AGREEMENT AND PLAN OF REORGANIZATION
AMONG
GATEWORKS CORPORATION,
THE SHAREHOLDERS OF GATEWORKS CORPORATION,
I-BUS / PHOENIX, INC.
AND
XXXXXXX TECHNOLOGIES, INC.
AS OF
SEPTEMBER 13, 2000
TABLE OF CONTENTS
Page
ARTICLE 1 TERMS OF THE MERGER 1
1.1 The Merger 1
1.2 Effective Date of the Merger 2
1.3 Articles of Incorporation of the Surviving Corporation 2
1.4 Board of Directors and Officers of the Surviving Corporation 2
1.5 Consideration; Cancellation of Company Common Stock 2
1.6 No Fractional Shares 3
1.7 Escrow 3
1.8 Exchange of Shares; Stock Transfer Books 3
1.9 Waiver of Dissenters' Rights 4
1.10 Securities Act Legend 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE OF THE SHAREHOLDERS 4
2.1 Organization and Good Standing 4
2.2 Subsidiaries 5
2.3 Capital Structure of the Company 5
2.4 Authorization and Approvals 5
2.5 Financial Statements 5
2.6 Taxes 6
2.7 Transactions with Affiliates 7
2.8 Intellectual Property 7
2.9 Absence of Certain Changes 8
2.10 Contracts 10
2.11 Employees 10
2.12 Litigation 11
2.13 Environmental Matters 11
2.14 Employee Benefits 13
2.15 Bank Accounts 13
2.16 Brokers and Finders 13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER 13
3.1 Title to Shares 14
3.2 Authorization 14
3.3 No Violations 14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF XXXXXXX AND I-BUS 14
4.1 Organization and Power 14
4.2 Capital Structure of I-Bus 14
4.3 Authorization and Enforceability of Agreements 15
4.4 No Conflicts 15
4.5 Financial Statements and SEC Reports 15
4.6 Brokers and Finders 16
4.7 I-Bus Shares 16
ARTICLE 5 CLOSING 16
5.1 The Closing 16
5.2 Delivery of Documents 16
ARTICLE 6 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND RELATED AGREEMENTS; INDEMNIFICATION 17
6.1 General Liability Period 17
6.2 Indemnification by the Shareholders 18
6.3 Indemnification by Xxxxxxx and I-Bus 18
6.4 Limitations on Recoverable Losses 18
6.5 Claims for Indemnification; Disputes 19
6.6 Exclusive Remedy 20
ARTICLE 7 POST-CLOSING COVENANTS 20
7.1 Relocation 20
7.2 Operating Committee 20
7.3 Incentive Equity Pool 20
7.4 Further Acts 21
ARTICLE 8 GENERAL PROVISIONS 22
8.1 Entire Agreement; Modifications; Waiver 22
8.2 Severability 22
8.3 Successors and Assigns 22
8.4 Counterparts 22
8.5 Governing Law 22
8.6 Notices 22
8.7 Expenses 23
8.8 Recovery of Litigation Costs 23
8.9 Publicity 23
8.10 Confidentiality 24
8.11 No Third Parties Benefitted 25
EXHIBIT INDEX
Exhibit 1.5 Purchase Price
Exhibit 1.7 Escrow Agreement
Exhibit 5.2(d) Form of Noncompetition Agreement
Exhibit 5.2(e) Form of Investment Letter
Exhibit 5.2(f) Form of Put Agreement
Exhibit A Agreement of Merger
SCHEDULE INDEX
Schedule 2.1 Organization and Good Standing
Schedule 2.3 Capital Structure of the Company
Schedule 2.4 Authorizations and Approvals
Schedule 2.5 Financial Statements
Schedule 2.6 Tax Matters
Schedule 2.7 Transactions with Affiliates
Schedule 2.8 Intellectual Property
Schedule 2.9 Absence of Certain Changes
Schedule 2.10 Contracts
Schedule 2.11 Employees
Schedule 2.12 Litigation
Schedule 2.13 Environmental Matters
Schedule 2.14 Employee Benefits
Schedule 2.15 Bank Accounts
Schedule 2.16 Brokers & Finders
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into as of September ____, 2000 by and among Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxxx,
and Xxxx Xxxxxxxxxxxxx (collectively, the "Shareholders") and Gateworks
Corporation, a California corporation (the "Company"), on the one hand, and
Xxxxxxx Technologies, Inc., a Delaware corporation ("Xxxxxxx") and its
subsidiary, I-Bus/Phoenix, Inc., a California corporation ("I-Bus"), on the
other hand.
R E C I T A L S
WHEREAS, the Shareholders own 100% of the issued and outstanding
capital stock of the Company;
WHEREAS, the parties intend that, subject to the terms and conditions
hereinafter set forth, the Company be merged with and into I-Bus pursuant
to this Agreement and the Agreement of Merger (the "Agreement of Merger")
substantially in the form of Exhibit A attached hereto;
WHEREAS, the parties hereto intend that this Agreement constitutes a
Plan of Reorganization and the Merger hereunder qualifies under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in order to consummate the Merger and in consideration
of the mutual representations, warranties and agreements contained herein,
the parties hereto agree as follows:
ARTICLE 1
TERMS OF THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement and the laws of the State of California, I-Bus, and the Company
shall execute and file, among other things, the Agreement of Merger in the
Office of the Secretary of State of the State of California (the "California
Secretary of State") pursuant to which the separate existence of the Company
shall cease and the Company shall be merged with and into I-Bus on the
Closing Date, as defined herein (the "Merger"). I-Bus and the Company are
sometimes collectively referred to as the "Constituent Corporations" and I-Bus
is sometimes referred to as the "Surviving Corporation."
1.2 Effective Date of the Merger. The Merger shall become effective
upon the filing of the Agreement of Merger and any other documents required
by the General Corporation Law of the State of California (the "California
Corporation Law") with the California Secretary of State in accordance with
the California Corporation Law. If the California Secretary of State requires
any changes in the Agreement of Merger as a condition to filing the Agreement
of Merger, I-Bus, the Company and the Shareholders will execute necessary
revisions incorporating such changes, provided such changes are not materially
inconsistent with or result in any material changes in the terms of this
Agreement or the Agreement of Merger.
1.3 Articles of Incorporation of the Surviving Corporation. Upon
the effectiveness of the Merger and without any further action on the part
of the Constituent Corporations, the Articles of Incorporation of I-Bus shall
be and remain the Articles of Incorporation of the Surviving Corporation,
and the Bylaws of I-Bus shall be the Bylaws of the Surviving Corporation. Such
Articles of Incorporation and Bylaws may thereafter be altered, amended or
repealed in accordance with the provisions thereof or applicable law.
1.4 Board of Directors and Officers of the Surviving Corporation.
The officers and directors of I-Bus at the time of the effectiveness of the
Merger shall be the officers and directors of the Surviving Corporation.
1.5 Consideration; Cancellation of Company Common Stock.
(a) The aggregate consideration (the "Purchase Price") to be
received by the Shareholders in connection with the Merger shall be one and
one-quarter times (1.25x) the annual product revenue (excluding service
revenue) of the business formerly operated by the Company in calendar year
2001, including products developed in collaboration with I-Bus and "sold" to
I-Bus; provided, however, that if such annual product revenue (excluding
service revenue) in calendar year 2001 is less than $15,000,000, then the
aggregate consideration will equal one times (1.0x) such 2001 product revenue.
The nature of the consideration, the timing of payment, methodology for
computing product revenue, the methodology for computing the per share value
of I-Bus common stock included in the payment of the Purchase Price, and
certain adjustments to the Purchase Price are all as set forth on Exhibit 1.5.
To the extent there is any inconsistency between the general terms of this
Section 1.5(a) and the more specific terms of Exhibit 1.5, the terms of
Exhibit 1.5 shall govern in all respects.
(b) The consideration to be received by each Shareholder in
connection with the Merger shall be the Purchase Price (as it may be
determined from time to time in accordance with Exhibit 1.5) divided by the
number of shares of Company Common Stock issued and outstanding upon filing
of the Agreement of Merger, multiplied by the number of shares held of record
by each such Shareholder at that time. In lieu of issuing fractional shares
of I-Bus Common Stock, cash may be paid. Such consideration shall be paid
in part following the Closing (the "Closing Payment") and the balance
following the end of the calendar year 2001 (the "Final Payment"), each to
be determined as provided in Exhibit 1.5.
(c) By virtue of the Merger and without any action on the part of the
holder thereof, each share of common stock of the Company ("Company Common
Stock") issued and outstanding immediately prior to the filing of the Agreement
of Merger shall be cancelled and all rights in respect thereof shall cease to
be outstanding, excepting the right to be converted into Purchase Price upon
surrender of certificates representing such shares to the Surviving Corporation.
(d) The Closing Payment payable upon filing of the Agreement of
Merger with the California Secretary of State shall be delivered to the
Shareholders promptly upon receipt by the Surviving Corporation of a certificate
evidencing ownership of Company Common Stock, accompanied by a stock power duly
endorsed in blank, provided that the Closing Payment to be made upon surrender
of such certificates shall not include those I-Bus Shares subject to the
Escrow, as hereinafter defined.
1.6 No Fractional Shares. No fractional share of I-Bus Common Stock
will be issued in the Merger, but, in lieu thereof, each holder of Company
Common Stock who would otherwise be entitled to a fraction of a share of
I-Bus Common Stock (after aggregating all fractional shares of I-Bus Common
Stock to be received by such holder) will be entitled to receive from I-Bus
an amount of cash (rounded to the nearest whole cent) equal to the product
of (a) the fraction multiplied by (b) the then applicable per-share value of
I-Bus Common Stock, as set forth on Exhibit 1.5.
1.7 Escrow. On the Closing Date, Xxxxxxx, I-Bus and the Shareholders
shall enter into an agreement with U.S. Bank and Trust National Association,
as escrow agent (the "Escrow Agent") substantially in the form of
Exhibit 1.7 hereto (the "Indemnification Escrow Agreement"). At the
Closing Date, I-Bus shall deposit in escrow (the "Indemnification Escrow")
a number of I-Bus Shares equal to 10% of the number of I-Bus Shares
issuable to the Shareholders as a part of the Closing Payment as set forth
on Exhibit 1.5 (the "Indemnification Escrow Shares"). In the event the
Shareholders are required to indemnify the Xxxxxxx Indemnitees (as defined
in Section 6.2) pursuant to Article 6 of this Agreement, Xxxxxxx or I-Bus
may make a claim against the Indemnification Escrow Shares in accordance
with the terms of the Indemnification Escrow Agreement; provided, however,
that the number or value of the Indemnification Escrow Shares will not in
any way limit the amount of the Shareholders' indemnification obligations
pursuant to Article 6. The Indemnification Escrow Shares shall be released
from the Indemnification Escrow on the first anniversary of the Closing Date
in accordance with, and to the extent provided by, the Indemnification
Escrow Agreement.
1.8 Exchange of Shares; Stock Transfer Books. Upon filing of the
Agreement of Merger, each holder of an outstanding certificate or certificates
theretofore representing shares of Company Common Stock shall be entitled,
upon surrender of such certificate or certificates to the Surviving
Corporation, to receive as a distribution in respect of each share represented
by such certificate or certificates, the per share portion of the Closing
Payment due on the Closing Date, less the Escrow, as further described on
Exhibit 1.5. The cash payment shall be made by bank wire to the holders of
record of Company Common Stock as shown on the certificate representing such
Company Common Stock upon surrender to I-Bus, duly endorsed in blank for
transfer. Upon filing of the Agreement of Merger there shall be no further
registry of transfers on the records in respect of Company Common Stock
outstanding immediately prior thereto. If, after the filing of the Agreement
of Merger, certificates are presented to the Surviving Corporation, they shall
be cancelled and exchanged for such cash payment and I-Bus Shares as provided
herein.
1.9 Waiver of Dissenters' Rights. Each Shareholder represents and
warrants to Xxxxxxx and I-Bus that they are familiar with the provisions of
the California Corporation Law providing dissenters' rights and allowing
shareholders to receive in lieu of merger consideration fair value for their
shares of Company Common Stock (as such term is used in the California
Corporation Law). By executing this Agreement and by executing a written
consent of shareholders to the Merger as a condition to the Closing under this
Agreement, the Shareholders will irrevocably waive their dissenters' rights
under the California Corporations Law. The Shareholders understand the
consequences of this waiver and agree jointly and severally to hold Xxxxxxx
and I-Bus harmless from any claim arising after the date hereof related to
the dissenters' rights provisions of Sections 1300 et. seq. of the California
Corporations Code or rights of Company Shareholders arising thereunder.
1.10 Securities Act Legend. The I-Bus Shares issued in the Merger will
not be registered under the Securities Act, and will therefore bear customary
securities restrictive legends.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders jointly and severally represent and warrant to Xxxxxxx
and I-Bus as follows:
2.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Except as set forth on Schedule 2.1
attached hereto, the Company is duly qualified to transact business and is
in good standing in every jurisdiction in which the character of its business
makes such qualification necessary, except for where the failure to be so
qualified would not have a material adverse effect on the Company or its
business, assets, properties, prospects, financial condition or results of
operations (a "Material Adverse Effect"), all of which jurisdictions are
listed on Schedule 2.1. Except as set forth on Schedule 2.1, the Company has
all necessary corporate power and authority to carry on its business as it is
now being conducted, and to own or lease and operate its properties and assets.
Complete, current and correct copies of the Articles of Incorporation and
Bylaws of the Company, all as amended to date, stock ledgers, minute books
and all other organizational documents of the Company have been made available
to Xxxxxxx.
2.2 Subsidiaries. The Company does not, directly or indirectly, own or
control any interest or investment (whether equity or debt) in any corporation,
partnership, limited liability company, joint venture, business organization,
trust or other entity.
2.3 Capital Structure of the Company. The authorized capital stock of
the Company consists of 1,000,000 shares of Company Common Stock of which
15,000 shares are issued and outstanding, and all of such shares are owned of
record and beneficially as set forth on Schedule 2.3 attached hereto. All of
the outstanding shares of capital stock of the Company have been duly
authorized, validly issued and are fully paid and nonassessable. Except for
any of the transactions contemplated pursuant to this Agreement and as set
forth on Schedule 2.3, there are no options, warrants, convertible debt or
securities, calls, agreements, arrangements, commitments, understandings or
other rights to purchase any of the Company's capital stock or securities
convertible into or exchangeable for any such capital stock. All of such
shares have been issued in transactions exempt from registration under the
Securities Act and any applicable state securities or Blue Sky laws.
2.4 Authorization and Approvals. The Company has all requisite
corporate power and authority to enter into this Agreement and to perform
its obligations hereunder. This Agreement has been duly and validly
authorized by and approved by all requisite corporate action on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms. Except as set forth
in Schedule 2.4 attached hereto, no further approvals or consents by, or
filings with, any federal, state, municipal, foreign or other court or
governmental or administrative body, agency or other third party is required
in connection with the execution and delivery by the Company of this
Agreement, or the consummation by the Company of the transactions
contemplated hereby.
2.5 Financial Statements. The Company has delivered to Xxxxxxx and
I-Bus, true and complete copies of (i) the unaudited balance sheet of the
Company as of August 31, 2000 (the "Interim Balance Sheet"), and the related
statement of profit and loss for the period January 1, 2000 to August 31,
2000 (collectively, the "Interim Financial Statements") and (ii) the
unaudited financial statements of the Company for the fiscal years ended
December 31, 1998 and 1999 (including, without limitation, the related balance
sheets and statements of profit and loss) (collectively, with the Interim
Financial Statements, the "Financial Statements"). Except as expressly set
forth or disclosed in Schedule 2.5 attached hereto, the Financial Statements
(i) present fairly in all material respects the financial position and results
of operations of the Company as of and for the periods reflected therein, (ii)
were prepared in accordance with income tax accounting principles and (iii)
disclose all material liabilities, including contingent and/or unmatured
liabilities as of the dates thereof. The Accounts Receivable shown on the
Financial Statements (net of any reserves) are valid and collectible in the
ordinary course of business of the Company, without recourse to legal action,
and are not contested or disputed by the account debtor. All inventories
reflected in the Financial Statements or acquired since the date of the
Interim Financial Statements, are in good condition and are currently usable
or salable in the category in which they are inventoried, in the ordinary
course of business of the Company. Except as disclosed in the Interim
Financial Statements or on Schedule 2.5 attached hereto, the Company has no
material liabilities, whether known or unknown, absolute, accrued, contingent
or otherwise, except liabilities incurred after August 31, 2000 in the ordinary
course of business consistent with past practice and not in violation of this
Agreement.
2.6 Taxes.
(a) Except as set forth on Schedule 2.6, the Company has timely
filed all Tax Returns that are required to be filed by the Company with respect
to the activities of the Company for any period ending on or before the Closing
Date, which Tax Returns are true, correct and complete in all material
respects, and the Company has paid within the time and in the manner prescribed
by law all Taxes shown thereon to be due. All Taxes attributable to all
taxable periods ending on or before the date thereof, to the extent not
required to be previously paid, have been fully and adequately reserved for
(as taxes payable or as accrued taxes) on the Financial Statements (as defined
in Section 2.5).
(b) No Tax assessment or deficiency which has not been paid or for
which an adequate reserve has not been set aside, has been made or proposed
against the Company, nor are any of the Tax Returns now being or, to the best
knowledge of the Company and the Shareholders, threatened to be examined or
audited, and no consents waiving or extending any applicable statutes of
limitations for the Tax Returns, or any Taxes required to be paid thereunder,
have been filed. The Company has never been subject to a Tax audit by
federal, state or local governmental authorities, nor has the Company ever
received a statement of deficiencies with respect to any tax assessed against
or agreed to by the Company. None of the assets of the Company are subject
to any liens in respect of Taxes (other than for current taxes not yet due
and payable). The Company is not a party to or bound by any Tax sharing, Tax
indemnity or Tax allocation agreement or other similar arrangement.
(c) The Company has collected all sales, use and value added Taxes
required to be collected, and has remitted, or will remit on a timely basis,
such amounts to the appropriate governmental authorities and has furnished
properly completed exemption certificates for all exempt transactions.
(d) The Company has properly withheld income and social security
or other similar Taxes and paid payroll Taxes with respect to all persons
properly characterized as employees for federal, state or local Tax purposes.
(e) Effective as of the date of incorporation, the Company duly
and timely filed with the IRS a properly completed and executed election to
be treated as an "S" corporation. From and after such date, the Company has
been duly qualified as, and satisfied all requirements of, an "S" corporation
as defined in the Code and for all applicable state income tax purposes.
(f) The Company has delivered to Xxxxxxx complete and correct copies
of all state, local and foreign income or franchise Tax Returns filed by the
Company for the three most recent taxable years for which such Tax Returns have
been filed immediately preceding the date of this Agreement. Other than with
respect to taxes shown on Tax Returns described in this clause, the Company is
not subject to any tax imposed on net income in any jurisdiction or by any
taxing authority.
(g) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Taxes" means any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, personal property, or windfall profit
tax, custom duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, addition to tax or additional amount imposed
by any governmental (whether federal, state, local or foreign) authority
(a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign), but only if and to the extent attributable to periods
(or partial periods) prior to and including the Closing Date, together with
any interest and any penalty thereon.
(ii) "Tax Return" means any return, report, information
return, registration form or other document (including any related or
supporting information) filed or required to be filed with any Taxing
Authority in connection with the determination of any Tax or the
administration of any laws, regulations or administrative requirements
relating to any Tax.
2.7 Transactions with Affiliates. Except as set forth on Schedule
2.7 attached hereto, neither the Shareholders nor any member of their
family (including in-laws) or Corporations or other entities in or for
which a Shareholder or a member of his family holds an ownership or
profits or interest of more than 1% or performs management duties
(including service as a Director) (collectively, "Affiliates"), (i) has
engaged or benefitted from any transaction with the Company, (ii) has any
interest, directly or indirectly, in any lease, contract, license, lien,
encumbrance, loan or other agreement to which the Company is a party or any
interest (other than as a shareholder) in any properties or assets of the
Company or (iii) has any interest in any competitor, supplier or customer
of the Company.
2.8 Intellectual Property.
(a) Schedule 2.8 attached hereto contains a complete and correct
list of all patents, patent applications, trade names, trademarks or service
marks or applications for registration therefore, and copyrights
(collectively, "Intellectual Property"), including all contracts, agreements
and licenses relating thereto owned by the Company or in which it has any
rights. Except as disclosed on Schedule 2.8, the Company has not granted any
licenses with respect to any of its respective Intellectual Property. Except
as set forth on Schedule 2.8, the Company has not received any notice of, nor
to the knowledge of the Company and the Shareholders do any grounds exist
for, any claim of infringement or other conflict or claimed conflict with
respect to the rights of others arising from or relating to the use of
Intellectual Property which could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. The Company and the
Shareholders have no knowledge of any infringement of the Intellectual
Property by any third party. The Company is the sole and legal owner of the
Intellectual Property in the countries indicated on Schedule 2.8 and in all
other jurisdictions in which the Company uses, has used or plans to use any
Intellectual Property and, as of the date hereof, neither the Company nor
the Shareholders has knowledge of any claim by any other person that such
other person is the legal owner of such. The Intellectual Property confers
upon the Company all rights necessary or desirable for the conduct of its
business as now conducted and as presently proposed to be conducted.
(b) Except as set forth on Schedule 2.8, the Company has valid and
enforceable contracts with every employee, consultant and/or contractor of
the Company which vests with the Company all rights in any invention,
copyright and/or trade secret which relates to the business of the Company
to the fullest extent permitted by law and also protects the trade secrets
and/or proprietary information of the Company to the fullest extent
permitted by law.
(c) No infringement, illicit copying, misappropriation or violation
of any third party intellectual property rights has or would reasonably be
expected to occur with respect to the Company's use of the intellectual
property rights embodied in the Intellectual Property.
(d) Except for licenses to use software disclosed as Contracts on
Schedule 2.10, there are no other material agreements requiring the Company
to make payments or provide any consideration for, or restricting the
Company's right to use, any intellectual property rights of third parties.
(e) Except as set forth on Schedule 2.8 and except for claims that
would have been covered by insurance policies carried by the Company on the
Closing Date had the claim arisen during the applicable policy period, the
software and hardware products of the Company (i) meet in all material respects
all the functional specifications for which they were designed or programmed,
(ii) to the best knowledge of the Company, are free from significant bugs,
defects or errors, viruses, worms, bombs, traps or other code designed to or
having the effect of interrupting normal processing, corrupt data or render
the software or hardware products unusable and (iii) in the case of software,
have been maintained on media and hardware that are free from material defects.
2.9 Absence of Certain Changes. Except as set forth in Schedule 2.9
attached hereto, and except for the transactions specifically contemplated
under this Agreement, since August 31, 2000, the Company has conducted its
business in the ordinary course consistent with past practice, and there has
not been:
(a) Any declaration, setting aside or payment of any dividend or
other distribution or payment (whether in cash, stock or property) with
respect to the capital stock of the Company, or any redemption, purchase or
other acquisition of any of the securities of the Company, or any other
payment to any stockholder of the Company in its capacity as a stockholder;
(b) Any transaction involving the Company not in the ordinary course
of business, including any sale of properties or assets (other than inventory
in the ordinary course);
(c) To the best knowledge of the Company and the Shareholders, any
material adverse change in the prospects, results of the operations,
liabilities, financial condition or business of the Company;
(d) Any loan or advance by the Company to any person, except normal
travel advances or other reasonable expense advances to officers or employees
of the Company and normal trade terms extended to customers;
(e) Any indebtedness for borrowed money incurred by the Company or
any commitment to incur indebtedness for borrowed money entered into by the
Company, or any loans made or agreed to be made by the Company other than as
set forth on Schedule 2.9;
(f) Any capital expenditures or commitments to make capital
expenditures materially in excess of the amount budgeted for the current
fiscal year, and a copy of such budget has been made available to Xxxxxxx and
I-Bus;
(g) Any material change in the Company's lines of business or
management practices and procedures;
(h) Any damage, destruction or loss, whether or not covered by
insurance, which has had or may have a Material Adverse Effect on the Company;
(i) Except in the ordinary course of business of the Company and
consistent with past practices, any payment, satisfaction, discharge or
cancellation of any debt or claim of, or owed to, the Company;
(j) Any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind on any of the Company's properties or assets, or any
assumption of, or taking any properties or assets subject to, any liability;
(k) Any amendment, modification or termination of any material
contract or agreement to which the Company is a party or pursuant to which
its properties or assets may be bound;
(l) Any sale or granting to any party or parties of any license,
franchise, option or other right of any nature whatsoever with respect to
the Company's business or termination of any such rights;
(m) Any increase in, or commitment to increase, the direct or
indirect compensation payable or to become payable to any officer or director
of the Company, its employees, or to any of its Affiliates, or any commitment
to make severance, bonus or special payments to any of such parties, upon a
change in ownership or management of the Company or upon termination of such
parties;
(n) Any settlement of any material litigation or entry of any
judgment against the Company with a value of $50,000 or more (which judgment
has not been stayed or satisfied);
(o) Any alteration in the manner of keeping the books, accounts
or records of the Company or in the manner of preparing the Financial
Statements, or in the accounting practices of the Company, or any
revaluation of assets; or
(p) Any agreement, whether in writing or otherwise, to take any
action described in this subsections (a)-(o) of this Section 2.9.
2.10 Contracts. Schedule 2.10 attached hereto contains a complete and
correct list of all contracts, commitments, obligations or agreements of the
Company, whether written or oral (the "Contracts"): (i) pursuant to which
the Company leases real or personal property, (ii) pursuant to which the
Company will make or receive payments in excess of $5,000 per annum, (iii)
regarding financing for the Company, (iv) with Affiliates, (v) with consultants
or independent contractors, (vi) resulting in the creation of any lien or
security interest (including lease notifications) or (vii) otherwise material
to the business of the Company. Each of the Contracts is in full force and
effect and is the legal, valid and binding obligation of the Company and,
to the knowledge of the Company and the Shareholders, of the other parties
thereto, enforceable in accordance with its terms. Other than as set forth
on Schedule 2.10, to the knowledge of the Company and the Shareholders, no
event has occurred which would constitute a default (or any event which,
with the giving of notice or lapse of time or both, would constitute a
default) under any term or provision of any of the Contracts and thereby
allow a party thereto to terminate and/or claim damages therefor. The
Company is not a party to any Contract that restricts it from carrying on
its business or any part thereof, or from competing in any line of business
with any person, corporation or entity.
2.11 Employees. Schedule 2.11 attached hereto contains a complete and
correct list of all of the Company's employees ("Employees"), which includes
the job position and compensation payable to each of the Employees. Except
to the extent set forth in Schedule 2.11:
(a) The Company is in compliance with all laws, statutes,
ordinances, rules, regulations, orders and other requirements relating to
the employment of labor, including without limitation Title VII of the
federal Civil Rights Act of 1964, the federal Age Discrimination in
Employment Act of 1967, the federal Americans with Disabilities Act, the
federal Employee Retirement Income Security Act of 1974 ("ERISA"), and any
and all provisions thereof relating to wages, hours, collective bargaining
and the payment of social security and similar Taxes, except where the
failure to be in compliance would not have a Material Adverse Effect;
(b) There is no pending or, to the best knowledge of the Company
and the Shareholders, threatened charge, complaint, allegation, application
or other process or claim against the Company before any federal,
territorial, state or local or other governmental or administrative agency
or other entity relating to employment matters;
(c) No employees of the Company are covered by any collective
bargaining agreement, nor, to the best knowledge of the Company and the
Shareholders, is there any effort being made by any union to organize the
Company's employees; and
(d) No person performing services for the Company has, to the
best knowledge of the Company and the Shareholders, been improperly
classified as an independent contractor or leased employee for purposes of
employee benefits, withholding obligations or overtime wage obligations.
2.12 Litigation. Except as set forth in Schedule 2.12 attached hereto,
there is no pending or, to the best knowledge of the Company and the
Shareholders, threatened, action, suit, arbitration, proceeding, investigation
or inquiry before any court or governmental or administrative body or agency,
or any private arbitration tribunal, against, relating to or affecting the
Company or any director, officer or employee of the Company in his or her
capacity as such, or the assets, properties or business of the Company, or
the transactions contemplated by this Agreement, an adverse decision or
finding in which could have a Material Adverse Effect; nor to the best
knowledge of the Company and the Shareholders, are there any facts or
circumstances which could reasonably lead to or provide the basis for any
such threatened action, suit, arbitration proceeding, investigation or
inquiry. There is not in effect any order, judgment or decree of any court
or governmental or administrative body or agency enjoining, barring,
suspending, prohibiting or otherwise limiting the Company or any officer,
director or employee of the Company from conducting or engaging in any aspect
of the ompany's business, or requiring the Company or any officer, director
or employee of the Company to take certain action with respect to any aspect
of the Company's business.
2.13 Environmental Matters.
(a) The Company is in compliance with Environmental Laws and the
Company has obtained and is in compliance with all necessary permits,
licenses, approvals and authorizations required under applicable Environmental
Laws, except for such noncompliance which would not have, or could not
reasonably be expected to have, singly or in the aggregate, a Material
Adverse Effect.
(b) The Company has not, and to the knowledge of the Company and
the Shareholders, no third party has, released Hazardous Materials at, from,
on, in, to or under the any of the properties or assets owned, leased or
operated (or formerly owned or operated) by the Company and there are no
underground storage tanks, polychlorinated biphenyl-containing equipment or
asbestos-containing material at any of the properties or assets owned, leased
or operated (or formerly owned or operated) by the Company.
(c) There are no past, pending or, to the knowledge of the Company
or the Shareholders, threatened, claims, notices of violation, investigations,
litigation, administrative proceedings, orders, judgments against Company
relating to Hazardous Materials, Environmental Laws or relating to any other
location where Hazardous Materials from Company have been transported, stored,
handled, disposed, treated or have otherwise come to be located ("Environmental
Claims") and neither the Company nor any of the Shareholders is aware of any
facts, events, conditions or circumstances which could reasonably be expected
to form the basis of any Environmental Claims against the Company.
(d) The Company is not a potentially responsible party with respect
to any federal, state or local environmental clean-up site or with respect to
investigations or corrective actions under any Environmental Law.
(e) The Company has not received notice of any alleged, actual or
potential responsibility, inquiry, investigation, claim or administrative or
judicial proceeding regarding any release, transportation or dispoal of
Hazardous Material by the Company or any violation of or non-compliance by
the Company with the conditions of any permit required under any Environmental
Law or the provisions of any Environmental Law.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental Law" means any and all federal, state, local, provincial
and foreign, civil and criminal laws, statutes, rules, ordinances, codes,
regulations, permits relating to the protection of health and the environment,
worker health and safety and or governing the use, handling, storage,
discharge or disposal of Hazardous Materials, including but not limited to
the Comprehensive Environmental Response, Compensation and Liability Act,
42 USC ?9601 et. seq., the Resource Conservation and Recovery Act, 42 USC
?6901 et. seq., the Occupational Health and Safety Act, 29 USC ?651 et. seq.
and the state and local analogues thereto, all as amended or superseded from
time to time.
"Hazardous Material" means petroleum and petroleum products, radioactive
materials, asbestos-containing materials, radon, lead-based paint,
polychlorinated biphenyls, pesticides and any other chemicals, substances,
wastes or materials defined, listed or regulated by any Environmental Law.
2.14 Employee Benefits. Except as disclosed on Schedule 2.14 attached
hereto, the Company is not a party to any employment agreement with any
officer or employee. Except as specified on Schedule 2.14, the Company does
not maintain any bonus, incentive compensation, deferred compensation, profit
sharing, severance, salary continuation, or consulting plan or arrangement
with or for the benefit of any officer or employee or for the benefit of any
group of officers or employees. Except as described on Schedule 2.14, the
Company does not have, and has never had, maintained or contributed to any
"401(k)," profit sharing, savings, retirement (including health and life
insurance enefits provided after retirement) or pension plan that constitutes
an "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or that is
intended to qualify for favorable income tax treatment under Section 401(a)
of the Internal Revenue Code. Except as set forth on Schedule 2.14, the
Company does not maintain any plan that provides (or will provide) medical
or death benefits to one or more former employees (including retirees)
beyond their retirement or other termination of service, other than benefits
that are required to be provided pursuant to federal or state law
continuation coverage or conversion rights. With respect to each employee
benefit plan or each employee welfare plan, the Company has not incurred
liabilities as a result of any failure to comply with any applicable
provision of ERISA, the Internal Revenue Code, any other applicable law, or
any provision of such plan. The Company has performed, in all material
respects, all of its obligations under each such plan required to be
performed by it as of the date hereof.
2.15 Bank Accounts. Attached hereto as Schedule 2.15 is a complete and
correct list of the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which the
Company maintains safe deposit boxes or accounts of any nature and the account
numbers of all such accounts.
2.16 Brokers and Finders. Neither the Shareholders nor the Company has
engaged or authorized any broker, finder, investment banker, financial advisor
or other third party to act on behalf of the Shareholders or the Company,
directly or indirectly, as a broker, finder, investment banker, financial
advisor or in any other like capacity in connection with this Agreement, the
transactions contemplated hereby, or the sale, merger, financing or
capitalization of the Company or has consented to or acquiesced in anyone so
acting, and neither the Shareholders nor the Company knows of any claim for
compensation from any such broker, finder, investment banker, financial
advisor or other third party for so or resulting from the closing of the
transaction contemplated hereby or of any basis for such a claim.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER
Each Shareholder, severally and not jointly, represents and warrants to
Xxxxxxx and I-Bus with respect to such Shareholder's Company Common Stock and
each agreement, document and instrument executed by such Shareholder as follows:
3.1 Title to Shares. Such Shareholder is the record and beneficial owner
of the shares of Company Common Stock set forth opposite such Shareholder's name
on Schedule 2.3, free and clear of any liens, encumbrances, security interests,
restrictions or claims whatsoever, and has full power and authority to convey
such shares in accordance with the terms of this Agreement.
3.2 Authorization. This Agreement has been duly executed and delivered
by such Shareholder and constitutes the legal, valid and binding obligations
of such Shareholder, enforceable in accordance with its terms.
3.3 No Violations. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby will (i) violate,
or be in conflict with, or constitute a default (or other event which, with
the giving of notice or lapse of time or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of any lease, license,
promissory note, contract, agreement, mortgage, deed of trust or other
instrument or document to which such Shareholder is a party or by which such
Shareholder or any of his or her properties or assets may be bound, (ii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
of any court or governmental authority applicable to such Shareholder or any
of his properties or assets or (iii) give rise to a declaration or imposition
of any claim, lien, charge, security interest or encumbrance of any nature
whatsoever upon the shares of Company Common Stock held by such Shareholder
or upon any of the assets of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF XXXXXXX AND I-BUS
Xxxxxxx and I-Bus jointly and severally represent and warrant to the
Shareholders as follows:
4.1 Organization and Power. Xxxxxxx and I-Bus are each corporations
duly organized, validly existing and in good standing under the laws of
their state of organization, and each has all requisite corporate power and
authority to own, lease and operate its properties, and to carry on its
business, as such is now being conducted.
4.2 Capital Structure of I-Bus. The authorized capital stock of I-Bus
consists of 30,000,000 shares of common stock, $.01 par value, of which
15,270,591 shares are issued and outstanding on the date of this Agreement.
Except for any of the transactions contemplated pursuant to this Agreement,
and for outstanding stock options covering 832,416 I-Bus Shares, there are
no outstanding options, warrants, convertible debt or securities, calls,
agreements, arrangements, commitments, understandings or other rights to
purchase any of I-Bus's capital stock, or securities convertible into or
exchangeable for any such capital stock. All of the outstanding shares of
capital stock of I-Bus have been duly authorized, validly issued and are
fully paid and nonassessable.
4.3 Authorization and Enforceability of Agreements. Xxxxxxx and I-Bus
each have all requisite corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder. This
Agreement has been duly and validly authorized by and approved by all
requisite corporate action on the part of Xxxxxxx and I-Bus. This Agreement
has been duly executed and delivered by Xxxxxxx and I-Bus, and constitutes
the legal, valid and binding obligation of Xxxxxxx and I-Bus enforceable in
accordance with its terms. Except for securities law filings required by
reason of the Stock Purchase, no further approvals or consents by, or
filings with, any federal, state, municipal, foreign or other court or
governmental or administrative body, agency or other third party is required
in connection with the execution and delivery by Xxxxxxx and I-Bus of this
Agreement or the consummation by Xxxxxxx or I-Bus of the transactions
contemplated hereby, except for those which, if not obtained, would not have
a material adverse impact on the ability of I-Bus to perform its business
as currently conducted or the ability of I-Bus to execute and deliver this
Agreement, or to consummate the transactions contemplated hereby.
4.4 No Conflicts. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby will (a) violate
any provisions of the charter or Bylaws of Xxxxxxx or I-Bus, (b) violate, or
be in conflict with, or constitute a default (or other event which, with the
giving of notice or lapse of time or both, would constitute a default) under,
or give rise to any right of termination, cancellation or acceleration under
any of the terms, conditions or provisions of any material lease, license,
promissory note, contract, agreement, mortgage, deed of trust or other
instrument or document to which Xxxxxxx or I-Bus is a party or by which
Xxxxxxx or I-Bus or any of its properties or assets may be bound, (c) violate
any order, writ, injunction, decree, law, statute, rule or regulation of any
court or governmental authority applicable to Xxxxxxx or I-Bus or any of its
properties or assets or (d) give rise to a declaration or imposition of any
claim, lien, charge, security interest or encumbrance of any nature whatsoever
upon any of the assets of Xxxxxxx'x or I-Bus' businesses.
4.5 Financial Statements and SEC Reports. Xxxxxxx has delivered to the
Shareholders copies of (i) its Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, and (ii) all other reports, statements and
registration statements filed or required to be filed by it with the SEC
since December 31, 1999 (the documents referred to in clauses (i) and (ii)
being hereinafter referred to as the "Xxxxxxx SEC Reports"). As of their
respective dates, the Xxxxxxx SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements (including any related
notes) of Xxxxxxx included in the Xxxxxxx SEC Reports were prepared in
conformity with GAAP applied on a consistent basis, and present fairly in all
material respects the consolidated financial position, results of operations
and cash flows of Xxxxxxx and its consolidated subsidiaries as of the date
and for the periods indicated, subject, in the case of unaudited interim
consolidated financial statements, to condensation, the absence of certain
notes thereto and normal year-end adjustments.
4.6 Brokers and Finders. Neither Xxxxxxx nor I-Bus has engaged or
authorized any broker, finder, investment banker, financial advisor or other
third party to act on their behalf, directly or indirectly, as a broker,
finder, investment banker, financial advisor or in any other like capacity
in connection with this Agreement or the transactions contemplated hereby,
or consented to or acquiesced in anyone so acting, and neither Xxxxxxx nor
I-Bus knows of any claim for compensation from any such broker, finder,
investment banker, financial advisor or other third party for so acting or
resulting from the closing of the transaction contemplated hereby or of any
basis for such a claim.
4.7 I-Bus Shares. The I-Bus Shares to be issued and delivered pursuant
to this Agreement will, on delivery of certificates therefor in accordance
with the terms hereof, be duly authorized, validly issued, fully paid and
nonassessable.
ARTICLE 5
CLOSING
5.1 The Closing. At the consummation of the Merger (referred to herein
as the "Closing"), each of the parties shall take all such action and deliver
all such documents, instruments, certificates and other items as may be
required, under this Agreement or otherwise, in order to perform or fulfill
all covenants, conditions and agreements on its part to be performed or
fulfilled at or prior to the date of such Merger consummation (referred to
herein as the "Closing Date") and to cause all conditions precedent to the
other parties' obligations under this Agreement to be satisfied in full.
5.2 Delivery of Documents. At the Closing, the parties shall execute
and deliver the following documents:
(a) Consents. The Company shall deliver copies of all consents
or approvals of any governmental authority or of any person in any
contractual relationship with the Company necessary for the consummation
of the transactions contemplated hereby.
(b) Company Board and Shareholder Approval. The Company shall
deliver a certified copy of the resolutions adopted by the Company's Board
of Directors and the Shareholders authorizing and approving this Agreement
and the transactions contemplated herein and therein.
(c) Offer Letters. I-Bus and the Shareholders shall sign Offer
Letters regarding the Shareholders' employment with I-Bus.
(d) Noncompetition Agreements. Xxxxxxx and I-Bus shall receive
from each of the Shareholders a signed Noncompetition Agreement in the form
of Exhibit 5.2(d) (the "Noncompetition Agreement") effective as of the
filing of the Agreement of Merger.
(e) Investment Letter. Xxxxxxx and I-Bus shall receive from each
Shareholder a signed Investment Letter in the form of Exhibit 5.2(e).
(f) Put Agreement. I-Bus and each of the Shareholders shall have
entered into the Put Agreement in the form of Exhibit 5.2(f) (the " Put
Agreement").
(g) Indemnification Escrow Agreement. The Shareholders and I-Bus
shall execute and deliver the Indemnification Escrow Agreement.
(h) I-Bus and Xxxxxxx Board Approval. Xxxxxxx and I-Bus shall
deliver to the Company and the Shareholders a certified copy of the
resolutions adopted by the Board of Directors of I-Bus and Xxxxxxx
authorizing and approving this Agreement and the transactions contemplated
herein.
(i) Merger Documents. An Agreement of Merger or other documents
required to effect the Merger shall have been filed with the California
Secretary of State.
(j) Cash. Xxxxxxx or I-Bus shall wire the $500,000 cash portion
of the Closing Payment to the Shareholders.
(k) Other Matters. The parties shall deliver such additional
certificates, agreements and the other documents as the other may reasonably
request.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND RELATED AGREEMENTS; INDEMNIFICATION
6.1 General Liability Period. The warranties, representations, covenants
and agreements made by the Company and the Shareholders on the one hand, or by
Xxxxxxx and I-Bus, on the other hand, in this Agreement, or in any document,
certificate, schedule or instrument delivered in connection herewith shall
survive the Closing and shall continue in effect, notwithstanding any
investigation by or on behalf of Xxxxxxx, I-Bus, the Company or the
Shareholders, for twelve months (the "General Liability Period") following
the Closing Date; provided that (a) the representations and warranties set
forth in Sections 2.1-2.4, 2.6, 3.1, 3.2, 3.3, 4.1, 4.2 and 4.3 and (b) the
agreements and covenants made by the parties hereunder shall survive the
Closing indefinitely.
6.2 Indemnification by the ShareholdersThe Shareholders, jointly and
severally, shall indemnify and hold harmless, Xxxxxxx and I-Bus and the
officers, directors, agents, affiliates and representatives of Xxxxxxx and
I-Bus or any of them (the "Xxxxxxx Indemnitees") from and against, and shall
reimburse the Xxxxxxx Indemnitees on demand for any loss, liability, damage
or expense that the Xxxxxxx Indemnitees shall incur or suffer, but subject at
all times to Section 6.4 hereof (collectively, "Xxxxxxx'x Recoverable
Losses"), arising out of or resulting from any misrepresentation by the
Shareholders or breach by the Shareholders of any (i) representation or
warranty contained in Article 2 hereof, (ii) agreement or covenant under or
pursuant to this Agreement, or (iii) document, certificate, schedule or
instrument delivered by or on behalf of the Company or the Shareholders
pursuant hereto (collectively with respect to which a claim for Xxxxxxx'x
Recoverable Losses is made by the Xxxxxxx Indemnitees during the General
Liability Period hereinafter referred to as a "Shareholders Agreement
Breach"); provided that no Shareholder need indemnify the Xxxxxxx Indemnitees
for the breach by the other Shareholder of the representations and warranties
set forth in Article 3 or the separate Noncompetition Agreement or Investment
Letter delivered by the other Shareholder. Each Shareholder, severally and
not jointly, agrees to indemnify and hold harmless the Xxxxxxx Indemnitees
from and against Xxxxxxx Recoverable Losses arising out of or resulting from
a breach by such Shareholder of the representations and warranties set forth
in Article 3 (collectively with respect to which a claim for Xxxxxxx'x
Recoverable Losses is made by the Xxxxxxx Indemnitees during the General
Liability Period hereinafter shall also be referred to as a "Shareholders
Agreement Breach").
6.3 Indemnification by Xxxxxxx and I-Bus. Xxxxxxx and I-Bus shall
indemnify and hold harmless the Shareholders from and against, and shall
reimburse the Shareholders for any loss, liability, damage or expense,
including reasonable attorneys' fees and cost of investigation incurred as
a result thereof, that the Shareholders shall incur or suffer (collectively,
the "Shareholders' Recoverable Losses") resulting from any misrepresentation
or breach by Xxxxxxx or I-Bus of any (i) representation or warranty
contained in Article 4 hereof, (ii) agreement or covenant under or pursuant
to this Agreement or (iii) document, certificate, schedule or instrument
delivered by or on behalf of Xxxxxxx or I-Bus in connection herewith
(collectively with respect to which a claim for the Shareholders'
Recoverable Losses is made by the Shareholders during the General Liability
Period hereinafter referred to as a "Xxxxxxx/I-Bus Agreement Breach").
6.4 Limitations on Recoverable Losses. Notwithstanding anything to the
contrary, express or implied, set forth herein, claims for payment of
Xxxxxxx'x Recoverable Losses in respect of a Shareholders Agreement Breach
(i) may be made only with respect to claims arising during the General
Liability Period (except with respect to breaches of the representations and
warranties specified in the proviso to Section 6.1 and the covenants and
agreements contained in this Agreement which shall not be so limited), (ii)
must be made by giving the written Claim Notice (as defined in Section 6.5(a)
hereof) to the Shareholders, (iii) except for breaches by the Shareholders or
any of them (a) of any representations and warranties set forth in Article 3,
(b) of any representation and warranty set forth in Sections 2.1-2.4 and 2.6,
or (c) of the covenants and agreements herein set forth, may be made only to
the extent that the aggregate amount of Xxxxxxx'x Recoverable Losses for
Shareholders Agreement Breaches exceeds $50,000, in which case all Xxxxxxx'x
Recoverable Losses for Shareholders Agreement Breaches which are covered by
clauses (i) and (ii) herein above shall be paid by the Shareholders, and (iv)
shall not exceed the greater of $5 million or 50% of the Purchase Price.
Notwithstanding anything to the contrary, express or implied, set forth
herein, claims for payment of the Shareholders' Recoverable Losses in
respect of a Xxxxxxx/I-Bus Agreement Breach (x) may be made only with respect
to claims arising during the General Liability Period (except with respect to
breaches of the representations and warranties specified in the proviso to
Section 6.1 and the covenants and agreements contained in this Agreement
which shall not be so limited) and (y) must be made, if at all, by giving a
written Claim Notice to Xxxxxxx and I-Bus.
6.5 Claims for Indemnification; Disputes.
(a) Claims for Indemnification. Any party hereto (individually or
with others, collectively, the "Indemnitee") shall give the Shareholders, or
Xxxxxxx and I-Bus, as the case may be (the "Indemnitor"), written notice (the
"Claim Notice") of any claim (including the receipt of any demand) or the
commencement of any action with respect to which indemnity may be sought by
the Indemnitee (individually, a "Claim" and collectively, the "Claims");
provided, however, that if the Indemnitee fails to give such Claim Notice
in a materially correct form prior to the expiration of the General Liability
Period (except with respect to breaches of the representations and warranties
specified in the proviso to Section 6.1 and the covenants and agreements
contained in this Agreement, which shall not be so limited), all rights of
the Indemnitee to assert any such Claims for a Xxxxxxx/I-Bus Agreement Breach,
a Shareholders Purchase Agreement Breach shall terminate and be forever
waived. The Claim Notice shall include a description of the grounds upon
which the Claim for indemnification is being made. The right of the
Indemnitee to indemnification for a Claim shall be deemed to be accepted by
the Indemnitor unless, within 45 days after the Indemnitor's receipt of the
Claim Notice, the Indemnitor shall notify the Indemnitee in writing that it
objects to the right of the Indemnitee to indemnification with respect to
the Claim.
(b) Control of Litigation; Mutual Cooperation. If a Claim is based
upon a claim asserted by a third party against the Indemnitee (a "Third Party
Claim") and the Indemnitor denies liability for the Claim hereunder, the
Indemnitee shall be entitled to control the defense of the Third Party Claim,
including, without limitation, the employment of counsel and the right to
settle the Third Party Claim without any participation by or consent from the
Indemnitor. All fees and expenses of counsel retained by the Indemnitee to
defend such Third Party Claim, expert witness fees and other costs incurred
in such action, shall be payable by the Indemnitee defending such Third Party
Claim; provided, however, that if such Third Party Claim results in a
Recoverable Loss for which the Indemnitor, notwithstanding any denial of
liability, is found to be liable hereunder, such reasonable fees and expenses
of counsel, expert witness fees and other reasonable costs incurred in such
action shall be deemed to be included in such Recoverable Loss and payable
by the Indemnitor to the extent and under the limitations provided in this
Article 6. The Indemnitee shall act in good faith and no settlement of the
Third Party Claim may be agreed to without the written consents of the
Indemnitor and the Indemnitee, which consents shall not be unreasonably
withheld. The party controlling the defense of the Third Party Claim shall
deliver, or cause to be delivered, to the other party copies of all
correspondence, pleading, motions, briefs, appeals or other written
statements relating to or submitted in connection with the defense of the
Third Party Claim, and timely notices of, and the right to participate in
(as an observer), any hearing or other court proceeding relating to the
Third Party Claim.
6.6 Exclusive Remedy. Except for issues arising under the Employment
and Noncompetition Agreements and claims arising from fraud, the remedies
provided in this Article 6 shall be the exclusive remedy for monetary
damages (whether at law or in equity) arising out of or related to this
Agreement or the transactions contemplated hereby.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 Relocation. Xxxxxxx and I-Bus covenant not to move the Company's
principal place of business to a location outside of San Xxxx Obispo County,
California prior to March 31, 2002; provided that Xxxxxxx and I-Bus may, as
they in their reasonable judgment deem appropriate to further the development
of the Company, establish additional business locations for the Company in
any location or locations as long as none of the Shareholders are required
to relocate outside of San Xxxx Obispo County without their express consent.
7.2 Operating Committee. Until the end of the first quarter of calendar
year 2002, management of the operations formerly conducted by the Company
(the "Company's Operations") will be directed by an operating committee
comprised of Xxxxxx Xxxxxxx, Xxxxx Xxxx (VP - Engineering and CTO of I-Bus)
and Xxxxx Xxxxxxx (VP - Finance of I-BUS), with the charter of coordinating
the activities of the Company's operations with the strategic direction of
I-Bus and to leverage efficiently the combined resources of the Company's
operations and I-Bus with the absolute minimal redundancy of operating
functions. This operating committee will report to Xxxx Xxxxxxxxx
(President of I-Bus) as may be determined by Xx. Xxxxxxxxx. After such
quarter, this management structure could be changed based on the best
structure for the broader I-Bus enterprise.
7.3 Incentive Equity Pool. To assist in the hiring and retention of
key employees into the operations formerly conducted by the Company, I-Bus
agrees to create an equity incentive program promptly following the Closing,
utilizing for this purpose, as necessary, existing available employee stock
options, newly-authorized employee stock options and shares of restricted
stock, in an aggregate number of shares of I-Bus common stock of 95,017
(representing 10%, fully diluted, of the I-Bus shares issued at Closing).
I-Bus further agrees to supplement this incentive equity pool with 10%,
fully diluted, of the I-Bus shares issued in the Final Payment (as defined
in Exhibit 1.5). Options or shares of restricted stock shall be granted or
issued, from time to time out of such available incentive equity pool by
the Board of Directors (or a stock option committee thereof) of I-Bus based
on recommendations by the Shareholders. The Board of Directors of I-Bus
(or such committee) shall adhere to such recommendations unless, in the
reasonable exercise of its business judgment, it concludes any such
recommendation is inappropriate or not in the best interest of I-Bus.
7.4 Further Acts.
(a) If, at any time after the Closing, any further action by any
of the parties to this Agreement is necessary or desirable to carry out the
purposes of this Agreement and/or to vest in I-Bus full title to all
properties, assets and rights of the Company, such parties shall take all
such necessary or desirable action or use such parties' best efforts to
cause such action to be taken.
(b) Xxxxxxx and I-Bus agree that in the event either of them
(or the Company) receives notice, whether orally or in writing, of any
federal, state or local examination, claim, proposed adjustment or related
matter with respect to any Tax Return for Taxes (the "Tax Controversies"),
they shall timely notify the Shareholders. Failure of Xxxxxxx or I-Bus to
timely notify the Shareholders of any Tax Controversies shall not constitute
a waiver of any rights of Xxxxxxx or I-Bus with respect to the
indemnification thereof by the Shareholders, but shall relieve the Shareholders
of their indemnification obligation to the extent that such obligation is
increased as the result of such failure to give timely notice.
(c) After the Closing Date, each of the Shareholders shall:
(i) assist Xxxxxxx and I-Bus in preparing any Tax Returns
not covered by (d) below for the Company for periods prior to the Closing
Date and in preparing for any audits of, or disputes, contests or proceedings
with, taxing authorities which relate to the Company for periods prior to
the Closing Date;
(ii) make available to Xxxxxxx and I-Bus and to any taxing
authority as reasonably requested all information, records and documents
relating to tax liabilities which are attributable to the Company's business
or the Company relating to periods beginning prior to the Closing Date.
(iii) make him or herself available, without charge, as
reasonably requested, in connection with tax disputes related to periods
prior to the Closing Date; and
(iv) keep confidential any Tax information except as may
otherwise be necessary in connection with the filing of returns or claims for
refund or in conducting any audit or other Tax proceeding.
(d) The Shareholders shall prepare and file federal and state
income and franchise Tax Returns for all periods up to the Closing Date and
will submit such returns to Xxxxxxx for review prior to filing.
(e) Following the Closing and so long as (i) a Shareholder is
employed by I-Bus and (ii) I-Bus is a majority-owned subsidiary of Xxxxxxx
with its stock not publicly traded, such Shareholder shall have access to
and the right to inspect, during business hours and upon reasonable prior
notice, the minute book and stock records of I-Bus. If either clause (i)
or (ii) is no longer true, then the inspection rights of such Shareholder
shall be as permitted by applicable law.
ARTICLE 8
GENERAL PROVISIONS
8.1 Entire Agreement; Modifications; Waiver. This Agreement and the
agreements ancillary hereto, supersede any and all agreements heretofore made,
written or oral, relating to the subject matter hereof, and constitute the
entire agreement of the parties relating to the subject matter hereof. This
Agreement may be amended only by an instrument in writing signed by Xxxxxxx
and I-Bus on the one hand and the Company and the Shareholders on the other
hand. Inspection of documents or the receipt of information pursuant to
this Agreement shall not constitute a waiver of any representation, warranty,
covenant or condition hereunder. No waiver shall be binding unless executed
in writing by the party making such waiver.
8.2 Severability. If any clause or provision of this Agreement shall
be held invalid or unenforceable by the final determination of a court of
competent jurisdiction, and all appeals therefrom shall have failed or the
time for such appeals shall have expired, such clause or provision shall be
deemed eliminated from this Agreement, but the remaining provisions shall
nevertheless be given full force and effect.
8.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto, and their respective
successors and assigns.
8.4 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.5 Governing Law. This Agreement shall be construed and interpreted
in accordance with the internal substantive laws of the State of California.
8.6 Notices. All notices required or desired to be given hereunder
shall be given in writing and signed by the party so giving notice, and shall
be effective when personally delivered, one business day after transmission
if sent by facsimile and appropriate confirmation is received, or five days
after being deposited in the United States mail, as certified or registered
mail, return receipt requested, first class postage and fees prepaid,
addressed as set forth below. Any party from time to time may change such
party's address for giving notice by giving notice thereof in the manner
outlined above:
If to Xxxxxxx:
Xxxxxxx Technologies, Inc.
0000 Xxx Xxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company or the Shareholders:
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
8.7 Expenses. Whether or not the Merger is consummated, each of the
Shareholders (and not the Company) and Xxxxxxx and I-Bus shall pay their
own expenses (including outside legal and accounting fees) incident to this
Agreement, filings and preparation of documents in connection with the
issuance of the I-Bus Shares, and any other documents prepared in connection
therewith and consummation of the Merger.
8.8 Recovery of Litigation Costs. If any legal action or arbitration or
other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection
with any of the provisions of this Agreement, the successful or prevailing
party or parties shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
8.9 Publicity. Neither the Company nor the Shareholders nor any of their
agents or affiliates, shall either directly or indirectly make any press
release or other public communication with respect to the transaction
contemplated hereby without the prior written consent of Xxxxxxx and I-Bus,
unless required by applicable law to make such a communication.
8.10 Confidentiality. From and after the date hereof, Xxxxxxx, I-Bus,
the Shareholders or the Company shall continue to be bound by, and observe
the provisions of, the Confidentiality Agreement dated July 14, 2000,
previously executed by each of them.
8.11 No Third Parties Benefitted. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto, their
successors and assigns, and no other person or persons shall have any right
or action under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GATEWORKS CORPORATION
By: /s/ Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
SHAREHOLDERS:
/s/ Xxxxxx Xxxxxxx
------------------------------
Xxxxxx Xxxxxxx
/s/ X. Xxxxxxxx
------------------------------
Xxxxxx Xxxxxxxx
/s/ X.X. Xxxxxxxxxxxx
------------------------------
Xxxx Xxxxxxxxxxxx
I-BUS/PHOENIX, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
XXXXXXX TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and
Chief Executive Officer
