Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NETSCAPE COMMUNICATIONS CORPORATION,
PCI ACQUISITION CORPORATION
AND
PORTOLA COMMUNICATIONS, INC.
DATED AS OF APRIL 30, 1997
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws. . . . . . . . . . . . 2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . 2
1.6 Shares to Be Issued; Effect on Capital Stock . . . . . . 2
1.7 Dissenting Shares. . . . . . . . . . . . . . . . . . . . 5
1.8 Surrender of Certificates. . . . . . . . . . . . . . . . 6
1.9 No Further Ownership Rights in Company Common Stock. . . 7
1.10 Lost, Stolen or Destroyed Certificates . . . . . . . . . 7
1.11 Tax Consequences . . . . . . . . . . . . . . . . . . . . 8
1.12 Taking of Necessary Action; Further Action . . . . . . . 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . 8
2.1 Organization of the Company. . . . . . . . . . . . . . . 8
2.2 Company Capital Structure. . . . . . . . . . . . . . . . 8
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Company Financial Statements . . . . . . . . . . . . . .10
2.6 No Undisclosed Liabilities . . . . . . . . . . . . . . .10
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . .11
2.8 Tax and Other Returns and Reports. . . . . . . . . . . .12
2.9 Restrictions on Business Activities. . . . . . . . . . .14
2.10 Title to Properties; Absence of Liens and Encumbrances .14
2.11 Intellectual Property. . . . . . . . . . . . . . . . . .14
2.12 Agreements, Contracts and Commitments. . . . . . . . . .17
2.13 Interested Party Transactions. . . . . . . . . . . . . .19
2.14 Compliance with Laws . . . . . . . . . . . . . . . . . .19
2.15 Litigation . . . . . . . . . . . . . . . . . . . . . . .19
2.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . .19
2.17 Minute Books . . . . . . . . . . . . . . . . . . . . . .20
2.18 Environmental Matters. . . . . . . . . . . . . . . . . .20
2.19 Brokers' and Finders' Fees; Third Party Expenses . . . .21
2.20 Employee Matters and Benefit Plans . . . . . . . . . . .21
2.21 Employees. . . . . . . . . . . . . . . . . . . . . . . .24
2.22 Governmental Authorizations and Licenses . . . . . . . .24
2.23 Representations Complete . . . . . . . . . . . . . . . .24
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.1 Organization, Standing and Power . . . . . . . . . . . .25
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . .25
3.3 Capital Structure. . . . . . . . . . . . . . . . . . . .25
3.4 Compliance with Other Instruments, None Burdensome, etc.26
3.5 Governmental Consent, etc. . . . . . . . . . . . . . . .26
3.6 SEC Documents; Parent Financial Statements . . . . . . .26
3.7 No Material Adverse Change . . . . . . . . . . . . . . .27
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . .27
3.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME. . . . . . . . . .27
4.1 Conduct of Business of the Company . . . . . . . . . . .27
4.2 No Solicitation. . . . . . . . . . . . . . . . . . . . .30
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . .31
5.1 Sale and Registration of Shares; Shareholder Matters . .31
5.2 Access to Information. . . . . . . . . . . . . . . . . .32
5.3 Confidentiality. . . . . . . . . . . . . . . . . . . . .32
5.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . .32
5.5 Public Disclosure. . . . . . . . . . . . . . . . . . . .33
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . .33
5.7 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . .33
5.8 Reasonable Efforts . . . . . . . . . . . . . . . . . . .33
5.9 Notification of Certain Matters. . . . . . . . . . . . .33
5.10 Certain Benefit Plans. . . . . . . . . . . . . . . . . .34
5.11 Tax-Free Reorganization. . . . . . . . . . . . . . . . .34
5.12 Affiliate Agreements . . . . . . . . . . . . . . . . . .34
5.13 Voting Agreements. . . . . . . . . . . . . . . . . . . .34
5.14 Additional Documents and Further Assurances. . . . . . .34
5.15 Registration Statement on Form S-8 . . . . . . . . . . .34
5.16 Nasdaq National Market Listing . . . . . . . . . . . . .34
5.17 Company's Auditors . . . . . . . . . . . . . . . . . . .34
5.18 Interim Development Agreement. . . . . . . . . . . . . .35
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VI CONDITIONS TO THE MERGER . . . . . . . . . . . . . . .35
6.1 Conditions to Obligations of Each Party to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . .35
6.2 Additional Conditions to Obligations of the Company. . .36
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE VII ESCROW. . . . . . . . . . . . . . . . . . . . . . . .38
7.1 Escrow Period. . . . . . . . . . . . . . . . . . . . . .38
7.2 Escrow Arrangements. . . . . . . . . . . . . . . . . . .38
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . .44
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . .44
8.2 Termination Fee. . . . . . . . . . . . . . . . . . . . .45
8.3 Effect of Termination. . . . . . . . . . . . . . . . . .45
8.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . .46
8.5 Extension; Waiver. . . . . . . . . . . . . . . . . . . .46
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . .46
9.1 Survival of Representations, Warranties and Agreements .46
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . .46
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . .48
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . .48
9.5 Entire Agreement; Assignment . . . . . . . . . . . . . .48
9.6 Severability . . . . . . . . . . . . . . . . . . . . . .48
9.7 Other Remedies . . . . . . . . . . . . . . . . . . . . .48
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . .49
9.9 Rules of Construction. . . . . . . . . . . . . . . . . .49
9.10 Specific Performance . . . . . . . . . . . . . . . . . .49
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
Exhibit A Form of Shareholder Questionnaire
Exhibit B Form of Declaration of Registration Rights
Exhibit C Form of Company Affiliate Agreement
Exhibit D Form of Company Shareholder Voting Agreement
Exhibit E Form of Interim Development Agreement
Exhibit F Form of Legal Opinion of Counsel to Parent
Exhibit G Form of Legal Opinion of Counsel to the Company
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
1.6(g)(i) Excluded Shares
1.6(g)(ii) Excluded Options
2.2(a) Shareholder List
2.2(b) Option List
2.4 Governmental and Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns and Audits
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(b) Registered Intellectual Property
2.11(c) Intellectual Property Proceedings
2.11(e) Intellectual Property Licenses
2.11(h) Intellectual Property Grants or Transfers
2.11(i) Intellectual Property Agreements
Exhibit 2.11(i) Form of License Agreement
2.11(k) Intellectual Property Obligations
2.11(n) Intellectual Property Infringement or Claims
Exhibit 2.11(o) Proprietary Information/Confidentiality
Agreement
2.11(p) Trademarks and Trade Names
2.12(a) Agreements, Contracts and Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.15 Litigation
2.16 Insurance
2.19 Brokers/Finders Fees; Expenses of Transaction
2.20(b) Employee Benefit Plans and Employee Agreements
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(h)(i) Effect of Transaction
2.20(h)(ii) Excess Parachute Payments
2.20(j) Labor
3.7 Material Adverse Change of Parent
4.1(l) Severance Agreements
5.12 Company Affiliate List
5.13 Shareholders Signing Voting Agreements
6.2(c) Third Party Consents Required of Parent
6.3(c) Third Party Consents Required of the Company
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT")
is made and entered into as of April 30, 1997 by and among Netscape
Communications Corporation, a Delaware corporation ("PARENT"), PCI
Acquisition Corporation, a California corporation and a wholly-owned
subsidiary of Parent ("MERGER SUB"), and Portola Communications, Inc., a
California corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent
and Merger Sub believe it is in the best interests of each company and their
respective stockholders that Parent acquire the Company through the statutory
merger of Merger Sub with and into the Company (the "MERGER") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject
to the terms and conditions of this Agreement, all of the issued and
outstanding shares of capital stock of the Company ("COMPANY CAPITAL STOCK")
and all outstanding options, warrants or other rights to acquire or receive
shares of Company Capital Stock shall be converted into the right to receive
shares of voting Common Stock of Parent ("PARENT COMMON STOCK").
C. A portion of the shares of Parent Common Stock otherwise
issuable by Parent in connection with the Merger shall be placed in escrow by
Parent, the release of which amount shall be contingent upon certain events
and conditions, all as set forth in Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises
and representations set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of the California Corporations Code ("CALIFORNIA
LAW"), Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation and as a wholly-owned subsidiary of Parent. The
Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier
terminated pursuant to Section 8.1, the closing of the Merger (the "CLOSING")
will take place as promptly as practicable, but no later than five (5)
business days following satisfaction or waiver of the conditions set forth in
Article VI, at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another place or time is agreed to by
Parent and the Company. The date upon which the Closing actually occurs is
herein referred to as the "CLOSING DATE." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing an Agreement or
Certificate of Merger (or like instrument) with the Secretary of State of the
State of California (the "MERGER AGREEMENT"), in accordance with the relevant
provisions of applicable law (the time of confirmation by the Secretary of
State of California of such filing being referred to herein as the "EFFECTIVE
TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of California
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation; provided,
however, that Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the
corporation is Portola Communications, Inc."
(b) Unless otherwise determined by Parent, the Bylaws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The director(s) of Merger Sub
immediately prior to the Effective Time shall be the initial director(s) of
the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation. The
officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, each to hold office in
accordance with the Bylaws of the Surviving Corporation.
1.6 SHARES TO BE ISSUED; EFFECT ON CAPITAL STOCK. The number
of shares of Parent Common Stock to be issued (including Parent Common Stock
to be reserved for issuance upon exercise of any of the Company's options and
warrants to be assumed by Parent) in exchange for the acquisition by Parent
of all outstanding Company Capital Stock and all unexpired and unexercised
options, warrants or other rights to acquire Company Capital Stock shall be
determined immediately prior to the Effective Time and shall be equal to the
Aggregate Share Number (as defined in Section 1.6(g)(iii)). No adjustment
shall be made in the number of shares of Parent Common Stock
2
issued in the Merger as a result of any cash proceeds received by the Company
from the date hereof to the Effective Time pursuant to the exercise of
options, warrants or other rights to acquire Company Capital Stock. Subject
to the terms and conditions of this Agreement, as of the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holder of any shares of the Company Capital Stock, the
following shall occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of
Common Stock of the Company (including each share of Common Stock of the
Company issued upon conversion of each share of Preferred Stock of the
Company ("COMPANY PREFERRED STOCK") immediately prior to the Closing) issued
and outstanding immediately prior to the Effective Time (collectively, the
"COMPANY COMMON STOCK") (other than any shares of Company Stock to be
canceled pursuant to Section 1.6(b) and any Dissenting Shares (as defined and
to the extent provided in Section 1.7(a)) will be canceled and extinguished
and be converted automatically into the right to receive that number of
shares of Parent Common Stock equal to the Exchange Ratio (as defined in
Section 1.6(g)(v) below), upon surrender of the certificate representing such
share of Company Common Stock in the manner provided in Section 1.8.
(b) CANCELLATION OF COMPANY-OWNED STOCK. Each share of
Company Capital Stock owned by Merger Sub, Parent, Company or any direct or
indirect wholly-owned subsidiary of Parent or the Company immediately prior
to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) STOCK OPTIONS. At the Effective Time, all options
to purchase Company Common Stock then outstanding under the Company's 1996
Stock Option Plan (the "Option Plan") or otherwise shall be assumed by Parent
in accordance with provisions described below.
(i) At the Effective Time, each outstanding option
to purchase shares of Company Common Stock (each a "COMPANY OPTION") under
the Option Plan or otherwise, whether vested or unvested, shall be, in
connection with the Merger, assumed by Parent. Each Company Option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Option Plan and/or as
provided in the respective option agreements governing such Company Option
immediately prior to the Effective Time, except that (A) such Company Option
shall be exercisable (when vested) for that number of whole shares of Parent
Common Stock equal to the product of the number of shares of Company Common
Stock that were issuable upon exercise of such Company Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded down
(in the case of Company Options granted under the Option Plan) to the nearest
whole number of shares of Parent Common Stock and (B) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Option shall be equal to the quotient determined by dividing
the exercise price per share of Company Common Stock at which such Company
Option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the
Company Options assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of
3
the Internal Revenue Code of 1986, as amended (the "Code"), to the extent the
Company Options qualified as incentive stock options immediately prior to the
Effective Time.
(iii) As soon as practicable after the Effective Time
and in any event within 5 days after the Effective Time, Parent will issue to
each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(d) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares of Common
Stock of the Merger Sub shall, as of the Effective Time, evidence ownership
of such shares of Common Stock of the Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Company Capital Stock), reorganization, recapitalization or other like
change with respect to Company Capital Stock occurring after the date hereof
and prior to the Effective Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall be entitled to receive, without
any interest, from Parent an amount of cash (rounded to the nearest whole
cent) equal to the product of (i) such fraction, multiplied by (ii) the
average closing price of a share of Parent Common Stock for the twenty (20)
consecutive trading days ending on the trading day immediately prior to the
Closing Date, on the Nasdaq National Market, as reported in THE WALL STREET
JOURNAL.
(g) DEFINITIONS.
(i) AGGREGATE COMMON NUMBER. The "Aggregate Common
Number" shall mean the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (including all shares of
Company Common Stock issued upon conversion of all Company Preferred Stock)
less that number of shares of Company Common Stock set forth on Schedule
1.6(g)(i).
(ii) AGGREGATE OPTION NUMBER. The "Aggregate Option
Number" shall mean the aggregate number of shares of Company Common Stock
issuable upon the exercise of all outstanding Company options (vested and
unvested), warrants and other rights to acquire shares of Company Common
Stock immediately prior to the Effective Time less that number of shares of
Common Stock issuable upon exercise of such options, warrants or other rights
and set forth on Schedule 1.6(g)(ii).
4
(iii) AGGREGATE SHARE NUMBER. The "Aggregate Share
Number" shall be the number of shares of Parent Common Stock determined by
dividing (A) $31,204,250 by (B) the average closing sale price of a share of
Parent Common Stock, as reported on The Nasdaq National Market, for the
twenty (20) most recent trading days ending on the trading day immediately
preceding the Closing Date (the "AVERAGE PRICE"); provided, however, that if
the Average Price is greater than $31.90, the Average Price shall be deemed
to be $31.90; and if the Average Price is less than $26.10, the Average Price
shall be deemed to be $26.10.
(iv) ESCROW AMOUNT. The "Escrow Amount" shall be the
number of shares of Parent Common Stock obtained by multiplying (x) the
Aggregate Common Number by (y) the Exchange Ratio by (z) 0.075
(v) EXCHANGE RATIO. The "Exchange Ratio" shall mean the
quotient obtained by dividing (x) the Aggregate Share Number by (y) the sum
of (A) the Aggregate Common Number, plus (B) the Aggregate Option Number.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has
demanded and perfected appraisal or dissenters' rights for such shares in
accordance with California Law and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights
("DISSENTING SHARES") shall not be converted into or represent a right to
receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by California Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such
shares under California Law shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to appraisal, then, as of the
later of the Effective Time and the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock and payment for any fractional share as provided
in Section 1.6, without interest thereon, upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to California Law and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under
California Law. The Company shall not, except with the prior written consent
of Parent, voluntarily make any payment with respect to any demands for
appraisal of capital stock of the Company or offer to settle or settle any
such demands.
5
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate a bank or trust company with assets of not less than $500 million
to act as exchange agent (the "Exchange Agent") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent
Common Stock issuable pursuant to Section 1.6 in exchange for outstanding
shares of Company Capital Stock; provided that, on behalf of the holders of
Company Capital Stock, Parent shall deposit into an escrow account a number
of shares of Parent Common Stock equal to the Escrow Amount out of the
aggregate number of shares of Parent Common Stock otherwise issuable pursuant
to Section 1.6. The portion of the Escrow Amount contributed on behalf of
each holder of Company Capital Stock shall be in proportion to the aggregate
number of shares of Parent Common Stock which such holder would otherwise be
entitled to receive under Section 1.6 by virtue of ownership of outstanding
shares of Company Capital Stock.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Company Capital Stock
and which shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock
(less the number of shares of Parent Common Stock, if any, to be deposited in
the Escrow Fund on such holder's behalf pursuant to Article VII hereof), plus
cash in lieu of fractional shares in accordance with Section 1.6, to which
such holder is entitled pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of
Article VII hereof, Parent shall cause to be distributed to the Escrow Agent
(as defined in Article VII) a certificate or certificates representing that
number of shares of Parent Common Stock equal to the Escrow Amount, which
certificate shall be registered in the name of the Escrow Agent. Such shares
shall be beneficially owned by the holders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Parent as
provided in Article VII. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Capital
Stock will be deemed from and after the Effective Time, for all corporate
6
purposes, other than the payment of dividends, to evidence the ownership of
the number of full shares of Parent Common Stock into which such shares of
Company Capital Stock shall have been so converted and the right to receive
an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to Parent Common Stock declared or made
after the Effective Time and with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record
of such Certificate shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole
shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to a holder of shares of Parent Common Stock
or Company Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Company Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an
7
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock and cash for fractional share, if any, as may be required pursuant to
Section 1.6; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent or the Exchange Agent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
1.11 TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
letter (referencing the appropriate schedule or section number) supplied by
the Company to Parent (the "COMPANY SCHEDULES") and dated as of the date
hereof, as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California. The Company has the corporate power to own its properties and
to carry on its business as now being conducted. The Company is duly
qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have, or
would reasonably be expected to have, a material adverse effect on the
business, financial condition, results of operations, assets (including
intangible assets), liabilities or prospects of the Company (hereinafter
referred to as a "MATERIAL ADVERSE EFFECT"); provided, however, that a
Material Adverse Effect shall not include any adverse effect following the
date of this Agreement on the business, financial condition or results of
operations of the Company, taken as a whole, that is attributable to the
Merger contemplated by this Agreement or the announcement of the Merger or
any material economic downturn in the Internet industry or any material
national economic downturn. The Company has delivered a true and correct
copy of its Articles of Incorporation and Bylaws, each as amended to date, to
Parent.
8
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists
of 20,000,000 shares of authorized Common Stock, of which 3,205,000
shares are issued and outstanding, and 9,000,000 shares of
authorized Preferred Stock, consisting of 3,500,000 shares of
Series A Preferred Stock, all of which are issued and outstanding
and 5,500,000 shares of Series B Preferred Stock, 5,160,000 of
which are issued and outstanding. The Company Capital Stock is
held of record by the persons, with the addresses of record and in
the amounts (including the number of shares of Company Capital
Stock subject to repurchase) set forth on Schedule 2.2(a). All
outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Articles of Incorporation
or Bylaws of the Company or any agreement to which the Company is a
party or by which it is bound.
(b) The Company has reserved 3,505,000 shares of Common
Stock for issuance to employees and consultants pursuant to the
Option Plan, of which 952,000 shares are subject to outstanding,
unexercised options, 1,268,000 shares remain available for future
grant and 1,330,000 shares have been issued pursuant to the
exercise of options issued under the Option Plan of which 45,000
shares have been repurchased by the Company. Schedule 2.2(b) sets
forth for each outstanding Company Option the name of the holder of
such option, the domicile address of such holder, the number of
shares of Common Stock subject to such option, the exercise price
of such option and the vesting schedule for such option, including
the extent vested to date and whether the exercisability of such
option will be accelerated and become exercisable by reason of the
transactions contemplated by this Agreement. Except for the
Company Options described in Schedule 2.2(b), there are no options,
warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company is a party or by
which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any
such option, warrant, call, right, commitment or agreement. The
holders of Company Options have been or will be given, or shall
have properly waived, any required notice prior to the Merger, and
all such rights will be terminated at or prior to the Effective
Time. As a result of the Merger, Parent will be the record and
sole beneficial owner of all capital stock of the Company and
rights to acquire or receive such capital stock.
2.3 SUBSIDIARIES. The Company does not have and has never
had any subsidiaries or affiliated companies and does not otherwise
own and has never otherwise owned any shares of capital stock or
any interest in, or control, directly or indirectly, any other
corporation, partnership, association, joint venture or other
business entity.
2.4 AUTHORITY. Subject only to the requisite approval of the
Merger and this Agreement by the Company's shareholders, the
Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated
hereby. The vote
9
required of the Company's shareholders to duly approve the Merger and this
Agreement is the affirmative vote of a majority of the outstanding shares of
Common Stock of the Company and the affirmative vote of more than 60% of the
outstanding shares of Preferred Stock of the Company. The execution and
delivery of this Agreement and the consummation of the transactions
contem-plated hereby have been duly authorized by all necessary corporate
action on the part of the Company, subject only to the approval of the Merger
and this Agreement by the Company's shareholders. The Company's Board of
Directors has unanimously approved the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies. Except as set forth on Schedule 2.4, subject only
to the approval of the Merger and this Agreement by the Company's
shareholders, the execution and delivery of this Agreement by the Company
does not, and, as of the Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "CONFLICT") (i)
any provision of the Articles of Incorporation or Bylaws of the Company or
(ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets. No consent, waiver, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other federal, state, county, local or foreign
governmental authority, instrumentality, agency or commission ("GOVERNMENTAL
ENTITY") or any third party (so as not to trigger any Conflict) is required
by or with respect to the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Merger Agreement with
the California Secretary of State, (ii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and (iii) such
other consents, waivers, authorizations, filings, approvals and registrations
which are set forth on Schedule 2.4.
2.5 COMPANY FINANCIAL STATEMENTS.
(a) Schedule 2.5 sets forth (i) the Company's unaudited
balance sheet as of December 31, 1996 and the related unaudited
statements of operations, cash flows and shareholders' equity for
the twelve-month period then ended and (ii) the Company's unaudited
balance sheet as of March 31, 1997 (the "BALANCE SHEET") and the
related statements of operations, cash flows and shareholders'
equity for the three-month period then ended (collectively, the
"COMPANY FINANCIALS"). The Company Financials are correct in all
material respects and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
basis consistent throughout the periods indicated and consistent
with each other (except that the Company Financials do not contain
footnotes). The Company Financials present fairly the
10
financial condition and operating results of the Company as of the dates and
during the periods indicated therein, subject to normal year-end adjustments,
which such adjustments will not be material in amount or significance.
2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, has not been
reflected in the Balance Sheet.
11
2.7 NO CHANGES. Except as set forth in Schedule 2.7, since the date of
the Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Balance Sheet and consistent with
past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct
or indirect redemption, purchase or other acquisition by the Company of any
Company Capital Stock;
(i) increase in the salary or other compensation payable or to
become payable to any of its officers, directors, employees or advisors, or
the declaration, payment or commitment or obligation of any kind for the
payment of a bonus or other additional salary or compensation to any such
person except as otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement
or license to which the Company is a party or by which it is bound;
12
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(o) notice of any claim of ownership by a third party of Company
Intellectual Property (as defined in Section 2.11 below) or of infringement
by the Company of any third party's Intellectual Property;
(p) change in pricing or royalties set or charged by the Company
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Company Intellectual Property to the Company;
(q) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company; or
(r) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses
(a) through (r) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES", means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS. Except as set forth in Schedule 2.8:
(i) The Company as of the Effective Time will have
prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports
13
("RETURNS") relating to any and all Taxes concerning or attributable to the
Company or its operations and such Returns will be true and correct in all
material respects as of the Effective Time and will have been completed in
accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will
have paid or accrued all Taxes it is required to pay or accrue and (B) will
have withheld with respect to its employees all federal and state income
taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of
the Company is currently in progress, nor has the Company been notified of
any request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, state, local and foreign Taxes which have not been accrued or
reserved against in accordance with GAAP on the Balance Sheet, whether
asserted or unasserted, contingent or otherwise, and the Company has no
knowledge of any basis for the assertion of any such liability attributable
to the Company, its assets or operations.
(vi) The Company has provided to Parent copies of
all federal and state income and all state sales and use Tax Returns for all
periods since the date of the Company's incorporation.
(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS") on the assets of the
Company relating to or attributable to Taxes other than Liens relating to or
attributable to Taxes not yet due and payable.
(viii) The Company has no knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to
14
the payment of any amount that would not be deductible pursuant to Sections
404, 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree
to which the Company is a party or otherwise binding upon the Company which
has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company or the conduct of business by the
Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from selling, licensing
or otherwise distributing any of its products to any class of customers, in
any geographic area, during any period of time or in any segment of the
market.
2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable
under any such lease. All such current leases are in full force and effect,
are valid and effective in accordance with their respective terms, and there
is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Liens (as defined in Section
2.8(b)(vii)), except as reflected in the Company Financials or in Schedule
2.10(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby.
15
2.11 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
(i) "INTELLECTUAL PROPERTY" shall mean any or all
of the following and all rights in, arising out
of, or associated therewith: (i) all United
States, international and foreign patents and
applications therefor and all reissues,
divisions, renewals, extensions, provisionals,
continuations and continuations-in-part
thereof; (ii) all inventions (whether
patentable or not), invention disclosures,
improvements, trade secrets, proprietary
information, know how, technology, technical
data and customer lists, and all documentation
relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and
applications therefor, and all other rights
corresponding thereto throughout the world;
(iv) all industrial designs and any
registrations and applications therefor
throughout the world; (v) all trade names,
logos, common law trademarks and service marks,
trademark and service xxxx registrations and
applications therefor throughout the world;
(vi) all databases and data collections and all
rights therein throughout the world; and (vii)
any similar or equivalent rights to any of the
foregoing anywhere in the world.
(ii) "COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property that is owned by, or
exclusively licensed to, Company.
(iii)REGISTERED INTELLECTUAL PROPERTY" means
all United States, international and
foreign: (i) patents and patent
applications (including provisional
applications); (ii) registered trademarks,
applications to register trademarks,
intent-to-use applications, or other
registrations or applications related to
trademarks; (iii) registered copyrights
and applications for copyright
registration; and (iv) any other
Intellectual Property that is the subject
of an application, certificate, filing,
registration or other document issued,
filed with, or recorded by any state,
government or other public legal
authority.
(b) Schedule 2.11(b) lists all of the Registered Intellectual
Property owned by, or filed in the name of, Company (the "COMPANY REGISTERED
INTELLECTUAL PROPERTY").
(c) Schedule 2.11(c) lists all proceedings or actions before any
court, tribunal (including the United States Patent and Trademark Office
("PTO") or equivalent authority anywhere in the world) related to any Company
Intellectual Property. Except as set forth in Schedule 2.11(c), no Company
Intellectual Property or product or service of Company is subject to any
proceeding or outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use,
16
transfer, or licensing thereof by Company, or which may affect the validity,
use or enforceability of such Company Intellectual Property.
(d) Each item of Company Registered Intellectual Property is valid
and subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been made and all
necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions,
as the case may be, for the purposes of maintaining such Registered
Intellectual Property.
(e) Except as set forth in Schedule 2.11(e): Company owns and has
good and exclusive title to each item of Company Intellectual Property,
including all Company Registered Intellectual Property listed on Schedule
2.11(b), free and clear of any lien or encumbrance;
(f) Company owns exclusively, and has good title to, all
copyrighted works that are Company products or which the Company otherwise
purports to own.
(g) To the extent that any work, invention, or material has been
developed or created by a third party for Company, Company has a written
agreement with such third party with respect thereto and Company thereby has
obtained ownership of, and is the exclusive owner of, all Intellectual
Property in such work, material or invention by operation of law or by valid
assignment.
(h) Except as set forth in Schedule 2.11(h), Company has not
transferred ownership of, or granted any exclusive license with respect to,
any Intellectual Property that is or was Company Intellectual Property, to
any third party.
(i) Schedule 2.11(i) lists all material contracts, licenses and
agreements to which Company is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party; or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to Company, with a potential value or cost in excess of $25,000.
Exhibit 2.11(i) is the form of agreement pursuant to which the Company
licenses Company Intellectual Property or products to third parties and
Schedule 2.11(i) list any agreements pursuant to which Company has licensed
any Company Intellectual Property or products to any third party that differs
in any material respect from such agreement.
(j) The contracts, licenses and agreements listed on Schedule
2.11(i) are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements. Company is in compliance with, and has not breached
any term any of such contracts, licenses and agreements and, to the knowledge
of Company, all other parties to such contracts, licenses and agreements are
in compliance with, and have not breached any term of, such contracts,
licenses and agreements. Following the Closing Date, Parent will be
permitted to exercise all of Company's rights under the contracts, licenses
and agreements listed on Schedule 2.11(i) to the same extent Company would
have been able to had the transactions
18
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Company would otherwise be required to pay.
(k) Schedule 2.11(k) lists all contracts, licenses and agreements
between Company and any third party wherein or whereby Company has agreed to,
or assumed, any obligation or duty to warrant, indemnify, hold harmless or
otherwise assume or incur any obligation or liability with respect to the
infringement or misappropriation by Company or such third party of the
Intellectual Property of any third party.
(l) The operation of the business of Company as such business
currently is conducted, or is reasonably is contemplated to be conducted,
including Company's design, development, manufacture, marketing and sale of
the products or services of the Company (including with respect to products
currently under development) has not, does not and, will not infringe or
misappropriate the Intellectual Property of any third party or constitute
unfair competition or trade practices under the laws of any jurisdiction.
(m) Company has not received notice from any third party that the
operation of the business of Company or any act, product or service of
Company, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of
any jurisdiction.
(n) Except as set forth in Schedule 2.11(n), to the knowledge of
Company, (i) no Person has or is infringing or misappropriating any Company
Intellectual Property and (ii) there have been, and are, no claims asserted
against Company or against any customer of Company, related to any product or
service of Company.
(o) Company has taken all steps that are reasonably required to
protect Company's rights in Company's confidential information and trade
secrets or any trade secrets or confidential information of third parties
provided to Company, and, without limiting the foregoing, Company has and
enforces a policy requiring each employee and contractor to execute a
proprietary information/ confidentiality agreement substantially in Company's
standard form and all current and former employees and contractors of Company
have executed such an agreement. Exhibit 2.11(o) is Company's standard form
of proprietary information/confidentiality agreement.
(p) Schedule 2.11 (p) sets forth a list of all of the trademarks
and trade names used in connection with the operation or conduct of the
business of Company, including the sale of any products or the provision of
any services by Company.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it
bound by:
18
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee benefit
plans or arrangements,
(iv) any employment or consulting agreement,
contract or commitment with an employee or individual consultant or
salesperson or any consulting or sales agreement, contract or
commitment under which any firm or other organization provides
services to the Company,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $25,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment
containing any covenant limiting the freedom of the Company to engage in any
line of business or to compete with any person,
(x) any agreement, contract or commitment relating
to capital expenditures and involving future payments in excess of
$25,000,
(xi) any agreement, contract or commitment relating
to the disposition or acquisition of assets or any interest in any
business enterprise outside the ordinary course of the Company's
business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating
to the borrowing of money or extension of credit, including guaranties
referred to in clause (viii) hereof,
(xiii) any purchase order or contract for the purchase
of raw materials involving $25,000 or more,
(xiv) any construction contracts,
-19-
(xv) any distribution, joint marketing or
development agreement,
(xvi) any agreement pursuant to which the Company has
granted or may grant in the future, to any party, a source-code
license or option or other right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment
that involves $25,000 or more or is not cancelable without penalty
within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 2.12(b), the Company
has not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule
2.12(a) or Schedule 2.11(b) (any such agreement, contract or commitment, a
"CONTRACT"). Each Contract is in full force and effect and, except as
otherwise disclosed in Schedule 2.12(b), is not subject to any default
thereunder of which the Company has knowledge by any party obligated to the
Company pursuant thereto.
2.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
2.13, no officer, director or shareholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an economic interest
in any entity which furnished or sold, or furnishes or sells, services or
products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial
interest in any contract or agreement set forth in Schedule 2.12(a) or
Schedule 2.11(b); provided, that ownership of no more than one percent (1%)
of the outstanding voting stock of a publicly traded corporation shall not be
deemed an "economic interest in any entity" for purposes of this Section 2.13.
2.14 COMPLIANCE WITH LAWS. The Company has complied in all
material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any foreign,
federal, state or local statute, law or regulation.
2.15 LITIGATION. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or, to the knowledge of the
Company, threatened against the Company, its properties or any of its
officers or directors, in their respective capacities as such. Except as set
forth in Schedule 2.15, there is no investigation pending or threatened
against the Company, its properties or any of its officers or directors by or
before any governmental entity. Schedule 2.15 sets forth, with respect to
any pending or threatened action, suit, proceeding or investigation, the
forum, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedy requested. No governmental entity has at any
time challenged or
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questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
2.16 INSURANCE. The Company maintains valid and enforceable insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company, and
such insurance policies and fidelity bonds, which are identified in Schedule
2.16, contain provisions which are reasonable and customary in the Company's
industry, and there is no claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company is
otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.17 MINUTE BOOKS. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the time of
incorporation of the Company.
2.18 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, at any
time, of any underground storage tank (or related piping or pumps), at any
property that the Company has at any time owned, operated, occupied or
leased. The Company has not released any amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, oil and
petroleum products, urea-formaldehyde and all substances listed as a
"hazardous substance," "hazardous waste," "hazardous material" or "toxic
substance" or words of similar import, under any law, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended; the Resource Conservation and Recovery Act
of 1976, as amended; the Federal Water Pollution Control Act, as amended; the
Clean Air Act, as amended, and the regulations promulgated pursuant to said
laws, (a "HAZARDOUS MATERIAL"). No Hazardous Materials are present as a
result of the actions or omissions of the Company, or, to the Company's
knowledge, as a result of any actions of any third party or otherwise, in, on
or under any property, including the land and the improvements, ground water
and surface water thereof, that the Company has at any time owned, operated,
occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect
on or before the Effective Time, nor has the Company disposed of,
transported, sold, or manufactured any product containing a Hazardous
Material (any or all of the
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foregoing being collectively referred to as
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity in effect prior to
or as of the date hereof to prohibit, regulate or control Hazardous Materials
or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
the Company's knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Company is not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby. Schedule 2.19 sets forth the
principal terms and conditions of any agreement, written or oral, with
respect to such fees. Schedule 2.19 sets forth the Company's current
reasonable estimate of all Third Party Expenses (as defined in Section 5.4)
expected to be incurred by the Company in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby.
2.20 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall
apply only to this Section 2.20), for purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or
entity under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations
thereunder;
(ii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(iii) "COMPANY EMPLOYEE PLAN" shall refer to any
plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay,
performance awards, stock or stock-related awards, fringe benefits
or other employee benefits or remuneration of any kind, whether
formal or informal, funded or unfunded and whether or not legally
binding, including without limitation, each "employee benefit
plan",
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within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to,
by the Company or any Affiliate for the benefit of any "Employee"
(as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability contingent or
otherwise;
(iv) "EMPLOYEE" shall mean any current, former, or
retired employee, officer, or director of the Company or any
Affiliate;
(v) "EMPLOYEE AGREEMENT" shall refer to each
management, employment, stock purchase, severance, separation,
consulting, relocation, loan, repatriation, expatriation, visas,
work permit or similar agreement, contract or arrangement between
the Company or any Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "MULTIEMPLOYER PLAN" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan", as
defined in Section 3(37) of ERISA; and
(viii) "PENSION PLAN" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within
the meaning of Section 3(2) of ERISA.
(b) SCHEDULE. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement, together with
a schedule of all liabilities, whether or not accrued, under each such
Company Employee Plan or Employee Agreement. The Company does not have any
plan or commitment, whether legally binding or not, to establish any new
Company Employee Plan or Employee Agreement, to modify any Company Employee
Plan or Employee Agreement (except to the extent required by law or to
conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to enter into any
Company Employee Plan or Employee Agreement, nor does it have any intention
or commitment to do any of the foregoing.
(c) DOCUMENTS. The Company has provided to Parent (i) correct and
complete copies of all documents embodying or relating to each Company
Employee Plan and each Employee Agreement including all amendments thereto
and written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the most
recent annual report (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee
Plan or related trust; (iv) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (v)
the most recent summary plan description together with the most recent
summary of material modifications, if any, required under ERISA with respect
to each Company Employee Plan; (vi) all IRS determination letters and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor
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("DOL") with respect to any Company Employee Plan; and (vii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating
to any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all
obligations required to be performed by it under each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) no "prohibited transaction", within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Company Employee Plan; (iii) there are no actions, suits
or claims pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; and (iv)
each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to the Company, Parent or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(v) there are no inquiries or proceedings pending or, to the knowledge of the
Company or any affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vi) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) PENSION PLANS. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company contributed
to or been requested to contribute to any Multiemployer Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any Employee
upon his or her retirement or termination of employment for any reason,
except as may be required by statute, and the Company has never represented,
promised or contracted (whether in oral or written form) to any Employee
(either individually or to Employees as a group) that such Employee(s) would
be provided with life insurance, medical or other employee welfare benefits
upon their retirement or termination of employment, except to the extent
required by statute.
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(h) EFFECT OF TRANSACTION.
(i) Except as set forth on Schedule 2.20(h)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(h)(ii), no
payment or benefit which will or may be made by the Company or Parent or any
of their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment", within the meaning of Section
280G(b)(1) of the Code.
(i) EMPLOYMENT MATTERS. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to
be withheld from the wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social
security or other benefits or obligations for Employees (other than routine
payments to be made in the normal course of business and consistent with past
practice).
(j) LABOR. No work stoppage or labor strike against the Company
is pending or, to the best knowledge of the Company, threatened. Except as
set forth in Schedule 2.20(j), the Company is not involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in liability to the Company.
Neither the Company nor any of its subsidiaries has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act which
would, individually or in the aggregate, directly or indirectly result in a
liability to the Company. Except as set forth in Schedule 2.20(j), the
Company is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by the
Company.
2.21 EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company (i) is in violation of any term of any employment contract,
patent disclosure agreement, non-competition agreement, or any restrictive
covenant to a former employer relating to the right of any such employee to
be employed by the Company because of the nature of the business conducted or
-25-
presently proposed to be conducted by the Company or to the use of trade
secrets or proprietary information of others or (ii) has given notice to the
Company, nor is the Company otherwise aware, that any employee intends to
terminate his or her employment with the Company.
2.22 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Company possesses
all material consents, licenses, permits, grants or other authorizations
issued to the Company by a governmental entity (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of its business or the holding of
any such interest therein (collectively called "COMPANY AUTHORIZATIONS"),
which Company Authorizations are in full force and effect and constitute all
Company Authorizations required to permit the Company to operate or conduct
its business or hold any interest in its properties or assets.
2.23 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor
any statement made in any schedule or certificate furnished by the Company
pursuant to this Agreement, or furnished in or in connection with documents
mailed or delivered to the shareholders of the Company in connection with
soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time, any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. Each of
Parent and Merger Sub has the corporate power to own its properties and to
carry on its business as now being conducted and is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on Parent and Merger Sub as a whole.
3.2 AUTHORITY. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent
and Merger Sub. This Agreement has been duly executed and delivered by
Parent and Merger Sub and constitutes the valid and binding obligations of
Parent and Merger Sub, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of
-26-
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
3.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 200,000,000 shares
of Common Stock, of which 88,218,678 shares were issued and outstanding as of
March 31, 1997, and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding. At the close of business on March 31, 1997, 9,282,394
shares of Parent Common Stock were subject to issuance upon the exercise of
outstanding stock options ("PARENT RIGHTS"). No shares of Parent Common
Stock were held by Parent in its treasury, and no shares of Parent Preferred
Stock were outstanding. All the outstanding shares of Parent Common Stock
are validly issued, fully paid, nonassessable and free of preemptive rights.
The shares of Parent Common Stock issuable in connection with the Merger have
been duly authorized and reserved for issuance and, when issued in accordance
with the terms of this Agreement and the Merger Agreement, will be validly
issued, fully paid, nonassessable and free of preemptive rights. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common
Stock, all of which, as of the date hereof, are issued and outstanding and
are held by Parent. All such shares have been duly authorized, and all such
issued and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens
or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid and
non-assessable.
3.4 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. Parent is
not in violation of any term of its Certificate of Incorporation or Bylaws,
or in any material respect of any agreement required to be filed as an
exhibit to any registration statements or reports filed with the U.S.
Securities and Exchange Commission (the "SEC") by Parent, and to the best of
its knowledge, is not in violation of any order, statute, rule or regulation
applicable to Parent. Subject to satisfaction of the conditions set forth in
Article VI, the execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby, will not conflict with or result in any violation of any material
statute, law, rule, regulation, judgment, order, decree or ordinance
applicable to Parent or Merger Sub or their respective properties or assets,
or conflict with or result in any breach or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit, under (i) any provision of the Certificate of Incorporation or
Bylaws of Parent or Merger Sub or (ii) any material agreement, contract,
note, mortgage, indenture, lease, instrument, permit, concession, franchise
or license to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or their respective properties or assets may be bound or affected.
3.5 GOVERNMENTAL CONSENT, ETC. 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 this Agreement and the Merger
Agreement or the consummation by Parent and Merger Sub of the transactions
contemplated
-27-
hereby or thereby, except for (a) the filing of the Merger Agreement and
officers' certificates with the California Secretary of State and appropriate
documents with the relevant authorities of other states in which Parent and
Merger Sub are qualified to do business, (b) such consents, approvals,
orders, authorizations, registrations, or qualifications as may be required
under state securities or Blue Sky laws in connection with the offer and sale
of Parent Common Stock pursuant to the Merger, (c) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the laws of any foreign country which if not obtained or made
would not have a material adverse effect on Parent, and (d) such filings as
are required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
3.6 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished
or made available to the Company true and complete copies of all reports or
registration statements filed by it with the SEC under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") for all periods since
January 1, 1997, all in the form so filed (all of the foregoing being
collectively referred to as the "SEC DOCUMENTS"). As of their respective
filing dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended
(the "SECURITIES ACT") or the Exchange Act, as the case may be, and none of
the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which
they were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "PARENT
FINANCIAL STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and present fairly the consolidated financial position of Parent at
the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal audit adjustments). There has been no change in Parent
accounting policies except as described in the notes to the Parent Financial
Statements.
3.7 NO MATERIAL ADVERSE CHANGE. Except as set forth in Schedule 3.7,
since the date of the balance sheet included in the Parent's most recently
filed report on Form 10-Q or Form 10-K, Parent has conducted its business in
the ordinary course and there has not occurred: (a) any material adverse
change in the financial condition, liabilities, assets or business of Parent;
(b) any amendment or change in the Certificate of Incorporation or Bylaws of
Parent, or (c) any damage to, destruction or loss of any assets of the Parent
(whether or not covered by insurance) that materially and adversely affects
the financial condition or business of Parent.
3.8 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion against Parent, which in any manner challenges or seeks
to prevent, enjoin, alter or materially delay any of the transactions
contemplated by this Agreement.
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3.9 DISCLOSURE. No statement by Parent contained in this Agreement and
the exhibits attached hereto and any written statement or certificate
furnished or to be furnished to the Company pursuant hereto or in connection
with the transactions contemplated hereby (when read together) contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing which consent shall not
be unreasonably withheld) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to
pay its debts and Taxes when due, to pay or perform other obligations when
due, and, to the extent consistent with such business, to use all reasonable
efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired its goodwill and
ongoing businesses at the Effective Time. The Company shall promptly notify
Parent of any event or occurrence or emergency not in the ordinary course of
its business, and any material event involving or adversely affecting the
Company or its business. Except as expressly contemplated by this Agreement,
the Company shall not, without the prior written consent of Parent:
(a) Enter into any commitment, activity or transaction not in the
ordinary course of business.
(b) Transfer to any person or entity any rights to any Company
Intellectual Property;
(c) Enter into or amend any agreements pursuant to which any other
party is granted manufacturing, marketing, distribution or similar rights of
any type or scope with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements
set forth or described in the Company Schedules;
(e) Commence any litigation or any dispute resolution process;
-29-
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any of Company Capital Stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Company Capital Stock, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares
of Company Capital Stock (or options, warrants or other rights exercisable
therefor);
(g) Except for the issuance of shares of Company Capital Stock
upon exercise or conversion of presently outstanding Company Options or
warrants, issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any
shares of Company Capital Stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(h) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of the Company;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and
consistent with past practice;
(k) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others;
(l) Grant any severance or termination pay to any director,
officer, employee or consultant, except payments made pursuant to standard
written agreements outstanding on the date hereof (which such agreements are
disclosed on Schedule 4.1(l));
(m) Adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, extend any employment
offer, pay or agree to pay any special bonus or special remuneration to any
director, employee or consultant, or increase the salaries or wage rates of
its employees;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice;
(o) Take any action that could jeopardize the tax-free
reorganization hereunder;
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(p) Pay, discharge or satisfy, in an amount in excess of $25,000,
in any one case, or $75,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the
Company Financial Statements;
(q) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(r) Enter into any strategic alliance, joint development or joint
marketing arrangement or agreement;
(s) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(t) Waive or commit to waive any rights with a value in excess of
$10,000, in any one case, or $25,000, in the aggregate;
(u) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(v) Alter, or enter into any commitment to alter, its interest in
any corporation, association, joint venture, partnership or business entity
in which the Company directly or indirectly holds any interest on the date
hereof; or
(w) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (v) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
4.2 NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier of
(i) the Effective Time and (ii) termination of this Agreement pursuant to
Section 8.1, the Company will not, directly or indirectly through any of its
directors, officers, employees, representatives, investment bankers, agents
or affiliates (i) solicit or encourage submission of any inquiries, proposals
or offers by any person, entity or group (other than Parent, Merger Sub and
their affiliates, agents and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any information concerning the
Company to, or afford any access to the properties, books or records of the
Company to, or otherwise assist, facilitate or encourage, or enter into any
agreement or understanding with, any person, entity or group (other than
Parent, Merger Sub and their affiliates, agents and representatives), in
connection with any Acquisition Proposal. For the
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purposes of this Agreement, an "ACQUISITION PROPOSAL" shall mean any inquiry
or proposal relating to (i) any merger, consolidation, sale of substantial
assets or similar transactions involving the Company (other than sales of
assets or inventory in the ordinary course of business), or (ii) any sale of
equity interests in the Company (including without limitation by way of a
tender offer or an exchange offer) other than pursuant to exercise of
outstanding options and warrants. In addition, subject to the other
provisions of this Section 4.2, from and after the date of this Agreement
until the Effective Time, the Company will not, directly or indirectly,
through any of its directors, officers, employees, representatives,
investment bankers, agents or affiliates, make or authorize any statement,
recommendation or solicitation in support of any Acquisition Proposal made by
any person, entity or group (other than Parent and/or Merger Sub). Upon
execution of this Agreement, the Company does not have, or will immediately
cease any and all, existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) The Company will (i) notify Parent promptly (and in any event
within 12 hours) if any inquiry or proposal is made or any information or
access is requested in connection with an Acquisition Proposal or potential
Acquisition Proposal and (ii) promptly (and in any event within 12 hours)
communicate to Parent in reasonable detail the terms and conditions of any
such Acquisition Proposal or potential Acquisition Proposal or inquiry and
the identity of the offeror or potential offeror.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 SALE AND REGISTRATION OF SHARES; SHAREHOLDER MATTERS.
(a) SALE OF SHARES. The parties hereto acknowledge and agree that
the shares of Parent Common Stock issuable to the shareholders pursuant to
Section 1.6 hereof, shall constitute "restricted securities" within the
meaning of the Securities Act of 1933, as amended (the "SECURITIES ACT").
The certificates for shares of Parent Common Stock to be issued in the Merger
shall bear appropriate legends to identify such privately placed shares as
being restricted under the Securities Act, to comply with applicable state
securities laws and, if applicable, to notice the restrictions on transfer
pursuant to the Affiliate Agreement (as defined below). It is acknowledged
and understood that Parent is relying upon certain written representations
made by each shareholder.
(b) SHAREHOLDER QUESTIONNAIRE. The Company will cause each
shareholder of the Company to execute and deliver to Parent a Shareholder
Questionnaire in the form attached hereto as EXHIBIT A (the "SHAREHOLDER
QUESTIONNAIRE").
(c) COMPANY SHAREHOLDER APPROVAL. As promptly as practicable
after the execution of this Agreement the Company shall submit this Agreement
and the transactions
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contemplated hereby to its shareholders for approval and adoption as provided
by California Law and its Articles of Incorporation and Bylaws. The Company
shall use its best efforts to solicit and obtain the written consent of its
shareholders to approve the Merger and this Agreement and to enable the
Closing to occur as promptly as practicable. In connection with such
shareholder approval and as soon as practicable after the execution of this
Agreement, the Company shall prepare, with the cooperation of Parent, an
Information Statement for purposes of soliciting such written consent of the
shareholders. The Information Statement shall also constitute a disclosure
document for the offer and sale of the shares of Parent Common Stock to be
received by the holders of the Company's Capital Stock in the Merger. The
Company shall use its commercially reasonable efforts, with the cooperation
of Parent, to cause such Information Statement to be distributed to the
Company's shareholders no later than May 15, 1997. Parent and the Company
shall each use its best efforts to cause the Information Statement to comply
with applicable federal and state securities laws requirements. Each of
Parent and the Company agrees to provide promptly to the other such
information concerning its business and financial statements and affairs as,
in the reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Information Statement or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. Each of the parties hereto will promptly advise the
other parties in writing if at any time prior to the Effective Time either
the Company or Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein
not misleading or to comply with applicable law. The Information Statement
shall contain the unanimous recommendation of the Board of Directors of the
Company that the Company shareholders approve the Merger and this Agreement
and the transactions contemplated hereby and the conclusion of the Board of
Directors that the terms and conditions of the Merger are fair and reasonable
to the shareholders of the Company. Anything to the contrary contained
herein notwithstanding, the Company shall not include in the Information
Statement any information with respect to Parent or its affiliates or
associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
(d) REGISTRATION STATEMENT ON FORM S-3. Parent shall use its
commercially reasonable efforts to file, within forty-five (45) days
following the Closing, a Registration Statement on Form S-3 with the SEC
covering the resale of the shares of Parent Common Stock issued to holders of
Company Capital Stock pursuant to the Merger; provided, however, that any
such registration shall be subject to the terms and conditions set forth in
the Declaration of Registration Rights attached hereto as EXHIBIT B.
(e) ADDITIONAL ASSURANCES. At the request of Parent, the Company
shall use its commercially reasonable efforts to cause the Company's
shareholders to execute and deliver to Parent such instruments and do and
perform such acts and things as may be necessary or desirable for complying
with all applicable securities laws and state corporate law.
5.2 ACCESS TO INFORMATION. Each party shall afford the others and
their accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time to
(a) all of its properties, books, contracts, commitments and records,
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and (b) all other information concerning its business, properties and
personnel (subject to restrictions imposed by applicable law) as the others
may reasonably request, subject, in the case of Parent, to reasonable limits
on access to its technical and other nonpublic information. No information or
knowledge obtained in any investigation pursuant to this Section 5.2 shall
affect or be deemed to modify any representation or warranty contained herein
or the conditions of the parties to consummate the Merger.
5.3 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to
Section 5.2, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any
violation of law, (c) became known to the public through no fault of such
party, (d) is later lawfully acquired by such party from other sources, (e)
is required to be disclosed by order of court or government agency with
subpoena powers or (f) which is disclosed in the course of any litigation
between any of the parties hereto.
5.4 EXPENSES. If the Merger is not consummated, all fees and expenses
incurred in connection with the Merger including, without limitation, all
legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") shall be borne by the
party that incurred such Third Party Expenses. If the Merger is consummated,
all reasonable Third Party Expenses incurred by the Company in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, up to a maximum of
$150,000, and all Third Party Expenses incurred by Parent or Merger Sub in
connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby shall be paid by
Parent. Whether or not the Merger is consummated, Parent agrees to pay the
reasonable costs, fees and expenses of the Purchaser Representative described
in Section 6.3(g), which costs, fees and expenses shall not be included in
the $150,000 described above.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by
the rules and regulations of The Nasdaq Stock Market, Inc. prior to the
Effective Time, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release, provided that such
approval shall not be unreasonably withheld.
5.6 CONSENTS. The Company shall use its commercially reasonable
efforts to obtain the consents, waivers and approvals under any of the
Contracts as may be required in connection with the Merger (all of such
consents, waivers and approvals are set forth in Company Schedules) so as to
preserve all rights of and benefits to the Company thereunder.
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5.7 FIRPTA COMPLIANCE. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.8 REASONABLE EFFORTS. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use its reasonable
efforts to ensure that its representations and warranties remain true and
correct in all material respects, and to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated hereby, to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings, and to remove any injunctions or other impediments or delays, legal
or otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties
hereto the benefits contemplated by this Agreement; provided that Parent
shall not be required to agree to any divestiture by Parent or the Company or
any of Parent's subsidiaries or affiliates of shares of capital stock or of
any business, assets or property of Parent or its subsidiaries or affiliates
or the Company or its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to
own or exercise control of such assets, properties and stock.
5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
the Company and Parent, respectively, contained in this Agreement to be
untrue or inaccurate at or prior to the Effective Time and (ii) any failure
of the Company or Parent, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.9 shall not limit or otherwise affect any remedies available
to the party receiving such notice.
5.10 CERTAIN BENEFIT PLANS. Parent shall take such reasonable actions
as are necessary to allow eligible employees of the Company to participate in
the benefit programs of Parent, or alternative benefits programs
substantially comparable to those applicable to employees of Parent on
similar terms, as soon as practicable after the Effective Time.
5.11 TAX-FREE REORGANIZATION. Parent and the Company shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code and to obtain an opinion of its
respective counsel to such effect as contemplated by Section 6.1(d).
5.12 AFFILIATE AGREEMENTS. Schedule 5.12 sets forth those persons who,
in the Company's reasonable judgment, are or may be "affiliates" of the
Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the Securities Act ("Rule 145"). The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company has delivered or shall cause to
be delivered to Parent, concurrently with the execution of this Agreement
from each of its Affiliates, an executed Affiliate Agreement in the form
attached hereto as EXHIBIT C. Parent shall be entitled to place appropriate
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legends on the certificates evidencing any Parent Common Stock to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent
Common Stock, consistent with the terms of such Affiliate Agreements.
5.13 VOTING AGREEMENTS. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each person listed on Schedule 5.13, an executed Voting Agreement in the form
attached hereto as EXHIBIT D (the "VOTING AGREEMENTS"), agreeing, among other
things, to vote in favor of the Merger and against any competing proposals.
5.14 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of this Agreement and
the transactions contemplated hereby.
5.15 REGISTRATION STATEMENT ON FORM S-8. Parent shall file a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options as soon as practicable after
the Effective Time and in any event within twenty (20) business days after
the Effective Time.
5.16 NASDAQ NATIONAL MARKET LISTING. Parent shall authorize for listing
on the Nasdaq National Market the shares of Parent Common Stock issuable, and
those required to be reserved for issuance, in connection with the Merger,
upon official notice of issuance.
5.17 COMPANY'S AUDITORS. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the preparation of financial statements
(including pro forma financial statements if required) as required by Parent
to comply with applicable SEC regulations, (ii) the review of the Company's
audit work papers for up to the past three years , including the examination
of selected interim financial statements and data, and (iii) the delivery of
such representations from the Company's independent accountants as may be
reasonably requested by Parent or its accountants in order for Parent's
accountants to render the opinion called for by Section 6.3(l) hereof.
5.18 INTERIM DEVELOPMENT AGREEMENT. The parties hereto shall use their
best efforts to negotiate, finalize, execute and deliver an Interim
Development Agreement, in the form proposed by Parent as Exhibit E attached
hereto, by May 10, 1997.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger shall
have been approved and adopted by the shareholders of the Company by the
requisite vote under applicable law and the Company's Articles of
Incorporation.
(b) GOVERNMENT APPROVALS. All approvals of governments and
governmental agencies necessary to consummate the transactions hereunder
shall have been received.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition preventing the consummation of the Merger shall be in effect.
(d) TAX OPINIONS. Parent and the Company shall each have received
substantially identical written opinions from their counsel, Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx and Xxxx Xxxx Xxxx & Freidenrich, respectively, in form and
substance reasonably satisfactory to them, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinions, such counsel may rely upon reasonable
representations and certificates of Parent, the Company, Merger Sub and
certain shareholders of the Company. Parent, the Company and the Merger Sub
will make such representations and delivery such certificates and the Company
agrees to use its best efforts to cause its shareholders to make such
representations and deliver such certificates.
(e) NASDAQ LISTING. The shares of Parent Common Stock issuable to
shareholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq National Market upon official
notice of issuance.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except
for changes contemplated by this Agreement and
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except for those representations and warranties which address matters only as
of a particular date (which shall remain true and correct as of such date),
with the same force and effect as if made on and as of the Closing Date,
except, in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a material adverse effect on Parent; and the
Company shall have received a certificate to such effect signed on behalf of
Parent by a duly authorized officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.
(c) THIRD PARTY CONSENTS. The Company shall have been furnished
with evidence satisfactory to it that Parent has obtained the consents,
approvals and waivers set forth in Schedule 6.2(c).
(d) LEGAL OPINION. The Company shall have received a legal
opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to Parent, in
substantially the form attached hereto as EXHIBIT E.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which
shall remain true and correct as of such date), with the same force and
effect as if made on and as of the Closing Date, except, in all such cases,
for such breaches, inaccuracies or omissions of such representations and
warranties which have neither had nor reasonably would be expected to have a
Material Adverse Effect on the Company or Parent; and Parent and Merger Sub
shall have received a certificate to such effect signed on behalf of the
Company by the chief executive officer and chief financial officer of the
Company.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate
to such effect signed by a duly authorized officer of the Company.
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(c) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) LEGAL OPINION. Parent shall have received a legal opinion
from Xxxx Xxxx Xxxx & Freidenrich, legal counsel to the Company, in
substantially the form attached hereto as EXHIBIT F.
(e) AFFILIATE AGREEMENTS. Each of the parties identified by the
Company as being an Affiliate of the Company shall have delivered to Parent
an executed Affiliate Agreement which shall be in full force and effect.
(f) SHAREHOLDER QUESTIONNAIRE. Each of the Company's shareholders
shall have delivered to Parent an executed Shareholder Questionnaire which
shall be in full force and effect.
(g) PURCHASER REPRESENTATIVE. There shall be a Purchaser
Representative, as defined in Regulation D under the Securities Act,
reasonably satisfactory to Parent representing each of the shareholders of
the Company who are not "accredited" as defined in Regulation D, and such
Purchaser Representative shall have executed documentation reasonably
satisfactory to Parent.
(h) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, assets (including intangible
assets), liabilities, financial condition, results of operations or prospects
of the Company since the date of the Balance Sheet.
(i) CONVERSION OF PREFERRED STOCK. All shares of Company
Preferred Stock shall have converted into Company Common Stock in accordance
with the Company's Articles of Incorporation.
(j) RESIGNATION OF DIRECTORS. The directors of the Company in
office immediately prior to the Effective Time shall have resigned as
directors of the Surviving Corporation effective immediately following the
Effective Time.
(k) DISSENTERS' RIGHTS. Holders of more than 5% of the
outstanding shares of Company Capital Stock shall not have exercised, nor
shall they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Merger.
(l) ESCROW AGREEMENT. Parent, the Company, the Securityholder
Agents (as defined in Section 7.2(h)) and the Escrow Agent (as defined in
Section 7.2(a)) shall have executed and delivered a mutually satisfactory
escrow agreement (the "ESCROW AGREEMENT") incorporating the provisions of
Article VII, which Escrow Agreement shall be in full force and effect.
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ARTICLE VII
ESCROW
7.1 ESCROW PERIOD. Subject to the following requirements, the Escrow
Fund (as defined in Section 7.2(a) below) shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., California
time, on the earlier of (i) the date which is one year following the Closing
Date or (ii) the issuance of Parent's audited financial statements for the
year ending December 31, 1997, which includes the results of the Company (the
"ESCROW PERIOD"); provided that the Escrow Period shall not terminate with
respect to such amount (or some portion thereof) that is necessary, in the
reasonable judgment of Parent, subject to the objection of the Securityholder
Agents (as defined in Section 7.2(h) below) and the subsequent arbitration of
the matter in the manner provided in Section 7.2(g) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period specified in any Officer's Certificate (as
defined in Section 7.2(d) below) delivered to the Escrow Agent prior to
termination of such Escrow Period.
7.2 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. At the Effective Time, the Company's
shareholders will be deemed to have received and deposited with the Escrow
Agent (as defined below) the Escrow Amount (plus any additional shares as may
be issued upon any stock split, stock dividend or recapitalization effected
by Parent after the Effective Time) without any act of any shareholder. As
soon as practicable after the Effective Time, the Escrow Amount, without any
act of any shareholder, will be deposited with an institution acceptable to
Parent and the Securityholder Agents as Escrow Agent (the "ESCROW AGENT"),
such deposit to constitute an escrow fund (the "ESCROW FUND") to be governed
by the terms set forth herein and at Parent's cost and expense. The portion
of the Escrow Amount contributed on behalf of each shareholder of the Company
shall be in proportion to the aggregate Parent Common Stock which such holder
would otherwise be entitled under Section 1.6(a). No portion of the Escrow
Amount shall be contributed in respect of any Company Options or warrants.
The Escrow Fund shall be available to compensate Parent and its affiliates
for any claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys' fees and expenses, and expenses of
investigation and defense (hereinafter individually a "LOSS" and collectively
"LOSSES") incurred by Parent, its officers, directors, or affiliates
(including the Surviving Corporation) directly or indirectly as a result of
any inaccuracy or breach of a representation or warranty of the Company or
any contained in Article II herein (as modified by the Company Schedules), or
any failure by the Company to perform or comply with any covenant contained
herein. Parent and the Company each acknowledge that such Losses, if any,
would relate to unresolved contingencies existing at the Effective Time,
which if resolved at the Effective Time would have led to a reduction in the
aggregate Merger consideration. Nothing herein shall limit the liability of
the Company for any breach of any representation, warranty or covenant if the
Merger does not close.
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(b) DAMAGE THRESHOLD. Notwithstanding the foregoing, Parent may
not receive any shares from the Escrow Fund unless and until an Officer's
Certificate or Certificates (as defined in Section 7.2(e) below) identifying
Losses the aggregate amount of which exceeds $150,000, has been delivered to
the Escrow Agent as provided in Section 7.2(e) below and such amount is
determined pursuant to this Article VII to be payable, in which case Parent
shall receive shares equal in value to the full amount of Losses; PROVIDED,
HOWEVER, that in no event shall Parent receive shares in excess of the Escrow
Amount.
(c) DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD. Upon
termination of the Escrow Period, the Escrow Agent shall deliver to the
shareholders of the Company that portion of the Escrow Fund that is not
required to satisfy any claims made by Parent pursuant to Section 7.1 hereof.
Deliveries of Escrow Amounts to the shareholders of the Company pursuant to
this Section 7.2(c) shall be made in proportion to their respective original
contributions to the Escrow Fund.
(d) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund
in accordance with the terms of this Agreement and not as the property of
Parent or the Company's shareholders and shall hold and dispose of the Escrow
Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other
equity securities issued or distributed by Parent (including shares issued
upon a stock split) ("NEW SHARES") in respect of Parent Common Stock in the
Escrow Fund which have not been released from the Escrow Fund shall be added
to the Escrow Fund and become a part thereof. New Shares issued in respect
of shares of Parent Common Stock which have been released from the Escrow
Fund shall not be added to the Escrow Fund but shall be distributed to the
recordholders thereof. Cash dividends on Parent Common Stock shall not be
added to the Escrow Fund but shall be distributed to the recordholders
thereof.
(iii) Each shareholder shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund
by such shareholder (and on any New Shares added to the Escrow Fund in
respect of such shares of Parent Common Stock).
(e) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Escrow Agent at any time on
or before the last day of the Escrow Period of a certificate signed by any
officer of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has
paid or properly accrued or reasonably anticipates that it will have to pay
or accrue Losses in excess of $150,000, and (B) specifying in reasonable
detail the individual items of Losses included in the amount so stated, the
date each such item was paid or properly accrued, or the basis for such
anticipated liability, and the nature of the
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misrepresentation, breach of warranty or covenant to which such item is
related, the Escrow Agent shall, subject to the provisions of Section 7.2(f)
hereof, deliver to Parent out of the Escrow Fund, as promptly as practicable,
shares of Parent Common Stock held in the Escrow Fund in an amount equal to
such Losses.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow
Fund pursuant to Section 7.2(e)(i) hereof, the shares of Parent Common Stock
shall be valued at the Average Price. Parent and the Securityholder Agents
shall certify such fair market value in a certificate signed by both Parent
and the Securityholder Agents, and shall deliver such certificate to the
Escrow Agent.
(f) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such
certificate shall be delivered to the Securityholder Agents and for a period
of thirty (30) days after such delivery, the Escrow Agent shall make no
delivery to Parent of any Escrow Amounts pursuant to Section 7.2(e) hereof
unless the Escrow Agent shall have received written authorization from the
Securityholder Agents to make such delivery. After the expiration of such
thirty (30) day period, the Escrow Agent shall make delivery of shares of
Parent Common Stock from the Escrow Fund in accordance with Section 7.2(e)
hereof, provided that no such payment or delivery may be made if the
Securityholder Agents shall object in a written statement to the claim made
in the Officer's Certificate, and such statement shall have been delivered to
the Escrow Agent prior to the expiration of such thirty (30) day period.
(g) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Securityholder Agents shall so
object in writing to any claim or claims made in any Officer's Certificate,
the Securityholder Agents and Parent shall attempt in good faith to agree
upon the rights of the respective parties with respect to each of such
claims. If the Securityholder Agents and Parent should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and distribute shares of Parent
Common Stock from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Securityholder Agents may demand
arbitration of the matter unless the amount of the damage or loss is at issue
in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by one arbitrator. Parent and the Securityholder
Agents shall agree on one arbitrator; provided that if Parent and the
Securityholder Agents cannot agree on one arbitrator, either Parent or the
Securityholder Agents can request that the Judicial Arbitration and Mediation
Services ("JAMS") select the arbitrator. The arbitrator selected by JAMS
shall determine the dispute in accordance with this Article 7. The
arbitrators shall set a limited time period and establish procedures designed
to reduce the cost
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and time for discovery while allowing the parties an opportunity, adequate in
the sole judgment of the arbitrators, to discover relevant information from
the opposing parties about the subject matter of the dispute. The
arbitrators shall rule upon motions to compel or limit discovery and shall
have the authority to impose sanctions, including attorneys' fees and costs,
to the same extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this
Agreement, and notwithstanding anything in Section 7.2(f) hereof, the Escrow
Agent shall be entitled to act in accordance with such decision and make or
withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact
and conclusions which shall set forth the award, judgment, decree or order
awarded by the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Santa Xxxxx County, California under the rules
then in effect of the American Arbitration Association. For purposes of this
Section 7.2(g), in any arbitration hereunder in which any claim or the amount
thereof stated in the Officer's Certificate is at issue, Parent shall be
deemed to be the Non-Prevailing Party in the event that the arbitrators award
Parent less than the sum of one-half (1/2) of the disputed amount plus any
amounts not in dispute; otherwise, the shareholders of the Company as
represented by the Securityholder Agents shall be deemed to be the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its own expenses, the fees of each arbitrator, the administrative costs of
the arbitration and the expenses, including without limitation, reasonable
attorneys' fees and costs, incurred by the other party to the arbitration.
(h) SECURITYHOLDER AGENTS OF THE SHAREHOLDERS; POWER OF ATTORNEY.
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any shareholder, Xxxxxxx
Xxxxxxxxxxxx and Xxxx Xxxxx shall be appointed as agents and
attorneys-in-fact, acting jointly and not individually, (the "SECURITYHOLDER
AGENTS") for each shareholder of the Company (except such shareholders, if
any, as shall have perfected their appraisal or dissenters' rights under
California Law), for and on behalf of shareholders of the Company, to give
and receive notices and communications, to authorize delivery to Parent of
shares of Parent Common Stock from the Escrow Fund in satisfaction of claims
by Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders
of courts and awards of arbitrators with respect to such claims, and to take
all actions necessary or appropriate in the judgment of the Securityholder
Agents for the accomplishment of the foregoing. Such agency may be changed
by the shareholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that neither of the
Securityholder Agents
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may be removed unless holders of a two-thirds interest of the Escrow Fund
agree to such removal and to the identity of the substituted agent. Any
vacancy in the position of either Securityholder Agents may be filled by
approval of the holders of a majority in interest of the Escrow Fund. No
bond shall be required of the Securityholder Agents, and the Securityholder
Agents shall not receive compensation for their services. Notices or
communications to or from the Securityholder Agents shall constitute notice
to or from each of the shareholders of the Company.
(ii) The Securityholder Agents shall not be liable
for any acts done or omitted hereunder as Securityholder Agents while acting
in good faith and in the exercise of reasonable judgment. The shareholders
of the Company on whose behalf the Escrow Amount was contributed to the
Escrow Fund shall severally indemnify the Securityholder Agents and hold the
Securityholder Agents harmless against any loss, liability or expense
incurred without negligence or bad faith on the part of the Securityholder
Agents and arising out of or in connection with the acceptance or
administration of the Securityholder Agents' duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by the
Securityholder Agents.
(i) ACTIONS OF THE SECURITYHOLDER AGENTS. A decision, act,
consent or instruction of the Securityholder Agents shall constitute a
decision of all the shareholders for whom a portion of the Escrow Amount
otherwise issuable to them are deposited in the Escrow Fund and shall be
final, binding and conclusive upon each of such shareholders, and the Escrow
Agent and Parent may rely upon any such decision, act, consent or instruction
of the Securityholder Agents as being the decision, act, consent or
instruction of each such shareholder of the Company. The Escrow Agent and
Parent are hereby relieved from any liability to any person for any acts done
by them in accordance with such decision, act, consent or instruction of the
Securityholder Agents.
(j) THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim which Parent intends to assert for a demand against the
Escrow Fund, Parent shall notify the Securityholder Agents of such claim.
Parent may not affect the settlement of any such claim without the consent of
the Securityholder Agents, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, with respect to claims relating to customers
of the Company or Parent, no consent of the Securityholders Agents shall be
required prior to settlement of any such claim; provided that such settlement
shall not alone be determinative of the amount of any claim against the
Escrow Fund. In the event that the Securityholder Agents have consented to
any such settlement, the Securityholder Agents shall have no power or
authority to object under any provision of this Article VII to the amount of
any claim by Parent against the Escrow Fund with respect to such settlement.
(k) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for
the performance of such duties as are specifically set forth herein, and as
set forth in any additional written escrow instructions which the Escrow
Agent may receive after the date of this Agreement which are signed by an
officer of Parent and the Securityholder Agents, and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed to be genuine and to
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have been signed or presented by the proper party or parties. The Escrow
Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting on good faith and in the exercise of reasonable judgment,
and any act done or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized
to comply with and obey orders, judgments or decrees of any court of law,
notwithstanding any notices, warnings or other communications from any party
or any other person to the contrary. In case the Escrow Agent obeys or
complies with any such order, judgment or decree of any court, the Escrow
Agent shall not be liable to any of the parties hereto or to any other person
by reason of such compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties
executing or delivering or purporting to execute or deliver this Agreement or
any documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to
this Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement,
the Escrow Agent shall not be liable to any party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of
the Escrow Agent. The Escrow Agent shall not incur any such liability for
(A) any act or failure to act made or omitted in good faith, or (B) any
action taken or omitted in reliance upon any instrument, including any
written statement or affidavit provided for in this Agreement that the Escrow
Agent shall in good faith believe to be genuine, nor will the Escrow Agent be
liable or responsible for forgeries, fraud, impersonations, or determining
the scope of any representative authority. In addition, the Escrow Agent may
consult with legal counsel in connection with Escrow Agent's duties under
this Agreement and shall be fully protected in any act taken, suffered, or
permitted by it in good faith in accordance with the advice of counsel. The
Escrow Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
(vi) If any controversy arises between the parties
to this Agreement, or with any other party, concerning the subject matter of
this Agreement, its terms or conditions, the Escrow Agent will not be
required to determine the controversy or to take any action regarding it.
The Escrow Agent may hold all documents and shares of Parent Common Stock and
may wait for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Escrow Agent's discretion, the Escrow
Agent xxxxx xxx be required, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be liable for damage.
Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and
rights among themselves. In connection with any
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such interpleader action, the Escrow Agent is authorized to deposit with the
clerk of the court all documents and shares of Parent Common Stock held in
escrow, and the parties jointly and severally agree to pay all costs,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent
due to such interpleader action. Upon initiating such action, the Escrow
Agent shall be fully released and discharged of and from all obligations and
liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and
expenses, including reasonable costs of investigation, counsel fees, and
disbursements that may be imposed on Escrow Agent or incurred by Escrow Agent
in connection with the performance of his/her duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; provided,
however, that no such resignation shall become effective until the
appointment of a successor escrow agent which shall be accomplished as
follows: the parties shall use their best efforts to mutually agree on a
successor escrow agent within thirty (30) days after receiving such notice.
If the parties fail to agree upon a successor escrow agent within such time,
the Escrow Agent shall have the right to appoint a successor escrow agent
authorized to do business in the State of California. The successor escrow
agent shall execute and deliver an instrument accepting such appointment and
it shall, without further acts, be vested with all the estates, properties,
rights, powers, and duties of the predecessor escrow agent as if originally
named as escrow agent. The predecessor escrow agent shall be discharged from
any further duties and liability under this Agreement.
(l) FEES. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be
considered compensation for ordinary services as contemplated by this
Agreement. In the event that the conditions of this Agreement are not
promptly fulfilled, or if the Escrow Agent renders any service not provided
for in this Agreement, or if the parties request a substantial modification
of its terms, or if any controversy arises, or if the Escrow Agent is made a
party to, or intervenes in, any litigation pertaining to this escrow or its
subject matter, the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs, attorney's fees, and
expenses occasioned by such default, delay, controversy or litigation.
Parent promises to pay these sums upon demand.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on June 30, 1997 (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation
hereunder has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date); (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any governmental entity that would make consummation of the
Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable
to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate all or a portion of the business or assets of the Company or
Parent as a result of the Merger;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
the Company and (i) such breach has not been cured within ten (10) business
days after written notice to the Company (provided that, no cure period shall
be required for a breach which by its nature cannot be cured), and (ii) as a
result of such breach the conditions set forth in Section 6.3(a) or 6.3(b),
as the case may be, would not then be satisfied;
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of Parent or Merger Sub and (i) such breach has not been cured
within ten (10) business days after written notice to Parent (provided that,
no cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied.
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Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 TERMINATION FEE. In the event this Agreement is terminated (i) by
Parent other than pursuant to Section 8.1 above or (ii) by the Company
pursuant to Section 8.1(e) above, then Parent shall immediately pay the
Company $5,000,000 by wire transfer or certified or official bank check in
immediately available funds. Such payment shall be liquidated damages for
any such termination of this Agreement.
8.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, 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 or
shareholders, provided that each party shall remain liable for any breaches
of this Agreement prior to its termination; and provided further that, the
provisions of Sections 5.3 and 5.4 and Articles VIII and IX (other than
Section 9.1) of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
8.4 AMENDMENT. Except as is otherwise required by applicable law after
the shareholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; PROVIDED, HOWEVER,
that Parent may in its sole discretion amend this Agreement (and all related
agreements to the extent necessary) to provide for the consummation of the
acquisition of the Company contemplated hereby through the statutory merger
of the Company with and into Parent.
8.5 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to
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this Agreement shall survive the consummation of the Merger and shall (except
to the extent that survival is necessary to effectuate the intent of such
provisions) terminate eighteen (18) months after the Closing Date.
9.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Netscape Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company prior to the Closing, to:
Portola Communications, Inc.
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xx 00000
Attention: Xxxxxxx Xxxxxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxx Xxxx Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) if to the Securityholder Agents:
Xxxxxxx Xxxxxxxxxxxx
Xxxx Xxxxx
c/o Asset Management Company
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxx Xxxx Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.3 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, that certain letter agreement of even date herewith between
Parent and the Company, and the documents and instruments and other
agreements among the parties hereto referenced herein: (a) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder;
and (c) shall not be assigned by operation of law or otherwise except as
otherwise specifically provided, except that Parent and Merger Sub may assign
their respective rights and delegate their respective obligations hereunder
to their respective affiliates.
9.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
9.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will
not preclude the exercise of any other remedy.
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9.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto agrees that process may be served
upon them in any manner authorized by the laws of the State of California for
such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
9.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Securityholder Agents (but only as to Articles VII and IX for Securityholder
Agents) have caused this Agreement to be signed by their duly authorized
respective officers, all as of the date first written above.
NETSCAPE COMMUNICATIONS PORTOLA COMMUNICATIONS, INC.
CORPORATION
By /s/ Xxxxx X.X. Xxxxxx By /s/ Xxxxxxx Xxxxxxxxxxxx
------------------------------- -----------------------------
Xxxxx X.X. Xxxxxx Xxxxxxx Xxxxxxxxxxxx
Senior Vice President and Chief President and Chief Executive
Financial Officer Officer
SECURITYHOLDER AGENTS: PCI ACQUISITION CORPORATION
/s/ Xxxxxxx Xxxxxxxxxxxx By /s/ Xxxxx X.X. Xxxxxx
------------------------------- -----------------------------
Xxxxxxx Xxxxxxxxxxxx Xxxxx X.X. Xxxxxx
President and Chief Financial
Officer
/s/ Xxxx Xxxxx
-------------------------------
Xxxx Xxxxx
***REORGANIZATION AGREEMENT***
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