EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among
BEATNIK, INC.,
BEATNIK ACQUISITION SUB, INC.
and
MIXMAN TECHNOLOGIES, INC.
Dated as of October 8, 1999
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS..............................................................................1
1.1 Defined Terms...........................................................................1
1.2 Other Defined Terms.....................................................................7
1.3 Interpretation Provisions...............................................................8
ARTICLE 2 THE MERGER; ASSUMPTION OF STOCK OPTIONS..................................................9
2.1 The Merger..............................................................................9
2.2 Effective Time..........................................................................9
2.3 Effect of the Merger....................................................................9
2.4 Articles of Incorporation; Bylaws......................................................10
2.5 Directors and Officers.................................................................10
2.6 Effect on Capital Stock................................................................10
2.7 Delivery of Certificates...............................................................14
2.8 Stock Transfer Book....................................................................14
2.9 No Further Ownership Rights in Shares of Mixman Stock..................................14
2.10 Lost, Stolen or Destroyed Certificates.................................................14
2.11 Escrow of Merger Shares................................................................14
2.12 Tax Consequences.......................................................................15
2.13 Taking of Necessary Action; Further Action.............................................15
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF MIXMAN................................................15
3.1 Organization of Mixman.................................................................15
3.2 Capitalization of Mixman...............................................................16
3.3 Authorization..........................................................................16
3.4 Officers and Directors.................................................................17
3.5 Bank Accounts..........................................................................17
3.6 Subsidiaries, Etc......................................................................17
3.7 Title to Assets........................................................................17
3.8 Sufficiency of Assets..................................................................17
3.9 Fixtures and Equipment.................................................................17
3.10 Contracts..............................................................................17
3.11 No Conflict or Violation; Consents.....................................................19
3.12 Financial Statements; Books and Records................................................19
3.13 Absence of Certain Changes or Events...................................................20
3.14 Liabilities............................................................................21
3.15 Litigation.............................................................................21
3.16 Labor Matters..........................................................................21
3.17 Employee Benefit Plans.................................................................22
3.18 Transactions with Related Parties......................................................23
3.19 Compliance with Law....................................................................23
3.20 Intellectual Property..................................................................23
3.21 Tax Matters............................................................................24
3.22 Insurance..............................................................................25
3.23 Accounts Receivable....................................................................26
3.24 Inventory..............................................................................26
3.25 Environmental Matters..................................................................26
3.26 Brokers; Transaction Costs.............................................................26
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TABLE OF CONTENTS
(continued)
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3.27 "Market Stand-Off" Agreement...........................................................26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BEATNIK...............................................27
4.1 Organization of Beatnik................................................................27
4.2 Capitalization of Beatnik and Merger Sub...............................................27
4.3 Authorization..........................................................................28
4.4 Officers and Directors.................................................................28
4.5 Subsidiaries, Etc......................................................................28
4.6 Title to Assets........................................................................29
4.7 Sufficiency of Assets..................................................................29
4.8 Contracts..............................................................................29
4.9 No Conflict or Violation; Consents.....................................................30
4.10 Financial Statements; Books and Records................................................31
4.11 Absence of Certain Changes or Events...................................................31
4.12 Liabilities............................................................................32
4.13 Litigation.............................................................................32
4.14 Labor Matters..........................................................................33
4.15 Employee Benefit Plans.................................................................33
4.16 Transactions with Related Parties......................................................34
4.17 Compliance with Law....................................................................34
4.18 Intellectual Property..................................................................34
4.19 Tax Matters............................................................................35
4.20 Insurance..............................................................................36
4.21 Accounts Receivable....................................................................37
4.22 Inventory..............................................................................37
4.23 Environmental Matters..................................................................37
4.24 Brokers; Transaction Costs.............................................................37
4.25 "Market Stand-Off" Agreement...........................................................37
ARTICLE 5 ACTIONS BY MIXMAN, BEATNIK AND MERGER SUB PRIOR TO THE CLOSING; ADDITIONAL AGREEMENTS..38
5.1 Conduct of Mixman's Business...........................................................38
5.2 Conduct of Beatnik's Business..........................................................39
5.3 Investigations.........................................................................41
5.4 Notification of Certain Matters........................................................41
5.5 No Mergers, Consolidations, Sale of Stock, Etc.; No Solicitation.......................41
5.6 Publicity..............................................................................42
5.7 Fairness Hearing; Joint Proxy Statement................................................42
5.8 Board of Directors.....................................................................43
5.9 Option Grants..........................................................................43
5.10 Disclosure Schedule....................................................................43
5.11 Further Assurances.....................................................................43
ARTICLE 6 CONDITIONS TO MIXMAN'S OBLIGATIONS......................................................43
6.1 Representations, Warranties and Covenants..............................................44
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TABLE OF CONTENTS
(continued)
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6.2 Consents...............................................................................44
6.3 No Actions or Court Orders.............................................................44
6.4 Closing Documents......................................................................44
6.5 Opinion of Counsel.....................................................................44
6.6 Material Adverse Effect................................................................44
6.7 Shareholder Approval; Dissenting Shares................................................44
6.8 Voting Agreement.......................................................................45
6.9 Amended and Restated Investors' Rights Agreement.......................................45
6.10 Xxxx Xxxxxxx...........................................................................45
6.11 Directors..............................................................................45
6.12 Beatnik Restated Articles..............................................................45
ARTICLE 7 CONDITIONS TO BEATNIK'S OBLIGATIONS.....................................................45
7.1 Representations, Warranties and Covenants..............................................45
7.2 Consents...............................................................................45
7.3 Shareholder Approval; Dissenting Shares................................................46
7.4 No Actions or Court Orders.............................................................46
7.5 Closing Documents......................................................................46
7.6 Opinion of Counsel.....................................................................46
7.7 Exemption under Federal and State Securities Laws......................................46
7.8 Escrow of Merger Shares................................................................46
7.9 Material Adverse Effect................................................................46
7.10 Amended and Restated Investors' Rights Agreement.......................................46
7.11 Employment Agreements..................................................................46
7.12 Noncompetition Agreement...............................................................47
7.13 Voting Agreement.......................................................................47
7.14 Amendments to Option Agreements........................................................47
7.15 Option Agreements......................................................................47
7.16 Accounts Receivable....................................................................47
7.17 Contracts Consents.....................................................................47
7.18 Contracts Signed.......................................................................47
7.19 Market Stand-Off.......................................................................47
7.20 Due Diligence..........................................................................47
ARTICLE 8 CLOSING.................................................................................47
8.1 Deliveries by Mixman to Beatnik and Merger Sub.........................................48
8.2 Deliveries by Beatnik and Merger Sub to Mixman.........................................48
ARTICLE 9 INDEMNIFICATION.........................................................................48
9.1 Survival of Representations, Etc.......................................................48
9.2 Indemnification........................................................................49
9.3 No Right of Contribution...............................................................50
9.4 Satisfaction of Claims; Threshold; Limitations on Indemnity............................51
ARTICLE 10 MISCELLANEOUS..........................................................................51
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TABLE OF CONTENTS
(continued)
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10.1 Termination............................................................................51
10.2 Certain Securities Laws Matters........................................................52
10.3 Assignment.............................................................................53
10.4 Notices................................................................................53
10.5 Choice of Law..........................................................................54
10.6 Arbitration............................................................................54
10.7 Entire Agreement,- Amendments and Waivers..............................................55
10.8 Counterparts...........................................................................55
10.9 Invalidity.............................................................................55
10.10 Expenses...............................................................................56
10.11 No Third Party Beneficiaries...........................................................56
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TABLE OF EXHIBITS AND ANNEXES
Exhibit A - Amended and Restated Investors' Rights Agreement
Exhibit B - Escrow Agreement
Exhibit C - Beatnik Amended and Restated Articles of Incorporation
Exhibit D - Form of Noncompetition Agreement
Exhibit E-1 - Beatnik Capitalization
Exhibit E-2 - Mixman Capitalization
Exhibit F - Voting Agreement
Exhibit G - Outstanding Due Diligence Materials
Annex 1 - Example of Calculation of Conversion Ratio
Annex 2 - Mixman Disclosure Schedule
Annex 3 - Mixman Financial Statements
Annex 4 - Beatnik Disclosure Schedule
Annex 5 - Beatnik Financial Statements
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION, dated as of October 8, 1999 (the
"Agreement"), is entered into by and among BEATNIK, INC., a California
corporation ("Beatnik"), BEATNIK ACQUISITION SUB, INC., a California corporation
and a wholly-owned subsidiary of Beatnik ("Merger Sub"), and MIXMAN
TECHNOLOGIES, INC., a California corporation ("Mixman").
RECITALS
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A. The Boards of Directors of Beatnik and Mixman have determined that it
is advisable and in the best interests of their respective shareholders for
Beatnik and Mixman to enter into a business combination upon the terms and
subject to the conditions set forth herein.
B. In furtherance of such combination, the Boards of Directors of Beatnik
and Mixman have each approved the merger of Merger Sub with and into Mixman (the
"Merger"), upon the terms and subject to the conditions set forth herein, in
accordance with the provisions of the California Corporations Code (the "CCC").
C. Beatnik and Mixman intend, by approving resolutions authorizing this
Agreement, to adopt this Agreement as a plan of reorganization and that the
Merger qualify as a tax-free reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder.
D. Pursuant to the Merger, each outstanding share of capital stock of
Mixman shall be converted into the right to receive shares of capital stock of
Beatnik, each outstanding option of Mixman shall be converted into an option to
receive shares of capital stock of Beatnik, and the holders of the Mixman
Convertible Debt (as defined in Section 1.1) shall receive shares of capital
stock of Beatnik, all upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE 1
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DEFINITIONS
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1.1 Defined Terms. As used herein, the terms below shall have the
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following meanings:
"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
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"Amended and Restated Investors' Rights Agreement" means the Amended and
Restated Investors' Rights Agreement to be entered into among Beatnik and
certain other parties substantially in the form attached hereto as Exhibit A.
"Ancillary Agreements" means the Escrow Agreement, the Amended and Restated
Investors' Rights Agreement and the Noncompetition Agreements between Beatnik
and each of Xxxx Xxxxxxx and Xxxxxx Xxxxxxx substantially in the form of Exhibit
D hereto and other agreements required hereunder to consummate the Closing.
"Assets" means all of a Person's right, title and interest in and to such
Person's properties, assets and rights of any kind, whether tangible or
intangible, real or personal.
"Beatnik Balance Sheet" means the balance sheet of Beatnik as of the
Beatnik Balance Sheet Date.
"Beatnik Balance Sheet Date" means September 17, 1999.
"Beatnik Common Stock" means the Beatnik Common Stock, par value $0.001,
having the rights, preferences, privileges and restrictions contained in the
Restated Articles.
"Beatnik Financial Statements" means Beatnik's (i) unaudited balance sheets
and related statements of income and cash flow for the 8 1/2-month period ended
September 17, 1999, and (ii) unaudited balance sheets and related statements of
income and cash flow for the 12-month period ended December 31, 1998. The
Beatnik Financial Statements are attached hereto as Annex 5.
"Beatnik Merger Preferred Stock" means the shares of Beatnik Series D-1
Preferred Stock, and Beatnik Series D-2 Preferred Stock issued pursuant to
Article 2 herein.
"Beatnik Options" means options to purchase Beatnik Common Stock issued by
Beatnik pursuant to the Beatnik Option Plan.
"Beatnik Option Plan" means the Beatnik, Inc. 1997 Stock Plan.
"Beatnik Preferred Stock" means the Beatnik Series A Preferred Stock,
Beatnik Series B Preferred Stock and Beatnik Series C Preferred Stock.
"Beatnik Restated Articles" means the Amended and Restated Articles of
Incorporation of Beatnik attached hereto as Exhibit C that sets forth the
preferences, privileges and restrictions of the Beatnik Merger Preferred Stock.
"Beatnik Series A Preferred Stock" means the Beatnik Series A Preferred
Stock, $0.001 par value, having the rights, preferences, privileges and
restrictions contained in the Beatnik Restated Articles.
"Beatnik Series B Preferred Stock" means the Beatnik Series B Preferred
Stock, $0.001 par value, having the rights, preferences, privileges and
restrictions contained in the Beatnik Restated Articles.
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"Beatnik Series C Preferred Stock" means the Beatnik Series C Preferred
Stock, $0.001 par value, having the rights, preferences, privileges and
restrictions contained in the Beatnik Restated Articles.
"Beatnik Series D-1 Preferred Stock" means the Beatnik Series D-1 Preferred
Stock, $0.001 par value, having the rights, preferences, privileges and
restrictions contained in the Beatnik Restated Articles.
"Beatnik Series D-2 Preferred Stock" means the Beatnik Series D-2 Preferred
Stock, $0.001 par value, having the rights, preferences, privileges and
restrictions contained in the Beatnik Restated Articles.
"Beatnik Stock" means the Beatnik Common Stock and the Beatnik Preferred
Stock.
"Beatnik Warrants" means (i) a warrant to purchase 333,888 shares of
Beatnik Series C Preferred Stock and (ii) a warrant to purchase an aggregate of
25,530 shares of Beatnik Common Stock.
"Benefit Plans" means any material pension, profit sharing, deferred
compensation or retirement plan.
"Business" of a Person means the business and operations of such Person.
"Closing Date" means the date of the Closing.
"Confidentiality Agreement" means that certain Mutual Non-Disclosure
Agreement dated as of July 10, 1999 between Beatnik and Mixman.
"Consents" of a Person means any and all Permits and any and all consent,
approvals or waivers from third parties that are (i) required for the
consummation of the transactions contemplated by this Agreement or (ii)
necessary or desirable in order that such Person can conduct its Business after
the Closing Date in the same manner as before the Closing Date.
"Contracts" of a Person means all currently binding agreements, contracts,
leases (whether for real or personal property), purchase orders, undertakings,
covenants not to compete, employment agreements, confidentiality agreements,
licenses, instruments, obligations and commitments to which such Person is a
party or by which such Person or any of its Assets are bound or affected,
whether written or oral.
"Court Order" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on a Person or its property
under applicable law.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
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"Employees" of a Person means all persons employed by such Person on a full
or part-time basis together with all persons retained as "independent
contractors" as of the relevant date.
"Employee Plan" means any legally enforceable benefit plan, program,
agreement, policy, commitment or other arrangement (whether or not set forth in
a written document) within the following categories or any employee benefit plan
as defined in section 3(3) of ERISA: (i) any employee pension benefit plan, as
defined in section 3(2) of ERISA, including (without limitation) any multi-
employer plan, as defined in section 3(37) of ERISA; (ii) any employee welfare
benefit plan, as defined in section 3(1) of ERISA, (iii) any bonus, deferred
compensation, incentive, restricted stock, stock purchase, stock option, stock
appreciation right, phantom stock, debenture, supplemental pension, profit-
sharing, royalty pool, commission or similar plan or arrangement; (iv) any plan,
program, agreement, policy, commitment or other arrangement relating to
severance or termination pay, whether or not published or generally known, (v)
any plan, program, agreement, policy, commitment or other arrangement relating
to the provision of any benefit described in section 3(1) of ERISA to former
employees or directors or to their survivors, other than procedures intended to
comply with Section 4980B of COBRA or similar state laws; (vi) any group or
material individual plan, program, agreement, policy, commitment or other group
or material individual arrangement relating to paid or unpaid leaves of absence,
education expense or vacation; (vii) any group or material individual plan,
program, agreement, policy, commitment or other arrangement relating to loans or
other extensions of credit, loan guarantees, relocation assistance or similar
benefits; (viii) any employment, consulting or termination agreement; or (ix)
any other material plan, program, agreement, procedure, policy, commitment,
understanding or other arrangement relating to employee benefits, executive
compensation, fringe benefits, severance pay, terms of employment or services as
an independent contractor.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in the nature
thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Beatnik, Mixman and the Seller Representatives substantially in the form of
Exhibit B hereof.
"Fixtures and Equipment" of a Person mean all of the furniture, fixtures,
furnishings, machinery, computer hardware, and other tangible personal property
owned by such Person, wherever located and including any such Fixtures and
Equipment in the possession of any of such Person's respective suppliers or
other vendors.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards
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Board (or agencies with similar functions of comparable stature and authority
within the accounting profession), or in such other statements by such entity as
may be in general use by significant segments of the U.S. accounting profession,
which are applicable to the facts and circumstances on the date of
determination.
"Intellectual Property" means (a) inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and the patents, patent applications and patent disclosures together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) trademarks, service marks, trade dress, logos, trade
names, and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) copyright-able works, copyrights and applications, registrations
and renewals in connection therewith, (d) mask works and all applications,
registrations and renewals in connection therewith, (e) trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (f) computer software (including data and related
documentation), (g) other proprietary rights and (h) copies and tangible
embodiments thereof (in whatever form or medium).
"Inventory" means all merchandise owned and intended for resale and all raw
materials, work in process, finished goods, wrapping, supply and packaging items
and similar items, whether or not located on the premises, on consignment to a
third party or in transit or storage.
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Material Adverse Effect" with respect to any Person means any effect or
change which has, or is reasonably likely to have, a material adverse effect on
the condition (financial or other), business, results of operations, assets,
liabilities or operations of such Person and its subsidiaries taken as a whole.
"Merger Shares" means the shares of Beatnik capital stock to be issued
pursuant to the Article 2 hereof.
"Mixman Balance Sheet" means the balance sheet of Mixman as of the Mixman
Balance Sheet Date.
"Mixman Balance Sheet Date" means August 31, 1999.
"Mixman Common Stock" means the Mixman Common Stock, no par value, having
the rights, preferences, privileges and restrictions contained in Mixman's
Articles of Incorporation.
"Mixman Convertible Debt" means that certain Mixman Convertible Promissory
Note dated January 13, 1995 issued to Xxxxx Summit.
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"Mixman Financial Statements" means Mixman's (i) unaudited balance sheets
and related statements of income and cash flow for the 8-month period ended
August 31, 1999, and (ii) unaudited balance sheets and related statements of
income and cash flow for the 12-month period ended December 31, 1998. The
Mixman Financial Statements are attached hereto as Annex 3.
"Mixman Options" means options to purchase Mixman Common Stock issued by
Mixman pursuant to the Mixman Option Plan.
"Mixman Option Plan(s)" means the Mixman Technologies, Inc. 1995 Equity
Incentive Plan.
"Mixman Preferred Stock" means the Mixman Series A Preferred Stock, Mixman
Series B Preferred Stock, and Mixman Series C Preferred Stock.
"Mixman Series A Preferred Stock" means the Mixman Series A Preferred
Stock, no par value, having the rights, preferences, privileges and restrictions
contained in Mixman's Articles of Incorporation.
"Mixman Series B Preferred Stock" means the Mixman Series B Preferred
Stock, no par value, having the rights, preferences, privileges and restrictions
contained in Mixman's Articles of Incorporation.
"Mixman Series C Preferred Stock" means the Mixman Series C Preferred
Stock, no par value, having the rights, preferences, privileges and restrictions
contained in Mixman's Articles of Incorporation.
"Mixman Stock" means the Mixman Common Stock and the Mixman Preferred
Stock.
"Permits" of a Person means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets of such Person.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Proprietary Rights" means rights under any Intellectual Property, whether
owned or licensed.
"Regulations" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation energy, motor
vehicle safety, public utility, zoning, building and health codes, Environmental
Laws, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.
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"Related Party" to a Person means (i) any of such Person's officers and
directors, and any partners, associates or relatives of such officers and
directors, and (ii) any Person in which such Person has any direct or material
indirect interest.
"Representative" means any officer, director, principal, attorney, agent,
employee or other representative of a Person.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Taxes" mean any and all taxes, charges, fees, levies or other assessments,
including income, gross receipts, excise, real or personal property, sales,
withholding, social security, retirement, unemployment, occupation, use,
service, license, net worth, payroll, franchise and transfer and recording,
imposed by the Internal Revenue Service or any taxing authority (whether
domestic or foreign, including any federal, state, county, local or foreign
government or any subdivision or taxing agency thereof (including a U.S.
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.
"To the knowledge" or "knowledge" of a party (or similar phrases) means to
the extent of matters (i) which are actually known by such party or (ii) which,
based on facts of which such party is aware, would be known to a reasonable
Person in similar circumstances.
1.2 Other Defined Terms. The following terms are defined in the Sections
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indicated:
Term Section
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Actions 3.15
Agreement Preamble
Agreement of Merger 2.2
Arbitrator 10.6(a)
Beatnik Preamble
Beatnik Closing Certificate 6.1
Beatnik Disclosure Schedule ARTICLE 4
Beatnik Indemnified Parties 9.2(a)
Beatnik Scheduled Contracts 4.8(a)(xii)
California Permit 5.7(a)
California Statute 5.7(a)
CCC Recitals
Certificates 2.7(a)
Claim Notice 9.2(b)
Closing 2.1(b)
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Term Section
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Code Recitals
Common Equivalents 2.6(a)
Outstanding
Commonly Controlled Entity 3.17(a)
Conversion Ratio 2.6(a)
Damage Threshold 9.4(a)
Damages 9.2(a)
Dispute Notice 9.2(c)
Dissenting Shares 2.6(e)
Effective Time 2.2
Escrow Termination Date 9.1
Escrow Shares 2.11
Founders Options 5.9
Fully Diluted Common 2.6(e)
Equivalents Outstanding
Indemnified Party 9.2(b)
Indemnitor 9.2(b)
IRS 3.17(a)
JAMS 10.6(b)
Joint Proxy Statement 5.7
Merger Recitals
Merger Sub Preamble
Mixman Preamble
Mixman Closing Certificate 7.1
Mixman Disclosure Schedule ARTICLE 3
Mixman Indemnified Parties 9.2(a)
Mixman Scheduled Contracts 3.10(a)(xii)
Pension Plans 3.17(a); 4.15(a)
Sellers 9.2(a)
Seller Representative 2.11
Surviving Corporation 2.1(a)
1.3 Interpretation Provisions.
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(a) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, schedule and
Exhibit references are to this Agreement unless otherwise specified. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. The term "or" is disjunctive but not necessarily exclusive.
The terms "include" and "including" are not limiting and mean "including without
limitation."
(b) References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto.
-8-
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(e) The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against either party.
(f) The annexes, schedules and exhibits to this Agreement are a material
part hereof and shall be treated as if fully incorporated into the body of the
Agreement.
ARTICLE 2
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THE MERGER; ASSUMPTION OF STOCK OPTIONS
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2.1 The Merger.
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(a) Effective Time. At the Effective Time (as defined in Section 2.2
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hereof) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of the CCC, Merger Sub shall be merged with and into
Mixman, the separate corporate existence of Merger Sub shall cease and Mixman
shall continue as the surviving corporation and a wholly-owned subsidiary of
Beatnik. Mixman, as the surviving corporation after the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated pursuant to
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Section 10.1, and subject to the satisfaction or waiver, if permissible, of the
conditions set forth in Articles 6 and 7, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place (i) at the
offices of Pillsbury Madison & Sutro LLP, 0000 Xxxxxxx Xxxxxx, Xxxx Xxxx,
Xxxxxxxxxx, as promptly as practicable (and in any event within five business
days) after satisfaction or waiver, if permissible, of the conditions set forth
in Articles 6 and 7 or (ii) at such other time, date or place as Beatnik and
Mixman may mutually agree.
2.2 Effective Time. As promptly as practicable after the satisfaction or
--------------
waiver of the conditions set forth in Articles 6 and 7, Beatnik and Mixman shall
cause the Merger to be consummated by filing the Agreement of Merger as
contemplated by the CCC (the "Agreement of Merger"), together with any required
related documents, in such form as required by, and executed in accordance with
the relevant provisions of, the CCC. The Merger shall be effective at the time
indicated in the Agreement of Merger (the "Effective Time").
2.3 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in this Agreement, the Agreement of Merger and the
applicable provisions of the CCC. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all of the property,
rights, privileges, powers and franchise of Merger Sub and Mixman shall vest in
the Surviving Corporation.
-9-
2.4 Articles of Incorporation; Bylaws.
---------------------------------
(a) Articles of Incorporation. At the Effective Time, the Articles of
-------------------------
Incorporation of Mixman, shall be the Articles of Incorporation of the Surviving
Corporation.
(b) Bylaws. At the Effective Time, the Bylaws of Merger Sub, as in effect
------
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter duly amended in accordance with applicable law, the
Articles of Incorporation of the Surviving Corporation and such Bylaws.
2.5 Directors and Officers. The directors of Merger Sub immediately prior
----------------------
to the Effective Time shall be the initial directors of the Surviving
Corporation at the Effective Time, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation, and the
officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation at the Effective Time, in each
case until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation and Bylaws of
the Surviving Corporation and in accordance with applicable law.
2.6 Effect on Capital Stock.
-----------------------
At the Effective Time, by virtue of the Merger and without any further
action on the part of Beatnik or Mixman:
(a) Conversion of Mixman Common Stock. Each share of Mixman Common Stock
---------------------------------
issued and outstanding immediately prior to the Effective Time (excluding any
Dissenting Shares) shall be converted, subject to Section 2.6(c) and Section
2.6(d), into the right to receive a number of shares of Beatnik Common Stock
equal to the "Conversion Ratio." The "Conversion Ratio" is the quotient of: (1)
the difference between (i) one-half Beatnik's "Fully-Diluted Common Equivalents
Outstanding" (as defined below) as of immediately prior to the Effective Time,
and (ii) 480,000 (such number to be adjusted for any Beatnik stock splits, stock
dividends or other recapitalization events), divided by (2) Mixman's "Common
Equivalents Outstanding" (as defined below) as of immediately prior to the
Effective Time excluding the Founders Options. As used herein, "Common
Equivalents Outstanding" means the sum of (A) shares of common stock outstanding
plus (B) shares of common stock issuable upon conversion of all outstanding
shares of preferred stock, plus (C) shares of common stock issuable upon
exercise or conversion of all outstanding or promised options, warrants and
convertible debt (and upon conversion of any preferred stock issuable upon
exercise or conversion of all outstanding options, warrants and convertible
debt). "Fully Diluted Common Equivalents Outstanding" means the sum of (A)
Common Equivalents Outstanding, plus (B) all shares of common stock (or
securities convertible into or exchangeable for common stock) reserved for
issuance to employees, officers, directors, contractors, consultants or advisors
under any stock option, stock purchase, stock bonus or other equity incentive
plan. An example of the calculation of the Conversion Ratio is set forth in
Annex 1. All such shares of Mixman Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each certificate previously representing any such shares shall thereafter
represent the shares of Beatnik Common Stock into which such Mixman Common Stock
has been converted.
-10-
Certificates previously representing shares of Mixman Common Stock shall be
exchanged for certificates representing whole shares of Beatnik Common Stock
issued in consideration therefor upon the surrender of such certificates in
accordance with Section 2.7 (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 2.10).
(b) Conversion of Mixman Preferred Stock. Each share of Mixman Preferred
------------------------------------
Stock issued and outstanding immediately prior to the Effective Time (excluding
any Dissenting Shares) shall be converted, subject to Section 2.6(c) and Section
2.6(d), into the right to receive shares of preferred stock of Beatnik, in each
case with the rights, preferences and privileges of the appropriate Series of
Beatnik Merger Preferred Stock as set forth in the Beatnik Restated Articles, as
follows:
(i) Each share of Mixman Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time (excluding any
Dissenting Shares) shall be converted, subject to Section 2.6(c) and
Section 2.6(d), into the right to receive a number of shares of Beatnik
Series D-1 Preferred Stock equal to the Conversion Ratio.
(ii) Each share of Mixman Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time (excluding any
Dissenting Shares) shall be converted, subject to Section 2.6(c) and
Section 2.6(d), into the right to receive a number of shares of Beatnik
Series D-2 Preferred Stock equal to the Conversion Ratio.
(iii) Each share of Mixman Series C Preferred Stock issued and
outstanding immediately prior to the Effective Time (excluding any
Dissenting Shares) shall be converted, subject to Section 2.6(c) and
Section 2.6(d), into the right to receive a number of shares of Beatnik
Series D-2 Preferred Stock equal to the Conversion Ratio.
All of the shares of Mixman Preferred Stock converted into Beatnik Merger
Preferred Stock in accordance with this Article I shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each
certificate previously representing any such shares of Mixman Preferred Stock
shall thereafter represent the shares of Beatnik Merger Preferred Stock into
which such Mixman Preferred Stock has been converted. Certificates previously
representing shares of Mixman Preferred Stock shall be exchanged for
certificates representing whole shares of corresponding Beatnik Merger Preferred
Stock issued in consideration therefor upon the surrender of such certificates
in accordance with Section 2.7 (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 2.10).
(c) Cancellation. Each share of Mixman Common Stock held in the treasury
------------
of Mixman immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(d) Fractional Shares. No certificates or scrip representing fractional
-----------------
shares of Beatnik shall be issued in connection with the Merger, and such
fractional share interests will be
-11-
canceled and thereafter will not entitle the owner thereof to vote or to any
rights as a stockholder of Beatnik.
(e) Dissenting Shares. Notwithstanding anything in this Agreement to the
-----------------
contrary, shares of Mixman capital stock issued and outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who has demanded appraisal for
such shares in accordance with Section 1300 of the CCC, if such Section provides
for appraisal rights for such shares in the Merger ("Dissenting Shares"), shall
not be converted into the right to receive shares of capital stock of Beatnik as
provided herein, unless and until such holder fails to perfect or withdraws or
otherwise loses his right to appraisal and payment under the CCC. If, after the
Effective Time, any such holder fails to perfect or withdraws or loses his right
to appraisal, then such Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive shares of
capital stock of Beatnik, if any, to which such holder is entitled, without
interest or dividends thereon. Mixman shall give Beatnik prompt notice of any
demands received by Mixman for appraisal of shares and, prior to the Effective
Time, Beatnik shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, Mixman
shall not, except with the prior written consent of Beatnik, make any payments
with respect to or settle or offer to settle, any such demands.
(f) Assumption of Mixman Options.
----------------------------
(i) At the Effective Time, each outstanding Mixman Option, whether
vested or unvested, shall be assumed by Beatnik and constitute an option to
acquire, on the same terms and conditions as were applicable under such
Mixman Option prior to the Effective Time, the number (rounded down to the
nearest whole number) of shares of Beatnik Common Stock as the holder of
the assumed Mixman Option would have been entitled to receive pursuant to
the Merger had such holder exercised the assumed Mixman Option in full
immediately prior to the Effective Time (not taking into account whether or
not such Mixman Option was in fact exercisable). Notwithstanding the
foregoing, effective and contingent upon the Closing, the agreement
governing the assumed Mixman Options (other than the Founders Options) held
by each of Xxxx Xxxxxxx and Xxxxxx Xxxxxxx shall be amended so that such
Mixman Options and Mixman Common Stock are 70% vested in the aggregate at
the Effective Time, and the unvested portion of such assumed Mixman Options
and Mixman Common Stock shall vest in three (3) equal installments six,
twelve and eighteen months following the Closing, pursuant to and in
accordance with amendments to the existing option agreements and founders
stock purchase agreements to be entered into between Beatnik and each of
Xxxx Xxxxxxx and Xxxxxx Xxxxxxx. Each assumed Mixman Option shall be
exercisable for shares of Beatnik Common Stock at a price per share equal
to (x) the aggregate exercise price for the Mixman Common Stock purchasable
pursuant to the assumed Mixman Option (not taking into account whether or
not such Mixman Option was in fact exercisable) divided by (y) the number
of shares of Beatnik Common Stock deemed purchasable pursuant to the
assumed Mixman Option (rounded down to the nearest whole cent) determined
in accordance with this Section 2.6(f). At and after the Effective Time,
Beatnik will honor all obligations with respect to the assumed Mixman
Options under the terms of the Stock Option Agreement and the
-12-
Mixman Option Plan governing the assumed Mixman Options as in effect on the
date hereof.
(ii) As soon as practicable after the Effective Time (but in any event
within thirty (30) calendar days) Beatnik shall deliver to each holder of
an outstanding Mixman Option an appropriate notice setting forth such
holder's rights pursuant thereto, and such Mixman Option shall otherwise
continue in effect on the same terms and conditions as were in effect prior
to the Effective Time. The notice shall include Beatnik's undertaking, at
the time of its initial public offering, to register all shares subject to
assumed Mixman Options on the same Form S-8 that Beatnik files for Beatnik
employees generally.
(g) Conversion of Mixman Convertible Debt. At the Effective Time,
-------------------------------------
holders of the Mixman Convertible Debt, if any, shall receive the number
(rounded to the nearest whole number) of shares of Merger Shares as such holders
of the Mixman Convertible Debt would have been entitled to receive pursuant to
the Merger had the Mixman Convertible Debt been converted in full to Mixman
Common Stock immediately prior to the Effective Time.
(h) Capital Stock of Merger Sub. At the Effective Time, each share of
---------------------------
Common Stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one (1) validly
issued, fully paid and nonassessable share of Common Stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(i) Adjustments. The number of shares of Beatnik Stock into which shares
-----------
of Mixman Stock are converted shall be subject to adjustment to reflect any
reclassification, exchange, substitution, stock split, stock dividend, or other
significant distribution by either of Beatnik or Mixman such that the Mixman
Stock shall be convertible into the number of shares of Beatnik Stock that would
have been received by the holders of such Mixman Stock if the Mixman Stock had
been converted to Beatnik Stock immediately prior to such event. In addition,
the number of shares of Beatnik Stock into which shares of Mixman Stock are
converted shall be subject to proportionate adjustment to the extent the Beatnik
or Mixman capitalization changes from that set forth on Exhibits E-1 and E-2.
-13-
2.7 Delivery of Certificates. At the Effective Time, Beatnik shall make
------------------------
available, and each holder of Mixman Stock shall be entitled to receive, subject
to Section 2.7(b) below, upon surrender to Beatnik or its representatives of any
certificate or certificates evidencing such Mixman Stock (the "Certificates")
for cancellation together with any reasonable supporting documentation requested
by Beatnik, including a tax identification number, the aggregate Merger Shares
into which such Mixman Stock shall have been converted in the Merger, and upon
such surrender of each Certificate and delivery by Beatnik of the aggregate
number of Merger Shares in exchange therefor, such Certificates shall forthwith
be canceled. Until so surrendered, each Certificate shall be deemed for all
corporate purposes to evidence ownership of the number of shares of Beatnik
Stock into which the Mixman Stock will have been converted.
2.8 Stock Transfer Book. At the Effective Time, the stock transfer books
-------------------
of Mixman shall be closed, and there shall be no further registration of
transfers of Mixman Stock thereafter on the records of Mixman.
2.9 No Further Ownership Rights in Shares of Mixman Stock. The shares of
-----------------------------------------------------
Beatnik Stock delivered upon the surrender for exchange of Mixman Stock in
accordance with the terms hereof, including, without limitation, the shares
delivered into escrow pursuant to Section 2.11 below, shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Mixman Stock, and there shall be no further registration of transfers of shares
of Mixman Stock which were outstanding immediately prior to the Effective Time
on the records of the Surviving Corporation. If, after the Effective Time, the
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 2.
2.10 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, Beatnik shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Beatnik Stock as
may be required pursuant to Section 2.6; provided, however, that Beatnik may,
-------- -------
in its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver an indemnity
and hold harmless agreement as indemnity against any claim that may be made
against Beatnik with respect to the Certificates alleged to have been lost,
stolen or destroyed.
2.11 Escrow of Merger Shares. Notwithstanding the provisions of this
-----------------------
Article 2, Beatnik shall place in escrow pursuant to the terms of the Escrow
Agreement that number of Merger Shares equal to 10% of the total Merger Shares
(the "Escrow Shares") allocated on a pro rata basis among all shareholders of
Mixman. In the event that the Merger is approved by the shareholders of Mixman
as provided herein, the shareholders of Mixman shall, without any further act of
any shareholder of Mixman, be deemed to have consented to and approved (i) the
use of the Escrow Shares as collateral for Mixman's indemnification obligations
under Article 9 in the manner set forth in the Escrow Agreement, (ii) the
appointment of Xxxx Xxxxxxx as the initial representative of the Mixman
shareholders (the "Seller Representative") under the Escrow Agreement and as the
attorney-in-fact and agent for and on behalf of each Mixman shareholder (other
than holders of Dissenting Shares), and the taking by the Seller Representative
of any and all actions and the making of any decisions required or permitted to
be taken by him under the
-14-
Escrow Agreement (including, without limitation, the exercise of the powers: to
authorize delivery of Escrow Shares in satisfaction of claims by Beatnik
Indemnified Parties; to agree to, negotiate, enter into settlements and
compromises of and demand arbitration and comply with orders of the courts and
awards of arbitrators with respect to such claims; to resolve any claim made
pursuant to Article 9 hereof; and to take all action necessary in the judgement
of the Seller Representative for the accomplishment of the foregoing), (iii)
reimbursement of the Seller Representative (from the remaining Escrow Property
or by each Seller) for the Seller Representative's reasonable, documented out of
pocket expenses in performing the functions specified in the Escrow Agreement
and in defending third party claims under Article 9 hereof, (iv) indemnification
by the Sellers of the Seller Representative against loss, damage liability and
expense that may be incurred by him arising out of or in connection with the
acceptance or administration of the Seller Representative's duties, except as
caused by his gross negligence or willful misconduct, and (v) to all of the
other terms, conditions and limitations in the Escrow Agreement.
2.12 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations.
2.13 Taking of Necessary Action; Further Action. Each of Beatnik and
------------------------------------------
Mixman will take all such reasonable lawful action as may be necessary or
appropriate in order to effect the Merger in accordance with this Agreement as
promptly as practicable. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest Surviving Corporation with full right, title and
possession to all the property, rights, privileges, power and franchises of
Mixman, the officers and directors of Beatnik and Mixman immediately prior to
the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF MIXMAN
----------------------------------------
Except as set forth on the disclosure letter supplied by Mixman and
attached to this Agreement as Annex 2 (the "Mixman Disclosure Schedule"), Mixman
makes the following representations and warranties to Beatnik and Merger Sub:
3.1 Organization of Mixman. Mixman is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of California.
Mixman has full corporate power and authority to conduct its Business as it is
presently being conducted and to own or lease, as applicable, its Assets. Mixman
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its Business or the ownership of
its properties and where the failure to be so qualified would have a Material
Adverse Effect on Mixman.
-15-
3.2 Capitalization of Mixman.
------------------------
(a) There are 10,000,000 shares of Mixman Common Stock authorized under
Mixman's Articles of Incorporation, 2,023,071 of which were issued and
outstanding as of October 5, 1999. There are 580,486 shares of Mixman Series A
Preferred Stock authorized under its Articles of Incorporation, all of which
were issued and outstanding as of October 5, 1999. Each share of Mixman Series A
Preferred Stock is convertible into one share of Mixman Common Stock. There are
175,000 shares of Mixman Series B Preferred Stock authorized under its Articles
of Incorporation, all of which were issued and outstanding as of October 5,
1999. Each share of Mixman Series B Preferred Stock is convertible into one
share of Mixman Common Stock. There are 416,667 shares of Mixman Series C
Preferred Stock authorized under its Articles of Incorporation, 336,662 of which
were issued and outstanding as of October 5, 1999. Each share of Mixman Series C
Preferred Stock is convertible into one share of Mixman Common Stock. Mixman has
no other stock authorized, issued or outstanding.
(b) As of October 5, 1999, 384,183 shares of Mixman Common Stock were
reserved for issuance upon the exercise of outstanding Mixman Options, and
192,686 shares of Mixman Common Stock were available for future grant of options
under the Mixman Option Plans.
(c) Except for the shares of Mixman Preferred Stock and Mixman Options
referred to above and the Mixman Convertible Debt, there are no options,
warrants, convertible securities or rights of any kind to purchase or otherwise
acquire any shares of capital stock or other securities of Mixman outstanding as
of October 5, 1999.
(d) All outstanding shares of Mixman Stock are, and any shares of Mixman
Common Stock issued upon conversion of any shares of Mixman Preferred Stock or
exercise and/or conversion of any Mixman Options or the Mixman Convertible Debt
will be upon conversion or exercise in accordance with the terms of the
applicable instrument, duly authorized, validly issued, fully paid and non-
assessable and not subject to any preemptive rights. All outstanding shares of
Mixman Stock, Mixman Options and the Mixman Convertible Debt have been issued in
compliance with all federal and state corporate and securities laws. Except for
the Mixman Convertible Debt, there are no bonds, debentures, notes or other
indebtedness of Mixman having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of Mixman may vote. Except as set forth above and as provided in
Mixman's Articles of Incorporation, there are no securities, options, warrants,
calls, rights, contracts, commitments, agreements, arrangements, obligations or
undertakings of any kind to which Mixman is a party, or by which Mixman is
bound, obligating Mixman to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Mixman or securities convertible or exchangeable thereafter or obligating
Mixman to issue, grant, extend or enter into any such security, option, warrant,
call, right, contract, commitment, agreement, arrangement, obligation or
undertaking. There are not any outstanding contractual obligations requiring
Mixman to repurchase, redeem or otherwise acquire any shares of capital stock of
Mixman.
3.3 Authorization. Mixman has all necessary corporate power and
-------------
authority to enter into this Agreement and the Ancillary Agreements to which it
is a party and has taken all corporate or other action necessary to consummate
the transactions contemplated hereby and
-16-
thereby and to perform its respective obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by Mixman, and this Agreement is,
and upon execution and delivery of each of the Ancillary Agreements to which
Mixman is a party, will be, a legal, valid and binding obligation of Mixman,
enforceable against Mixman in accordance with its terms, except that
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors.
3.4 Officers and Directors. Section 3.4 of the Mixman Disclosure
----------------------
Schedule contains a true,. Section 3.4 of the Mixman Disclosure Schedule
contains a true, correct and complete list of all the officers and directors of
Mixman.
3.5 Bank Accounts. Section 3.5 of the Mixman Disclosure Schedule
-------------
contains a list of all of Mixman's bank accounts, safe deposit boxes, and
related powers of attorney, and persons authorized to draw thereon or have
access thereto.
3.6 Subsidiaries, Etc. Mixman does not own or hold any equity interest of
-----------------
any kind in any Person.
3.7 Title to Assets. Except as set forth in Section 3.7 of the Mixman
---------------
Disclosure Schedule, Mixman has good and marketable fee simple title to its
Assets, and none of its Assets are subject to any Encumbrances.
3.8 Sufficiency of Assets. The Assets of Mixman constitute all of the
---------------------
assets, rights and properties, tangible or intangible, real or personal, which
are required for the operation of Mixman's Business as it is presently
conducted.
3.9 Fixtures and Equipment. Section 3.9 of the Mixman Disclosure
----------------------
Schedule contains an accurate list of all Fixtures and Equipment of Mixman where
the value of an individual item exceeds $25,000 or where the value of an
aggregate of similar items exceeds $50,000. All tangible assets and properties
which are part of Mixman's Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are usable in the ordinary course of
business.
3.10 Contracts.
---------
(a) Disclosure. Section 3.10 of the Mixman Disclosure Schedule sets
forth a complete and accurate list of all of Mixman's Contracts of the following
categories:
(i) Contracts not made in the ordinary course of business;
(ii) Manufacturing or joint development agreements;
(iii) License agreements or royalty agreements, whether Mixman is
the licensor or licensee thereunder, other than license agreements pursuant
to which Mixman licenses its intellectual property to third parties in the
ordinary course of its business;
(iv) Confidentiality and non-disclosure agreements (whether Mixman
is the beneficiary or the obligated party thereunder);
-17-
(v) Contracts made with independent contractors pursuant to which
Mixman has retained such contractor to engage in research relating to the
development of products for Mixman's business;
(vi) Contracts or commitments involving future expenditures or
Liabilities, actual or potential, in excess of $50,000 after the date
hereof or otherwise material to Mixman's Business or Assets;
(vii) Contracts or commitments relating to commission arrangements
with others, other than agreements with Mixman personnel entered into by
Mixman in the ordinary course of its business;
(viii) Employment contracts, consulting contracts and severance
agreements, including Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former
officers or directors of Mixman or (B) that will result in the payment or
the creation of any Liability to pay any severance, termination, "golden
parachute," or other similar payments to any present or former personnel
following termination of employment or otherwise as a result of the
consummation of the transactions contemplated by this Agreement;
(ix) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating
to an obligation to pay money, whether Mixman shall be the borrower, lender
or guarantor thereunder (excluding credit provided by Mixman in the
ordinary course of business to purchasers of its products and obligations
to pay vendors in the ordinary course of business and consistent with past
practice);
(x) Contracts containing covenants limiting the freedom of Mixman
or any officer, director, Employee or Affiliate of Mixman, to engage in any
line of business that relates directly or indirectly to Mixman's Business
or compete with any person in a business that relates directly or
indirectly to Mixman's Business;
(xi) Contracts that relate to corporate governance, voting on
transfer of equity securities, registration of securities under the
Securities Act or that grants any redemption or pre-emptive rights; and
(xii) Any other Contract material to Mixman's Business or Assets.
True, correct and complete copies of all of the Contracts listed in Section 3.10
of the Mixman Disclosure Schedule (the "Mixman Scheduled Contracts"), including
all amendments and supplements thereto, have been delivered to Beatnik.
(b) Absence of Defaults. All of the Mixman Scheduled Contracts are valid,
binding and enforceable in accordance with their terms with no existing (or to
the knowledge of Mixman, threatened) Default or dispute. Mixman has fulfilled,
or taken all action necessary to enable it to fulfill when due, all of its
material obligations under each of the Mixman Scheduled Contracts. To the
knowledge of Mixman, all parties to the Mixman Scheduled Contracts have complied
in all material respects with the provisions thereof and no party is in Default
thereunder. No notice
-18-
of any claim of Default with respect to the Mixman Scheduled Contracts has been
given to Mixman. Mixman has no reason to believe that the products or services
called for by any executory Mixman Scheduled Contract cannot be supplied in
accordance with the terms of such Mixman Scheduled Contract, including time
specifications, and no reason to believe that any unfinished Mixman Scheduled
Contract will, upon performance by Mixman, result in a loss to Mixman.
3.11 No Conflict or Violation; Consents. None of the execution, delivery
----------------------------------
or, subject to the approval and adoption of this Agreement and approval of the
Merger by Mixman's shareholders, performance of this Agreement or any Ancillary
Agreement, the consummation of the transactions contemplated hereby or thereby,
nor compliance by Mixman with any of the provisions hereof or thereof, will (a)
violate or conflict with any provision of its governing documents, (b) violate,
conflict with, or result in a breach of or constitute a default (with or without
notice of passage of time) under, or result in the termination of, or accelerate
the performance required by, or result in a right to terminate, accelerate,
modify or cancel under, or require a notice under, or result in the creation of
any Encumbrance upon any of its respective Assets under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, security interest or
other arrangement to which Mixman is a party or by which Mixman is bound or to
which any of its Assets are subject where the occurrence of any of the above-
described events or circumstances, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Mixman; or (c)
violate any applicable Regulation or Court Order. Except for (i) the proper
filing and certification by the proper authorities of the Agreement of Merger,
(ii) notice to and approval of Mixman's shareholders to the adoption of this
Agreement and the Merger as may be required under the CCC and (iii) such filings
as may be required to comply with federal and state securities laws, no notices
to, declaration, filing or registration with, approvals or consents of, or
assignments by, any Persons (including any federal, state or local governmental
or administrative authorities) are necessary to be made or obtained by Mixman in
connection with the execution, delivery or performance of this Agreement or any
Ancillary Agreement or the consummation of the transactions contemplated hereby
or thereby.
3.12 Financial Statements; Books and Records.
---------------------------------------
(a) The Mixman Financial Statements, which are attached hereto as Annex 3,
are complete and fairly present its assets, liabilities and financial condition
and results of operations indicated thereby in accordance with GAAP consistently
applied throughout the periods covered thereby except, as to the unaudited
financial statements, for ordinary year-end adjustments and the absence of
required footnotes.
(b) Mixman maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed with
management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of Mixman's financial statements in accordance with GAAP and
to maintain accountability for assets, (iii) access to assets is permitted only
in accordance with management's authorization and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
-19-
(c) Mixman has not engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts or funds
which have been and are reflected in its normally maintained Books and Records.
3.13 Absence of Certain Changes or Events. Since the Mixman Balance
------------------------------------
Sheet Date there has not been any:
(a) event resulting in a Material Adverse Effect on Mixman;
(b) failure by Mixman to operate its Business in the ordinary course so as
to use its commercially reasonable efforts to preserve its Business intact and
to preserve the continued services of its Employees and the goodwill of
suppliers, customers and others having business relations with Mixman or its
Representatives;
(c) resignation or termination of any officer of Mixman, or any increase
in the rate of compensation payable or to become payable to any officer or
director of Mixman, including the making of any loan to, or the payment, grant
or accrual of any bonus, incentive compensation, service award or other similar
benefit outside the ordinary course of business of Mixman to, any such Person;
(d) sale, transfer or lease of any properties or Assets of Mixman to, or
entrance by Mixman into of any Contract with, any Related Party;
(e) sale, assignment, license, transfer or encumbrance of any of Mixman's
Assets tangible or intangible, where the value of an individual item exceeds
$25,000 or where the value of an aggregate of similar items exceeds $50,000,
other than sales of products and services in the ordinary course of business and
consistent with past practice;
(f) change in accounting methods or practices by Mixman;
(g) revaluation by Mixman of any of its Assets, including writing off
notes or accounts receivable other than for which adequate reserves have been
established;
(h) damage, destruction or loss (whether or not covered by insurance)
which resulted in a Material Adverse Effect on Mixman;
(i) declaration, setting aside or payment of dividends or distributions in
respect of any stock of Mixman or any redemption, purchase or other acquisition
of any of Mixman's equity securities;
(j) cancellation of any indebtedness or waiver of any rights of
substantial value to Mixman, except in the ordinary course of business and
consistent with past practice;
(k) indebtedness incurred by Mixman for borrowed money or any commitment
to borrow money entered into by Mixman, or any loans made or agreed to be made
by Mixman;
-20-
(l) Liability incurred by Mixman except in the ordinary course of business
and consistent with past practice, or any increase or change in any assumptions
underlying or methods of calculating any bad debt, contingency or other
reserves;
(m) payment, discharge or satisfaction of any Liabilities of Mixman other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of Liabilities reflected or reserved against
in the Mixman Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the Mixman Balance Sheet Date;
(n) acquisition of any equity interest in any other Person; or
(o) agreement by Mixman to do any of the foregoing.
3.14 Liabilities. Mixman has no Liabilities or obligations (absolute,
-----------
accrued, contingent or otherwise) except (i) liabilities which are reflected and
properly reserved against in the Mixman Balance Sheet, (ii) liabilities incurred
in the ordinary course of business and consistent with past practice since the
Mixman Balance Sheet Date (all of which liabilities do not exceed $100,000 in
the aggregate) and (iii) liabilities arising under the Contracts (other than
obligations which are required to be reflected on a balance sheet prepared in
accordance with GAAP).
3.15 Litigation. There is no action, order, writ, injunction, judgment
----------
or decree outstanding or claim, suit, litigation, proceeding, investigation or
dispute (collectively, "Actions") pending or, to the knowledge of Mixman,
threatened or anticipated (i) against, relating to or affecting Mixman, any of
its Assets or any of its officers and directors as such, (ii) which seek to
enjoin or obtain damages in respect of the transactions contemplated hereby or
by the Ancillary Agreements or (iii) with respect to which there is a reasonable
likelihood of a determination which would prevent Mixman from consummating the
transactions contemplated hereby. No Action, if adversely determined against
Mixman, its directors or officers, or any other Person could reasonably be
expected to result in a loss to Mixman, individually or in the aggregate, in
excess of $25,000. To the knowledge of Mixman, there is no reasonable basis for
any Action, which if adversely determined against Mixman, its directors or
officers, or any other Person could reasonably be expected to result in a loss
to Mixman, individually or in the aggregate, in excess of $25,000. There are
presently no outstanding judgments, decrees or orders of any court or any
governmental or administrative agency against or affecting Mixman, its Business
or any of its Assets. There are no Court Orders or agreements with, or liens by,
any governmental authority relating to any environmental laws which regulate,
obligate, bind or in any way affect Mixman, its Business or any of its Assets.
3.16 Labor Matters.
-------------
(a) Mixman is not a party to any labor agreement with respect to its
Employees with any labor organization, group or association and has not
experienced any attempt by organized labor or its representatives to make Mixman
conform to demands of organized labor relating to its Employees or to enter into
a binding agreement with organized labor that would cover the Employees of
Mixman. There is no unfair labor practice charge or complaint against Mixman
-21-
pending before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other federal, state or local governmental agency
arising out of Mixman's activities, and Mixman has no knowledge of any facts or
information which would give rise thereto. To the knowledge of Mixman there is
no labor strike or labor disturbance pending or threatened against Mixman nor is
any grievance currently being asserted against it. Mixman has not experienced a
work stoppage or other labor difficulty. There are no material controversies
pending or, to the knowledge of Mixman, threatened between Mixman and any of its
Employees, and Mixman is not aware of any facts which could reasonably result in
any such controversy.
(b) Mixman is in material compliance with all applicable Regulations
respecting employment practices, terms and conditions of employment, wages and
hours, equal employment opportunity, and the payment of social security and
similar taxes, and is not engaged in any unfair labor practice. Mixman is not
liable for any claims for past due wages or any penalties for failure to comply
with any of the foregoing.
3.17 Employee Benefit Plans.
----------------------
(a) Section 3.17(a) of the Mixman Disclosure Schedule contains a list of
all "employee pension benefit plans" (as defined in Section 3(2) of ERISA)
(sometimes referred to herein as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(l) of ERISA) and all other Benefit Plans
maintained or contributed to by Mixman or any person or entity that, together
with Mixman, is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code (a "Commonly Controlled Entity") for the benefit of any current
or former officers, directors or employees of Mixman. Mixman has made available
to Beatnik true, complete and correct copies of (i) each Benefit Plan (or, in
the case of any unwritten Benefit Plans, descriptions thereof), (ii) the most
recent annual report on Form 5500 required to be filed with the Internal Revenue
Service (the "IRS") with respect to each Benefit Plan (if any such report was
required), (iii) the most recent summary plan description for each Benefit Plan
for which such summary plan description is required and (iv) each trust
agreement and group annuity contract relating to any Benefit Plan. Each Benefit
Plan has been administered in accordance with its terms, except where the
failure to so administer would not, individually or in the aggregate, have a
Material Adverse Effect on Mixman. Mixman and all the Benefit Plans are all in
compliance with applicable provisions of ERISA and the Code, except for
instances of possible noncompliance that would not, individually or in the
aggregate, have a Material Adverse Effect on Mixman.
(b) Each of the Pension Plans has been the subject of a determination
letter (or its equivalent) from the IRS to the effect that such Pension Plan is
qualified and exempt from United States Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, and no such determination letter
(or its equivalent) has been revoked nor has any event occurred since the date
of its most recent determination letter (or its equivalent) or application
therefor that would adversely affect its qualification or materially increase
its costs.
(c) Neither Mixman nor any Commonly Controlled Entity of Mixman has
maintained, contributed to or been obligated to contribute to any Benefit Plan
that is subject to Title IV of ERISA.
-22-
(d) Mixman has made available to Beatnik a list of all options to
purchase shares of Mixman Common Stock issued under the Mixman Option Plan
outstanding as of September 17, 1999, indicating for each such option (i) the
number of shares issuable, (ii) the number of vested shares, (iii) the date of
expiration and (iv) the exercise price.
(e) No director, officer or employee of Mixman will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement or any benefits under any
Benefits Plan the value of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
3.18 Transactions with Related Parties. To the knowledge of Mixman no
---------------------------------
Related Party has (a) borrowed or loaned money or other property to Mixman,
other than the Mixman Convertible Debt, which has not been repaid or returned,
(b) any contractual or other claims, express or implied, of any kind whatsoever
against Mixman, or (c) has any interest in any property used by Mixman in its
Business.
3.19 Compliance with Law. Mixman has conducted its Business in
-------------------
Mixman has conducted its Business in material compliance with all
applicable Regulations and Court Orders. Mixman has not received any notice to
the effect that, or has otherwise been advised that, Mixman is not in compliance
with any such Regulations or Court Orders, and Mixman does not have any reason
to anticipate that any existing circumstances are likely to result in any
material violation of any of the foregoing.
3.20 Intellectual Property.
---------------------
(a) General. Section 3.20 of the Mixman Disclosure Schedule accurately
-------
sets forth, with respect to Mixman's Intellectual Property: (i) for each patent,
the number, normal expiration date, title and priority information for each
country in which such patent has been issued and, for each patent application,
the application number, date of filing, title and priority information for each
country, (ii) for each trademark, trade name or service xxxx, whether or not
registered, the date first used, any application serial number or registration
number, the class of goods covered, the nature of the goods or services, the
countries in which the names or xxxx is used and the expiration date for each
country in which a trademark has been registered, (iii) for each copyright for
which registration has been sought, whether or not registered, the date of
creation and first publication of the work, the number and date of registration
for each country in which a copyright application has been registered, (iv) for
each mask work, whether or not registered, the date of first commercial
exploitation and if registered, the registration number and date of registration
and (v) for all Proprietary Rights in the form of licenses, the same information
for the type of Intellectual Property that is set forth above, plus the name of
the owner, the name of the licensor (if different from the owner) and the date
of the license. A true and correct copy (as amended to date) of each of the
items listed in Section 3.20 of the Mixman Disclosure Schedule (including all
pending applications, application related documents and materials and written
license agreements has been provided to Beatnik.
(b) Adequacy. To its knowledge, Mixman's Proprietary Rights are all
--------
those necessary for the normal conduct of its Business as presently conducted,
including the design, manufacture, sale and use of all products offered by
Mixman.
-23-
(c) Royalties and Licenses. To its knowledge, Mixman has no obligation
----------------------
to compensate any Person for the use of any of the Proprietary Rights necessary
to conduct its Business as presently conducted nor has Mixman granted to any
Person any license, option or other rights to use in any manner any of its
Intellectual Property, whether requiring the payment of royalties or not, except
for license agreements pursuant to which Mixman licenses its Intellectual
Property to third parties in the ordinary course of its business.
(d) Ownership. To its knowledge, Mixman owns or has a valid rights to
---------
its Intellectual Property (including without limitation, the Intellectual
Property set forth in Section 3.20 of the Mixman Disclosure Schedule). Mixman's
Proprietary Rights will not cease in any manner or become diminished or diluted
by reason of the execution, delivery and performance of this Agreement or the
Ancillary Agreements or the consummation of the transactions contemplated hereby
or thereby. To its knowledge, Mixman's Intellectual Property is free from any
security interest, lien, encumbrance or other restriction and is not subject to
any outstanding injunction, judgement, order decree, ruling or charge.
(e) Absence of Claims. Mixman has not received notice of (A) alleged
-----------------
invalidity with respect to any of Mixman's Proprietary Rights (including a
challenge to the underlying Intellectual Property) or (B) alleged infringement
of any rights of others due to any activity by Mixman. To the knowledge of
Mixman, Mixman's use of its Proprietary Rights in its past, current and planned
products do not and would not infringe upon or otherwise violate the valid
rights of any third party anywhere in the world. No other Person has notified
Mixman that it is claiming any ownership of or right to use any of Mixman's
Proprietary Rights.
(f) Protection of Proprietary Rights. Mixman has taken reasonable steps
--------------------------------
necessary, customary or appropriate (including, entering into appropriate
assignment, confidentiality and nondisclosure agreements with officers,
directors, consultants, contractors, vendors, Employees, licensees and customers
in connection with Mixman's Assets and Business) to safeguard and maintain
Mixman's interest in the Intellectual Property used in Mixman's Business.
3.21 Tax Matters.
-----------
(a) Filing of Tax Returns. Mixman has timely filed with the appropriate
---------------------
taxing authorities all Tax Returns in respect of Taxes required to be filed
prior to the date hereof. The Tax Returns filed are complete and accurate in
all material respects. Mixman has not requested any extension of time within
which to file Tax Returns in respect of any Taxes. Mixman has delivered to
Beatnik complete and accurate copies of its respective federal, state and local
Tax Returns for the years ended December 31, 1997 and 1998.
(b) Payment of Taxes. All Taxes due from Mixman, or for which it could
----------------
be liable, in respect of periods beginning before the Closing Date have been
timely paid or an adequate reserve has been established therefor, and Mixman has
no material Liability for Taxes in excess of the amounts so paid or reserves so
established. All Taxes that Mixman is required by law to withhold or collect
have been duly withheld or collected and have been timely paid over to the
appropriate governmental authorities to the extent due and payable.
-24-
(c) Audits, Investigations or Claims. There are no pending or, to the
--------------------------------
knowledge of Mixman, threatened audits, assessments or other Actions for or
relating to any Liability in respect of Taxes of Mixman, and there are no
matters under discussion with any governmental authorities, or known to Mixman,
with respect to Taxes that are likely to result in an additional Liability for
Taxes. No extension of a statute of limitations relating to Taxes is in effect
with respect to Mixman.
(d) Lien. There are no Encumbrances for Taxes (other than for current
----
Taxes not yet due and payable) on any of Mixman's Assets.
(e) Prior Affiliated Groups. Mixman has never been a member of an
-----------------------
affiliated group of corporations within the meaning of Section 1504 of the Code.
(f) Tax Sharing Agreements. There are no Tax-sharing agreements or
----------------------
similar arrangements (including indemnity arrangements) with respect to or
involving Mixman, and, after the Closing Date, Mixman shall not be bound by any
such Tax-sharing agreements or similar arrangements (entered into prior to the
Closing) or have any Liability thereunder for amounts due in respect of periods
prior to the Closing Date.
(g) Partnerships. Mixman does not have an interest in and is not subject
------------
to any joint venture, partnership, or other arrangement or contract which is
treated as a partnership for federal income tax purposes.
(h) Foreign Person. For purposes of withholding under Section 1445 of
--------------
the Code, Mixman is not a "foreign person" as defined in Section 1445(f)(3) of
the Code.
(i) U.S. Real Property Holding Corporation. Mixman is not and has never
--------------------------------------
been a United States real property holding corporation as defined in Section
897(c)(2) of the Code.
(j) No Withholding. The transaction contemplated herein is not subject
--------------
to the tax withholding provisions of Section 3406 of the Code, or of Subchapter
A of Chapter 3 of the Code or of any other provision of law.
3.22 Insurance. Section 3.22 of the Mixman Disclosure Schedule contains a
---------
complete and accurate list of all policies or binders of insurance (showing as
to each policy or binder the carrier, policy number, coverage limits, expiration
dates, annual premiums, a general description of the type of coverage provided
and any pending claims thereunder) of which Mixman is the owner, insured or
beneficiary. Such policies are sufficient for (i) compliance with any insurance
requirements imposed by applicable Regulations and any of the Mixman Contracts,
(ii) covering all reasonably foreseeable damage to and liabilities or
contingencies relating to Mixman's conduct of its Business and (iii) providing
replacement cost insurance coverage for all of its material Assets, Fixtures and
Equipment and all material leasehold improvements. Mixman is not in default
under any of such policies or binders, and it has not failed to give any notice
or to present any claim under any such policy or binder in a due and timely
fashion. There are no facts known to Mixman upon which an insurer might
reasonably be justified in reducing or denying coverage or increasing premiums
on existing policies or binders. There are no outstanding unpaid claims under
any such policies or binders. Such policies and binders are in
-25-
full force and effect on the date hereof and shall be kept in full force and
effect by Mixman through the Closing Date.
3.23 Accounts Receivable. The accounts and notes receivable reflected in
-------------------
the Mixman Balance Sheet, and all accounts or notes receivable arising since the
Mixman Balance Sheet Date, represent bona fide claims against debtors for sales,
services performed or other charges arising on or before the date of recording
thereof, and all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts or customer requirements. To the knowledge of Mixman, all such
receivables are fully collectible in the ordinary course of business.
3.24 Inventory. The value at which the Inventory is shown on the
---------
Mixman Balance Sheet has been determined in accordance with the normal valuation
policy of Mixman, consistently applied and in accordance with GAAP. The
Inventory of Mixman consists only of items of quality and quantity commercially
usable and salable in the ordinary course of business, except for any items of
obsolete material or material below standard quality, all of which have been
written down to realizable market value, or for which adequate reserves have
been provided, and the present quantity of all Inventory is reasonable in the
present circumstances of Mixman's Business.
3.25 Environmental Matters. To the knowledge of Mixman, Mixman is
---------------------
not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to the knowledge of Mixman,
no material expenditures are or will be required in order to comply with any
such existing statute, law or regulation.
3.26 Brokers; Transaction Costs. Mixman has not entered into and will
--------------------------
not enter into any contract, agreement, arrangement or understanding with any
Person which will result in the obligation of Beatnik to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby.
3.27 "Market Stand-Off" Agreement. Each Mixman shareholder, option holder
---------------------------
and warrant holder is bound by an agreement that such shareholder, option holder
or warrant holder will not, to the extent requested by Mixman or any successor
thereof, or an underwriter of securities of Mixman or any successor thereof,
sell or otherwise transfer or dispose of such shareholder's, option holder's or
warrant holder's Mixman shares (or any shares issued in exchange therefore)
(with certain exceptions for transfers to donees or partners of the shareholder
who agree to be similarly bound) for up to one hundred eigthty (180) days
following the effective date of a registration statement filed under the
Securities Act; provided that such agreement shall be applicable only to the
first such registration statement of Mixman or any successor thereof, which
covers securities to be sold on its behalf to the public in an underwritten
offering; and provided further, that all officers and directors of Mixman or any
successor thereof, and all the holders of more than one percent (1%) of the
Common Stock of Mixman or any successor thereof, enter into similar agreements.
-26-
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF BEATNIK
-----------------------------------------
Except as set forth on the disclosure letter supplied by Beatnik and
attached to this Agreement as Annex 4 (the "Beatnik Disclosure Schedule"),
Beatnik and Merger Sub represent and warrant to Mixman as follows:
4.1 Organization of Beatnik. Each of Beatnik and Merger Sub is a
-----------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California. Each of Beatnik and Merger Sub has full corporate
power and authority to conduct its Business as it is presently being conducted
and to own or lease, as applicable, its Assets. Each of Beatnik and Merger Sub
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its Business or the ownership of
its properties and where the failure to be so qualified would have a Material
Adverse Effect on Beatnik and Merger Sub.
4.2 Capitalization of Beatnik and Merger Sub.
----------------------------------------
(a) There are 40,000,000 shares of Beatnik Common Stock authorized under
Beatnik's Restated Articles, 7,065,109 of which were issued and outstanding as
of September 17, 1999, and 25,530 shares of which were reserved for issuance
pursuant to certain of the Beatnik warrants. There are 3,709,971 shares of
Beatnik Series A Preferred Stock authorized under its Restated Articles, all of
which are issued and outstanding. Each share of Beatnik Series A Preferred Stock
is convertible into 1.0 share of Beatnik Common Stock. There are 1,309,523
shares of Beatnik Series B Preferred Stock authorized under its Restated
Articles, all of which are issued and outstanding. Each share of Beatnik Series
B Preferred Stock is convertible into 1.0 share of Beatnik Common Stock. There
are 10,500,000 shares of Beatnik Series C Preferred Stock authorized under its
Restated Articles, 9,439,991 of which were issued and outstanding as of
September 17, 1999, and 333,888 shares of which were reserved for issuance
pursuant to certain of the Beatnik Warrants. Each share of Beatnik Series C
Preferred Stock is convertible into 1.0 share of Beatnik Common Stock. As of the
Closing there will be such number of shares of Beatnik Series D-1 Preferred
Stock and Beatnik Series D-2 Preferred Stock authorized under Beatnik's Restated
Articles as are necessary for the conversion of the Mixman Preferred Stock, none
of which will be issued and outstanding prior to the Closing. There are
additional shares of Beatnik Preferred Stock authorized under its Restated
Articles, none of which are designated, issued and outstanding. Beatnik has no
other stock authorized, issued or outstanding.
(b) As of September 17, 1999, 2,076,688 shares of Beatnik Common Stock
were reserved for issuance upon the exercise of outstanding Beatnik Options, and
59,346 shares of Beatnik Common Stock were available for future grant of options
under the Beatnik Option Plan.
(c) Except for the shares of Beatnik Preferred Stock, Beatnik Warrants
and Beatnik Options referred to above, there are no options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any shares of capital stock or other securities of Beatnik outstanding as of
September 17, 1999.
-27-
(d) All outstanding shares of Beatnik Stock are, and any shares of
Beatnik Stock issued upon conversion of any shares of Beatnik Preferred Stock or
exercise and/or conversion of any Beatnik Options or Beatnik Warrants will be
upon conversion or exercise in accordance with the terms of the applicable
instrument, duly authorized, validly issued, fully paid and non-assessable and
not subject to any preemptive rights. All outstanding shares of Beatnik Stock,
Beatnik Options and Beatnik Warrants have been issued in compliance with all
federal and state corporate and securities laws. There are no bonds, debentures,
notes or other indebtedness of Beatnik having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which shareholders of Beatnik may vote. Except as set forth above and as
provided in Beatnik's Restated Articles, there are no securities, options,
warrants, calls, rights, contracts, commitments, agreements, arrangements,
obligations or undertakings of any kind to which Beatnik is a party, or by which
Beatnik is bound, obligating Beatnik to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of Beatnik or securities convertible or exchangeable thereafter or
obligating Beatnik to issue, grant, extend or enter into any such security,
option, warrant, call, right, contract, commitment, agreement, arrangement,
obligation or undertaking. There are not any outstanding contractual obligations
requiring Beatnik to repurchase, redeem or otherwise acquire any shares of
capital stock of Beatnik.
(e) There are 1,000 shares of Common Stock authorized under Merger Sub's
Articles of Incorporation, all of which were issued and outstanding as of
September 17, 1999. Except for the shares of Merger Sub Common Stock referred to
above, there are no options, warrants, convertible securities or rights of any
kind to purchase or otherwise acquire any shares of capital stock or other
securities of Merger Sub outstanding as of September 17, 1999. All outstanding
shares of Merger Sub Common Stock are duly authorized, validly issued, fully
paid and non-assessable and not subject to any preemptive rights.
4.3 Authorization. Each of Beatnik and Merger Sub has all necessary
-------------
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party and has taken all corporate or other action
necessary to consummate the transactions contemplated hereby and thereby and to
perform its respective obligations hereunder and thereunder. This Agreement has
been duly executed and delivered by each of Beatnik and Merger Sub, and this
Agreement is, and upon execution and delivery of each of the Ancillary
Agreements to which Beatnik or Merger Sub is a party, will be, a legal, valid
and binding obligation of Beatnik or Merger Sub, as the case may be, enforceable
against Beatnik or Merger Sub in accordance with its terms, except that
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors.
4.4 Officers and Directors. Section 4.4 of the Beatnik Disclosure
----------------------
Schedule contains a true, correct and complete list of all the officers and
directors of Beatnik and all the officers and directors of Merger Sub.
4.5 Subsidiaries, Etc. Beatnik does not own or hold any equity interest
------------------
of any kind in any Person other than Merger Sub. Merger Sub does not own or hold
any equity interest of any kind in any other Person.
-28-
4.6 Title to Assets. Except as set forth in Section 4.6 of the Beatnik
---------------
Disclosure Schedule, Beatnik has good and marketable fee simple title to its
Assets, and none of its Assets are subject to any Encumbrances. Merger Sub has
no material assets or liabilities.
4.7 Sufficiency of Assets. The Assets of Beatnik constitute all of the
---------------------
assets, rights and properties, tangible or intangible, real or personal, which
are required for the operation of Beatnik's Business as it is presently
conducted.
4.8 Contracts.
---------
(a) Disclosure. Section 4.8 of the Beatnik Disclosure Schedule sets
forth a complete and accurate list of all of Beatnik's Contracts of the
following categories:
(i) Contracts not made in the ordinary course of business;
(ii) Manufacturing or joint development agreements;
(iii) License agreements or royalty agreements, whether Beatnik is
the licensor or licensee thereunder, other than license
agreements pursuant to which Beatnik licenses its intellectual
property to third parties in the ordinary course of its
business;
(iv) Confidentiality and non-disclosure agreements (whether Beatnik
is the beneficiary or the obligated party thereunder);
(v) Contracts made with independent contractors pursuant to which
Beatnik has retained such contractor to engage in research
relating to the development of products for Beatnik's business;
(vi) Contracts or commitments involving future expenditures or
Liabilities, actual or potential, in excess of $50,000 after
the date hereof or otherwise material to Beatnik's Business or
Assets;
(vii) Contracts or commitments relating to commission arrangements
with others, other than agreements with Beatnik personnel
entered into by Beatnik in the ordinary course of its business;
(viii) Employment contracts, consulting contracts and severance
agreements, including Contracts (A) to employ or terminate
executive officers or other personnel and other contracts with
present or former officers or directors of Beatnik or (B) that
will result in the payment or the creation of any Liability to
pay any severance, termination, "golden parachute," or other
similar payments to any present or former personnel following
termination of employment or otherwise as a result of the
consummation of the transactions contemplated by this
Agreement;
(ix) Promissory notes, loans, agreements, indentures, evidences of
indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether
Beatnik shall be the borrower, lender or guarantor thereunder
(excluding credit provided by Beatnik in the ordinary course of
business to purchasers of
-29-
its products and obligations to pay vendors in the ordinary course of
business and consistent with past practice);
(x) Contracts containing covenants limiting the freedom of Beatnik
or any officer, director, Employee or Affiliate of Beatnik, to engage in
any line of business that relates directly or indirectly to Beatnik's
Business or compete with any person in a business that relates directly or
indirectly to Beatnik's Business;
(xi) Contracts that relate to corporate governance, voting on
transfer of equity securities, registration of securities under the
Securities Act or that grants any redemption or pre-emptive rights; and
(xii) Any other Contract material to Beatnik's Business or Assets.
True, correct and complete copies of all of the Contracts listed in Section 4.8
of the Beatnik Disclosure Schedule (the "Beatnik Scheduled Contracts"),
including all amendments and supplements thereto, have been delivered to Mixman.
(b) Absence of Defaults. All of the Beatnik Scheduled Contracts are valid,
binding and enforceable in accordance with their terms with no existing (or to
the knowledge of Beatnik, threatened) Default or dispute. Beatnik has fulfilled,
or taken all action necessary to enable it to fulfill when due, all of its
material obligations under each of the Beatnik Scheduled Contracts. To the
knowledge of Beatnik, all parties to the Beatnik Scheduled Contracts have
complied in all material respects with the provisions thereof and no party is in
Default thereunder. No notice of any claim of Default with respect to the
Beatnik Scheduled Contracts has been given to Beatnik. Beatnik has no reason to
believe that the products or services called for by any executory Beatnik
Scheduled Contract cannot be supplied in accordance with the terms of such
Beatnik Scheduled Contract, including time specifications, and no reason to
believe that any unfinished Beatnik Scheduled Contract will, upon performance by
Beatnik, result in a loss to Beatnik.
4.9 No Conflict or Violation; Consents. None of the execution, delivery
----------------------------------
or, subject to the approval and adoption of this Agreement and approval of the
Merger by Beatnik's or Merger Sub's shareholders, performance of this Agreement
or any Ancillary Agreement, the consummation of the transactions contemplated
hereby or thereby, nor compliance by Beatnik or Merger Sub with any of the
provisions hereof or thereof, will (a) violate or conflict with any provision of
their respective governing documents, (b) violate, conflict with, or result in a
breach of or constitute a default (with or without notice of passage of time)
under, or result in the termination of, or accelerate the performance required
by, or result in a right to terminate, accelerate, modify or cancel under, or
require a notice under, or result in the creation of any Encumbrance upon any of
their respective Assets under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, security interest or other arrangement to
which Beatnik or Merger Sub is a party or by which Beatnik or Merger Sub is
bound or to which any of its Assets are subject where the occurrence of any of
the above described events or circumstances, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Beatnik, or
(c) violate any applicable Regulation or Court Order. Except for (i) the proper
filing and certification by the proper authorities of the Agreement of Merger,
(ii) notice to and approval of
-30-
Beatnik's and Merger Sub's shareholders to the adoption of this Agreement and
the Merger as may be required under the CCC, and (iii) such filings as may be
required to comply with federal and state securities laws, no notices to,
declaration, filing or registration with, approvals or consents of, or
assignments by, any Persons (including any federal, state or local governmental
or administrative authorities) are necessary to be made or obtained by Beatnik
or Merger Sub in connection with the execution, delivery or performance of this
Agreement or any Ancillary Agreement or the consummation of the transactions
contemplated hereby or thereby.
4.10 Financial Statements; Books and Records.
---------------------------------------
(a) The Beatnik Financial Statements, which are attached hereto as Annex
5, are complete and fairly present its assets, liabilities and financial
condition and results of operations indicated thereby.
(b) Beatnik maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed with
management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of Beatnik's financial statements in accordance with GAAP and
to maintain accountability for assets, (iii) access to assets is permitted only
in accordance with management's authorization and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(c) Beatnik has not engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in its normally maintained Books and
Records.
4.11 Absence of Certain Changes or Events. Since the Beatnik Balance
------------------------------------
Sheet Date there has not been any:
(a) event resulting in a Material Adverse Effect on Beatnik;
(b) failure by Beatnik to operate its Business in the ordinary course so
as to use its commercially reasonable efforts to preserve its Business intact
and to preserve the continued services of its Employees and the goodwill of
suppliers, customers and others having business relations with Beatnik or its
Representatives;
(c) resignation or termination of any officer of Beatnik, or any increase
in the rate of compensation payable or to become payable to any officer or
director of Beatnik, including the making of any loan to, or the payment, grant
or accrual of any bonus, incentive compensation, service award or other similar
benefit outside the ordinary course of business of Beatnik to, any such Person;
(d) sale, transfer or lease of any properties or Assets of Beatnik to, or
entrance by Beatnik into of any Contract with, any Related Party;
(e) sale, assignment, license, transfer or encumbrance of any of
Beatnik's Assets tangible or intangible, where the value of an individual item
exceeds $25,000 or where the value
-31-
of an aggregate of similar items exceeds $50,000, other than sales of products
and services in the ordinary course of business and consistent with past
practice;
(f) change in accounting methods or practices by Beatnik;
(g) revaluation by Beatnik of any of its Assets, including writing off
notes or accounts receivable other than for which adequate reserves have been
established;
(h) damage, destruction or loss (whether or not covered by insurance)
which resulted in a Material Adverse Effect on Beatnik;
(i) declaration, setting aside or payment of dividends or distributions
in respect of any stock of Beatnik or any redemption, purchase or other
acquisition of any of Beatnik's equity securities;
(j) cancellation of any indebtedness or waiver of any rights of
substantial value to Beatnik, except in the ordinary course of business and
consistent with past practice;
(k) indebtedness incurred by Beatnik for borrowed money or any commitment
to borrow money entered into by Beatnik, or any loans made or agreed to be made
by Beatnik;
(l) Liability incurred by Beatnik except in the ordinary course of
business and consistent with past practice, or any increase or change in any
assumptions underlying or methods of calculating any bad debt, contingency or
other reserves;
(m) payment, discharge or satisfaction of any Liabilities of Beatnik
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of Liabilities reflected or reserved
against in the Beatnik Financial Statements or incurred in the ordinary course
of business and consistent with past practice since the Beatnik Balance Sheet
Date;
(n) acquisition of any equity interest in any other Person other than
Merger Sub; or
(o) agreement by Beatnik to do any of the foregoing.
4.12 Liabilities. Neither Beatnik nor Merger Sub has any Liabilities or
-----------
obligations (absolute, accrued, contingent or otherwise) except (i) liabilities
which are reflected and properly reserved against in the Beatnik Balance Sheet,
(ii) liabilities incurred in the ordinary course of business and consistent with
past practice since the Beatnik Balance Sheet Date (all of which liabilities do
not exceed $100,000 in the aggregate) and (iii) liabilities arising under the
Contracts (other than obligations which are required to be reflected on a
balance sheet prepared in accordance with GAAP).
4.13 Litigation. There are no Actions pending or, to the knowledge of
----------
of Beatnik, threatened or anticipated (i) against, relating to or affecting
Beatnik or Merger Sub, any of their Assets or any of their officers and
directors as such, (ii) which seek to enjoin or obtain damages in respect of the
transactions contemplated hereby or by the Ancillary Agreements or (iii) with
respect to which there is a reasonable likelihood of a determination which would
prevent Beatnik
-32-
or Merger Sub from consummating the transactions contemplated hereby. No
Action, if adversely determined against Beatnik or Merger Sub, their directors
or officers, or any other Person could reasonably be expected to result in a
loss to Beatnik or Merger Sub, individually or in the aggregate, in excess of
$50,000. To the knowledge of Beatnik or Merger Sub, there is no reasonable basis
for any Action, which if adversely determined against Beatnik or Merger Sub,
their directors or officers, or any other Person could reasonably be expected to
result in a loss to Beatnik or Merger Sub, individually or in the aggregate, in
excess of $50,000. There are presently no outstanding judgments, decrees or
orders of any court or any governmental or administrative agency against or
affecting Beatnik or Merger Sub, their Business or any of their Assets. There
are no Court Orders or agreements with, or liens by, any governmental authority
relating to any environmental laws which regulate, obligate, bind or in any way
affect Beatnik, Merger Sub, their Business or any of their Assets.
4.14 Labor Matters
-------------
(a) Beatnik is not a party to any labor agreement with respect to its
Employees with any labor organization, group or association and has not
experienced any attempt by organized labor or its representatives to make
Beatnik conform to demands of organized labor relating to its Employees or to
enter into a binding agreement with organized labor that would cover the
Employees of Beatnik. There is no unfair labor practice charge or complaint
against Beatnik pending before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other federal, state or local
governmental agency arising out of Beatnik's activities, and Beatnik has no
knowledge of any facts or information which would give rise thereto. To the
knowledge of Beatnik there is no labor strike or labor disturbance pending or
threatened against Beatnik nor is any grievance currently being asserted against
it. Beatnik has not experienced a work stoppage or other labor difficulty. There
are no material controversies pending or, to the knowledge of Beatnik,
threatened between Beatnik and any of its Employees, and Beatnik is not aware of
any facts which could reasonably result in any such controversy.
(b) Beatnik is in material compliance with all applicable Regulations
respecting employment practices, terms and conditions of employment, wages and
hours, equal employment opportunity, and the payment of social security and
similar taxes, and is not engaged in any unfair labor practice. Beatnik is not
liable for any claims for past due wages or any penalties for failure to comply
with any of the foregoing.
4.15 Employee Benefit Plans
----------------------
(a) Section 4.15(a) of the Beatnik Disclosure Schedule contains a list of
a Pension Plans, "employee welfare benefit plans" (as defined in Section 3(l) of
ERISA) and all other Benefit Plans maintained or contributed to by Beatnik or
any person or entity that, together with Beatnik, is treated as a Commonly
Controlled Entity for the benefit of any current or former officers, directors
or employees of Beatnik. Beatnik has made available to Beatnik true, complete
and correct copies of (i) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (ii) the most recent annual report on Form
5500 required to be filed with the IRS with respect to each Benefit Plan (if any
such report was required), (iii) the most recent summary plan description for
each Benefit Plan for which such summary plan description is required and (iv)
each trust agreement and group annuity contract relating to any Benefit Plan.
-33-
Each Benefit Plan has been administered in accordance with its terms, except
where the failure to so administer would not, individually or in the aggregate,
have a Material Adverse Effect on Beatnik. Beatnik and all the Benefit Plans are
all in compliance with applicable provisions of ERISA and the Code, except for
instances of possible noncompliance that would not, individually or in the
aggregate, have a Material Adverse Effect on Beatnik.
(b) Each of the Pension Plans has been the subject of a determination
letter (or its equivalent) from the IRS to the effect that such Pension Plan is
qualified and exempt from United States Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, and no such determination letter
(or its equivalent) has been revoked nor has any event occurred since the date
of its most recent determination letter (or its equivalent) or application
therefor that would adversely affect its qualification or materially increase
its costs.
(c) Neither Beatnik nor any Commonly Controlled Entity of Beatnik has
maintained, contributed to or been obligated to contribute to any Benefit Plan
that is subject to Title IV of ERISA.
(d) Beatnik has made available to Mixman a list of all options to
purchase shares of Beatnik Common Stock issued under the Beatnik Option Plan
outstanding as of September 17, 1999, indicating for each such option (i) the
number of shares issuable, (ii) the number of vested shares, (iii) the date of
expiration and (iv) the exercise price.
(e) No director, officer or employee of Beatnik will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement or any benefits under any
Benefits Plan the value of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
4.16 Transactions with Related Parties. To the knowledge of Beatnik and
---------------------------------
Merger Sub, no Related Party has (a) borrowed or loaned money or other property
to Beatnik or Merger Sub which has not been repaid or returned, (b) any
contractual or other claims, express or implied, of any kind whatsoever against
Beatnik or Merger Sub or (c) has any interest in any property used by Beatnik or
Merger Sub used in their Businesses.
4.17 Compliance with Law. Beatnik has conducted its Business in material
-------------------
compliance with all applicable Regulations and Court Orders. Beatnik has not
received any notice to the effect that, or has otherwise been advised that,
Beatnik is not in compliance with any such Regulations or Court Orders, and
Beatnik does not have any reason to anticipate that any existing circumstances
are likely to result in any material violation of any of the foregoing.
4.18 Intellectual Property.
---------------------
(a) General. Section 3.20 of the Beatnik Disclosure Schedule sets forth
-------
with respect to Beatnik's Proprietary Rights: (i) for each patent and patent
application, as applicable, the number, normal expiration date, title and
priority information for each country in which such patent has been issued, or,
the application number, date of filing, title and priority information for each
country, (ii) for each trademark, trade name or service xxxx, whether or not
registered, the date first used, the application serial number or registration
number, the class of goods
-34-
covered, the nature of the goods or services, the countries in which the names
or xxxx is used and the expiration date for each country in which a trademark
has been registered, (iii) for each copyright for which registration has been
sought, whether or not registered, the date of creation and first publication of
the work, the number and date of registration for each country in which a
copyright application has been registered, (iv) for each mask work, whether or
not registered, the date of first commercial exploitation and if registered, the
registration number and date of registration and (v) all such Proprietary Rights
in the form of licenses. True and correct copies of all Proprietary Rights
(including all pending applications and application related documents and
materials) owned, controlled or used by or on behalf of Beatnik or in which
Beatnik has any interest whatsoever have been provided to Beatnik.
(b) Adequacy. To its knowledge Beatnik's Proprietary Rights are all those
--------
necessary for the normal conduct of its Business as presently conducted and as
presently contemplated, including the design, manufacture and sale of all
products currently under development, planned for development or in production.
(c) Royalties and Licenses. To its knowledge Beatnik has no obligation to
----------------------
compensate any Person for the use of any of its Proprietary Rights necessary to
conduct its Business as presently conducted nor has Beatnik granted to any
Person any license, option or other rights to use in any manner any of its
Proprietary Rights, whether requiring the payment of royalties or not, except
for license arrangements pursuant to which Beatnik licenses its Intellectual
Property to third parties in the ordinary course of its business.
(d) Ownership. To its knowledge Beatnik owns or has a valid right to use
---------
its Proprietary Rights, and such Proprietary Rights will not cease to be valid
rights of Beatnik by reason of the execution, delivery and performance of this
Agreement or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby.
(e) Absence of Claims. Beatnik has not received notice of (A) alleged
-----------------
invalidity with respect to any of Beatnik's Proprietary Rights or (B) alleged
infringement of any rights of others due to any activity by Beatnik. To the
knowledge of Beatnik, Beatnik's use of its Proprietary Rights in its past,
current and planned products do not and would not infringe upon or otherwise
violate the valid rights of any third party anywhere in the world. No other
Person has notified Beatnik that it is claiming any ownership of or right to use
any of Beatnik's Proprietary Rights.
(f) Protection of Proprietary Rights. Beatnik has taken reasonable steps
--------------------------------
necessary or appropriate (including, entering into appropriate confidentiality
and nondisclosure agreements with officers, directors, subcontractors,
Employees, licensees and customers in connection with Beatnik's Assets and
Business) to safeguard and maintain Beatnik's interest in the Intellectual
Property used in Beatnik's Business.
4.19 Tax Matters.
-----------
(a) Filing of Tax Returns. Beatnik has timely filed with the appropriate
---------------------
taxing authorities all Tax Returns in respect of Taxes required to be filed
prior to the date hereof. The Tax Returns filed are complete and accurate in all
material respects. Beatnik has not requested any extension of time within which
to file Tax Returns in respect of any Taxes. Beatnik has
-35-
delivered to Beatnik complete and accurate copies of its respective federal,
state and local Tax Returns for the years ended December 31, 1997 and 1998.
(b) Payment of Taxes. All Taxes due from Beatnik, or for which it could
----------------
be liable, in respect of periods beginning before the Closing Date have been
timely paid or an adequate reserve has been established therefor, and Beatnik
has no material Liability for Taxes in excess of the amounts so paid or reserves
so established. All Taxes that Beatnik is required by law to withhold or collect
have been duly withheld or collected and have been timely paid over to the
appropriate governmental authorities to the extent due and payable.
(c) Audits, Investigations or Claims. There are no pending or, to the
--------------------------------
knowledge of Beatnik, threatened audits, assessments or other Actions for or
relating to any Liability in respect of Taxes of Beatnik, and there are no
matters under discussion with any governmental authorities, or known to Beatnik,
with respect to Taxes that are likely to result in an additional Liability for
Taxes. No extension of a statute of limitations relating to Taxes is in effect
with respect to Beatnik.
(d) Lien. There are no Encumbrances for Taxes (other than for current
----
Taxes not yet due and payable) on any of Beatnik's Assets.
(e) Prior Affiliated Groups. Beatnik has never been a member of an
-----------------------
affiliated group of corporations within the meaning of Section 1504 of the Code.
(f) Tax Sharing Agreements. There are no Tax-sharing agreements or
----------------------
similar arrangements (including indemnity arrangements) with respect to or
involving Beatnik, and, after the Closing Date, Beatnik shall not be bound by
any such Tax-sharing agreements or similar arrangements (entered into prior to
the Closing) or have any Liability thereunder for amounts due in respect of
periods prior to the Closing Date.
(g) Partnerships. Beatnik does not have an interest in and is not subject
------------
to any joint venture, partnership, or other arrangement or contract which is
treated as a partnership for federal income tax purposes.
(h) Foreign Person. For purposes of withholding under Section 1445 of the
--------------
Code, Beatnik is not a "foreign person" as defined in Section 1445(f)(3) of the
Code.
(i) U.S. Real Property Holding Corporation. Beatnik is not and has never
--------------------------------------
been a United States real property holding corporation as defined in Section
897(c)(2) of the Code.
(j) No Withholding. The transaction contemplated herein is not subject to
--------------
the tax withholding provisions of Section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code or of any other provision of law.
4.20 Insurance. Section 4.20 of the Beatnik Disclosure Schedule contains a
---------
complete and accurate list of all policies or binders of insurance (showing as
to each policy or binder the carrier, policy number, coverage limits, expiration
dates, annual premiums, a general description of the type of coverage provided
and any pending claims thereunder) of which Beatnik is the owner, insured or
beneficiary. Such policies are sufficient for (i) compliance with any insurance
-36-
requirements imposed by applicable Regulations and any of the Beatnik Contracts,
(ii) covering all reasonably foreseeable damage to and liabilities or
contingencies relating to Beatnik's conduct of its Business and (iii) providing
replacement cost insurance coverage for all of its material Assets, Fixtures and
Equipment and all material leasehold improvements. Beatnik is not in default
under any of such policies or binders, and it has not failed to give any notice
or to present any claim under any such policy or binder in a due and timely
fashion. There are no facts known to Beatnik upon which an insurer might
reasonably be justified in reducing or denying coverage or increasing premiums
on existing policies or binders. There are no outstanding unpaid claims under
any such policies or binders. Such policies and binders are in full force and
effect on the date hereof and shall be kept in full force and effect by Beatnik
through the Closing Date.
4.21 Accounts Receivable. The accounts and notes receivable reflected in
-------------------
the Beatnik Balance Sheet, and all accounts or notes receivable arising since
the Beatnik Balance Sheet Date, represent bona fide claims against debtors for
sales, services performed or other charges arising on or before the date of
recording thereof, and all the goods delivered and services performed which gave
rise to said accounts were delivered or performed in accordance with the
applicable orders, Contracts or customer requirements. To the knowledge of
Beatnik, all such receivables are fully collectible in the ordinary course of
business.
4.22 Inventory. The value at which the Inventory is shown on the
---------
Beatnik Balance Sheet has been determined in accordance with the normal
valuation policy of Beatnik consistently applied in accordance with GAAP. The
Inventory consists only of items of quality and quantity commercially usable and
salable in the ordinary course of business, except for any items of obsolete
material or material below standard quality, all of which have been written down
to realizable market value, or for which adequate reserves have been provided,
and the present quantity of all Inventory is reasonable in the present
circumstances of Beatnik's Business.
4.23 Environmental Matters. To the knowledge of Beatnik and Merger Sub,
---------------------
neither Beatnik nor Merger Sub is in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
the knowledge of Beatnik and Merger Sub, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
4.24 Brokers; Transaction Costs. Neither Beatnik nor Merger Sub has
--------------------------
entered into and will not enter into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of Beatnik or
Merger Sub to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.25 "Market Stand-Off" Agreement. Each Beatnik shareholder, option holder
----------------------------
and warrant holder is bound by an agreement that such shareholder, option holder
or warrant holder will not, to the extent requested by Beatnik or an underwriter
of securities of Beatnik, sell or otherwise transfer or dispose of such
shareholder's, option holder's or warrant holder's Beatnik shares (or any shares
issued in exchange therefore) (with certain exceptions for transfers to donees
or partners of the shareholder who agree to be similarly bound) for up to one
hundred eighty (180) days following the effective date of a registration
statement filed under the
-37-
Securities Act; provided that such agreement shall be applicable only to the
first such registration statement of Beatnik which covers securities to be sold
on its behalf to the public in an underwritten offering; and provided further,
that all officers and directors of Beatnik and all the holders of more than one
percent (1%) of the Common Stock of Beatnik enter into similar agreements.
ARTICLE 5
---------
ACTIONS BY MIXMAN, BEATNIK AND MERGER SUB
-----------------------------------------
PRIOR TO THE CLOSING; ADDITIONAL AGREEMENTS
-------------------------------------------
Mixman, Beatnik and Merger Sub covenant as follows for the period from the
date hereof through the Closing Date:
5.1 Conduct of Mixman's Business. From the date hereof through the
----------------------------
Closing, Mixman shall, except as contemplated by this Agreement, or as consented
to by Beatnik in writing, which consent shall not be unreasonably withheld,
operate Mixman's Business in the ordinary course of business and in accordance
with past practice and will not take any action inconsistent with this
Agreement, the Ancillary Agreements or the consummation of the Closing. Without
limiting the generality of the foregoing, Mixman shall not, except as
specifically contemplated by this Agreement or as consented to by Beatnik in
writing:
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse (other than endorsements for deposit or collection in the ordinary
course of business), or otherwise become responsible for obligations of any
other Person;
(b) issue (except pursuant to outstanding Mixman Options, Mixman Warrants
or Mixman Convertible Debt) or commit to issue any shares of its capital stock
or any other securities or any securities convertible into shares of its capital
stock or any other securities, including, without limitation, any options to
acquire capital stock, except for options granted to newly hired employees in
the ordinary course of business under existing plans that are reserved for
issuance as of the Mixman Balance Sheet Date;
(c) pay or incur any obligation to pay any dividend on its capital stock
or make or incur any obligation to make any distribution or redemption with
respect to capital stock;
(d) make any change to Mixman's Articles of Incorporation or Bylaws;
(e) mortgage, pledge or otherwise encumber any of Mixman's Assets or
sell, transfer, license or otherwise dispose of any of Mixman's material Assets
except for the sales and licensing of Mixman's products and services in the
ordinary course of business and consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or any claims
or rights held by it, except in the ordinary course of business and consistent
with past practice;
-38-
(g) make any investment of a capital nature either by purchase of stock
or securities, contributions to capital, property transfer or otherwise, or by
the purchase of any property or assets of any other Person;
(h) terminate any material Contract or make any material change in any
material Contract;
(i) hire any new Employee, enter into or modify any employment Contract,
pay or agree to pay any compensation to or for any Employee, officer or director
other than in the ordinary course of business and consistent with past practice,
pay or agree to pay any bonus, incentive compensation, service award or other
like benefit except for options granted to newly hired employees in the ordinary
course of business under existing plans that are reserved for issuance as of the
Mixman Balance Sheet Date, or enter into or modify any other Employee Plan;
(j) enter into or modify any Contract with a Related Party or enter into
or modify any Contract that is a license agreement (other than standard end user
license agreements), OEM agreement or "bundling" agreement or that is otherwise
material;
(k) make any change in any method of accounting or accounting practice
except as may be required by GAAP;
(l) fail to pursue the development and introduction of new products and
technology advances in connection with its Business on a basis consistent
with past practice;
(m) fail to comply with all Regulations applicable to Mixman's Assets and
Business consistent with past practices;
(n) fail to use its commercially reasonable efforts to (i) maintain
Mixman's Business, (ii) retain the Employees so that such Employees will remain
available to Beatnik on and after the Closing Date, (iii) maintain existing
relationships with suppliers and customers and others having business dealings
with Mixman and (iv) otherwise to preserve the goodwill of its Business so that
such relationships and goodwill will be preserved on and after the Closing Date;
or
(o) do any other act which would cause any representation or warranty of
Mixman in this Agreement to be or become untrue in any material respect or that
is not in the ordinary course of business consistent with past practice.
5.2 Conduct of Beatnik's Business. From the date hereof through the Closing,
-----------------------------
Beatnik shall, except as contemplated by this Agreement or as consented to by
Mixman in writing, which consent shall not be unreasonably withheld, operate
Beatnik's Business in the ordinary course of business and in accordance with
past practice and will not take any action inconsistent with this Agreement, the
Ancillary Agreements or the consummation of the Closing. Without limiting the
generality of the foregoing, Beatnik shall not, except as specifically
contemplated by this Agreement or as consented to by Mixman in writing or, with
respect to clauses (a) and (b), without notifying Mixman in writing:
-39-
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse (other than endorsements for deposit or collection in the ordinary
course of business), or otherwise become responsible for obligations of any
other Person, without notifying Mixman except for the credit line currently
under negotiation.
(b) cancel, release or assign any indebtedness owed to it or any claims
or rights held by it, except in the ordinary course of business and consistent
with past practice without notifying Mixman;
(c) issue (except pursuant to outstanding options, warrants or preferred
stock) or commit to issue any shares of its capital stock or any other
securities or any securities convertible into shares of its capital stock or any
other securities, including, without limitation, any options to acquire capital
stock, except for option grants to newly hired employees in the ordinary course
of business under existing plans that are reserved for issuance as of the
Beatnik Balance Sheet Date;
(d) pay or incur any obligation to pay any dividend on its capital stock
or make or incur any obligation to make any distribution or redemption with
respect to capital stock;
(e) make any change to Beatnik's Restated Articles or Bylaws, except as
necessary to permit the creation and issuance of the Merger Shares;
(f) mortgage, pledge or otherwise encumber any of Beatnik's material
Assets or sell, transfer, license or otherwise dispose of any of its material
Assets except for encumbrances of Assets and sales and licenses of products and
services in the ordinary course of business and consistent with past practice
and except for the lease line that Beatnik is currently negotiating;
(g) make any change in any method of accounting or accounting practice
except as may be required by GAAP;
(h) make any investment of a capital nature in excess of $100,000, either
by purchase of stock or securities, contributions to capital, property transfer
or otherwise, or by the purchase of any property or assets of any other Person;
(i) terminate any material Contract or make any material change in any
material Contract;
(j) enter into or modify any employment Contract, pay or agree to pay any
compensation to or for any Employee, officer or director, in each case other
than in the ordinary course of business and consistent with past practice, pay
or agree to pay any bonus, incentive compensation, service award or other like
benefit, except for option grants to newly hired employees in the ordinary
course of business under existing plans, or enter into or modify any other
Employee Plan other than the creation of a 401(k) Plan;
(k) enter into or modify any Contract with a Related Party; or
-40-
(l) knowingly do any other act which would cause any representation or
warranty of Beatnik in this Agreement to be or become untrue in any material
respect or that is not in the ordinary course of business consistent with past
practice.
5.3 Investigations. Subject to the Confidentiality Agreement, from the
--------------
date hereof through the Closing Date, Mixman shall, and shall cause its
officers, Employees and Representatives to, and Beatnik shall, and shall cause
its officers, Employees, Representatives and Merger Sub to, afford the
Representatives of the other party and its affiliates access upon reasonable
notice and at all reasonable times to its respective Business for the purpose of
inspecting the same, and to its officers, Employees and Representatives,
properties, books and records, Contracts and other Assets, and shall furnish the
other party and its Representatives, upon reasonable notice and in a timely
manner, all financial, operating and other data and information (including with
respect to Intellectual Property) as the other party or its affiliates, through
their respective Representatives, may reasonably request.
5.4 Notification of Certain Matters. Each party shall give prompt notice
-------------------------------
to the other of (i) the occurrence, or failure to occur, of any event which
occurrence or failure to occur would be likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect and (ii) any material failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that such disclosure shall not be deemed to
cure any breach of a representation, warranty, covenant or agreement or to
satisfy any condition. Mixman shall promptly notify Beatnik, and Beatnik shall
promptly notify Mixman, of any Default, the threat or commencement of any
Action, or any development that occurs before the Closing that could reasonably
be expected to result in a Material Adverse Effect on Beatnik or Mixman, as the
case may be.
5.5 No Mergers, Consolidations, Sale of Stock, Etc.; No Solicitation.
----------------------------------------------------------------
(a) Between the date hereof and the Effective Time, neither Mixman nor
any Representative thereof, shall directly or indirectly, solicit, initiate,
engage in or encourage any inquiries, offers or proposals, enter into or
continue or otherwise facilitate (by, among other things, affording access to
the properties, books or records of Mixman) any discussions, negotiations or
agreements relating to (i) the acquisition, merger or other business combination
of Mixman with, or the direct or indirect disposition (by sale, license or
otherwise, including the licensing of source code) of a substantial portion of
Mixman's Assets or Business to, any Person other than Beatnik or its Affiliates,
(iii) the licensing of Mixman's Intellectual Property to any Person other than
in the ordinary course of business consistent with past practice or (iv) the
provision of any assistance, cooperation or nonpublic information to any Person
in connection with any such inquiry, proposal or transaction. In the event an
acquisition, merger, other business combination or sale of assets proposal is
received by Mixman, Mixman shall (i) promptly notify any such offeror that
neither it nor its Assets are available for purchase or merger, (ii) shall
promptly notify Beatnik of any such proposal and provide full details, and (iii)
shall promptly provide to Beatnik any written materials relating in any manner
to any such proposal. Nothing in this Section 5.5(a) shall be interpreted or
applied to require Mixman or any representative thereof to violate their
fiduciary duties to the Mixman Shareholders.
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(b) Neither Beatnik, Mixman nor any Representative thereof, shall
directly or indirectly, take any action or permit any shareholder of Beatnik or
Mixman to take any action involving the solicitation for hire or the offering of
inducements or encouragement to any employee of the other party to leave his or
her employment with such party from the date hereof until February 28, 2001.
5.6 Publicity. Except as required by law or on advice of counsel, none
---------
of Mixman, Beatnik or Merger Sub shall issue any press release or make any
public statement regarding the transactions contemplated hereby without the
prior approval of the other party, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after the Closing Date.
5.7 Fairness Hearing; Joint Proxy Statement.
---------------------------------------
(a) As soon as reasonably practicable following the execution of this
Agreement, Beatnik and Mixman shall prepare the necessary documentation for, and
Beatnik shall apply to obtain, a permit (a "California Permit") from the
Commissioner of Corporations of the State of California (after a hearing before
such Department) pursuant to Section 25121 of the California Corporate
Securities Law of 1968 (the "California Statute"), so that the issuance of
Beatnik Common Stock and Beatnik Merger Preferred Stock and the assumption of
Mixman Options and the conversion of the Mixman Convertible Debt in the Merger
shall be exempt from registration under Section 3(a)(10) of the Securities Act
and the registration requirements of the CCC. Mixman and Beatnik will respond to
any comments from the California Department of Corporations and use their
commercially reasonable efforts to have the California Permit granted as soon as
practical after such filing. If Beatnik fails to obtain the California Permit,
Beatnik and Mixman shall use commercially reasonable efforts to identify and
satisfy an alternative exemption from the registration requirements of the
Securities Act and Beatnik will grant the Mixman shareholders registration
rights in order that the Mixman shareholders might have, as nearly as
practicable, the same opportunity to sell their Beatnik shares as Beatnik
preferred shareholders who invested at similar times or rendered services over a
comparable period. As promptly as practical after the date of this Agreement,
Beatnik and Mixman shall prepare and make such filings as are required under
applicable "blue sky" laws relating to the transactions contemplated by this
Agreement.
(b) Mixman shall take all actions necessary to submit, as promptly as
practicable after the receipt of a California Permit, this Agreement and the
transactions contemplated hereby, including without limitation the Merger, to
its shareholders for approval and adoption, by a vote at a duly called
shareholders meeting or by written consent, as provided by the CCC and Mixman's
Articles of Incorporation and Bylaws. Beatnik shall take all actions necessary
to submit, as promptly as practicable after receipt of a California Permit, this
Agreement to its shareholders for approval, by a vote at a duly called
shareholders meeting or by written consent, as provided by Beatnik's Restated
Articles and Bylaws. In connection therewith, Beatnik and Mixman shall cooperate
to prepare and deliver to their shareholders a proxy statement as required by
law (the "Joint Proxy Statement"). Beatnik, Mixman and their respective counsels
shall be afforded a reasonable opportunity to review and comment upon the
materials to be submitted to the shareholders of Mixman and the shareholders of
Beatnik, which shall include, without limitation, information regarding both
Beatnik and Mixman, the terms of the Merger and
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this Agreement and the recommendation of the Board of Directors of both Beatnik
and Mixman in favor of the Merger, this Agreement and the transactions
contemplated hereby. Mixman and Beatnik shall take all lawful action to solicit,
and use commercially reasonable efforts to obtain, the necessary approvals of
their respective shareholders.
5.8 Board of Directors. Prior to the Effective Time, a sufficient number
------------------
of Sellers (as defined in Section 9.2 hereof) and Beatnik shareholders shall
enter into a Voting Agreement in the form attached hereto as Exhibit F so as to
cause the individuals named in the Voting Agreement to be elected as directors
of Beatnik following the Effective Time as contemplated in such agreement.
5.9 Option Grants. Prior to the Effective Time, Mixman shall grant
-------------
Mixman Options to each of Xxxx Xxxxxxx and Xxxxxx Xxxxxxx (the "Founder
Options"), to purchase a number of shares of Mixman Common Stock equal to the
quotient of (A) 240,000, divided by (B) the Conversion Ratio, which Founder
Options shall vest at the rate of 25% upon the first anniversary of the
Effective Time and thereafter at the rate of 1/48th of the balance per month.
5.10 Disclosure Schedule. Beatnik and Mixman shall provide the other
-------------------
party with any changes to their Disclosure Schedules as such changes arise;
provided any change shall not be deemed to be incorporated in any Disclosure
Schedule without the written consent of the other party.
5.11 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, Beatnik, Merger Sub and Mixman agree, in each case both before
and after the Closing, (i) to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements, (ii) to use their respective best
efforts to cause the acquisition to qualify, and will not take any actions which
to their knowledge could reasonably be expected to prevent the acquisition from
qualifying, as a reorganization under the provisions of Section 368 of the Code,
(iii) to execute any documents, instruments or conveyances of any kind which may
be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder and thereunder and (iv) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective reasonable efforts (A) to obtain any necessary Consents
(provided, however, that no amendment or modification shall be made to any
Contract to obtain such Consent without Beatnik's consent), (B) to obtain all
necessary Permits, (C) to give all notices to, and make all registrations and
filings with third parties, including submissions of information requested by
governmental authorities and (D) to fulfill all conditions to this Agreement.
ARTICLE 6
---------
CONDITIONS TO MIXMAN'S OBLIGATIONS
----------------------------------
The obligations of Mixman to effect the Merger and complete the related
transactions contemplated by this Agreement are subject, in the discretion of
Mixman, to the satisfaction, on or prior to the Closing Date, of each of the
following conditions:
-43-
6.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Beatnik and Merger Sub contained in this Agreement shall be true
and correct at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date except to the extent (i) any
such failure to be so true and correct would not have a Material Adverse Effect
on Beatnik, (ii) for changes contemplated by this Agreement, and (iii) for those
representations and warranties which address matters only as of a particular
date (which representations shall have been true and correct except as does not
constitute a Material Adverse Effect on Beatnik as of such particular date), and
Beatnik shall have performed in all material respects all agreements and
covenants required hereby to be performed by it prior to or at the Effective
Time. For purposes of this Section 6.1, all "Material Adverse Effect"
qualifications and other qualifications based on the word "material" or similar
phrases contained in Beatnik's representations and warranties shall be
disregarded. There shall be delivered to Mixman a certificate executed by
Beatnik (i.e., signed by a senior officer of Beatnik on behalf of Beatnik) to
the foregoing effect ("Beatnik Closing Certificate").
6.2 Consents. All Consents, approvals and waivers from governmental
--------
authorities and other parties necessary to permit consummation of the Merger as
contemplated hereby and by the Ancillary Agreements (including, without
limitation, the requisite vote or consent of the shareholders of Mixman and of
the shareholders of Beatnik as required by the CCC, and by the parties'
respective charter documents) shall have been obtained, all approvals required
under any Regulations to carry out the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been obtained and the parties
shall have complied with all Regulations applicable to the transactions
contemplated hereby and thereby.
6.3 No Actions or Court Orders. No Action by any court, governmental
--------------------------
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
by the Ancillary Agreements and which could reasonably be expected to materially
damage the shareholders of Mixman if the transactions contemplated hereby or
thereby are consummated. There shall not be any Regulation or Court Order that
makes the transactions contemplated hereby and by the Ancillary Agreements
illegal or otherwise prohibited or which would have a Material Adverse Effect on
Beatnik.
6.4 Closing Documents. Beatnik shall have delivered to Mixman the
-----------------
documents and other items described in Section 8.2.
6.5 Opinion of Counsel. Mixman shall have received a corporate opinion
------------------
of Pillsbury Madison & Sutro LLP, counsel to Beatnik, dated as of the Closing
Date, in form and substance customary to transactions similar to those
contemplated by this Agreement.
6.6 Material Adverse Effect. There shall not have been any Material
-----------------------
Adverse Effect on Beatnik.
6.7 Shareholder Approval; Dissenting Shares. This Agreement and the
---------------------------------------
Merger shall have been approved and adopted by the requisite vote or consent of
the shareholders of Mixman and of the shareholders of Beatnik and Merger Sub as
required by the CCC, and by the parties' respective charter documents, and the
number of Dissenting Shares shall not exceed five (5%) of
-44-
the number of shares of the capital stock of Beatnik to be outstanding
immediately following the Effective Time.
6.8 Voting Agreement. The requisite number of Sellers and Beatnik
----------------
shareholders shall have signed a Voting Agreement in the form attached hereto at
Exhibit F.
6.9 Amended and Restated Investors' Rights Agreement. The holders of
------------------------------------------------
Mixman Preferred Stock shall have become parties to the Amended and Restated
Investors' Rights Agreement attached hereto as Exhibit A to be delivered
pursuant to Section 7.5.
6.10 Xxxx Xxxxxxx. Xxxx Xxxxxxx'x title will be Senior Vice President
------------
and General Manager and he will initially report to Beatnik's Chief Executive
Officer.
6.11 Directors. Xxxx Xxxxxxx and Xxxxxxx Xxxxx shall have been elected
---------
as directors of Beatnik.
6.12 Beatnik Restated Articles. Beatnik shall have filed the Beatnik
-------------------------
Restated Articles with the California Secretary of State and such Beatnik
Restated Articles shall be effective.
ARTICLE 7
---------
CONDITIONS TO BEATNIK'S OBLIGATIONS
-----------------------------------
The obligations of Beatnik and Merger Sub to effect the Merger and complete
the related transactions contemplated by this Agreement are subject, in the
discretion of Beatnik, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Mixman contained in this Agreement shall be true and correct at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date except to the extent (i) any such failure to be so
true and correct would not have a Material Adverse Effect on Mixman, (ii) for
changes contemplated by this Agreement, and (iii) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct except as does not constitute a
Material Adverse Effect on Beatnik as of such particular date), and Mixman shall
have performed in all material respects all agreements and covenants required
hereby to be performed by it prior to or at the Effective Time. For the purposes
of this Section 7.1, all "Material Adverse Effect" qualifications and other
qualifications based on the word "material" or similar phrases contained in
Mixman's representations and warranties shall be disregarded. There shall be
delivered to Beatnik a certificate executed by Mixman ("Mixman Closing
Certificate") to the foregoing effect.
7.2 Consents. All Consents, approvals and waivers from governmental
--------
authorities and other parties necessary to permit consummation of the Merger as
contemplated hereby and by the Ancillary Agreements and for the operation of
Mixman's Business after the Closing (including all required third party consents
under the Contracts) shall have been obtained. Beatnik shall be satisfied that
all approvals required under any Regulations to carry out the transactions
contemplated by this Agreement and the Ancillary Agreements shall have been
-45-
obtained and that the parties shall have complied with all Regulations
applicable to the transactions contemplated hereby and thereby.
7.3 Shareholder Approval; Dissenting Shares. This Agreement and the
---------------------------------------
Merger shall have been approved and adopted by the requisite vote or consent of
the shareholders of Mixman and of the shareholders of Beatnik and Merger Sub as
required by the CCC, and by the parties' respective charter documents, and the
number of Dissenting Shares shall not exceed five (5%) of the number of shares
of the capital stock of Beatnik to be outstanding immediately following the
Effective Time.
7.4 No Actions or Court Orders. No Action by any court, governmental
--------------------------
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
by the Ancillary Agreements and which could reasonably be expected to materially
damage Beatnik, Mixman's Assets or Mixman's Business if the transactions
contemplated hereby or thereby are consummated, including any material adverse
effect on the right or ability of Beatnik or Merger Sub to own, operate or
transfer Mixman's Assets after the Closing. There shall not be any Regulation or
Court Order that makes the transactions contemplated hereby and by the Ancillary
Agreements illegal or otherwise prohibited or which would have a Material
Adverse Effect on Mixman.
7.5 Closing Documents. Mixman shall have delivered to Beatnik the
-----------------
documents and other items described in Section 8.1.
7.6 Opinion of Counsel. Beatnik shall have received a corporate opinion
------------------
of Fenwick & West LLP, counsel to Mixman, dated as of the Closing Date, in form
and substance customary to transactions similar to those contemplated by this
Agreement.
7.7 Exemption under Federal and State Securities Laws. The issuance of
-------------------------------------------------
shares of Beatnik Stock in the Merger shall not violate any federal or state
securities laws.
7.8 Escrow of Merger Shares. At or prior to the Effective Time, Mixman
-----------------------
shall have executed and delivered the Escrow Agreement and shall have taken such
other action as is necessary so that 10% of the Merger Shares are placed in
escrow pursuant to the Escrow Agreement. The Merger Shares placed in escrow,
subject to any claims asserted by Beatnik, shall be released from escrow
pursuant to the terms of the Escrow Agreement on the first anniversary of the
Closing Date.
7.9 Material Adverse Effect. There shall not have been a Material
-----------------------
Adverse Effect on Mixman.
7.10 Amended and Restated Investors' Rights Agreement. The holders of
------------------------------------------------
Mixman Preferred Stock shall have become parties to the Amended and Restated
Investors' Rights Agreement attached hereto as Exhibit A to be delivered
pursuant to Section 7.5.
7.11 Employment Agreements. At least a majority of those individuals
---------------------
employed by Mixman on the date hereof, including Xxxx Xxxxxxx and Xxxxxx
Xxxxxxx, shall have (i) accepted offers of employment from Beatnik, (ii)
executed offer letters delivered by Beatnik and returned the same to Beatnik and
(iii) taken no action to rescind such acceptances of employment.
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Mixman will cooperate with reasonable requests of Beatnik in connection with the
efforts of Beatnik to interview, recruit and hire the shareholders and employees
of Mixman.
7.12 Noncompetition Agreement. Each of Xxxx Xxxxxxx and Xxxxxx Xxxxxxx
------------------------
shall have executed Noncompetition Agreements in the form attached hereto at
Exhibit D.
7.13 Voting Agreement. The requisite number of Sellers and Beatnik
----------------
Shareholders shall have signed a Voting Agreement in the form attached hereto at
Exhibit F.
7.14 Amendments to Option Agreements. The option agreements and founders
-------------------------------
restricted stock purchase agreement for each of Xxxx Xxxxxxx and Xxxxxx Xxxxxxx
shall have been amended and be in form and substance reasonably satisfactory to
Beatnik.
7.15 Option Agreements. Each of Xxxx Xxxxxxx and Xxxxxx Xxxxxxx shall
-----------------
have received option agreements to purchase that number of shares of Mixman
Common Stock that is equal to 240,000 (which represents that number of shares of
Beatnik Common Stock that will be subject to such options when they are assumed
by Beatnik, as adjusted for stock dividends, stock splits and combinations)
divided by the Conversion Ratio, and such option agreements shall be in form and
substance reasonably satisfactory to Beatnik.
7.16 Accounts Receivable. All accounts receivable of Mixman which have
-------------------
been outstanding for more than ninety (90) days shall have been written off on
Mixman's records.
7.17 Contracts Consents. Mixman shall have delivered to Beatnik executed
------------------
consents to the Merger from the parties to the Mixman Contracts marked with an
asterisk on item 3.11 of the Mixman Disclosure Schedule.
7.18 Contracts Signed. Mixman shall have delivered to Beatnik fully
----------------
executed copies of the Mixman Contracts marked with a "+" on item 3.10 of the
Mixman Disclosure Schedule. Such Mixman Contracts shall be in the same form as
the unsigned copies provided to Beatnik prior to the execution of this
Agreement.
7.19 Market Stand-Off. Xxxx Xxxxxxx and Xxxx Xxxxxxx shall have executed
----------------
Market Stand-Off Agreements substantially similar to the provisions of Section
2.15 of the Amended and Restated Investor's Rights Agreement.
7.20 Due Diligence. Mixman shall have delivered to Beatnik all
-------------
outstanding due diligence materials listed on Exhibit G, (the "Due Diligence
Materials"); provided, however, that Beatnik in its sole and absolute
-------- -------
discretion may waive such requirements for any and all Due Diligence
Materials as it deems fit up until the time of Closing.
ARTICLE 8
---------
CLOSING
-------
On the Closing Date at the Closing Place:
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8.1 Deliveries by Mixman to Beatnik and Merger Sub. Mixman shall deliver
----------------------------------------------
(or cause to be delivered) to Beatnik and Merger Sub:
(a) the Ancillary Agreements to which Mixman, the shareholders of Mixman
or any employees of Mixman are a party;
(b) any Consents required to be obtained by Mixman;
(c) the Mixman Closing Certificate;
(d) and such other documents, certificates and items as Beatnik or Merger
Sub may reasonably require; and
(e) the opinion of counsel to Mixman described in Section 7.6.
8.2 Deliveries by Beatnik and Merger Sub to Mixman. Beatnik and Merger
----------------------------------------------
Sub shall deliver to Mixman, and, as applicable, the shareholders of Mixman:
(a) the Ancillary Agreements to which Beatnik or Merger Sub is a party,
(b) any Consents required to be obtained by Beatnik or Merger Sub;
(c) the Beatnik Closing Certificate;
(d) and such other documents, certificates and items as Mixman may
reasonably require; and
(e) the opinion of counsel to Beatnik described in Section 6.5.
ARTICLE 9
---------
INDEMNIFICATION
---------------
9.1 Survival of Representations, Etc. All statements contained in this
---------------------------------
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement shall be
deemed to be representations and warranties by such party hereunder. The
representations and warranties contained herein shall survive the Closing Date
until (and claims based upon or arising out of such representations and
warranties, as well as any claims based upon or arising out of any covenants and
agreements herein, may be asserted at any time before the date which shall be)
the sooner of one year after the Closing Date and six months after Beatnik's
initial public offering (the "Escrow Termination Date"). No investigation made
by any of the parties hereto (whether prior to, on or after the Closing Date)
shall in any way limit the representations and warranties of the parties. The
termination of the representations and warranties provided herein shall not
affect the rights of a party in respect of any claim made by such party in a
writing received by the other party prior to the expiration of the applicable
survival period provided herein.
-48-
9.2 Indemnification.
---------------
(a) General. Subsequent to the Closing, every shareholder of Mixman
-------
immediately prior to the Closing (the "Sellers") shall, severally and not
jointly, indemnify Beatnik, its Affiliates, and each of their respective
partners, officers, directors, employees, shareholders and agents ("Beatnik
Indemnified Parties") against, and hold each of the Beatnik Indemnified Parties
harmless from, any damage, claim, loss, cost, liability or expense, including
without limitation, interest, penalties, reasonable attorneys' fees and expenses
of investigation, response action, removal action or remedial action
(collectively "Damages") incurred by such Beatnik Indemnified Party, that are
incident to, arise out of, in connection with, or related to, whether directly
or indirectly, the breach of any warranty, representation, covenant or agreement
of Mixman contained in this Agreement which survives the Closing Date pursuant
to Section 9.1.
Subsequent to the Closing, Beatnik shall indemnify the Sellers, their
Affiliates, and each of their respective partners, officers, directors,
employees, shareholders and agents, as the case may be ("Mixman Indemnified
Parties"), against, and hold each of the Mixman Indemnified Parties harmless
from, any Damages incurred by such Mixman Indemnified Party, that are incident
to, arise out of, in connection with, or related to, whether directly or
indirectly, the breach of any warranty, representation, covenant or agreement of
Beatnik contained in this Agreement which survives the Closing Date pursuant to
Section 9.1.
The term "Damages" as used in this Section 9.2 is not limited to matters
asserted by third parties against Mixman Indemnified Parties or Beatnik
Indemnified Parties, but includes Damages incurred or sustained by such persons
in the absence of third party claims.
(b) Procedure for Claims between Parties. Any Beatnik Indemnified Party
------------------------------------
or Mixman Indemnified Party (the "Indemnified Party") seeking indemnification
hereunder shall, within the relevant limitation period for indemnification
claims provided for in Section 9.1 above, give to the party obligated to provide
indemnification to such Indemnified Party (the "Indemnitor") a notice (a "Claim
Notice") describing in reasonable detail the facts giving rise to any claims for
indemnification hereunder and shall include in such Claim Notice (if then known)
the amount or the method of computation of the amount of such claim, and a
reference to the provision of this Agreement or any agreement, document or
instrument executed pursuant hereto or in connection herewith upon which such
claim is based provided that failure to give such notice shall not relieve the
Indemnitor of its obligations hereunder except to the extent it shall have been
prejudiced by such failure,
(c) In the event that the indemnitee is a Beatnik Indemnified Party, all
provisions set forth in Sections 9.2(b), 9.2(c) and 9.3 regarding notices to, or
consents of, the Sellers shall be determined by the Seller Representative (as
defined in the Escrow Agreement) and shall be binding upon all Sellers.
The Indemnitor shall have fifteen (15) days after the giving of any Claim
Notice pursuant hereto to (i) agree to the amount or method of determination set
forth in the Claim Notice and to pay such amount to such Indemnified Party or
(ii) to provide such Indemnified Party with notice that it disagrees with the
amount or method of determination set forth in the Claim Notice (the "Dispute
Notice"). Within fifteen (15) days after the giving of the Dispute Notice, a
-49-
representative of Indemnitor and such Indemnified Party shall negotiate in a
bona fide attempt to resolve the matter. In the event that the controversy is
not resolved within thirty (30) days of the giving of the Dispute Notice, the
parties shall proceed to binding arbitration as provided in Section 10.6.
(d) Defense of Third Party Claims. If any lawsuit or enforcement action
-----------------------------
is filed against any Indemnified Party, written notice thereof shall be given to
the other party as promptly as practicable (and in any event within fifteen (15)
calendar days after the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the other party
demonstrates they were actually prejudiced by such failure. After such notice,
if the other party shall acknowledge in writing to the Indemnified Party that
they shall be obligated under the terms of their indemnity hereunder in
connection with such lawsuit or action, or that they will defend such lawsuit or
action under a reservation of rights, then they shall be entitled, if they so
elect at their own cost, risk and expense, (i) to take control of the defense
and investigation of such lawsuit or action, (ii) to employ and engage attorneys
of their own choice to handle and defend the same unless the named parties to
such action or proceeding include both the other party and the Indemnified Party
and the Indemnified Party has been advised in writing by counsel that there may
be one or more legal defenses available to such Indemnified Party that are
different from or additional to those available to the other party, in which
event the Indemnified Party shall be entitled, at the other party's cost, risk
and expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such claim, which compromise or settlement shall be made only with the
written consent of the Indemnified Party, such consent not to be unreasonably
withheld. The Indemnified Party shall cooperate in all reasonable respects with
the other party and their attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; provided, however, that
the Indemnified Party may, at its own cost, participate in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom.
The parties shall cooperate with each other in any notifications to insurers. If
the other party fails to assume the defense of such claim within fifteen (15)
calendar days after receipt of the notice of claim, the Indemnified Party
against which such claim has been asserted will (upon delivering notice to such
effect to the other party) have the right to undertake, at the other party's
cost, risk and expense, the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the other party; provided, however,
that such claim shall not be compromised or settled without the written consent
of the other party, which consent shall not be unreasonably withheld. If the
Indemnified Party assumes the defense of the claim, the Indemnified Party will
keep the Seller Representative or Beatnik, as the case may be, reasonably
informed of the progress of any such defense, compromise or settlement. The
other party shall be liable for any settlement of any action effected pursuant
to and in accordance with this Section 9.2 and for any final judgment (subject
to any right of appeal), and the other party agrees to indemnify and hold
harmless an Indemnified Party from and against any Damages by reason of such
settlement or judgment.
9.3 No Right of Contribution. After the Closing, no Seller shall have
------------------------
any right of contribution against the Surviving Corporation for any breach of
any representation, warranty, covenant or agreement of Mixman. The remedies set
forth in this Article 9 shall be the Indemnified Parties' exclusive remedies.
The exclusive remedy of Beatnik shall be to the Merger Shares under the Escrow
Agreement. Notwithstanding anything to the contrary provided
-50-
by this Agreement, including without limitation this Article 9, nothing in this
Agreement shall be construed to restrict or otherwise affect any remedies based
on causes of action for fraud or willful misconduct that may be available to the
Indemnified Parties under this or any other agreement or pursuant to statutory
or common law. Without limiting the generality of the foregoing, the Sellers and
Beatnik shall be entitled to specific performance and injunctive relief, without
posting bond or other security, for the purpose of asserting their respective
rights under this Article 9.
9.4 Satisfaction of Claims; Threshold; Limitations on Indemnity.
-----------------------------------------------------------
(a) The Beatnik Indemnified Parties shall not be entitled to recover for
any Damages until such time as the Damages claimed by the Beatnik Indemnified
Parties in the aggregate exceed $25,000 (the "Damage Threshold"), at which time
the Beatnik Indemnified Parties shall be entitled to be indemnified against and
compensated and reimbursed for all such Damages, and only such Damages, in
excess of the Damage Threshold; provided, however, subject to Section 9.3 of
this Agreement, in no event, other than in cases involving fraud or willful
misconduct, shall such Sellers be liable pursuant to Article 9 to the Beatnik
Indemnified Parties for any Damages in excess of the value of the shares held in
escrow pursuant to Section 2.11.
(b) The Mixman Indemnified Parties shall not be entitled to recover for
any Damages until such time as the Damages claimed by the Mixman Indemnified
Parties in the aggregate exceed the Damage Threshold, at which time the Mixman
Indemnified Parties shall be entitled to be indemnified against and compensated
and reimbursed for all such Damages, and only such Damages, in excess of the
Damage Threshold; provided, however, subject to Section 9.3 of this Agreement,
in no event shall Beatnik be liable pursuant to this Article 9 to the Mixman
Indemnified Parties for any Damages in excess of the value of the shares held in
escrow pursuant to Section 2.11.
The indemnification obligations of Sellers hereunder shall be satisfied by
the distribution to the Beatnik Indemnified Party of Merger Shares held pursuant
to the Escrow Agreement. To the extent an indemnification claim is brought by a
Mixman Indemnified Party, such indemnification obligations shall be satisfied by
either the transfer of shares of capital stock of Beatnik or the payment of cash
to the Mixman Indemnified Party, at the election of the party owing such
obligation. In the event that Beatnik or the Seller Representative elects to
satisfy indemnification obligations by the transfer of shares of capital stock
of Beatnik, such shares shall be valued as described in the Escrow Agreement.
ARTICLE 10
----------
MISCELLANEOUS
-------------
10.1 Termination.
-----------
(a) This Agreement may be terminated at any time prior to Closing:
(i) By mutual written consent of Beatnik, Merger Sub and Mixman,
whether or not the shareholders of Mixman and the shareholders of Beatnik
and Merger Sub have approved and adopted this Agreement and the Merger;
-51-
(ii) By Beatnik or Mixman if the Closing shall not have occurred
on or before November 5, 1999, other than due to a breach of this Agreement
by the party seeking to terminate;
(iii) By Beatnik or Merger Sub if there is a material breach of any
representation or warranty set forth in Article 3 or any covenant or
agreement to be complied with or performed by Mixman under this Agreement
(in either case such that the conditions set forth in Section 7.1 would not
be satisfied as of the time of such breach) and such breach, if capable of
cure, is not cured within fifteen (15) days after notice thereof, so long
as any such breach is not caused by the action or inaction of Beatnik or
Merger Sub; or
(iv) By Mixman if there is a material breach of any representation
or warranty set forth in Article 4 hereof or of any covenant or agreement
to be complied with or performed by Beatnik or Merger Sub pursuant to the
terms of this Agreement (in either case such that the conditions set forth
in Section 6.1 would not be satisfied as of the time of such breach) and
such breach, if capable of cure, is not cured within fifteen (15) days of
notice thereof, so long as any such breach is not caused by the action or
inaction of Mixman.
(b) In the event of termination of this Agreement:
(i) The provisions of the Confidentiality Agreement shall
continue in full force and effect; and
(ii) No party hereto shall have any liability arising under this
Agreement to any other party to this Agreement, except for any willful
breach of, or knowing misrepresentation made in, this Agreement occurring
prior to the proper termination of this Agreement.
10.2 Certain Securities Laws Matters. Mixman acknowledges and agrees that
-------------------------------
(i) Beatnik's issuance of the Merger Shares will not have been registered under
the Securities Act, (ii) such Merger Shares may need to be held indefinitely,
(iii) there may not be a public market for such shares, (iv) when and if such
shares may be disposed of without registration in reliance on Rule 144 and/or
Rule 145 promulgated under the Securities Act, such disposition can be made only
in limited amounts in accordance with the terms and conditions of such Rule, if
the shareholder is an "affiliate" of Beatnik, (v) if the Rule 144 and/or Rule
145 exemption is not available, public sale without registration will require
compliance with an exemption under the Securities Act, (vi) a restrictive legend
in the following form shall be placed on the certificates representing the
Merger Shares held by affiliates of Mixman who become affiliates of Beatnik:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). AS
LONG AS THE HOLDER OF THESE SECURITIES IS AN AFFILIATE OF THE ISSUER, THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT
-52-
IN EFFECT WITH RESPECT TO THE SALE OF THESE SECURITIES UNDER THE SECURITIES
ACT UNLESS THE OFFERING AND SALE ARE IN COMPLIANCE WITH RULE 144 UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR OTHERWISE
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
(vii) restrictive legend in the following form shall be placed on the
certificates representing the Merger Shares held by affiliates of Mixman who do
not become affiliates of Beatnik:
IF THE HOLDER OF THESE SECURITIES WAS AN AFFILIATE (AS DEFINED IN RULE 145
OF THE SECURITIES ACT) OF MIXMAN TECHNOLOGIES, INC. AT THE TIME THE
TRANSACTION BETWEEN THE ISSUER AND MIXMAN TECHNOLOGIES, INC. WAS SUBMITTED
FOR VOTE OR CONSENT, THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SALE OF THESE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, UNLESS THE OFFERING AND SALE ARE IN COMPLIANCE
WITH RULE 145(d) OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
and (viii) no restrictive legend regarding federal securities laws shall be
placed on the certificates representing the Merger Shares held by persons who
were not affiliates of Mixman.
10.3 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by Mixman without the prior written
consent of Beatnik and Merger Sub, or by Beatnik or Merger Sub without the prior
written consent of Mixman.
10.4 Notices. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed,
sent by facsimile transmission, sent via overnight delivery service or mailed by
registered or certified mail (such notice to be effective upon receipt), as
follows:
If to Mixman:
Mixman Technologies, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Chief Executive Officer
-53-
With a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxx
If to Beatnik or, if after the Closing, to the Surviving Corporation:
Beatnik, Inc.
0000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
With a copy to:
Pillsbury Madison & Sutro LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx Xxxxxx
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.5 Choice of Law. This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
California except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
10.6 Arbitration. This Section 10.6 and the parties' rights under this
-----------
Section 10.6 shall be governed by and construed in accordance with the Federal
Arbitration Act, 9 U.S.C. (S) 1 et seq. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, shall be settled by the
following procedures:
(a) Any party may send another party written notice identifying the
matter in dispute and invoking the procedures of this Section 10.6. Within
fourteen days after such written notice is given, one or more principals of each
party involved in the dispute shall meet at a mutually agreeable location in San
Francisco, California (or such other locations as the parties shall mutually
agree), for the purpose of determining whether they can resolve the dispute
themselves by written agreement and, if not, whether they can agree upon a
third-party impartial arbitrator (the "Arbitrator") to whom to submit the matter
in dispute for final and binding arbitration.
(b) If such parties fail to resolve the dispute by written agreement or
agree on the Arbitrator within said fourteen day period, any such party may make
written application to
-54-
Judicial Arbitration & Mediation Services, Inc. ("JAMS"), 000 Xxxx Xxxxxx, Xxxxx
000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, for the appointment of a single Arbitrator
to resolve the dispute by arbitration. Such arbitrator shall be qualified to
practice law in at least one jurisdiction in the United States and have
expertise in the interpretation of commercial contracts. At the request of JAMS,
the parties involved in the dispute shall meet with JAMS at its offices within
ten (10) calendar days of such request to discuss the dispute and the
qualifications and experience which each party respectively believes the
Arbitrator should have; provided, however, that the selection of the Arbitrator
shall be the exclusive decision of JAMS and shall be made within thirty (30)
days of the written application to JAMS.
(c) Within thirty days of the selection of the Arbitrator, the parties
involved in the dispute shall meet in San Francisco, California with such
Arbitrator at a place and time designated by the Arbitrator after consultation
with such parties and present their respective positions on the dispute. The
parties shall use their best efforts to cooperate with each other in causing the
arbitration to be held in as efficient and expeditious a manner as practicable,
including but not limited to, providing such documents as the Arbitrator may
request, so that the decision may be reached timely. The Arbitrator shall take
into account the parties' stated goal of expediting proceedings in determining
whether to authorize discovery and, if so, the scope of permissible discovery
and other hearing and pre-hearing procedures. Each party shall have no longer
than one day to present its position, the entire proceedings before the
Arbitrator shall be on no more than three consecutive days, and the award shall
be made in writing no more than thirty days following the end of the proceeding.
The authority of the Arbitrator shall be limited to deciding liability for, and
the proper amount of, a claim, and the Arbitrator shall have no authority to
award punitive damages. Such award shall be a final and binding determination of
the dispute and shall be fully enforceable as an arbitration award in any court
having jurisdiction and venue over such parties. The prevailing party (as
determined by the Arbitrator) shall in addition be awarded by the Arbitrator
such party's own attorneys' fees and expenses in connection with such
proceeding. The non-prevailing party (as determined by the Arbitrator) shall pay
the Arbitrator's fees and expenses.
10.7 Entire Agreement,- Amendments and Waivers. This Agreement, together
-----------------------------------------
with all exhibits and schedules hereto, and the Confidentiality Agreement,
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
10.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts and signature pages may be delivered by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
10.9 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be
-55-
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.10 Expenses. The parties hereto shall be liable for their expenses
--------
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement; provided, however, that if the Merger is
consummated as contemplated hereby, Beatnik shall assume the expenses (other
than any premiums billed by legal counsel to Mixman) incurred by Mixman in
connection with the negotiation, preparation, execution and performance of this
Agreement.
10.11 No Third Party Beneficiaries. This Agreement shall be binding upon
----------------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation.
[THIS SPACE LEFT BLANK INTENTIONALLY]
-56-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
BEATNIK, INC.
By /s/ Xxxxxxxx Xxxxxxx
--------------------------------------
Xxxxxxxx Xxxxxxx
President and Chief Executive Officer
BEATNIK ACQUISITION SUB, INC.
By /s/ Xxxxxxxx Xxxxxxx
--------------------------------------
Xxxxxxxx Xxxxxxx
President and Chief Executive Officer
MIXMAN TECHNOLOGIES, INC.,
By /s/ Xxxx Xxxxxxx
--------------------------------------
Xxxx Xxxxxxx
Chief Executive Officer
-S-1-
AMENDMENT TO THE AGREEMENT AND PLAN OF REORGANIZATION
This AMENDMENT TO THE AGREEMENT AND PLAN OF REORGANIZATION, dated as of
November 5, 1999 (the "Agreement"), is entered into by and between BEATNIK,
INC., a California corporation ("Beatnik"), BEATNIK ACQUISITION SUB, INC., a
California corporation and a wholly-owned subsidiary of Beatnik ("Merger Sub"),
and MIXMAN TECHNOLOGIES, INC., a California corporation ("Mixman").
WHEREAS Beatnik, Merger Sub and Mixman have entered into that Agreement and
Plan of Reorganization dated as of October 8, 1999 (the "Reorganization
Agreement"); and
WHEREAS, Beatnik, Merger Sub and Mixman hereby agree that certain sections
and provisions of the Reorganization Agreement shall be amended:
NOW, THEREFORE, for due and adequate consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. The Reorganization Agreement shall be amended as follows:
(a) All references to "Founders Options" are hereby deleted in their
entirety;
(b) Section 2.6(a) is hereby deleted in its entirety and replaced with the
following language:
"(a) Conversion of Mixman Common Stock. Each share
---------------------------------
of Mixman Common Stock issued and outstanding immediately
prior to the Effective Time (excluding any Dissenting
Shares) shall be converted, subject to Section 2.6(c) and
Section 2.6(d), into the right to receive a number of
shares of Beatnik Common Stock equal to the "Conversion
Ratio." The "Conversion Ratio" is the quotient of: (1) one-
half Beatnik's "Fully-Diluted Common Equivalents
Outstanding" (as defined below) as of immediately prior to
the Effective Time, divided by (2) Mixman's "Common
Equivalents Outstanding" (as defined below) as of
immediately prior to the Effective Time. As used herein,
"Common Equivalents Outstanding" means the sum of (A)
shares of common stock outstanding plus (B) shares of
common stock issuable upon conversion of all outstanding
shares of preferred stock, plus (C) shares of common stock
issuable upon exercise or conversion of all outstanding or
promised Options, warrants and convertible debt (and upon
conversion of any preferred stock issuable upon exercise or
conversion of all outstanding Options, warrants and
convertible debt). "Fully Diluted Common Equivalents
Outstanding" means the sum of (A) Common Equivalents
Outstanding, plus (B) all shares of common stock (or
securities convertible into or exchangeable for common
stock) reserved for issuance to employees, officers,
directors, contractors, consultants or advisors
-S-1-
under any stock option, stock purchase, stock bonus or
other equity incentive plan. An example of the calculation
of the Conversion Ratio is set forth in Annex 1. All such
shares of Mixman Common Stock shall no longer be
outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent the
shares of Beatnik Common Stock into which such Mixman
Common Stock has been converted. Certificates previously
representing shares of Mixman Common Stock shall be
exchanged for certificates representing whole shares of
Beatnik Common Stock issued in consideration therefor upon
the surrender of such certificates in accordance with
Section 2.7 (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 2.10)."
(c) Section 5.9 is hereby deleted in its entirety;
(d) Section 7.15 is hereby deleted in its entirety;
(e) Annex 1 is hereby replaced in its entirety as set forth in Exhibit A
---------
attached hereto.
2. The Reorganization Agreement shall be changed to reflect an extension of the
dead-line date for the closing, as defined in Section 2.1(b) of the
Reorganization Agreement (the "Closing") to December 15, 1999, and pursuant to
such change Section 10.1(a)(ii) of the Reorganization Agreement shall provide
that either Beatnik or Mixman may terminate the Reorganization Agreement if the
Closing shall not have occurred on or before December 15, 1999, other than due
to a breach of the Reorganization Agreement by the party seeking to terminate.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
-S-2-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
BEATNIK, INC.
/s/ Xxxxxxxx Xxxxxxx
By _______________________________________
Xxxxxxxx Xxxxxxx
President and Chief Executive Officer
BEATNIK ACQUISITION SUB, INC.
/s/ Xxxxxxxx Xxxxxxx
By _______________________________________
Xxxxxxxx Xxxxxxx
President and Chief Executive Officer
MIXMAN TECHNOLOGIES INC.
/s/ Xxxx Xxxxxxx
By _______________________________________
Xxxx Xxxxxxx
Chief Executive Officer
-S-3-
EXHIBIT A
---------
"Annex 1
--------
[SUBJECT TO UPDATE]
Beatnik/Mixman Calculations
---------------------------
Beatnik Shares (fully diluted) 24,461,705
--------------------------------------------
. Common 7,437,686
--------------------------------------------
. Options (incl. Pool) 2,205,116
--------------------------------------------
. Preferred 14,459,485
--------------------------------------------
. Warrants 359,418
--------------------------------------------
Mixman Shares 3,650,057
--------------------------------------------
. Common 2,023,471
--------------------------------------------
. Options 528,633
--------------------------------------------
. Preferred 1,092,148
--------------------------------------------
. Promissory Note 5,805
--------------------------------------------
Calculation Pursuant to Section 2.6(a)
--------------------------------------
Conversion ratio =
__
24,461,705
----------
2
_____________________________ = 3.3508662
3,650,057
Alternative Calculation
-----------------------
24,461,705 = 36,692,557 (total shares post merger)
----------
2/3
---------------------------------------------------------------------------
12,230,852 Shares to Mixman SH (36,692,557 - 24,461,705)
---------------------------------------------------------------------------
12,230,852 = 3.3508661
----------
3,650,057
-S-4-
MIXMAN SHARES
Note: The numbers provided on this page are rounded down by group, but not for
each Mixman shareholder. Thus, the Beatnik share-numbers are approximations.
---------------------------------------------------------------------------
Common = 2,023,471 shares
---------------------------------------------------------------------------
Preferred = 1,092,148 shares
---------------------------------------------------------------------------
Note = 5,805*
---------------------------------------------------------------------------
Options = 528,633
---------------------------------------------------------------------------
* Assumes conversion on October 29, 1999
------------------------------------------------------------------------------
2,023,471 x 3.3508662 = 6,780,380 Beatnik Shares for Mixman Common Stock
------------------------------------------------------------------------------
1,092,148 x 3.3508662 = 3,659,641 Beatnik Shares for Mixman Preferred Stock**
------------------------------------------------------------------------------
5,805 x 3.3508662 = 19,451 Beatnik Shares for Mixman Note converted into
Mixman Common
------------------------------------------------------------------------------
528,633 x 3.3508662 = 1,771,378 Beatnik Shares for Mixman Options
------------------------------------------------------------------------------
Mixman Series A to be exchanged for 1,945,131 shares of Beatnik Series D-1
Preferred Stock with a liquidation preference of $0.36111 per share
(approximately $702,406).
Mixman Series B and C to be exchanged for 1,714,511 shares of Beatnik Series D-2
Preferred Stock with a liquidation preference of $0.89529 per share
(approximately $1,534,984)."
-S-5-
