EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
EAGLE WIRELESS INTERNATIONAL, INC.,
EAGLE ACQUISITION CORPORATION
AND
XXXXXXXXXX.XXX, INC.
DATED AS OF SEPTEMBER 15, 2000
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
September 15, 2000, among Eagle Wireless International, Inc., a Texas
corporation ("PARENT"), Eagle Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Parent ("MERGER SUB") and XxxxxXxxxx.xxx, Inc.,
a Delaware corporation ("COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware Corporation
Law ("DELAWARE LAW"), Parent and Company intend to enter into a business
combination transaction.
B. The Board of Directors of Company unanimously (i) has determined that
the Merger (as defined in Section 1.1) is consistent with and in furtherance of
the long-term business strategy of Company and fair to, and in the best
interests of, Company and its shareholders, (ii) has approved this Agreement,
the Merger (as defined in Section 1.1) and the other transactions contemplated
by this Agreement, and (iii) has determined to recommend that the shareholders
of Company adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Parent unanimously (i) has determined that
the Merger is consistent with and in furtherance of the long-term business
strategy of Parent and is fair to, and in the best interests of, Parent and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement, and (iii) has determined to
recommend that the stockholders of Parent approve the issuance of shares of
Parent Common Stock (as defined below) pursuant to the Merger (the "SHARE
ISSUANCE").
D. Concurrently with the execution of this Agreement, (i) as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of Company are entering into Voting Agreements in the form attached
hereto as Exhibit A-1 (the "COMPANY VOTING AGREEMENTS") and (ii) as a condition
and inducement to Company's willingness to enter into this Agreement, certain
affiliates of Parent are entering into Voting Agreements in the form attached
hereto as Exhibit A-2 (the "PARENT VOTING Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE").
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I.
THE MERGER
1.1 THE MERGER.
At the Effective Time (as defined in Section 1.2) and subject to and upon
the terms and conditions of this Agreement and the applicable provisions of
Delaware Law, Merger Sub shall be merged with and into Company (the "MERGER"),
the separate corporate existence of Merger Sub shall cease and Company shall
continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME; CLOSING.
Subject to the provisions of this Agreement, the parties hereto shall
cause the Merger to be consummated by filing an agreement and plan of merger and
articles, certificates or other appropriate filing documents with the Secretary
of State of the State of Delaware in accordance with the relevant provisions of
Delaware Law (collectively, the "CERTIFICATE OF MERGER") (the time of such
filing (or such later time as may be agreed in writing by Company and Parent and
specified in the Certificate of Merger) being the "EFFECTIVE TIME") as soon as
practicable on or after the Closing Date (as herein defined). Unless the context
otherwise requires, the term "AGREEMENT" as used herein refers collectively to
this Agreement and Plan of Reorganization and the Certificate of Merger. The
closing of the Merger (the "CLOSING") shall take place at the offices of Xxxxxx
& Xxxxxxxxx, P.C., Three Riverway, 18th Floor, Houston, Texas at a time and date
to be specified by the parties, which shall be no later than the second business
day after the satisfaction or waiver of the conditions set forth in Article VI,
or at such other time, date and location as the parties hereto agree in writing
(the "CLOSING DATE").
1.3 EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement and the applicable provisions of Delaware Law. Without limiting
the generality of the foregoing and subject thereto, at the Effective Time, all
the property, rights, privileges, powers, and franchises of Company and Merger
Sub shall vest in the Surviving Corporation and all debts, liabilities, and
duties of Company and Merger Sub shall become the debts, liabilities, and duties
of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be "XxxxxXxxxx.xxx, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS.
The initial directors of the Surviving Corporation shall be the directors
of Merger Sub immediately prior to the Effective Time, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified. The initial
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officers of the Surviving Corporation shall be the officers of Merger Sub
immediately prior to the Effective Time, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation until
their respective successors are duly appointed.
1.6 EFFECT ON CAPITAL STOCK.
Subject to the terms and conditions of this Agreement, at the Effective
Time, by virtue of the Merger and without any action on the part of Merger Sub,
Company or the holders of any of the following securities, the following shall
occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock, par
value $.001 per share, of Company (the "COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be cancelled pursuant to Section 1.6(b)), will be
cancelled and extinguished and automatically converted (subject to Sections
1.6(e) and (f)) into the right to receive that number of shares of Common Stock,
$0.001 par value per share, of Parent (the "PARENT COMMON STOCK") equal to 0.8
(the "EXCHANGE RATIO"), upon surrender of the certificate representing such
share of Company Common Stock in the manner provided in Section 1.7 (or in the
case of a lost, stolen or destroyed certificate, upon delivery of an affidavit
(and bond, if required) in the manner provided in Section 1.9). If any shares of
Company Common Stock outstanding immediately prior to the Effective Time are
unvested or are subject to a repurchase option, risk of forfeiture, or other
condition under any applicable restricted stock purchase agreement or other
agreement with the Company, then, subject to the terms of the plan or agreement
pursuant to which such shares were issued, the shares of Parent Common Stock
issued in exchange for such shares of Company Common Stock will also be unvested
and subject to the same repurchase option, risk of forfeiture, or other
condition, and the certificates representing such shares of Parent Common Stock
may accordingly be marked with appropriate legends. Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
(b) CANCELLATION OF PARENT-OWNED STOCK. Each share of Company Common Stock
held by Company or any direct or indirect wholly-owned subsidiary of Company
immediately prior to the Effective Time shall be cancelled and extinguished
without any conversion thereof.
(c) STOCK OPTIONS AND WARRANTS. At the Effective Time, all options to
purchase Company Common Stock and stock appreciation rights then outstanding, if
any, and all warrants to purchase Company Common Stock shall be assumed by
Parent in accordance with Section 5.8 hereof.
(d) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, par value
$.001 per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into or
exercisable for one validly issued, fully paid and nonassessable share of Common
Stock, par value $.001 per share, of the Surviving Corporation. Each certificate
evidencing ownership of shares of Merger Sub Common Stock shall evidence
ownership of such one share of capital stock of the Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
or exercisable for Parent Common Stock or Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof, each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock that otherwise would be received by such holder) shall, upon surrender of
such holder's Certificate(s) (as defined in Section 1.7(c)), receive from
Parent, at the sole discretion of Parent, either (A) an amount of cash (rounded
to the nearest whole cent), without interest, equal to the product of (i) such
fraction and (ii) the average closing price of Parent Common Stock for the five
trading days immediately preceding the last full trading day prior to the
Effective Time, as reported on the American Stock Exchange ("AMEX"), or (B) a
whole share of Parent Common Stock.
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1.7 SURRENDER OF CERTIFICATES; PAYMENT OF STOCK CONSIDERATION.
(a) EXCHANGE AGENT. Parent and Company hereby select Registrar and
Transfer Company to act as the exchange agent (the "EXCHANGE AGENT") in the
Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent, for exchange in accordance
with this Article I, (i) the shares of Parent Common Stock issuable pursuant to
Section 1.6 in exchange for outstanding shares of Company Common Stock and (ii)
cash in an amount sufficient for payment in lieu of fractional shares pursuant
to Section 1.6(f), if any, and any dividends or distributions to which holders
of shares of Company Common Stock may be entitled pursuant to Section 1.7(d).
(c) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time
(and in any event within five business days after Parent's receipt of all
necessary shareholder list and other supporting information), Parent shall cause
the Exchange Agent to mail to each holder of record (as of the Effective Time)
of a certificate or certificates (the "CERTIFICATES"), which immediately prior
to the Effective Time represented outstanding shares whose shares were converted
into the right to receive shares of Parent Common Stock pursuant to Section
1.6(a), cash in lieu of any fractional shares pursuant to Section 1.6(f) and any
dividends or other distributions pursuant to Section 1.7(d), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall contain such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock, cash in lieu of any fractional shares pursuant to
Section 1.6(f), and any dividends or other distributions pursuant to Section
1.7(d). Upon surrender of Certificates for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefore certificates representing the number of whole
shares of Parent Common Stock into which their shares of Company Common Stock
were converted at the Effective Time, payment in lieu of fractional shares which
such holders have the right to receive pursuant to Section 1.6(f), and any
dividends or distributions payable pursuant to Section 1.7(d), and the
Certificates so surrendered shall forthwith be cancelled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 1.7(d) as to the payment of dividends
and other distributions, to evidence only the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.6(f).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificate(s) with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificate(s) shall surrender such Certificate(s). Subject to applicable
law, following surrender of any such Certificate(s), the Exchange Agent shall
deliver to the record holders thereof, without interest, a certificate(s)
representing whole shares of Parent Common Stock issued in exchange therefore
along with payment in lieu of fractional shares pursuant to Section 1.6(f)
hereof and the amount of any such dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate representing shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefore is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) REQUIRED WITHHOLDING. Each of the Exchange Agent, Parent, and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be
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deducted or withheld therefrom under the Code or under any provision of state,
local, or foreign tax law or under any other applicable legal requirement. To
the extent such amounts are so deducted or withheld, such amounts shall be
treated for all purposes under this Agreement as having been paid to the person
to whom such amounts would otherwise have been paid.
(g) NO LIABILITY. Notwithstanding anything to the contrary in this Section
1.7, none of the Exchange Agent, Parent, the Surviving Corporation, or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.
All shares of Parent Common Stock issued upon the surrender for exchange
of shares of Company Common Stock in accordance with the terms hereof (together
with any cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event that any Certificate shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate, upon the making of an affidavit of that fact by the
holder thereof, certificates representing the shares of Parent Common Stock into
which the shares of Company Common Stock represented by such Certificates were
converted pursuant to Section 1.6, cash for fractional shares, if any, as may be
required pursuant to Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d); provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance of such certificates
representing shares of Parent Common Stock, cash and other distributions,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Parent, the Surviving Corporation, or the Exchange Agent
with respect to the Certificates alleged to have been lost, stolen or destroyed.
1.10 TAX AND ACCOUNTING CONSEQUENCES.
(a) It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code. The parties
hereto adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
(b) It is also intended by the parties hereto that the Merger shall
qualify for accounting treatment as a purchase.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title, and possession to all assets,
property, rights, privileges, powers and franchises of Company and Merger Sub,
the officers and directors of Company and Merger Sub are fully authorized in the
manner of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub, subject to such
exceptions as are specifically disclosed in writing in the schedules hereto
(each such exception to reference the specific section number of this Article II
to which it applies and each other section number of this Article II to the
extent such applicability is reasonably apparent on the face of such exception),
dated as of the date hereof (the "COMPANY SCHEDULE"):
2.1 ORGANIZATION OF COMPANY; SUBSIDIARIES.
(a) Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted and
as proposed to be conducted; and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect (as defined in Section
8.3(b)(ii)) on Company.
(b) Schedule 2.1(b) of the Company Schedule contains a true and complete
list of all of Company's subsidiaries, indicating the jurisdiction of
incorporation of each subsidiary and Company's equity interest therein. Neither
Company nor any of its subsidiaries directly or indirectly owns an equity,
membership, partnership, or similar interest in, or any interest convertible
into, or exchangeable or exercisable for any such interest in, any corporation,
partnership, joint venture, limited liability company or other business
association or entity.
(c) Schedule 2.1(c) of the Company Schedule contains a true and correct
copy of the Certificate of Incorporation and Bylaws of Company and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither Company nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) All of the outstanding shares of capital stock of each of Company's
subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the charter
documents of any such subsidiary or any agreement or document to which any such
subsidiary is party or by which its is bound, and all such shares are owned, of
record and beneficially, by Company or another subsidiary of Company free and
clear of all security interests, liens, claims, pledges, agreements, limitations
on voting rights, charges or other encumbrances of any nature.
2.2 COMPANY CAPITAL STRUCTURE.
The authorized capital stock of Company consists of 50,000,000 shares of
Common Stock, par value $.001 per share, of which there were 24,474,818 shares
issued and outstanding as of September 1, 2000, and 5,000,000 shares of
Preferred Stock, par value $.001 per share, of which no shares are issued or
outstanding as of September 1, 2000. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid, and nonassessable, and
are not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Company, or any agreement or document to which
Company is a party or by which it is bound. As of the Closing, there is no
Company stock option plan or other incentive plan. As of September 1, 2000,
Company had reserved an aggregate of approximately 5,100,000 shares of Company
Common Stock for issuance to holders of warrants to purchase Company Common
Stock ("COMPANY WARRANTS") and Company options to purchase Company common stock.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid,
and nonassessable. Schedule 2.2 of the Company Schedule lists (i) each
outstanding option to acquire shares of Company Common Stock at September 1,
2000, the name of the holder of such option, the number of shares subject to
such option, the exercise price of such option, the number of shares as to which
such option will have vested at such date, the vesting schedule for such option
and whether the exercisability of such option will be accelerated in any way by
the transactions contemplated by this Agreement or for any other reason, and
indicates the extent of acceleration, if any, and (ii) each outstanding Company
Warrant at September 1, 2000, the name of the holder of such Company Warrant,
the number of shares subject to such Company Warrant, the exercise price of such
Company Warrant, the number of shares as to which such Company Warrant will have
vested at such date, the vesting schedule for such Company Warrant and whether
the exercisability of such Company Warrant will be accelerated in any way by the
transactions contemplated by this Agreement or for any other reason, and
indicates the extent of acceleration, if any.
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2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK.
Except as set forth in Company Schedule 2.2, as of the date hereof, there
are no equity securities, partnership interests, or similar ownership interests
of any class of Company, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests, or similar
ownership interests issued, reserved for issuance or outstanding. Except for
securities Company owns, directly or indirectly through one or more
subsidiaries, there are no equity securities, partnership interests, or similar
ownership interests of any class of any subsidiary of Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests issued, reserved for
issuance or outstanding. Except as set forth in Company Schedule 2.2, there are
no stock appreciation rights, phantom stock, or other similar rights of Company
and no options, warrants, equity securities, partnership interests, or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Company or any of its subsidiaries is a
party, or by which it is bound, obligating Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition,
of any shares of capital stock of Company or any of its subsidiaries or
obligating Company or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such stock appreciation rights, phantom stock, or
other similar rights, or any such option, warrant, equity security, partnership
interest or similar ownership interest, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of Company there are no
voting trusts, proxies or other agreements or understandings with respect to any
equity security of any class of Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries.
2.4 AUTHORITY.
(a) Company has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Company's
shareholders and the filing and recordation of the Certificate of Merger
pursuant to Delaware Law. Votes of the holders of a majority of the outstanding
shares of Company Common Stock is required for Company's shareholders to approve
and adopt this Agreement and approve the Merger. This Agreement has been duly
executed and delivered by Company and, assuming the due authorization,
execution, and delivery by Parent and Merger Sub, constitutes the valid and
binding obligations of Company, enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
Company do not, and the performance of this Agreement by Company will not, (i)
conflict with or violate the Certificate of Incorporation or Bylaws of Company
or the equivalent organizational documents of any of its subsidiaries, (ii)
subject to obtaining the approval of the Merger by Company's shareholders as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 2.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment, or decree applicable to Company or any of its subsidiaries or by which
its or any of their respective properties is bound or affected, or (iii) result
in any breach of, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration, or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, or other
instrument or obligation to which Company or any of its subsidiaries is a party
or by which Company or any of its subsidiaries or its or any of their respective
properties are bound or affected, except to the extent such conflict, violation,
breach, default, impairment or other effect could not, in the case of clause
(ii) or (iii), individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Company or a material adverse effect on the ability
of Company to perform its obligations under this Agreement.
(b) No consent, approval, order or authorization of, or registration,
declaration, or filing with any court, administrative agency or commission or
other governmental authority or instrumentality ("GOVERNMENTAL
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ENTITY") is required by or with respect to Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of a Form S-4
Registration Statement (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission ("SEC") in accordance with the Securities Act of 1933, as
amended (the "SECURITIES ACT"), (ii) the filing of the Certificate of Merger
with the Secretary of State of Delaware, (iii) the filing of the Joint Proxy
Statement/Prospectus (as defined in Section 2.19) with the SEC in accordance
with the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (iv)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws, and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"), and (v) such other consents, authorizations, filings,
approvals, and registrations which, if not obtained or made, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Company or a material adverse effect on the ability of Company
to perform its obligations under this Agreement.
2.5 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) Company has filed all forms, reports and documents required to be
filed with the SEC, and has made available to Parent such forms, reports and
documents in the form filed with the SEC. All such required forms, reports, and
documents (including those that Company may file subsequent to the date hereof)
are referred to herein as the "COMPANY SEC REPORTS." As of their respective
dates, the Company SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Company SEC Reports, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. None of Company's subsidiaries is required to file
any forms, reports, or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including any Company SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q or Form 10-QSB, as
applicable, under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Company and its subsidiaries at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount. The balance sheet of Company
contained in the Company SEC Reports as of June 30, 2000 is hereinafter referred
to as the "COMPANY BALANCE SHEET." Except as disclosed in the Company
Financials, neither Company nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Company and its subsidiaries taken as a whole, except liabilities
(i) provided for in the Company Balance Sheet, or (ii) incurred since the date
of the Company Balance Sheet in the ordinary course of business and are
immaterial in the aggregate.
(c) Schedule 2.5(c) of the Company Schedule contains a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the date of the Company Balance Sheet there has not been: (i) any
Material Adverse Effect on the Company, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock, or
property) in respect of, any of the Company's or any of its subsidiaries'
capital stock, or any purchase,
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redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities, (iii)
any split, combination, or reclassification of any of the Company's or any of
its subsidiaries' capital stock, (iv) any granting by the Company or any of its
subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by the Company or any of its
subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, (v) any granting by the Company or any
of its subsidiaries of any increase in severance or termination pay, (vi) any
entry by the Company or any of its subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any other
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving the Company of
the nature contemplated hereby, (vii) entry by the Company or any of its
subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any material Intellectual Property (as defined
herein) other than licenses in the ordinary course of business consistent with
past practice, (viii) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, (ix) any revaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business
and consistent with past practice, (x) any changes in the vesting schedules of
outstanding Company options or Company Warrants, or (xi) any grant of stock
options or Company Warrants prior to the date of this Agreement other than
grants to new employees in connection with the commencement of their employment.
2.7 TAXES.
DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or "TAXES"
refers to any and all federal, state, local, and foreign taxes, assessments, and
other governmental charges, duties, impositions, and liabilities relating to
taxes, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
2.8 TAX RETURNS AND AUDITS.
(a) Company and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information statements and reports
("RETURNS") and/or extensions relating to Taxes required to be filed by Company
and each of its subsidiaries with any Tax authority, except such Returns which
are not material to Company. Company and each of its subsidiaries have paid all
Taxes shown to be due on such Returns.
(b) Company and each of its subsidiaries as of the Effective Time will
have withheld with respect to its employees all federal and state income Taxes,
Taxes pursuant to the Federal Insurance Contribution Act, Taxes pursuant to the
Federal Unemployment Tax Act, and other Taxes required to be withheld, except
such Taxes which are not material to Company.
(c) Neither Company nor any of its subsidiaries has been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Company or any of its subsidiaries,
nor has Company or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of Company or any of its
subsidiaries by any Tax authority is presently in progress, nor has Company or
any of its subsidiaries been notified of any request for such an audit or other
examination.
(e) No adjustment relating to any Returns filed by Company or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Company or any of its subsidiaries or any representative thereof.
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(f) Neither Company nor any of its subsidiaries has any liability for any
material unpaid Taxes which has not been accrued for or reserved on Company
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Company, other than any liability
for unpaid Taxes that may have accrued since June 30, 2000 in connection with
the operation of the business of Company and its subsidiaries in the ordinary
course.
(g) There is no contract, agreement, plan or arrangement to which Company
or any of its subsidiaries is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Company or any of its subsidiaries that,
individually or collectively, would reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code. There is no contract, agreement, plan, or arrangement
to which Company is a party or by which it is bound to compensate any individual
for excise taxes paid pursuant to Section 4999 of the Code.
(h) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Company or any of its subsidiaries.
(i) Neither Company nor any of its subsidiaries is party to or has any
obligation under any Tax-sharing, Tax indemnity or Tax allocation agreement or
arrangement.
(j) None of Company's or its subsidiaries' assets are tax-exempt use
property within the meaning of Section 168(h) of the Code.
(k) Company has (a) never been a member of an affiliated group (within the
meaning of Code Section 1504(a)) filing a consolidated federal income Tax Return
(other than a group the common parent of which was Company), (b) with respect to
the Taxes of any person (other than Company or any of its subsidiaries) (i) no
liability under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local or foreign law) and (ii) no material liability as a transferee or
successor and (c) never been a party to any joint venture, partnership or other
agreement that should be treated as a partnership for Tax purposes.
(l) Company has not been either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code.
2.9 COMPANY INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have the following
definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefore and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefore, and all other rights corresponding thereto
throughout the world; (iv) all industrial designs and any registrations and
applications therefore throughout the world; (v) all trade names, logos, common
law trademarks and service marks, trademark and service xxxx registrations and
applications therefore throughout the world; (vi) all databases and data
collections and all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated, throughout the
world, and (viii) any similar or equivalent rights to any of the foregoing
anywhere in the world. "COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property that is owned by, or exclusively licensed to, Company.
(a) No Company Intellectual Property or product or service of Company or
any of its subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, contract, license, agreement, or stipulation restricting in any
manner the use, transfer, or licensing thereof by Company or any of its
subsidiaries, or which may affect the validity, use or enforceability of such
Company Intellectual Property.
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(b) To the knowledge of Company, Company owns, or has license or other
rights to use (sufficient for the conduct of its business as currently
conducted), each material item of Company Intellectual Property or other
Intellectual Property used by Company free and clear of any lien or encumbrance
(excluding licenses and related restrictions).
(c) Neither Company nor any of its subsidiaries has transferred ownership
of or granted any license with respect to, any material Company Intellectual
Property to any third party.
(d) To the knowledge of Company, the operation of the business of Company
and its subsidiaries as such business currently is conducted does not infringe
the Intellectual Property of any third party.
(e) Neither Company nor any of its subsidiaries has received notice from
any third party that the operation of the business of Company or any of its
subsidiaries or any act, product, or service of Company or any of its
subsidiaries, infringes the Intellectual Property of any third party.
(f) To the knowledge of Company, no person has or is infringing any
material Company Intellectual Property.
(g) Company and each of its subsidiaries has taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Company or any of its
subsidiaries, and, without limiting the foregoing, each of Company and its
subsidiaries has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Parent and all current and former employees and contractors of
Company and any of its subsidiaries have executed such an agreement, except
where the failure to do so is not reasonably expected to be material to Company.
2.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Neither Company nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment, or decree applicable to Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (ii) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, or other instrument or obligation
to which Company or any of its subsidiaries is a party or by which Company or
any of its subsidiaries or its or any of their respective properties is bound or
affected. To the knowledge of Company, no investigation or review by any
Governmental Entity is pending or threatened against Company or its
subsidiaries, nor has any Governmental Entity indicated an intention to conduct
the same. There is no material agreement, judgment, injunction, order, or decree
binding upon Company or any of its subsidiaries which has or would reasonably be
expected to have the effect of prohibiting or materially impairing any current
business practice of Company or any of its subsidiaries, any acquisition of
material property by Company or any of its subsidiaries or the conduct of
business by Company as currently conducted.
(b) Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders, and approvals from governmental authorities which are
material to the operation of the business of Company, as set forth in Company
Schedule 2.10(b) (collectively, the "COMPANY PERMITS"). Company and its
subsidiaries are in compliance in all material respects with the terms of the
Company Permits.
2.11 LITIGATION.
As of the date of this Agreement, except as set forth in Company Schedule
2.11, there is no action, suit, proceeding, claim, arbitration, or investigation
pending, or as to which Company or any of its subsidiaries has received any
notice of assertion nor, to Company's knowledge, is there a threatened action,
suit, proceeding, claim, arbitration, or investigation against Company or any of
its subsidiaries which in each case reasonably would be likely to be material to
Company, or which in any manner challenges or seeks to prevent, enjoin, alter,
or delay any of the transactions contemplated by this Agreement.
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2.12 BROKERS' AND FINDERS' FEES.
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.13 EMPLOYEE BENEFIT PLANS.
(a) Company or its subsidiaries do not contribute to, any pension,
profit-sharing, option, other incentive plan, or other Employee Benefit Plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974),
or has any obligation to or customary arrangement with employees for bonuses,
incentive compensation, vacations, severance pay, insurance, or other benefits,
except as set forth in Company Schedule 2.13.
(b) Company is in compliance in all material respects with all applicable
material foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any shareholder, director or Company employee or
any of its subsidiaries under any agreement or otherwise, (ii) increase any
benefits otherwise payable under any agreement, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.14 ABSENCE OF LIENS AND ENCUMBRANCES.
Company and each of its subsidiaries has good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens or encumbrances except as reflected in the
Company Financials and except for liens for Taxes not yet due and payable and
such imperfections of title and encumbrances, if any, which would not be
material to Company.
2.15 ENVIRONMENTAL MATTERS.
(a) Except as would not reasonably be likely to result in a Material
Adverse Effect on Company, (i) neither Company nor any of its subsidiaries has
generated, transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to pollutants, contaminants, wastes, or any
toxic, radioactive or otherwise hazardous materials ("HAZARDOUS MATERIALS") in
violation of, or in a manner that would be reasonably likely to result in
liability under, any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect as of the date hereof to protect the environment
or to prohibit, regulate or control Hazardous Materials "ENVIRONMENTAL LAWS")
and (ii) no Hazardous Materials are located in, on or under any real property or
facility now or previously owned, leased or operated by Company or any of its
subsidiaries in a manner which would reasonably be expected to result in
liability under, or a violation of, any Environmental Law.
(b) Except for matters which would not reasonably be expected to result in
a Material Adverse Effect on Company, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Company's knowledge, threatened concerning any Company Permit relating to any
environmental matter, or otherwise relating to any Environmental Law.
2.16 LABOR MATTERS.
(i) There are no controversies pending or, to the knowledge of each of
Company and its respective subsidiaries, threatened, between Company or any of
its subsidiaries and any of their respective employees; (ii) as of the date of
this Agreement, neither Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Company or its subsidiaries nor does Company or its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) as of the date of this Agreement, neither
Company nor any of its subsidiaries has any knowledge of any strikes, slowdowns,
work stoppages or lockouts, or threats thereof, by or with respect to any
employees of Company or any of its subsidiaries.
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2.17 AGREEMENTS, CONTRACTS, AND COMMITMENTS.
As of the date hereof, except as provided in Company Schedule 2.17,
neither Company nor any of its subsidiaries is a party to or is bound by:
(a) (i) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of Company's
Board of Directors, other than those that are terminable by Company or any of
its subsidiaries on no more than thirty (30) days' notice without liability or
financial obligation to Company, (ii) any such agreement, contract or commitment
with any employee, consultant, shareholder or other person that will result in
any obligation of Company or any of its subsidiaries to make any payments as a
result of the transactions contemplated hereby, (iii) any agreement with any
employee, consultant or shareholder of Company pursuant to which Company has
loaned or is obligated to loan any money thereto or (iv) any agreement or
arrangement providing for severance or termination pay;
(b) any agreement or plan, including, without limitation, any stock option
plan, warrant agreement, stock appreciation right plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification of officers, directors or employees
of Company, except as provided for in Company's Articles of Incorporation or
Bylaws, or any guaranty of third party indebtedness or of obligations of
officers, directors, employees or agents of Company;
(d) any agreement, contract or commitment containing any covenant limiting
in any respect the right of Company or any of its subsidiaries to engage in any
line of business in any geographic area or to compete with any person or
granting to any person any interest in Company's distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Company or any of its subsidiaries after the
date of this Agreement of a material amount of assets not in the ordinary course
of business or pursuant to which Company has any material ownership interest in
any corporation, partnership, joint venture or other business enterprise other
than Company's subsidiaries;
(f) any agreement, contract or commitment containing exclusivity
provisions pursuant to which Company has agreed not to purchase the goods or
services of, or enter into a commercial relationship with, another person;
(g) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit;
(h) any settlement agreement relating to any claim or suit;
(i) any real property lease covering more than 5,000 square feet; or
(j) any other agreement, lease, contract or commitment that involves
remaining obligations of Company of $10,000 or more individually. Neither
Company nor any of its subsidiaries, nor to Company's knowledge any other party
to a Company Contract (as defined below), is in breach, violation or default
under, and neither Company nor any of its subsidiaries has received written
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any of the agreements, contracts or commitments to which Company
or any of its subsidiaries is a party or by which it is bound that are required
to be disclosed in the Company Schedules (any such agreement, contract or
commitment, a "COMPANY CONTRACT") in such a manner as would permit any other
party to cancel or terminate any such Company Contract, or would permit any
other party to seek material damages or other remedies (for any or all of such
breaches, violations or defaults, in the aggregate).
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2.18 INSURANCE.
There is no material claim by Company or any of its subsidiaries pending
under any of the insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of Company and its subsidiaries as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds.
2.19 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
None of the information supplied or to be supplied by Company for
inclusion in (i) the Registration Statement (as defined in Section 2.5(b)) will
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading and (ii) the proxy statement/prospectus to be sent to the
shareholders of Company and stockholders of Parent in connection with the
meeting of Company's shareholders to consider the approval and adoption of this
Agreement and the approval of the Merger (the "COMPANY SHAREHOLDERS' MEETING")
and in connection with the meeting of Parent's stockholders to consider the
approval of the issuance of shares of Parent Common Stock pursuant to the terms
of the Merger (the "PARENT STOCKHOLDERS' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"JOINT PROXY STATEMENT/PROSPECTUS") shall not, (a) on the date the Joint Proxy
Statement/Prospectus is first mailed to Company's shareholders and Parent's
stockholders, (b) at the time of the Company Shareholders' Meeting or the Parent
Stockholders' Meeting and (c) at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Shareholders' Meeting or the Parent Stockholders' Meeting which has become false
or misleading. The Joint Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Securities Act and Exchange
Act, and the rules and regulations thereunder. If at any time prior to the
Effective Time, any event relating to Company or any of its affiliates, officers
or directors should be discovered by Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, Company shall promptly inform Parent. Notwithstanding the
foregoing, Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub that is contained in any of the
foregoing documents.
2.20 BOARD APPROVAL.
The Board of Directors of Company has, as of the date of this Agreement,
unanimously (i) determined that the Merger is fair to, advisable, and in the
best interests of Company and its shareholders, (ii) determined to recommend
that the shareholders of Company approve this Agreement and (iii) duly approved
the Merger, this Agreement, and the transactions contemplated hereby.
2.21 STATE TAKEOVER STATUTES.
The Board of Directors of Company has taken all actions so that (i) the
restrictions contained in Section 203 of the Delaware Law applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or the other transactions contemplated by this Agreement. No other
state takeover statute or similar statute or regulation applies to or purports
to apply to the Merger, this Agreement, the Company Voting Agreements or the
transactions contemplated hereby and thereby.
2.22 FAIRNESS OPINION.
Company will receive a written opinion from a firm acceptable to Parent,
dated prior to the Effective Time, that the Exchange Ratio is fair to Company's
shareholders from a financial point of view and has provided to Parent a copy of
such opinion.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
the schedules hereto (each such exception to reference the specific section
number of this Article III to which it applies and each other section number of
this Article III to the extent such applicability is reasonably apparent on the
face of such exception), dated as of the date hereof (the "PARENT SCHEDULE"):
3.1 ORGANIZATION OF PARENT; SUBSIDIARIES.
(a) Parent and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted and
as proposed to be conducted; and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect (as defined in Section
8.3(b)(ii)) on Parent.
(b) Parent Schedule 3.1(b) contains a true and complete list of all of
Parent's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and Parent's equity interest therein. Neither Parent nor any of its
subsidiaries directly or indirectly owns an equity, membership, partnership or
similar interest in, or any interest convertible into, or exchangeable or
exercisable for any such interest in, any corporation, partnership, joint
venture, limited liability company or other business association or entity.
(c) Parent has delivered or made available to Company a true and correct
copy of the Article of Incorporation and Bylaws of Parent and similar governing
instruments of each of its subsidiaries, each as amended to date, and each such
instrument is in full force and effect. Neither Parent nor any of its
subsidiaries is in violation of any of the provisions of its Article of
Incorporation or Bylaws or equivalent governing instruments.
(d) All of the outstanding shares of capital stock of each of Parent's
subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the charter
documents of any such subsidiary or any agreement or document to which any such
subsidiary is party or by which its is bound, and all such shares (other than
directors' qualifying shares in the case of applicable foreign subsidiaries) are
owned, of record and beneficially, by Parent or another subsidiary of Parent
free and clear of all security interests, liens, claims, pledges, agreements,
limitations on voting rights, charges or other encumbrances of any nature.
3.2 PARENT CAPITAL STRUCTURE.
The authorized capital stock of Parent consists of 100,000,000 shares of
Common Stock, par value $0.001 per share, of which 25,801,988 shares are issued
and outstanding as of August 31, 2000 and 5,000,000 shares of Preferred Stock,
par value $.001 per share, of which no shares are issued or outstanding. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
par value $.001 per share, all of which, as of the date hereof, is issued and
outstanding and is held by Parent. All outstanding shares of Parent Common Stock
are duly authorized, validly issued, fully paid, and non-assessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Parent or any agreement or document to which Parent
is a party or by which it is bound. As of August 31, 2000, Parent had reserved
an aggregate of 400,000 shares of Parent Common Stock, net of exercises, for
issuance to employees, consultants and non-employee directors pursuant to
Parent's stock option plan (the "PARENT STOCK OPTION PLAN"), under which options
are outstanding for 156,858 shares as of August 31, 2000. As of August 31, 2000,
Parent had reserved an aggregate of 2,450,259 shares of Parent Common Stock for
issuance to holders of warrants to purchase Parent Common Stock ("PARENT
WARRANTS"). All shares of Parent Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, would be duly authorized, validly issued, fully
paid, and nonassessable.
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3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK.
Except as set forth in Section 3.2, and except as set forth in Parent
Schedule 3.3, as of the date hereof, there are no equity securities, partnership
interests, or similar ownership interests of any class of Parent, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except for securities Parent owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class of
any subsidiary of Parent, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2, and except as set forth in Parent Schedule 3.3, there are
no stock appreciation rights, phantom stock or other similar rights of Parent
and no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Parent or any of its subsidiaries is a
party or by which it is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition,
of any shares of capital stock of Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such stock appreciation rights, phantom stock or
other similar rights or any such option, warrant, equity security, partnership
interest or similar ownership interest, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of Parent there are no
voting trusts, proxies or other agreements or understandings with respect to any
equity security of any class of Parent or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries.
3.4 AUTHORITY.
(a) Parent has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent, subject only to the approval and
adoption of this Agreement and the approval of the Share Issuance by Parent's
stockholders and the filing and recordation of the Certificate of Merger
pursuant to Delaware Law. A vote of the holders of at least a majority of the
shares of Parent Common Stock present or represented by proxy at the Parent
Stockholders' Meeting is required for Parent's stockholders to approve and adopt
a Share Issuance. This Agreement has been duly executed and delivered by Parent
and Merger Sub and, assuming the due authorization, execution and delivery by
Company, constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement by Parent do not, and the
performance of this Agreement by Parent will not, (i) conflict with or violate
the Article of Incorporation or Bylaws of Parent or the equivalent
organizational documents of any of its subsidiaries, (ii) subject to obtaining
the approval of the Share Issuance by Parent's stockholders as contemplated in
Section 5.2 and compliance with the requirements set forth in Section 3.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or any of its subsidiaries or by which its or any of
their respective properties is bound or affected, or (iii) result in any breach
of, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair Parent's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
are bound or affected, except to the extent such conflict, violation, breach,
default, impairment or other effect could not, in the case of clause (ii) or
(iii), individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent or a material adverse effect on Parent's
ability to perform its obligations under this Agreement.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of a Registration Statement with the SEC in accordance with
the Securities Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of Delaware, (iii) the filing of the Joint Proxy
Statement/Prospectus with the SEC in accordance
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with the Exchange Act, (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the HSR Act, (v) the filing with AMEX of a
Notification Form for Listing of Additional Shares with respect to the shares of
Parent Common Stock issued, or to be reserved for issuance, in connection with
the Merger, and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be material to Parent or
have a material adverse effect on the ability of the parties to consummate the
Merger or to perform the obligations under this Agreement.
3.5 SEC FILINGS; PARENT FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports and documents required to be filed
with the SEC since August 31, 1999, and has made available to Company such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports, and documents (including those that Parent may file subsequent
to the date hereof) are referred to herein as the "PARENT SEC REPORTS." As of
their respective dates, the Parent SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-QSB under the Exchange Act) and (iii) fairly presented the
consolidated financial position of Parent and its subsidiaries at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not,
or are not expected to be, material in amount. The balance sheet of Parent
contained in the Parent SEC Reports as of May 31, 2000 is hereinafter referred
to as the "PARENT BALANCE SHEET." Except as disclosed in the Parent Financials,
neither Parent nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which are, individually or in the aggregate,
material to the business, results of operations or financial condition of Parent
and its subsidiaries taken as a whole, except liabilities (i) provided for in
the Parent Balance Sheet, or (ii) incurred since the date of the Parent Balance
Sheet in the ordinary course of business and immaterial in the aggregate.
(c) Parent Schedule 3.5(a) sets forth a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
which previously had been filed by Parent with the SEC pursuant to the
Securities Act or the Exchange Act.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the date of the Parent Balance Sheet there has not been: (i) any
Material Adverse Effect on the Parent, (ii) any split, combination, or
reclassification of any of Parent's or any of its subsidiaries' capital stock,
(iii) any granting by Parent or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
(iv) any entry by Parent or any of its subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any other
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Parent of the
nature contemplated hereby, (v) entry by Parent or any of its subsidiaries into
any licensing or other agreement
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with regard to the acquisition or disposition of any material Parent
Intellectual Property (as defined herein) other than licenses in the ordinary
course of business consistent with past practice, (vi) any material change by
Parent in its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, (vii) any revaluation by Parent of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course of business and consistent with past practice, (viii) any changes in the
vesting schedules of outstanding Parent Options or Parent Warrants, or (ix) any
grant of stock options or warrants prior to the date of this Agreement other
than grants to new employees in connection with the commencement of their
employment.
3.7 TAXES.
(a) Parent and each of its subsidiaries have timely filed all Returns
and/or extensions relating to Taxes required to be filed by Parent and each of
its subsidiaries with any Tax authority, except such Returns which are not
material to Parent. Parent and each of its subsidiaries have paid all Taxes
shown to be due on such Returns.
(b) Parent and each of its subsidiaries as of the Effective Time will have
withheld with respect to its employees all federal and state income Taxes, Taxes
pursuant to the Federal Insurance Contribution Act, Taxes pursuant to the
Federal Unemployment Tax Act and other Taxes required to be withheld, except
such Taxes which are not material to Parent.
(c) Neither Parent nor any of its subsidiaries has been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Parent or any of its subsidiaries, nor
has Parent or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of Parent or any of its
subsidiaries by any Tax authority is presently in progress, nor has Parent or
any of its subsidiaries been notified of any request for such an audit or other
examination.
(e) No adjustment relating to any Returns filed by Parent or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Parent or any of its subsidiaries or any representative thereof.
(f) Neither Parent nor any of its subsidiaries has any liability for any
material unpaid Taxes which has not been accrued for or reserved on Parent
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, other than any liability
for unpaid Taxes that may have accrued since May 31, 2000 in connection with the
operation of the business of Parent and its subsidiaries in the ordinary course.
(g) There is no contract, agreement, plan or arrangement to which Parent
or any of its subsidiaries is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Parent or any of its subsidiaries that,
individually or collectively, would reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code. There is no contract, agreement, plan or arrangement
to which Parent is a party or by which it is bound to compensate any individual
for excise taxes paid pursuant to Section 4999 of the Code.
(h) Neither Parent nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset(as defined in
Section 341(f)(4) of the Code) owned by Parent or any of its subsidiaries.
(i) Neither Parent nor any of its subsidiaries is party to or has any
obligation under any Tax-sharing, Tax indemnity or Tax allocation agreement or
arrangement.
(j) None of Parent's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
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(k) Parent has (a) never been a member of an affiliated group (within the
meaning of Code Section 1504(a)) filing a consolidated federal income Tax Return
(other than a group the common parent of which was Parent), (b) with respect to
the Taxes of any person (other than Parent or any of its subsidiaries) (i) no
liability under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local or foreign law) and (ii) no material liability as a transferee or
successor and (c) never been a party to any joint venture, partnership or other
agreement that should be treated as a partnership for Tax purposes.
3.8 PARENT INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have the following
definitions:
"PARENT INTELLECTUAL PROPERTY" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Parent.
(a) No Parent Intellectual Property or product or service of Parent or any
of its subsidiaries is subject to any proceeding or outstanding decree, order,
judgment, contract, license, agreement, or stipulation restricting in any manner
the use, transfer, or licensing thereof by Parent or any of its subsidiaries, or
which may affect the validity, use or enforceability of such Parent Intellectual
Property.
(b) To the knowledge of Parent, Parent owns, or has license or other
rights to use (sufficient for the conduct of its business as currently
conducted), each material item of Parent Intellectual Property or other
Intellectual Property used by Parent free and clear of any lien or encumbrance
(excluding licenses and related restrictions).
(c) Neither Parent nor any of its subsidiaries has transferred ownership
of, or granted any license with respect to any material Parent Intellectual
Property to any third party.
(d) To the knowledge of Parent, the operation of the business of Parent
and its subsidiaries as such business currently is conducted does not infringe
the Intellectual Property of any third party.
(e) Neither Parent nor any of its subsidiaries has received notice from
any third party that the operation of the business of Parent or any of its
subsidiaries or any act, product or service of Parent or any of its
subsidiaries, infringes the Intellectual Property of any third party.
(f) To the knowledge of Parent, no person has or is infringing or
misappropriating any material Parent Intellectual Property.
(g) Parent and each of its subsidiaries has taken reasonable steps to
protect Parent's and its subsidiaries' rights in Parent's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Parent or any of its
subsidiaries, and, without limiting the foregoing, each of Parent and its
subsidiaries has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Company and all current and former employees and contractors of
Parent and any of its subsidiaries have executed such an agreement, except where
the failure to do so is not reasonably expected to be material to Parent.
3.9 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Neither Parent nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (ii) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its subsidiaries or its or any of their respective properties is bound or
affected. To the knowledge of Parent, no investigation or review by any
Governmental Entity is pending or threatened against Parent or its subsidiaries,
nor has any Governmental Entity indicated an intention to conduct the same.
There is no material agreement, judgment, injunction, order or decree binding
upon Parent or any of its subsidiaries which has or could reasonably be expected
to have the effect of prohibiting or materially
A-19
impairing any current business practice of Parent or any of its subsidiaries,
any acquisition of material property by Parent or any of its subsidiaries or the
conduct of business by Parent as currently conducted.
(b) Parent and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of Parent (collectively, the "PARENT
PERMITS"). Parent and its subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
3.10 LITIGATION.
As of the date of this Agreement, excluding such matters as are disclosed
in Parent's SEC Reports, there is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent or any of its
subsidiaries has received any notice of assertion nor, to Parent's knowledge, is
there a threatened action, suit, proceeding, claim, arbitration or investigation
against Parent or any of its subsidiaries which reasonably would be likely to be
material to Parent, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
3.11 BROKERS' AND FINDERS' FEES.
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.12 EMPLOYEE BENEFIT PLANS.
(a) Parent does not contribute to, any pension, profit-sharing, option,
other incentive plan, or other Employee Benefit Plan (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974), or has any obligation
to or customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits, except as set forth in
Parent Schedule 3.12(a).
(b) Parent is in compliance in all material respects with all applicable
material foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or Parent employee or
any of its subsidiaries under any agreement or otherwise, (ii) increase any
benefits otherwise payable under any agreement, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
3.13 ABSENCE OF LIENS AND ENCUMBRANCES.
Parent and each of its subsidiaries has good and valid title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens or encumbrances except as reflected in the
Parent Financials and except for liens for Taxes not yet due and payable and
such imperfections of title and encumbrances, if any, which would not be
material to Parent.
3.14 ENVIRONMENTAL MATTERS.
(a) Except as would not reasonably be likely to result in a Material
Adverse Effect on Parent, (i) neither Parent nor any of its subsidiaries has
generated, transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of, or in a
manner that would reasonably be likely to result in liability under, any
Environmental Law, and (ii) no Hazardous Materials are located in, on or under
any real property or facility now or previously owned, leased or operated by
Parent or any of its
A-20
subsidiaries in a manner which would reasonably be expected to result in
liability under, or in violation of, any Environmental Law.
(b) Except for matters which would not reasonably be expected to result in
a Material Adverse Effect on Parent, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Parent's knowledge, threatened concerning any Parent Permit relating to any
environmental matter, or otherwise relating to any Hazardous Material or any
Environmental Law.
3.15 LABOR MATTERS.
(a) There are no controversies pending or, to the knowledge of each of
Parent and its respective subsidiaries, threatened, between Parent or any of its
subsidiaries and any of their respective employees; (b) as of the date of this
Agreement, neither Parent nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Parent or its subsidiaries nor does Parent or its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) as of the date of this Agreement, neither
Parent nor any of its subsidiaries has any knowledge of any strikes, slowdowns,
work stoppages or lockouts, or threats thereof, by or with respect to any
employees of Parent or any of its subsidiaries.
3.16 AGREEMENTS, CONTRACTS, AND COMMITMENTS.
As of the date hereof, except as provided in Parent Schedule 3.16, neither
Parent nor any of its subsidiaries is a party to or is bound by:
(a) (i) any employment or consulting agreement, contract or commitment
with any officer or director or member of Parent's Board of Directors, other
than those that are terminable by Parent or any of its subsidiaries on no more
than thirty (30) days' notice without liability or financial obligation to
Parent, (ii) any such agreement, contract or commitment with any employee,
consultant, stockholder or other person that will result in any obligation of
Parent or any of its subsidiaries to make any payments as a result of the
transactions contemplated hereby, (iii) any agreement with any employee,
consultant or stockholder of Parent pursuant to which Parent has loaned or is
obligated to loan any money thereto or (iv) any arrangement or agreement
providing for severance or termination pay;
(b) any agreement or plan, including, without limitation, any stock option
plan, warrant agreement, stock appreciation right plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification of officers, directors or employees
of Parent, except as provided for in Parent's Articles of Incorporation or
Bylaws, or any guaranty of third party indebtedness or of obligations of
officers, directors, employees or agents of Parent;
(d) any agreement, contract or commitment containing any covenant limiting
in any respect the right of Parent or any of its subsidiaries to engage in any
line of business in any geographic area or to compete with any person or
granting to any person any interest in Parent's distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Parent or any of its subsidiaries after the
date of this Agreement of a material amount of assets not in the ordinary course
of business or pursuant to which Parent has any material ownership interest in
any corporation, partnership, joint venture or other business enterprise other
than Parent's subsidiaries;
(f) any contract, agreement or commitment containing exclusivity
provisions pursuant to which Parent has agreed not to purchase the goods (other
than local grocery products) or services of, or enter into a commercial
relationship with, another person;
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(g) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit;
(h) any settlement agreement relating to any claim or suit;
(i) any real property lease covering more than 25,000 square feet; or
(j) any other agreement, lease, contract or commitment that involves
remaining obligations of Parent of $100,000 or more individually. Neither Parent
nor any of its subsidiaries, nor to Parent's knowledge any other party to a
Parent Contract (as defined below), is in breach, violation or default under,
and neither Parent nor any of its subsidiaries has received written notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any of the agreements, contracts or commitments to which Parent or any of its
subsidiaries is a party or by which it is bound that are required to be
disclosed in the Parent Schedules (any such agreement, contract or commitment, a
"PARENT CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Parent Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate).
3.17 INSURANCE.
There is no material claim by Parent or any of its subsidiaries pending
under any of the insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of Parent and its subsidiaries as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds.
3.18 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
None of the information supplied or to be supplied by Parent for inclusion
in (i) the Registration Statement will at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading and (ii) the Joint Proxy
Statement/Prospectus shall not, (a) on the date the Joint Proxy
Statement/Prospectus is first mailed to Parent's stockholders and Company's
shareholders, (b) at the time of the Parent Stockholders' Meeting or the Company
Shareholders' Meeting and (c) at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Parent
Stockholders' Meeting or the Company Shareholders' Meeting which has become
false or misleading. The Joint Proxy Statement/Prospectus will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder. If at any time prior to the Effective Time, any
event relating to Parent or any of its affiliates, officers or directors should
be discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
Parent shall promptly inform Company. Notwithstanding the foregoing, Parent
makes no representation or warranty with respect to any information supplied by
Company that is contained in any of the foregoing documents.
3.19 BOARD APPROVAL.
The Board of Directors of Parent has, as of the date of this Agreement,
unanimously (i) determined that the Merger is fair to and in the best interests
of Parent and its stockholders, (ii) determined to recommend that the
stockholders of Parent approve the Share Issuance and (iii) duly approved the
Merger, this Agreement and the transactions contemplated hereby.
3.20 FAIRNESS OPINION.
Parent has received an opinion from G.A. Xxxxxxx & Co., dated prior to the
Effective Time, that the Exchange Ratio is fair to Parent from a financial point
of view and will provide to Company a copy of the written confirmation of such
opinion promptly after Parent's receipt thereof.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY COMPANY.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Company and each of its subsidiaries shall, except to the extent
that Parent shall otherwise consent in writing, carry on its business, in the
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees, and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
In addition, except as expressly permitted by the terms of this Agreement
and except as set forth in Schedule 4.1 without the prior written consent of
Parent, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Company shall not do any of the following and shall not permit
its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of warrants or options or restricted stock, or reprice
warrants or options granted under any employee, consultant, director or other
stock plans or agreements or authorize cash payments in exchange for any options
granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on the
date hereof and as previously disclosed in writing, or adopt any new severance
plan;
(c) Transfer or license to any person or entity or otherwise extend, amend
or modify any rights to the Company Intellectual Property other than in the
ordinary course of business consistent with past practices;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than (x) the issuance,
delivery and/or sale of Company Common Stock pursuant to the exercise of stock
options and Company Warrants outstanding as of the date of this Agreement, (y)
the issuance of Company common stock in connection with the possible acquisition
of Link-Two Communications, Inc. in an amount not to exceed 9,000,000 shares in
the aggregate, and (z) the issuance of up to 500,000 shares of Company common
stock to executive officers of Company;
(g) Cause, permit, or propose any amendments to the Company Charter
Documents (or similar governing instruments of any of its subsidiaries);
A-23
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets (other than in the ordinary course of business consistent
with past practice) or enter into any joint ventures, strategic partnerships or
alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any properties
or assets except sales of inventory in the ordinary course of business
consistent with past practice, except for the sale, lease or disposition (other
than through licensing) of property or assets which are not material,
individually or in the aggregate, to the business of Company and its
subsidiaries;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any agreement to maintain any financial statement condition or enter into
any arrangement having the economic effect of any of the foregoing other than in
connection with the financing of ordinary course trade payables consistent with
past practice;
(k) Adopt or amend any employee benefit plan, policy or arrangement, any
employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than as required
by law or offer letters and letter agreements entered into in the ordinary
course of business consistent with past practice with employees who are
terminable "at will"), pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants other than annual review salary increases for
non-officer employees in the ordinary course of business consistent with past
practice;
(l) (i) Pay, discharge, settle or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) in which Company is a defendant other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, or liabilities recognized or
disclosed in the most recent consolidated financial statements (or the notes
thereto) of Company included in the Company SEC Reports or incurred in the
ordinary course of business consistent with past practice since the date of such
financial statements, or (ii) waive the benefits of, agree to modify in any
manner, terminate, release any person from or fail to enforce any
confidentiality or similar agreement to which Company or any of its subsidiaries
is a party or of which Company or any of its subsidiaries is a beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $10,000;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any material contract or agreement to which
Company or any subsidiary thereof is a party or waive, delay the exercise of,
release or assign any material rights or claims thereunder;
(o) Enter into any agreement, contract or commitment which if in existence
on the date hereof would be required to be listed in Company Schedule 2.17;
(p) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
(q) Incur or enter into any agreement, contract or commitment outside of
the ordinary course of business in excess of $10,000 individually;
(r) Engage in any action that would reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code, whether or not otherwise permitted by the provisions of this Article IV;
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(s) Make any Tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Company or any of its subsidiaries or settle or compromise
any material income Tax liability;
(t) Enter into any collective bargaining agreements; or
(u) Agree in writing or otherwise to take any of the actions described in
Section 4.1 (a) through (t) above.
4.2 CONDUCT OF BUSINESS BY PARENT.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent and each of its subsidiaries shall, except to the extent
that Company shall otherwise consent in writing, carry on its business, in the
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
In addition, except as expressly permitted by the terms of this Agreement
and except as set forth in Parent Schedule 4.2, without the prior written
consent of Company, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Parent shall not do any of the following and
shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of warrants or options or restricted stock, or reprice
warrants or options granted under any employee, consultant, director or other
stock plans or authorize cash payments in exchange for any options granted under
any of such plans;
(b) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock, except for intercompany dividends or distributions, or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock, except as set forth in Parent Schedules;
(c) Cause, permit or propose any amendments to the Parent Charter
Documents (or similar governing instruments of any of its subsidiaries) that
would have an adverse effect on the rights of holders of Parent Common Stock;
(d) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
(e) Engage in any action that would reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code, whether or not otherwise permitted by the provisions of this Article IV;
(f) Make any Tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Parent or any of its subsidiaries or settle or compromise
any material income Tax liability; or
(g) Agree in writing or otherwise to take any of the actions described in
Sections 4.2 (a) through (f) above.
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4.3 CREDIT FACILITY AGREEMENT
Notwithstanding the above Sections 4.1 and 4.2, the Company may enter into
a credit facility on mutually agreeable terms with Parent or a subsidiary of
Parent, whereby such party will provide a line of credit in an amount not to
exceed $5 million, collateralized by certain agreements and other assets of
Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practicable after the execution of this Agreement,
Parent and Company shall jointly prepare and shall file with the SEC a document
or documents that will constitute (i) the S-4 and (ii) the Joint Proxy
Statement/Prospectus. Each of the parties hereto shall use commercially
reasonable efforts to cause the S-4 to become effective as promptly as
practicable after the date hereof, and, prior to the effective date of the S-4,
the parties hereto shall take all action required under any applicable Laws in
connection with the issuance of shares of Parent Common Stock pursuant to the
Merger. Parent or Company, as the case may be, shall furnish all information
concerning Parent or Company as the other party may reasonably request in
connection with such actions and the preparation of the S-4 and the Joint Proxy
Statement/ Prospectus. As promptly as practicable after the effective date of
the S-4, the Joint Proxy Statement/Prospectus shall be mailed to the
shareholders of Company and of Parent. Each of the parties hereto shall cause
the Joint Proxy Statement/Prospectus to comply as to form and substances to such
party in all material respects with the applicable requirements of (i) the
Exchange Act, (ii) the Securities Act, (iii) the rules and regulations of the
AMEX.
(b) The Joint Proxy Statement/Prospectus shall include the approval of
this Agreement and the Merger and the recommendation of the Board of Directors
of Company to Company's shareholders that they vote in favor of approval of this
Agreement and the Merger, subject to the right of the Board of Directors of
Company to withdraw at any time prior to the date of the Company Shareholders'
Meeting its recommendation and to recommend a Superior Proposal determined to be
such in compliance with Section 5.4(a) of this Agreement. The Joint Proxy
Statement/Prospectus shall include the approval of the Share Issuance and the
recommendation of the Board of Directors of Parent to Parent's stockholders that
they vote in favor of approval of the Share Issuance.
(c) No amendment or supplement to the Joint Proxy Statement/Prospectus or
the S-4 shall be made without the approval of Parent and Company, which approval
shall not be unreasonably withheld or delayed. Each of the parties hereto shall
advise the other parties hereto, promptly after it receives notice thereof, of
the time when the S-4 has become effective or any supplement or amendment has
been filed, of the issuance of any stop order, of the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or of any request by the SEC for
amendment of the Joint Proxy Statement/Prospectus or the S-4 or comments thereon
and responses thereto or requests by the SEC for additional information.
5.2 SHAREHOLDER AND STOCKHOLDER MEETINGS.
Company shall call and hold the Company Shareholders' Meeting and Parent
shall call and hold the Parent Stockholders' Meeting as promptly as practicable
after the date hereof for the purpose of voting upon the adoption and approval
of this Agreement and the approval of the Merger (in the case of the Company
Shareholders' Meeting) and the Share Issuance (in the case of the Parent
Stockholders' Meeting) pursuant to the Joint Proxy Statement/Prospectus, and
Company and Parent shall use all reasonable efforts to hold the Parent
Stockholders' Meeting and the Company Shareholders' Meeting on the same day and
as soon as practicable after the date on which the S-4 becomes effective.
Nothing herein shall prevent Company or Parent from adjourning or postponing the
Company Shareholders' Meeting or the Parent Stockholders' Meeting, as the case
may be, if there are insufficient shares of Company Common Stock or Parent
Common Stock, as the case may be, necessary to conduct business at their
respective meetings of the shareholders or stockholders. The Board of Directors
of Company shall submit this Agreement and the Merger for shareholder approval
pursuant to Delaware Law subject only to the condition of shareholder approval
as described in Section 2.4. Unless Company's Board of Directors has withdrawn
its recommendation of this Agreement and the Merger in compliance with Section
5.4(a), Company shall use commercially reasonable efforts to solicit from its
shareholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger pursuant to the Joint Proxy Statement/Prospectus and
shall take all other
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commercially reasonable action necessary or advisable to secure the vote or
consent of shareholders required by Delaware Law or applicable AMEX requirements
to obtain such approval. Parent shall use commercially reasonable efforts to
solicit from its stockholders proxies in favor of the Share Issuance pursuant to
the Joint Proxy Statement/Prospectus and shall take all other commercially
reasonable action necessary or advisable to secure the vote or consent of
stockholders required by applicable AMEX requirements to obtain such approval.
Company shall call and hold the Company Shareholders' Meeting for the purpose of
voting upon the adoption and approval of this Agreement and the approval of the
Merger whether or not Company's Board of Directors at any time subsequent to the
date hereof withdraws its recommendation of this Agreement and the Merger.
5.3 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement, dated as of September 1, 2000 (the
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Each of Company and Parent will afford the other and the other's
accountants, counsel and other representatives reasonable access to its
properties, books, records, shareholder lists and personnel during the period
prior to the Effective Time to obtain all information concerning its business as
such other party may reasonably request. No information or knowledge obtained in
any investigation pursuant to this Section 5.3 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 NO SOLICITATION.
(i) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (A) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined below), (B) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or knowingly take any other action to facilitate
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Acquisition Proposal, (C) engage in discussions with
any person with respect to any Acquisition Proposal, (D) approve, endorse or
recommend any Acquisition Proposal or (E) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction (as defined below); provided,
however, that nothing contained in this Section 5.4(a) shall prohibit the Board
of Directors of Company from (m) complying with Rule 14d-9 or 14e-2(a)
promulgated under the Exchange Act with regard to a tender or exchange offer not
made after a violation of this Section 5.4(a) or (n) at any time prior to the
date of the Company Shareholders' Meeting, in response to a bona fide written
Acquisition Proposal received without the prior occurrence of a breach of this
Section 5.4(a) that Company's Board of Directors reasonably concludes
constitutes a Superior Proposal (as defined below), engaging in discussions or
participating in negotiations with and furnishing information to the party
making such Acquisition Proposal to the extent (1) the Board of Directors of
Company determines in good faith after consultation with its outside legal
counsel that its fiduciary obligations under applicable law require it to do so,
(2) (x) at least two business days prior to furnishing any such nonpublic
information to, or entering into discussions or negotiations with, such party,
Company gives Parent written notice of Company's intention to furnish nonpublic
information to, or enter into discussions or negotiations with, such party and
(y) Company receives from such party an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such party by or on behalf of Company,
and (3) contemporaneously with furnishing any such nonpublic information to such
party, Company furnishes such nonpublic information to Parent (to the extent
such nonpublic information has not been previously furnished by Company to
Parent). Company and its subsidiaries will immediately cease any and all
existing activities, discussions, or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
this Section 5.4(a) by any officer, director, affiliate or employee of Company
or any of its subsidiaries or any investment banker, attorney or other advisor
or representative of Company or any of its subsidiaries shall be deemed to be a
breach of this Section 5.4(a) by Company. (ii) For purposes of this Agreement,
(A) "ACQUISITION PROPOSAL" shall mean any offer, inquiry or proposal (other than
an offer, inquiry or proposal by Parent) relating to any
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Acquisition Transaction. For the purposes of this Agreement; (B) "ACQUISITION
TRANSACTION" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (X) any
acquisition or purchase from Company by any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
more than a 15% interest in the total outstanding voting securities of Company
or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning 15% or more of the total outstanding voting securities of Company or any
of its subsidiaries or any merger, consolidation, business combination or
similar transaction involving Company pursuant to which the shareholders of
Company immediately preceding such transaction hold less than 85% of the equity
interests in the surviving or resulting entity of such transaction; (Y) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition or
disposition of more than 15% of the assets of Company; or (Z) any liquidation,
dissolution, recapitalization or other significant corporate reorganization of
the Company; and (C) "SUPERIOR PROPOSAL" shall mean an Acquisition Proposal with
respect to which (x) if any cash consideration is involved, shall not be subject
to any financing contingency or with respect to which Company's Board of
Directors shall have reasonably determined (based upon the advice of Company's
financial advisors) that the acquiring party is capable of consummating the
proposed Acquisition Transaction on the terms proposed, and (y) Company's Board
of Directors shall have reasonably determined that the proposed Acquisition
Transaction provides greater value to the shareholders of Company than the
Merger (based upon a written opinion of Company's financial advisor). (iii) In
addition to the obligations of Company set forth in paragraph (i) of this
Section 5.4(a), Company as promptly as practicable, and in any event within 24
hours, shall advise Parent orally and in writing of any request for information
which Company reasonably believes would lead to an Acquisition Proposal or of
any Acquisition Proposal, or any inquiry with respect to or which Company
reasonably believes would lead to any Acquisition Proposal, the material terms
and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the person or group making any such request, Acquisition Proposal or
inquiry. Company will keep Parent informed in all material respects of the
status and details (including material amendments or proposed amendments) of any
such request, Acquisition Proposal, or inquiry. In addition to the foregoing,
Company shall (A) provide Parent with at least 48 hours prior notice (or such
lesser prior notice as provided to the members of Company's Board of Directors
but in no event less than eight hours) of any meeting of Company's Board of
Directors at which Company's Board of Directors is reasonably expected to
consider an Acquisition Proposal and (B) provide Parent with at least three (3)
business days prior written notice of a meeting of Company's Board of Directors
at which Company's Board of Directors is reasonably expected to recommend a
Superior Proposal to its shareholders and together with such notice a copy of
the definitive documentation relating to such Superior Proposal.
5.5 PUBLIC DISCLOSURE.
Parent and Company will consult with each other and agree before issuing
any press release or otherwise making any public statement with respect to the
Merger, this Agreement or an Acquisition Proposal and will not issue any such
press release or make any such public statement prior to such agreement, except
as may be required by law or any listing agreement with a national securities
exchange, in which case reasonable efforts to consult with the other party will
be made prior to any such release or public statement. The parties have agreed
to the text of the joint press release announcing the signing of this Agreement.
5.6 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
suits, claims, actions, investigations or
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proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Company and its Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Merger, this Agreement, the Company Voting Agreements or any of the
transactions contemplated hereby and thereby, use commercially reasonable
efforts to ensure that the Merger, this Agreement, the Company Voting Agreements
and the other transactions contemplated hereby and thereby may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Merger,
this Agreement, the Company Voting Agreements and the transactions contemplated
hereby and thereby. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require Parent or Company or any subsidiary or
affiliate thereof to agree to any divestiture by itself or any of its affiliates
of shares of capital stock or of any business, assets or property, or the
imposition of any material limitation on the ability of any of them to conduct
their business or to own or exercise control of such assets, properties and
stock.
(b) Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of Company to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, such that the conditions set forth in Section
6.3(a) or 6.3(b) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate, or any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.7 THIRD- PARTY CONSENTS.
As soon as practicable following the date hereof, Parent and Company will
each use commercially reasonable efforts to obtain any consents, waivers and
approvals under any of its or its subsidiaries' respective agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
5.8 STOCK OPTIONS; WARRANTS.
(a) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock (each, a "COMPANY STOCK OPTION"), whether or not vested,
and each outstanding Company Warrant, whether or not then exercisable, shall by
virtue of the Merger be assumed by Parent. Each Company Stock Option and each
Company Warrant so assumed by Parent under this Agreement will continue to have,
and be subject to, the same terms and conditions of such options or warrants
immediately prior to the Effective Time, except that (i) each Company Stock
Option and each Company Warrant will be exercisable (or will become exercisable
in accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Stock Option or Company Warrant, as
applicable, immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded down to the nearest whole number of shares of Parent Common Stock
and (ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Stock Option or Company Warrant
will be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such Company Stock Option or Company
Warrant, as applicable, was exercisable immediately prior to the Effective Time
by the Exchange Ratio, rounded up to the nearest whole cent.
(b) [Reserved].
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(c) Parent shall cause employees of Company and its subsidiaries as of the
Effective Time ("AFFECTED EMPLOYEES") to be credited with service with Company
and each of its subsidiaries for purposes of eligibility and vesting under each
employee benefit plan maintained by Parent or its subsidiaries after the
Effective Time to the extent of their service with Company provided, however,
that such service shall not be recognized to the extent that such recognition
would result in duplication of benefits. To the extent permitted by the Parent
Plans and applicable law, Parent will, or will cause Company to (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Affected Employees immediately prior to the Effective Time, and (ii)
provide each Affected Employee with credit for any co-payments and deductibles
paid prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
5.9 [Reserved].
5.10 AMEX LISTING.
Parent agrees to file with the AMEX a Notification Form for Listing of
Additional Shares with regards to the shares of Parent Common Stock issuable,
and those required to be reserved for issuance, in connection with the Merger.
5.11 AFFILIATES.
Set forth in Company Schedule 5.11 is a list of those persons who may be
deemed to be, in Company's reasonable judgment, affiliates of Company within the
meaning of Rule 145 promulgated under the Securities Act (each, a "COMPANY
AFFILIATE"). Company will promptly provide Parent with updates to such list with
respect to persons who may deemed, after the date hereof, to be Company
Affiliates. Company has provided to Parent (with respect to current Company
Affiliates), and will use its commercially reasonable efforts to deliver or
cause to be delivered to Parent, as promptly as practicable on or following the
date any person who subsequently becomes a Company Affiliate, from each person
who becomes a Company Affiliate after the date hereof, an executed affiliate
agreement in substantially the form attached hereto as Exhibit C (the "AFFILIATE
AGREEMENT"), each of which will be in full force and effect as of the Effective
Time. Parent will be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by a Company Affiliate
pursuant to the terms of the Affiliate Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Affiliate Agreement.
5.12 REGULATORY FILINGS; REASONABLE EFFORTS.
If required, as soon as may be reasonably practicable, Company and Parent
each shall file with the United States Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ")
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties. Company and Parent each
shall promptly (a) supply the other with any information which may be required
in order to effectuate such filings and (b) supply any additional information
which reasonably may be required by the FTC, the DOJ or the competition or
merger control authorities of any other jurisdiction and which the parties may
reasonably deem appropriate; provided, however, that neither Parent nor Company
shall be required to agree to any divestiture by Parent or Company or any of
Parent's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Parent or its subsidiaries or affiliates or of
Company, its affiliates, or the imposition of any material limitation on the
ability of any of them to conduct their businesses or to own or exercise control
of such assets, properties and stock.
5.13 BOARD OF DIRECTORS.
The Board of Directors of Parent will take all actions necessary such that
(a) Xxxxxxx XxXxxxx, Xxxxxxx XxXxxxx, and Xxxxxxx Xxxxxxx shall be appointed to
Parent's Board of Directors as of the Effective Time and (b)
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upon such appointment the Board of Directors of Parent will be comprised of
seven members. The other members of Board of Directors are H. Xxxx Xxxxxx, Xxx
Xxxxx, X. X. Xxxxxxxx, and Xxxx Xxxxxx. Dr. H. Xxxx Xxxxxx shall serve as the
Chairman of the Board until a successor is elected.
5.14 PERSONAL GUARANTIES.
Parent will use its reasonable best efforts to remove Xxxxxxx XxXxxxx and
Xxxxxxx X. XxXxxxx as personal guarantors made by them with suppliers or other
creditors of Company; provided, however, that such obligation shall not require
Parent to extinguish any such obligations.
5.15 OFFICERS; EMPLOYMENT AGREEMENTS.
Xxxxxxx XxXxxxx and Xxxxxxx XxXxxxx shall be appointed as officers of
Parent as of the Effective Time. Parent shall enter into mutually acceptable
employment agreements with Xxxxxxx XxXxxxx and Xxxxxxx XxXxxxx not later than 15
business days after Closing, and Xxxxxxx XxXxxxx and Xxxxxxx XxXxxxx agree to
terminate their prior employment agreements with Company.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
the following conditions:
(a) SHAREHOLDER AND STOCKHOLDER APPROVALS. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the shareholders of Company. The Share
Issuance shall have been approved by the requisite vote under applicable AMEX
rules by the stockholders of Parent.
(b) REGISTRATION STATEMENT EFFECTIVE; JOINT PROXY STATEMENT. The SEC shall
have declared the S-4 effective. No stop order suspending the effectiveness of
the S-4 or any part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the Joint Proxy
Statement/Prospectus, shall have been initiated or threatened in writing by the
SEC.
(c) NO ORDER; HSR ACT. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger. All waiting periods, if any,
under the HSR Act relating to the transactions contemplated hereby will have
expired or terminated early and all material foreign antitrust approvals
required to be obtained prior to the Merger in connection with the transactions
contemplated hereby shall have been obtained.
(d) TAX OPINIONS. Each of Parent and Company shall have received a written
opinion from its tax counsel, in form and substance reasonably satisfactory to
it, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY.
The obligation of Company to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Company:
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(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Parent and Merger Sub contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on the
Closing Date except, in the case of clauses (i) and (ii), (A) for such failures
to be true and correct that do not in the aggregate constitute a Material
Adverse Effect on Parent and Merger Sub provided, however, that such Material
Adverse Effect qualifier shall be inapplicable with respect to the
representations and warranties contained in Sections 3.2 and 3.19 (which
representations and warranties shall have been true and correct in all material
respects as of the date of this Agreement and shall be true and correct in all
material respects as of the Closing Date), and (B) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the qualifications
set forth in the preceding clause (A)) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties in connection with clauses (i) and (ii), all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded). Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by an authorized officer of
Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Company shall have received a certificate to such effect
signed on behalf of Parent by an authorized officer of Parent.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date except, in the case of clauses (i) and (ii), (A) for such failures to be
true and correct that do not in the aggregate constitute a Material Adverse
Effect on the Company provided, however, that such Material Adverse Effect
qualifier shall be inapplicable with respect to the representations and
warranties contained in Section 2.2 and 2.20 (which representations and
warranties shall have been true and correct in all material respects as of the
date of this Agreement and shall be true and correct in all material respects as
of the Closing Date) and (B) for those representations and warranties which
address matters only as of a particular date (which representations shall have
been true and correct (subject to the qualifications set forth in the preceding
clause (A)) as of such particular date) (it being understood that, for purposes
of determining the accuracy of such representations and warranties in connection
with clauses (i) and (ii), all "Material Adverse Effect" qualifications and
other qualifications based on the word "material" or similar phrases contained
in such representations and warranties shall be disregarded). Parent shall have
received a certificate with respect to the foregoing signed on behalf of Company
by an authorized officer of Company.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by an authorized officer of Company.
(c) CONSENTS. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after the requisite approval of the shareholders of Company
and the stockholders of Parent:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by March 31, 2001 for any reason; provided, however, that the right
to terminate this Agreement under this Section 7.1(b) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a material breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Company or Parent if (i) required approval of the
shareholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Company shareholders duly convened therefore or at any adjournment thereof; or
(ii) the required approval by the stockholders of Parent of the Share Issuance
required under applicable AMEX rules shall not have been obtained by reason of
the failure to obtain the required vote at a meeting of Parent stockholders duly
convened therefore or at any adjournment or postponement thereof;
(e) by Company, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
Parent's representations and warranties or breach by Parent is curable by
Parent, then Company may not terminate this Agreement under this Section 7.1(e)
for thirty (30) days after delivery of written notice from Company to Parent of
such breach, provided Parent continues to exercise best efforts to cure such
breach (it being understood that Company may not terminate this Agreement
pursuant to this paragraph (e) if such breach by Parent is cured during such
thirty (30)-day period);
(f) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a), (b), or (c) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in
Company's representations and warranties or breach by Company is curable by
Company, then Parent may not terminate this Agreement under this Section 7.1(f)
for thirty (30) days after delivery of written notice from Parent to Company of
such breach, provided Company continues to exercise best efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (f) if such breach by Company is cured during such
thirty (30)-day period);
(g) by Parent, if (i) the Board of Directors of Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or its stockholders, (ii) the Board of Directors of
Company shall have recommended to the shareholders of Company an Acquisition
Proposal, (iii) the Company fails to comply with Section 5.4, (iv) an
Acquisition Proposal shall have been announced or otherwise become publicly
known and the Board of Directors of Company shall have (A) failed to recommend
against acceptance of such by its shareholders (including by taking no position,
or indicating its inability to take a position, with respect to the acceptance
by its shareholders of an Acquisition Proposal involving a tender offer or
exchange offer) or (B) failed to reconfirm its approval and recommendation of
this Agreement and the transactions contemplated hereby within five business
days thereafter or (v) the Board of Directors of Company resolves to take any of
the actions described above;
(h) by Company, if the Board of Directors of Parent withdraws, modifies or
changes its recommendation of the Share Issuance in a manner adverse to Company
and its shareholders; or
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(i) by Company or Parent, if the respective Board Of Directors determines
in its due diligence review that a condition exists that would have a Material
Adverse Effect on the business or financial condition of Company or Parent, as
the case may be; provided, however, that notice is given pursuant to Section 7.2
on or before October 2, 2000.
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION.
Any termination of this Agreement under Section 7.1 above will be
effective immediately upon the delivery of written notice of the terminating
party to the other parties hereto (or such later time as may be required by
Section 7.1). In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 5.3(a), Section 7.3 and Article 8,
each of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for fraud in connection with, or
any willful breach of, this Agreement.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred (i) in relation to the printing and filing of the
Joint Proxy Statement/Prospectus (including any preliminary materials related
thereto) and the S-4 (including financial statements and exhibits) and any
amendments or supplements thereto or (ii) for the premerger notification and
report forms under the HSR Act.
(b) TERMINATION FEE PAYABLE BY COMPANY.
(i) In the event that (A) Parent shall terminate this Agreement pursuant
to Section 7.1(g), or (B) this Agreement shall be terminated (x) pursuant to
Section 7.1(d)(i) and within 12 months after any such termination pursuant to
Section 7.1(d)(i), Company shall enter into a definitive agreement with respect
to any Company Acquisition, then, in the case of clause (A), promptly after such
termination, or in the case of clause (B), concurrently with the consummation of
such Company Acquisition, Company shall pay to Parent $1,000,000 in cash (the
"TERMINATION FEE"); provided, however, that no fee shall be payable pursuant to
this Section 7.3(b)(i) if at the time of such vote of Company's shareholders,
the representations of Parent or Merger Sub contained in this Agreement shall
have become untrue or inaccurate, or Parent or Merger Sub shall have failed to
comply with in any material respect any covenant or agreement to be complied
with by it under this Agreement, in each case such that the conditions set forth
in Section 6.2(a) or 6.2(b) would not be satisfied (excluding, for purposes of
this analysis, clause (B)(z) of Section 8.3(b)(ii)).
(ii) In the event that this Agreement shall be terminated pursuant to
Section 7.1(d)(i), then promptly after such termination Company shall pay to
Parent $750,000 in cash; provided, however, that no fee shall be payable
pursuant to this Section 7.3(b)(ii) if (A) prior to the payment of such fee,
Company shall have paid or become obligated to pay the Termination Fee pursuant
to Section 7.3(b)(i) or (B) at the time of such vote of Company's shareholders,
the representations of Parent or Merger Sub contained in this Agreement shall
have become untrue or inaccurate, or Parent or Merger Sub shall have failed to
comply with in any material respect any covenant or agreement to be complied
with by it under this Agreement, in each case such that the conditions set forth
in Section 6.2(a) or 6.2(b) would not be satisfied (excluding, for purposes of
this analysis, clause (B)(z) of Section 8.3(b)(ii)). Any fee payable pursuant to
this Section 7.3(b)(ii) will be credited against any Termination Fee that
Company becomes obligated to pay pursuant to Section 7.3(b)(i).
(iii) In the event that Parent shall terminate this Agreement pursuant to
Section 7.1(f), then Company shall promptly reimburse Parent for Parent's
reasonable costs and expenses in connection with this Agreement and the
transactions contemplated hereby up to $750,000.
(iv) Company acknowledges that the agreements contained in this Section
7.3(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not enter into this Agreement;
accordingly, if Company fails to pay in a timely manner the amounts due pursuant
to this Section 7.3(b) and, in order to obtain such payment, Parent makes a
claim that results in a judgment against Company for the amounts set forth in
this Section
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7.3(b), Company shall pay to Parent its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amounts set forth in this Section 7.3(b) at the prime rate of Citibank, N.A. in
effect on the date such payment was required to be made. Payment of the fees
described in this Section 7.3(b) shall not be in lieu of damages incurred in the
event of willful breach of this Agreement. For the purposes of this Agreement,
"COMPANY ACQUISITION" shall mean any of the following transactions (other than
the transactions contemplated by this Agreement): (A) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Company pursuant to which the shareholders of Company
immediately preceding such transaction hold less than 60% of the aggregate
equity interests in the surviving or resulting entity of such transaction, (B) a
sale or other disposition by Company of assets representing in excess of 40% of
the aggregate fair market value of Company's business immediately prior to such
sale or (C) the acquisition by any person or group (including by way of a tender
offer or an exchange offer or issuance by Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 40% of the voting power of the then outstanding shares
of capital stock of Company.
(c) TERMINATION FEE PAYABLE BY PARENT.
(i) In the event that (A) Company shall terminate this Agreement pursuant
to Section 7.1(h), or (B) this Agreement shall be terminated (x) pursuant to
Section 7.1(d)(ii) and within 12 months after any such termination pursuant to
Section 7.1(d)(ii), Parent shall enter into a definitive agreement to acquire a
corporation providing the same services as Company on the same terms as set
forth in this Agreement, then concurrently with the consummation of such Parent
Acquisition, Parent shall pay to Company $1,000,000 in cash (the "PARENT
TERMINATION FEE"); provided, however, that no fee shall be payable pursuant to
this Section 7.3(c)(i) if at the time of the vote of Parent's shareholders, the
representations of Company contained in this Agreement shall have become untrue
or inaccurate, or Company shall have failed to comply with in any material
respect any covenant or agreement to be complied with by it under this
Agreement, in each case such that the conditions set forth in Section 6.3(a),
6.3(b), or 6.3(c) would not be satisfied (excluding clause (B)(z) of Section
8.3(b)(ii) for the purpose of this analysis)).
(ii) In the event (A) that this Agreement shall be terminated pursuant to
Section 7.1(d)(ii), or (B) that Company shall terminate this Agreement pursuant
to Section 7.1(e), then promptly after such termination Parent shall pay to
Company $750,000 in cash; provided, however, that no fee shall be payable
pursuant to this Section 7.3(c)(ii) if at the time of the vote of Parent's
shareholders, the representations of Company contained in this Agreement shall
have become untrue or inaccurate, or Company shall have failed to comply with in
any material respect any covenant or agreement to be complied with by it under
this Agreement, in each case such that the conditions set forth in Section
6.3(a), 6.3(b), or 6.3(c) would not be satisfied (excluding clause (B)(z) of
Section 8.3(b)(ii) for the purpose of this analysis)). Any fee payable pursuant
to this Section 7.3(c)(ii) will be credited against any Parent Termination Fee
that Company becomes obligated to pay pursuant to Section 7.3(c)(i).
(iii) Parent acknowledges that the agreements contained in this Section
7.3(c) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Company would not enter into this Agreement;
accordingly, if Parent fails to pay in a timely manner the amounts due pursuant
to this Section 7.3(c) and, in order to obtain such payment, Company makes a
claim that results in a judgment against Parent for the amounts set forth in
this Section 7.3(c), Parent shall pay to Company its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amounts set forth in this Section 7.3(c) at the prime rate
of Citibank, N.A. in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(c) shall not be in lieu of
damages incurred in the event of willful breach of this Agreement.
7.4 AMENDMENT.
Subject to applicable law, this Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed on behalf of
each of Parent, Merger Sub and Company.
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7.5 EXTENSION; WAIVER.
At any time prior to the Effective Time, any party hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Company, Parent and Merger Sub
contained in this Agreement shall terminate at the Effective Time, and only the
covenants that by their terms survive the Effective Time shall survive the
Effective Time.
8.2 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers for
a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Eagle Wireless International , Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
with copies to:
Xxxxxx & Xxxxxxxxx, P.C.
Three Riverway, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx / Cavas X. Xxxxx
Telecopy No.: (000) 000-0000
(b) if to Company, to:
XxxxxXxxxx.xxx, Inc.
0000 Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
8.3 INTERPRETATION; DEFINITIONS.
(a) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections, such reference
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shall be to a Section of this Agreement. Unless otherwise indicated the words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. When
reference is made herein to "the business of" an entity, such reference shall be
deemed to include the business of all direct and indirect subsidiaries of such
entity. Reference to the subsidiaries of an entity shall be deemed to include
all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement:
(i) the term "KNOWLEDGE" means with respect to a party hereto, with
respect to any matter in question, the actual knowledge of the executive
officers of such party;
(ii) the term "MATERIAL ADVERSE EFFECT" when used in connection with an
entity means any change, event, violation, inaccuracy, circumstance or effect
that is, or is reasonably likely to be, materially adverse to the business,
assets, liabilities, financial condition or results of operations of such entity
and its subsidiaries taken as a whole; provided, however, that in no event shall
(A) a decrease in such entity's stock price or the failure to meet or exceed
Wall Street research analysts' or such entity's internal earnings or other
estimates or projections in and of itself constitute a Material Adverse Effect
or (B) any change, event, violation, inaccuracy, circumstance or effect that
results from (x) changes affecting the industry in which such entity operates
generally (which changes do not disproportionately affect such entity), (y)
changes affecting the United States economy generally or (z) the public
announcement or pendency of the Merger, constitute a Material Adverse Effect;
(iii) the term "PERSON" shall mean any individual, corporation (including
any non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
8.4 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign the same
counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement and the documents and instruments and other agreements
among the parties hereto as contemplated by or referred to herein, including the
Company Schedules and the Parent Schedules (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder.
8.6 SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business, and other purposes of
such void or unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such
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party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
8.8 GOVERNING LAW.
Except to the extent mandatorily governed by Delaware Law, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
8.9 ARBITRATION.
If a dispute should arise, all claims, disputes, controversies,
differences or other matters in question arising out of the Agreement to each
other in the matters stated in this Agreement (the claims) shall be settled
finally, completely and conclusively by arbitration in Houston, Xxxxxx County,
Texas, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules"), by one or more arbitrators chosen in
accordance with the Rules. Arbitration shall be initiated by written demand by
the party seeking arbitration. This Agreement to arbitrate shall be specifically
enforceable only in the District Court of Xxxxxx County, Texas. A decision of
the arbitrator or arbitrators shall be final, conclusive and binding on Parent
and the Company, and judgment may be entered thereon in the District Court of
Xxxxxx County, Texas, to enforce such decision and the benefits thereof. Upon
appointment, the arbitrators shall then proceed to decide the arbitration
subjects in accordance with the Rules. Any arbitration held in accordance with
this paragraph shall be private and confidential and no person shall be entitled
to attend the hearings except the arbitrator(s), the stenographer, if one is
requested, Parent, Company, and any designated representatives of the parties.
The matters submitted for arbitration, the hearings and proceedings thereunder
and the arbitration award shall be kept and maintained in strictest confidence
by the parties and shall not be discussed, disclosed or communicated to any
persons. On request of either party, the record of the proceeding shall be
sealed and may not be disclosed except insofar, and only insofar, as may be
necessary to enforce the award of the arbitrators and any judgment enforcing
such award. If counsel is required to seek the enforcement of this agreement or
this particular section, counsel shall be entitled to recover its (his)
reasonable and necessary attorneys' fees and costs from the opposing party.
8.10 RULES OF CONSTRUCTION.
The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
8.11 ASSIGNMENT.
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. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
EAGLE WIRELESS INTERNATIONAL, INC.
SIGNATURE:________________________
TITLE:____________________________
XXXXXXXXXX.XXX, INC.
SIGNATURE:________________________
TITLE:____________________________
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