1
Exhibit Index
Exhibit
No. Description
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2 Agreement and Plan of Merger dated as of
March 31, 1999 by and among the Registrant,
Spyglass Acquisition Corp. and Navitel Communications Inc.
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
SPYGLASS, INC.,
SPYGLASS ACQUISITION CORP.
AND
NAVITEL COMMUNICATIONS, INC.
As Amended
March 31, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER 1
1.1 The Merger 1
1.2 The Closing 1
1.3 Actions at the Closing 2
1.4 Additional Action 2
1.5 Conversion of Shares 2
1.6 Dissenting Shares 3
1.7 Exchange of Shares 4
1.8 Fractional Shares 4
1.9 Options and Warrants 5
1.10 Escrow 6
1.11 Articles of Incorporation and By-laws 6
1.12 No Further Rights 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
2.1 Organization, Qualification and Corporate Power 7
2.2 Capitalization 7
2.3 Authorization of Transaction 8
2.4 Noncontravention 9
2.5 Subsidiaries 9
2.6 Financial Statements 9
2.7 Absence of Certain Changes 10
2.8 Undisclosed Liabilities 10
2.9 Tax Matters 10
2.10 Assets 12
2.11 Owned Real Property 12
2.12 Intellectual Property 12
2.13 Contracts 14
2.14 Accounts Receivable 15
2.15 Powers of Attorney 15
2.16 Insurance 15
2.17 Litigation 15
2.18 Product Warranty 16
2.19 Employees 16
2.20 Employee Benefits 16
2.21 Legal Compliance 18
2.22 Customers and Suppliers 18
2.23 Permits 18
2.24 Certain Business Relationships With Affiliates 18
2.25 Brokers' Fees 18
2.26 Books and Records 18
2.27 Pooling 19
2.28 Disclosure 19
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Page
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY 19
3.1 Organization, Qualification and Corporate Power 19
3.2 Capitalization 19
3.3 Authorization of Transaction 20
3.4 Noncontravention 20
3.5 Reports and Financial Statements 20
3.6 Absence of Material Adverse Change 21
3.7 Litigation 21
3.8 Pooling; Tax-Free Reorganization 21
3.9 Interim Operations of the Transitory Subsidiary 21
3.10 Brokers' Fees 21
3.11 Disclosure 22
ARTICLE IV COVENANTS 22
4.1 Closing Efforts 22
4.2 Governmental and Third-Party Notices and Consents. 22
4.3 Stockholder Approval 22
4.4 Operation of Business 24
4.5 Access to Information 25
4.6 Exclusivity 25
4.7 Agreements from Certain Affiliates of the Company 26
4.8 Listing of Merger Shares 26
4.9 Expenses 26
4.10 Stock Options 26
4.11 Indemnification 26
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER 27
5.1 Conditions to Each Party's Obligations 27
5.2 Conditions to Obligations of the Buyer and the
Transitory Subsidiary 27
5.3 Conditions to Obligations of the Company 29
ARTICLE VI INDEMNIFICATION 30
6.1 Indemnification by the Company Stockholders 30
6.2 Indemnification by the Buyer 30
6.3 Indemnification Claims 30
6.4 Survival of Representations and Warranties 34
6.5 Limitations 35
ARTICLE VII REGISTRATION RIGHTS 36
7.1 Registration of Shares 36
7.2 Limitations on Registration Rights 36
7.3 Registration Procedures 37
7.4 Requirements of Company Stockholders 37
7.5 Indemnification 38
7.6 Assignment of Rights 38
ARTICLE VIII TERMINATION 39
8.1 Termination of Agreement 39
8.2 Effect of Termination 39
ARTICLE IX DEFINITIONS 40
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Page
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ARTICLE X MISCELLANEOUS 42
10.1 Press Releases and Announcements 42
10.2 No Third Party Beneficiaries 42
10.3 Entire Agreement 42
10.4 Succession and Assignment 42
10.5 Counterparts 42
10.6 Headings 43
10.7 Notices 43
10.8 Governing Law 43
10.9 Amendments and Waivers 43
10.10 Severability 44
Exhibit A - Merger Agreement
Exhibit B - Escrow Agreement
Exhibit C - Affiliate Agreement
Exhibit D - Non-Competition Agreement
Exhibit E - Investment Representation Letter
Exhibit F - Opinion of Counsel to the Company
Exhibit G - Promissory Note
Exhibit H - Pledge Agreement
Exhibit I - Opinion of Counsel to the Buyer
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of March 31, 1999 by and among Spyglass, Inc.,
a Delaware corporation (the "Buyer"), Spyglass Acquisition Corp., a California
corporation and a wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and Navitel Communications, Inc., a California corporation (the
"Company"), as amended as of April 15, 1999. The Buyer, the Transitory
Subsidiary and the Company are referred to collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary into
the Company. In such merger, the stockholders of the Company will receive common
stock of the Buyer in exchange for their capital stock of the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Surviving
Corporation files the Merger Agreement in the form attached hereto as Exhibit A,
together with the required officers' certificates and the certificates of
satisfaction from the California Franchise Tax Board for the Transitory
Subsidiary and the Company (collectively, the "Merger Filings"), in accordance
with Section 1103 of the California General Corporation Law, with the Secretary
of State of the State of California. The Merger shall have the effects set forth
in Section 1107 of the California General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxx and Xxxx LLP
in Boston, Massachusetts commencing at 12:00 p.m. local time on the first
business day after the obtaining of any good standing certificates necessary for
the Merger Filings and the satisfaction or waiver of all conditions (excluding
the delivery of any documents to be delivered at the Closing by any of the
Parties) set forth in Article V hereof, or such other date as is mutually agreed
(the "Closing Date").
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1.3 Actions at the Closing. At the Closing, (a) the Company shall
deliver to the Buyer and the Transitory Subsidiary the various certificates,
instruments and documents referred to in Section 5.2, (b) the Buyer shall
deliver to the Company the various certificates, instruments and documents
referred to in Section 5.3, (c) the Company and the Transitory Subsidiary shall
file with the Secretary of State of the State of California the Merger Filings,
and (d) the Buyer, Xxxxx Xxxxx (the "Indemnification Representative") and State
Street Bank and Trust Company (the "Escrow Agent") shall execute and deliver the
Escrow Agreement in substantially the form attached hereto as Exhibit B (the
"Escrow Agreement") and the Buyer shall deliver to the Escrow Agent a
certificate for the Escrow Shares (as defined below) being placed in escrow on
the Closing Date pursuant to Section 1.10.
1.4 Additional Action. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.001 par value per share, of the
Company ("Common Shares") issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares (as defined below) and Common
Shares held in the Company's treasury) shall be converted into and represent the
right to receive (subject to the provisions of Section 1.10) such number of
shares of common stock, $.01 par value per share, of the Buyer ("Buyer Common
Stock") as is equal to the Conversion Ratio (as defined below).
(b) The "Conversion Ratio" shall be the result obtained by
dividing (i) 1,250,000 by (ii) the sum of (A) the number of outstanding Common
Shares immediately prior to the Effective Time (after giving effect to the
conversion of all outstanding shares of Preferred Stock, $.001 par value per
share, of the Company ("Preferred Shares"; and, together with the Common Shares,
the "Company Shares") into Common Shares) plus (B) the number of Common Shares
issuable upon exercise of all Options and Warrants (as defined below)
outstanding immediately prior to the Effective Time. The Conversion Ratio shall
be subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or similar event affecting the Buyer Common Stock
prior to the Effective Time. Stockholders of record of the Company immediately
prior to the Effective Time ("Company Stockholders") shall be entitled to
receive immediately 90% of the shares of Buyer Common Stock into which their
Company Shares were converted pursuant to this Section 1.5 (the "Initial
Shares"); the remaining 10% of the shares of Buyer Common Stock into which their
Company Shares were converted pursuant to this Section 1.5 (the "Escrow Shares")
shall be deposited in escrow pursuant to Section 1.10 and shall be held and
disposed of in accordance with the terms of the Escrow Agreement. The Initial
Shares and the Escrow Shares shall together be referred to herein as the "Merger
Shares."
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(c) Each Company Share held in the Company's treasury immediately
prior to the Effective Time and each Company Share owned beneficially by the
Buyer or the Transitory Subsidiary shall be cancelled and retired without
payment of any consideration therefor.
(d) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
$.01 par value per share, of the Surviving Corporation.
1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Stockholder who has
not voted such Company Shares in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Chapter 13 of the California General Corporation
Law and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be converted into or represent the right to receive
the Merger Shares, unless such Company Stockholder's right to appraisal shall
have ceased in accordance with Section 1309 of the California General
Corporation Law. If such Company Stockholder has so forfeited or withdrawn his,
her or its right to appraisal of Dissenting Shares, then, (i) as of the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Shares issuable in respect of such Company Shares pursuant to Section
1.5, and (ii) promptly following the occurrence of such event, the Buyer shall
deliver to the Exchange Agent a certificate representing 90% of the Merger
Shares to which such holder is entitled pursuant to Section 1.5 (which shares
shall be considered Initial Shares for all purposes of this Agreement) and shall
deliver to the Escrow Agent a certificate representing the remaining 10% of the
Merger Shares to which such holder is entitled pursuant to Section 1.5 (which
shares shall be considered Escrow Shares for all purposes of this Agreement).
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the California General Corporation Law.
The Company shall not, except with the prior written consent of the Buyer, make
any payment with respect to any demands for appraisal of Company Shares or offer
to settle or settle any such demands.
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1.7 Exchange of Shares.
(a) Prior to the Effective Time, the Buyer shall appoint American
Stock Transfer and Trust Company, the transfer agent for the Buyer Common Stock,
to act as exchange agent (the "Exchange Agent") to effect the exchange for the
Initial Shares of certificates that, immediately prior to the Effective Time,
represented Company Shares converted into Merger Shares pursuant to Section 1.5
(including any Company Shares referred to in the last sentence of Section
1.6(a)) ("Certificates"). As soon as practicable, but in no event later than 15
days, after the Effective Time, the Buyer shall cause the Exchange Agent to send
a notice and a transmittal form to each holder of a Certificate advising such
holder of the procedure for surrendering to the Exchange Agent such Certificate
in exchange for the Initial Shares issuable pursuant to Section 1.5. Each holder
of a Certificate, upon proper surrender thereof to the Exchange Agent in
accordance with the instructions in such notice, shall be entitled to receive in
exchange therefor (subject to any taxes required to be withheld) the Initial
Shares issuable pursuant to Section 1.5. Until properly surrendered, each such
Certificate shall be deemed for all purposes to evidence only the right to
receive the Initial Shares issuable pursuant to Section 1.5. Holders of
Certificates shall not be entitled to receive certificates for the Initial
Shares to which they would otherwise be entitled until such Certificates are
properly surrendered.
(b) No dividends or other distributions that are payable to the
holders of record of Buyer Common Stock as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Initial Shares until such holders surrender their Certificates
for certificates representing the Merger Shares. Upon such surrender, the Buyer
shall pay or deliver to the persons in whose name the certificates representing
such Initial Shares are issued any dividends or other distributions that are
payable to the holders of record of Buyer Common Stock as of a date on or after
the Closing Date and which were paid or delivered between the Effective Time and
the time of such surrender; provided that no such person shall be entitled to
receive any interest on such dividends or other distributions.
1.8 Fractional Shares. No certificates or script representing fractional
Initial Shares shall be issued to former Company Stockholders upon the surrender
for exchange of Certificates, and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Initial Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional Initial Shares that would otherwise be
issued, each former Company Stockholder that would have been entitled to receive
a fractional Initial Share shall, upon proper surrender of such person's
Certificates, receive such whole number of Initial Shares as is equal to the
precise number of Initial Shares to which such person would be entitled, rounded
up or down to the nearest whole number (with a fractional interest equal to .5
rounded to the nearest odd number); provided that each such holder shall receive
at least one Initial Share.
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1.9 Options and Warrants.
(a) As of the Effective Time, all options to purchase Common
Shares issued by the Company pursuant to its stock option plans or otherwise
("Options"), whether vested or unvested, shall be assumed by the Buyer.
Immediately after the Effective Time, each Option outstanding immediately prior
to the Effective Time shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Option at the Effective
Time, such number of shares of Buyer Common Stock as is equal to the number of
Common Shares subject to the unexercised portion of such Option multiplied by
the Conversion Ratio (with any fraction resulting from such multiplication to be
rounded down to the nearest whole number). The exercise price per share of each
such assumed Option shall be equal to the exercise price of such Option
immediately prior to the Effective Time, divided by the Conversion Ratio. The
term, exercisability, vesting schedule, status as an "incentive stock option"
under Section 422 of the Internal Revenue Code of 1986 (as amended, the "Code"),
if applicable, and all of the other terms of the Options shall otherwise remain
unchanged.
(b) As soon as practicable after the Effective Time, the Buyer or
the Surviving Corporation shall deliver to the holders of Options appropriate
notices setting forth such holders' rights pursuant to such Options, as amended
by this Section 1.9, and the agreements evidencing such Options shall continue
in effect on the same terms and conditions (subject to the amendments provided
for in this Section 1.9).
(c) The Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Options assumed in accordance with this Section
1.9. As soon as practicable after the Effective Time, the Buyer shall file a
Registration Statement on Form S-8 (or any successor form) under the Securities
Act of 1933 (as amended, the "Securities Act") with respect to all shares of
Buyer Common Stock subject to such Options that may be registered on a Form S-8,
and shall use its best efforts to maintain the effectiveness of such
Registration Statement for so long as such Options remain outstanding.
(d) [Deleted]
(e) The Company shall obtain, prior to the Closing, the consent
from each holder of an Option to the amendment of such Option pursuant to this
Section 1.9 (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
1.10 Escrow.
(a) On the Closing Date, the Buyer shall deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5, for the purpose of
securing the indemnification obligations of the Indemnifying Stockholders (as
defined in Section 6.1) set forth in this Agreement. The Escrow Shares shall be
held by the Escrow Agent under the Escrow
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Agreement pursuant to the terms thereof. The Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party, and shall be held and
disbursed solely for the purposes and in accordance with the terms of the Escrow
Agreement.
(b) The adoption of this Agreement and the approval of the Merger
by the Company Stockholders shall constitute approval of the Escrow Agreement
and of all of the arrangements relating thereto, including without limitation
the placement of the Escrow Shares in escrow and the appointment of the
Indemnification Representative.
1.11 Articles of Incorporation and By-laws.
(a) The Articles of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Articles of
Incorporation of the Transitory Subsidiary immediately prior to the Effective
Time, except that the name of the corporation set forth therein shall be changed
to the name of the Company.
(b) The By-laws of the Surviving Corporation immediately
following the Effective Time shall be the same as the By-laws of the Transitory
Subsidiary immediately prior to the Effective Time, except that the name of the
corporation set forth therein shall be changed to the name of the Company.
1.12 No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify other paragraphs in this
Article II only to the extent it is clear from a reading of the disclosure that
such disclosure is applicable to such other paragraphs.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of California. The Company is duly
qualified to conduct business and is in corporate and tax good standing under
the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Company
Material Adverse Effect
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(as defined below). The Company has all requisite corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. The Company has furnished to the Buyer complete
and accurate copies of its Articles of Incorporation and By-laws, each as
amended and as in effect on the date hereof. For purposes of this Agreement,
"Company Material Adverse Effect" means a material adverse effect on the assets,
business, financial condition, results of operations or future prospects of the
Company.
2.2 Capitalization. The authorized capital stock of the Company consists
of (a) 50,000,000 Common Shares, of which, as of the date of this Agreement,
11,278,137 shares were issued and outstanding and (b) 15,000,000 Preferred
Shares, of which (i) 1,831,496 shares have been designated as Series A Preferred
Stock, of which, as of the date of this Agreement, 1,831,494 shares were issued
and outstanding and (ii) 2,489,624 shares have been designated as Series B
Preferred Stock, of which, as of the date of this Agreement, 2,489,619 shares
were issued and outstanding and (iii) 4,819,278 shares have been designated as
Series C Preferred Stock, of which, as of the date of this Agreement, all of
which were issued and outstanding. Of the 11,278,137 issued and outstanding
Common Shares, 10,020 shares are subject to a repurchase option in favor of the
Company. Section 2.2 of the Disclosure Schedule sets forth a complete and
accurate list of (i) all stockholders of the Company, indicating the number and
class or series of Company Shares held by each stockholder and (for Company
Shares other than Common Shares) the number of Common Shares (if any) into which
such Company Shares are convertible, (ii) all holders of Options and Warrants,
indicating the number of Common Shares subject to each Option and Warrant, the
number of Common Shares for which each Option and Warrant is exercisable, and
any acceleration of vesting that will occur in connection with the Merger, and
(iii) all stock option plans and other stock or equity-related plans of the
Company. All of the issued and outstanding Company Shares are, and all Company
Shares that may be issued upon exercise of Options or Warrants will be, duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock, other than the Options and Warrants listed in Section 2.2
of the Disclosure Schedule. All Options have been granted pursuant to the
Company's standard form of option agreement, a copy of which has been provided
to the Buyer. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to the Company. There are no agreements,
voting trusts, proxies or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares. All of the issued
and outstanding Company Shares were issued subject to a valid exemption from the
registration requirements of applicable federal and state securities laws.
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2.3 Authorization of Transaction. The Company has all requisite power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by the Company of this
Agreement and, subject to (i) the adoption of this Agreement and the approval of
the Merger by a majority of the votes represented by the outstanding Common
Shares and a majority of the votes represented by the outstanding Preferred
Shares (the "Requisite Stockholder Approval") and (ii) the consent of the
holders of a majority of the outstanding shares of each series of Preferred
Stock of the Company to the conversion of all outstanding shares of such series
into Common Shares (the "Conversion Approval"), the consummation by the Company
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company. Without limiting the
generality of the foregoing, the Board of Directors of the Company, at a meeting
duly called and held, by the unanimous vote of all directors (i) determined that
the Merger is fair and in the best interests of the Company and its
stockholders, (ii) adopted this Agreement in accordance with the provisions of
the California General Corporation Law, and (iii) directed that this Agreement
and the Merger and the conversion of the outstanding Preferred Shares into
Common Shares be submitted to the stockholders of the Company for their adoption
and approval and resolved to recommend that the stockholders of Company vote in
favor of the adoption of this Agreement and the approval of the Merger and the
conversion of the outstanding Preferred Shares into Common Shares. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
2.4 Noncontravention. Subject to the filing of the Merger Filings as
required by the California General Corporation Law, neither the execution and
delivery by the Company of the Agreement, nor the consummation by the Company of
the transactions contemplated hereby, will (a) conflict with or violate any
provision of the Articles of Incorporation or By-laws of the Company, (b)
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity"), (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, modify or cancel, or require any notice, consent
or waiver under, any contract or instrument to which the Company is a party, (d)
result in the imposition of any Security Interest (as defined below) upon any
assets of the Company or (e) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company. For purposes of this
Agreement: "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge or other lien (whether arising by contract or by operation
of law), other than (i) mechanic's, materialmen's, and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation, and
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(iii) liens on goods in transit incurred pursuant to documentary letters of
credit, in each case arising in the Ordinary Course of Business (as defined
below) of the Company and not material to the Company; and "Ordinary Course of
Business" means the ordinary course of the Company's business, consistent with
past custom and practice (including with respect to frequency and amount).
2.5 Subsidiaries. The Company does not have any subsidiaries or own any
equity interest in any other corporation or entity.
2.6 Financial Statements. The Company has provided to the Buyer the
audited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows of the Company as of and for the fiscal
years ended June 30, 1997 and 1998 and the eight months ended February 28, 1999
(the "Most Recent Balance Sheet Date"). Such financial statements (collectively,
the "Financial Statements") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods covered thereby, fairly present the financial condition,
results of operations and cash flows of the Company as of the respective dates
thereof and for the periods referred to therein and are consistent with the
books and records of the Company; provided, however, that the Financial
Statements as of and for the eight months ended February 28, 1999 are subject to
normal recurring year-end adjustments (which will not be material) and do not
include footnotes.
2.7 Absence of Certain Changes. Since the Most Recent Balance Sheet
Date, (a) there has occurred no event or development which has had, or could
reasonably be foreseen to have in the future, a Company Material Adverse Effect,
and (b) the Company has not taken any of the actions set forth in paragraphs (a)
through (n) of Section 4.4.
2.8 Undisclosed Liabilities. The Company has no liabilities except for
(a) liabilities shown on the February 28, 1999 balance sheet referred to in
Section 2.6 (the "Most Recent Balance Sheet"), (b) liabilities which have arisen
since the Most Recent Balance Sheet Date in the Ordinary Course of Business and
(c) contractual and other liabilities incurred in the Ordinary Course of
Business which are not required by GAAP to be reflected on a balance sheet.
2.9 Tax Matters.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or
other similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes imposed by the United States of America or any state,
local or
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foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) The Company has filed on a timely basis (or has filed
appropriate extensions with respect to) all Tax Returns that it was required to
file, and all such Tax Returns were complete and accurate in all material
respects. The Company is not and has never been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Company has paid on a timely basis all
Taxes that were due and payable. The unpaid Taxes of the Company for tax periods
through the Most Recent Balance Sheet Date do not exceed the accruals and
reserves for Taxes (excluding accruals and reserves for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the Most Recent Balance Sheet. The Company has no actual or potential
liability for any Tax obligation of any taxpayer (including without limitation
any affiliated group of corporations or other entities that included the Company
during a prior period). All Taxes that the Company is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity.
(c) The Company has delivered to the Buyer complete and accurate
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since January 1, 1995.
The federal income Tax Returns of the Company have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for all
taxable years through the taxable year specified in Section 2.9(c) of the
Disclosure Schedule. No examination or audit of any Tax Return of the Company by
any Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. The Company has not been informed by any
jurisdiction that the jurisdiction believes that the Company was required to
file any Tax Return that was not filed. The Company has not waived any statute
of limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.
(d) The Company: (i) is not a "consenting corporation" within the
meaning of Section 341(f) of the Code, and none of the assets of the Company are
subject to an election under Section 341(f) of the Code; (ii) has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code; (iii) has not made any payments, is not obligated
to make any payments, and is not a party to any agreement that could obligate it
to make any payments that may be treated as an "excess parachute payment" under
Section 280G of the Code; (iv) has no liability for any
16
Taxes of any person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of federal, state, local, or foreign law), or
as a transferee or successor, by contract, or otherwise; and (v) is not and has
not been required to make a basis reduction pursuant to Treasury Regulation
Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (iii) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(f) The Company has not undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481 of the Code.
2.10 Assets. The Company owns or leases all tangible assets necessary
for the conduct of its businesses as presently conducted. Each such tangible
asset is free from material defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used. No asset of the Company (tangible or intangible) is subject to any
Security Interest, other than Security Interests which do not, individually or
in the aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of the Company. All of the tangible
assets of the Company are located at the Company's headquarters in Menlo Park,
California.
2.11 Owned Real Property. The Company does not own any real property.
2.12 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual
Property (as defined below) necessary (i) to use, manufacture, market and
distribute the products manufactured, marketed, sold or licensed, and to provide
the services provided, by the Company to other parties (together, the "Customer
Deliverables") or (ii) to operate the Company's internal systems that are
material to the business or operations of the Company, including, without
limitation, computer hardware systems, software applications and embedded
systems (the "Internal Systems"; the Intellectual Property owned by or licensed
to the Company and incorporated in or underlying the Customer Deliverables or
the Internal Systems is referred to herein as the "Company Intellectual
Property"). Each item of Company Intellectual Property will be owned or
available for use by the Surviving Corporation on substantially identical terms
and conditions immediately following the Closing. The Company has taken all
reasonable measures to protect the proprietary nature of each item of Company
Intellectual Property, and to maintain in confidence all trade secrets and
confidential information, that it owns or uses. To the knowledge of the Company,
(a) no other
17
person or entity has any rights to any of the Company Intellectual Property
owned by the Company (except pursuant to agreements or licenses specified in
Section 2.12(c) of the Disclosure Schedule), and (b) no other person or entity
is infringing, violating or misappropriating any of the Company Intellectual
Property. For purposes of this Agreement, "Intellectual Property" means all (i)
patents and patent applications, (ii) copyrights and registrations thereof,
(iii) mask works and registrations and applications for registration thereof,
(iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) trademarks, service marks, trade names, domain names and applications and
registrations therefor and (vii) other proprietary rights relating to any of the
foregoing. Section 2.12(a) of the Disclosure Schedule lists each patent, patent
application, copyright registration or application therefor, mask work
registration or application therefor, and trademark, service xxxx and domain
name registration or application therefor of the Company.
(b) None of the Customer Deliverables, or the marketing,
distribution, provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any United States Intellectual Property rights of any
person or entity; provided that the representation in this sentence, insofar as
it relates to Intellectual Property rights that may accrue to another party as a
result of the issuance of a patent pursuant to a patent application currently on
file or filed prior to the Closing, shall be limited to the best knowledge of
the Company. To the knowledge of the Company, none of the Internal Systems, or
the use thereof, infringes or violates, or constitutes a misappropriation of,
any Intellectual Property rights of any person or entity. Section 2.12(b) of the
Disclosure Schedule lists any complaint, claim or notice, or written threat
thereof, received by the Company alleging any such infringement, violation or
misappropriation; and the Company has made available to the Buyer complete and
accurate copies of all written documentation in the possession of the Company
relating to any such complaint, claim, notice or threat.
(c) Section 2.12(c) of the Disclosure Schedule identifies each
license or other agreement (or type of license or other agreement) pursuant to
which the Company has licensed, distributed or otherwise granted any rights to
any third party with respect to, any Customer Deliverables or Company
Intellectual Property.
(d) Section 2.12(d) of the Disclosure Schedule identifies each
item of Company Intellectual Property that is owned by a party other than the
Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant to
"shrink wrap" licenses).
18
(e) The Company has not disclosed the source code for any of the
software owned by the Company and incorporated in any Customer Deliverables or
Internal Systems (the "Software") or other confidential information
constituting, embodied in or pertaining to the Software to any person or entity,
except pursuant to the agreements listed in Section 2.12(e) of the Disclosure
Schedule, and the Company has taken reasonable measure to prevent disclosure of
such source code.
(f) All of the copyrightable materials incorporated in or bundled
with the Customer Deliverables have been created by employees of the Company
within the scope of their employment by the Company or by independent
contractors of the Company who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to the Company. No
portion of such copyrightable materials was jointly developed with any third
party.
(g) All of the Customer Deliverables currently being marketed,
distributed or licensed by the Company or which were marketed, distributed or
licensed by the Company since January 1, 1997, and all Internal Systems, are
Year 2000 Compliant. The Company is not aware of any failure to be Year 2000
Compliant of any third-party system that is material to the business or
operations of the Company, including without limitation any system belonging to
any of the Company's suppliers, service providers or customers. For purposes of
this Agreement, "Year 2000 Compliant" means that the applicable system or item:
(i) will accurately receive, record, store, provide,
recognize and process all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;
(ii) will accurately perform all date-dependent
calculations and operations (including, without limitation, mathematical
operations, sorting, comparing and reporting) from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years; and
(iii) will not malfunction, cease to function or provide
invalid or incorrect results as a result of (x) the change of years from 1999 to
2000, (y) date data, including date data which represents or references
different centuries, different dates during 1999 and 2000, or more than one
century or (z) the occurrence of any particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by the
Company correctly exchange date data with or provide data to such system or
item.
2.13 Contracts.
(a) Section 2.13 of the Disclosure Schedule lists the following
agreements to which the Company is a party as of the date of this Agreement:
19
(i) any agreement providing for payments to or by the
Company in excess of $50,000 per annum;
(ii) any agreement in which the Company has granted "most
favored nation" pricing provisions or exclusive marketing or distribution rights
relating to any products or territory;
(iii) any lease or sublease of real property;
(iv) any agreement under which it has created, incurred,
assumed or guaranteed indebtedness or which imposes a Security Interest on any
of the Company's assets;
(v) any agreement in which the Company has agreed not to
compete with another party or not to disclose confidential information of
another party;
(vi) any agreement with any officer, director or
stockholder of the Company; and
(vii) any agreement with any distributors or resellers of
the Company's products.
(b) The Company has delivered to the Buyer a complete and
accurate copy of each agreement (as amended to date) listed in Section 2.12 or
2.13 of the Disclosure Schedule. With respect to each such agreement: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding and enforceable and
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect immediately prior to the Closing; and (iii)
neither the Company nor, to the knowledge of the Company, any other party, is in
breach or violation of, or default under, any such agreement, and no event has
occurred, is pending or, to the knowledge of the Company, is threatened, which,
after the giving of notice, with lapse of time, or otherwise, would constitute a
breach or default by the Company or, to the knowledge of the Company, any other
party under such contract.
2.14 Accounts Receivable. All accounts receivable of the Company are
valid receivables subject to no setoffs or counterclaims.
2.15 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2.16 Insurance. The Company is covered by insurance (including fire,
theft, casualty, general liability, workers compensation, business interruption,
environmental, product liability and automobile insurance policies and bond and
surety arrangements) of the type and in amounts customarily carried by
organizations conducting businesses or owning assets similar to those of the
Company. There is no material claim pending under any such policy as to which
coverage has been questioned, denied or disputed by the underwriter of such
policy. All premiums due and payable under all such policies have been paid and
the Company are otherwise in compliance in all material respects with the terms
of such policies.
20
2.17 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or, to
the Company's knowledge, threatened against the Company.
2.18 Product Warranty. No product manufactured, sold, leased, licensed
or delivered by the Company is subject to an guaranty, warranty, right of
return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale, license or lease of the Company, which
are set forth in Section 2.18 of the Disclosure Schedule and (ii) manufacturers'
warranties for which the Company has no liability.
2.19 Employees.
(a) Section 2.19 of the Disclosure Schedule contains a list of
all employees of the Company whose annual rate of compensation exceeds $50,000
per year, along with the position and the annual rate of compensation of each
such person. Each such employee has entered into a Confidentiality and Invention
Assignment Agreement and Statement of At-Will Employment with the Company, a
copy of which has previously been delivered to the Buyer. Section 2.19 of the
Disclosure Schedule contains a list of all employees of the Company who are a
party to a non-competition agreement with the Company; copies of such
agreements have previously been delivered to the Buyer. To the knowledge of any
Company Stockholder, no key employee or group of employees has any plans to
terminate employment with the Company.
(b) The Company is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The
Company has no knowledge of any organizational effort made or threatened, either
currently or within the past two years, by or on behalf of any labor union with
respect to employees of the Company.
2.20 Employee Benefits.
(a) Section 2.20(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company. Complete and accurate copies of
all Employee Benefit Plans have been delivered to the Buyer. The Company has
complied in all material respects, in the administration and operation of each
Employee Benefit Plan, with the terms of such Plan and the requirements of
applicable law (including without limitation the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code and the regulations
thereunder). The Company has no monetary liability under any Employee Benefit
Plan, except for those set forth on the Most Recent Balance Sheet or those that
have arisen since the date of the Most Recent Balance Sheet in the Ordinary
Course of Business. "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct
21
or indirect compensation, including without limitation insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation.
(b) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit Plans
are qualified and the plans and the trusts related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in a
manner that would adversely affect its qualification. Each Employee Benefit Plan
which is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code
has been tested for compliance with, and satisfies the requirements of, Section
401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to
the Closing Date.
(c) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code or
other applicable law and insurance conversion privileges under state law. The
assets of each Employee Benefit Plan which is funded are reported at their fair
market value on the books and records of such Employee Benefit Plan.
(d) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(e) Section 2.20(e) of the Disclosure Schedule discloses each:
(i) agreement or plan of the Company the benefits of which are contingent, or
the terms of which have been or will be materially altered, in connection with
the Merger; and (ii) agreement, plan or arrangement under which any person may
receive payments from the Company that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code.
2.21 Legal Compliance.
22
(a) The Company, and the conduct and operations of its business,
are in compliance with each law (including rules and regulations thereunder) of
any federal, state, local or foreign government, or any Governmental Entity,
which is applicable to the Company or its business, except for any violation of
or default which reasonably may be expected not to have a Company Material
Adverse Effect.
(b) The Company has no liability or remediation obligation under
any federal, state or local law, statute, rule or regulation or the common law
relating to the protection or clean-up of the environment.
2.22 Customers and Suppliers. Section 2.22 of the Disclosure Schedule
sets forth a list of (a) each customer that accounted for more than 5% of the
consolidated revenues of the Company during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and (b) each supplier
that is the sole supplier of any significant product to the Company. No such
customer or supplier has indicated within the past year that it will stop, or
decrease the rate of, buying products or supplying products, as applicable, to
the Company.
2.23 Permits. Section 2.23 of the Disclosure Schedule sets forth a list
of all permits, licenses, registrations, certificates, orders or approvals from
any Governmental Entity (including without limitation those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property) ("Permits") issued to or held by the Company. Such listed
Permits are the only Permits that are required for the Company to conduct its
business, except for those the absence of which would not have a Company
Material Adverse Effect. Each such Permit will continue in full force and effect
immediately following the Closing.
2.24 Certain Business Relationships With Affiliates. No affiliate, as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, of the Company
(an "Affiliate") (a) owns any property or right, tangible or intangible, which
is used in the business of the Company, (b) has any claim or cause of action
against the Company, or (c) owes any money to, or is owed any money by, the
Company.
2.25 Brokers' Fees. The Company has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.26 Books and Records. The books and records of the Company are
accurate and complete in all material respects and have been maintained in
accordance with good business and bookkeeping practices.
2.27 Pooling. To the knowledge of the Company, neither the Company nor
any of its Affiliates has through the date of this Agreement taken or agreed to
take any action that would prevent the Buyer from accounting for the business
combination to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
23
2.28 Disclosure. No representation or warranty by the Company contained
in this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants
to the Company as follows:
3.1 Organization, Qualification and Corporate Power. Each of the Buyer
and the Transitory Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The Buyer
is duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Buyer has furnished
or made available to the Company complete and accurate copies of its Certificate
of Incorporation and By- laws, each as amended and as in effect on the date
hereof. For purposes of this Agreement, "Buyer Material Adverse Effect" means a
material adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Buyer and its subsidiaries, taken as a
whole.
3.2 Capitalization. The authorized capital stock of the Buyer consists
of (a) 50,000,000 shares of Buyer Common Stock, of which 15,081,047 shares were
issued and outstanding as of March 24, 1999, and (b) 2,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares will be, when issued in accordance
with this Agreement, duly authorized, validly issued, fully paid, nonassessable
and free of all preemptive rights.
3.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery by the Buyer
and the Transitory Subsidiary of this Agreement and (in the case of the Buyer)
the Escrow Agreement and the consummation by the Buyer and the Transitory
Subsidiary of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary, respectively. This Agreement has been duly and
validly executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
24
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the filing
of the Merger Filings as required by the California General Corporation Law,
neither the execution and delivery by the Buyer or the Transitory Subsidiary of
this Agreement or (in the case of the Buyer) the Escrow Agreement, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the charter or By-laws of the Buyer or the Transitory Subsidiary, (b) require
on the part of the Buyer or the Transitory Subsidiary any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Buyer or the Transitory Subsidiary is a party or (d) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Buyer or the Transitory Subsidiary.
3.5 Reports and Financial Statements. The Buyer has previously furnished
or made available to the Company complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended
September 30, 1998, as filed with the Securities and Exchange Commission (the
"SEC"), and (b) all other reports filed by the Buyer under Section 13 or 14 of
the Exchange Act with the SEC since September 30, 1998 (such reports are
collectively referred to herein as the "Buyer Reports"). The Buyer Reports
constitute all of the documents required to be filed by the Buyer under Section
13 or 14 of the Exchange Act with the SEC from September 30, 1998 through the
date of this Agreement. The Buyer Reports comply in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder.
As of their respective dates, the Buyer Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of the
Buyer.
25
3.6 Absence of Material Adverse Change. Since December 31, 1998, there
has occurred no event or development which has had, or could reasonably be
foreseen to have in the future, a Buyer Material Adverse Effect (except as may
be disclosed in the Buyer Reports).
3.7 Litigation. Except as disclosed in the Buyer Reports, as of the date
of this Agreement, there is no Legal Proceeding which is pending or, to the
Buyer's knowledge, threatened against the Buyer or any subsidiary of the Buyer
which, if determined adversely to the Buyer or such subsidiary, could have a
Buyer Material Adverse Effect or which in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
3.8 Pooling; Tax-Free Reorganization. To the knowledge of the Buyer,
neither the Buyer nor any of its Affiliates has through the date of this
Agreement taken or agreed to take any action that would (a) prevent the Buyer
from accounting for the business combination to be effected by the Merger as a
"pooling of interests" in conformity with GAAP or (b) prevent the Merger from
constituting a transaction qualifying as a reorganization under Section 368(a)
of the Code.
3.9 Interim Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
3.10 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
3.11 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in the any document, certificate or
other instrument delivered or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omit or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
26
ARTICLE IV
COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain,
at its expense, all such waivers, permits, consents, approvals or other
authorizations from Governmental Entities, and to effect all such registrations,
filings and notices with or to Governmental Entities, as may be required for
such Party to consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement. The Company
shall use its Reasonable Best Efforts to obtain, at its expense, all such
waivers, consents or approvals from third parties, and to give all such notices
to third parties, as are required to be listed in Section 2.4 of the Disclosure
Schedule.
(b) Each of the stockholders of the Company listed on the
signature page hereto hereby (i) consents to the termination of the Investors'
Rights Agreement dated July 9, 1997 among the Company and certain stockholders
thereof, the Co-Sale Agreement dated July 9, 1997 among the Company and certain
stockholders thereof and the Shareholders Agreement dated July 9, 1997 among the
Company and certain stockholders thereof, and (ii) provides any consent and/or
waiver, under any agreement or instrument to which it is a party or under which
it has rights, which may be necessary to permit the consummation of the
transactions contemplated by the Merger Agreement on the terms provided for
therein.
4.3 Stockholder Approval.
(a) The Company shall use its Reasonable Best Efforts to obtain,
as promptly as practicable, the Requisite Stockholder Approval and the
Conversion Approval, either at a special meeting of stockholders or pursuant to
a written stockholder consent, all in accordance with the applicable
requirements of the California General Corporation Law. In connection with such
special meeting of stockholders or written stockholder consent, the Company
shall provide to its stockholders a written proxy or information statement (the
"Disclosure Statement") which includes (A) a summary of the Merger and this
Agreement (which summary shall include a summary of the terms relating to the
indemnification obligations of the Company Stockholders, the escrow arrangements
and the authority of the Indemnification Representative, and a statement that
the adoption of this Agreement by the stockholders
27
of the Company shall constitute approval of such terms), (B) the information
required by Rule 503(b)(2) of Regulation D under the Securities Act, (C) a
statement that appraisal rights are available for the Company Shares pursuant to
Chapter 13 of the California General Corporation Law and a copy of such Chapter
13 and (D) the unanimous recommendation of the Company's Board of Directors that
the stockholders of the Company vote in favor of the adoption of this Agreement
and the approval of the Merger and the conversion of the outstanding Preferred
Shares into Common Shares. The Buyer agrees to cooperate with the Company in the
preparation of the Disclosure Statement. The Company agrees not to distribute
the Disclosure Statement until the Buyer has had a reasonable opportunity to
review and comment on the Disclosure Statement and the Disclosure Statement has
been approved by the Buyer (which approval may not be unreasonably withheld or
delayed). If the Requisite Stockholder Approval and the Conversion Approval are
obtained by means of a written consent, the Company shall send, pursuant to the
applicable requirements of the California General Corporation Law, a written
notice to all stockholders of the Company that did not execute such written
consent informing them of the Requisite Stockholder Approval and the Conversion
Approval and that appraisal rights are available for their Company Shares
pursuant to Chapter 13 of the California General Corporation Law (which notice
shall include a copy of such Chapter 13), and shall promptly inform the Buyer of
the date on which such notice was sent.
(b) The Company shall ensure that the Disclosure Statement does
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading (provided that the
Company shall not be responsible for the accuracy or completeness of any
information furnished by the Buyer in writing for inclusion in the Disclosure
Statement). The Buyer shall ensure that any information furnished by the Buyer
to the Company in writing for inclusion in the Proxy Statement does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
(c) The stockholders of the Company listed on the signature page
hereto each agree (i) to vote all Company Shares that are beneficially owned by
him, her or it in favor of the adoption of this Agreement and the approval of
the Merger and the conversion of the outstanding Preferred Shares into Common
Shares, (ii) not to vote any Company Shares in favor of any other acquisition
(whether by way of merger, consolidation, share exchange, stock purchase or
asset purchase) of all or a majority of the outstanding capital stock or assets
of the Company and (iii) otherwise to use his, her or its Reasonable Best
Efforts to obtain the Requisite Stockholder Approval and the Conversion
Approval.
4.4 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent
28
therewith, use its Reasonable Best Efforts to keep its physical assets in good
working condition, keep available the services of its current officers and
employees and preserve its relationship with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, prior to the Effective Time, the Company shall not,
without the written consent of the Buyer:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any such
stock or securities (except pursuant to the exercise of Options or Warrants
outstanding on the date hereof), or amend any of the terms of (including without
limitation the vesting of) any Options or Warrants;
(b) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(c) create, incur or assume any indebtedness; assume, guarantee,
endorse or otherwise become liable or responsible for the obligations of any
other person or entity; or make any loans, advances or capital contributions to,
or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.20(e) or increase in any manner (except for normal increases in the
Ordinary Course of Business) the compensation or fringe benefits of, or
materially modify the employment terms of, its directors, officers or employees,
or pay any bonus or other benefit to its directors, officers or employees
(except for existing payment obligations listed in Section 2.20 of the
Disclosure Schedule);
(e) acquire, sell, lease, license or dispose of any assets or
property, other than purchases and sales of assets in the Ordinary Course of
Business;
(f) mortgage or pledge any of its property or assets or subject
any such assets to any Security Interest;
(g) pay any obligation or liability other than in the Ordinary
Course of Business;
(h) amend its Articles of Incorporation or By-laws;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess of
$10,000 per item or $50,000 in the aggregate;
29
(l) institute or settle any Legal Proceeding;
(m) take any action that would jeopardize the treatment of the
Merger as a "pooling of interests" for accounting purposes; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.5 Access to Information. The Company shall permit representatives of
the Buyer to have full access (at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Company) to all
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company.
4.6 Exclusivity. The Company shall not, and the Company shall direct
each of its officers, directors, employees, representatives and agents not to,
directly or indirectly, (i) initiate, solicit, encourage or otherwise facilitate
any inquiry, proposal, offer or discussion with any party (other than the Buyer)
concerning any merger, consolidation, share exchange, sale of stock, sale of
material assets or similar business transaction involving the Company, (ii)
furnish any non-public information concerning the business, properties or assets
of the Company to any party (other than the Buyer) or (iii) engage in
discussions or negotiations with any party (other than the Buyer) concerning any
such transaction. The Company shall immediately notify any party with which
discussions or negotiations of the nature described in the first sentence of
this Section 4.6 were pending that the Company is terminating such discussions
or negotiations. If the Company receives any inquiry, proposal or offer of the
nature described in the first sentence of this Section 4.6, the Company shall,
within one business day after such receipt, notify the Buyer of such inquiry,
proposal or offer, including the identity of the other party and the terms of
such inquiry, proposal or offer.
4.7 Agreements from Certain Affiliates of the Company. Upon the
execution of this Agreement, each Affiliate of the Company has executed and
delivered to the Buyer an Affiliate Agreement in the form attached hereto as
Exhibit C. In the event any other person or entity becomes an Affiliate of the
Company between the date of this Agreement and the Closing, the Company shall
use its Reasonable Best Efforts to deliver or cause to be delivered to the
Buyer, as soon as practicable after such person becomes an Affiliate, such an
Affiliate Agreement executed by such Affiliate.
4.8 Listing of Merger Shares. The Buyer shall list the Merger Shares on
the Nasdaq National Market.
4.9 Expenses. Except as set forth in Article VI and the Escrow
Agreement, each of the Parties shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that if the Merger is
consummated, the Company shall not incur more than an aggregate of $75,000 in
financial advisory, legal and accounting fees and expenses in connection with
the Merger.
30
4.10 Stock Options. Within 90 days following the Closing Date, the Buyer
shall grant stock options to employees of the Surviving Corporation covering a
total of 35,000 shares of Buyer Common Stock (subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split or similar
event affecting the Buyer Common Stock prior to such grant). Such stock options
shall have an exercise price equal to the fair market value of the Buyer Common
Stock on the date of grant and have such other terms as are customary for
employee stock option grants by the Buyer.
4.11 Indemnification.
(a) The Buyer shall not, for a period of three years after the
Effective Time, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Articles of Incorporation or
By-laws of the Company for the benefit of any individual who served as a
director or officer of the Company at any time prior to the Effective Time,
except for any changes which may be required to conform with changes in
applicable law and any changes which do not affect the application of such
provisions to acts or omissions of such individuals prior to the Effective Time.
(b) From and after the Effective Time, the Buyer agrees that it
will, and will cause the Surviving Corporation to, indemnify and hold harmless
each present and former director and officer of the Company (the "Indemnified
Executives") against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under California law.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) the Requisite Stockholder Approval shall have been obtained
by the Company; and
(b) the Conversion Approval shall have been obtained by the
Company and all outstanding Preferred Shares shall have converted into Common
Shares.
31
5.2 Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of
the following additional conditions:
(a) the number of Dissenting Shares shall not exceed 10% of the
number of outstanding Common Shares as of the Effective Time (after giving
effect to the conversion into Common Shares of all outstanding Preferred
Shares);
(b) the Company shall have obtained (and shall have provided
copies thereof to the Buyer) all of the waivers, permits, consents, approvals or
other authorizations, and effected all of the registrations, filings and
notices, referred to in Section 4.2 which are required on the part of the
Company, except for any the failure of which to obtain or effect would not have
a Company Material Adverse Effect or a material adverse effect on the ability of
the Parties to consummate the transactions contemplated by this Agreement;
(c) the representations and warranties of the Company set forth
in this Agreement shall be true and correct as of the Effective Time as though
made as of the Effective Time, except to the extent that any such inaccuracies,
individually or in the aggregate, would not have a Company Material Adverse
Effect or a material adverse effect on the ability of the Parties to consummate
the transactions contemplated by this Agreement (it being agreed that any
materiality qualifications in particular representations and warranties shall be
disregarded in determining whether any such inaccuracies would have a Company
Material Adverse Effect for purposes of this Section 5.2(c));
(d) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding shall be pending or threatened in writing
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation or (iii) have a Company Material Adverse
Effect, and no such judgment, order, decree, stipulation or injunction shall be
in effect;
(f) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate (the "Company Certificate") to the effect
that each of the conditions specified in Section 5.1 and clauses (a) through (e)
(insofar as clause (e) relates to Legal Proceedings involving the Company) of
this Section 5.2 is satisfied;
(g) each of Xxxxx Xxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxx and Xxxxx
Xxxxxx shall have executed and delivered to the Buyer a Non-Competition
Agreement in the form attached hereto as Exhibit D;
32
(h) each of the Company Stockholders (other than those exercising
dissenters' rights) shall have executed and delivered to the Buyer an Investment
Representation Letter in the form attached hereto as Exhibit E;
(i) the Buyer shall have received a letter from Ernst & Young
LLP, auditors for the Buyer, in a form reasonably satisfactory to the Buyer,
regarding its concurrence with the conclusion of the Buyer that the Buyer may
treat the Merger as a "pooling of interests" for accounting purposes under
Accounting Principles Board Opinion No. 16;
(j) the Buyer shall have received from Xxxx Xxxx Xxxx &
Friedenrich LLP an opinion with respect to the matters set forth in Exhibit F
attached hereto, addressed to the Buyer and dated as of the Closing Date; and
(k) the Buyer shall have received copies of the resignations,
effective as of the Effective Time, of each director and officer of the Company
(other than any such resignations which the Buyer designates, by written notice
to the Company, as unnecessary).
5.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the Merger Shares shall have been authorized for listing on
the Nasdaq National Market upon official notice of issuance;
(b) the Buyer shall have effected all of the registrations,
filings and notices referred to in Section 4.2 which are required on the part of
the Buyer, except for any which if not obtained or effected would not have a
Buyer Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement;
(c) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in this Agreement shall be true and correct as
of the Effective Time as though made as of the Effective Time, except to the
extent that any such inaccuracies, individually or in the aggregate, would not
have a Buyer Material Adverse Effect or a material adverse effect on the ability
of the Parties to consummate the transactions contemplated by this Agreement (it
being agreed that any materiality qualifications in particular representations
and warranties shall be disregarded in determining whether any such inaccuracies
would have a Buyer Material Adverse Effect for purposes of this Section 5.3(c));
(d) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Effective Time;
(e) no Legal Proceeding shall be pending or threatened in writing
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be
33
rescinded following consummation or (iii) have a Buyer Material Adverse Effect,
and no such judgment, order, decree, stipulation or injunction shall be in
effect;
(f) the Buyer shall have delivered to the Company a certificate
(the "Buyer Certificate") to the effect that each of the conditions specified in
clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings
involving the Buyer) of this Section 5.3 is satisfied;
(g) the Buyer shall have loaned Xxxxx Xxxxx $250,000, to be
evidenced by a promissory note in the form attached hereto as Exhibit G, and
secured by a pledge of 50,000 shares of Buyer Common Stock evidenced by a pledge
agreement in the form attached hereto as Exhibit H; and
(h) the Company shall have received from counsel to the Buyer and
the Transitory Subsidiary an opinion with respect to the matters set forth in
Exhibit I attached hereto, addressed to the Company and dated as of the Closing
Date.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company Stockholders. The Company
Stockholders receiving the Merger Shares pursuant to Section 1.5 (the
"Indemnifying Stockholders") shall indemnify the Buyer in respect of, and hold
it harmless against, any and all debts, obligations and other liabilities,
monetary damages, fines, fees, penalties, interest obligations, deficiencies,
losses and expenses (including without limitation amounts paid in settlement,
interest, court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) ("Damages") incurred or suffered by the Surviving Corporation or the
Buyer or any Affiliate thereof resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company contained in this Agreement or
the Company Certificate; or
(b) any claim by a stockholder or former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company; (ii) any
rights of a stockholder (other than the right to receive the Merger Shares
pursuant to this Agreement or appraisal rights under the applicable provisions
of the California General Corporation Law), including any option, preemptive
rights or rights to notice or to vote; or (iii) any claim that his, her or its
shares were wrongfully repurchased by the Company.
34
6.2 Indemnification by the Buyer. The Buyer shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Buyer or the Transitory
Subsidiary contained in this Agreement or the Buyer Certificate.
6.3 Indemnification Claims.
(a) A party entitled, or seeking to assert rights, to
indemnification under this Article VI (an "Indemnified Party") shall give
written notification to the party from whom indemnification is sought (an
"Indemnifying Party") of the commencement of any suit or proceeding relating to
a third party claim for which indemnification pursuant to this Article VI may be
sought. Such notification shall be given within 10 business days after receipt
by the Indemnified Party of notice of such suit or proceeding, and shall
describe (to the extent known by the Indemnified Party) the facts constituting
the basis for such suit or proceeding and the amount of the claimed damages;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if it acknowledges in writing to the Indemnified Party that any damages, fines,
costs or other liabilities that may be assessed against the Indemnified Party in
connection with such suit or proceeding constitute Damages for which the
Indemnified Party shall be indemnified pursuant to this Article VI and (ii) the
Indemnifying Party may not assume control of the defense of a suit or proceeding
in which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not so assume control of such defense, the Indemnified
Party shall control such defense. The party not controlling such defense (the
"Non-controlling Party") may participate therein at its own expense; provided
that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such suit or proceeding, the reasonable fees and expenses of
counsel to the Indemnified Party shall be considered "Damages" for purposes of
this Agreement. The party controlling such defense (the "Controlling Party")
shall keep the Non- controlling Party advised of the status of such suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such suit or proceeding (including copies of any
summons, complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) and shall
35
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld or
delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article VI for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages. If the
Indemnified Party is the Buyer, the Indemnifying Party shall deliver a copy of
the Claim Notice to the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Claimed Amount, by check or by wire transfer;
provided that if the Indemnified Party is the Buyer, the Indemnifying Party and
the Indemnified Party shall deliver to the Escrow Agent, within three days
following the delivery of the Response, a written notice executed by both
parties instructing the Escrow Agent to distribute to the Buyer such number of
Escrow Shares as have an aggregate Value (as defined below) equal to the Claimed
Amount), (ii) agree that the Indemnified Party is entitled to receive part, but
not all, of the Claimed Amount (the "Agreed Amount") (in which case the Response
shall be accompanied by a payment by the Indemnifying Party to the Indemnified
Party of the Agreed Amount, by check or by wire transfer; provided that if the
Indemnified Party is the Buyer, the Indemnifying Party and the Indemnified Party
shall deliver to the Escrow Agent, within three days following the delivery of
the Response, a written notice executed by both parties instructing the Escrow
Agent to distribute to the Buyer such number of Escrow Shares as have an
aggregate Value equal to the Agreed Amount) or (iii) dispute that the
Indemnified Party is entitled to receive any of the Claimed Amount. If the
Indemnifying Party in the Response disputes its liability for all or part of the
Claimed Amount, the Indemnifying Party and the Indemnified Party shall follow
the procedures set forth in Section 6.3(d) for the resolution of such dispute (a
"Dispute"). For purposes of this Article VI, the "Value" of any Escrow Shares
delivered in satisfaction of an indemnity claim
36
shall be the average of the last reported sale prices per share of the Buyer
Common Stock on the Nasdaq National Market over the five consecutive trading
days ending on the Closing Date (subject to equitable adjustment in the event of
any stock split, stock dividend, reverse stock split or similar event affecting
the Buyer Common Stock since the beginning of such five-day period), multiplied
by the number of such Escrow Shares.
(d) During the 60-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use good faith efforts to resolve the Dispute. If the Dispute is not resolved
within such 60-day period, the Indemnifying Party and the Indemnified Party
shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.3(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Party and the
Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party. If the Indemnified Party is the
Buyer, the Indemnifying Party and the Indemnified Party shall deliver to the
Escrow Agent, promptly following the resolution of the Dispute (whether by
mutual agreement, pursuant to an ADR Procedure, as a result of a judicial
decision or otherwise), a written notice executed by both parties instructing
the Escrow Agent as to what (if any) portion of the Escrow Shares shall be
distributed to the Buyer and/or the Indemnifying Stockholders (which notice
shall be consistent with the terms of the resolution of the Dispute).
(e) Notwithstanding the other provisions of this Section 6.3, if
a third party asserts (other than by means of a lawsuit) that an Indemnified
Party is liable to such third party for a monetary or other obligation which may
constitute or result
37
in Damages for which such Indemnified Party may be entitled to indemnification
pursuant to this Article VI, and such Indemnified Party reasonably determines
that it has a valid business reason to fulfill such obligation, then (i) such
Indemnified Party shall be entitled to satisfy such obligation, without prior
notice to or consent from the Indemnifying Party, (ii) such Indemnified Party
may subsequently make a claim for indemnification in accordance with the
provisions of this Article VI, and (iii) such Indemnified Party shall be
reimbursed, in accordance with the provisions of this Article VI, for any such
Damages for which it is entitled to indemnification pursuant to this Article VI
(subject to the right of the Indemnifying Party to dispute the Indemnified
Party's entitlement to indemnification, or the amount for which it is entitled
to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.3 and the last two sentences
of Section 6.4, (i) if the Indemnifying Stockholders comprise the Indemnifying
Party, any references to the Indemnifying Party (except provisions relating to
an obligation to make or a right to receive any payments provided for in Section
6.3 or Section 6.4) shall be deemed to refer to the Indemnification
Representative, and (ii) if the Indemnifying Stockholders comprise the
Indemnified Party, any references to the Indemnified Party (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representative. The Indemnification Representative shall have
full power and authority on behalf of each Indemnifying Stockholder to take any
and all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the Indemnifying Stockholders under this
Article VI. The Indemnification Representative shall have no liability to any
Indemnifying Stockholder for any action taken or omitted on behalf of the
Indemnifying Stockholders pursuant to this Article VI.
6.4 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement, the Company Certificate or the Buyer
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of an Indemnified Party and (b) shall expire on the date one
year following the Closing Date. If an Indemnified Party delivers to an
Indemnifying Party, before expiration of a representation or warranty, either a
Claim Notice based upon a breach of such representation or warranty, or a notice
that, as a result a legal proceeding instituted by or written claim made by a
third party, the Indemnified Party reasonably expects to incur Damages as a
result of a breach of such representation or warranty (an "Expected Claim
Notice"), then such representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice has
been given is definitively withdrawn or resolved in favor of the Indemnified
Party, the Indemnified Party shall promptly so notify the Indemnifying Party;
and if the Indemnified Party has delivered a copy of the Expected Claim Notice
to the Escrow Agent and Escrow Shares have been retained in escrow after the
Termination Date (as defined in the Escrow Agreement) with
38
respect to such Expected Claim Notice, the Indemnifying Party and the
Indemnified Party shall promptly deliver to the Escrow Agent a written notice
executed by both parties instructing the Escrow Agent to distribute such
retained Escrow Shares to the Indemnifying Stockholders in accordance with the
terms of the Escrow Agreement.
6.5 Limitations.
(a) Notwithstanding anything to the contrary herein:
(i) the Escrow Agreement shall be the exclusive means for
the Buyer to collect any Damages for which it is entitled to indemnification
under this Article VI, and the aggregate liability of the Indemnifying
Stockholders for Damages under this Article VI shall be limited to the Escrow
Shares;
(ii) the aggregate liability of the Buyer for Damages
under this Article VI shall be limited to the Value of the Escrow Shares, as
determined pursuant to Section 6.3(c);
(iii) the Indemnifying Stockholders and the Buyer shall be
liable under this Article VI for only that portion of the aggregate Damages for
which they or it would otherwise be liable which exceeds $150,000; provided that
the limitation set forth in this clause (iii) shall not apply to (A) a claim
pursuant to Section 6.1(a) relating to a breach of the representations and
warranties set forth in Sections 2.2 or 2.3 (or the portion of the Company
Certificate relating thereto) or to a breach of the covenant set forth in
Section 4.9 or (B) a claim pursuant to Section 6.2 relating to a breach of the
representations and warranties set forth in Section 3.3 (or the portion of the
Buyer Certificate relating thereto) or to a breach of the covenant set forth in
Section 4.11.
(b) For purposes solely of this Article VI, all representations
and warranties of the Company in Article II (other than Section 2.28) and all
representations and warranties of the Buyer and the Transitory Subsidiary in
Article III (other than Section 3.11) shall be construed as if the term
"material" and any reference to "Company Material Adverse Effect" and "Buyer
Material Adverse Effect" (and variations thereof) were omitted from such
representations and warranties.
(c) Except with respect to claims based on fraud, after the
Closing, the rights of the Indemnified Parties under this Article VI and the
Escrow Agreement shall be the exclusive remedy of the Indemnified Parties with
respect to claims resulting from or relating to any misrepresentation, breach of
warranty or failure to perform any covenant or agreement contained in this
Agreement.
(d) No Indemnifying Stockholder shall have any right of
contribution against the Company or the Surviving Corporation with respect to
any breach by the Company of any of its representations, warranties, covenants
or agreements.
39
ARTICLE VII
REGISTRATION RIGHTS
7.1 Registration of Shares. The Buyer shall file with the SEC a
registration statement on Form S-3, covering the resale to the public by the
Company Stockholders of 50% of the Merger Shares issuable to each Company
Stockholder (the "Stockholder Registration Statement"). The Buyer shall use its
best efforts to cause the Stockholder Registration Statement to be declared
effective by the SEC on or before the date that financial results covering at
least 30 days of combined operations of the Company and the Buyer after the
Effective Time shall have been publicly released. The Buyer shall cause the
Stockholder Registration Statement to remain effective until the date one year
after the Closing Date or such earlier time as all of the Merger Shares covered
by the Stockholder Registration Statement have been sold pursuant thereto.
7.2 Limitations on Registration Rights.
(a) The Buyer may, by written notice to the Company Stockholders,
(i) delay the filing or effectiveness of the Stockholder Registration Statement
or (ii) suspend the Stockholder Registration Statement after effectiveness and
require that the Company Stockholders immediately cease sales of shares pursuant
to the Stockholder Registration Statement, in the event that (A) the Buyer files
a registration statement (other than a registration statement on Form S-4 or
Form S-8 or their successor forms) with the SEC for a public offering of its
securities or (B) the Buyer is engaged in any activity or transaction or
preparations or negotiations for any activity or transaction that the Buyer
desires to keep confidential for business reasons, if the Buyer determines in
good faith that the public disclosure requirements imposed on the Buyer under
the Securities Act in connection with the Stockholder Registration Statement
would require disclosure of such activity, transaction, preparations or
negotiations.
(b) If the Buyer delays or suspends the Stockholder Registration
Statement or requires the Company Stockholders to cease sales of shares pursuant
to paragraph (a) above, the Buyer shall, as promptly as practicable following
the termination of the circumstance which entitled the Buyer to do so, take such
actions as may be necessary to file or reinstate the effectiveness of the
Stockholder Registration Statement and/or give written notice to all Company
Stockholders authorizing them to resume sales pursuant to the Stockholder
Registration Statement. If as a result thereof the prospectus included in the
Stockholder Registration Statement has been amended to comply with the
requirements of the Securities Act, the Buyer shall enclose such revised
prospectus with the notice to Company Stockholders given pursuant to this
paragraph (b), and the Company Stockholders shall make no offers or sales of
shares pursuant to the Stockholder Registration Statement other than by means of
such revised prospectus.
40
7.3 Registration Procedures.
(a) In connection with the filing by the Buyer of the Stockholder
Registration Statement, the Buyer shall furnish to each Company Stockholder a
copy of the prospectus thereunder, including a preliminary prospectus, in
conformity with the requirements of the Securities Act.
(b) The Buyer shall use its best efforts to register or qualify
the Merger Shares covered by the Stockholder Registration Statement under the
securities laws of each state of the United States.
(c) If the Buyer has delivered preliminary or final prospectuses
to the Company Stockholders and after having done so the prospectus is amended
or supplemented to comply with the requirements of the Securities Act, the Buyer
shall promptly notify the Company Stockholders and, if requested by the Buyer,
the Company Stockholders shall immediately cease making offers or sales of
shares under the Stockholder Registration Statement and return all prospectuses
to the Buyer. The Buyer shall promptly provide the Company Stockholders with
revised or supplemented prospectuses and, following receipt of the revised or
supplemented prospectuses, the Company Stockholders shall be free to resume
making offers and sales under the Stockholder Registration Statement.
(d) The Buyer shall pay the expenses incurred by it in complying
with its obligations under this Article VII, including all registration and
filing fees, exchange listing fees, fees and expenses of counsel for the Buyer,
and fees and expenses of accountants for the Buyer, but excluding (i) any
brokerage fees, selling commissions or underwriting discounts incurred by the
Company Stockholders in connection with sales under the Stockholder Registration
Statement and (ii) the fees and expenses of any counsel retained by Company
Stockholders.
7.4 Requirements of Company Stockholders. The Buyer shall not be
required to include any Merger Shares in the Stockholder Registration Statement
unless:
(a) the Company Stockholder owning such shares furnishes to the
Buyer in writing such information regarding such Company Stockholder and the
proposed sale of Merger Shares by such Company Stockholder as the Buyer may
reasonably request in writing in connection with the Stockholder Registration
Statement or as shall be required in connection therewith by the SEC or any
state securities law authorities;
(b) such Company Stockholder shall have provided to the Buyer its
written agreement:
41
(i) to indemnify the Buyer and each of its directors and
officers against, and hold the Buyer and each of its directors and officers
harmless from, any losses, claims, damages, expenses or liabilities (including
reasonable attorneys fees) to which the Buyer or such directors and officers may
become subject by reason of any statement or omission in the Stockholder
Registration Statement made in reliance upon, or in conformity with, a written
statement by such Company Stockholder furnished pursuant to this Section 7.4;
and
(ii) to report to the Buyer sales made pursuant to the
Stockholder Registration Statement.
7.5 Indemnification. The Buyer agrees to indemnify and hold harmless
each Company Stockholder whose shares are included in the Stockholder
Registration Statement against any losses, claims, damages, expenses or
liabilities to which such Company Stockholder may become subject by reason of
any untrue statement of a material fact contained in the Stockholder
Registration Statement or any omission to state therein a fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon information furnished to the Buyer by or on behalf of a
Company Stockholder for use in the Stockholder Registration Statement. The Buyer
shall have the right to assume the defense and settlement of any claim or suit
for which the Buyer may be responsible for indemnification under this Section
7.5.
7.6 Assignment of Rights. A Company Stockholder may not assign any of
its rights under this Article VII except in connection with the transfer of some
or all of his, her or its Merger Shares to a child or spouse, or trust for their
benefit or, in the case of a partnership, to the partners of such partnership
pursuant to a pro rata distribution, provided each such transferee agrees in a
written instrument delivered to the Buyer to be bound by the provisions of this
Article VII.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company in the event the Company is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
satisfied and (ii) is not cured within 10 days following delivery by the Buyer
to the Company of written notice of such breach;
42
(c) the Company may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer or the Transitory Subsidiary is in
breach of any representation, warranty or covenant contained in this Agreement,
and such breach, individually or in combination with any other such breach, (i)
would cause the conditions set forth in clauses (c) or (d) of Section 5.3 not to
be satisfied and (ii) is not cured within 10 days following delivery by the
Company to the Buyer of written notice of such breach;
(d) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before April
30, 1999 by reason of the failure of any condition precedent under Section 5.1
or 5.2 hereof (unless the failure results primarily from a breach by the Buyer
or the Transitory Subsidiary of any representation, warranty or covenant
contained in this Agreement); or
(e) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before April 30, 1999 by reason of the failure of any condition
precedent under Section 5.1 or 5.3 hereof (unless the failure results primarily
from a breach by the Company of any representation, warranty or covenant
contained in this Agreement).
8.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 8.1, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party for willful breaches of this Agreement).
43
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
ADR Procedure 6.3(d)
ADR Service 6.3(d)
Affiliate 2.24
Agreed Amount 6.3(c)
Buyer Introduction
Buyer Certificate 5.3(f)
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Certificates 1.7(a)
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.2
Closing Date 1.2
Code 1.9(a)
Common Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Intellectual Property 2.12(a)
Company Material Adverse Effect 2.1
Company Shares 1.5(b)
Company Stockholder 1.5(b)
Controlling Party 6.3(a)
Conversion Ratio 1.5(b)
Conversion Approval 2.3
Customer Deliverables 2.12(a)
Damages 6.1
Disclosure Schedule Article II
Disclosure Statement 4.3(a)
Dispute 6.3(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.20(a)
ERISA 2.20(a)
Escrow Agent 1.3
Escrow Agreement 1.3
Escrow Shares 1.5(b)
Expected Claim Notice 6.4
Exchange Act 3.4
Exchange Agent 1.7(a)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representative 1.3
Indemnified Executive 4.11(b)
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Indemnifying Stockholders 6.1
Initial Shares 1.5(b)
Intellectual Property 2.12(a)
44
Defined Term Section
------------ -------
Internal Systems 2.12(a)
Legal Proceeding 2.17
Merger 1.1
Merger Filings 1.1
Merger Shares 1.5(b)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.3(a)
Options 1.9(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.23
Preferred Shares 1.5(b)
Reasonable Best Efforts 4.1
Response 6.3(c)
Requisite Stockholder Approval 2.3
SEC 3.5
Securities Act 1.9(c)
Security Interest 2.4
Software 2.12(e)
Stockholder Registration Statement 7.1
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Transitory Subsidiary Introduction
Value 6.3(c)
Warrants 1.9(d)
Year 2000 Compliant 2.12(g)
45
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
the Buyer may make any public disclosure it believes in good faith is required
by applicable law or stock market regulation (in which case the disclosing Party
shall use reasonable efforts to advise the Company prior to making the
disclosure).
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares, Article VI concerning
indemnification and Article VII concerning registration rights are intended for
the benefit of the Company Stockholders and (b) the provisions in Section 4.11
concerning indemnification are intended for the benefit of the individuals
specified therein and their successors and assigns.
10.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Confidential Disclosure Agreement dated May 5, 1998 between the Buyer and the
Company shall remain in effect in accordance with its terms.
10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered two business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service, in each case to the intended recipient as set forth
below:
46
If to the Company: With a copy to:
Navitel Communications, Inc. Xxxx Xxxx Xxxx &
Friedenrich LLP
000 Xxxxxxxxxxx Xxxx, Xxxxx 000 000 Xxxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000 Xxxx Xxxx, XX 00000-
1825
Attn: Xxxxx Xxxxx Attn: Xxxxx X.
Xxxxxxxx, Esq.
If to the Buyer or the
Transitory Subsidiary: With a copy to:
Spyglass, Inc. Xxxx and Xxxx LLP
Xxx Xxxxxxxxx Xxxxxx 00 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx Attn: Xxxxxxx X.
Xxxxxxx, Esq.
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware; provided that the
implementation and effect of the Merger shall be governed by the laws of the
State of California.
10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver of any right or remedy hereunder shall be valid unless
the same shall be in writing and signed by the Party giving such waiver. No
waiver by any Party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforce ability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
47
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforce- able and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be enforceable as
so modified.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
SPYGLASS, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Title: /s/ Exec. V.P. & CFO
-------------------------------
SPYGLASS ACQUISITION CORP.
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Title: /s/ CFO
-------------------------------
NAVITEL COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------
Title: /s/ CEO
-------------------------------
The following stockholders of the Company hereby execute this Agreement
for the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.2(b) and Section 4.3(c).
/s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx
/s/ Xxxxxx Xxxxx
-------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxxx X. XxXxxx
-------------------------------
Xxxxx XxXxxx
Wasatch Venture Corp.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Title:
-------------------------------
48
Xxxxxx Associates, L.P.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Title:
-------------------------------
SET Engineering
By: /s Xxxxx X. Xxxxxxx
-------------------------------
Title: /s/ President
-------------------------------
Microsoft Corporation
By: /s/Xxxxxx X. Xxxxxxxx
-------------------------------
Title: /s/ Asst. Secretary
-------------------------------
/s/ Xxxxx Xxxxx for the beneficiary of
---------------------------------------
Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
/s/ Xxxxx Xxxxx for the beneficiary of
Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
/s/ Xxxxx Xxxxx for the beneficiary of
---------------------------------------
Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
-------------------------------
Polaris Fund L.P.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Title:
-------------------------------
Xxxxxxx X. Xxxxx
/s/ X. X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
Xxxxxx Family Trust
By: /s/ Xxxxx Xxxxx as Attorney-in-Fact for
----------------------------------------
Xxxxxx Family
-------------------------------
Title:
-------------------------------
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx Xxxxxx
/s/ Xxxx XxxXxxxxx
-------------------------------
Xxxx XxxXxxxxx
49
[All Schedules and Exhibits to this Merger Agreement have been omitted and will
be provided to the Commission upon request to Spyglass]
