Exhibit 99.2
OPTION AGREEMENT
This Option Agreement (this "OPTION AGREEMENT") dated as of February
17, 2001 is entered into by and between VideoState, Inc., a Delaware corporation
("VIDEOSTATE"), and xxxxxxx.xxx, inc., a Delaware corporation ("BUSYBOX").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises set forth below
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. OPTION GRANT. Upon the terms and subject to the conditions of this Option
Agreement, BusyBox hereby grants to VideoState an exclusive and irrevocable
option (the "OPTION") to purchase up to all or substantially all of the assets
of BusyBox (the "PURCHASE"), pursuant to the terms and conditions set forth in a
definitive asset purchase agreement (the "APA"). Such assets include, but are
not limited to, all of BusyBox's rights in and to intellectual property, its
physical property, its computers, all of its real and personal property leases,
all of its customer lists, any and all copyrights, and any and all rights in and
to the URLs/domain names "xxxxxxxxxx.xxx" and "xxxxxxxxx.xxx" and any similars
(specifically excluding "xxxxxxx.xxx") (the "ASSETS"). VideoState will not
assume or be deemed to have assumed any obligations or liabilities whether
related or unrelated to the Assets, unless such obligations or liabilities are
specifically set forth in the APA as being assumed. BusyBox expressly
acknowledges that VideoState's decision to exercise or not exercise the Option
is in VideoState's sole and absolute discretion, to be determined by the factors
that VideoState deems relevant, including but not limited to (i) its assessment
of the legal and commercial risks of the Purchase, (ii) completion of any and
all required financing and (iii) requisite board approval.
2. OPTION CONSIDERATION. In consideration for BusyBox entering into this Option
Agreement, VideoState will deliver $25,000 to BusyBox in readily available funds
within 14 business days after execution of this Option Agreement.
3. OPTION PERIOD. The Option will be exercisable at any time during the period
that begins on the date hereof and ends at 5:00 PM Pacific Daylight Savings Time
on May 31, 2001 (the "OPTION PERIOD").
4. PURCHASE PRICE. The Option is exercisable for an aggregate purchase price of
USD $3,800,000, $800,000 of which will be paid in readily available funds and
the remaining $3,000,000 of which will be paid in shares of Convergence Holdings
plc. The value of each Convergence Holdings plc share will be the average
closing sale prices on the principal exchange on which the shares traded for
each business day during the 10 day trading period ending on the third business
day prior to the closing of the Purchase (the "CLOSING"). In no case will the
value of such shares exceed 50 xxxxx (UK currency) per share. One-half of the
$3,000,000 in Convergence Holdings plc shares will be subject to a 12 month
lock-up agreement and subject to any applicable US securities rules or
regulations and the other half of such shares will be subject to a 24 month
lock-up agreement and any applicable US securities rules or regulations.
$600,000 in shares of the purchase price (the "ESCROW AMOUNT") will be deposited
into escrow
at the Closing for a period of 24 months as the first recourse to
satisfy BusyBox's indemnification obligation under the APA (which will have a
basket of $50,000). At the end of the first 12 months of the escrow period,
VideoState and BusyBox agree to release all of the Escrow Amount in excess of
$300,000 (based on the closing date valuation) plus the shares representing any
amounts then subject to outstanding claims.
5. EXERCISE PROCEDURE.
A. During the Option Period, VideoState and BusyBox will commence the
negotiation and drafting of the APA and any and all related transaction
documents (including the APA, the "PURCHASE DOCUMENTS"). VideoState's
obligation to negotiate and draft the Purchase Documents and to conduct
its due diligence is subject to the satisfaction or extension, in
VideoState's sole discretion, of BusyBox's covenant in Section 8(F).
B. At any time during the Option Period, VideoState or one of its
affiliates, if this Option Agreement and the Option have been
transferred thereto pursuant to Section 7 herein (as applicable, the
"OPTION HOLDER"), may, in its sole and absolute discretion, exercise
the Option by delivering a written notice (the "OPTION NOTICE") of such
exercise to BusyBox at the address listed in Section 13 herein.
C. As soon as reasonably practicable after receipt by BusyBox of the
Option Notice, VideoState and BusyBox will use their respective
commercially reasonable best efforts to: (i) complete the negotiation
and drafting of the Purchase Documents; (ii) execute and deliver the
Purchase Documents; and (iii) close the Purchase as soon as
practicable.
6. DEFINITIVE ASSET PURCHASE AGREEMENT. If VideoState exercises the Option:
A. All terms and conditions concerning the Purchase will be stated in
the APA which will be subject to the approval of the parties, with the
advice of counsel, and further subject to any conditions of closing set
forth therein. These terms and conditions will include, but not be
limited to, representations, warranties, covenants (including
noncompetition) and indemnities (covering up to the full purchase
price) by all parties customary in a transaction of this nature,
including (i) those regarding the proprietary information related to
the BusyBox intellectual property rights and software; (ii) customary
investor representations by BusyBox that satisfy applicable securities
laws; (iii) a two year survival period for the representations and
warranties; (iv) indemnities by BusyBox for its breaches of the APA and
for liabilities not assumed by VideoState; and (v) covenants by BusyBox
not to dispose of the shares it receives as part of the purchase price
until it is allowed under the applicable securities laws.
B. The Closing will be subject to, among other things: (i) any required
stockholder consents, (ii) VideoState's completion of any required
financing, (iii) VideoState's satisfactory completion of the due
diligence process and (iv) Xxxxxx Xxxxxxx and other key employees of
BusyBox entering into service agreements with VideoState or one of its
affiliates in a form reasonably satisfactory to VideoState, including,
but not limited to, reasonable non-compete and non-solicitation
covenants and a standard definition of
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Cause with all parties having the ability to terminate their respective
agreements for Cause.
C. BusyBox and VideoState will each be solely responsible for and bear
all of its own expenses, including, but not limited to, expenses of
lenders, legal counsel, investment bankers, consultants, accountants
and other advisors, incurred at any time in connection with this Option
Agreement or pursuing or consummating the Purchase, the APA and the
transactions contemplated thereby.
7. ASSIGNMENTS/TRANSFER. VideoState will not directly or indirectly sell,
pledge, dispose of, transfer or otherwise encumber the Option or this Option
Agreement by agreement, operation or law or otherwise (each, a "TRANSFER") at
any time from the date hereof through and including the expiration of the Option
Period and any purported Transfer will be void; provided, however, that upon one
days' written notice to BusyBox, VideoState may assign the Option and this
Option Agreement in writing to any one of its affiliates.
8. COVENANTS OF BUSYBOX.
A. BusyBox agrees that during the Option Period, BusyBox will not (and
will not permit any affiliate, employee, officer, director, trustee,
agent or other person acting on its or their behalf to) directly or
indirectly solicit, offer or engage in any agreement, discussion or
negotiation other than with VideoState regarding the possible
acquisition of stock or the assets of BusyBox. BusyBox will immediately
communicate to VideoState the terms of any proposal that it may receive
indicating or suggesting any interest in acquiring all or any part of
the stock or the assets of BusyBox.
B. BusyBox agrees that during the Option Period it will not, without
the prior written consent of VideoState:
(i) declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money,
other personal property, real property or other thing
of value;
(ii) change or amend its charter documents or bylaws to
adversely affect the rights of Option Holder
hereunder; or
(iii) effect a merger, sale of substantially all of its
stock or assets, or other similar transaction with
any entity other than Option Holder.
C. During the Option Period, the business of BusyBox will be conducted
in the ordinary course consistent with prudent industry practices.
D. Nothing contained in this Section 8 will prohibit the BusyBox board
of directors (the "BOARD") from furnishing information to or entering
into discussions or negotiations with any third party that makes an
unsolicited bona fide offer of merger or to acquire substantially all
of the assets or stock of BusyBox (a "BONA FIDE OFFER"), if, and only
to the extent that (i) the Board, based upon the written advice of
outside counsel, determines in good faith that such action is required
for the Board to comply with its fiduciary duties
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to stockholders imposed by law, (ii) prior to furnishing such
information to or entering into discussions or negotiations with any
such third party, BusyBox provides written notice to VideoState that it
is doing so (the "OFFER NOTICE") and (iii) BusyBox keeps VideoState
informed of the status and all material information with respect to any
such discussions or negotiations. Nothing in this Section 8 will permit
BusyBox to enter into any agreement with respect to a Bona Fide Offer
for as long as this Option Agreement remains in effect. This Option
Agreement may be terminated by action of the Board if in the exercise
of its good faith judgment as to fiduciary duties to its stockholders
imposed by law, as advised by outside counsel, the Board determines
that such termination is required by reason of a Bona Fide Offer being
made, provided that BusyBox notifies VideoState promptly of its
intention to terminate this Option Agreement (in no case less than two
business days prior to public announcement of BusyBox's termination of
this Option Agreement).
E. Upon receiving the Offer Notice, VideoState will have the right to
terminate this Option Agreement at any time. If VideoState chooses to
exercise this termination right or BusyBox exercises its termination
right under Section 8-D above, BusyBox will be obligated to repay to
VideoState, within two business days, the $25,000 option consideration
provided for in Section 2 above. If BusyBox executes a definitive
agreement with respect to a Bona Fide Offer within one year after such
termination, BusyBox will (i) within two business days pay VideoState a
break-up fee in the amount of $100,000 and (ii) within two business
days of the later of the execution of the definitive agreement or the
receipt of an invoice from VideoState, reimburse VideoState for the
out-of-pocket expenses incurred by VideoState (or its affiliates) in
connection with the transaction contemplated by this Option Agreement,
including the fees and expenses of legal counsel, auditors and other
consultants in relation to the due diligence investigation of BusyBox
and the preparation and negotiation of the Option Agreement and the
Purchase Documents. The sum of the break-up fee and out-of pocket
reimbursement in the preceding sentence will not exceed $250,000.
F. In connection with this Option Agreement, VideoState is entering
into a Stockholders Agreement pursuant to which certain of BusyBox's
stockholders will agree to vote his or her respective shares of BusyBox
capital stock in favor of approving the Purchase, APA and/or any other
Purchase Documents. BusyBox will use its commercially reasonable best
efforts, and will direct its officers, including, but not limited to,
Xxx Xxxxxxxxxx, to use their commercially reasonable best efforts, to
have such stockholders execute and deliver the Stockholders Agreement
within 10 days of the execution of this Option Agreement.
9. REPRESENTATIONS AND WARRANTIES OF BUSYBOX AND VIDEOSTATE. Each of BusyBox and
VideoState represent and warrant, as applicable, as follows:
A. AUTHORIZATION; NON-CONTRAVENTION. The execution and delivery of this
Option Agreement by it and the performance by it of its obligations
hereunder, have been duly authorized by all requisite corporate,
partnership or other action on the part of it (including but not
limited to stockholder approval). This Option Agreement constitutes the
legally valid and binding obligation of it enforceable against it in
accordance with its
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terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, moratorium, reorganization, or similar laws affecting
creditors' rights and to general equitable principles. Neither the
entry into this Option Agreement nor the exercise of the Option will
violate, or constitute a breach or default (whether upon lapse of time
and/or the occurrence of any act or event or otherwise) of it under its
charter documents, bylaws or any contract of that is material to it or
that would have a material adverse effect on it.
10. CONFIDENTIALITY. All parties agree that each party may disclose or reveal,
or may have disclosed or revealed, to the other, orally, in writing or by
inspection, confidential information for the purpose of evaluating the parties'
business relationship. Such confidential information may include financial
information, technology, marketing and customer data and such other information
that is not generally ascertainable from public or published information or
trade sources (the "CONFIDENTIAL INFORMATION"). All parties agree that they will
use the Confidential Information for the sole purpose of evaluating the Option
and/or the Purchase, and that neither party will use the Confidential
Information disclosed by the other, directly or indirectly, for any other
purpose. All parties further undertake and agree to retain in confidence, and to
require their employees, consultants, professional representatives, and agents
to retain in confidence, all such Confidential Information. The obligations
pursuant to this paragraph will not apply to any portion of the Confidential
Information which (i) is or becomes generally available to the public other than
as a result of disclosure which violates the terms of this Option Agreement,
(ii) becomes available to one party on a nonconfidential basis from a source
other than the other party or (iii) is known to the receiving party on a
nonconfidential basis prior to its disclosure by the other; provided, however,
that all parties confirm that any Confidential Information disclosed by the
other prior to the execution of this Option Agreement will be subject to the
terms of this Option Agreement. The obligations under this Section 11 will
expire on the fifth anniversary of the date hereof.
11. HEADINGS. The headings, captions and arrangements used in this Option
Agreement are for convenience of reference only and are not to be deemed to
limit, amplify or modify the terms of this Option Agreement or affect the
meaning thereof.
12. NOTICES. Any notice, consent or other communication made pursuant to the
provisions of this Option Agreement will be sufficiently made or given if in
writing and either delivered in person with receipt acknowledged or sent by
facsimile or registered or certified mail and addressed as follows:
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IF TO THE VIDEOSTATE: IF TO BUSYBOX:
GlobalState Ltd. xxxxxxx.xxx, inc.
00 Xxxxxxxxx Xxxxxx 15113 Xxxxxx Xxxxxxxxx
Xxxxxx X0 0XX Xxxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx Attention: Xxx X. Xxxxxxxxxx, Esq.
Fax: 000 00 000 000 0000 Fax: 000-000-0000
with a copy to: with a copy to:
O'Melveny & Xxxxx LLP Xxxxxx Xxxxx LLP
1999 Avenue of the Stars 0000 X Xxxxxx, XX
Xxxxx 000 Xxxxxxxxxx, XX 00000
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Attention: Xxxxxxxx Xxxxx, Esq.
Attention: Xxxxxxxx X. Xxxxx, Esq. Fax: 000-000-0000
Fax: 000-000-0000
13. AMENDMENTS AND MODIFICATIONS. This Option Agreement may not be amended or
modified in any way, nor any of its provisions waived, except in writing by the
parties.
14. COUNTERPARTS. This Option Agreement and any amendment hereto or any other
agreement (or document) delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts will constitute one and the same agreement (or other document) and
will become effective (unless otherwise therein provided) when one or more
counterparts have been signed by each party and delivered to the other party by
facsimile or otherwise.
15. GOVERNING LAW. This Option Agreement will be governed by and construed in
accordance with the internal laws of the State of California, without giving
effect to conflict of laws provisions thereof.
16. NO BROKERS. Each party represents that it has not engaged or authorized any
broker, finder or similar agent who would be entitled to a commission or other
fee in respect of this Option Agreement or the Purchase.
17. INTEGRATED AGREEMENT. This Option Agreement and the exhibits and schedules
hereto constitute the entire agreement between the parties hereto, and no
agreements, understandings, restrictions, warranties or representations exist
between the parties other than those set forth herein or provided for herein.
All exhibits and schedules attached to this Option Agreement are incorporated
herein.
18. PUBLICITY. VideoState and BusyBox will coordinate all publicity relating to
the transactions contemplated by this Option Agreement, and no party will issue
any press release, publicity statement, or other public notice relating to this
Option Agreement, or the transactions contemplated by this Option Agreement,
without prior written consent from the other party, except to the extent that
independent legal counsel to VideoState or BusyBox, as the case may
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be, will deliver a written opinion to the other party to the effect that a
particular action is required by applicable law.
19. DISPUTE RESOLUTION.
A. This Option Agreement will be governed by and interpreted in
accordance with the laws of the State of California as set forth in
Section 16 herein. The material provisions of this Option Agreement
will be deemed performed or to be performed in California, and,
regardless of the order in which signatures of the representatives of
BusyBox and VideoState are affixed, the contract will be deemed to have
been executed at the offices of VideoState's legal counsel at O'Melveny
& Xxxxx, 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx
00000.
B. In the event that any dispute arises between BusyBox and VideoState
relating in any way to this Option Agreement or either party's
performance thereunder, said dispute will be settled in Los Angeles,
California by arbitration in accordance with the rules and regulations
of Judicial Arbitration & Mediation Services, Inc. The arbitrators will
be empowered to find facts, to interpret or invalidate all or any
provision of this Option Agreement, to award money damages, and to
grant injunctive relief in order to enforce the terms and provisions of
this Option Agreement.
C. If necessary for enforcement of the arbitration judgment, the party
prevailing in arbitration may apply to either the California Superior
Court in and for the County of Los Angeles or to the United States
District Court for the Southern District of California, as may be
appropriate. BusyBox and VideoState consent to the jurisdiction of both
of those said courts, and to venue at the location of each of those
said courts.
D. In the event of arbitration, litigation, or both, the party
ultimately prevailing will be entitled to receive from the other its
reasonable attorneys' fees and costs, as determined by the arbitrator
or court rendering the final decision.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Option Agreement as of the date first above written.
VideoState, Inc.,
a Delaware corporation
/s/ XXXXXXX XXXXXXXX
-----------------------------------------------
By: Xxxxxxx Xxxxxxxx, President
xxxxxxx.xxx, inc.
a Delaware corporation
/s/ XXX X. XXXXXXXXXX
-----------------------------------------------
By: Xxx X. Xxxxxxxxxx, Chief Executive Officer
