Document:

EXHIBIT 10.14

 

AGREEMENT AND PLAN OF
MERGER

 

 

DATED AS OF

 

AUGUST 15, 2003

 

 

BY AND AMONG

 

 

SSA GLOBAL TECHNOLOGIES,
INC.,

 

RUSH MERGER SUBSIDIARY,
INC.

 

AND

 

EXE TECHNOLOGIES, INC.

 

 

CROSS REFERENCES

 

	
   

  	
  Section

  
	
   

  	
   

  
	
  125 Plan

  	
  4.10(d)

  
	
  Acquisition Proposals

  	
  4.4(a)

  
	
  Agreement

  	
  Preamble

  
	
  Asset Purchase

  	
  1.4

  
	
  Asset Purchase Documents

  	
  2.1(c)(i)

  
	
  Asset Purchase Price

  	
  1.4

  
	
  Business Day

  	
  4.4(a)

  
	
  Certificate

  	
  1.10(c)

  
	
  Certificate of Merger

  	
  1.3

  
	
  Closing

  	
  1.2

  
	
  Closing Date

  	
  1.2

  
	
  Code

  	
  2.1(h)

  
	
  Company

  	
  Preamble

  
	
  Company Benefit Plans

  	
  2
  .1(l)(i)

  
	
  Company Board

  	
  Preamble

  
	
  Company Common Stock

  	
  Preamble

  
	
  Company Disclosure Schedule

  	
  2.1

  
	
  Company Material Contracts

  	
  2.1(r)

  
	
  Company Participants

  	
  2.1(l)(i)

  
	
  Company SEC Reports

  	
  2.1(d)(i)

  
	
  Company Stockholders
  Meeting

  	
  4.1(a)

  
	
  Company Voting Debt

  	
  11

  
	
  Confidentiality Agreement

  	
  4.2

  
	
  Continuation Period

  	
  4.10(c)

  
	
  Continuing Employee

  	
  43

  
	
  Contract

  	
  2.1(i)(iii)

  
	
  DGCL

  	
  1.1

  
	
  Dissenting Shares

  	
  1.14

  
	
  Effective Date

  	
  1.3

  
	
  Effective Time

  	
  1.3

  
	
  Employee

  	
  2.1(l)(iii)(a)

  
	
  ERISA

  	
  2.1(1)(i)

  
	
  Exchange Act

  	
  1.12
  (c)

  
	
  Existing Policy

  	
  4.6(b)(ii)

  
	
  Expense Payment

  	
  6.4(c)

  
	
  Expenses

  	
  4.5

  
	
  GAAP

  	
  2.1(d)(ii)

  
	
  Governmental Entity

  	
  1.13
  (b)

  
	
  Indemnified Parties

  	
  4.6(b)(i)

  
	
  Indemnified Party

  	
  4.6(b)(i)

  
	
  Insurance Policies

  	
  2.1(p)

  
	
  Intellectual Property

  	
  2.1(m)(i)

  
	
  IRS

  	
  2.1(l)(ii)

  
	
  Leases

  	
  2.1(k)(i)

  

 

 

	
  Liens

  	
  2.1(b)(ii)

  
	
  Material Adverse Effect

  	
  2.1(a)

  
	
  Merger

  	
  Preamble

  
	
  Merger Sub

  	
  Preamble

  
	
  NASDAQ

  	
  2.1(c)(iii)

  
	
  Option

  	
  1.11

  
	
  Option Plans

  	
  1.11

  
	
  Options

  	
  1.11

  
	
  Ordinary Course

  	
  2.1(d)(iii)

  
	
  Organizational Documents

  	
  2.1(a)

  
	
  Parent

  	
  Preamble

  
	
  Parent Disclosure Schedule

  	
  2.2

  
	
  Parent Plans

  	
  4.10(d)

  
	
  Paying Agent

  	
  1.12(a)

  
	
  Permits

  	
  2.1(f)

  
	
  Permitted Lien

  	
  1.4

  
	
  Person

  	
  1.12(c)

  
	
  Price Per Share

  	
  1.10(c)

  
	
  Proxy Statement

  	
  2.1(e)(i)

  
	
  Purchased Assets

  	
  1.4

  
	
  Required Approvals

  	
  4.3

  
	
  Schedule 13E-3

  	
  4.1(c)

  
	
  SEC

  	
  2.1(d)(i)

  
	
  Securities Act

  	
  2.1(c)(iii)

  
	
  Subsequent Filings

  	
  2.1(d)(i)

  
	
  Subsidiary

  	
  2.1(b)(ii)

  
	
  Superior Proposal

  	
  4.4(d)

  
	
  Surviving Corporation

  	
  1.1

  
	
  Tax

  	
  1.12(c)

  
	
  Tax Returns

  	
  2.1(h)

  
	
  Taxable

  	
  1.12(c)

  
	
  Taxes

  	
  1.12(c)

  
	
  Terminating Company Breach

  	
  6.2(b)

  
	
  Terminating Parent Breach

  	
  6.3(a)

  
	
  Termination Fee

  	
  6.4(c)

  
	
  Vested Option

  	
  1.11

  
	
  Violation

  	
  2.1(c)(ii)

  
	
  Voting Agreement

  	
  Preamble

  
	
  Warrant Agreements

  	
  3.1(c)

  
	
  Warrants

  	
  2.1(b)(i)

  

 

 

AGREEMENT AND PLAN
OF MERGER

 

THIS
AGREEMENT AND PLAN OF MERGER, dated as of August 15, 2003 (this “Agreement”),
by and among SSA GLOBAL TECHNOLOGIES, INC., a Delaware corporation (“Parent”),
RUSH MERGER SUBSIDIARY, INC., a Delaware corporation and a wholly owned
subsidiary of Parent (“Merger Sub”), and EXE TECHNOLOGIES, INC., a Delaware
corporation (the “Company”).

 

WITNESSETH:

 

WHEREAS,
Parent and the Company have each determined that it is in their respective best
interests for Parent to acquire the Company, upon the terms and subject to the
conditions set forth in this Agreement;

 

WHEREAS,
the Board of Directors of the Company (the “Company Board”) (i) has determined
that this Agreement and the transactions contemplated hereby, including the
Merger and the Asset Purchase (as hereinafter defined), are fair to and in the
best interests of the Company and the unaffiliated stockholders and its
stockholders generally, (ii) approved and declared the advisability of this
Agreement and the transactions contemplated hereby, including the Merger and
the Asset Purchase and (iii) resolved to recommend that the stockholders of the
Company adopt this Agreement and approve the Asset Purchase;

 

WHEREAS,
the boards of directors of Parent and Merger Sub each have approved this
Agreement, the Merger, the Asset Purchase and the other transactions
contemplated by this Agreement;

 

WHEREAS,
as soon as may be permitted after satisfaction or waiver of the conditions set
forth herein, each share of the Company’s Common Stock, par value $0.01 per
share (the “Company Common Stock”), issued and outstanding immediately prior to
the Effective Time shall be cancelled, extinguished and converted into and
become a right to receive a price per share equal to the Price Per Share,
subject to the terms and conditions set forth herein and Merger Sub shall be
merged with and into the Company (the “Merger”) in accordance with this
Agreement and the relevant provisions of the DGCL, and the surviving
corporation of the Merger shall be the Company; and

 

WHEREAS,
as inducement and a condition to Parent’s willingness to enter into this
Agreement, Parent, the Company and certain of the Company’s stockholders are
entering into a voting agreement and irrevocable proxy, dated as of the date
hereof, substantially in the form as that attached hereto as Exhibit A (the
“Voting Agreement”), pursuant to which such stockholders party thereto have
agreed, among other things, to vote the shares of Company Common Stock held by
them in favor of the adoption of this Agreement and the Asset Purchase.

 

NOW,
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows: 

 

 

ARTICLE I

THE MERGER AND ASSET
PURCHASE

 

1.1  THE MERGER.

 

Upon the terms and
subject to the conditions set forth in this Agreement, Merger Sub shall be
merged with and into the Company at the Effective Time. Following the Merger,
the separate corporate existence of Merger Sub shall cease and the Company, as
a wholly owned subsidiary of Parent, shall continue as the surviving
corporation (the “Surviving Corporation”). The Merger will be effected pursuant
to the provisions of, and with the effect provided in, the General Corporation
Law of the State of Delaware, as amended (the “DGCL”).

 

1.2  CLOSING.

 

The closing of the Merger
and the Asset Purchase (the “Closing”) will take place as soon as practicable
after satisfaction or waiver (as permitted by this Agreement and applicable
law) of the conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing Date) set forth in Article V (the “Closing Date”),
unless another time or date is agreed to in writing by the parties hereto. The
Closing shall be held at the offices of Baker & McKenzie, 2001 Ross Avenue,
Suite 2300, Dallas, Texas 75201, unless another place is agreed to in writing
by the parties hereto.

 

1.3  EFFECTIVE DATE AND TIME.

 

Upon the Closing, the
parties shall file with the Secretary of State of the State of Delaware an
appropriate certificate of merger or other appropriate documents (in any such
case, the “Certificate of Merger”) executed in accordance with the relevant
provisions of the DGCL and shall make all other filings, recordings or
publications required under the DGCL in connection with the Merger. The Merger
shall become effective as of the date and time of such filings or such other
time after such filings as the parties hereto shall agree to and specify in the
Certificate of Merger (the “Effective Time”). The date on which the Effective
Time shall occur is referred to as the “Effective Date.”

 

1.4  ASSET PURCHASE.

 

Unless the Company is
otherwise notified in writing by Parent prior to the Effective Time,
immediately prior to the Effective Time and upon the satisfaction or waiver in
accordance with the terms of this Agreement or the conditions set forth herein
other than the condition set forth in Section 5.3(e) of this Agreement, the
Company will sell, assign, transfer, convey and deliver to Parent or its
designated Subsidiary, free and clear of all Liens (other than Permitted
Liens), and Parent or its designated Subsidiary will purchase, acquire and
accept from the Company, certain assets of the Company set forth on Schedule
2.1(m)(i)(A) (the “Purchased Assets”) (such transaction, the “Asset Purchase”).
“Permitted Lien” shall mean Liens reflected in the Company’s financial
statements included in the Company SEC Reports (including the notes thereto).
The purchase price for the Purchased Assets (the “Asset Purchase Price”) shall
be an amount equal to fair market value as determined by KPMG, LLP pursuant to
a written valuation report and shall be payable in immediately available same
day funds at Closing to an account designated by the Company at least two
Business Days prior to the Closing Date.

 

 

1.5  EFFECTS OF THE MERGER.

 

At the Effective Time,
the separate corporate existence of Merger Sub shall cease and the Surviving
Corporation shall continue its corporate existence under the laws of the State
of Delaware. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers,
immunities and franchises of Merger Sub and the Company shall vest in the
Surviving Corporation, and all debts, liabilities, obligations and duties of
Merger Sub and the Company shall become the debts, liabilities, obligations and
duties of the Surviving Corporation.

 

1.6  SUBSEQUENT ACTIONS.

 

If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or otherwise
in the Surviving Corporation its right, title or interest in, to or under any
of the rights, properties or assets of either of the Company or Merger Sub
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of either the Company or Merger
Sub, all such deeds, bills of sale, assignments and assurances and to take, in
the name and on behalf of each of such corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
transactions contemplated by this Agreement.

 

1.7  CERTIFICATE OF INCORPORATION.

 

At the Effective Time,
the certificate of incorporation of the Company, as in effect immediately prior
to the Effective Time, shall be amended so as to read in its entirety in the
form set forth in Exhibit B hereto and, as so amended, shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided by the DGCL and the provisions of such certificate of incorporation.

 

1.8  BYLAWS.

 

Subject to Section
4.6(a), at the Effective Time, the Surviving Corporation will take all
necessary actions so that the bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall become the bylaws of the Surviving
Corporation until thereafter amended as provided by the DGCL, the provisions of
the certificate of incorporation of the Surviving Corporation and such bylaws,
except that the name of the Surviving Corporation shall be “EXE Technologies,
Inc.” 

 

1.9  OFFICERS AND DIRECTORS OF SURVIVING
CORPORATION.

 

The officers of Merger
Sub immediately prior to the Effective Time shall be, from and after the
Effective Time, the officers of the Surviving Corporation, until the earlier of
their death, resignation or removal. The directors of Merger Sub shall be, from
and after the Effective Time,

 

 

the directors of the
Surviving Corporation, until the earlier of their death, resignation or
removal, or until their respective successors are duly elected and qualified,
as the case may be.

 

1.10  EFFECT ON CAPITAL STOCK.

 

As
of the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Merger Sub, the Company or the holder of any shares of the
Company Common Stock or any shares of capital stock of Merger Sub:

 

(a)  Capital
Stock of Merger Sub. Each issued and outstanding share of capital stock of
Merger Sub shall be converted into and become one fully paid and nonassessable
share of common stock, par value $0.01 per share, of the Surviving Corporation.

 

(b) 
Cancellation of Treasury Stock and Parent or Merger Sub  Owned Stock. Each share of the Company Common
Stock that immediately prior to the Effective Time is owned by Parent, Merger
Sub or the Company or any direct or indirect wholly owned subsidiary of Parent,
Merger Sub or the Company, shall be cancelled, extinguished and retired, and no
payment of any consideration shall be made with respect thereto.  

 

(c)  Company
Common Stock. Each share of the Company Common  Stock issued and outstanding immediately
before the Effective Time (other than shares to be cancelled in accordance with
Section 1.10(b) and any Dissenting Shares) will, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive $7.10 in cash per share without any interest thereon (as adjusted
in accordance with this Agreement, the “Price Per Share”), subject to
appropriate adjustment for any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange with respect to the Company
Common Stock occurring before the Effective Time. As of the Effective Time, all
such shares of the Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a stock certificate which immediately prior to the Effective Time
represented any such shares of the Company Common Stock (a “Certificate”) shall
cease to have any rights with respect thereto, except the right to receive,
upon the surrender of such Certificates as provided in Section 1.12, the
aggregate Price Per Share attributable to the number of shares of the Company
Common Stock represented by such Certificate in cash.  

 

1.11  OPTIONS.

 

Except
as may be otherwise agreed in writing among Parent, the Company and any holder
of any Option (as hereinafter defined), upon the consummation of the Merger,
each option to acquire Company Common Stock (each, an “Option,” and
collectively, the “Options”) outstanding immediately prior to the Effective
Time under the Company’s 1997 Incentive and Non-Qualified Stock Option Plan, as
amended, the Company’s Stock Option Plan for Non-Employee Directors, as
amended, and the Former AllPoints Systems 1996 Stock Option Plan (such plans
referred to herein as the “Option Plans”), whether or not then exercisable or vested,
shall be terminated and cancelled immediately prior to the Effective Time for
the consideration (if any) provided in this Section 1.11. Each Option that has
an option exercise price per share less than the Price Per Share and (i) that
is vested immediately prior to the Effective Time or (ii)

 

 

that automatically vests
upon or in connection with the consummation of the Merger without any action on
the part of the Company or the Company Board or any committee thereof (each
Option described in the foregoing clauses (i) and (ii), a “Vested Option”),
shall entitle the holder thereof to the right to receive, as soon as is
practicable on or after the Effective Time from the Surviving Corporation a
cash payment (less applicable federal, state and local withholding taxes) in an
aggregate amount equal to the product of (A) the excess of the Price Per Share
over the exercise price per share of such Vested Option and (B) the number of
shares of Company Common Stock for which such Vested Option was exercisable. Each
Option that is not a Vested Option and each Option that is a Vested Option that
has an exercise price per share equal to or greater than the Price Per Share
will automatically be cancelled without any consideration as of the Effective
Time. As of the Effective Time, each of the Option Plans and any other plan,
program or arrangement (other than the Warrants) providing for the issuance or
grant of any other interest in respect of the capital stock or equity of the
Company or any subsidiary thereof shall be terminated and cancelled (without
any liability on the part of the Surviving Corporation other than as expressly
set forth in this Section 1.11). The Company and the Company Board and any
committee thereof shall take any and all actions (including but not limited to
giving requisite notices to holders of Options advising them of such
cancellations and any rights pursuant to this Section 1.11 and obtaining any
requisite consents from holders of Options) (A) as are necessary to fully
advise holders of Options of their rights under the Option Plans in connection
with the Merger and the Options and (B) as are necessary to effectuate the
provisions of this Section 1.11 under the terms of the Option Plans. From and
after the Effective Time, other than as expressly set forth in this Section
1.11, no holder of an Option shall have any rights in respect thereof other
than to receive payment (if any) for his or her Options as set forth in this
Section 1.11.

 

1.12  SURRENDER AND PAYMENT.

 

(a)  Paying
Agent. Before the Effective Time, Parent shall designate a reputable bank or trust company reasonably acceptable to
the Company to act as paying agent for the record holders of shares of the
Company Common Stock in connection with the Merger (the “Paying Agent”).
Immediately after the Effective Time, Parent will deposit or cause to be
deposited the Payment Fund in trust with the Paying Agent for the benefit of
the holders of Certificates with the Paying Agent. The Paying Agent will be
authorized, at the request of Parent, to invest the Payment Fund in (i)
investment grade money market instruments, (ii) direct obligations of the
United States of America, (iii) obligations for which the full faith and credit of the United States of America is
pledged to provide for the payment of principal and interest, (iv) commercial
paper rated the highest quality by either Moody’s Investors Services, Inc. or
Standard & Poor’s Corporation or (v) certificates of deposit, bank
repurchase agreements or bankers’ acceptances of commercial banks with capital
exceeding $1 billion, in each case having maturities not to exceed 30 days and
as designated by Parent, with any interest earned thereon being payable to
Parent. The “Payment Fund” shall mean cash in immediately available funds in an
aggregate amount which is equal to the aggregate Price Per Share payable in
accordance with Section 1.10(c) and (ii) is sufficient to enable the Paying
Agent to make payments pursuant to Section 1.10 and 1.11.

 

(b)  Surrender
of Certificates. Promptly after the Effective Time, Parent and the Surviving Corporation will cause the Paying Agent
to mail and/or otherwise distribute to each record holder of Certificates
(other than holders of Certificates representing Dissenting Shares or

 

 

representing shares contemplated by Section 1.10(b)), a notice and
letter of transmittal and instructions in standard form for use in effecting
the surrender of all Certificates held by each such record holder.

 

(c)  Payment
Procedures. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal duly executed and completed, the Paying Agent shall
pay to the holder of such Certificate the aggregate Price Per Share
attributable to the number of shares of the Company Common Stock represented by
such Certificate, and such Certificate will then be cancelled. Until
surrendered in accordance with the provisions of this Section 1.12(c), each
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing shares covered by Section 1.10(b)) will represent for
all purposes only the right to receive the aggregate Price Per Share relating
thereto. No interest shall accrue or be paid in respect of cash payable upon
the surrender of Certificates. At the Effective Time, all Certificates
outstanding immediately prior to the Effective Time shall automatically be
cancelled and retired and shall cease to exist, and holders of Certificates
shall cease to have any rights as stockholders of the Company, except as
provided herein or under applicable state corporation law. If any payment of
cash in respect of cancelled shares of the Company Common Stock is to be paid
to a Person other than the registered holder of the shares represented by the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such payment that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Paying Agent any transfer
or other Taxes required as a result of such payment to a Person other than the
registered holder of such shares or establish to the satisfaction of the Paying
Agent that such Tax has been paid or is not payable. Any consideration
otherwise payable pursuant to this Agreement shall be subject to all applicable
federal, state, local and foreign Tax withholding requirements. For purposes of
this Agreement, “Tax” (including, with correlative meaning, the terms “Taxes”
and “Taxable”) means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, transfer, employment, unemployment,
disability, use, property, withholding, excise, production, value added, occupancy
and other taxes, duties or assessments of any nature whatsoever, together with
all interest, penalties, fines and additions to tax imposed with respect to
such amounts and any interest in respect of such penalties and additions to
tax. For purposes of this Agreement, “Person” means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization, entity or group (as defined in the Securities and Exchange Act of
1934, as amended (the “Exchange Act”)).

 

(d)  No
Transfer. After the Effective Time, there will be no transfers of shares shares
of the Company Common Stock recorded on the stock transfer books of the
Surviving Corporation. If, after the Effective Time, valid Certificates are
presented to the Surviving Corporation or to the Paying Agent, they will be
cancelled and exchanged for the aggregate Price Per Share attributable to the
number of shares of the Company Common Stock represented by such Certificate as provided in Section
1.10(c).

 

(e)  Lost Certificates.
If any Certificate has been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim

 

 

that may be made against it with respect to such Certificate, the
Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate
the aggregate Price Per Share attributable to the number of shares of the
Company Common Stock represented by such Certificate due to such Person as
provided in Section 1.12(c) of this Agreement.

 

1.13  UNCLAIMED MERGER
CONSIDERATION.

 

(a)  Transfer to
Parent. Any portion of the Payment Fund and the Company Contribution made available to the Paying Agent pursuant to
Section 1.12(a) that remains unclaimed by the holders of Certificates for 180
days after the Effective Time will be transferred to the Parent upon demand.
Any holder of Certificates who has not theretofore complied with this Article I
will thereafter look only to the Parent for payment of the Price Per Share in
accordance with this Agreement upon surrender of such Certificates.

 

(b)  No Escheat
of Remaining Funds. None of Parent, Merger Sub, the Company or the Paying Agent will be liable to any Person in respect
of any cash delivered from the Payment Fund and the Company Contribution to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates have not been surrendered before seven years
after the Effective Time (or immediately before such earlier date on which any
payment pursuant to this Section 1.13(b) would otherwise escheat to or become the
property of any Governmental Entity), the aggregate Price Per Share payable in
respect to such Certificates will, unless otherwise provided by applicable law,
become the property of the Parent, free and clear of all claims or interest of
any Person previously entitled thereto. For purposes of this Agreement,
“Governmental Entity” means any supranational, foreign, national, state,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any quasi-governmental or private body exercising
any regulatory, taxing or other governmental or quasi-governmental authority.

 

(c)  Merger
Consideration. Any portion of the Payment Fund and Company Contribution made
available to the Paying Agent pursuant to Section 1.12(a) to pay the Price Per
Share in cash for shares of the Company Common Stock issued and outstanding
immediately prior to the Effective Time for which appraisal rights have been
perfected shall be returned to Parent, upon demand.  

 

1.14  DISSENTING SHARES.

 

Notwithstanding
Section 1.10 hereof, shares of the Company Common Stock issued and outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has properly
demanded such holder’s right to appraisal for such shares in accordance with
Section 262 of the DGCL (and who has neither effectively withdrawn nor lost
his, her or its right to such appraisal) (“Dissenting Shares”), shall not be converted
into a right to receive cash pursuant to Section 1.10, and the holder thereof
shall be entitled to only such rights as are granted by the DGCL. If after the
Effective Time such holder fails to perfect or withdraws or otherwise loses
his, her or its right to appraisal, such Dissenting Shares shall be treated as
if they had been converted as of the Effective Time into a right to receive
cash as provided in Section 1.10, without interest thereon. The Company shall
give Parent prompt notice of any demands received by the Company under

 

 

Section 262 of the DGCL for
appraisal of shares of the Company Common Stock, and Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any
such demands.

 

ARTICLE II

REPRESENTATIONS
AND WARRANTIES

 

2.1  REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.

 

Except
as set forth in the Company Disclosure Schedule delivered by the Company to
Parent at or prior to the execution and delivery of this Agreement (the
“Company Disclosure Schedule”) (it being understood that (a) the Company
Disclosure Schedule will be arranged by sections corresponding to the lettered
and numbered sections contained in this Section 2.1 and (b) nothing in the
Company Disclosure Schedule shall be deemed adequate to disclose an exception
to a representation or warranty made herein unless the Company Disclosure
Schedule identifies the exception with particularity and describes the relevant
facts in detail), the Company represents and warrants to Parent and Merger Sub
as of the date of this Agreement and as of the Closing Date:

 

(a)  Organization,
Standing and Power. Each of the Company and each of its Subsidiaries (i) has been organized and is validly existing
and in good standing under the laws of its jurisdiction of organization, (ii)
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, (iii) has all requisite power and authority
to own or lease and operate its properties and assets, and to carry on its
business as now conducted and as currently proposed to be conducted and (iv)
has obtained all licenses, permits, franchises and other governmental
authorizations necessary to the ownership or operation of its properties or the
conduct of its business, except, in the cases of clauses (i) (with respect to
Subsidiaries only), (ii) and (iv), as would not reasonably be expected to have
a Material Adverse Effect on the Company. For purposes of this Agreement,
“Material Adverse Effect” means, with respect to any entity, (a) any adverse
change, circumstance or effect that, individually or aggregated with other
changes, circumstances and effects, is or would reasonably be expected to be
materially adverse to the business, operations, cash flows, assets,
liabilities, condition or results of operations of such entity and its
Subsidiaries taken as a whole, or (b) an impairment of the ability of such
entity and its Subsidiaries taken as a whole to perform any of their material
obligations under this Agreement or to consummate the transactions contemplated
hereby, excluding any such change, circumstance or effect to the extent
resulting from or arising in connection with (A) changes or conditions
generally affecting the industries or segments in which the Company operates,
(B) changes in general economic, market or political conditions which, in the
case of (A) or (B), do not have a materially disproportionate effect (relative
to other industry participants) on the Company, (C) any litigation brought or
threatened by stockholders of the Company (whether on behalf of the Company or
otherwise) in respect of the announcement of this Agreement or the consummation
of the Merger, or (D) any disruption of customer, business partner, supplier or
employee relationships that resulted from the announcement of this Agreement or
the consummation of the Merger, to the extent so attributable; provided, that
any reduction in the market price or trading volume of the Company’s publicly
traded common stock

 

 

shall not be deemed to
constitute a Material Adverse Effect on the Company (it being understood that
the foregoing shall not prevent Parent from asserting that any underlying cause
of such reduction independently constitutes such a Material Adverse Effect on
the Company). Copies of the Organizational Documents, as amended and currently
in force, and all corporate minute books and records of the Company and each of
its Subsidiaries have been furnished by the Company to Parent for inspection.
For purposes of this Agreement, “Organizational Documents” means, with respect to
any entity, the certificate of incorporation, bylaws and/or other similar
governing documents of such entity.

 

(b)  Capital
Structure.

 

(i)  The
authorized capital stock of the Company consists solely of (A) 150,000,000 shares of the Company Common Stock and
(B) 20,000,000 shares of Preferred Stock, par value $0.01 per share. As of the
close of business on the date hereof, (x) with respect to Company Common Stock,
6,822,099 shares of Company Common Stock are issued and outstanding 156,418
shares of Company Common Stock are issued and held in the treasury of the
Company and 1,984,536 shares of Company Common Stock are reserved for issuance
upon the exercise of outstanding Options and Warrants to purchase Company
Common Stock, and (y) with respect to Preferred Stock, no shares are issued and
outstanding, or held in the treasury of the Company. As of the date of this
Agreement, there are no outstanding or authorized options, warrants or other
rights to acquire capital stock of the Company other than (I) Options
representing in the aggregate the right to purchase 1,388,499 shares (of which
17,932 are vested and have a per share exercise price that is less than the
Price per Share, of which 454,231 are vested and have a per share exercise
price that is equal to or greater than the Price Per Share, and of which
916,336 are unvested)) of the Company Common Stock under the Option Plans and
(II) warrants to acquire shares of the Company Common Stock (“Warrants”)
representing in the aggregate the right to purchase 144,286 shares (of which
714 have a per share exercise price that is less than the Price per Share and
which will be unvested as of immediately prior to the Effective Time, 715 have
a per share exercise price that is less than the Price per Share and which will
be vested as of immediately prior to the Effective Time, and 142,857 have a per
share exercise price that is less than the Price per Share and which will be
unvested as of immediately prior to the Effective Time). Section 2.1(b)(i) of
the Company Disclosure Schedule sets forth, as of the date hereof, the exercise
price, grant date, expiration date for and number of shares subject to all
outstanding Options and Warrants to purchase Company Common Stock. All
outstanding shares of capital stock or other equity interests, as the case may
be, of the Company and each of the Subsidiaries are duly authorized, validly
issued, fully paid and non-assessable, and are not subject to and were not
issued in violation of any preemptive rights, purchase option, call option,
right of first refusal, subscription right or any similar right, and were
issued in compliance with all applicable federal and

 

 

state
securities laws and regulations. All shares of capital stock of the Company
subject to issuance on the terms and conditions set forth in the Options or
Warrants pursuant to which they are issuable, will, when issued in accordance
with the terms of such instruments, be duly authorized, validly issued, fully
paid and non-assessable, and will not be subject upon issuance to, nor issued
in violation of, any preemptive rights, purchase option, call option, right of
first refusal, subscription right or any similar right, and will be issued in
compliance with applicable federal and state securities laws and regulations.
Except as set forth above and in Section 2.1(b)(i) of the Company Disclosure
Schedule, (A) there are no shares of capital stock or other equity securities
(voting or nonvoting) of the Company or any of its Subsidiaries authorized,
issued or outstanding, (B) there are no outstanding or authorized options,
warrants or restricted stock (other than the options to purchase Company Common
Stock and Warrants described in Section 2.l(b)(i) of the Company Disclosure
Schedule) or calls, preemptive rights, subscriptions or other similar rights,
limited stock appreciation rights, stock-based performance units, agreements,
arrangements, commitments or claims of any character, contingent or otherwise,
(1) relating to the issued or unissued capital stock of the Company or any of its
Subsidiaries or (2) obligating the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interests in the Company or any of its
Subsidiaries or securities convertible into or exchangeable for such shares or
equity interests, or obligating the Company or any of its Subsidiaries to
grant, extend or enter into any such option, restricted stock, warrant, call,
preemptive right, subscription or other right, convertible or exchangeable
security, agreement, arrangement, commitment or claim.

 

(ii)  Section
2.1(b)(ii) of the Company Disclosure Schedule sets forth a complete and accurate list of the Subsidiaries of
the Company. For purposes of this Agreement, “Subsidiary” when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, (1) of which such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting and economic interests in such
partnership) or (2) at least a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries. All of the issued and outstanding shares of
capital stock of the Company’s Subsidiaries are owned directly or indirectly by
the Company free and clear of any liens, claims, encumbrances, restrictions, preemptive
rights or any other claims of any third party (“Liens”). Except for the capital
stock of its Subsidiaries, the Company does not own, directly or indirectly,
any capital stock or other ownership interest in any Person.  

 

(iii)  No bonds,
debentures, notes or other indebtedness
of the Company nor any of its Subsidiaries having, or convertible into other
securities having, the right to vote on any matters on which stockholders may
vote (“Company Voting Debt”) are authorized, issued or outstanding.

 

(iv)  There are no
outstanding obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or its Subsidiaries. There is no voting
trust or other agreement to which the Company or any of its Subsidiaries is a
party or is bound, or, to the knowledge of the Company, to which any
stockholder of such entity is a party or is bound, with respect to the voting
of the capital stock or other voting securities of the Company of any of its Subsidiaries.
The Company has the ability to effect any action requiring the approval of

 

 

the stockholders of any
of its Subsidiaries and to designate all of the members of the board of
directors or others performing similar functions of each of its Subsidiaries.

 

(c)  Authority; No Conflicts.

 

(i)  The Company
has all requisite corporate power and corporate authority to execute and
deliver this Agreement, the Voting Agreements and a bill of sale, duly executed
on behalf of the Company, in the form attached hereto as Exhibit C, and short
form assignments of trademarks, domain names and copyrights in the form
attached hereto as Exhibit C-l (Exhibits C and C-l collectively, the “Asset
Purchase Documents”) and each instrument required hereby to be executed and
delivered by the Company prior to or at the Effective Time and, subject to the
adoption of this Agreement and approval of the Asset Purchase by the requisite
vote of the holders of the Company Common Stock, to consummate the transactions
contemplated hereby and perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Asset Purchase Documents, the
Voting Agreement and each instrument required hereby to be executed and
delivered by the Company prior to or at the Effective Date, the performance of
its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject in the case of the consummation
of the Merger and the Asset Purchase to any required adoption of this Agreement
by the holders of the Company Common Stock. Subject to the adoption of this
Agreement and the approval of the Asset Purchase by the requisite vote of the
holders of the Company Common Stock, this Agreement and the Voting Agreement
have been, and the Asset Purchase Documents, when executed and delivered in
accordance herewith, will be, duly executed and delivered by the Company and,
assuming due authorization, execution and delivery of such agreements by the
other parties hereto and thereto, constitute (or, in the case of the Asset
Purchase Documents, will constitute) valid and binding agreements of the
Company, enforceable against it in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally and by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). 

 

(ii)  The
execution and delivery of each of this Agreement, the Asset Purchase Documents
and each of the Voting Agreements does not or will not, as the case may be, and
the consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a material
penalty or right of termination, amendment, cancellation or acceleration of any
material obligation or the loss of a material benefit under, or the creation of
a Lien on any material assets pursuant to (any such conflict, violation,
default, right of termination, amendment, cancellation or acceleration, loss or
creation, a “Violation”): (A) any provision of the Organizational Documents of
the Company or any of its Subsidiaries or (B) subject to obtaining or making
the consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in Section 2.1(c)(iii) below, (x) any Company Material
Contracts or other material obligation, instrument, permit, concession,
franchise, license, or (y) except 

 

 

for
such Violations as would not reasonably be expected to have a Material Adverse
Effect on the Company, any judgment, order, decree, statute, law, ordinance,
rule or regulation, in each case described in (x) or (y) above applicable to
the Company, its Subsidiaries or their respective properties or assets.

 

(iii)  No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to the Company or
any of its Subsidiaries in connection with the execution and delivery of this
Agreement, the Asset Purchase Documents or the Voting Agreements by the Company
or the consummation by the Company of the transactions contemplated hereby,
except for those required under or in relation to (A) state securities or “blue
sky” laws, (B) the Securities Act of 1933 as amended (the “Securities Act”),
(C) the Exchange Act, (D) the DGCL with respect to the filing and recordation
of the Certificate of Merger or other documents, (E) rules and regulations of
the NASDAQ National Market (“NASDAQ”) and (F) those consents, approvals,
orders, authorizations, registrations, declarations or filings the failure of
which to obtain or make as would not reasonably be expected to (x) result in a
material loss or liability to the Company or its Subsidiaries or (y) interfere
in a material manner with the business or operations of the Company and its
Subsidiaries or the ownership of their property or assets.

 

(d)  Reports and
Financial Statements.

 

(i)  The Company
has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company with the Securities and Exchange Commission
(the “SEC”) since December 31, 2001 through the date of this Agreement,
including all exhibits thereto (the “Company SEC Reports”). All of the Company
SEC Reports have been filed using the SEC’s Electronic Data Gathering and
Retrieval System. None of the Company’s Subsidiaries is required to file any
form, report or other document with the SEC. None of the Company SEC Reports,
as of their respective dates (and, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing), contained, and
none of the Company’s subsequent filings made after the date of this Agreement
amending or superseding any Company SEC Reports and any reports, schedules,
forms, statements, proxy statements or other documents (including in each case,
exhibits, schedules, amendments or supplements thereto and any other
information incorporated by reference therein) filed with the SEC after the
date of this Agreement (the “Subsequent Filings”) will contain, 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 therein, in light of the
circumstances under which they were made, not misleading.

 

(ii)  Each of the
financial statements (including the related notes) included in the Company SEC
Reports and the Subsequent Filings presents or will present fairly, in all
material respects, the consolidated financial position and consolidated results
of operations of the Company and its Subsidiaries as of the respective dates or
for the respective periods set forth therein, all in conformity with generally
accepted accounting principles (“GAAP”) consistently applied during the periods
involved except as otherwise noted therein, and subject, in the case of the

 

 

unaudited
interim financial statements, to normal and recurring year-end adjustments that
have not been and are not expected to be material in amount, and except that
the unaudited financial statements need not contain footnotes. Since December
31, 2002, there has been no material change in the Company’s accounting methods
or principles except as described in the notes to the consolidated financial
statements of the Company contained in the Company SEC Reports and Subsequent
Filings. All of such Company SEC Reports and Subsequent Filings, as of their
respective dates (and as of the date of any amendment to the respective Company
SEC Reports), complied and will comply as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder.

 

(iii)  Except (A)
as set forth in the consolidated balance
sheets (and notes thereto) of the Company and its consolidated Subsidiaries
included in the Company SEC Reports, (B) for liabilities or obligations
incurred in the Ordinary Course (none of which is a material liability
resulting from breach of contract, breach of warranty, tort, infringement,
claim or lawsuit), (C) to the extent specifically identified as a claim,
liability, indebtedness or payment obligation of the Company or its
Subsidiaries of any nature in any section of the Company Disclosure Schedule
and (D) for such claims, liabilities, indebtedness or payment obligations of
any nature that would have been required to be disclosed as such in any section
of the Company Disclosure Schedule but for the existence of a materiality or
Company Material Adverse Effect qualification or a specific dollar threshold
limiting such disclosure since December 31, 2002, neither the Company nor any
of its Subsidiaries has any material liabilities or material obligations of any
nature (whether accrued, absolute, contingent, asserted, liquidated or
otherwise).  For purposes of this
Agreement, “Ordinary Course” means, with respect to any entity, any actions
taken in the regular and ordinary course of that entity’s business, consistent
in all material respects with past practices.

 

(e)  Information
Supplied.

 

(i)  None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (A) the proxy or information statement (including any amendment or
supplement thereto) related to the meeting of the Company’s stockholders to be
held in connection with the Merger and the transactions contemplated by this
Agreement (the “Proxy Statement”) or (B) the Schedule 13E-3 will, at the time
the Proxy Statement is first published, sent or given to the Stockholders of
the Company, at the time of the Company Stockholders Meeting and at the Effective
Time, contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
false or misleading or necessary to correct any statement in any earlier
communication with respect to any solicitation of proxies for the Company
Stockholders Meeting which shall have become false or misleading. All documents
that the Company is responsible in whole or in part for filing with the SEC in
connection with the Merger will comply as to form in all material respects with
the requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder at the time the Proxy Statement is first
published, sent or given to the Stockholders of the Company and at the
Effective Time.

 

 

(ii)  Notwithstanding
the foregoing provisions of this Section 2.1(e), no representation or warranty
is made by the Company with respect to statements made or incorporated by
reference in the Proxy Statement and the Schedule 13E-3 based on information
supplied in writing by Parent or Merger Sub specifically for inclusion or
incorporation by reference therein.

 

(f)  Compliance
with Applicable Laws; Regulatory Matters. The Company and its Subsidiaries hold
all permits, licenses, certificates, franchises, registrations, variances,
exemptions, orders and approvals of all Governmental Entities (“Permits”) which
are material to the Leases and the operation of their respective businesses,
except for such failures to have received such Permits as would not reasonably
be expected to have a Material Adverse Effect on the Company or materially
affect the ownership, use, occupancy or value of the Leases.  The
Company and its Subsidiaries and the Leases are in compliance with the terms of
such Permits, except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect on the Company or materially affect
the ownership, use, occupancy or value of the Leases. The businesses of the
Company and its Subsidiaries are not being and have not been conducted in
violation of any law, ordinance, regulation, judgment, decree, injunction, rule
or order of any Governmental Entity, except for violations which would not
reasonably be expected to have a Material Adverse Effect on the Company. No
investigation by any Governmental Entity with respect to the Company or any of
its Subsidiaries is pending or, to the knowledge of the Company, threatened.

 

(g)  Litigation.
Except as disclosed in the Company SEC Reports, there is no litigation, arbitration, grievance, claim, suit,
action, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its
Subsidiaries or any of their respective assets which, in the case of any such
pending litigation, arbitration, grievance, claim, suit, action, investigation
or proceeding, could reasonably be expected to result in payments in excess of
$250,000 or, in the case of any threatened litigation, arbitration, grievance,
claim, suit, action, investigation or proceeding, would reasonably be expected
to have a Material Adverse Effect on the Company. There is no judgment, award,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries that requires any
payment in excess of $250,000 or which would materially interfere with the
business or operations of the Company or any of its Subsidiaries.  

 

(h)  Taxes.
(i) The Company and each of its Subsidiaries have  duly and timely filed (taking into account
any extension of time within which to file) all material Tax Returns required
to be filed by any of them, and all such filed Tax Returns are complete and
accurate in all material respects, and neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return, (ii) the Company and each of its Subsidiaries have paid
all Taxes that are due and owing whether or not shown on such filed Tax Returns
or that the Company or any of its Subsidiaries are obligated to withhold from
amounts owing to any stockholder, employee, creditor or third party, except
with respect to matters contested in good faith and for which adequate reserves
have been established in accordance with GAAP as reflected in the most recent
consolidated balance sheet, (iii) there are no pending or, to the knowledge of
the Company, threatened audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters relating to the Company or any
of its  

 

 

Subsidiaries, (iv) there are
no material deficiencies or claims for any Taxes that have been proposed,
asserted or assessed against the Company or any of its Subsidiaries, (v) there
are no material Liens for Taxes upon the assets of the Company or any of its
Subsidiaries, other than Liens for current Taxes not yet due and payable and
Liens for Taxes that are being contested in good faith by appropriate proceedings
and for which adequate reserves have been established in accordance with GAAP
as reflected in the Latest Financials and (vi) none of the Company or its
Subsidiaries has made an election under Section 341(f) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the “Code”). Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in the receipt (whether in cash or property or
the vesting of property) by any “disqualified individual” (as such term is
defined in Proposed Treasury Regulation Section 1.280G-1) with respect to the
Company or any of its Subsidiaries of any amount that would be an “excess
parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).
Neither the Company nor any of its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the past five years. Neither the Company nor any of its
Subsidiaries is a party to, bound by or has any obligation under, any Tax
sharing agreement or similar contract or arrangement or any agreement that
obligates it to make any payment computed by reference to the Taxes, taxable
income or taxable losses of any other Person (other than contracts or
arrangements entered into with employees, consultants or independent
contractors or in connection with purchase or sale agreements or sale
leasebacks, which contracts and arrangements would not reasonably be expected
to have a Material Adverse Effect on the Company). The Company and its
Subsidiaries (A) are not, and have not been, a member of an affiliated group
filing a consolidated federal income Tax Return or an affiliated, combined or
unitary group other than a group the common parent of which is the Company and
(B) have no liability for Taxes of any Person under Treasury Regulation
1.1502-6(a) (or any similar provision of state, local or foreign law), or as a
transferee or successor, by contract or otherwise. None of the Company or its
Subsidiaries has waived any statute of limitations in respect of Taxes or
consented to extend the time, or is the beneficiary of any extension of time,
in which any Tax may be assessed or collected by any taxing authority. None of
the Company or its Subsidiaries will be required to include any item of income
in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any
(i) change in method of accounting for a taxable period ending on or prior to
the Closing Date under Code Section 481(a), Section 481(c) (or any
corresponding or similar provision of state, local or foreign income Tax law),
(ii) “closing agreement” as described in Code Section 7121 (or any
corresponding or similar provision of state, local or foreign income Tax law),
(iii) deferred intercompany gain or any excess loss account described in
Treasury Regulations under Code Section 1502 (or any corresponding or similar
provision of state, local or foreign income Tax law) or (iv) installment sale
made prior to the Closing Date. Neither the Company nor any of its Subsidiaries
has incurred any liability to make any payments that are or may be
nondeductible under Code Section 162(m). Neither the Company nor any of its
Subsidiaries has filed with respect to any item a disclosure statement pursuant
to Code Section 6662. Seller has no knowledge of the existence of any
“5-percent shareholder” (as defined in Section 382(k)(7) of the Code) of the
Company, since August 4, 2000, and the Company has no knowledge of any changes
in ownership in the Company’s capital stock by such stockholders since August
4, 2000, except as set forth in Section 2.1(h) of the Company Disclosure
Schedule or as reported by such stockholders that

 

 

were
also officers or directors of the Company through filings pursuant to Section
16 of the Exchange Act. Since August 4, 2000, the Company’s net operating
losses for federal income tax purposes are not less than $30,000,000. For
purposes of this Agreement, “Tax Returns” means all returns and reports
(including elections, claims, declarations, disclosures, schedules, estimates,
computations and information returns) required to be supplied to a Tax
authority in any jurisdiction relating to Taxes, including any amendments
thereof.

 

(i)  Absence of
Certain Changes or Events. Since December 31, 2002, the Company and its
Subsidiaries have conducted their respective businesses in the Ordinary Course.
Except as disclosed in Section 2.1(i) of the Company Disclosure Schedule:

 

(i)  except as
set forth in the Company SEC Reports or as specifically identified on the
Company Disclosure Schedules as an event, condition or occurrence constituting
a Material Adverse Effect, there has not been any condition, event or
occurrence which has had or would reasonably be expected to have a Material
Adverse Effect on the Company;

 

(ii)  other than
the reverse stock split of the Company’s
issued and outstanding shares of common stock that occurred on January 2, 2003,
there has been no declaration, setting aside or payment by the Company or any
Subsidiary of any dividend or other distribution payable in cash, securities or
other property with respect to, or split, combination, redemption,
reclassification, purchase or other acquisition of, any shares of capital stock
(or other equity interests) or other securities of the Company or any of its
Subsidiaries, other than those payable by a wholly-owned Subsidiary of the
Company solely to the Company or to another wholly-owned Subsidiary of the
Company, or any other change in the capital structure of the Company or any of
its Subsidiaries;  

 

(iii)  other than
issuances of Common Stock pursuant to the exercise of Options outstanding prior
to the date of this Agreement, there has been no issuance or sale, or
authorization therefor, by the Company or any Subsidiary of any shares of
capital stock or any other securities (equity or debt) of the Company or any of
its Subsidiaries or issuance, sale or authorization by the Company or any
Subsidiary for any securities (equity or debt) convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to purchase
or subscribe for, or the entering into by the Company or any Subsidiary of any
arrangement or contract, agreement, instrument, arrangement, guarantee,
license, executory commitment or understanding that is binding on the Company
or any of its Subsidiaries (a “Contract”) with respect to the issuance or sale
of, any shares of capital stock of any class of the Company or Voting Debt or
other securities (equity or debt), or any other changes to the capital
structure of the Company or any of its Subsidiaries;  

 

(iv)  there have
been no Contracts (or amendments, modifications, supplements or replacements to
existing Contracts) made or committed to be made or entered into to be
performed by the Company or any of its Subsidiaries relating to, capital
expenditures by the Company or any of its Subsidiaries under which the
obligations of the Company or any of its Subsidiaries from and after June 30,
2003 will be in excess of $100,000 in the current year or any future calendar
year, or in the aggregate for such

 

 

capital
expenditures with a value in excess of $200,000 and the Company and its
Subsidiaries have not made any capital expenditures in excess of such amounts
since June 30, 2003;

 

(v)  neither the
Company nor any of its Subsidiaries has acquired, by merging or consolidating
with, by purchasing an equity interest in, by purchasing all or a portion of
the assets of, or by any other manner, any business or any Person, or other
acquisition of any assets of any Person (other than the purchase of equipment,
inventories and supplies in the Ordinary Course);

 

(vi)  there have
been no transfers, leases, licenses, guarantees, sales, mortgages, pledges,
disposals of, subjecting to Liens (other than Permitted Liens) or other
encumbrances on, any assets of the Company or any of its Subsidiaries that are
material to their business or that have a value individually in excess of
$50,000 other than with respect to (i) transactions between wholly-owned
Subsidiaries of the Company and the Company or between wholly-owned
Subsidiaries of the Company, (ii) dispositions of excess or obsolete assets of
the Company or any of its Subsidiaries in the Ordinary Course and (iii) leases,
licenses or sales in the Ordinary Course;

 

(vii)  except as
disclosed in the Company SEC Reports and except to the extent required under
existing employee and director benefit plans, agreements or arrangements in
effect on December 31, 2002, as set forth in Section 2.1(i)(vii) of the Company
Disclosure Schedule or required by applicable law or contemplated by Section
1.10, and other than the grant of awards in the Ordinary Course pursuant to the
Company’s stock option plans prior to the date of this Agreement and set forth
in Section 2.1(b)(i) of the Company Disclosure Schedule, there have been no
increases in the compensation or fringe benefits of any of the Company’s or its
Subsidiaries’ directors, officers or employees (except for increases to
employees who are not officers of the Company or any of its Subsidiaries in the
Ordinary Course);

 

(viii)  there have
been no plans of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganizations of the
Company or any of its Subsidiaries or any agreements relating to any
Acquisition Proposals adopted or entered into;

 

(ix)  except as
disclosed in the Company SEC Reports, there has been no (i) incurrence,
assumption, modification or prepayment of any indebtedness for borrowed money,
issuance of any debt securities or warrants or other rights for the acquisition
of debt securities, or guarantees, endorsements or liabilities or
responsibilities for the obligations or indebtedness of another Person by the
Company or any of its Subsidiaries, other than indebtedness owing to or
guarantees of indebtedness owing to, the Company or any direct or indirect
wholly-owned Subsidiary of the Company, or capital leases entered into, or (ii)
loans, extensions of credit or advances by the Company or any of its
Subsidiaries to any other Person, other than to the Company or to any direct or
indirect wholly-owned Subsidiary of the Company, except, in the case of
preceding clauses (i) and (ii), for loans, extensions of credit or advances
constituting trade payables or receivables arising in the Ordinary Course and
in the case of preceding clause (ii), for

 

 

advances
to employees in respect of travel and entertainment expenses in the Ordinary
Course;

 

(x)  except as
set forth on Schedule 4.10(e), there have been no accelerations of the payment,
right to payment or vesting of any bonus, severance, profit sharing,
retirement, deferred compensation, stock option, restricted stock, insurance
(including arrangements or agreements for premiums therefor) or other
compensation or benefits of the Company or any of its Subsidiaries;

 

(xi)  neither the
Company nor any of its Subsidiaries has made any payments, discharges,
settlements or satisfactions of any claims, litigation, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) other than (i) the payment, discharge, settlement or satisfaction,
in the Ordinary Course, of (A) liabilities reflected or reserved against in the
December 31, 2002 balance sheet included in the Company SEC Documents or (B)
liabilities (other than litigation) subsequently incurred in the Ordinary Course
and (ii) other claims, litigation, liabilities or obligations (qualified as
aforesaid) that in the aggregate do not exceed $100,000;

 

(xii)  except as
disclosed in the Company SEC Reports, there have been no plans, announcements,
implementations or effectuations of any reductions in force, lay-offs, early
retirement programs, severance programs or other programs or efforts concerning
the termination of employment of employees of the Company or its Subsidiaries,
other than routine employee terminations in the Ordinary Course;

 

(xiii)  there have
been no actions or omissions which would (or would reasonably be likely to)
materially impede, delay, hinder or make more burdensome for the Surviving
Corporation or Parent to obtain and maintain any and all authorizations,
approvals, consents or orders from any Governmental Entity or other third party
necessary or required to maintain the Company Permits in effect at all times
following the Merger on the same terms as in effect on the date of this
Agreement;

 

(xiv)  there have
been no entries into any new material lines of business;

 

(xv)  there has
been no failure to maintain with current or other financially responsible
insurance companies insurance on the Company’s or its Subsidiaries’ assets,
tangible and intangible, and their respective businesses in such amounts and
against such risks and losses as are consistent with past practice and standard
practice in the Company’s industry;

 

(xvi)  there has
been (i) no materially amended Tax Returns or claims for refund filed, (ii) no
making or rescission of any material Tax election or other failure to prepare
all Tax Returns in a manner which is consistent with the past practices of the
Company and each Subsidiary of the Company, as the case may be, with respect to
the treatment of items on such Tax Returns except to the extent that any
inconsistency (A) did not, would not, or may not materially increase Parent’s,
the Company’s or any of the Company’s Subsidiaries’ liability for Taxes for any
period or (B) is or was required by Law, (iii) no incurrence of any material
liability for Taxes other than in the ordinary

 

 

course
of business, apart from any Tax liability that may result from the Asset
Purchase, or (iv) no settlement or closing agreement with a taxing authority
that materially increases or would reasonably be likely to materially increase
the Tax liability of the Company or any of its Subsidiaries for any period
entered into; and

 

(xvii)  there has
been no material change by the Company
or any of its Subsidiaries in any accounting practices, policies or procedures
or any methods of reporting income, deductions or other items for income tax
purposes (except insofar as may have been required by applicable law, GAAP or
SEC rule or which are, or will be in the event of a requirement of law, GAAP or
SEC rule adopted or applicable after December 31, 2002, disclosed in the
Company SEC Reports and described in Section 2.1(i)(xvii) of the Company
Disclosure Schedule).

 

(j)  Vote
Required. The affirmative vote of the holders of a majority of the outstanding shares of the
Company Common Stock is the only vote of the holders of any class or series of
the capital stock of the Company necessary to adopt this Agreement or approve
the Asset Purchase or the other transactions contemplated hereby.

 

(k)  Real
Property.

 

(i)  None the
Company or any of its Subsidiaries owns any real property. Section 2.1(k)(i) of the Company Disclosure
Schedule sets forth a list of all material leases, subleases, licenses and
other agreements (true, correct and complete copies of which have been
delivered to Parent relating to real property with respect to which the Company
and/or any of its Subsidiaries are a party (collectively, the “Leases”). The
Leases are legal, valid, binding, enforceable and in full force and effect,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally and by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and the
Company and/or its Subsidiaries has a valid leasehold interest in the leasehold
estates and licenses created by the Leases free and clear of Liens, except
where such Liens would not interfere in any material respect with the conduct
of the business of the Company and its Subsidiaries as currently conducted on
the leased premises and would not in the aggregate have a Material Adverse
Effect on the Company. To the best knowledge of the Company, no other parties
to the Leases are in breach or default of any such leases.

 

In
addition, neither the Company or any of its Subsidiaries are in breach or
default of any of the Leases, and no events have occurred which, with the
passage of time, could constitute a default or breach by the Company or any of
its Subsidiaries under any of the Leases or, to the knowledge of the Company,
could constitute a default or breach by any other party under any Lease.

 

(ii)  No consent
or approval is required to be obtained
under any of the Leases, and no breach, default or right of termination shall
arise under any Lease nor does any landlord or other party have the right to
increase the amounts payable or charge any sum under any Lease, in each case in
connection with the execution and delivery of

 

 

this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except to the extent that the foregoing individually and
in the aggregate would not have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries or, to the knowledge of the
Company, any affiliates of any of the foregoing is, or has an ownership,
financial or other interest in, the landlord under any of the Leases. The
Leases comprise all of the real property used or intended to be used in, or
otherwise related to, the Company’s and its Subsidiaries’ business. Neither the
Company nor any of its Subsidiaries is subletting any space covered by, or has
assigned its interest in, any of the Leases. All brokerages commissions or
other fees due in connection with the real estate lease for the Company’s
headquarters in Dallas, Texas have been paid in full on or prior to the date
hereof.

 

(iii)  All of the
Company’s and its Subsidiaries’ material
personal property, including computers, electronics, leasehold improvements,
furnishings, machinery and equipment, is in good repair (ordinary wear and tear
excepted), is in good working order and, to the knowledge of the Company,
materially complies with all applicable Laws.

 

(iv)  Except as
set forth in Section 2.1(k)(iv) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is contractually obligated to undertake or
pay for the restoration or removal of any alterations or improvements or the
repair of any damages (including any such damages arising from lapses of
maintenance) with respect to any leased real property which is reasonably
likely to cost in excess of $100,000 in the aggregate except to the extent that
such restoration, removal, alteration, improvement or repair is specifically
provided for on the most recent consolidated balance sheet of the company.

 

(1)  Employee
Benefit Plans; Labor Matters.

 

(i)  Section
2.1(l)(i) of the Company Disclosure Schedule contains a true and complete list of each (a) employee benefit
plan and any material policy, program or arrangement (including, without
limitation, each “employee benefit plan,” within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and
each employee benefit plan and any material policy, program or arrangement that
is governed by the laws of any jurisdiction other than the United States)
sponsored, maintained or contributed to by the Company or any of its Subsidiaries
for the benefit of current or former employees, directors, consultants or
independent contractors or with respect to which the Company or any of its
Subsidiaries has any material liability, and (b) benefit arrangement or
Contract between the Company or its Subsidiaries and any current or former
employees, directors, consultants and independent contractors (which have or
had an annual base compensation of more than $75,000), and with respect to each
of (a) and (b) which sets forth any incentive, bonus, change in control,
severance, redundancy payment, notice of termination of employment, relocation,
employment and insurance provisions under which any such current or former
employee, director, consultant or independent contractor of the Company or any
of its Subsidiaries (the “Company Participants”) has any present or future
right to material benefits (collectively, the “Company Benefit Plans”).

 

 

(ii)  (a)  Each of the Company Benefit Plans has been
maintained, funded, operated, and administered in compliance with applicable
law, its governing plan document and, where applicable, any contractual
commitments to participants including but not limited to ERISA and the Code,
except where such noncompliance would not reasonably be expected to have a
Material Adverse Effect on the Company, (b) each of the Company Benefit Plans
intended to be “qualified” within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
(the “IRS”) to such effect, has been timely amended to comply in all material
respects with the provisions of the Tax legislation commonly referred to as
“GUST” and “EGTRRA” and has been or will be submitted to the IRS for a
determination letter that takes such amendments into account within the
remedial amendment period specified by Section 401(b) of the Code, and the
Company knows of no event that would cause the disqualification of any such
Company Benefit Plan, (c) no Company Benefit Plan provides welfare or
welfare-type benefits (whether or not insured) to Company Participants or their
dependents or beneficiaries beyond the Company Participant’s termination of
employment or termination of service of non-employees with the Company or any
of its Subsidiaries, other than coverage mandated by applicable law or benefits
the full cost of which is borne by the Company Participant (or his or her
dependent or beneficiary), (d) no Company Benefit Plan or any other employee
pension benefit plan that the Company, any Subsidiary or any other entity that,
together with the Company or any Subsidiary, is treated as a single employer
under Section 414 of the Code, maintains, contributes to or ever has maintained
or contributed to (i) is a “multiemployer plan,” as such term is defined in
Section 3(37) or 4001(a)(3) of ERISA, (ii) is subject to Section 412 of the
Code or Title IV of ERISA or (iii) is a defined benefit plan not covered by
2.1(l)(ii)(d)(ii) above, and neither the Company nor any of its Subsidiaries
has any liability (contingent or otherwise) under Title IV of ERISA or similar
applicable law on account of any such plan or otherwise, (e) neither the
Company nor any of its Subsidiaries has engaged in a transaction with respect
to any Company Benefit Plan which to the Company’s knowledge would subject such
entity to either a civil penalty assessed pursuant to Sections 502(i) or 502(1)
of ERISA or a Tax imposed pursuant to Section 4975 or 4976 of the Code, (f)
except as disclosed in the Company SEC Reports, to the knowledge of the
Company, there are no pending or threatened claims (other than routine claims
for benefits, but including an individual participant’s claims under a Company
health and welfare plan that, in the aggregate, exceeds or is likely to exceed
$100,000) by, on behalf of or against any of the Company Benefit Plans or any
trusts related thereto, nor has the Company or any of its Subsidiaries received
notice of any threatened, actions or proceedings by any Governmental Entity,
against or otherwise involving any Company Benefit Plan, (g) there are no
uninsured liabilities with respect to any benefits or claims under any Company
Benefit Plan, except as included as a liability in the financial statements
included in the Company SEC Reports, (h) no event has occurred and no condition
exists that to the Company’s knowledge would subject the Company or any of its
Subsidiaries to any Tax, fine, lien, penalty or other liability with respect to
any Company Benefit Plan imposed by ERISA or the Code or other applicable law,
which would reasonably be expected to have a Material Adverse Effect on the
Company, (i) any terminated Company Benefit Plan has been terminated in all
material respects in accordance with applicable laws and all benefits under any
such terminated

 

 

plan
have been paid in accordance with the terms of such Company Benefit Plan, (j)
each U.S. (and, to the Company’s knowledge, foreign) Company Benefit Plan in
the form as of the Closing Date may be amended or terminated at any time after
the Closing Date without material liability to the Company other than for
accrued benefits and costs of termination, (k) all material contributions or
amounts payable by the Company or any of its Subsidiaries as of the Effective
Time with respect to any Company Benefit Plan in respect of current or prior
plan years which are required to be reflected in the Company’s financial
statements in accordance with GAAP have been paid or accrued in accordance with
GAAP, and (l) the Company has made available to Parent and the Merger Sub true
and correct copies in all material respects of all Company Benefit Plans and
benefit arrangements or contracts listed in Section 2.1(l)(i) of the Company
Disclosure Schedule, together with all amendments thereto, and to the extent
applicable, (i) all current summary plan descriptions; (ii) the most recent
annual report on the IRS Form 5500-series, including any attachments thereto;
(iii) the most recent accountant’s report, if any; and (iv) the most recent IRS
determination letter.

 

Except
as provided pursuant to this Agreement or as disclosed  on Section 2.1(1)(ii) of the Company
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby shall (a) result in any payment becoming due
to any Company Participant, (b) increase any benefits otherwise payable under
any Company Benefit Plan, (c) result in any acceleration of the time of payment
or vesting of any benefits under any Company Benefit Plan, (d) result in any
forgiveness of indebtedness, (e) result in any obligations to fund benefits
with respect to any current or former employees of the Company or any of its
Subsidiaries or (f) violate the provisions of any agreement between a Company
Participant and the Company or any of its Subsidiaries, except in each case
where such payment, increase, acceleration, forgiveness, funding or violation
would not reasonably be expected to have a Material Adverse Effect on the
Company.

 

(iii)  (a) Neither
the Company nor any of its Subsidiaries
is a party to any collective bargaining or other labor union contract and no
collective bargaining agreement is being negotiated by the Company or any of
its Subsidiaries and there are no labor or collective bargaining agreements
that pertain to the employees of the Company or any of its Subsidiaries other
than works councils required by statute, (b) there is no pending or to the
knowledge of the Company, threatened labor dispute, strike, work stoppage,
lockout or other labor controversy involving the Company or any of its
Subsidiaries which may interfere with the respective business activities of the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries experienced any such labor controversy within the past three
years, (c) there is no union or similar organization currently certified, and
there is no union representation question and no union or other organization
activity that would be subject to the National Labor Relations Act (20 U.S.C.
Section 151 et seq.) or similar applicable law exists, or to the Company’s
knowledge, is threatened with respect to the Company’s or any of its
Subsidiaries operations; (d) to the Company’s knowledge, no officer of the
Company or any of its Subsidiaries (“Employee”) is a party to any
confidentiality, non-competition, proprietary rights or other such agreement
between such Employee and any other Person besides the

 

 

Company
or any of its Subsidiaries, as applicable, that would be material to the
performance of such Employee’s employment duties, or the ability of the Company
or Merger Sub to conduct their business, (e) there is no pending or, to the
knowledge of the Company, threatened action, complaint, arbitration, proceeding
or investigation against the Company or any of its Subsidiaries by or before
any court, governmental agency, administrative agency, board, commission or
arbitrator brought by or on behalf of any prospective, current or former
employee, labor organization or other representative of employees of the Company
or any of its Subsidiaries, (f) the Company and its Subsidiaries are in
compliance with all applicable laws, agreements, and policies relating to
employment of labor, employment practices and terms and conditions of
employment, including, but not limited to, all such laws relating to hours,
wages, civil rights, safety and health, workers’ compensation, and the
collection and payment of withholding and/or Social Security taxes and other
similar taxes, except where such noncompliance would not reasonably be expected
to have a Material Adverse Effect on the Company, (g) except as disclosed in
the Company SEC Reports, neither the Company nor any of its Subsidiaries has
closed any office, plant or facility, effectuated any layoffs of employees or
otherwise engaged in any act that would trigger the application of the WARN Act
or any similar applicable law and none of the affected employees has suffered
an “employment loss” (as defined in the WARN Act) since ninety days prior to
the date hereof, or implemented any early retirement, separation or window
program within the past year, nor has the Company or any of its Subsidiaries
planned or announced any such action or program for the future, and (h) all
salaries, wages and other benefits, bonuses and commissions of all directors,
officers and employees of the Company and its Subsidiaries have, to the extent
due, been paid or discharged in full or are reflected as liabilities on the
financial statements contained in the Company SEC Reports.

 

(m)  Intellectual
Property.

 

(i)  Except as
disclosed in the Company SEC Reports, the Company or one or more of its Subsidiaries owns or has the right to
use pursuant to written license agreements, free and clear of all liens,
security interests or other encumbrances, all trademarks, tradenames, service
marks, Internet domain names, trade dress, patents, patent applications or
trademarks, service marks, copyrights or other registrations or applications
for registration of intellectual property, copyrights, technology, software, know-how,
trade secrets, confidential information, unpatented inventions and processes
used by the Company or any of its Subsidiaries in their respective businesses
and material thereto or necessary therefor (the “Intellectual Property”).
Section 2.1(m)(i)(A) of the Company Disclosure Schedule sets forth a true and
complete list of all Intellectual Property owned by the Company and its
Subsidiaries and Section 2.1(m)(i)(B) of the Company Disclosure
Schedules sets forth a true and complete list of all Intellectual Property that
the Company and its Subsidiaries are licensed or otherwise permitted by other
Persons to use.

 

(ii)  Except as
disclosed in the Company SEC Reports, no claim has been asserted against the
Company or any of its Subsidiaries and, to the Company’s knowledge no claim is
pending by any Person challenging or questioning the Company or any other
Person’s use of the Intellectual Property or the validity or effectiveness of
the

 

 

Intellectual Property, and to the Company’s knowledge,
there is no reasonable basis for same.

 

(iii)  To the
Company’s knowledge, the conduct of the Company’s and its Subsidiaries’
businesses does not infringe, misappropriate or misuse the intellectual
property, confidential information or other rights of any Person, and, except
as disclosed in the Company SEC Reports, to the Company’s knowledge no claim
has been asserted or is pending alleging same.  

 

(iv)  To the
Company’s knowledge, no third party has infringed, misappropriated or misused
any of the Intellectual Property and the Company is not aware of any facts that
indicate a likelihood of the same, and, except as disclosed in the Company SEC
Reports, to the Company’ s knowledge no claim has been asserted or is pending
alleging same.

 

(v)  Except to
the extent that it would not reasonably be expected to have a Material Adverse
Effect on the Company, no loss or expiration of any of the Intellectual
Property is pending or reasonably foreseeable or (to the Company’s knowledge)
threatened, except for patents expiring at the end of their statutory terms
(and not as a result of any act or omission by the Company, including, without
limitation, a failure by the Company to pay any required maintenance fees).

 

(vi)  The Company
has a policy of requiring all employees, agents, consultants or contractors who
have contributed or participated in the creation, development or improvement or
modification of Intellectual Property, software or other products of the
Company or its Subsidiaries to assign all of their rights therein to the Company
or a Subsidiary. The Company complies in all material respects with such
policy. To the Company’s knowledge, (i) no Person has any basis for claiming
any right, title or interest in and to any such Intellectual Property, software
or other products except for such claims as would not reasonably be expected to
be successful and (ii) no such claim is currently pending or threatened.

 

(vii)  The Company
and its Subsidiaries have taken reasonable measures consistent with industry
practice to protect and preserve the confidentiality of all of the Company’s
and Subsidiaries’ trade secrets (including, without limitation, any software
source code). Schedule 2.1(m)(vii) contains a description of all escrow
accounts that are used with respect to the Company’s and Subsidiaries’ software
source codes. To the Company’s knowledge, neither the Company nor its
Subsidiaries has disclosed or authorized anyone to disclose source code for
Company or Subsidiary software products or material trade secrets other than
pursuant to a nondisclosure agreement, and to the Company’s knowledge, no such
party to any nondisclosure agreement is in breach thereof.

 

(viii)  None of the
software products of the Company or any Subsidiary is subject to the provisions
of any open source or other source code license agreement that (A) requires the
distribution of source code in connection with the distribution of the licenses
software in object code form; (B) prohibits or limits the Company or any

 

 

Subsidiary from charging
a fee or receiving consideration in connection with sublicensing or
distributing such licensed software (whether in source code or object code
form); or (C) allows a customer or requires that a customer have the right to
decompile, disassemble or otherwise reverse engineer the software by its terms
and not by operation of law.

 

(ix)  The consummation of the transactions
contemplated by this Agreement will not result as a consequence of actions
taken by the Company prior to the Effective Date in: (A) the Company being
bound by any non-compete or other restriction on the operation of any business
of the Company; (B) the granting by the Company of any Intellectual Property to
a third party (including, without limitation, a covenant not to sue); and (C)
the loss or impairment of the Company’s rights to own or use any material
Intellectual Property.

 

(x)  The generally released software
products of the Company and its Subsidiaries perform in all material respects
in accordance with their documentation and meet in all material respects the
contractual terms and warranties provided to customers in connection therewith.
Except as set forth in Section 2.1(r) of the Company Disclosure Schedule, there
are no material Contracts concerning the Intellectual Property and no material
Contracts concerning the software products of the Company or its Subsidiaries
other than customer Contracts in the Ordinary Course..

 

(n)  Environmental, Health, and
Safety Matters. Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, each of the Company and its Subsidiaries has
complied and is in compliance with all Environmental, Health, and Safety
Requirements, including, without limitation, all permits, licenses and other
authorizations that are required pursuant to Environmental, Health, and Safety
Requirements for the occupation of its facilities and the operation of its
business. None of the Company or its Subsidiaries has received any notice or
report regarding any actual or alleged violation of Environmental, Health, and
Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), relating to any of
them or its facilities arising under Environmental, Health, and Safety
Requirements. Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, none of the Company, its Subsidiaries, or their
respective predecessors has treated, stored, disposed of, arranged for or
permitted the disposal of, manufactured, distributed, transported, handled, or
released any substance, including without limitation any hazardous substance,
or owned or operated any property or facility (and no such property or facility
is contaminated by any such substance) in a manner that has given rise to liabilities
or could reasonably be expected to give rise to liabilities pursuant to any
Environmental, Health, and Safety Requirements. Except as would not reasonably
be expected to have a Material Adverse Effect on the Company, neither the
Company nor any of its Subsidiaries has assumed, undertaken, or otherwise
become subject to, any liability of any other Person or entity relating to
Environmental, Health, and Safety Requirements. Except as would not reasonably
be expected to have a Material Adverse Effect on the Company, no facts, events
or conditions relating to the past or present facilities, properties or
operations of the Company, its Subsidiaries, or any of their respective
predecessors could reasonably be expected to prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise to
any investigatory, remedial or corrective obligations pursuant to
Environmental, Health,

 

 

and
Safety Requirements, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental, Health, and
Safety Requirements.

 

For
purposes of this Agreement, “Environmental, Health, and Safety Requirements”
shall mean all federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, all contractual obligations and
all common law concerning public health and safety, pollution, or protection of
the environment.

 

(o)  Brokers or
Finders. Except for the engagement of Stephens Inc. by the Company, no agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker’s or
finder’s fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company. The Company has provided Parent with a true and
complete copy of the engagement letters relating to its arrangements with
Stephens Inc.

 

(p)  Insurance.
Section 2.1(p) of the Company
Disclosure Schedule contains a
list of all material insurance policies which are owned by the Company and any
of its Subsidiaries and which name the Company or any of its Subsidiaries as an
insured, including without limitation self-insurance programs and those which
pertain to the Company’s assets, employees or operations (the “Insurance
Policies”). All such Insurance Policies are in full force and effect and (a)
each of the Insurance Policies is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full and cover against the risks of the
types to which the Company reasonably believes it is subject and in coverage
amounts that are reasonably sufficient for the Company’s property and business
of the nature normally insured against by entities in the same or similar lines
of business as the Company and its Subsidiaries in coverage amounts typically
and reasonably carried by such entities, (b) none of the Insurance Policies
shall terminate or lapse (or be affected in any other material adverse manner)
by reason of the Merger, (c) each of the Company and its Subsidiaries has
complied in all material respects with the provisions of each Insurance Policy
under which it is the insured party, (d) to the knowledge of the Company, no
insurer under any Insurance Policy has cancelled or generally disclaimed
liability under any such Insurance Policy or given notice of any intent to do
so or not to renew any such Insurance Policy and (e) to the knowledge of the
Company, all material claims under the Insurance Policies have been filed in a
timely fashion.

 

(q)  Affiliate
Transactions. Except as disclosed in the Company SEC Reports and this
Agreement, there are no material contracts, commitments, agreements,
arrangements or other transactions between the Company or any of its
Subsidiaries, on the one hand, and any (i) present or former officer or
director of the Company or any of its Subsidiaries or any of their immediate
family members (including their spouses), (ii) record or beneficial owner of
ten percent or more of the voting securities of the Company or (iii) affiliate
of any such officer, director, family member or beneficial owner, on the other
hand.

 

(r)  Material
Contracts. Section 2.1(r) of the
Company Disclosure Schedule sets
forth a list of all of the Company Material Contracts and, prior to the date
hereof, the Company has made available to Parent true copies of each Company
Material Contract and summaries of

 

 

all oral Company Material Contracts. For purposes of
this Agreement, the term “Company Material Contracts” shall mean with respect
to the Company or any of its Subsidiaries: (i) all Contracts required to be
disclosed pursuant to Items 401 or 601 of Regulation S-K of the SEC as an
exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 or any Company SEC Report filed thereafter, in each case
under the rules and regulations of the SEC, (ii) all Contracts for the future
purchase or sale (in each case whether by merger, acquisition, purchase of an
equity interest or otherwise) or lease of materials, supplies, merchandise,
equipment or other personal property or assets which will involve consideration
in excess of $200,000 in the aggregate or for the grant of any preferential
right for any such future purchase, sale or lease, (iii) all Contracts for the
furnishing or receipt of services, the performance of which will involve
consideration in excess of $300,000 in the aggregate, (iv) all Contracts for
the license of any software products of the Company or its Subsidiaries entered
into by the Company or its Subsidiaries in the two year period preceding the
date of this Agreement, other than licenses of the Company’s software to customers
in the Ordinary Course that involve consideration less than $350,000 in the
aggregate, (v) all mortgages, pledges, conditional sales contracts, security
agreements, factoring agreements or other similar agreements with respect to
any assets of the Company which involve consideration in excess of $100,000 in
the aggregate, (vi) all agreements with current or former consultants currently
in effect providing for annual payments thereunder in excess of $150,000 in the
aggregate, (vii) all non-competition or similar agreements which restrict or
may hereafter restrict in any material respect the geographic or operational
scope of the business of the Company or the ability of the Company to enter
into new lines of business, (viii) all agreements or indentures relating to
borrowed money or other indebtedness which involve consideration in excess of
$100,000 in the aggregate or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company or its
Subsidiaries, (ix) all Contracts under which the Company has advanced or loaned
any other Person in the aggregate exceeding $25,000, (x) all material
distribution, joint venture, partnership, marketing, development or franchise
agreements, (xi) all agreements by which the Company or its Subsidiaries
guarantee, endorse or otherwise become or are contingently liable for the debt,
obligation or other liability of any other Person in the aggregate exceeding
$100,000 or guarantee the payment of dividends or other distribution upon the
shares of any other Person, (xii) all Contracts for the license of any
Intellectual Property (including, without limitation, any software) by any
Person to the Company or its Subsidiaries the breach or loss of which would
have a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole, (xiii) all Contracts which contain restrictions with respect to payment
of dividends or any other distribution in respect of its capital stock, (xiv)
Contracts which are material to the Company or any of its Subsidiaries and
which restrict the Company or any of its Subsidiaries from disclosing any
information concerning or obtained from any other Person (other than Contracts
entered into in the Ordinary Course or currently enforceable Contracts, to the
extent any disclosure thereof is prohibited thereby, with respect to any
currently pending potential sale of all or a substantial portion of the Company
whether such sale is pursuant to a merger or otherwise), (xv) Contracts that
contain minimum annual purchase obligations (take-or-pay) in excess of $200,000
or that contain penalties or repricing provisions (e.g., “retroactive
discounts”) in excess of $200,000 if certain minimum quantities are not
purchased; (xvi) Contracts (other than Benefit Plans) with any current or
former employee, director or officer of the Company or any of its Subsidiaries
under which the Company or its Subsidiaries may have ongoing or future payment
obligations for services rendered or to be

 

 

rendered other than employment
Contracts with current or former employees whose base compensation is less than
$75,000 annually and, (xvii) Contracts to be performed relating to capital
expenditures of the Company and/or its Subsidiaries with a value in excess of
$100,000 in any fiscal year, or in the aggregate capital expenditures of the
Company and/or its Subsidiaries with a value in excess of $200,000. All such
Company Material Contracts are valid, binding and enforceable in accordance
with their respective terms (assuming the other parties thereto are bound) and
are in full force and effect, except (A) to the extent they have previously
expired in accordance with their terms, (B) to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally and by general,
equity principles, or (C) where such invalidity or unenforceability would not
reasonably be expected to have a Material Adverse Effect on the Company. No
payment default, breach or violation by the Company or its Subsidiaries or to
the Company’s knowledge, by any other party thereto exists under such Company
Material Contracts, except for defaults, breaches or violations which would not
reasonably be expected to have a Material Adverse Effect on the Company, and no
material payment would be accelerated or be due by the Company as a result of
any change-in-control provisions in any Company Material Contracts as a result
of the transactions contemplated by this Agreement.

 

(s)  State
Takeover Statutes. The Company Board has approved the execution of this Agreement and Voting
Agreement and authorized and approved the Merger prior to the execution by the
Company of this Agreement, so that the restrictions on business combinations
contained in Section 203 of the DGCL will not apply to this Agreement, the
Voting Agreement or the transactions contemplated hereby or by the Voting
Agreement (including the Merger). The Company Board has taken all such action
required to be taken by it to provide that this Agreement, the Voting Agreement
and the transactions contemplated hereby and by the Voting Agreement shall be
exempt from the restrictions on business combinations contained in any
“moratorium,” “control share,” “fair price” or other anti-takeover laws or
regulations of any state (including Section 203 of the DGCL).

 

(t)  Financial
Advisory Opinion. Stephens Inc. has delivered to the Company Board its written opinion, dated the date of this
Agreement, subject to the qualifications and limitations stated therein, to the
effect that the consideration to be received by the holders of the Company
Common Stock (other than GA Company Common Stock) pursuant to the Merger is
fair to holders of the Company Common Stock (other than the GA Company Common
Stock) from a financial point of view and such opinion has not been withdrawn.

 

(u)  Disclosure.
The representations and warranties of the Company contained in this Agreement are true and correct in all
material respects, and such representations and warranties do not omit any
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.

 

2.2 REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB.

 

Except
as set forth in the Parent Disclosure Schedule delivered by Parent to the
Company at or prior to the execution and delivery of this Agreement (the
“Parent Disclosure Schedule”) (it being understood that (a) the Parent
Disclosure Schedule will be arranged by sections corresponding to the lettered
and numbered sections contained in this Section 2.2 and (b) nothing

 

 

in
the Parent Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Parent
Disclosure Schedule identifies the exception with particularity and describes
the relevant facts in detail), Parent and Merger Sub each represent and warrant
to the Company as of the date of this Agreement and as of the Closing Date:

 

(a)  Organization,
Standing and Power. Each of Parent and Merger Sub has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Parent and
Merger Sub is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except as would not
reasonably be expected to have a Material Adverse Effect on Parent and Merger
Sub. True and complete copies of the Organizational Documents of Parent and
Merger Sub have been furnished by Parent to the Company for inspection.

 

(b)  Authority;
No Conflicts.

 

(i)  Each of Parent and Merger Sub has all requisite power and authority to execute and deliver
each of this Agreement, each of the Voting Agreements and the Asset Purchase
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. Subject to the succeeding sentence, the
execution and delivery of this Agreement, the Voting Agreements and the Asset
Purchase Documents to which it is a party by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of Parent
and Merger Sub. Immediately following execution of each of this Agreement, the
Voting Agreements and the Asset Purchase Documents to which it is a party by
the parties hereto, Parent shall, as sole stockholder of Merger Sub, execute
and deliver to Merger Sub its written consent to the adoption of this
Agreement. Each of this Agreement, the Voting Agreements and the Asset Purchase
Documents to which it is a party has been duly executed and delivered by Parent
and Merger Sub and constitutes a valid and binding agreement of Parent and
Merger Sub, enforceable against them in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally, or by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

(ii)  The
execution and delivery of each of this Agreement, the Voting Agreements and the Asset Purchase Documents to
which it is a party by Parent and Merger Sub does not or will not, as the case
may be, and the consummation by Parent and Merger Sub of the transactions
contemplated hereby will not, result in any Violation of: (A) any provision of
the Organizational Documents of Parent and Merger Sub or (B) except for such
Violations as would not reasonably be expected to have a Material Adverse
Effect on Parent and Merger Sub and subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession,  

 

 

franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Merger Sub or their respective properties or assets.

 

(iii)  No consent,
approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to Parent or Merger Sub in connection with the execution and
delivery of each of this Agreement, the Voting Agreements and the Asset
Purchase Documents to which it is a party by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
except for (A) the consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to Section 2.1(c)(iii)
and (B) such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain would not
reasonably be expected to have a Material Adverse Effect on Parent and Merger
Sub or impair or delay the ability of Parent or Merger Sub to consummate the transactions
contemplated hereby.

 

(c)  No Prior Activities. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby. Except for obligations
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby,
Merger Sub has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever, or entered into any
agreement or arrangement with any Person. Merger Sub is a wholly-owned
subsidiary of Parent.

 

(d)  Cash
Consideration. Parent has available to it, or at the Closing will have available to it, sufficient
cash resources necessary to make the payments for the Asset Purchase and the
shares of the Company Common Stock contemplated by this Agreement and all
associated costs and expenses. At the Effective Time, Parent or its designated
Subsidiary shall enter into a license with the Surviving Corporation to provide
the Surviving Corporation with such rights in the Owned Intellectual Property
as are necessary to conduct the business of the Surviving Corporation with
respect to its currently existing properties and assets in substantially the
same manner that it was conducted prior to the sale of the Owned Intellectual
Property.

 

(e)  Information
Supplied.

 

(i)  The
Schedule 13E-3 and any amendments or supplements thereto will, when filed, comply as to form in all material
respects with the applicable requirements of the Exchange Act and the rules and
regulations thereunder.

 

(ii)  None of the
information supplied or to be supplied
by Parent or Merger Sub in writing specifically for inclusion or incorporation
by reference in the Proxy Statement, the Schedule 13E-3 and any other documents
to be filed with the SEC in connection with the transactions contemplated
hereby, including any amendment or supplement to such documents, will, at the
respective times such documents are filed, and, with respect to the Proxy
Statement, when first published, sent or given to stockholders of the Company,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to made the statements
made therein, in light of the circumstances under which they are made, not

 

 

misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Company Stockholders Meeting, and at the Effective
Time, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to made the
statements made therein, in light of the circumstances under which they are
made, not false or misleading or necessary to correct any statement in any
earlier communication with respect to any solicitation of proxies for the
Company Stockholders Meeting which shall have become false or misleading.

 

(iii)  Notwithstanding
the foregoing provisions of this Section 2.2(e), no representation or warranty is made by Parent or
Merger Sub with respect to statements made or incorporated by reference in the
Schedule 13E-3 based on information supplied by any party other than Parent or
Merger Sub for inclusion or incorporation by reference therein.

 

(f)  Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any
broker’s or finder’s fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Merger Sub.

 

(g)  Ownership
of the Company Common Stock. Other than General Atlantic Partners LLC or any of its affiliates, except as contemplated
by this Agreement or in connection with the execution of the Voting Agreement,
as of the date of this Agreement, neither Parent nor, to the best of its
knowledge, any of its affiliates or associates (as such terms are defined under
the Exchange Act) (i) beneficially owns, directly or indirectly or (ii) is
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in case of either clause (i) or
(ii), shares of the Company Common Stock.

 

(h)  Disclosure.
The representations and warranties of Parent and Merger Sub contained in this Agreement
are true and correct in all material respects, and such representations and
warranties do not omit any material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.

 

ARTICLE III

COVENANTS RELATING
TO CONDUCT OF BUSINESS

 

3.1 COVENANTS OF THE
COMPANY AND PARENT.

 

During the period from
the date of this Agreement and continuing until the Effective Time (except as
expressly contemplated or permitted by this Agreement or to the extent that the
Company or Parent shall otherwise consent in writing):

 

(a)  Ordinary Course. The Company
and its Subsidiaries shall carry on their respective businesses in the Ordinary
Course and with no less diligence and effort than would be applied in the
absence of this Agreement, and shall use all reasonable efforts to preserve
intact their present business organizations and their relationships with
customers, suppliers and others having business dealings with them.

 

 

(b)  Dividends; Changes in Share Capital. The Company shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, directly or
indirectly (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock or (iii) repurchase, redeem or otherwise acquire any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock or other securities of the Company or any of its
Subsidiaries.

 

(c)  Issuance of Securities; Changes to Options.
The Company shall not, and shall cause its Subsidiaries not to, directly or
indirectly issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its Capital stock of any class, any Company
Voting Debt or other Securities (equity or debt) of the Company or any
Subsidiary or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares, Company Voting Debt or
other Securities (equity or debt) of the Company or any Subsidiary, or enter
into any agreement with respect to any of the foregoing, or make any other
change to its capital structure other than the issuance of shares of the
Company Common Stock upon the exercise of Options issued in the Ordinary Course
prior to the date hereof in accordance with the terms of the Option Plans as in
effect on the date of this Agreement and the Warrants outstanding on the date
hereof. Except as expressly set forth in this Agreement, the Company and its
board of directors and any committee thereof shall not, and shall cause the
Company’s Subsidiaries not to, grant, amend, modify, waive or take any action
with respect to any of the Company’s Options, Options Plans, or Warrants or
agreements pursuant to which any Warrants have been or could be issued (“Warrant
Agreements”) or accelerate the vesting of any Options except for the issuance
of Company Common Stock in connection with the exercise of Options and Warrants
in accordance with this Agreement and the Option Plans, the Options, the
Warrants and/or the Warrant Agreements as the case may be or the acceleration
of the vesting of Options pursuant to the terms of agreements with certain of
the Company’s executives existing as of the date of this Agreement. The Company
and its board of directors and any committee thereof shall not permit or allow
the exercise of any Options or Warrants prior to the Effective Time unless the
exercise price paid in connection with such exercise is paid to the Company in
cash or pursuant to the Company’s existing cashless exercise program.

 

(d)  Organizational Documents. Except to the extent required to comply with
their respective obligations hereunder, by law or by the rules and regulations
of the SEC or NASDAQ, the Company and its Subsidiaries shall not amend or
propose to amend their respective Organizational Documents.

 

(e)  Indebtedness and Other Matters. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly (i) other than
incurrence of indebtedness under existing working capital facilities in the
Ordinary Course, incur, modify or prepay any indebtedness for borrowed money or
guarantee, assume, endorse or otherwise become responsible for any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or its Subsidiaries or of other
Persons or enter into any capital lease, other than indebtedness of the Company
or its direct or indirect wholly-owned Subsidiaries to the Company or its
direct or indirect wholly-owned Subsidiaries, (ii) make any loans or advances
other than by the Company or its direct or indirect wholly-owned Subsidiaries

 

 

to or in the Company or its
direct or indirect wholly-owned Subsidiaries or other than to customers for the
purchase of products from the Company in the Ordinary Course, (iii) make any
capital contributions to, or acquire, authorize or make (or commit to make) any
investment in, any Person, other than by the Company or its direct or indirect
wholly-owned Subsidiaries to or in the Company or its direct or indirect
wholly-owned Subsidiaries, (iv) make or commit to make or enter into any
Contracts (or any amendments, modifications, supplements or replacements to
existing Contracts) to be performed relating to the making of any capital
expenditures in excess of $100,000 in the aggregate in any one quarter, (v)
transfer, issue, deliver, sell, lease, sell and leaseback, license, pledge,
mortgage, dispose of or encumber material (either individually or in the
aggregate) properties or assets of the Company or any of its Subsidiaries,
except Liens for Taxes not currently due and other than software license
agreements with customers in the Ordinary Course, (vi) (A) file or cause to be
filed any materially amended Tax Returns or claims for refund; (B) make or
rescind any material Tax election or otherwise fail to prepare all Tax Returns
in a manner which is consistent with the past practices of the Company and each
Subsidiary of the Company, as the case may be, with respect to the treatment of
items on such Tax Returns except to the extent that any inconsistency (x) would
not or may not materially increase Parent’s, the Company’s or any of the
Subsidiaries’ liability for Taxes for any period or (y) is required by Law; (C)
incur any material liability for Taxes other than in the Ordinary Course, apart
from any Tax liability that may result from the Asset Purchase; or (D) enter
into any settlement or closing agreement with a taxing authority that
materially increases or would reasonably be likely to materially increase the
Tax liability of the Company or any of its Subsidiaries for any period, (vii)
pay, discharge, satisfy, settle or compromise any claims, liabilities,
obligations or litigation (whether or not commenced prior to the date of this
Agreement), other than settlements involving amounts payable by the Company and
its Subsidiaries that are not in excess of $100,000 in the aggregate over the
sum of (x) amounts reserved for in respect of litigation in the most recent
consolidated financial statements of the Company included in the Company SEC
Reports and (y) amounts fully recoverable from insurers of the Company and its
Subsidiaries and other than the payment, discharge, settlement or satisfaction,
in the Ordinary Course, of (A) liabilities reflected or reserved against in the
December 31, 2002 balance sheet included in the Company SEC Documents or (B)
liabilities (other than litigation) subsequently incurred in the Ordinary
Course, (viii) enter into any Contract or agreement with any labor unions
representing employees of the Company or any Subsidiary, (ix) enter into or
amend, modify, renew or terminate any material agreement or transaction,
including, without limitation, any transaction involving any merger,
consolidation, joint venture, license agreement, partial or complete
liquidation or dissolution, reorganization, recapitalization, restructuring, or
a purchase, a Lease, sale, lease or other acquisition or disposition of any
assets or capital stock other than in the Ordinary Course, (x) sell, transfer or
pledge or agree to sell, transfer or pledge any shares of capital stock or
other equity interests owned by it in any other Person, (xi) acquire, by
merging or consolidating with, by purchasing an equity interest in or by
purchasing all or a portion of the assets of, or by any other manner, any
business or any Person (other than the purchase of equipment, inventories and
supplies in the Ordinary Course), (xii) except as may be required by applicable
law, GAAP or SEC rule, make any change in any of its accounting practices,
policies or procedures or any of its methods of reporting income, deductions or
other items for income tax purposes, (xiii) except as contemplated by Article I
or as set forth in Section 3.1(e)(xiii) of the Company Disclosure Schedule, adopt
or enter into a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring,

 

 

recapitalization or other
reorganization of the Company or any of its Subsidiaries or any agreement
relating to an Acquisition Proposal, except as expressly permitted in Section
4.4, (xiv) except as provided by this Agreement or described in the Company
Disclosure Schedule, accelerate the payment, right to payment or vesting of any
bonus, severance, profit sharing, retirement, deferred compensation, stock
option, restricted stock, insurance (including arrangements or agreements for
the premiums therefor) or other compensation or benefits, (xv) plan, announce,
implement or effectuate any reduction in force, lay-off, early retirement
program, severance program or other program or effort concerning the
termination of employment of employees of the Company or its Subsidiaries,
other than routine employee terminations in the Ordinary Course, (xvi) take any
action or omit to take any action which would, directly or indirectly, restrict
or impair the ability of Parent or Merger Sub, as the case may be, to vote or
otherwise to exercise the rights and receive the benefits of a stockholder with
respect to securities of the Company that may be acquired or controlled by
Parent or Merger Sub, as the case may be, or any action which would permit any
Person to acquire securities of the Company or any of its Subsidiaries from the
Company or such Subsidiary on a basis not available to Parent or Merger Sub,
(xvii) enter into any new material line of business or enter into any agreement
that restrains, limits or impedes the Company’s or any of its Subsidiaries’
ability to compete with or conduct any business or line of business, (xviii)
fail to maintain with current or other financially responsible insurance
companies insurance on its assets, tangible and intangible, and its businesses
in such amounts and against such risks and losses as are consistent with past
practice, (xix) enter into any Contract for the sale of products not available
for delivery to the customer as of the date of this Agreement, (xx) undertake
any action or fail to take any action that will result in a breach of the
representations and warranties set forth in Section 2.1 in any material respect
as if made on and as of the Closing Date or (xxi) agree, or commit to agree, to
take or fail to take any action not permitted to be taken or not taken pursuant
to this Section 3.1(e).

 

(f)  Benefit Plans. The Company shall not, and shall not permit any of its
Subsidiaries to, (i) establish, adopt, enter into, amend or replace in any
material respect any Company Benefit Plan, or any plan, agreement, program,
policy, trust, fund or other arrangement that would be a Company Benefit Plan
if it were in existence as of the date of this Agreement, except as required by
law, (ii) increase the compensation or fringe benefits payable or to become
payable to any of its directors, officers or, except in the Ordinary Course,
other employees, (iii) forgive any indebtedness of any current or former
employees to the Company or any of its Subsidiaries or (iv) take any action
with respect to the grant, modification or amendment of any severance or
termination pay, or stay, bonus or other incentive arrangement (other than
pursuant to benefit plans and policies in effect on the date of this
Agreement).

 

(g)  Intellectual Property. Neither the Company nor any of its Subsidiaries
shall: (i) license, sell, transfer or abandon any Intellectual Property except
in the Ordinary Course; or (ii) take any action, or fail to take any action,
that may adversely affect the Intellectual Property owned by the Company or any
such Subsidiary or, to the extent necessary for the conduct of the Company’s or
any such Subsidiary’s business, licensed by the Company or any such Subsidiary.

 

(h)  Operation of Parent’s Business. Parent shall carry on its business in
the Ordinary Course.

 

 

(i)  Dividends; Changes in Share
Capital. Parent shall not, and shall not permit any of its Subsidiaries to, and
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock.

 

3.2 ADVICE OF CHANGES;
GOVERNMENT FILINGS.

 

Each of the Company and
Parent shall (a) confer on a regular and frequent basis with the other, (b)
report (to the extent permitted by law, regulation and any applicable
confidentiality agreement) to the other on operational matters, (c) promptly
advise the other orally and in writing of (i) any representation or warranty
made by it contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect, (ii) the failure by it (A) to comply with or satisfy in any respect
any covenant, condition or agreement required to be complied with or satisfied
by it under this Agreement that is qualified as to materiality or Material
Adverse Effect or (B) to comply with or satisfy in any material respect any
covenant, condition or agreement required to be complied with or satisfied by
it under this Agreement that is not so qualified as to materiality or (iii) any
change, event or circumstance that has had a Material Adverse Effect on such
party or materially and adversely affects its ability to consummate the
transactions contemplated hereby in a timely manner, and (d) promptly notify
each other of (i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transaction contemplated by this Agreement and that would require disclosure
under Section 2.1(c)(iii), (ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement, (iii) any actions, suits, claims, investigations or proceedings
commenced or, to the Company’s knowledge or to the knowledge of Parent, as the
case may be, threatened against, relating to or involving or otherwise
affecting the Company or any of its Subsidiaries, on the one hand, or Parent or
Merger Sub, on the other hand, which relate to the consummation of the
transactions contemplated by this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. The Company and Parent and Merger Sub shall file all
reports required to be filed by each of them with the SEC (and all other
Governmental Entities) between the date of this Agreement and the Effective
Time and shall (to the extent permitted by law or regulation or any applicable
confidentiality agreement) deliver to the other party copies of all such
reports promptly after the same are filed. Subject to applicable laws relating
to the exchange of information, each of the Company and Parent shall have the
right to review in advance, and to the extent practicable each will consult
with the other, with respect to all the material information relating to the
other party and each of their respective Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as practicable.
Each of the Company and Parent agrees that, to the extent practicable, it will
consult with the other party with respect to the obtaining of all Permits,
consents, approvals and

 

 

authorizations
of all third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each further
agrees to keep the other apprized of the status of matters relating to
completion of the transactions contemplated hereby.

 

ARTICLE IV

ADDITIONAL AGREEMENTS

 

4.1  PREPARATION OF THE PROXY STATEMENT; SCHEDULE
13E-3; THE COMPANY STOCKHOLDERS MEETING.

 

(a)  Company Stockholders Meeting. The Company shall, as soon as practicable
following execution of this Agreement and in accordance with this Agreement and
promptly following clearance by the SEC of the Proxy Statement and the Schedule
13E-3, duly call, give notice of, convene and hold a special meeting of its
stockholders (the “Company Stockholders Meeting”), for the purpose of
considering and taking action upon the adoption of this Agreement and the other
transactions contemplated hereby, and the Company shall, through the Company
Board, recommend to its stockholders that they adopt this Agreement; provided,
however, that the Company Board may withdraw, modify or change such
recommendation in accordance with the terms of Section 4.4 of this Agreement.
The Proxy Statement shall provide for separate votes by Company Stockholders on
the adoption of the Merger Agreement and the approval of the Asset Purchase,
but shall also provide that neither shall be deemed to be approved unless both
are approved by the requisite vote of the Company Stockholders. Parent and
Merger Sub shall vote or cause to be voted all the shares of the Company Common
Stock owned of record or beneficially by Parent or any of its Subsidiaries in
favor of this Agreement and the transactions contemplated by this Agreement.

 

(b)  Proxy Statement. As soon as practicable following the execution of this
Agreement, the Company shall prepare and file with the SEC the Proxy Statement
with respect to the Company Stockholders Meeting in a form reasonably
acceptable to Parent, and use its reasonable efforts to have a Proxy Statement
cleared by the SEC and mailed to the Company’s stockholders. Parent, Merger Sub
and the Company shall cooperate with each other in the preparation of the Proxy
Statement. The Proxy Statement shall contain (A) statements of the Company
Board that its has (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger and the Asset Purchase, are fair to
and in the best interests of the unaffiliated stockholders of the Company and,
the Stockholders generally, (ii) declared the Merger, the Asset Purchase and
this Agreement to be advisable and (iii) recommended unanimously that the
stockholders of the Company vote in favor of the approval of the Asset Purchase
and the adoption of this Agreement, which recommendations shall not be
withdrawn, amended or modified in a manner adverse to Parent or the Merger Sub (unless
withdrawn, modified or changed in accordance with the terms of Section 4.4) and
(B) the written opinions of the Company’s financial advisors. The Proxy
Statement shall comply as to form and content in all material respects with the
applicable provisions of the federal securities laws. Parent and its counsel
shall be given an opportunity to review and comment upon the Proxy Statement
and any amendment or supplement thereto prior to the filing thereof with the
SEC, and the Company shall consider any such comments in good faith. The
Company agrees to provide to Parent and its counsel any comments which the
Company or its counsel may receive from the

 

 

staff
of the SEC with respect to the Proxy Statement promptly after receipt thereof.
Parent and Merger Sub will promptly supply to the Company in writing, for
inclusion in the Proxy Statement, all information concerning Parent and Merger
Sub required by law, rule or regulation to be included in the Proxy Statement.
The Company, Parent and Merger Sub agree to promptly correct any information
provided by any of them for use in the Proxy Statement which shall have become
false or misleading in any respect, and the Company further agrees to take all
steps necessary to cause such Proxy Statement as so corrected to be filed with
the SEC and disseminated to the Company’s stockholders, in each case as and to
the extent required by the applicable provisions of the federal securities
laws. The Company agrees to use reasonable efforts, after consultation with the
other parties hereto, to respond promptly to any comments made by the
Commission with respect to the Proxy Statement and any preliminary version or
amendment thereof, filed by it. Each of Parent and Merger Sub agree to use
reasonable efforts to promptly provide the Company with any information
necessary to respond to any such comments made by the Commission. The Company,
Parent and Merger Sub shall use reasonable efforts to cause the Proxy Statement
to be mailed to the Company’s stockholders at the earliest practicable time.

 

(c)  Schedule 13E-3. Concurrently with the filing of the Proxy Statement,
Parent and Merger Sub and their respective affiliates (to the extent required
by law) shall prepare and file with the SEC, together with the Company, a Rule
13e-3 Transaction Statement on Schedule 13E-3 (together with all supplements
and amendments thereto, the “Schedule 13E-3”) with respect to the transactions
contemplated by this Agreement. Parent, Merger Sub and the Company shall
cooperate with each other in the preparation of the Schedule 13E-3. The
Schedule 13E-3 shall comply as to form and content in all material respects
with the applicable provisions of the federal securities laws. The Company and
its counsel shall be given an opportunity to review and comment upon the
Schedule 13E-3 and any amendment, supplement or comments thereto prior to the
filing thereof with the SEC, and Parent and Merger Sub shall consider any such
comments in good faith. Parent agrees to provide to the Company and its counsel
any comments which Parent or its counsel may receive from the staff of the SEC
with respect to the Schedule 13E-3 promptly after receipt thereof. The Company
shall promptly furnish to Parent in writing, for inclusion in the Schedule
13E-3, all information concerning the Company required by law, rule or
regulation to be included in the Schedule 13E-3. Parent, Merger Sub and the
Company agree to promptly correct any information provided by any of them for
use in the Schedule 13E-3 which shall have become false or misleading in any
respect, and Parent further agrees to take all steps necessary to cause the
Schedule 13E-3 as so supplemented, updated or corrected to be filed with the
SEC and disseminated to the holders of Company Common Stock, in each case as
and to the extent required by the applicable provisions of the federal
securities laws. Parent agrees to use reasonable efforts, after consultation
with the other parties hereto, to respond promptly to any comments made by the
SEC with respect to the Schedule 13E-3 and any amendment thereof, filed by it.
The Company agrees to use reasonable efforts to promptly provide Parent and
Merger Sub with any information necessary to respond to any such comments made
by the SEC.

 

4.2  ACCESS TO INFORMATION; MONTHLY FINANCIAL
STATEMENTS.

 

Upon
reasonable notice, the Company shall (and shall cause its Subsidiaries to)
afford to the officers, employees, accountants, counsel, financial advisors and
other representatives of

 

 

Parent and Merger Sub
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records and its officers, employees and representatives and, during such
period, the Company shall (and shall cause its Subsidiaries, to) furnish
promptly to Parent and Merger Sub (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of federal or
state securities laws, as applicable (other than reports or documents which
such party is not permitted to disclose under applicable law) and (b)
consistent with its legal obligations, all other information concerning its
business, properties and personnel as Parent or Merger Sub may reasonably
request. Such information shall be held in confidence to the extent required
by, and in accordance with, the provisions of the Confidentiality Agreement,
dated as of July 7, 2003, between the Company and Parent (the “Confidentiality
Agreement”), which Confidentiality Agreement shall remain in full force and
effect. The Company shall deliver to Parent, as soon as available, all of the
monthly financial statements, reports and similar financial information for
each of the calendar months following June 30, 2003 that is prepared by or for
the Company in the Ordinary Course. No information or knowledge obtained in any
investigation pursuant to this Section 4.2 or otherwise shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the transactions
contemplated hereby.

 

4.3 APPROVALS AND
CONSENTS; COOPERATION.

 

Each of the Company,
Parent and Merger Sub shall cooperate with each other and use (and shall cause
their respective Subsidiaries to use) its reasonable best efforts to take or
cause to be taken all actions, and do or cause to be done all things,
reasonably necessary, proper or advisable on their part under this Agreement
and applicable laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including
without limitation (a) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions,
filings, Tax ruling requests and other documents and to obtain as promptly as
practicable all consents, waivers, licenses, orders, registrations, approvals,
Permits, Tax rulings and authorizations required to be obtained from any third party
and/or any Governmental Entity in order to consummate the Merger, the Asset
Purchase or any of the other transactions contemplated by this Agreement
(including, but not limited to, those approvals, consents, orders,
registrations, declarations and filings required under or in relation to
Section 2.1(c)(iii)) (collectively, the “Required Approvals”) and (b) taking
all reasonable steps as may be necessary to obtain all such Required Approvals.
Without limiting the generality of the foregoing, each of the Company, Parent
and Merger Sub agree to make all necessary filings in connection with the
Required Approvals as promptly as practicable after the date of this Agreement,
and to use its reasonable best efforts to furnish or cause to be furnished, as
promptly as practicable, all information and documents requested with respect
to such Required Approvals, and shall otherwise cooperate with any applicable
Governmental Entity in order to obtain any Required Approvals in as expeditious
a manner as possible. Each of the Company, Parent and Merger Sub shall use its
reasonable best efforts to resolve such objections, if any, as any Governmental
Entity may assert with respect to this Agreement and the transactions
contemplated hereby in connection with the Required Approvals. In the event
that a suit is instituted by a Person or Governmental Entity challenging this
Agreement and the transactions contemplated hereby as violative of applicable
antitrust or competition laws, each of the Company and Parent shall use its reasonable
best efforts to resist or resolve such suit,

 

 

provided that in no event
shall Parent be required to agree to (i)  any
prohibition of or limitation on the ownership or operation by Parent, the
Company or any of their respective subsidiaries or affiliates of any portion of
their respective businesses or assets, (ii) divest, hold separate or otherwise
dispose of any portion of its or their respective businesses or assets, (iii)
any limitation on the ability of Parent, the Company or any of their respective
subsidiaries or affiliates, as the case may be, to acquire or hold, or exercise
full rights of ownership of, the Company Common Stock and any capital stock of
any subsidiary of the Company, or (iv) any other limitation on Parent’s, the
Company’s or any of their respective subsidiaries’ or affiliates’ ability to
effectively control their respective businesses or operations. Each of the
Company and Parent shall, upon request by the other, furnish the other with all
information concerning itself, its Subsidiaries, affiliates, directors,
officers and stockholders and such other matters as may reasonably be necessary
or advisable in connection with the Proxy Statement, the Schedule 13E-3 or any
other statement, filing, Tax ruling request, notice or application made by or
on behalf of the Company, Parent or any of their respective Subsidiaries to any
third party and/or any Governmental Entity in connection with the Merger or the
other transactions contemplated by this Agreement.

 

4.4 ACQUISITION PROPOSALS.

 

(a)
Neither the Company nor any of its Subsidiaries shall (whether directly or
indirectly through advisors, agents or other intermediaries), nor shall the
Company or any of its Subsidiaries authorize or permit any of its or their
officers, directors, agents, representatives or advisors to (A) directly or
indirectly solicit, initiate, knowingly encourage (including by way of
furnishing information) or take any action knowingly to facilitate the
submission of any inquiries, proposals or offers (whether or not in writing)
from any Person or group of related Persons (other than Parent and its
affiliates) relating to, other than the transactions contemplated by this
Agreement, (i) any acquisition or purchase of 10% or more of the consolidated
assets of the Company and its Subsidiaries or of 10% or more of any class of
equity securities of the Company or any of its Subsidiaries, (ii) any tender
offer (including a self tender offer) or exchange offer that if consummated
would result in any Person or group of related Persons beneficially owning 10%
or more of any class of equity securities of the Company or any of its
Subsidiaries, (iii) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute 10% or more of the consolidated
assets of the Company (collectively, “Acquisition Proposals”), or agree to or
endorse any Acquisition Proposal or (B) enter into or participate in any
negotiations regarding any of the foregoing, or furnish to any other Person any
information with respect to its business, properties or assets in connection
with the foregoing, or otherwise cooperate in any way with, or participate in
or knowingly assist, facilitate, or encourage, any effort or attempt by any
other Person or group of related Persons (other than any of Parent, Merger Sub
and their affiliates) to do or seek any of the foregoing; provided, however,
that the foregoing shall not prohibit the Company (X) from complying with Rule
14e-2 and Rule 14d-9 under the Exchange Act with regard to a bona fide tender
offer or exchange offer, (Y) from making such disclosure to the Company’s
stockholders or otherwise which, the Company Board concludes in good faith,
after consultation with its legal counsel, is necessary under applicable law or
the rules of the NASDAQ or is necessary in order to comply with its fiduciary
duties to the Company’s stockholders under applicable law, (Z) from
participating in negotiations or discussions with or furnishing information to
any Person in connection with an Acquisition Proposal not solicited

 

 

after the date hereof which
is submitted in writing by such Person or group of related Persons to the
Company Board after the date of this Agreement; provided, however, that prior
to participating in any such discussions or negotiations or furnishing any
information, the Company receives from such Person or group of related Persons,
as the case may be, an executed confidentiality agreement on terms not less
favorable to the Company than the Confidentiality Agreement and the Company
furnishes Parent any such nonpublic information; and provided, further, that
the Company Board shall have concluded in good faith that such Acquisition
Proposal, in the case of furnishing information, is or is reasonably likely to
lead to or, in the case of participating in discussions or negotiations,
constitutes a Superior Proposal and, after consultation with its outside legal
counsel, that participating in such negotiations or discussions or furnishing
such information is necessary in order to comply with its fiduciary duties to
the stockholders of the Company under applicable law; and provided, further,
that the Company Board shall not take any of the foregoing actions prior to
three Business Days (for purposes of this Agreement, “Business Day” means any
day on which banks are not required or authorized to close in the City of New
York) after it provides Parent with prompt (but in no event later than 24 hours
after the occurrence or commencement of such action) written notice thereof. If
the Company Board receives an Acquisition Proposal, then the Company shall
promptly inform Parent of the material terms and conditions of such proposal
and the identity of the Person or group of related Persons making it.

 

(b)  In the event the Company Board determines in good faith upon the
consultation of an independent financial advisor of nationally recognized reputation
(which shall be deemed to include Stephens Inc.) that it has received a
Superior Proposal and determines in good faith upon the consultation of its
outside legal counsel that taking the following actions is necessary in order
to comply with its fiduciary duties under applicable law and provided that
neither the Company nor any representative of the Company has breached any of
the provisions of this Section 4.4, the Company and the Company Board may (i)
withdraw, modify or change the Company Board’s approval or recommendation of
this Agreement or the Merger, (ii) approve or recommend to the Company’s
stockholders such Superior Proposal, (iii) terminate this
Agreement in accordance with Section 6.3(b) and (iv) publicly announce the
Company Board’s intention to do any or all of the foregoing.

 

(c)  The Company will immediately cease and cause its advisors, agents and
other intermediaries to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing, and shall use its best efforts to cause any such parties in
possession of confidential information about the Company that was furnished by
or on behalf of the Company to return or destroy all such information in the
possession of any such party or in the possession of any agent or advisor of
any such party. The Company agrees not to release any third party from or waive
any provisions of confidentiality in any confidentiality
agreement to which Company is a party.

 

(d)  “Superior Proposal” means a proposal with respect to any of the
transactions described in clause (i), (ii) or (iii) of the definition of
Acquisition Proposal (with all of the percentages included in the definition of
such term replaced with “50%” for purposes of this definition) with respect to
which the Company Board shall have concluded in good faith, after consultation
with its financial advisor, (i) is fully financed or reasonably capable of
being financed but not contingent on the availability of financing, (ii) is
capable of being

 

 

consummated, taking into
account all legal, financial, regulatory and other aspects of the Acquisition
Proposal, including the Person or group of related Persons making the proposal
and after taking into account compliance by the Company with this Agreement and
(iii) would, if consummated, result in a transaction more favorable to the
Company’s stockholders from a financial point of view than the transactions
contemplated by this Agreement.

 

4.5  FEES AND EXPENSES.

 

Whether or not the Merger
is consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, all expenses of Parent and Merger Sub incurred
in connection with the transactions contemplated by this Agreement, (b) as set
forth in Section 6.4(b) and (c) Parent shall pay all filing fees in respect of
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. For purposes of this Agreement, “Expenses” includes all out-of-pocket
expenses (including all fees and expenses of counsel, accountants, investment
bankers, financing sources and their counsel, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the Voting Agreements and the
Asset Purchase Documents and the transactions contemplated hereby, including
the preparation, printing, filing and mailing of the Proxy Statement and the
Schedule 13E-3 and the solicitation of stockholder approvals and all other
matters related to the transactions contemplated hereby and all property or
transfer Taxes imposed as a result of this Agreement and the transactions
contemplated hereby.

 

4.6  INDEMNIFICATION.

 

(a)  Continuation of Organizational Documents Obligations. The Company shall
and, from and after the Effective Time until the sixth anniversary of the
Effective Time, the Surviving Corporation shall maintain the right to
indemnification and exculpation of, and advancement of expenses to, officers
and directors provided for in the Organizational Documents of the Company as in
effect on the date hereof, with respect to acts and omissions occurring prior
to the Effective Time, including, without limitation, the transactions
contemplated by this Agreement.

 

(b)  Indemnification.

 

(i) Until the sixth anniversary of the Effective Time the Company shall
and, from and after the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted under applicable law and to the extent such Person
would have been entitled to indemnification and advancement of expenses under
the certificate of incorporation and bylaws of the Company as such documents
were in effect on the date of this Agreement, indemnify and hold harmless, and
advance expenses to, each present and former director and officer of the Company
(each an “Indemnified Party” and collectively, the “Indemnified Parties”)
against any costs or expenses (including attorneys’ fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any pending, threatened or completed claim, action, suit,

 

 

proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to any action or omission based upon or arising
from his or her capacity as an officer or director of the Company occurring
prior to the Effective Time (including, without limitation, any claim, action,
suit, proceeding or investigation arising out of or pertaining to the
transactions contemplated by this Agreement).

 

(ii) For a period of three years following the Effective Date, the
Surviving Corporation shall maintain in effect, for the benefit of the
Indemnified Parties with respect to acts or omissions occurring prior to the
Effective Time, the existing policy of directors’ and officers’ liability
insurance maintained by the Company as of the date of this Agreement in the
form disclosed by the Company to Parent prior to the date of this Agreement
(“Existing Policy”); provided, however, that (A) the Surviving Corporation may
substitute for the Existing Policy a policy or policies of comparable coverage
and (B) the Surviving Corporation shall not be required to pay annual premiums
for the Existing Policy (or for any substitute policies) in excess of 200% of
the annual premium currently paid by the Company for the Existing Policy. In
the event any future annual premiums for the Existing Policy (or any substitute
policies) exceeds 200% of the annual premium currently paid by the Company for
the Existing Policy, the Surviving Corporation shall be entitled to reduce the
amount of coverage of the Existing Policy (or any substitute policies) to the
amount of coverage that can be obtained for such 200% amount.

 

(iii) Parent hereby unconditionally guarantees the full performance of
the Company’s and the Surviving Company’s obligations under this Section 4.6
and the Company’s existing indemnification agreements with certain of its
current and former directors and officers.

 

(c)  Survival. This Section 4.6 shall survive the closing of the
transactions contemplated hereby, is intended to benefit the Company, Merger
Sub and the Surviving Corporation and each of the Indemnified Parties (each of
whom shall be entitled to enforce this Section 4.6 against the Company, Merger
Sub and the Surviving Corporation, as the case may be), and shall be binding on
all successors and assigns of the Surviving Corporation.

 

(d)  Merger, Assignment, etc. If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 4.6.

 

4.7  PUBLIC ANNOUNCEMENTS.

 

Neither party hereto
shall make any press release or public announcement with respect to this
Agreement, the Merger or the transactions contemplated hereby without the prior
written consent of the other party hereto (which consent shall not be
unreasonably withheld); provided, however, that each party hereto may make any
disclosure or announcement which such party, after consultation with its legal
counsel, determines that it is obligated to make pursuant to

 

 

applicable law or regulation of any national
securities exchange or in order to discharge its fiduciary duties, in which
case, the party desiring to make the disclosure shall consult with the other
party hereto and give due consideration to the comments as such other party may
have prior to making such disclosure or announcement.

 

4.8  FURTHER ASSURANCES; GOOD
STANDING.

 

In case at any time after
the Effective Time any further action is reasonably necessary to carry out the
purposes of this Agreement or the transactions contemplated by this Agreement,
the proper officers of the Company, Parent and the Surviving Corporation shall
take any such reasonably necessary action.

 

4.9  DELISTING.

 

Each of the parties
agrees to cooperate with each other in taking, or causing to be taken, all
actions necessary to delist the Company Common Stock from NASDAQ and to
terminate registration under the Exchange Act, provided that such delisting and
termination shall not be effective until after the Effective Time of the
Merger.

 

4.10  EMPLOYEE BENEFITS.

 

(a)  At the Effective Time, each employee of the Company and each of its
Subsidiaries (including employees absent from work due to disability, sick
leave, military leave, parental leave or other employer-approved or
statutorily-required leave of absence) shall be offered employment with Parent,
or the Surviving Corporation or any other Subsidiary of Parent; provided,
however, that, subject to the laws of the local jurisdiction or any agreement
between an employee and Parent, the Surviving Corporation or any other
Subsidiary of Parent, the employment of each employee of the Company or any of
its Subsidiaries who continues employment with Parent, the Surviving
Corporation or any Subsidiary of the Surviving Corporation after the Effective
Time (a “Continuing Employee”) shall be “at will” employment.

 

(b)  The Surviving Corporation shall take steps to assume or adopt each of
the Company Benefit Plans (other than any equity-based plans), and each
Continuing Employee shall be eligible to continue to participate in such
Company Benefit Plans adopted by the Surviving Corporation; provided, however,
that (i) subject to the terms of the Company Benefit Plans or the applicable
laws, and (ii) except as provided in Section 4.10(c) below, nothing in this
Section 4.10 or elsewhere in this Agreement shall limit the right of Parent or
the Surviving Corporation to amend or terminate any such Company Benefit Plans
at any time.

 

(c)  For the one-year period ending on the first anniversary of the
Effective Date (the “Continuation Period”), except as otherwise provided in any
employment agreement with the Company or any of its Subsidiaries, Parent shall,
or shall cause the Surviving Corporation or its Subsidiaries to, (i) pay to the
Continuing Employees of the Surviving Corporation or its subsidiaries, during
any portion of the Continuation Period that such Continuing Employee is
employed by the Surviving Corporation or any such subsidiary, an annual salary
or hourly wage rate, as applicable, that is substantially similar to the annual
salary or hourly wage rate, as applicable, paid to employees engaged in similar
positions with Parent and such individuals will be eligible for bonus and
annual incentives, as applicable, that are substantially similar in the

 

 

aggregate
to such bonus and annual incentives for which employees engaged in similar
positions with Parent are eligible and (ii) provide such Continuing Employees
with employee benefits, during any portion of the Continuation Period that such
employees are employed by the Surviving Corporation or any such Subsidiary,
that are substantially similar in the aggregate to the employee benefits
provided to employees engaged in similar positions with Parent, effective as of
the Effective Time.

 

(d)  With respect to the Company’s U.S. employee benefit plans, if any, of
Parent or its Subsidiaries in which Continuing Employees become eligible to
participate after the Effective Time (the “Parent Plans”), Parent shall, or
shall cause the Surviving Corporation or its Subsidiaries to: (i) with respect
to each Parent Plan that is a medical, health, life or disability plan, (w)
waive any exclusions for pre-existing conditions or in the case of a Parent
Plan that provides only medical or health benefits evidence of insurability
under such Parent Plan that would result in a lack of coverage for any
condition for which the applicable Continuing Employee would have been entitled
to coverage under the corresponding Company Benefit Plan in which such
Continuing Employee was an active participant (or would have been participating
in upon the satisfaction of any waiting period) immediately prior to his or her
transfer to the Parent Plan; (x) waive any waiting period under such Parent
Plan, to the extent that such period exceeds the corresponding waiting period
under the corresponding Company Benefit Plan in which such Continuing Employee
was an active participant (or was eligible to participate in but for the
satisfaction of any waiting period) immediately prior to his or her transfer to
the Parent Plan (after crediting all service of the Continuing Employee with
the Company or any of its Subsidiaries (or their respective predecessors) for
purposes of satisfying such waiting period); (y) provide each Continuing
Employee with similar coverage under the Parent Plan that is a plan described
under Section 125 of the Code that, where applicable, includes flexible
spending accounts for medical care reimbursements and dependent care
reimbursements (the “125 Plan”) for which such Continuing Employee would be
eligible for the balance of the plan year in which the Continuation Period
expires; and (z) based on information provided by the Company, provide each Continuing
Employee with credit for any co-payments and deductibles paid (or accrued) by
such Continuing Employee prior to his or her transfer to the Parent Plan (to
the same extent such credit was given under the analogous Company Benefit Plan
prior to such transfer) in satisfying any applicable deductible or
out-of-pocket requirements under such Parent Plan for the plan year that
includes such transfer; and (ii) recognize service of the Continuing Employees
with the Company or any of its Subsidiaries (or their respective predecessors)
for purposes of eligibility to participate and, where applicable, vesting
credit under each of the Company Benefit Plans, and, solely with respect to
vacation and severance benefits, benefit accrual in any Parent Plan in which the
Continuing Employees are eligible to participate after the Effective Time, to
the extent that such service was recognized for that purpose under the
analogous Company Benefit Plan prior to such transfer; provided, however, that
the foregoing shall not apply to the extent it would result in duplication of
benefits. Nothing in this Section 4.10(d) shall be interpreted to require
Parent to provide for the participation of any Continuing Employee in any
Parent Plan, nor shall this paragraph be interpreted to require the termination
of any or all the Company Benefit Plans.

 

(e)  Parent and the Surviving Corporation shall honor in accordance with
their terms all agreements, Contracts, arrangements, commitments and
understandings described in Section 4.10(e) of the Company Disclosure Schedule.

 

 

4.11  INTELLECTUAL PROPERTY
SCHEDULE.

 

No later than 10 Business
Days after the execution of this Agreement, the Company shall deliver to Parent
Schedule 2.1(m)(i)(A) and (B) containing the lists of Intellectual Property
as required pursuant to Section 2.1(m) of this Agreement and no later than 7
Business Days after the execution of this Agreement the Company shall deliver
to Parent drafts of such schedules.

 

4.12  RESIGNATIONS.

 

The Company shall use its
reasonable best efforts to obtain prior to the Effective Time executed undated
forms of resignation reasonably satisfactory to Parent from each person in
office as a director of the Company or any Subsidiary.

 

ARTICLE V

CONDITIONS PRECEDENT

 

5.1  CONDITIONS TO EACH PARTY’S
OBLIGATION TO EFFECT THE MERGER.

 

The
respective obligations of Parent, Merger Sub and the Company to effect the
Merger are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:

 

(a)  Stockholder Approval. The Company shall have obtained all approvals of
holders of shares of the capital stock of the Company required under the DGCL
to approve this Agreement, the Asset Purchase and the other transactions
contemplated hereby; and

 

(b)  No Injunctions or Restraints, Illegality. No temporary restraining
order, preliminary or permanent injunction or other order, statute, rule,
regulation, executive order, issued, enacted, promulgated or enforced by a
court of competent jurisdiction or other Governmental Entity shall be in effect
and have the effect of making the Merger illegal, has a Material Adverse Effect
on the Company and its Subsidiaries or otherwise prohibiting consummation of
the Merger.

 

(c)  Governmental and Regulatory Consents. All material filings required to
be made prior to the Effective Time with, and all material consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from any Governmental Entity that are listed in Section 5.1(c) of the Company
Disclosure Schedule shall have been made or obtained.

 

5.2  CONDITIONS TO THE OBLIGATIONS
OF PARENT AND MERGER SUB TO EFFECT THE MERGER.

 

The respective
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:

 

(a)  Representations and
Warranties. The representations and warranties of the Company set forth in this
Agreement shall be true and correct (i) as to any representation or warranty
which addresses matters as of a particular date, as of the date referred to
therein and (ii)

 

 

as
to all other representations and warranties, as of the date of this Agreement
and as of the Effective Date, unless the inaccuracies under such
representations and warranties, do not, individually or in the aggregate,
result in or constitute a Material Adverse Effect with respect to the Company;
provided that for purposes of determining whether any representation or
warranty is not true and correct under this condition, all references to
materiality and Material Adverse Effect shall be ignored;

 

(b)  Performance. The Company shall have performed all obligations and
complied in all material respects with all agreements or covenants to be
performed or complied with by it under this Agreement; and

 

(c)  No Material Adverse Effect. There shall not have occurred any event or
circumstance that has had or would be reasonably likely to have a Material
Adverse Effect on the Company since the date hereof.

 

(d)  No Litigation. No requirement of Law shall have been issued, enacted,
enabled, promulgated or enforced by any Governmental Entity which would have
materially reduced the benefits of the transactions contemplated hereby to
Parent or the Surviving Corporation in a manner that Parent, in its good faith
reasonable judgment, would not have entered into this Agreement had such
condition or requirement been known on the date hereof.

 

(e)  Resignations. All of the directors of the Company and at least a
majority of the directors of each of its Subsidiaries in office immediately
prior to the Effective Time shall have provided executed, undated forms of
resignation reasonably satisfactory to Parent, which shall not have been
revoked, from their positions as directors of the Company and each of its Subsidiaries
as applicable.

 

(f)  Dissenters Rights. No more than 9% of the shares shall have properly
and timely exercised dissenters rights.

 

(g)  Certificates and Documents. The Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer of
the Company to the effect that each of the conditions described in Section 5.2
(a), (b) and (c) have been satisfied in all respects and otherwise in form and
substance reasonably satisfactory to Parent. The Parent shall have received
from the Company (i) each Asset Purchase Document to which the Company is a
party duly executed on behalf of the Company, (ii) a copy of the Amended and
Restated Certificate of Incorporation of the Company with all amendments
thereto, certified as of a recent date by the Secretary of State of the State
of Delaware, (iii) a certificate of good standing of the Company and each of
the Subsidiaries, issued as of a recent date by the Secretary of State of the
State of Delaware, (iv) a certificate of the Secretary or an Assistant
Secretary of the Company, dated as of the Closing Date, in form and substance
reasonably satisfactory to Parent certifying as to (A) the Company’s Amended
Restated Certificate of Incorporation, as amended, and Bylaws, and (C) the incumbency
and signatures of the officers of the Company executing this Agreement and the
Asset Purchase Documents and (v) a certificate executed on behalf of the
Company’s transfer agent certifying as to the number of issued and outstanding
shares of Company Common Stock.

 

 

5.3 CONDITIONS TO THE
OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER.

 

The
obligations of the Company to effect the Merger are subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:

 

(a)  Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement shall be true and correct (i)
as to any representation or warranty which addresses matters as of a particular
date, as of the date referred to therein and (ii) as to all other
representations and warranties, as of the date of this Agreement and as of the
Effective Date, unless the inaccuracies under such representations and
warranties, do not, individually or in the aggregate, result in a Material
Adverse Effect with respect to Parent and Merger Sub, taken as a whole;
provided that for purposes of determining whether any representation or
warranty is not true and correct under this condition, all references to
materiality and Material Adverse Effect shall be ignored;

 

(b)  Performance. Parent and Merger Sub shall have performed all obligations
and complied in all material respects with all agreements or covenants to be
performed or complied with by them under this Agreement; and

 

(c)  Material Adverse Effect. There shall have been no Material Adverse
Effect on Parent that would affect Parent’s ability to make the payments for
the shares of Company Common Stock contemplated by this Agreement.

 

(d)  Certificates and Documents. The Company shall have received a
certificate signed on behalf of an officer of Parent to the effect that each of
the conditions described in Section 5.3(a), (b) and (c) have been satisfied in
all respects and otherwise in form and substance reasonably satisfactory to the
Company. The Company shall have received from the Parent (i) each Asset
Purchase Document to which the Parent is a party duly executed on behalf of the
Parent, (ii) a certificate of good standing of each of Parent and Merger Sub,
issued as of a recent date by the Secretary of State of the State of Delaware,
(iv) a certificate of the Secretary or an Assistant Secretary of each of the
Parent and Merger Sub, dated as of the Closing Date, in form and substance
reasonably satisfactory to Parent certifying as to (A) Parent’s Amended
Restated Certificate of Incorporation, as amended, and Bylaws, and (B) the
incumbency and signatures of the officers of the Parent executing this
Agreement and the Asset Purchase Documents.

 

(e)  Asset Purchase. The obligation of the Company to effect the Merger
shall be subject to, and conditioned upon, the closing of the Asset Purchase
pursuant to Section 1.4.

 

ARTICLE VI

TERMINATION AND AMENDMENT

 

6.1 TERMINATION BY EITHER
THE COMPANY OR PARENT.

 

This Agreement may be
terminated at any time prior to the Effective Time by either the Company or
Parent, whether before or after adoption of this Agreement by the Company’s
stockholders:

 

 

(a)  by the mutual written consent of Parent and the Company, by action of
their respective boards of directors;

 

(b)  if any Governmental Entity shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and nonappealable; provided, however, that the
provisions of this Section 6.1(b) shall not be available to any party whose
failure to fulfill its obligations pursuant to Section 4.3 shall have been the
cause of, or shall have resulted in, such order, decree, ruling or other
action;

 

(c)  if the Merger has not been consummated by February 28, 2004 (or such
later date as may be agreed to in writing by Parent and the Company), provided
that the party seeking to exercise such right is not then in breach in any
material respect of any of its obligations covenants, agreements,
representations or warranties under this Agreement; and

 

(d)  if, at a duly held stockholders meeting of the Company or any
adjournment or postponement thereof at which this Agreement, the Asset Purchase
and the Merger are voted upon, the requisite stockholder adoption and approval
shall not have been obtained.

 

6.2  TERMINATION BY PARENT.

 

This
Agreement may also be terminated by Parent at any time prior to the Effective
Time:

 

(a)  if (i) the Company Board shall have withdrawn, modified or amended in
any manner adverse to Parent or Merger Sub any of its recommendations described
in Section 4.1(a) hereof, (ii) the Company or the Company Board shall have approved,
recommended or entered into an agreement, arrangement or understanding with
respect to, or consummated, any Acquisition Proposal from a Person other than
Parent or any of its affiliates, (iii) the Company Board in response to such
Acquisition Proposal, shall not have recommended rejection of such Acquisition
Proposal within ten Business Days of commencement of such Acquisition Proposal
or of any request by the Parent to do so, or (iv) resolved to do any of the
actions described in (i), (ii) or (iii) of this Section 6.2(a) or publicly
announced its intention to do any of such actions; or

 

(b)  upon a material breach of any covenant or agreement (other than
Section 4.4) on the part of the Company set forth in this Agreement, or if (i)
any representation or warranty of the Company set forth herein that is
qualified as to materiality or Material Adverse Effect shall have become untrue
or (ii) any such representation or warranty of the Company that is not so
qualified shall have become untrue in any material respect, if such false
representation or warranty (together with any other false representations or
warranties) would be reasonably be expected to have a Material Adverse Effect
on the Company (each, a “Terminating Company Breach”); provided, however, that,
if such Terminating Company Breach is reasonably capable of being cured by the
Company no later than ten calendar days after Parent has furnished the Company
with written notice of such Terminating Company Breach through the exercise of
reasonable best efforts, so long as the Company continues to exercise such
reasonable best

 

 

efforts, Parent may not
terminate this Agreement under this Section 6.2(b) prior to the expiration of
such ten-day period; or

 

(c)  upon a breach of any provision
of Section 4.4 by the Company or any Representative of the Company.

 

6.3  TERMINATION BY THE COMPANY.

 

This
Agreement may also be terminated by the Company at any time prior to the
Effective Time:

 

(a)  upon a material breach of any covenant or agreement on the part of
Parent or Merger Sub set forth in this Agreement, or if (i) any representation
or warranty of Parent or Merger Sub set forth herein that is qualified as to
materiality or Material Adverse Effect shall have become untrue or (ii) any
such representation or warranty of Parent or Merger Sub that is not so
qualified shall have become untrue in any material respect, if such false
representation or warranty shall have a material adverse effect on Parent or
Merger Sub’s ability to consummate the transactions contemplated hereby (a
“Terminating Parent Breach”); provided, however, that, if such Terminating
Parent Breach is reasonably capable of being cured by Parent or Merger Sub, as
the case may be, no later than ten calendar days after the Company has
furnished Parent with written notice of such Terminating Parent Breach, through
the exercise of reasonable best efforts, so long as Parent or Merger Sub, as
the case may be, continues to exercise such reasonable best efforts, the
Company may not terminate this Agreement under this Section 6.3(a) prior to the
expiration of such ten-day period;

 

(b)  if the Company Board receives a Superior Proposal and reasonably
determines in good faith, after consultation with outside legal counsel that it
is necessary to terminate this Agreement and enter into an agreement to effect
the Superior Proposal in order to not be inconsistent with its fiduciary duties
under applicable law; provided, however, that (A) the Company shall have
complied with the terms of Section 4.4 and (B) this Agreement may not be
terminated pursuant to this Section 6.3(b) unless (x) Parent has received the
Termination Fee (as hereinafter defined) and any Expense Payment (as
hereinafter defined) previously paid by wire transfer in immediately available
funds and (y) the Company shall have provided Parent with at least three
Business Days’ advance notice of such termination and shall cause its
respective financial and legal advisers to negotiate during such
three-Business-Day period with Parent and Merger Sub in an effort to make such
adjustments in the terms and conditions of this Agreement and the Merger as
would enable the Company to proceed with the transactions contemplated herein
on such adjusted terms, and notwithstanding such negotiations and adjustments,
the Company Board reasonably concludes in good faith judgment that the
transactions contemplated herein on such terms as adjusted are not at least as
favorable to the stockholders of the Company as such Superior Proposal.

 

6.4  Effect of Termination.

 

(a)  In the event of termination of this Agreement by either the Company or
Parent as provided in this Article VI, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent,
Merger Sub or the Company or their respective

 

 

officers, directors,
stockholders, affiliates, representatives, agents, employees or advisors,
provided, however, (i)  Section
4.5, this Section 6.4, and Article VII shall survive termination and shall
remain in full force and effect, and (ii) termination shall not relieve any
party with respect to any liabilities or damages incurred or suffered by a
non-breaching party as a result of the breach of this Agreement.

 

(b)  The Company shall (provided that neither Parent nor Merger Sub is then
in material breach of its obligations under this Agreement) prior to the
termination of this Agreement pursuant to Sections 6.1(d) and an Acquisition
Proposal has been publicly disclosed or publicly proposed to the Company or its
stockholders at any time, on or after the date of this Agreement but prior to
any termination of this Agreement and has not been publicly withdrawn or
abandoned, promptly, but in no event later than two Business Days following
such termination, pay to Parent the Termination Fee and the Expense Payment.

 

(c)  In the event that this Agreement is terminated pursuant to Section
6.2(a), Section 6.2(c) or Section 6.3(b) and provided that neither Parent nor
Merger Sub is then in material breach of its obligations under this Agreement,
the Company shall pay to Parent, by wire transfer of immediately available
funds to an account designated by Parent prior to such termination, an amount
equal to $1,430,000 (the “Termination Fee”) and a reimbursement for the
out-of-pocket expenses of Parent and Merger Sub (including printing fees,
filing fees and fees and expenses of its legal and financial advisors) related
to this Agreement and the transactions contemplated hereby and any related
financing, in an amount not to exceed $240,000 (the “Expense Payment”).

 

(d)  If (A) an Acquisition Proposal is publicly disclosed or publicly
proposed to the Company or its stockholders at any time on or after the date of
this Agreement but prior to any termination of this Agreement and it has not
been publicly withdrawn or abandoned, (B) this Agreement is terminated pursuant
to Section 6.1(c) and (C) within 12 months of the date if such termination, the
Company enters into an agreement, arrangement or understanding, including a
letter of intent, with respect to or consummates an Acquisition Proposal, the
Company shall pay to Parent, by wire transfer of immediately available funds to
an account designated by Parent prior to such termination, an amount equal to
the Termination Fee and the Expense Payment.

 

(e)  The Company acknowledges that the agreements contained in Sections
6.4(b), (c) and, (d) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent and Merger Sub would
not enter into this Agreement.

 

6.5  AMENDMENT.

 

This Agreement may be
amended by the parties hereto, by action taken or authorized by their
respective boards of directors, at any time before or after adoption of this
Agreement by the Company’s stockholders, but, after any such adoption, no amendment
shall be made which by law or in accordance with the rules of the NASDAQ
requires further approval by such stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.

 

 

6.6  EXTENSION; WAIVER.

 

At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective boards of directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions 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 a written instrument signed on
behalf of such party. No delay on the part of any party hereto in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party hereto of any right, power or
privilege hereunder operate as a waiver of any other right, power or privilege
hereunder, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties hereto may otherwise have
at law or in equity. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver
of those rights.

 

ARTICLE VII

GENERAL PROVISIONS

 

7.1  NON-SURVIVAL OF
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER REPRESENTATIONS AND
WARRANTIES.

 

None of the
representations, warranties, covenants and other agreements in this Agreement
or in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms apply or are to
be performed in whole or in part after the Effective Time and/or the provisions
of this Article VII. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, none of the
Company, Parent or Merger Sub makes any other representations or warranties,
and each hereby disclaims any other representations and warranties made by
itself or any of its officers, directors, employees, agents, financial and
legal advisors or other representatives, with respect to the execution and
delivery of this Agreement, the documents and the instruments referred to
herein, or the transactions contemplated hereby or thereby, notwithstanding the
delivery or disclosure to the other party or the other party’s representatives
of any documentation or other information with respect to any one or more of
the foregoing.

 

7.2  NOTICES.

 

All notices and other
communications hereunder shall be in writing and shall be deemed duly given (a)
on the date of delivery if delivered personally, (b) on the first Business Day
following the date of dispatch if delivered by a nationally recognized next-day
courier service, (c) on the third Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid or (d) if sent by facsimile transmission, with a

 

 

copy
mailed on the same day in the manner provided in (a) or (b) above, when
transmitted and receipt is confirmed by telephone. All notices hereunder shall
be delivered as set forth below, or pursuant to such other instructions as may
be designated in writing by the party to receive such notice:

 

if
to Parent or Merger Sub:

 

SSA
Global Technologies, Inc.

500 W. Madison

Chicago, IL 60661

Attention:   General Counsel

Facsimile:   (312) 474-7451

 

with
a copy to:

 

Schulte
Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Attention:   Robert B. Loper

Facsimile:   (212) 593-5955

 

if
to the Company:

 

EXE
Technologies, Inc.

8787
Stemmons Freeway

Dallas,
TX 75247

Attention:   Kenneth R. Vines

Facsimile:   (214) 775-0912

 

with
a copy to:

 

Baker
& McKenzie

2300
Trammell Crow Center

2001
Ross Avenue

Dallas,
TX 75201

Attention:   Daniel W. Rabun

Facsimile:   (214) 978-3099

 

7.3  INTERPRETATION.

 

When
a reference is made in this Agreement to Sections, Exhibits or Schedules, such
reference shall be to a Section of or Exhibit or Schedule to this Agreement
unless otherwise indicated. The table of contents, cross references 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. Whenever
the words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.” The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an

 

 

ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden or proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statue or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the content requires otherwise. It
is understood and agreed that neither the specifications of any dollar amount
in this Agreement nor the inclusion of any specific item in the Schedules or
Exhibits is intended to imply that such amounts or higher or lower amounts, or
the items so included or other items, are or are not material, and neither
party shall use the fact of setting of such amounts or the fact of the
inclusion of such item in the Schedules or Exhibits in any dispute or
controversy between the parties as to whether any obligation, item or matter is
or is not material for purposes hereof.

 

7.4  COUNTERPARTS.

 

This Agreement may be
executed in two or more counterparts (including by means of telecopied signature
pages), all of which shall be considered one and the same agreement and shall
become effective when two or more counterparts have been signed by each of the
parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.

 

7.5  ENTIRE AGREEMENT; NO THIRD PARTY
BENEFICIARIES; LIABILITY.

 

(a)  This Agreement (including the Schedules and
Exhibits) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof, other than the Confidentiality Agreement, which
shall survive the execution and delivery of this Agreement.

 

(b)  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Sections 4.6 and 4.10 (which is intended to be
for the benefit of the Persons covered thereby and may be enforced by such
Persons).

 

(c)  No affiliate, officer, director or
stockholder of any party hereto shall have any liability hereunder.

 

7.6  TAX DISCLOSURES.

 

Notwithstanding anything
herein to the contrary, the parties hereto and each other party to the
transactions contemplated hereby (and each affiliate and Person acting on
behalf of any such party) agree that each party (and each employee,
representative, and other agent of such party) may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the transactions and all materials of any kind (including opinions or other tax
analyses) that are provided to such party or such Person relating to such tax
treatment and tax structure; provided, however, that such disclosure may not be
made (a) until the earlier of (i) the date of the public announcement of
discussions relating to the transaction, (ii) the date of the public
announcement of the transaction, or (iii) the date of execution of this
Agreement, and (b) to the extent required to be kept confidential to comply
with any applicable securities laws. Each

 

 

party shall have the
unlimited ability to consult with any tax advisor (including a tax advisor
independent from all other entities involved in the transaction) regarding the
tax treatment or tax structure of the transaction. This authorization is not
intended to permit disclosure of any other information including (without
limitation) (i) any portion of any materials to the extent not related to the
tax treatment or tax structure of the transactions, (ii) the identities of
participants or potential participants in the transactions, (iii) the existence
or status of any negotiations, (iv) any pricing or financial information
(except to the extent such pricing or financial information is related to the
tax treatment or tax structure of the transaction), or (v) any other term or
detail not relevant to the tax treatment or the tax structure of the
transactions.

 

7.7  GOVERNING LAW;  JURISDICTION.

 

This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware,
without regard to the laws that might be applicable under conflicts of laws
principles. Each of the Company, Parent and Merger Sub irrevocably agrees that
any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by the
other party hereto or its successors or assigns may be brought and determined
in the Court of Chancery of the State of Delaware, and each of the Company,
Parent and Merger Sub hereby irrevocably submits with regard to any such action
or proceeding for itself and in respect to its property, generally and unconditionally,
to the nonexclusive jurisdiction of the aforesaid courts. Each of the Company,
Parent and Merger Sub hereby irrevocably waives, and agrees not to assert, by
way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior
to judgment, attachment in aid of execution of judgment, execution of judgment
or otherwise), and (c) to the fullest extent permitted by applicable law, that
(i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.

 

7.8  SEVERABILITY.

 

If any term or other
provision of this Agreement is invalid, illegal or incapable of being enforced
by any law or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible. Any
provision of this Agreement held invalid or unenforceable only in part, degree
or certain jurisdictions will remain in full force and effect to the extent not
held invalid or unenforceable. To the extent permitted by applicable law, each
party waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.

 

 

7.9  ASSIGNMENT.

 

Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto, in whole or in part (whether by operation of law or
otherwise), without the prior written consent of the other parties, and any
attempt to make any such assignment without such consent shall be null and
void; provided that each of Parent or Merger Sub may assign its rights,
interests or obligations hereunder to an Affiliate without the consent of any
other party so long as Parent is not released from its obligations hereunder
pursuant to such assignment. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.

 

7.10  ENFORCEMENT.

 

The parties 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. It is
accordingly agreed that the parties shall be entitled to specific performance
of the terms hereof, this being in addition to any other remedy to which they
are entitled at law or in equity.

 

* * * * *

 

 

IN WITNESS WHEREOF, the
Company, Parent and Merger Sub have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of date first written
above.

 

	
   

  	
  SSA GLOBAL TECHNOLOGIES,
  INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/  Shelley Isenberg

  
	
   

  	
   

  	
  Name:

  	
  Shelley Isenberg

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RUSH MERGER SUBSIDIARY,
  INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shelley Isenberg

  
	
   

  	
   

  	
  Name:

  	
  Shelley Isenberg

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXE TECHNOLOGIES, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth R. Vines

  
	
   

  	
   

  	
  Name:

  	
  Kenneth R. Vines

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice PresidentQuickLinks
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Exhibit 10.1  

 
  EXECUTIVE EMPLOYMENT AGREEMENT    
    

        This Executive Employment Agreement (the "Agreement") shall be effective as of the 1st day of January, 2004, by and between Boston Private Financial
Holdings, Inc., a duly organized Massachusetts corporation with its principal place of business at Ten Post Office Square, Boston, Massachusetts (the "Company"), and Timothy L. Vaill of
Andover, Massachusetts (the "Executive"), hereinafter collectively the "Parties." 

        WHEREAS,
the operations of the Company and its affiliates are a complex matter requiring leadership and direction in a variety of areas, including financial, strategic planning,
regulatory, personnel development, community relations and others; 

        WHEREAS,
the Executive is possessed of certain experience and expertise that qualify him to provide the leadership and direction required by the Company and its affiliates; 

        WHEREAS,
the Executive is currently serving as Chairman and Chief Executive Officer of the Company; and 

        WHEREAS,
subject to the terms and conditions hereinafter set forth, the Company desires to retain the Executive to continue serving as its Chairman and Chief Executive Officer, and the
Executive wishes to accept such continuing employment; 

        NOW,
THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the Parties hereby agree as follows: 

        1.    Employment.    Subject to the terms and conditions set forth in this Agreement, the Company agrees to continue
to employ the Executive, and the Executive agrees to continue to be employed by the
Company, for the Term set forth in Paragraph 2 below, in the positions and with the duties and responsibilities set forth in Paragraph 3 below. 

        2.    Term.    This Agreement shall become effective as of the date first set forth above (the "Effective Date"), and,
as of that date, shall replace any preceding Employment Agreement with respect to periods of employment on and after the Effective Date. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term of three (3) years, commencing on the Effective Date hereof and continuing through the close of business on December 31, 2006 (the
"Term"). Provided, however, on December 31, 2004 and on each succeeding December 31 thereafter, the Term then in effect shall automatically be extended for one calendar year, unless the
Board of Directors of the Company (the "Board") provides the Executive with written notice to the contrary at least thirty (30) days before the date the Agreement would otherwise be so
extended. Such notice, in the sole discretion of the Board, may provide that the Term will not be extended in the future, and that there shall be no further automatic extensions of the Term hereof on
each succeeding December 31. 

        Notwithstanding
the foregoing, the Term of this Agreement shall be automatically extended, as necessary, in the event of a Change in Control (as hereinafter defined), so that, as so
extended, it shall terminate no earlier than three years following the date of such Change in Control. 

        A
"Change in Control" shall occur upon the earliest of the following events: (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the "Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan or trust of the Company, or any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company and other than the Executive and his affiliates and associates (as such terms are
defined in Rule 12b-2 under the Act) becomes a "beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the Act), directly or indirectly, of
securities of the Company representing at least twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; (2) persons who, as of
the date of the Agreement, constituted the Company's Board (the "Incumbent Board") cease for 

 

any
reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director of the Company subsequent to the date of this Agreement whose election or nomination for election was approved by at least a majority of the directors then
comprising the Incumbent Board shall, for purposes of this Agreement, be considered a member of the Incumbent Board; or (3) (i) any consolidation or merger of the Company or its subsidiaries
where the stockholders oft Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the corporation issuing cash or securities in the
consolidation or merger (or the ultimate parent corporation, if any), (ii) any sale, lease, exchange or other transfer (in a transaction or series of transactions contemplated or arranged by
any party as a single plan) of all or substantially all of the assets of the Company, or (iii) any liquidation or dissolution of the Company. 

        3.    Capacity and Performance.    

        3.1    The
Executive shall be employed during the Term as Chairman and Chief Executive Office of the Company, and shall perform such duties and responsibilities on behalf of
the Company as may reasonably be assigned to him by the Board consistent with Executive's position. As Chairman and Chief Executive Officer, the Executive shall exercise general supervision over the
property, business and overall affairs of the Company and its subsidiaries and affiliates. The Executive shall report and be responsible to the Board. 

        3.2    During
the Term, and excluding any periods of vacation and leave to which the Executive is entitled, the Executive agrees to devote substantially all of his working time
and best efforts to the performance of his duties and responsibilities under this Agreement. Provided, however, it shall not be a violation of this Agreement for the Executive (i) to serve on
the boards of directors of a reasonable number of other corporations, trade associations and/or charitable organizations, (ii) to engage in charitable and community affairs, and/or
(iii) to manage his personal investments and affairs, so long as such activities do not materially interfere with the proper performance of his duties and responsibilities as Chairman and Chief
Executive Officer of the Company. It is expressly agreed and understood that, to the extent that any such activities have been conducted by the Executive prior to a Change in Control (as defined in
Paragraph 5.2(b) below), the continued conduct of such activities following a Change of Control shall not be deemed to interfere materially with the performance of the Executive's duties and
responsibilities to the Company. 

        3.3    lf
the Executive is suspended and/or temporarily prohibited from participating in the affairs of the Company by a notice served by state or federal banking regulators,
the obligations of the Company hereunder shall be suspended as of the date of service, unless stayed by appropriate legal proceedings. If the charges in the notice are dismissed without a finding or
acknowledgment of wrongdoing on the part of the Executive, the Company shall pay to the Executive all of the compensation under Paragraph 4 withheld while such obligations were suspended, and
shall promptly reinstate going forward all of the obligations that had been so suspended. 

        4.    Compensation.    For all services rendered by the Executive in any capacity required hereunder during the Term,
including, without limitation, service as an executive, officer, director, or member of any committee of the Company, or any subsidiary or affiliate thereof, the Executive shall be compensated as set
forth below. 

        4.1    Base Salary.    The Executive shall be paid a base salary at an annual rate of $535,000, payable in accordance
with the regular payroll practices of the Company and subject to increase from time to time by the Board, in its sole discretion. Such base salary, as from time to time increased, is hereinafter
referred to as "Base Salary." The Executive's Base Salary shall be 

2

 

reviewed
no less frequently than annually for increase, in the sole discretion of the Board. Base Salary shall in no event be subject to decrease from its then-existing level during the
Term. 

        4.2    Bonus.    The Executive shall participate in the Annual Executive Incentive Plan (or a substantially similar or
successor plan), pursuant to which the Executive shall be considered annually for an incentive bonus based on an agreed percentage of Base Salary ("Bonus"). The amount of the annual Bonus shall be
determined by the Board, based on its assessment of the Executive's performance and that of the Company against appropriate and reasonably achievable goals established by the Compensation Committee of
the Board after consultation with the Executive, which Bonus, if any, shall be payable not later than the end of the first quarter of the fiscal year following that for which the Bonus was earned. Any
Bonus or incentive compensation paid to the Executive shall be in addition to Base Salary. 

        4.3    Long-Term Incentive Compensation.    The Executive shall participate in the 2004 Stock and
Incentive (or any successor plan) (the "Stock Plan") and all other similar plans that the Board may adopt, or has adopted, from time to time on such terms and conditions as the Board shall determine. 

        5.    Benefits.    

        5.1    Employee Benefit Programs.    During the Term, and subject to any contribution therefor generally required of
executives of the Company, the Executive shall be entitled to participate in any and all employee pension and welfare benefit plans, programs and arrangements of the Company, as in effect from time to
time, to the same extent that other senior executives of the Company are eligible to so participate. Such participation shall be subject to the terms of the governing plan documents and generally
applicable Company policies. 

        5.2    Supplemental Executive Retirement Plan.    The Supplemental Executive Retirement Agreement dated
May 2001, as amended by the First Amendment effective as of the first day of January 2004, shall continue in effect until amended or terminated by the parties (as amended, the "SERP"). 

        5.3    Fringe Benefits.    During the Term, the Executive shall be eligible to participate in any and all of the
Company's executive fringe benefits, subject to and in accordance with the terms and conditions of such arrangements as are in effect from time to time for the senior executives of the Company.
Notwithstanding any changes to the fringe benefits available to senior executives of the Company, the Executive shall be entitled during the Term to either direct payment or reimbursement (at the
Executive's option) of reasonable costs and expenses in an amount not to exceed $100,000 annually for (i) an annual physical examination and any medical testing related thereto,
(ii) annual tax planning and tax return preparation services, (iii) periodic estate planning and will preparation services, and (iv) personal legal services approved by the Board
and arising from Company-related activities. The payment for tax return preparation and legal services, as provided hereinabove, shall avail for the year in which the Executive retires and shall
likewise be extended for the benefit of the Executive's estate for a period of one year following the Executive's death during the Term. 

        5.4    Vacation.    During the Term, the Executive shall be entitled to four (4) weeks of paid vacation during
the course of any twelve (12) month period of employment. Vacation shall be taken at such times and intervals as shall be determined by the Executive, in his reasonable judgment, subject to the
operating and business needs of the Company. 

        5.5    Insurance.    

        (a)   The
Company shall purchase and maintain in effect by prompt payment of the premiums due thereon a policy (1) covering officers' and directors' liability in
compliance with 

3

 

applicable
federal banking rules and regulations, and (2) fiduciary liability relating to the Employee Retirement Income Security Act of 1974, as amended. 

        (b)   In
addition to the insurance coverage provided to employees of the Company generally, the Company shall provide to the Executive Company-paid term life
insurance with a gross death benefit of no less than $2,000,000. 

        (c)   The
Company shall pay to Executive annually on or about January 1 a bonus, grossed up for applicable taxes, in such amounts as are necessary to pay the
Executive's premium for such year for a split dollar life insurance policy issued by Mass Mutual on March 22,1996 and owned by the Vaill
Insurance Trust 1995-B.P.B.T.C.-trustee. Upon termination of employment, the Company shall have no further responsibility for premium payments. 

        5.6    Expense Reimbursement.    During the Term, the Executive shall be entitled to receive reimbursement for all
reasonable out-of-pocket expenses incurred by him in performing services hereunder, in accordance with the prevailing policies and procedures established by the Company for its
senior executive officers. 

        6.    Termination of Employment.    Notwithstanding the provisions of Paragraph 2 hereof, if the Executive's
employment hereunder shall terminate prior to the expiration of the Term under the following circumstances, the following consequences shall result: 

        6.1    Death.    In the event of the Executive's death during the Term, the Executive's employment hereunder shall
automatically terminate. In such event, the Company shall promptly pay to the Executive's designated beneficiary or, if no beneficiary has been designated by the Executive, to his estate or other
legal representative: 

        (a)   Base
Salary for the period ending on the 12th month following the date of the Executive's death; 

        (b)   pro-rata
Bonus for the fiscal year of the Executive's death; 

        (c)   rights
to exercise stock options, as provided under the terms of the Executive's stock option grants and agreements with the Company; 

        (d)   any
rights, benefits and/or coverages available for the benefit of deceased participants under the terms of the plans, programs and arrangements for the Executive set
forth in Paragraphs 4.3, 5.1, 5.2, 5.3 and 5.5 hereof; and 

        (e)   payment
of any accrued but unpaid Base Salary, unused vacation, unreimbursed business expenses, and unpaid Bonus for the prior Performance Year, together with any other
vested rights and entitlements remaining unpaid at the Executive's death. 

        6.2    Disability.    In the event the Executive's employment with the Company is terminated for reason of disability,
the Company shall promptly pay to the Executive: 

        (a)   Base
Salary until the later of the end of the Term or the commencement of payments under a long-term disability insurance policy of the Company replacing at
least sixty-six and two-thirds percent (662/3%) of the Executive's Base Salary as in effect immediately prior to the termination of the Executive's employment; 

        (b)   pro-rata
Bonus for the fiscal year in which the Executive's employment terminated; 

        (c)   rights
to exercise stock options, as provided under the terms of the Executive's stock option grants and agreements with the Company; 

4

 

        (d)   any
rights, benefits and/or coverages available to former employees who separate from service based on disability under the terms of the plans, programs and arrangements
for the Executive set forth in Paragraphs 4.3, 5.1, 5.2, 5.3 and 5.5 hereof; and 

        (e)   payment
of any accrued but unpaid Base Salary, unused vacation, unreimbursed business expenses, and unpaid Bonus for the prior Performance Year, together with any other
vested rights and entitlements remaining unpaid at the Executive's termination of employment. 

        For
purposes of this Agreement, "disability" shall mean the Executive's incapacity due to a physical or mental illness which has caused the Executive to be unable to carry out the
essential functions of his position at the Company, either with or without reasonable accommodation, for 90 days during any period of 365 consecutive calendar days. 

        Disagreement
regarding a determination of disability shall be subject to the certification of a qualified medical doctor mutually agreed to by the Company and the Executive, or, in the
event of the Executive's incapacity to designate a doctor, the Executive's legal representative or guardian. In the absence of an agreement between the Company and the Executive (or his legal proxy)
in designating a doctor, each party shall nominate a qualified medical doctor, and the two doctors so nominated shall select a third doctor, which third doctor shall make the conclusive determination
as to the disability of the Executive. 

        6.3    Retirement.    In the event the Executive's employment terminates due to normal retirement, the Company shall
promptly pay or provide to the Executive: 

        (a)   Base
Salary for the period ending on the date of the Executive's retirement; 

        (b)   pro-rata
Bonus for the fiscal year of the Executive's retirement; 

        (c)   rights
to exercise stock options as provided under the terms of the Executive's stock option grants and agreements with the Company; 

        (d)   any
rights, benefits and/or coverages available to retired employees under the terms of the plans, programs and arrangements for the Executive set forth under Paragraphs
4.3, 5.1, 5.2, 5.3 and 5.5 hereof; 

        (e)   payment
of any accrued but unpaid Base Salary, unused vacation, unpaid Bonus for the prior Performance Year(s), together with any other vested rights and entitlements
remaining unpaid at the Executive's retirement; and 

        (f)    continued
access to a Company-funded office, computer, telephonic equipment and clerical services, all at a location in the greater Boston, Massachusetts area selected
by the Board. 

        For
purposes of this Agreement, "normal retirement" shall mean voluntary termination of the Executive's employment after he reaches age 65 or has completed 15 years of service
with the Company, whichever is later, or in accordance with any other retirement arrangement with respect to the Executive established by the Board with the Executive's express written consent. 

        6.4    Termination By the Company For Cause.    The Company may terminate the Executive's employment hereunder for
"Cause," at any time upon written notice to the Executive setting forth in reasonable detail the nature of such Cause. The following shall constitute Cause for termination: 

        (a)   conviction
of the Executive of, or plea of guilty or nolo contendere by the Executive to, a felony; or 

        (b)   willfully
dishonest acts against the Company that are materially injurious to it or any of its affiliated entities; or 

5

 

        (c)   gross
and willful misconduct which causes or is likely to cause substantial financial loss to the Company or any of its affiliated entities, or to cause significant
damage to the business reputation of the Company or any of its affiliated entities; or 

        (d)   willful
and persistent misconduct constituting bad faith in the performance of the Executive's obligations Under this Agreement; or 

        (e)   willful
breach of fiduciary duty involving personal profit to the Executive. 

        Provided,
however, the Executive's employment shall not be terminated for Cause, with the exception of the events described in Subparagraph (a) above, unless the Executive shall
have first received adequate written notice of the specific charges against him and an opportunity to be heard before the Board in response to same. No termination for Cause shall be effective unless
the Board shall determine, based on clear and convincing evidence, that Cause in fact exists. In the event of a termination for Cause in accordance with the procedure set forth above, the Executive
shall be entitled only to any unpaid Base Salary and Bonus for a prior Performance Year, and to those other continuing rights and benefits, if any, available under employee benefit programs of the
Company to employees terminated for cause, and shall have no further rights hereunder. 

        For
purposes of this Paragraph 6.4, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive
intentionally, purposefully and without a subjective belief that the Executive's act, or failure to act, was in the best interests of the Company and/or any of its subsidiaries. 

        6.5    Termination By the Company Other Than For Cause.    The Company may terminate the employment of the Executive
for reasons other than Cause, in which case the Company shall be obligated to pay promptly, and the Executive shall be entitled to receive without any requirement of mitigation, the following: 

        (a)   an
amount equal to 2.99 times (i) the Executive's current Base Salary and (ii) the average of the Bonus payments for the three most recent taxable years
preceding termination, payable in a lump sum; 

        (b)   pro-rata
Bonus for the fiscal year in which the Executive's employment terminated; 

        (c)   any
outstanding unvested stock options and restricted stock awards under the Company's 1988 Employee Incentive Stock Option Plan, the 1997 Long-Term
Incentive Plan, the Stock Plan, and any other equity plans shall become immediately vested and exercisable; provided that any such options granted on and after the date hereof may be exercised by the
Executive within three years following the date of such termination, and prior options may be exercised in accordance with their terms; 

        (d)   continuation
of the Executive's perquisites and all other benefits of the Executive under any of the Company's medical and benefit plans, life insurance plans,
disability income plans, benefits equalization plan, vacation plans, expense reimbursement plans, or other employee benefit plans described in Paragraph 5 hereof (collectively the "Employee
Benefit Plans" and each individually an "Employee Benefit Plan"), except as specifically provided herein with respect to the SERP, upon the same terms as in effect on the date of termination for a
period of three (3) years following such termination, or until such earlier time as the Executive becomes eligible for equivalent coverage(s) under another group benefit plan. Solely for
purposes of benefits continuation under the Employee Benefit Plans, except with respect to the SERP, the Executive shall be deemed to be an active employee of the Company, during the three year period
following termination. For purposes of the SERP, Executive shall be granted three additional Years of Service (as defined in the SERP) for vesting purposes only. To the extent that benefits required
under this Paragraph 6.5(d) cannot be provided under the 

6

 

terms
of any Employee Benefit Plan, the Company shall enter into alternative arrangements that will provide the Executive with comparable benefits, or shall provide the Executive with the economic
equivalent of the same; and 

        (e)   any
accrued but unpaid Base Salary, unused vacation, unpaid Bonus for the prior Performance Year(s), together with any other vested rights and entitlements remaining
unpaid at the Executive's termination of employment. 

        Payment(s)
made under this Paragraph 6.5 shall not be reduced by any compensation or benefits which the Executive may receive from other employment with another employer, or
otherwise, following termination of his employment with the Company. No termination hereunder shall adversely affect the Executive's (or his spouse's) rights, if any, to receive benefits as described
in Section 5.2 hereof. 

        6.6    Termination By the Executive For Good Reason.    The Executive may terminate his employment with the Company
for Good Reason, in which case the Company shall be obligated to pay promptly when due, and the Executive shall be entitled to receive without any requirement of mitigation, all of the compensation
and benefits described in Paragraph 6.5 hereof. 

        For
purposes of this Agreement, "Good Reason" shall exist if the Executive has complied with the "Good Reason Process" (as hereinafter defined) following the occurrence of any one of the
following events during the Term: 

        (a)   a
significant adverse change, not consented to by the Executive, in the nature or scope of the Executive's responsibilities, authorities, powers, title, functions or
duties; or 

        (b)   a
reduction, not consented to by the Executive, in the Executive's Base Salary or Bonus opportunity as in effect on the date hereof or as the same may have been
increased from time to time; or 

        (c)   an
attempt by the Company to relocate, not consented to by the Executive, the Executive to, or to require him to perform regular services at, any location that is more
than fifty (50) miles from the Executive's employment location on the date hereof; or 

        (d)   except
as required by law or as consented to by the Executive, the failure by the Company or any of its subsidiaries to continue in effect any benefits or perquisites,
or any pension, life insurance, medical insurance or disability plan in which the Executive was theretofore participating, unless the Company or its successor provides the Executive with a plan or
plans that provide substantially similar benefits, or the taking of any action by the Company that would adversely affect the Executive's benefits under any such plans or deprive the Executive of any
material fringe benefit enjoyed by the Executive hereunder; or 

        (e)   the
failure by the Company, not consented to by the Executive, to obtain an effective agreement from any successor to assume and agree to perform this Agreement. 

        "Good
Reason Process" shall mean that (A) the Executive reasonably determines in good faith that a "Good Reason" event has occurred; (B) the Executive notifies the Company
in writing of the occurrence of the Good Reason event; (C) the Executive cooperates in good faith with the Company's efforts, for a period not less than 30 days following such notice, to
modify the Executive's employment situation in a manner reasonably acceptable to the Executive; and (D) notwithstanding such efforts, one or more of the Good Reason events continues to exist
and has not been modified in a manner acceptable to the Executive. If the Company cures the Good Reason event in a manner acceptable to the Executive during the 30-day period, Good Reason
shall be deemed not to have occurred. 

7

 

        6.7    Termination By the Executive Other Than For Good Reason.    The Executive may terminate his employment with the
Company for reasons other than Good Reason, on reasonable notice of not less than thirty (30) days, in which case the Company shall be obligated to pay promptly, and the Executive shall be
entitled to receive, any unpaid Base Salary and Bonus for prior year(s), together with any other continuing rights and benefits, if any, available under any employee benefit programs of the Company,
and the Executive shall have no further rights hereunder. 

        6.8    Limitation on Termination Payments.    Notwithstanding the foregoing, and except as provided herein, payments
and benefits under this Agreement will be reduced to the extent necessary so that the Executive will not be liable for the federal excise tax levied on certain "excess parachute payments" under
section 4999 of the Internal Revenue Code of 1986, as amended. Whether payments to the Executive are to be reduced will be jointly determined by the Executive and the Company. The Executive
may, at the expense of the Company, hire an accounting firm, law firm and/or employment consulting firm selected by the Executive to assist him in such determination. If a reduction is made hereunder,
the Executive will have the right to determine which payments and benefits will be reduced. 

        7.    Non-Competition.    

        7.1    In
the event the Executive voluntarily terminates his employment with the Company (other than for Good Reason), the Company shall be entitled to enjoin the employment of
the Executive with any significant competitor of the Company for a period of either two years or the remaining Term plus one year, whichever is less. During such period, even if the Executive is
allowed to be employed with a significant competitor, he shall not misuse proprietary and confidential information of the Company for the benefit of such significant competitor. The term "significant
competitor" shall mean any business that engages in an activity that competes substantially with the business of the Company or any of its affiliates. 

        It
is the desire and intent of the Parties that the provisions of this Paragraph 7.1 shall be enforced to the fullest extent permissible under the laws and public policies applied
in each jurisdiction in which enforcement is sought. Accordingly, if any particular portion of this Paragraph 7.1 shall be adjudicated to be invalid or unenforceable, such invalidation shall
apply only with respect to the operation of this Paragraph 7.1 in the particular jurisdiction in which such adjudication is made. 

        7.2    The
Parties recognize that the Company will have no adequate remedy at law for breach by the Executive of the agreements provided in this Paragraph 7.1 and, in
the event of any such breach, the Company and the Executive hereby agree that the Company shall be entitled to a decree of specific performance or other appropriate remedy to enforce performance of
such agreement. 

        7.3    In
addition to the foregoing provisions of this Paragraph 7 and Paragraph 8 below, the Executive's Non-Solicitation/Not Accept and
Confidentiality Agreement and Release dated November, 2003 shall continue in full force and effect and shall not be affected by this Agreement. 

        8.    Confidential Information.    

        8.1    The
Executive agrees not to disclose, either while in the employ of the Company or at any time thereafter, to any person not employed by the Company, or not engaged to
render services to the Company, any confidential information obtained by him while in the employ of the Company. Provided, however, this provision shall not preclude the Executive from use or
disclosure of information known generally to the public (other than that which may have been disclosed by someone not bound by an obligation of confidentiality and other than as a result of wrongful
action by the Executive) or from disclosure required by law or court order or in the 

8

 

proper
course of conduct of the Company's business. For purposes of this Agreement, the term "confidential information" includes, but is not limited to, any information relating to the business or
affairs of the Company, including, but not limited to, financial statements, business plans, personnel, operations, technology, customer lists and identities, potential customers, employees, servicing
methods, strategies, analyses, profit margins or other proprietary information relating to the Company. 

        8.2    The
Executive also agrees that, upon leaving the employ of the Company, he will not take with him, without the prior written consent of an officer authorized to act in
the matter by the Board of Directors of the Company, any confidential information obtained by him during the course of his employment by the Company, including any depositor list, shareholder list,
client list, drawing, blueprint, specification or other document of the Company, its subsidiaries, affiliates and divisions, which is of a confidential nature relating to the Company, its
subsidiaries, affiliates and divisions. 

        8.3    The
Parties recognize that the Company will have no adequate remedy at law for breach by the Executive of the covenants provided in this Paragraph 8 and, in the
event of any such breach, the Company and the Executive hereby agree that the Company shall be entitled to a decree of specific performance or other appropriate remedy to enforce performance of such
covenant(s). 

        9.    Withholding.    Anything to the contrary notwithstanding, all payments required to be made by the Company
hereunder to the Executive, or to his estate or beneficiaries, shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation. 

        10.    Mitigation.    In the event of any termination of employment entitling the Executive to amounts under this
Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain except as specifically provided in this Agreement respecting employee benefits. 

        11.    Notices.    Any notices, requests, demands or other communications provided for by this Agreement shall be
sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to the Executive at the last address the Executive has filed in writing with the Company, or
to the Company at its main office, attention of the Board of Directors. 

        12.    Entire Agreement.    This Agreement contains the entire agreement between the Parties hereto with respect to
the matters referenced herein, and supersedes all prior agreements or understandings relating to such matter, provided however, that except as otherwise specifically modified by this Agreement,
nothing herein shall supercede the terms of any stock option award(s) or restricted stock grant(s) authorized and granted in writing to the Executive under the Boston Private Financial
Holdings, Inc. 2004 Stock Option and Incentive Plan, Boston Private Financial Holdings, Inc. 1997 Long-Term Incentive Plan, and the Boston Private Bancorp Inc.,
Employee Incentive Stock Option Plan (approved 1/87). 

        13.    Assignment.    Except as herein expressly provided, the respective rights and obligations of the Executive and
the Company under this Agreement shall not be assignable by either party without the written consent of the other party, but shall inure to the benefit of and be binding upon his or its permitted
successors or assigns, including, in the case of the Company, any other corporate entity with which the Company may be merged or otherwise combined or which may acquire the Company or its assets in
whole or substantial part. Nothing herein expressed or implied is intended to confer upon any person, other than the Parties hereto, any right, remedies, obligations, or liabilities under or by reason
of this Agreement. 

9

 

        14.    Applicable Law.    This Agreement shall be deemed a contract under, and for all purposes shall be construed in
accordance with, the laws of the Commonwealth of Massachusetts. 

        15.    Amendment or Modification; Waiver.    No provision of this Agreement may be amended or waived unless such
amendment or waiver is authorized by the Board, or any authorized committee of the Board, is agreed to in writing, and is signed by the Executive and by an officer of the Company thereunto duly
authorized. Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or dissimilar provision or condition at the same time or at any prior or subsequent time. 

        16.    Severability.    In the event that any provision or portion of this Agreement shall be determined to be invalid
or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 

        17.    Reference.    In the event of the Executive's death or a judicial determination of his incompetency, reference
in this Agreement to the Executive shall be deemed, where appropriate, to refer to his legal representatives, or, where appropriate, to his beneficiary or beneficiaries. 

        18.    Titles.    Titles to the paragraphs of the Agreement are intended solely for convenience, and no provisions in
this Agreement are to be construed by reference to the title of any paragraph. 

[the
remainder of this page is left intentionally blank] 

10

 

        IN
WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto authorized, and the Executive has hereunto set his hand, all on the day and year
first above written. 

	 	 	BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
	

 	
 	

By:	

 Eugene S. Colangelo,

Chairman of the Compensation Committee of its Board of Directors
	

 	
 	

TIMOTHY L. VAILL
	

 	
 	

 	

11

QuickLinks

EXECUTIVE EMPLOYMENT AGREEMENT

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