under any of the Contracts identified on Schedule 2.12 as may be required in connection with the Merger. 5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to ----------------- Parent a properly executed statement in a form reasonably acceptable to Parent for purposes of satisfying Parent's obligations under Treasury Regulation Section 1.1445-2(c)(3). 5.8 Reasonable Efforts. Subject to the terms and conditions provided in ------------------ this Agreement, each of the parties hereto shall use its reasonable efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated hereby to obtain all necessary waivers, consents and approvals and to effect all necessary registrations and filings and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective the transactions contemplated by this Agreement for the purpose of securing to the parties hereto the benefits contemplated by this Agreement; provided that Parent shall not be required to agree to any divestiture by Parent or the Company or any of Parent's subsidiaries or affiliates of shares of capital stock or of any business, assets or property of Parent or its subsidiaries or affiliates or the Company or its affiliates material to Parent, in Parent's reasonable judgement, or the imposition of any material limitation on the ability of any of them to conduct their businesses or to own or exercise control of such assets, properties and capital stock. 5.9 Notification of Certain Matters. The Company shall use all ------------------------------- reasonable efforts to give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (i) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of the Company and Parent or Merger Sub, respectively, contained in this Agreement to be untrue or inaccurate at or prior to the Effective Time except as contemplated by this Agreement (including the Company Schedules) and (ii) any failure of the Company or Parent, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise affect any remedies available to the party receiving such notice. 5.10 Additional Documents and Further Assurances. Each party hereto, at ------------------------------------------- the request of the other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. 5.11 Form S-8. Parent shall file within 15 business days after the Closing -------- a registration statement on Form S-8 for the shares of Parent Common Stock issuable with respect to assumed Company Options promptly after the Closing Date. -34- 5.12 NMS Listing. Parent shall cause to be listed on the Nasdaq National ----------- Market the shares of Parent Common Stock issuable, and those required to be reserved for issuance, in connection with the Merger, upon official notice of issuance. 5.13 Cooperation With Financial Statements. The Company will use its best ------------------------------------- efforts to cause the Company's management and its independent auditors to facilitate on a timely basis (i) the preparation of historical and pro forma financial statements as required by Parent to comply with applicable SEC regulations, and (ii) the review of the Company's 1997 and 1998 audit work papers, including the examination of selected interim financial statements and data. 5.14 Employee Benefits. ----------------- (a) Parent shall take such reasonable actions as are necessary to allow eligible employees of the Company to participate in the benefit programs of Parent, or alternative benefits programs substantially comparable to those applicable to employees of Parent on similar terms, as soon as practicable after the Effective Time. Without limiting the generality of the foregoing, (i) to the extent that any employee of the Company becomes eligible to participate in any employee benefit plan of Parent after the Effective Time, Parent, the Surviving Corporation and their subsidiaries shall credit such employee's service with the Company, to the same extent as such service was credited under the similar employee benefit plans of the Company immediately prior to the Effective Time, for purposes of determining eligibility to participate in and vesting under, and for purposes of calculating benefits under, such employee benefit plan of Parent, and (ii) to the extent permitted by such employee benefit plan of Parent and applicable law, Parent, the Surviving Corporation and its subsidiaries shall waive any pre-existing condition limitations, waiting periods or similar limitations under such employee benefit plan of Parent and shall provide each such employee with credit for any co-payments previously made and any deductibles previously satisfied. (b) Parent shall reserve the sum set forth on Schedule 5.14 in cash, which sum shall be (i) allocated among those employees of the Company as determined by the Company (and agreed to by Parent) prior to the Closing (the "Participating Employees"), and (ii) paid to each such Participating Employee in accordance with the terms set forth in Schedule 5.14. (c) Parent shall cause the Surviving Corporation to pay commercially reasonable severance costs to those employees of the Company whose employment with the Surviving Corporation is terminated (other than for Cause, as defined in Schedule 5.14) within one year after the Closing. 5.15 Indemnification of Directors and Officers. ----------------------------------------- (a) For a period of three years from the Closing Date, Parent shall, and shall cause the Surviving Corporation to, fulfill and honor in all respects all rights to indemnification existing in favor of the current directors and officers of the Company, as provided in the Company's Articles of Incorporation and Bylaws (as in effect as of the date of this Agreement) and as provided in any indemnification agreements between the Company and such directors and officers (as in effect as of the date of this Agreement) and as otherwise existing in favor of such directors and officers. -35- (b) For three years after the Effective Time, Parent shall maintain in effect the current level and scope of directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy; provided, however, that in no event shall Parent be required to expend in any one year an amount in excess of 150% of the annual premium currently paid by the Company for such insurance, and, provided further, that if the annual premiums of such insurance coverage exceed such amount, Parent shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. (c) Section 5.15 shall survive the consummation of the transactions contemplated hereby, is intended to benefit and may be enforced by the directors and officers of the Company, and shall be binding on all successors and assigns of the Parent and the Company. ARTICLE VI CONDITIONS TO THE MERGER 6.1 Conditions to Obligations of Each Party to Effect the Merger. The ------------------------------------------------------------ respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction at or prior to the Closing of the following conditions: (a) Shareholder Approval. This Agreement and the Merger shall have -------------------- been approved and adopted by the shareholders of the Company by the requisite vote under applicable law and the Company's Articles of Incorporation. (b) No Injunctions or Restraints; Illegality; HSR Act. No temporary ------------------------------------------------- restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall be in effect. All waiting periods under the HSR Act shall have expired or been terminated early. (c) Tax Opinions. Parent and the Company shall each have received ------------ written opinions from their respective tax counsel to the effect that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code; provided, however, that if the counsel to either Parent or the Company -------- ------- does not render such opinion, this condition shall nonetheless be deemed to be satisfied with respect to such party if counsel to the other party renders such opinion to such party. The parties to this Agreement agree to make reasonable Tax representations (including those substantially in the form of the representations contained in the tax representations letters attached as Exhibit E) as requested by such counsel for the purpose of rendering such opinions. (d) Nasdaq Listing. The shares of Parent Common Stock issuable to -------------- shareholders of the Company pursuant to this Agreement and such other shares required to be reserved for issuance in connection with the Merger shall have been authorized for listing on the Nasdaq Stock Market upon official notice of issuance. -36- (e) California Permit. The California Commissioner of Corporations ----------------- shall have issued the California Permit and the exemption provided by Section 3(a)(10) of the Securities Act shall be available with respect to the issuance of the Parent Common Stock in the Merger, or the Form S-4 Registration Statement shall have become effective in accordance with the provisions of the Securities Act, and no stop order shall have been issued by the SEC with respect to the Form S-4 Registration Statement. 6.2 Additional Conditions to Obligations of the Company. The obligations --------------------------------------------------- of the Company to consummate the Merger and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by the Company: (a) Representations. The representations of Parent and Merger Sub --------------- contained in this Agreement shall have been true and correct in all respects as of the date of this Agreement except for such breaches as would not, either individually or in the aggregate, result in a material liability to Parent. The Company shall have received a certificate with respect to the foregoing signed on behalf of Parent by a duly authorized officer of Parent. (b) Agreements and Covenants. Parent and Merger Sub shall have ------------------------ performed or complied (which performance or compliance shall be subject to Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below) in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Effective Time, and the Company shall have received a certificate to such effect signed on behalf of the Parent by a duly authorized officer of Parent. (c) Legal Opinion. The Company shall have received a legal opinion ------------- from Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to Parent, in substantially the form attached hereto as Exhibit C. --------- (d) Stock Price. The average closing price per share of Parent Common ----------- Stock for the ten (10) consecutive trading days ending on the second trading day immediately prior to the date on which all of the conditions to the Closing set forth in Article VI are satisfied or properly waived (other than this Section 6.2(d)), as reported on the Nasdaq National Market shall not be equal to or less than $22.00. 6.3 Additional Conditions to the Obligations of Parent and Merger Sub. ----------------------------------------------------------------- The obligations of Parent and Merger Sub to consummate the Merger and the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Parent: (a) Representations and Warranties. The representations and warranties ------------------------------ of the Company contained in this Agreement shall have been true and correct in all respects as of the date of this Agreement except for such breaches as would not, either individually or in the aggregate, result in a material liability to Company. Parent shall have received a certificate with respect to the foregoing signed on behalf of the Company by a duly authorized officer of the Company. -37- (b) Agreements and Covenants. The Company shall have performed or ------------------------ complied (which performance or compliance shall be subject to the Company's ability to cure as provided in Section 8.1(d) below) in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Effective Time, and Parent and Merger Sub shall have received a certificate to such effect signed on behalf of the Company by a duly authorized officer of the Company. (c) Legal Opinion. Parent shall have received a legal opinion from ------------- Cooley Godward LLP, legal counsel to the Company, in substantially the form attached hereto as Exhibit D. --------- (d) Escrow Agreement. The Shareholders' Representatives (as defined ---------------- in the Escrow Agreement) shall have entered into an Escrow Agreement substantially in the form attached hereto as Exhibit F (the "Escrow Agreement"). ---------- ---------------- (e) Resignation of Directors and Officers. All directors and officers ------------------------------------- of the Company shall have resigned their respective offices as directors and officers of the Company effective as of the Effective Time. ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; ESCROW 7.1 Survival of Representations and Warranties. All of the Company's ------------------------------------------ representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement (each as modified by the Company Schedules), and all of Parent's and Merger Sub's representations and warranties in this Agreement and in any instrument delivered pursuant to this Agreement, shall survive the Merger and continue until 5:00 p.m., California time, on the first anniversary of the Closing Date. 7.2 Obligation of the Company to Indemnify, Reimburse, etc. Subject to ------------------------------------------------------ the provisions of Section 7.4 hereof, the Company, its successors and assigns, jointly and severally, shall indemnify, reimburse, defend, protect and hold harmless Parent and Merger Sub and each of their successors and assigns and each of their respective directors, officers, employees, affiliates, agents, and their respective successors and assigns (each a "Parent Indemnitee") from and against any claims, losses, liabilities, damages, causes of action, costs and expenses (including reasonable attorney's, accountant's, consultant's and expert's fees and expenses) (collectively "Losses") resulting from, imposed upon, incurred or suffered by any of them, directly or indirectly, based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of (i) any representation contained in this Agreement as if such representation was made as of the date of this Agreement or such other date prior to the date of this Agreement as is indicated in such representation and at no other point in time (as modified by the Company Schedules) or (ii) any warranty, covenant or agreement of the Company contained in this Agreement. 7.3 Obligation of Parent to Indemnify, Reimburse, etc. Subject to the ------------------------------------------------- provisions of Section 7.4 hereof, Parent and Merger Sub and their respective successors and assigns, jointly and severally, shall -38- indemnify, reimburse, defend, protect and hold harmless the Shareholders and their successors and assigns and each of their directors, officers, employees, affiliates, agents, and their respective successors and assigns (each a "Shareholder Indemnitee") from and against any Losses resulting from, imposed upon, incurred or suffered by any of them, directly or indirectly, based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation or warranty, but not any covenant or agreement, of Parent contained in this Agreement. 7.4 Limits on Indemnification, Reimbursement, etc. ---------------------------------------------- (a) Absent fraud or willful misconduct of any party (for which there shall be no limitation of liability of any party), no Parent Indemnitee and no Shareholder Indemnittee shall have any right to seek or obtain indemnification, reimbursement or defense under this Agreement or the Escrow Agreement until Losses which would otherwise be indemnifiable hereunder, and have been incurred by such party and other indemnitees associated with or related to such party, exceed $500,000, after which such party or parties to be indemnified hereunder shall be entitled to receive indemnification for all Losses in excess of $500,000. In addition (absent fraud or willful misconduct), neither Parent nor any Shareholder shall have any liability under Article VII unless the Losses incurred by a Parent Indemnitee or a Shareholder Indemnitee, as the case may be, in connection with a claim for indemnification or reimbursement exceed $25,000, and the Losses related thereto shall be disregarded for purposes of determining whether the $500,000 deductible set forth in this Section 7.4(a) has been met. (b) Absent fraud or willful misconduct of the Company, from and after the Closing, recourse of the Parent Indemnitees to the Escrow Amount in the Escrow Fund shall be the sole and exclusive remedy of the Parent Indemnitees for Losses relating directly or indirectly, based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation, warranty (as modified by the Company Schedules), covenant or agreement of the Company, contained in this Agreement. (c) Absent fraud or willful misconduct, no party hereto shall be entitled to recover punitive damages with respect to any breach of any representation or warranty or non-performance of any obligation under this Agreement (or otherwise relating to the transactions contemplated hereby), and under no circumstances shall such damages be considered Losses under this Article VII. (d) To the extent that any indemnifying party makes or is required to make any indemnification or reimbursement payment to any indemnified party, the indemnifying party shall be entitled to exercise, and shall be subrogated to, any rights and remedies (including rights of indemnity, rights of contribution and other rights of recovery) that the indemnified party may have against any other person with respect to any Losses, circumstances or matters to which such indemnification or reimbursement payment is directly or indirectly related. Each indemnified party shall permit the indemnifying party to use the name of the indemnified party in any transaction or in any proceeding or other matter involving any of such rights or remedies; and the indemnified party shall take such actions as the indemnifying party may reasonably request for the purpose of enabling the indemnifying party to perfect or exercise the indemnifying party's right of subrogation hereunder. (e) Notwithstanding anything to the contrary contained in this Agreement (i) the Parent Indemnitees and Shareholder Indemnitees, as the case may be, shall seek recovery from their -39- insurance providers with respect to any Losses for which indemnity or reimbursement may be sought under Article VII and for which insurance may be available, and no part of the Escrow Fund shall be released from escrow to a Parent Indemnitee or Shareholder Indemnitee, as the case may be, until it shall be finally determined whether such Parent Indemnitee or Shareholder Indemnitee, as the case may be, may recover from such insurance provider; provided however, that nothing in this Section 7.4(e) shall preclude a Parent Indemnitee or Shareholder Indemnitee, as the case may be, from asserting a claim under Article VII before it shall be finally determined whether such Parent Indemnitee or Shareholder Indemnitee, as the case may be, may recover from its respective insurance provider. 7.5 Escrow Arrangements. Concurrent with the Effective Time, the Escrow ------------------- Amount shall be placed in an escrow fund (the "Escrow Fund"), to be governed by the terms of the Escrow Agreement. The Escrow Fund shall be available to compensate Parent and its affiliates for losses for which Parent or its affiliates are entitled to indemnification under Article VII. The terms and conditions of the Escrow Fund shall be set forth more fully in the Escrow Agreement. ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 8.1 Termination. This Agreement may be terminated and the Merger ----------- abandoned at any time prior to the Effective Time: (a) by mutual written consent of the Company and Parent; (b) by Parent or the Company if: (i) the Effective Time has not occurred by October 15, 1999 (provided that the right to terminate this Agreement under this clause 8.1(b)(i) shall not be available to any party whose willful failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date); provided, however, that if Parent shall file the Form S-4 Registration Statement in accordance with Section 5.1(iii), then the reference to October 15, 1999 in this sentence shall be replaced with January 15, 2000; (ii) there shall be a final nonappealable order of a federal or state court in effect preventing consummation of the Merger; or (iii) there shall be any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger by any governmental entity that would make consummation of the Merger illegal; (c) by Parent if there shall be any action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or the Company's ownership or operation of any portion of the business of the Company which is material to the Company or (ii) compel Parent or the Company to dispose of or hold separate, as a result of the Merger, any portion of the business or assets of the Company or Parent which is material to the Company or Parent as the case may be. (d) by Parent if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Company and as a result of such breach the conditions set forth in Section 6.3(a) or 6.3(b), -40- as the case may be, would not then be satisfied; provided, however, that if such breach is curable by the Company within thirty (30) days through the exercise of its reasonable best efforts, then for so long as the Company continues to exercise such reasonable best efforts Parent may not terminate this Agreement under this Section 8.1(d) unless such breach is not cured within thirty (30) days (but no cure period shall be required for a breach which by its nature cannot be cured); (e) by the Company if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Parent or Merger Sub and as a result of such breach the conditions set forth in Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied; provided, however, that if such breach is curable by Parent or Merger Sub within thirty (30) days through the exercise of its reasonable best efforts, then for so long as Parent or Merger Sub continues to exercise such reasonable best efforts the Company may not terminate this Agreement under this Section 8.1(e) unless such breach is not cured within thirty (30) days (but no cure period shall be required for a breach which by its nature cannot be cured). Where action is taken to terminate this Agreement pursuant to this Section 8.1, it shall be sufficient for such action to be authorized by the Board of Directors (as applicable) of the party taking such action. 8.2 Effect of Termination. In the event of termination of this Agreement --------------------- as provided in Section 8.1, this Agreement shall forthwith become void and, except as set forth in this Section 8.2, there shall be no liability or obligation on the part of Parent, Merger Sub or the Company, or their respective officers, directors or shareholders, provided that each party shall remain liable for any willful breaches of this Agreement prior to its termination; and provided further that, the provisions of Sections 5.3 and 5.4 and Article IX of this Agreement shall remain in full force and effect and survive any termination of this Agreement. 8.3 Amendment. Except as is otherwise required by applicable law after --------- the shareholders of the Company approve this Agreement, this Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of the parties hereto. 8.4 Extension; Waiver. At any time prior to the Effective Time, Parent ----------------- and Merger Sub, on the one hand, and the Company, on the other, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations of the other party hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. -41- ARTICLE IX GENERAL PROVISIONS 9.1 Notices. All notices and other communications hereunder shall be in ------- writing and shall be deemed given (a) on the date of delivery, if delivered personally or (b) two business days after sent, if sent by commercial delivery service, or mailed by registered or certified mail (return receipt requested) or, (c) on the date of delivery, if sent via facsimile (with acknowledgment of complete transmission) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Merger Sub, to: Critical Path, Inc. 320 First Street San Francisco, CA 94105 Attention: Chief Financial Officer Telephone No: (415) 808-8800 Facsimile No: (415) 808-8777 with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 Attention: Alan K. Austin Mark L. Reinstra Telephone No: (650) 493-9300 Facsimile No: (650) 493-6811 (b) if to the Company, to: Amplitude Software Corporation 185 Berry Street, Suite 4700 San Francisco, CA 94107 Attention: Chief Executive Officer Telephone No.: (415) 659-3500 Facsimile No.: (415) 659-0006 -42- with a copy to: Cooley Godward LLP 5 Palo Alto Square Palo Alto, California Attention: James C. Gaither Keith A. Flaum Telephone No.: (650) 843-5000 Facsimile No.: (650) 857-0663 9.2 Interpretation. The words "include," "includes" and "including" when -------------- used herein shall be deemed in each case to be followed by the words "without limitation." The word "agreement" when used herein shall be deemed in each case to mean any contract, commitment or other agreement, whether oral or written, that is legally binding. As used in this Agreement, the phrase "to the best of [a party's] knowledge," "to [a party's] knowledge," "[a party] is not aware," and similar phrases shall mean the actual knowledge of the officers and directors of such party, after careful consideration of the matters set forth in the representation that is so qualified and a reasonably diligent review of all files, documents, agreements and other materials in such person's possession or subject to his or her control. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.3 Counterparts. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. 9.4 Entire Agreement; Assignment. This Agreement, the schedules and ---------------------------- Exhibits hereto, and the documents and instruments and other agreements among the parties hereto referenced herein: (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; (b) are not intended to confer upon any other person (other than the Shareholder Indemnittees and those persons referred to in Sections 5.14 and 5.15) any rights or remedies hereunder; and (c) shall not be assigned by operation of law or otherwise except as otherwise specifically provided, except that Parent and Merger Sub may assign their respective rights and delegate their respective obligations hereunder to their respective affiliates as long as such assignment or delegation does not adversely affect the rights of the Shareholders. 9.5 Severability. In the event that any provision of this Agreement or ------------ the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. -43- 9.6 No Implied Representations. Parent and the Company acknowledge that, -------------------------- except as expressly provided in Articles II and III, and except as expressly provided in any document delivered by a party hereto to any other party hereto in connection with the transactions contemplated hereby, none of the parties (and no other person) has made or is making any representations or warranties whatsoever, implied or otherwise. 9.7 Other Remedies. Except as otherwise provided herein (including in -------------- Section 7.4), any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 9.8 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of the parties hereto agrees that process may be served upon them in any manner authorized by the laws of the State of California for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction and such process. 9.9 Rules of Construction. The parties hereto agree that they have been --------------------- represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 9.10 Specific Performance. The parties hereto agree that irreparable -------------------- damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 9.11 Share Legends. All certificates representing any of the shares of ------------- Parent Common Stock to be issued pursuant to this Agreement shall have endorsed thereon any legend required by Federal or state securities laws. (Remainder of page intentionally left blank) -44- IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be signed by their duly authorized respective officers, all as of the date first written above. AMPLITUDE SOFTWARE CORP. CRITICAL PATH, INC. By: /s/ Randall Sosnick By: /s/ David A. Thatcher -------------------------------------- ---------------------- Randall Sosnick David A. Thatcher President and Chief Executive Officer Executive Vice President and Chief Financial Officer APOLLO ACQUISITION CORP. By: /s/ David A. Thatcher --------------------- David A. Thatcher Chief Financial Officer and Secretary ***REORGANIZATION AGREEMENT*** INDEX OF EXHIBITS Exhibit Description - ------- ----------- Exhibit A Form of Voting Agreement Exhibit B Form of Legal Opinion of Counsel to Parent Exhibit C Form of Legal Opinion of Counsel to the Company Exhibit D Form of Escrow Agreement INDEX OF SCHEDULES Schedule Description - -------- ----------- 2.2(a) Shareholder List 2.2(b) Option List 2.4 (Non Contravention; Conflicts) 2.5 Company Financials 2.6 Undisclosed Liabilities 2.7 No Changes 2.8 Tax Returns and Audits 2.10(a) Leased Real Property 2.10(b) Liens on Property 2.11(b) Registered Intellectual Property 2.11(c) Intellectual Property Encumbrance 2.11(e) Intellectual Property Licensed by Company 2.11(g) Intellectual Property Licensed to Company 2.11(h) Intellectual Property Licensed to Company 2.11(i) Intellectual Property Licensed by Company 2.11(k) Indemnification Regarding Intellectual Property 2.11(l) Transferability of Intellectual Property 2.11(m) Transferability of Intellectual Property 2.11(q) Intellectual Property Proceedings 2.11(r) Pending Intellectual Property Rights 2.12(a) Agreements, Contracts and Commitments 2.12(b) (Contracts - Breach or Default) 2.12(c) (Contracts - Notice or Consent) 2.13 Interested Party Transactions 2.15 Litigation 2.19 Brokers/Finders Fees; Third-Party Expenses 2.20(b) (Company Employee Plans) 2.20(d) Employee Plan Compliance 2.20(g) Post Employment Obligations 2.20(h)(i) Effect of Merger on Employee Plans 2.20(h)(ii) Excess Parachute Payments 2.20(j) Labor 2.21 Change of Control; Non-Compete Payments (to Employees) 4.1 Conduct of the Business 5.14 (Participants in Management Bonus) 6.3(f) List of Offer Letter Acceptances -i- EX-99.1 3 PRESS RELEASE BY CRITICAL PATH, INC. Exhibit 99.1 CRITICAL PATH COMPLETES ACQUISITION OF AMPLITUDE SOFTWARE CORP. Critical Path Moving Quickly To Offer A Complete Spectrum Of Messaging Solutions Offering Customers Ultimate In Flexibility, Functionality and Choice SAN FRANCISCO, California (August 31, 1999) -- Critical Path, Inc. (Nasdaq: CPTH), a leading provider of business-to-business Internet messaging solutions, today announced it has successfully completed the acquisition of Amplitude Software Corp., a leading provider of Internet calendar and resource scheduling solutions. Critical Path previously announced a definitive acquisition agreement to acquire Amplitude on June 23, 1999. Amplitude brings a key component to Critical Path's growth strategy and reinforces Critical Path's leadership in offering a complete spectrum of messaging solutions to complement its core email hosting solution. Amplitude, founded in 1996, offers a proven suite of web-based calendaring and resource scheduling applications built for maximum scalability, unparalleled performance and ubiquitous access. By integrating Amplitude's leading-edge business applications with its proprietary email outsourcing solution, Critical Path will offer customers one of the most robust integrated messaging platforms with increased functionality, flexibility and choice. "Critical Path is committed to maintaining its leadership position and offering a full range of advanced messaging solutions that satisfies the broad range of email and messaging demands presented by customers and prospects," said Doug Hickey, Critical Path's president and CEO. "We are aggressively moving to leverage our first-mover, leadership position, and quickly bring to market an integrated messaging platform providing customers with the most comprehensive and robust solutions. Amplitude's calendar and resource sharing solutions add a critical layer of value on top of our formidable messaging platform as well as an impressive customer list to the Critical Path family." Amplitude's customer list boasts more than 275 customers across a wide range of industries. During the first half of 1999, Amplitude drove impressive growth increasing revenues more than 100% quarter-to-quarter and winning new Fortune 1000 customers exemplifying the growing demand for Web-based messaging solutions that improve enterprise communications and optimize corporate resources. Recent customers include Arthur Anderson, Ascend, FreeMarkets, Hewlett Packard, Nokia, Pharmacia & Upjohn, Pitney Bowes, and Sprint. The customers join an already impressive customer base of Chevron, Bristol-Myers Squibb, Monsanto, KPMG, Kraft Foods, Lucent, and Macy's. Expanded Services to Meet Customer Needs Email has become a pivotal, compelling form of communication for individuals and the business world. According to industry reports, as many as 148 million corporate users relying on email as a primary form of communication. This explosive global trend shows no signs of abatement with the number of users expected to grow to 300 million by next year. The ubiquitous nature of email has also spawned corporations and business to look for news ways to leverage the Internet to improve communications and maximize corporate resources. By offering services such as integrated calendaring, Critical Path is leading the messaging revolution providing customers with new ways to utilize the Internet. Services such as calendaring will extend Critical Path's relationships with current customers, attract new customers and differentiate Critical Path in the email service provider market. These services also allow Critical Path to target a larger market opportunity through its expanded "midsource" strategy. This strategy enables enterprises that have chosen in house email solutions to selectively outsource and take advantage of new messaging services without altering their existing IT infrastructure. Outsourcing and midsourcing applications provide many benefits to customers such as access to the most advanced email and messaging systems available, while reducing the typical infrastructure and support costs, faster time to market, and scalability to meet business growth, giving businesses and ISPs of all sizes an alternative to purchasing, deploying and managing messaging applications internally. The total value of the Amplitude transaction is estimated to be $215 million comprised of cash and stock. Critical Path plans to extend its services by offering other premium services such as unified messaging, guaranteed delivery, advanced directory services, permanent archiving and instant messaging. About Critical Path, Inc. Critical Path, Inc. (Nasdaq: CPTH) is a leading provider of business- to-business Internet messaging solutions for corporations, Internet service providers (ISPs), Web hosting companies, and Web portals. Critical Path has built an industry-leading global infrastructure with data centers connected to key Internet exchange points, and currently reaches millions of end-users through its customer relationships. Critical Path provides reliable, secure, and scalable email, and a flexible suite of enhanced messaging services to partners such as E*TRADE, CompuServe, Network Solutions, U S West, Sprint, and ICQ. Critical Path is headquartered in San Francisco, California, with offices in locations nationwide and in Germany and the UK. More information on Critical Path can be found at www.cp.net. # # # Critical Path is a service mark and the Critical Path logo is a trademark of Critical Path, Inc. All other trademarks are the property of their respective holders. The statements in this press release relating to matters that are not historical are forward-looking statements. Actual results could differ materially from these forward-looking statements. Risks and uncertainties facing Critical Path are described in its prospectus dated June 1, 1999 and with its periodic filings with the Securities and Exchange Commission (www.sec.gov). ----------- -----END PRIVACY-ENHANCED MESSAGE-----