AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NETSCAPE COMMUNICATIONS CORPORATION,
FIFI ACQUISITION CORPORATION
AND
ATWEB, INC.
DATED AS OF NOVEMBER 10, 1998
TABLE OF CONTENTS
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws. . . . . . . . . . . . . . . . 2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . 3
1.6 Shares to Be Issued; Effect on Capital Stock . . . . . . . . . . 3
1.7 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Surrender of Certificates. . . . . . . . . . . . . . . . . . . . 6
1.9 No Further Ownership Rights in Company Common Stock. . . . . . . 7
1.10 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . 8
1.11 Tax and Accounting Consequences. . . . . . . . . . . . . . . . . 8
1.12 Taking of Necessary Action; Further Action . . . . . . . . . . . 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 8
2.1 Organization of the Company. . . . . . . . . . . . . . . . . . . 8
2.2 Company Capital Structure. . . . . . . . . . . . . . . . . . . . 9
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.5 Company Financial Statements . . . . . . . . . . . . . . . . . .11
2.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . .11
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.8 Tax and Other Returns and Reports. . . . . . . . . . . . . . . .13
2.9 Restrictions on Business Activities. . . . . . . . . . . . . . .14
2.10 Title to Properties; Absence of Liens and Encumbrances . . . . .15
2.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . .15
2.12 Agreements, Contracts and Commitments. . . . . . . . . . . . . .18
2.13 Interested Party Transactions. . . . . . . . . . . . . . . . . .20
2.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .20
2.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
2.17 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . .21
2.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . .21
2.19 Brokers' and Finders' Fees; Third Party Expenses . . . . . . . .22
2.20 Employee Matters and Benefit Plans . . . . . . . . . . . . . . .22
2.21 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
2.22 No Interference or Conflict. . . . . . . . . . . . . . . . . . .25
2.23 Governmental Authorizations and Licenses . . . . . . . . . . . .26
2.24 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . .26
2.25 Representations Complete . . . . . . . . . . . . . . . . . . . .26
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. . . . .26
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . .26
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . .26
3.3 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . .27
3.4 SEC Documents; Parent Financial Statements . . . . . . . . . . .27
3.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . .28
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .28
3.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME. . . . . . . . . . . . . . .29
4.1 Conduct of Business of the Company . . . . . . . . . . . . . . .29
4.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE V ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . .32
5.1 Sale and Registration of Shares; Shareholder Matters . . . . . .32
5.2 Access to Information. . . . . . . . . . . . . . . . . . . . . .34
5.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . .34
5.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
5.5 Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . .34
5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
5.7 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . . . . . .35
5.8 Commercially Reasonable Efforts. . . . . . . . . . . . . . . . .35
5.9 Notification of Certain Matters. . . . . . . . . . . . . . . . .35
5.10 Certain Benefit Plans. . . . . . . . . . . . . . . . . . . . . .35
5.11 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . .35
5.12 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . .36
5.13 Voting Agreements. . . . . . . . . . . . . . . . . . . . . . . .36
5.14 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . .36
5.15 Registration Statement on Form S-8 . . . . . . . . . . . . . . .36
5.16 Nasdaq National Market Listing . . . . . . . . . . . . . . . . .36
5.17 Company's Auditors . . . . . . . . . . . . . . . . . . . . . . .36
5.18 Non-Competition Agreements . . . . . . . . . . . . . . . . . . .36
5.19 Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . .37
5.20 Additional Documents and Further Assurances. . . . . . . . . . .37
ARTICLE VI CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . .37
6.1 Conditions to Obligations of Each Party to Effect the Merger . .37
6.2 Additional Conditions to Obligations of the Company. . . . . . .38
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6.3 Additional Conditions to the Obligations of Parent and
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE VII ESCROW . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
7.1 Escrow Period. . . . . . . . . . . . . . . . . . . . . . . . . .41
7.2 Escrow Arrangements. . . . . . . . . . . . . . . . . . . . . . .41
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . .47
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.2 Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . .48
8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . .48
8.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.5 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . .49
9.1 Survival of Representations, Warranties and Agreements . . . . .49
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . .50
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .51
9.5 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . .51
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .51
9.7 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . .51
9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .51
9.9 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . .51
9.10 Rules of Construction. . . . . . . . . . . . . . . . . . . . . .52
9.11 Specific Performance . . . . . . . . . . . . . . . . . . . . . .52
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into as of November 10, 1998 by and among Netscape Communications
Corporation, a Delaware corporation ("PARENT"), Fifi Acquisition Corporation, a
California corporation and a wholly-owned subsidiary of Parent ("MERGER SUB"),
and AtWeb, Inc., a California corporation (the "COMPANY").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "MERGER") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding shares
of capital stock of the Company (including all shares of Common Stock of the
Company issued upon conversion of all Preferred Stock of the Company and upon
exercise of all outstanding warrants immediately prior to the Merger) ("COMPANY
CAPITAL STOCK") shall be converted into the right to receive shares of voting
Common Stock of Parent ("PARENT COMMON STOCK"), and all outstanding options and
warrants to purchase Common Stock of the Company shall be assumed by Parent.
C. A portion of the shares of Parent Common Stock otherwise issuable
by Parent in connection with the Merger shall be placed in escrow by Parent, and
the release of such amount shall be contingent upon certain events and
conditions, all as set forth in Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations, warranties, and other agreements in connection with the
Merger.
E. Concurrent with the execution and delivery of this Agreement, as
a material inducement to Parent and Merger Sub to enter into this Agreement,
certain shareholders of the Company are entering into a Voting Agreement in the
form attached hereto as EXHIBIT A ("VOTING AGREEMENT"), and certain employees
of the Company are entering into Non-Competition Agreements, each in the form
attached as EXHIBIT B hereto (the "NON-COMPETITION AGREEMENTS").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law ("CALIFORNIA
LAW"), Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation and as a wholly-owned subsidiary of Parent. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but no later than five (5) business days,
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx, unless another place or time is agreed to by Parent and the Company.
The date upon which the Closing actually occurs is herein referred to as the
"CLOSING DATE." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing an Agreement or Certificate of Merger (or like
instrument) with the Secretary of State of the State of California (the "MERGER
AGREEMENT"), in accordance with the applicable provisions of California Law (the
time of acceptance by the Secretary of State of California of such filing or
such later time as may be provided in the Merger Agreement being referred to
herein as the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of California Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Articles of Incorporation of the
Surviving Corporation shall be automatically amended such that the provisions of
the Articles of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the provisions of the Articles of Incorporation of
the Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation; provided, however, that Article I of the Articles of
Incorporation of the Surviving Corporation shall automatically be amended to
read as follows: "The name of the corporation is AtWeb, Inc."
(b) Unless otherwise determined by Parent, the Bylaws of the
Surviving Corporation shall be automatically amended such that the provisions of
the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the provisions of the Bylaws of the Surviving
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Corporation until thereafter amended in accordance with California Law and as
provided in the Articles of Incorporation of the Surviving Corporation and such
Bylaws.
1.5 DIRECTORS AND OFFICERS. The director(s) of Merger Sub
immediately prior to the Effective Time shall be the initial director(s) of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 SHARES TO BE ISSUED; EFFECT ON CAPITAL STOCK. The number of
shares of Parent Common Stock to be issued (including Parent Common Stock to be
reserved for issuance upon exercise of any of the Company's options to be
assumed by Parent) in exchange for the acquisition by Parent of all outstanding
Company Capital Stock and all unexpired and unexercised options or other rights
to acquire Company Capital Stock shall be determined immediately prior to the
Effective Time and shall be equal to the Aggregate Parent Share Number (as
defined in Section 1.6(g)(iii)). No adjustment shall be made in the number of
shares of Parent Common Stock issued in the Merger as a result of any cash
proceeds received by the Company from the date hereof to the Effective Time
pursuant to the exercise of options, warrants or other rights to acquire Company
Capital Stock. Subject to the terms and conditions of this Agreement, as of the
Effective Time, by virtue of the Merger and without any action on the part of
Merger Sub, the Company or the holder of any shares of the Company Capital
Stock, the following shall occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common
Stock of the Company (including all shares of Common Stock of the Company issued
upon conversion of all Preferred Stock of the Company ("COMPANY PREFERRED
STOCK") and upon exercise of all outstanding warrants (the "WARRANTS")
immediately prior to the Closing) (collectively, the "COMPANY COMMON STOCK")
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Stock to be canceled pursuant to Section 1.6(b) and any
Dissenting Shares (as defined and to the extent provided in Section 1.7(a)) will
be canceled and extinguished and be converted automatically into the right to
receive that number of shares of Parent Common Stock equal to the Exchange Ratio
(as defined in Section 1.6(g)(v) below), upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 1.8; provided, however, that to the extent that shares of Company Common
Stock or Company Preferred Stock were subject to vesting immediately prior to
the Effective Time, the shares of Parent Common Stock received pursuant to this
Section 1.6(a) shall be subject to the provisions of the agreement governing
such vesting, except that any reference in such agreement to the Company shall
mean the Surviving Corporation or Parent.
(b) CANCELLATION OF COMPANY-OWNED STOCK. Each share of
Company Capital Stock owned by the Company or any direct or indirect
wholly-owned subsidiary of the Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof.
(c) STOCK OPTIONS AND WARRANTS. At the Effective Time, all
options to purchase Company Common Stock then outstanding under the Company's
1997 Stock Plan (the "OPTION PLAN")
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or otherwise and all outstanding Warrants shall be assumed by Parent in
accordance with provisions described below.
(i) At the Effective Time, each outstanding option or
other right to purchase shares of Company Common Stock (each a "COMPANY OPTION")
under the Option Plan or otherwise, whether vested or unvested, and each Warrant
shall be, in connection with the Merger, assumed by Parent. Each Company Option
and Warrant so assumed by Parent under this Agreement shall continue to have,
and be subject to, the same terms and conditions set forth in the Option Plan
and/or as provided in the respective option agreements or warrant agreement
governing such Company Option or Warrant, as the case may be, immediately prior
to the Effective Time, except that (A) such Company Option or Warrant shall be
exercisable (when vested) for that number of whole shares of Parent Common Stock
equal to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such Company Option or Warrant immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down (in the case
of Company Options granted under the Option Plan) to the nearest whole number of
shares of Parent Common Stock and (B) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Company
Option or Warrant shall be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Option or
Warrant was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the
Company Options assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "CODE"), to the extent the Company Options qualified as
incentive stock options immediately prior to the Effective Time.
(iii) As soon as practicable following the Effective
Time, Parent will issue to each holder of an outstanding Company Option or
Warrant a document evidencing the foregoing assumption of such Company Option or
Warrant by Parent.
(iv) Parent shall take all necessary corporate action
to reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Options and Warrants assumed in accordance
with this Section 1.6(c).
(d) CAPITAL STOCK OF MERGER SUB. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub or
the Company, each share of Common Stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares of Common Stock of the Merger Sub shall, as of the
Effective Time, evidence ownership of such shares of Common Stock of the
Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall
be adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Company Capital Stock or Parent Common Stock), reorganization,
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recapitalization or other like change with respect to Company Capital Stock or
Parent Common Stock occurring after the date hereof and prior to the Effective
Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof, each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall be entitled to receive, without any
interest, from Parent an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the Parent Share
Price (as defined in Section 1.6(g)(iii)).
(g) DEFINITIONS.
(i) AGGREGATE COMPANY COMMON NUMBER. The "AGGREGATE
COMPANY COMMON NUMBER" shall mean the aggregate number of shares of Company
Common Stock outstanding immediately prior to the Effective Time (including all
shares of Company Common Stock to be issued upon conversion of all Company
Preferred Stock and upon exercise of the Warrants).
(ii) AGGREGATE COMPANY OPTION NUMBER. The "AGGREGATE
COMPANY OPTION NUMBER" shall mean the aggregate number of shares of Company
Common Stock issuable upon the exercise of all outstanding Company Options and
Warrants, and other rights to acquire shares of Company Common Stock immediately
prior to the Effective Time.
(iii) AGGREGATE PARENT SHARE NUMBER. The "AGGREGATE
PARENT SHARE NUMBER" shall mean 3,363,823.
(iv) ESCROW AMOUNT. The "ESCROW AMOUNT" shall be a
number of shares of Parent Common Stock obtained by multiplying (x) the
Aggregate Company Common Number by (y) the Exchange Ratio by (z) 0.10.
(v) EXCHANGE RATIO. The "EXCHANGE RATIO" shall mean
the quotient obtained by dividing (x) the Aggregate Parent Share Number by (y)
the sum of (A) the Aggregate Company Common Number, plus (B) the Aggregate
Company Option Number.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who, as of the
Effective Time, has not effectively withdrawn or lost (through failure to
perfect or otherwise) appraisal or dissenters' rights pursuant to California Law
("DISSENTING SHARES") shall not be converted into or represent a right to
receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by California Law.
(b) Notwithstanding the provisions of subsection (a), if
after the Effective Time any holder of Dissenting Shares shall effectively
withdraw or lose (through failure to perfect or otherwise)
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the right to appraisal, then, as of the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock and payment for any fractional share as provided in
Section 1.6(f), without interest thereon, upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to
California Law (including without limitation instruments concerning appraisal or
dissenters' rights) and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under California Law. The Company shall not, except with the prior
written consent of Parent, voluntarily make any payment with respect to any
demands for appraisal of any shares of Company Capital Stock or offer to settle
or settle any such demands.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent
shall designate a bank or trust company with assets of not less than $500
million to act as exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. As soon as practicable
after the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, (i) the aggregate number of shares
of Parent Common Stock issuable pursuant to Section 1.6 in exchange for
outstanding shares of Company Capital Stock, and (ii) cash for fractional shares
in the amount described in Section 1.6(f); provided that, on behalf of the
holders of Company Capital Stock, Parent shall deposit into an escrow account a
number of shares of Parent Common Stock equal to the Escrow Amount out of the
aggregate number of shares of Parent Common Stock otherwise issuable pursuant to
Section 1.6. The portion of the Escrow Amount contributed on behalf of each
holder of Company Capital Stock shall be in proportion to the aggregate number
of shares of Parent Common Stock which such holder would otherwise be entitled
to receive under Section 1.6 by virtue of ownership of outstanding shares of
Company Capital Stock.
(c) EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Capital Stock and which shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
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representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock, if any, to be deposited in the Escrow Fund on
such holder's behalf pursuant to Article VII hereof), plus cash in lieu of
fractional shares in accordance with Section 1.6, to which such holder is
entitled pursuant to Section 1.6(f), and the Certificate so surrendered shall
forthwith be canceled. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Article VII hereof, Parent
shall cause to be distributed to the Escrow Agent (as defined in Article VII) a
certificate or certificates representing that number of shares of Parent Common
Stock equal to the Escrow Amount, which certificate shall be registered in the
name of the Escrow Agent. Such shares shall be beneficially owned by the
holders on whose behalf such shares were deposited in the Escrow Fund and shall
be available to compensate Parent as provided in Article VII. Notwithstanding
the provisions of Section 1.6(a), from the Closing and until so surrendered,
each outstanding Certificate that, prior to the Effective Time, represented
shares of Company Capital Stock will be deemed from and after the Effective
Time, for all corporate purposes, other than the payment of dividends (subject
to Section 1.8(d)), to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Capital Stock shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(f).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Parent Common Stock declared or
made after the Effective Time and with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Parent
Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary
in this Section 1.8, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accor-
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dance with the terms hereof (including any cash paid in respect thereof) shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Company Capital Stock, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6(f);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and (ii) qualify for accounting treatment as a
pooling of interests.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub, the officers
and directors of the Company and Merger Sub are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a document dated as of the date hereof referring
specifically (referencing the appropriate schedule or section number) to the
representations, warranties or covenants in this Agreement which reasonably
identifies the basis for an exception to a representation, warranty or covenant
in this Agreement and which is delivered by the Company to Parent prior to the
execution of this Agreement (the "COMPANY SCHEDULES"), the Company represents
and warrants to Parent and Merger Sub as set forth below.
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the
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failure to be so qualified would have, or would reasonably be expected to have,
a material adverse effect on the business, financial condition, results of
operations, assets (including intangible assets), liabilities or prospects of
the Company (hereinafter referred to as a "MATERIAL ADVERSE EFFECT"). The
Company has delivered a true and correct copy of its Articles of Incorporation
and Bylaws, each as amended to date, to Parent.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of authorized Common Stock, of which 8,110,000 shares are
issued and outstanding, and 3,552,923 shares of authorized Preferred Stock,
consisting of 500,000 shares of Series A Preferred Stock, 500,000 shares of
which are issued and outstanding, and 3,052,923 shares of Series B Preferred
Stock, 3,052,923 shares of which are issued and outstanding. The number of
shares of Company Common Stock into which the Series A Preferred Stock and the
Series B Preferred Stock is convertible is set forth in SCHEDULE 2.2(a).
Assuming the same total capitalization as on the date hereof, the total number
of shares of Company Common Stock outstanding as of immediately prior to the
Effective Time (assuming the conversion, exercise or exchange of all securities
convertible into, or exercisable or exchangeable for, shares of Company Common
Stock, and the exercise of all Company Options and Warrants) will be as set
forth in SCHEDULE 2.2(a). The Company Capital Stock is held of record by the
persons, with the addresses of record and in the amounts and with the vesting
schedule (including the extent vested to date) set forth on SCHEDULE 2.2(a).
All outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound.
(b) The Company has reserved 3,373,846 shares of Common Stock
for issuance to employees and consultants pursuant to the Option Plan, of which
2,963,500 shares are subject to outstanding, unexercised options, 400,346 shares
remain available for future grant and 10,000 shares have been issued pursuant to
the exercise of options issued under the Option Plan. The Company has reserved
22,000 shares of Common Stock for issuance upon exercise of the Warrants.
SCHEDULE 2.2(b) sets forth for each outstanding Company Option or Warrant the
name of the holder of such option or Warrant, the domicile address of such
holder, the number of shares of Common Stock subject to such option or Warrant,
the exercise price of such option or Warrant and the vesting schedule for such
option or Warrant, including the extent vested to date and whether the
exercisability of such option or Warrant will be accelerated and become
exercisable by reason of the transactions contemplated by this Agreement.
Except for the Company Options and Warrants described in SCHEDULE 2.2(b), there
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company. Except as
contemplated hereby, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company. The
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holders of Company Capital Stock, Company Options and Warrants have been or will
be given, or shall have properly waived, any required notice prior to the
Merger, and all such rights will be terminated at or prior to the Effective
Time. As a result of the Merger, Parent will be the record and sole beneficial
owner of all capital stock of the Company and rights to acquire or receive such
capital stock.
2.3 SUBSIDIARIES. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 AUTHORITY. Subject only to the requisite approval of the Merger
and this Agreement by the Company's shareholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
shareholders to duly approve the Merger and this Agreement is the affirmative
vote of a majority of the outstanding shares of Company Preferred Stock voting
separately as a class, the affirmative vote of a majority of the outstanding
shares of Company Common Stock voting separately as a class and the affirmative
vote of a majority of the outstanding shares of the Company's Series B Preferred
Stock. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger and this Agreement by the Company's shareholders. The Company's Board of
Directors has unanimously approved the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance with
its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies. Except as set forth on SCHEDULE 2.4, subject only to the
approval of the Merger and this Agreement by the Company's shareholders, the
execution and delivery of this Agreement by the Company does not, and, as of the
Effective Time, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "CONFLICT") (i) any provision of the Articles
of Incorporation or Bylaws of the Company or (ii) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, except with respect to
the preceding clause (ii) for any Conflict which could not reasonably be
expected to have a Material Adverse Effect. No consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("GOVERNMENTAL ENTITY") or any third party (so as not to trigger any Conflict)
is required by or with respect to the Company in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Merger Agreement with the
California Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, (iii) such other consents,
waivers, authorizations, filings,
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approvals and registrations which are set forth on SCHEDULE 2.4, and (iv) where
the failure to obtain or make any such consent, waiver, approval, order,
authorization, registration, declaration or filing could not reasonably be
expected to have a Material Adverse Effect.
2.5 COMPANY FINANCIAL STATEMENTS.
(a) SCHEDULE 2.5 sets forth the Company's audited balance
sheet as of December 31, 1997 (the "BALANCE SHEET") and the related audited
statements of operations, shareholders' equity and cash flows for the
twelve-month period then ended and the footnotes thereto as well as the
Company's unaudited balance sheet as of September 30, 1998 (the "INTERIM BALANCE
SHEET") and the related unaudited statements of operations for the nine-month
period then ended (collectively, the "COMPANY FINANCIALS"). The Company
Financials are correct in all material respects and have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent throughout the periods indicated and consistent with each
other. The Company Financials present fairly the financial condition and
operating results of the Company as of the dates and during the periods
indicated therein, subject to normal year-end adjustments in the case of
unaudited financial statements, which such adjustments will not be material in
amount or significance.
2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (which is required to be
reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, has not been
reflected in the Interim Balance Sheet.
2.7 NO CHANGES. Except as set forth in SCHEDULE 2.7, since the date
of the Interim Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course
of business as conducted on the date of the Interim Balance Sheet and consistent
with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
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(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any Company Capital Stock, or any split, combination or reclassification in
respect of any shares of Company Capital Stock, or any issuance or authorization
of any issuance of any other securities in respect of, in lieu of or in
substitution for shares of Company Capital Stock;
(i) increase in the salary or other compensation payable or
to become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment of a bonus or other additional salary or compensation to any
such person except as otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company, except in the ordinary course of business
as conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurrence
by the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, or creation of any security
interest in any of the Company's assets or properties, except for advances to
employees for travel and business expenses in the ordinary course of business,
consistent with past practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs, or
any reasonable basis for any of the foregoing;
(o) notice of any claim or potential claim of ownership by a
third party of Company Intellectual Property Rights (as defined in Section 2.11
below) or of infringement by the Company of any third party's intellectual
property rights;
(p) change in pricing or royalties set or charged by the
Company to its customers or licensees or in pricing or royalties set or charged
by persons who have licensed Company Intellectual Property Rights to the
Company;
(q) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company; or
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(r) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (q) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES", means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) TAX RETURNS AND AUDITS. Except as set forth in
SCHEDULE 2.8:
(i) The Company, as of the Effective Time, will have
prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("RETURNS") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
(ii) The Company, as of the Effective Time: (A) will
have paid or accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment
of any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, state, local and foreign Taxes which have not been accrued or
reserved against on the Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company does not have any knowledge of any
basis for the assertion of any such liability attributable to the Company, or
its assets or operations.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for all periods
since the date of the Company's incorporation.
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(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS") on the assets of the
Company relating to or attributable to Taxes.
(viii) The Company does not have any knowledge of any
basis for the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Company.
(ix) The Company's assets are not treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement to which the Company is a party,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Sections 404, 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, nor has it been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) No adjustment relating to any Return filed by the
Company has been proposed formally or, to the knowledge of the Company,
informally by any tax authority to the Company or any representative thereof.
(xv) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's tax books and records.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
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2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company does not own real property, nor has the
Company ever owned any real property. SCHEDULE 2.10(a) sets forth a list of all
real property currently, or at any time in the past, leased by the Company, the
name of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental and/or other fees
payable under any such lease. All such current leases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default).
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens (as defined in Section
2.8(b)(vii)), except as reflected in the Company Financials or in
SCHEDULE 2.10(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
(c) The Company has sole and exclusive ownership, free and
clear of any Liens, of all customer files and other customer information
relating to the Company's current and former customers (the "CUSTOMER
INFORMATION"). No person other than the Company possesses any claim or rights
with respect to use of the Customer Information.
2.11 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms
have the following definitions:
"INTELLECTUAL PROPERTY" means any or all of the following and all rights
in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether or not patentable or
patented), invention disclosures, improvements, trade secrets, proprietary
information, know-how, technology, technical data and customer lists; (iii) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks; (vi) all trademark
and service xxxx registrations and applications therefor and all goodwill
associated therewith throughout the world; (vii) all domain names, uniform
resource locators and other Internet or similar addresses or identifiers
("DOMAIN NAMES"); (viii) all databases and data collections and all rights
therein throughout the world; and (ix) all computer software including all
source code, object code, firmware, development tools, files, records and data,
all media on which any of the foregoing is recorded; (x) any similar,
corresponding or equivalent rights to any of the foregoing and (xi) all
documentation related to any of the foregoing.
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"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that (i) is owned by (ii) is exclusively licensed to or (iii) was developed or
created by the Company.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks or service marks,
applications to register trademarks or service marks, intent-to-use
applications, or other registrations or applications related to trademarks or
service marks; (iii) registered copyrights and applications for copyright
registration; (iv) Domain Name registrations and other registrations,
subscriptions and memberships related to the Internet; and (v) any other Company
Intellectual Property that is subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any state,
regulatory, standards, government or other public or private legal authority.
(b) SCHEDULE 2.11(b) lists all Registered Intellectual
Property owned by, or filed in the name of, the Company (the "COMPANY REGISTERED
INTELLECTUAL PROPERTY") and lists (i) any proceedings or actions before any
court, tribunal (including the United States Patent and Trademark Office (the
"PTO"), Internet registration authority or equivalent authority anywhere in the
world related to any of the Company Registered Intellectual Property and (ii)
the date on which such registrations will expire or by which time the rights in
the Intellectual Property related to such registrations will have to be renewed
or extended to prevent expiration, lapse or other loss.
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property, is free and clear of any Liens. The
Company (i) is the exclusive owner of, and has the right to use exclusively, all
Trademarks and Domain Names, used in connection with the operation or conduct of
the business of the Company, including the sale of any products or technology or
the provision of any services by the Company and (ii) owns exclusively, and has
good title to, (x) all copyrighted works that are Company products (including
all copyrights related to any World Wide Web other similar Internet sites
operated by or on behalf of the Company) or (y) other works of authorship that
the Company otherwise purports to own.
(d) To the extent that any Intellectual Property (including
any software, Internet sites or other products or materials of the Company) has
been developed or created by any person other than the Company for which the
Company has, directly or indirectly, paid, the Company has a written agreement
with such person with respect thereto and the Company thereby has obtained
ownership of, and is the exclusive owner of, all such Intellectual Property. To
the extent that the Company has acquired any Intellectual Property from a third
party, to the maximum extent provided for by, and in accordance with, applicable
laws and regulations, the Company has recorded each such assignment with the
relevant authorities.
(e) Except as set forth in SCHEDULE 2.11(e), and except for
co-branded marketing agreements in substantially the form attached as Exhibit C
hereto, the Company has not transferred ownership of or granted any license of
or right to use or authorized the retention of any rights to use any
Intellectual Property that is or was Company Intellectual Property, to any other
person.
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(f) Other than "shrink-wrap" and similar widely available
commercial end-user licenses, the contracts, licenses and agreements listed in
SCHEDULE 2.11(f) include all contracts, licenses and agreements, to which the
Company is a party and which are reasonably necessary for the conduct of the
Company's business, with respect to any Intellectual Property of any person
other than the Company. No person other than the Company has ownership rights
to improvements made by the Company in Intellectual Property which has been
licensed to the Company.
(g) SCHEDULE 2.11(g) lists all contracts, licenses and
agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any material obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
material obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property of any person other than the Company.
(h) The operation of the business of the Company as such
business is currently conducted or is reasonably contemplated to be conducted
(including, without limitation, products, technology or services currently under
development and the design, development, manufacture, use, import and sale of
the products, technology and services of the Company) does not, and the Company
has not received notice that the operation of the business of the Company as
such is currently conducted (including, without limitation, products, technology
or services currently under development and the design, development,
manufacture, use, import and sale of the products, technology and services of
the Company), infringes or misappropriates the Intellectual Property of any
person, violate the rights of any person or entity (including rights to privacy
or publicity), constitute unfair competition or trade practices under the laws
of any jurisdiction, or violate the laws or regulations of any jurisdiction. To
the Company's knowledge, none of the advertising or other similar activities of
the Company violates any public or private codes or regulations governing such
activities.
(i) There are neither contracts, licenses nor agreements
between the Company on one hand and any other person on the other with respect
to Company Intellectual Property under which there is any dispute known to the
Company regarding the scope of such agreement or performance under such
agreement including with respect to any payments to be made or received by the
Company thereunder.
(j) To the Company's knowledge, no person is infringing or
misappropriating any Company Intellectual Property.
(k) The Company has taken reasonable steps in accordance with
normal industry practice to protect the Company's rights in confidential
information and trade secrets of the Company or provided by any other person to
the Company. Without limiting the foregoing, the Company has and enforces a
policy requiring each employee, consultant and contractor to execute proprietary
information, confidentiality and assignment agreements substantially in the
Company's standard forms, and all current and former employees, consultants and
contractors of the Company have executed such an agreement.
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(l) No Company Intellectual Property or product, technology
or service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(m) To the knowledge of the Company, no (i) product,
technology, service or publication of the Company, (ii) material published or
distributed by the Company or (iii) conduct or statement of the Company,
constitutes obscenity, defames any person, constitutes false advertising or
otherwise violates any law or regulation.
(n) The Company has not used or accessed (including by
hyperlinks or framing) the content or materials of any third party, including a
third party's Internet site, in manner that violates any laws or regulations or
misappropriates or infringes the Intellectual Property of such third party.
(o) Neither this Agreement nor the transactions contemplated
by this Agreement, including the assignment by operation of law or otherwise of
any contracts or agreements to which the Company is a party, will result in the
Parent or the Merger Sub granting to any third party any right to or with
respect to any Intellectual Property owned by, or licensed to, either of them,
or will result in either the Parent or the Merger Sub being bound by, or subject
to, any non-compete or other restriction on the operation or scope of their
respective businesses.
(p) The Company has operated its business in compliance with
all material terms of all freeware and shareware used in its business.
(q) The Company has taken reasonable steps to ensure that its
products (including existing products and technology and products and technology
currently under development) will accurately record, store, process, calculate
and present calendar dates falling on and after (and if applicable, spans of
time including) January 1, 2000, and will calculate any information dependent on
or relating to such dates in the same manner, and with the same functionality,
data integrity and performance, as the products record, store, process,
calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"YEAR 2000 COMPLIANT"). The Company has taken reasonable steps to ensure that
its products (i) will lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000 and (ii) will be
interoperable with other products used and distributed by Parent that may
reasonably deliver records to the Company's products or receive records from the
Company's products, or interact with the Company's products, including but not
limited to back-up and archived data. All of the Company's internal computer
and technology products and systems are Year 2000 Compliant.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth on SCHEDULE 2.12(a), the Company does
not have, is not a party to and is not bound by:
(i) any collective bargaining agreements,
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(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract
or commitment (excluding "at will" employee relationships) with an employee or
individual consultant or salesperson or any consulting or sales agreement,
contract or commitment under which any firm or other organization provides
services to the Company,
(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $50,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $50,000,
(xi) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any purchase order or contract for the purchase of
raw materials involving $50,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
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(xvi) any agreement pursuant to which the Company has
granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment that
involves $50,000 or more or is not cancelable without penalty within thirty
(30) days.
(b) Except for such alleged breaches, violations and
defaults, and events that would constitute a breach, violation or default with
the lapse of time, giving of notice, or both, as are all noted in
SCHEDULE 2.12(b), the Company has not breached, violated or defaulted under, or
received notice that it has breached, violated or defaulted under, any of the
terms or conditions of any End-User License or any agreement, contract or
commitment required to be set forth on SCHEDULE 2.12(a) or SCHEDULE 2.11(b) (any
such agreement, contract or commitment, a "CONTRACT"). Each Contract is in full
force and effect and, except as otherwise disclosed in SCHEDULE 2.12(b), is not
subject to any material default thereunder, of which the Company has knowledge,
by any party obligated to the Company pursuant thereto. Following the Effective
Time, the Company will be permitted to exercise all of the Company's rights
under the Contracts without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
would otherwise be required to pay had the transactions contemplated by this
Agreement not occurred.
2.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
2.13, no officer, director or shareholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an interest), has or
has had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that the Company
furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in
any entity that purchases from or sells or furnishes to, the Company, any goods
or services or (iii) a beneficial interest in any contract or agreement set
forth in SCHEDULE 2.12(a) or SCHEDULE 2.11(b); provided, that ownership of no
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13.
2.14 COMPLIANCE WITH LAWS. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.15 LITIGATION. Except as set forth in SCHEDULE 2.15, there is no
action, suit or proceeding of any nature pending, or to the Company's knowledge,
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
SCHEDULE 2.15, there is no investigation pending or threatened against the
Company, its properties or any of its officers or directors by or before any
Governmental Entity. SCHEDULE 2.15 sets forth, with respect to any pending or
threatened action, suit, proceeding or investigation, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedy requested. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
its products in the present manner or style thereof.
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2.16 INSURANCE. The Company maintains valid and enforceable insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company, and
such insurance policies and fidelity bonds, which are identified in SCHEDULE
2.16, contain provisions which are reasonable and customary in the Company's
industry, and there is no claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company is otherwise in
material compliance with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage). The Company has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.17 MINUTE BOOKS. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and shareholders or actions by written consent since the time of incorporation
of the Company.
2.18 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIALS. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, at any time,
of any underground storage tank (or related piping or pumps), at any property
that the Company has at any time owned, operated, occupied or leased. No
Hazardous Materials (as defined below) are present as a result of the actions or
omissions of the Company, or, to the Company's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property, including
the land and the improvements, ground water and surface water thereof, that the
Company has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "HAZARDOUS MATERIALS
ACTIVITIES") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Company's knowledge, threatened concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the Company.
The Company is not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
-21-
(e) DEFINITION OF "HAZARDOUS MATERIALS". As used herein,
"HAZARDOUS MATERIALS" shall mean any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean Air Act, as amended,
and the regulations promulgated pursuant to such laws.
2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on SCHEDULE 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. SCHEDULE 2.19 sets forth the principal terms
and conditions of any agreement, written or oral, with respect to such fees.
SCHEDULE 2.19 sets forth the Company's current reasonable estimate of all Third
Party Expenses (as defined in Section 5.4) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) DEFINITIONS. With the exception of the definition of
"AFFILIATE" set forth in Section 2.20(a)(i) below (which definition shall apply
only to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "COMPANY EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan",
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any "Employee" (as defined below), and pursuant to
which the Company or any Affiliate has or may have any material liability
contingent or otherwise;
-22-
(v) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(vi) "EMPLOYEE" shall mean any current, former, or
retired employee, consultant, or director of the Company or any Affiliate;
(vii) "EMPLOYEE AGREEMENT" shall refer to each
management, employment, stock purchase, severance, separation, consulting,
relocation, loan, repatriation, expatriation, visas, work permit or similar
agreement, contract or arrangement between the Company or any Affiliate and any
Employee or consultant;
(viii) "IRS" shall mean the Internal Revenue Service;
(ix) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan", as defined in Section 3(37)
of ERISA; and
(x) "PENSION PLAN" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the meaning of
Section 3(2) of ERISA.
(b) SCHEDULE. SCHEDULE 2.20(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement,
together with a schedule of all liabilities, whether or not accrued, under each
such Company Employee Plan or Employee Agreement. The Company does not have any
plan or commitment, whether legally binding or not, to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) DOCUMENTS. The Company has made available to Parent
(i) correct and complete copies of all documents embodying each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination letters and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company; and (viii) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
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(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on
SCHEDULE 2.20(d), (i) the Company has performed in all material respects all
obligations required to be performed by it under each Company Employee Plan, and
each Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction", within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; and (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
Parent's Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (v) there are no inquiries or proceedings
pending or, to the knowledge of the Company, threatened by the IRS or DOL with
respect to any Company Employee Plan; and (vi) neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) PENSION PLANS. The Company has never maintained,
established, sponsored, participated in, or contributed to, any Pension Plan.
(f) MULTIEMPLOYER PLANS. At no time has the Company or any
Affiliate contributed to or been requested to contribute to any Multiemployer
Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
SCHEDULE 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee welfare benefits to any
Employee upon his or her retirement or termination of employment for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to
the extent required by statute.
(h) COBRA. Neither the Company nor any Affiliate has, prior
to the Effective Time and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) EFFECT OF TRANSACTION.
(i) Except as set forth on SCHEDULE 2.20(i)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
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(ii) Except as set forth on SCHEDULE 2.20(i)(ii), no
payment or benefit which will or may be made by the Company or its Affiliates or
by Parent or any of its affiliates with respect to any Employee as a result of
the transactions contemplated by this Agreement or otherwise will be
characterized as an "excess parachute payment", within the meaning of Section
280G(b)(1) of the Code, which is subject to the imposition of an excise tax
under Section 4999 of the Code or which would not be deductible by reason of
Section 280G of the Code.
(j) EMPLOYMENT MATTERS. The Company (i) is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(k) LABOR. No work stoppage or labor strike against the
Company is pending or, to the best knowledge of the Company, threatened. Except
as set forth in SCHEDULE 2.20(k), the Company is not involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. The Company has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act which would, individually or in the aggregate, directly or
indirectly result in a liability to the Company. Except as set forth in
SCHEDULE 2.20(k), the Company is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
2.21 EMPLOYEES. To the Company's knowledge, no employee of the
Company (i) is in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or presently
proposed to be conducted by the Company or to the use of trade secrets or
proprietary information of others and (ii) has given notice to the Company, nor
is the Company otherwise aware, that any employee intends to terminate his or
her employment with the Company.
2.22 NO INTERFERENCE OR CONFLICT. To the knowledge of the Company, no
shareholder, officer, employee or consultant of the Company is obligated under
any contract or agreement subject to any judgment, decree or order of any court
or administrative agency that would interfere with such person's efforts to
promote the interests of the Company or that would interfere with the Company's
business. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business as presently conducted or proposed to be
conducted nor any activity of such officers, directors, employees
-25-
or consultants in connection with the carrying on of the Company's business as
presently conducted or currently proposed to be conducted, will, to the
knowledge of the Company, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract or
agreement under which any of such officers, directors, employees or consultants
is now bound.
2.23 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Company possesses
all material consents, licenses, permits, grants or other authorizations issued
to the Company by a Governmental Entity (i) pursuant to which the Company
currently operates or holds any interest in any of its properties or (ii) which
is required for the operation of its business or the holding of any such
interest therein (collectively called "COMPANY AUTHORIZATIONS"), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company to operate or conduct its business
or hold any interest in its properties or assets.
2.24 POOLING OF INTERESTS. To the Company's knowledge, based on
consultation with its independent accountants, neither the Company nor any of
its directors, officers or shareholders has taken any action which would
interfere with Parent's ability to account for the Merger as a pooling of
interests.
2.25 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company in this Agreement (as modified by the Company
Schedules), nor any statement made in any schedule or certificate furnished by
the Company pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to the shareholders of the Company in connection
with soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time, any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified would have a material adverse effect on Parent and Merger Sub
as a whole.
3.2 AUTHORITY. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
-26-
duly authorized by all necessary corporate action on the part of Parent and
Merger Sub. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes the valid and binding obligations of Parent and
Merger Sub, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies. The execution and delivery of
this Agreement by Parent and Merger Sub does not, and, as of the Effective Time,
the consummation of the transactions contemplated hereby will not, constitute a
Conflict with (i) any provision of the Certificate of Incorporation or Bylaws of
Parent or Merger Sub or (ii) any mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or Merger Sub or their properties or assets, except, with respect to the
preceding clause (ii), for any Conflict which could not reasonably be expected
to have a material adverse effect on the business, financial condition, results
of operations, assets (including intangible assets), liabilities or prospects of
Parent ("PARENT MATERIAL ADVERSE EFFECT"). No consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity or any third party (so as not to trigger any Conflict) is
required by or with respect to Parent or Merger Sub in connection with Parent's
or Merger Sub's execution and delivery of this Agreement or its consummation of
the transactions contemplated hereby, except (i) the filing of the Merger
Agreement with the California Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws, (iii) for
such other consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings which are set forth on SCHEDULE 3.2, and (iv) where the
failure to obtain or make any such consent, waiver, approval, order,
authorization, registration, declaration or filing could not reasonably be
expected to have a Parent Material Adverse Effect.
3.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 200,000,000
shares of Common Stock, of which 99,814,642 shares were issued and outstanding
as of October 30, 1998, and 5,000,000 shares of Preferred Stock, none of which
are issued or outstanding. At the close of business on November 9, 1998,
19,557,175 shares of Parent Common Stock were subject to issuance upon the
exercise of outstanding stock options. All of the outstanding shares of Parent
Common Stock are validly issued, fully paid, nonassessable and free of
preemptive rights. The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, all of which, as of the date hereof, are issued and
outstanding and are held by Parent. All such shares have been duly authorized,
and all such issued and outstanding shares have been validly issued, are fully
paid and nonassessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant
to the Merger, when issued, will be duly authorized, validly issued, fully paid
and non-assessable, and free of preemptive rights.
3.4 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished
or made available to the Company true and complete copies of all reports or
registration statements filed by it with the U.S.
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Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934 (the "EXCHANGE ACT") for all periods since January 1, 1998, all in the
form so filed (all of the foregoing being collectively referred to as the "SEC
DOCUMENTS"). As of their respective filing dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933 (the
"SECURITIES ACT") or the Exchange Act, as the case may be, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a document subsequently filed
with the SEC. Parent has filed all SEC Documents required to be filed under the
Securities Act or Exchange Act, as the case may be. The financial statements of
Parent, including the notes thereto, included in the SEC Documents (the "PARENT
FINANCIAL STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and present
fairly the consolidated financial position of Parent at the dates thereof and
the consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal audit
adjustments). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements.
3.5 NO MATERIAL ADVERSE CHANGE. Since the date of the balance sheet
included in the Parent's most recently filed report on Form 10-Q or Form 10-K,
Parent has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in the financial condition,
liabilities, assets or business of Parent; (b) any amendment or change in the
Certificate of Incorporation or Bylaws of Parent, or (c) any damage to,
destruction or loss of any assets of the Parent (whether or not covered by
insurance) that materially and adversely affects the financial condition or
business of Parent.
3.6 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion against Parent, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
3.7 DISCLOSURE. No statement by Parent contained in this Agreement
and the exhibits attached hereto and any written statement or certificate
furnished or to be furnished to the Company pursuant hereto or in connection
with the transactions contemplated hereby (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement and the Effective Time, the Company agrees (except to the extent
that Parent shall otherwise consent in writing or to the extent set forth in
SCHEDULE 4.1) to carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, to pay its debts and
Taxes when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, to use all reasonable efforts consistent with
past practice and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of its business, and any material event involving or
adversely affecting the Company or its business. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Parent:
(a) Enter into any commitment, activity or transaction not in
the ordinary course of business.
(b) Transfer to any person or entity any rights to any
Company Intellectual Property (other than co-branded marketing agreements
entered into in the ordinary course of business in substantially the form
attached as EXHIBIT C hereto);
(c) (i) sell, license or transfer to any person or entity any
rights to any Company Intellectual Property or enter into any agreement with
respect to the Company Intellectual Property with any person or entity or with
respect to the Intellectual Property of any person or entity (other than
co-branded marketing agreements entered into in the ordinary course of business
in substantially the form attached as EXHIBIT C hereto), (ii) other than
Intellectual Property rights acquired under "shrink-wrap" and similar widely
available commercial binary code end-user licenses (in each case which is not
included in the Company's products or technology including products and
technology currently available or under development), buy or license any
Intellectual Property or enter into any agreement with respect to the
Intellectual Property of any person or entity, (iii) enter into any agreement
with respect to the development of any Intellectual Property with a third party,
(iv) or change pricing or royalties charged by the Company to its customers or
licensees, or the pricing or royalties set or charged by persons who have
licensed Intellectual Property to the Company;
(d) Enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of the Company (other than
co-branded marketing agreements entered into in the ordinary course of business
in substantially the form attached as EXHIBIT C hereto);
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(e) Amend or otherwise modify (or agree to do so), except in
the ordinary course of business, or violate the terms of, any of the agreements
set forth or described in the Company Schedules;
(f) Commence or settle any litigation or any dispute
resolution process;
(g) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
Company Capital Stock, or split, combine or reclassify any of Company Capital
Stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of Company Capital Stock, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
Company Capital Stock (or options, warrants or other rights exercisable
therefor);
(h) Except for the issuance of shares of Company Capital
Stock upon exercise or conversion of presently outstanding Preferred Stock,
Company Options or Warrants or grants of options to purchase up to 225,000
shares of Company Common Stock to employees of the Company hired after the date
of this Agreement in accordance with past practice, issue, grant, deliver or
sell or authorize or propose the issuance, grant, delivery or sale of, any
shares of Company Capital Stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(i) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practice;
(l) Incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities of the Company or
purchase or guarantee any debt securities of others or amend the terms of any
outstanding loan agreement;
(m) Grant any severance or termination pay to any director,
officer, employee or consultant, except payments made pursuant to written
agreements outstanding on the date hereof (which such agreements are disclosed
on SCHEDULE 4.1(m)) or otherwise hire employees in material variance from the
projections delivered to Parent;
(n) Adopt or amend any employee benefit plan, program, policy
or arrangement (including without limitation any amendment which accelerates
vesting under any such employee benefit plan, program, policy or arrangement),
or enter into any employment contract, extend any employment offer, pay or agree
to pay any special bonus or special remuneration to any director, employee or
consultant, or increase the salaries or wage rates of its employees;
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(o) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business and consistent with past practice;
(p) Take any action, including the acceleration of vesting of
any options, warrants, restricted stock or other rights to acquire shares of
Company capital stock, which would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests or any
other action that could jeopardize the treatment of the Merger as a tax-free
reorganization hereunder;
(q) Pay, discharge or satisfy, in an amount in excess of
$25,000, in any one case, or $50,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Financials;
(r) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Enter into any strategic alliance, joint development or
joint marketing arrangement or agreement;
(t) Fail to pay or otherwise satisfy its monetary obligations
as they become due, except such as are being contested in good faith;
(u) Waive or commit to waive any rights with a value in
excess of $25,000, in any one case, or $50,000, in the aggregate;
(v) Cancel, materially amend or renew any insurance policy
other than in the ordinary course of business;
(w) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any interest on the
date hereof; or
(x) Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) through (w) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
4.2 NO SOLICITATION. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, shareholders, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, initiate, entertain, or encourage
any proposals or offers from, or conduct
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discussions with or engage in negotiations with, any person relating to any
possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its
capital stock or assets or any equity interest in the Company, (b) provide
information with respect to it to any person, other than Parent and its
affiliates, relating to, or otherwise cooperate with, facilitate or encourage
any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its capital stock or
assets or any equity interest in the Company, (c) enter into an agreement with
any person, other than Parent and its affiliates, providing for the acquisition
of the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its capital stock or assets or any
equity interest in the Company, or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise), any material portion of its capital stock or assets or any equity
interest in the Company by any person, other than by Parent and its affiliates.
The Company shall immediately cease and cause to be terminated any such contacts
or negotiations with third parties relating to any such transaction or proposed
transaction. In addition to the foregoing, if the Company receives prior to the
Effective Time or the termination of this Agreement any offer or proposal or
request, directly or indirectly, relating to any of the above, the Company shall
immediately notify Parent thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as Parent may reasonably request. Except as contemplated by
this Agreement, disclosure by the Company of the terms of this Agreement (other
than the prohibition of this section) shall be deemed to be a violation of this
Section 4.2. Notwithstanding the foregoing, the provisions of this Section 4.2
shall not prohibit or restrict any shareholder of the Company from voting such
shareholder's shares in favor of a business combination of the Company with any
party.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 SALE AND REGISTRATION OF SHARES; SHAREHOLDER MATTERS.
(a) SALE OF SHARES. The parties hereto acknowledge and agree
that the shares of Parent Common Stock issuable to the shareholders pursuant to
Section 1.6 hereof, shall constitute "restricted securities" within the meaning
of the Securities Act of 1933, as amended (the "SECURITIES ACT"). The
certificates for shares of Parent Common Stock to be issued in the Merger shall
bear appropriate legends to identify such privately placed shares as being
restricted under the Securities Act, to comply with applicable state securities
laws and, if applicable, to notice the restrictions on transfer pursuant to the
Affiliate Agreement (as defined below). It is acknowledged and understood that
Parent is relying upon certain written representations made by each stockholder.
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(b) SHAREHOLDER'S QUESTIONNAIRE. The Company will use all
reasonable efforts to arrange for each shareholder of the Company to execute and
deliver to Parent a Shareholder's Questionnaire in the form attached hereto as
EXHIBIT D (the "SHAREHOLDER'S QUESTIONNAIRE").
(c) COMPANY SHAREHOLDER APPROVAL. As promptly as practicable
after the execution of this Agreement the Company shall submit this Agreement
and the transactions contemplated hereby to its shareholders for approval and
adoption as provided by California Law and its Articles of Incorporation and
Bylaws. The Company shall use its best efforts to solicit and obtain the
written consent of its shareholders to approve the Merger and this Agreement and
to enable the Closing to occur as promptly as practicable. In connection with
such shareholder approval and as soon as practicable after the execution of this
Agreement, the Company shall prepare, with the cooperation of Parent, an
Information Statement for purposes of soliciting such written consent of the
shareholders. The Information Statement shall also constitute a disclosure
document for the offer and sale of the shares of Parent Common Stock to be
received by the holders of the Company's Capital Stock in the Merger and shall
comply with the information requirements of Rule 502(b) promulgated under the
Securities Act so that Parent may avail itself of the exemption provided by Rule
506 promulgated under the Securities Act if it so chooses. The Company shall
use its commercially reasonable efforts, with the cooperation of Parent, to
cause such Information Statement to be distributed to the Company's shareholders
no later than November 30, 1998. Parent and the Company shall each use its best
efforts to cause the Information Statement to comply with all applicable federal
and state securities laws requirements. Each of Parent and the Company agrees
to provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the
Information Statement or in any amendments or supplements thereto, and to cause
its counsel and auditors to cooperate with the other's counsel and auditors in
the preparation of the Information Statement. Each of the parties hereto will
promptly advise the other parties in writing if at any time prior to the
Effective Time either the Company or Parent shall obtain knowledge of any facts
that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained or incorporated
by reference therein not misleading or to comply with applicable law. The
Information Statement shall contain the unanimous recommendation of the Board of
Directors of the Company that the Company shareholders approve the Merger and
this Agreement and the transactions contemplated hereby and the conclusion of
the Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the shareholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company shall not include in the
Information Statement any information with respect to Parent or its affiliates
or associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
(d) REGISTRATION STATEMENT ON FORM S-3. Parent shall use its
commercially reasonable efforts to file, within 45 days following the Closing, a
Registration Statement on Form S-3 with the SEC covering the resale of the
shares of Parent Common Stock issued to holders of Company Capital Stock
pursuant to the Merger. Any such registration shall be subject to the terms and
conditions set forth in the Declaration of Registration Rights attached hereto
as EXHIBIT E.
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(e) ADDITIONAL ASSURANCES. At the request of Parent, the
Company shall use its commercially reasonable efforts to cause the Company's
shareholders to execute and deliver to Parent such instruments and do and
perform such acts and things as may be necessary or desirable for complying with
all applicable securities laws and state corporate law.
5.2 ACCESS TO INFORMATION. Each party shall afford the others and
their accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of its properties, books, contracts, commitments and records, and (b) all other
information concerning its business, properties and personnel (subject to
restrictions imposed by applicable law) as the others may reasonably request,
subject, in the case of Parent, to reasonable limits on access to its technical
and other nonpublic information. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions of the parties
to consummate the Merger.
5.3 CONFIDENTIALITY. Each of the parties hereto hereby agrees to
keep such information or knowledge obtained in any investigation pursuant to
Section 5.2, or pursuant to the negotiation and execution of this Agreement or
the effectuation of the transactions contemplated hereby, confidential, and also
agrees not to use such knowledge or information; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession on a non-confidential basis
prior to the disclosure thereof by the other party, (b) is generally known to
the public and did not become so known through any violation of law, (c) became
known to the public through no fault of such party, (d) is later lawfully
acquired by such party from other sources, (e) is required to be disclosed by
order of court or government agency with subpoena powers or (f) which is
disclosed in the course of any litigation between any of the parties hereto.
5.4 EXPENSES. If the Merger is not consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby shall be the obligation
of the respective party incurring such fees and expenses. If the Merger is
consummated, all reasonable Third Party Expenses incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, up to a maximum of
$250,000, and all Third Party Expenses incurred by Parent or Merger Sub in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby shall be paid by Parent.
Whether or not the Merger is consummated, Parent agrees to pay the reasonable
costs, fees and expenses of the Purchaser Representative described in Section
6.3(f), which costs, fees and expenses shall not be included in the Third Party
Expenses described above.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by the
rules and regulations of The Nasdaq Stock Market Inc. prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent and the Company prior to release, provided that such approval shall not
be unreasonably withheld or delayed.
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5.6 CONSENTS. The Company shall use its commercially reasonable
efforts to obtain the consents, waivers and approvals of parties to any Contract
as may be required in connection with the Merger, or for any such Contract to
remain in full force and effect without limitation, modification or alteration
after the Effective Time (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of and benefits to the
Company and Parent thereunder.
5.7 FIRPTA COMPLIANCE. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.8 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to ensure that its representations and
warranties remain true and correct in all material respects, and to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals, to effect all
necessary registrations and filings, and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise
affect any remedies available to the party receiving such notice.
5.10 CERTAIN BENEFIT PLANS. Subject to compliance with
pooling-of-interest accounting treatment of the Merger, as soon as practicable
after the Effective Time, Parent shall take such reasonable actions as are
necessary to allow eligible employees of the Company to participate in the
benefit programs of Parent available to employees of Parent having similar
positions and levels of responsibility on the terms and conditions provided in
such plans and giving credit to such employees for their term of service with
the Company.
5.11 POOLING ACCOUNTING. Each of the parties hereto shall each use
its best efforts to cause the business combination to be effected by the Merger
to be accounted for as a pooling of interests. Each of the parties hereto shall
use its best efforts to cause its respective employees, directors, shareholders
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and affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests.
5.12 AFFILIATE AGREEMENTS. SCHEDULE 5.12 sets forth those persons
who, in the Company's reasonable judgment, are or may be "affiliates" of the
Company within the meaning of Rule 145 (each such person an "AFFILIATE")
promulgated under the Securities Act ("RULE 145"). The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. Each of Parent and the Company has delivered
or shall cause to be delivered to Parent, concurrently with the execution of
this Agreement from each of their respective Affiliates, an executed Affiliate
Agreement in the form attached hereto as EXHIBIT F (for Affiliates of the
Company) or EXHIBIT G (for Affiliates of the Parent). Parent shall be entitled
to place appropriate legends on the certificates evidencing any Parent Common
Stock to be received by such Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
Parent Common Stock, consistent with the terms of such Affiliate Agreements.
5.13 VOTING AGREEMENTS. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement, from
each person listed on SCHEDULE 5.13, an executed Voting Agreement in the form
attached hereto as EXHIBIT A, agreeing, among other things, to vote in favor of
the Merger.
5.14 [Intentionally Omitted]
5.15 REGISTRATION STATEMENT ON FORM S-8. Parent shall file a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Options as soon as practicable after
the Effective Time.
5.16 NASDAQ NATIONAL MARKET LISTING. Parent shall authorize for
listing on The Nasdaq National Market the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, upon official notice of issuance.
5.17 COMPANY'S AUDITORS. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the preparation of financial statements
(including pro forma financial statements if required) as required by Parent to
comply with applicable SEC regulations, (ii) the review of the Company's audit
work papers for up to the past three years, including interim periods and access
for review or examination of selected interim financial statements and data, and
(iii) the delivery of such representations from the Company's independent
accountants as may be reasonably requested by Parent or its accountants in order
for Parent's accountants to assess their concurrence with Parent management's
conclusions called for by Section 6.3(m) hereof.
5.18 NON-COMPETITION AGREEMENTS. The Company shall deliver or use
reasonable efforts to cause to be delivered to Parent an executed
Non-Competition Agreement in substantially the form attached hereto as EXHIBIT B
concurrently with the execution of this Agreement from each of the persons
listed on SCHEDULE 5.18.
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5.19 TAX-FREE REORGANIZATION. Parent and the Company shall each use
its best efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code and to obtain an opinion of its
respective counsel to such effect as contemplated by Section 6.1(d).
5.20 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger
shall have been approved and adopted by the stockholders of the Company by the
requisite vote under applicable law and the Company's Articles of Incorporation.
(b) GOVERNMENT APPROVALS. All approvals of governments and
governmental agencies necessary to consummate the transactions hereunder shall
have been received.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(d) TAX OPINIONS. Parent and the Company shall each have
received substantially identical written opinions from their counsel, Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx and Xxxx Xxxx Xxxx & Freidenrich LLP, respectively, in
form and substance reasonably satisfactory to them, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code; PROVIDED, HOWEVER, that if the counsel to either Parent or the
Company does not render such opinion, this condition shall nonetheless be deemed
to be satisfied with respect to such party if counsel to the other party renders
such opinion to such party. In rendering such opinions, counsel may rely upon
reasonable representations and certificates of Parent, Merger Sub, the Company,
and certain shareholders of the Company, and the Company agrees to make, and to
use reasonable efforts to cause the shareholders of the Company to make, such
representations and deliver such certificates.
(e) NASDAQ LISTING. The shares of Parent Common Stock
issuable to shareholders of the Company pursuant to this Agreement and such
other shares required to be reserved for issuance in connection with the Merger
shall have been authorized for listing on The Nasdaq National Market upon
official notice of issuance.
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6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects (except for those representations and
warranties which are by their terms qualified by a statement of materiality,
which representations and warranties shall be true and correct in all respects)
on and as of the Closing Date, except for changes contemplated by this Agreement
and except for those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date),
with the same force and effect as if made on and as of the Closing Date, except,
in all such cases, for such breaches, inaccuracies or omissions of such
representations and warranties which have neither had nor reasonably would be
expected to have a material adverse effect on Parent; and the Company shall have
received a certificate to such effect signed on behalf of Parent by a duly
authorized officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.
(c) LEGAL OPINION. The Company shall have received a legal
opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to Parent, in
substantially the form attached hereto as EXHIBIT H.
(d) BOARD OF MERGER SUB. Xxxxx Xxxxxxx and Xxx Xxxxxx shall
have been appointed to the Board of Directors of Merger Sub effective
immediately prior to the Effective Time.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES AT SIGNING. The
representations and warranties of the Company contained in this Agreement shall
have been true and correct in all material respects (except for those
representations and warranties which are by their terms qualified by a standard
of materiality, which representations and warranties shall have been true and
correct in all respects) as of the date of this Agreement.
(b) REPRESENTATIONS AND WARRANTIES AT CLOSING. The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects (except for those representations
and warranties which are by their terms qualified by a standard of materiality,
which representations and warranties shall be true and correct in all respects)
on and as of the Closing Date (without regard to any updates to the Company
Schedules, unless otherwise agreed by Parent),
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except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same force
and effect as if made on and as of the Closing Date, except, in all such cases,
for such breaches, inaccuracies or omissions of such representations and
warranties which have neither had nor reasonably would be expected to have a
substantial adverse effect on the business, financial condition, results of
operations, assets (including intangible assets), liabilities or prospects of
the Company or Parent (hereinafter referred to as a "SUBSTANTIAL ADVERSE
EFFECT"); and Parent and Merger Sub shall have received a certificate to such
effect signed on behalf of the Company by the chief executive officer and chief
financial officer of the Company.
(c) AGREEMENTS AND COVENANTS. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to
the Effective Time (excluding solely the covenants of Section 5.6, the
satisfaction of which shall not constitute a condition to Parent's or Merger
Sub's obligations to consummate the Merger and the transactions contemplated by
this Agreement), except for non-performance of such agreements and covenants
which neither has, nor reasonably could be expected to have, a Substantial
Adverse Effect, and Parent and Merger Sub shall have received a certificate to
such effect signed by a duly authorized officer of the Company.
(d) LEGAL OPINION. Parent shall have received a legal
opinion from Xxxx Xxxx Xxxx & Freidenrich LLP, legal counsel to the Company, in
substantially the form attached hereto as EXHIBIT I.
(e) AFFILIATE AGREEMENTS. Each of the parties identified by
the Company as being an Affiliate of the Company shall have delivered to Parent
an executed Affiliate Agreement in substantially the form attached hereto as
EXHIBIT F which shall be in full force and effect.
(f) PURCHASER REPRESENTATIVE. A Purchaser Representative, as
defined in Regulation D under the Securities Act, reasonably satisfactory to
Parent shall be made available to represent each of the shareholders of the
Company who are not "accredited" as defined in Regulation D, and such Purchaser
Representative shall have executed documentation reasonably satisfactory to
Parent to reflect such appointment.
(g) NON-COMPETITION AGREEMENTS. Each of the persons listed
on SCHEDULE 5.18(a) (the "REQUIRED EMPLOYEES") and at least three of the persons
listed on SCHEDULE 5.18(b) (the "REQUESTED EMPLOYEES") shall have executed and
delivered to Parent a Non-Competition Agreement in the form attached hereto as
EXHIBIT B. Each of the Required Employees and at least three of the Requested
Employees that have executed and delivered Non-Competition Agreements to Parent
shall be employees of the Company immediately prior to the Effective Time and
the Non-Competition Agreements executed by the Required Employees and at least
three of the Requested Employees shall have not been terminated or repudiated by
the Required Employees or such Requested Employees, as the case may be, and all
of such executed Non-Competition Agreements shall be in full force and effect.
(h) SHAREHOLDER APPROVAL. The Shareholders holding a
sufficient number of shares of Company Capital Stock as required under the
Company's Articles of Incorporation and California
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Law, shall have approved this Agreement, the Merger and the transactions
contemplated hereby and thereby. The Shareholders shall have approved by the
requisite vote any acceleration of vesting with respect to Company Options or
unvested Company Capital Stock that may be deemed to constitute "parachute
payments" pursuant to Section 280G of the Code, such that such acceleration of
vesting and all such payments, sales and purchases resulting from the
transactions contemplated hereby shall not be deemed to be "parachute payments"
pursuant to Section 280G of the Code or shall be exempt from such treatment
under such Section 280G; provided, however, that no such shareholder approval
shall be required if such process would adversely affect the ability of Parent
to account for the business combination to be effected by the Merger as a
pooling of interests.
(i) SUBSTANTIAL ADVERSE CHANGE. There shall not have
occurred any adverse change in the business, assets (including intangible
assets), liabilities, financial condition, results of operations or prospects of
the Company since the date of this Agreement having a Substantial Adverse
Effect.
(j) CONVERSION OF PREFERRED STOCK. All shares of Company
Preferred Stock shall have converted into Company Common Stock in accordance
with the Company's Articles of Incorporation.
(k) RESIGNATION OF DIRECTORS. The directors of the Company
in office immediately prior to the Effective Time other than Xxxxx Xxxxxxx and
Xxx Xxxxxx shall have resigned as directors of the Surviving Corporation
effective immediately following the Effective Time.
(l) DISSENTERS' RIGHTS. Holders of more than 5% of the
outstanding shares of Company Capital Stock shall not have exercised, nor shall
they have any continued right to exercise, appraisal, dissenters' or similar
rights under applicable law with respect to their shares by virtue of the
Merger.
(m) POOLING LETTERS. Immediately prior to the Closing,
Parent shall have received a letter from Ernst & Young LLP regarding such firm's
concurrence with Parent management's conclusions as to the appropriateness of
pooling of interests accounting for the Merger under Accounting Principles Board
Opinion No. 16 ("APB16"), if consummated in accordance with this Agreement. In
addition, immediately prior to the execution and delivery of this Agreement the
Company's accountants shall have provided and immediately prior to the Closing
the Company's accountants shall provide a letter, reasonably satisfactory in
form and substance to Parent, regarding such firm's concurrence with the
Company's management's conclusions as to the appropriateness of pooling of
interests accounting for the Merger under APB16 if consummated in accordance
with this Agreement.
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ARTICLE VII
ESCROW
7.1 ESCROW PERIOD. Subject to the following requirements, the Escrow
Fund (as defined in Section 7.2(a) below) shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., California time,
on the date which is one year following the Closing Date as to all
representations, warranties and covenants of the Company set forth in this
Agreement except for those representations set forth in Section 2.2, Section
2.5, Section 2.6, Section 2.7, Section 2.8 and Section 2.15, as to which the
Escrow Fund shall terminate on the earlier of (i) one year following the Closing
Date or (ii) the date of the auditor's report for the audit of Parent's
financial statements for the year ending October 31, 1999, which includes the
results of the Company (the "ESCROW PERIOD"); provided that the Escrow Period
shall not terminate with respect to such amount (or some portion thereof) that
is necessary in the reasonable judgment of Parent, subject to the objection of
the Securityholder Agent (as defined below) and the subsequent arbitration of
the matter in the manner provided in Section 7.2(f) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period specified in any Officer's Certificate (as
defined in Section 7.2(d) below) delivered to the Escrow Agent prior to
termination of such Escrow Period; provided further that the Escrow Fund will
terminate in full upon final and complete resolution of all disputed matters.
7.2 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. As soon as practicable after the Effective
Time, the Escrow Amount, without any act of any shareholder, will be deposited
with an institution acceptable to Parent and the Securityholder Agent (as
defined in Section 7.2(g) below)) as Escrow Agent (the "ESCROW AGENT"), such
deposit to constitute an escrow fund (the "ESCROW FUND") to be governed by the
terms set forth herein and at Parent's cost and expense. The portion of the
Escrow Amount contributed on behalf of each shareholder of the Company shall be
in proportion to the aggregate Parent Common Stock which such holder would
otherwise be entitled under Section 1.6(a) and shall be comprised of shares of
Parent Common Stock which have vested in such shareholder to the maximum extent
possible. No portion of the Escrow Amount shall be contributed in respect of
any Company Options or Warrants. The Escrow Fund shall be available to
compensate Parent and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defense (hereinafter
individually a "LOSS" and collectively "LOSSES") incurred by Parent, its
officers, directors, or affiliates (including the Surviving Corporation)
directly or indirectly as a result of any inaccuracy or breach of a
representation or warranty of the Company contained in Article II herein (as
modified by the Company Schedules), or any failure by the Company to perform or
comply with any covenant contained herein; provided, however, that Parent may
not receive any shares from the Escrow Fund unless and until such Losses exceed
in the aggregate $350,000, in which event Parent shall receive shares equal in
value to the full amount of such Losses. Parent and the Company each
acknowledge that such Losses, if any, would relate to unresolved contingencies
existing at the Effective Time, which if resolved at the Effective Time would
have led to a reduction in
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the aggregate Merger Consideration. Nothing herein shall limit the liability of
the Company for any breach of any representation, warranty or covenant if the
Merger does not close.
(b) DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD. Upon
termination of the Escrow Period, the Escrow Agent shall deliver to the
shareholders of the Company that portion of the Escrow Fund that is not required
to satisfy any claims made by Parent pursuant to Section 7.2(d) hereof.
Deliveries of Escrow Amounts to the shareholders of the Company pursuant to this
Section 7.2(b) shall be made in proportion to their respective original
contributions to the Escrow Fund; provided, however, that if any of the shares
in escrow are subject to a repurchase right in favor of the Company upon
termination of services to the Company, then such shares shall not be
distributed to the applicable Shareholder but in lieu thereof shall (to the
extent not already repurchased in the event of prior termination of services) be
delivered to the appropriate Escrow Agent who is authorized to hold such shares
for the benefit of the Company in the event of a future termination of services
to the Company.
(c) PROTECTION OF ESCROW FUND.
(i) The Escrow Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent or
the Company's shareholders and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("NEW SHARES") in respect of Parent Common Stock in the Escrow Fund which
have not been released from the Escrow Fund shall be added to the Escrow Fund
and become a part thereof. New Shares issued in respect of shares of Parent
Common Stock which have been released from the Escrow Fund shall not be added to
the Escrow Fund but shall be distributed to the recordholders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but shall
be distributed to the recordholders thereof.
(iii) Each shareholder shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such shareholder (and on any New Shares added to the Escrow Fund in respect of
such shares of Parent Common Stock).
(d) CLAIMS UPON ESCROW FUND.
(i) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has paid or
properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(e) hereof,
deliver to Parent out of the Escrow Fund, as promptly as practicable, shares of
Parent Common Stock held in the Escrow Fund in an amount equal to any Losses
incurred or accrued by Parent.
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(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
pursuant to Section 7.2(d)(i) hereof, each share of Parent Common Stock shall be
valued at the closing price of Parent's Common Stock on the principal securities
exchange on which Parent's Common Stock is then traded, or if not so traded, The
Nasdaq National Market, in either case as reported in THE WALL STREET JOURNAL on
the Closing Date. Parent and the Securityholder Agent shall certify such fair
market value in a certificate signed by both Parent and the Securityholder
Agent, and shall deliver such certificate to the Escrow Agent.
(e) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Securityholder Agent and counsel to the Company and
for a period of thirty (30) days after such delivery, the Escrow Agent shall
make no delivery to Parent of any Escrow Amounts pursuant to Section 7.2(d)
hereof unless the Escrow Agent shall have received written authorization from
the Securityholder Agent to make such delivery. After the expiration of such
thirty (30) day period, the Escrow Agent shall make delivery of shares of Parent
Common Stock from the Escrow Fund in accordance with Section 7.2(d) hereof,
provided that no such payment or delivery may be made if the Securityholder
Agent shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
prior to the expiration of such thirty (30) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Securityholder Agent shall so object
in writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Securityholder Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
one arbitrator. Parent and the Securityholder Agent shall agree on such
arbitrator; provided that if Parent and the Securityholder Agent cannot agree on
such arbitrator, either Parent or the Securityholder Agent can request that the
Judicial Arbitration and Mediation Services ("JAMS") select the arbitrator. The
arbitrator selected by JAMS shall determine the dispute in accordance with
Article VII of this Agreement. The arbitrator shall set a limited time period
and establish procedures designed to reduce the cost and time for discovery
while allowing the parties an opportunity, adequate in the sole judgment of the
arbitrator, to discover relevant information from the opposing parties about the
subject matter of the dispute. The arbitrator shall rule upon motions to compel
or limit discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the same extent as a court of competent law or
equity, should the arbitrator determine that discovery was sought without
substantial justification or that discovery was refused or objected to
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without substantial justification. The decision of the arbitrator as to the
validity and amount of any claim in such Officer's Certificate shall be binding
and conclusive upon the parties to this Agreement, and notwithstanding anything
in Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Santa Xxxxx County, California under the rules then
in effect of the American Arbitration Association. For purposes of this
Section 7.2(f), in any arbitration hereunder in which any claim or the amount
thereof stated in the Officer's Certificate is at issue, Parent shall be deemed
to be the Non-Prevailing Party in the event that the arbitrators award Parent
less than the sum of one-half (1/2) of the disputed amount plus any amounts not
in dispute; otherwise, the shareholders of the Company as represented by the
Securityholder Agent shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative costs of the arbitration and the expenses,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
(g) SECURITYHOLDER AGENT OF THE STOCKHOLDERS; POWER OF
ATTORNEY.
(i) In the event that the Merger is approved,
effective upon such vote, and without further act of any stockholder, Xxxxxx
Xxxxxxxx shall be appointed as agent and attorney-in-fact (the "SECURITYHOLDER
AGENT") for each shareholder of the Company (except such stockholders, if any,
as shall have perfected their appraisal or dissenters' rights under California
Law), for and on behalf of shareholders of the Company, to give and receive
notices and communications, to authorize delivery to Parent of shares of Parent
Common Stock from the Escrow Fund in satisfaction of claims by Parent, to object
to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the shareholders
of the Company from time to time upon not less than thirty (30) days prior
written notice to Parent; provided that the Securityholder Agent may not be
removed unless holders of a two-thirds interest of the Escrow Fund agree to such
removal and to the identity of the substituted agent. Any vacancy in the
position of Securityholder Agent may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the shareholders
of the Company.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent while acting in good
faith and in the exercise of reasonable judgment. The shareholders of the
Company on whose behalf the Escrow Amount was contributed to the Escrow Fund
shall severally indemnify the Securityholder Agent and hold the Securityholder
Agent harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Securityholder Agent and arising out
of or in connection with the acceptance or administration of the
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Securityholder Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Securityholder Agent. Subject to
the prior right of Parent to make claims for Losses, Securityholder Agent shall
have the right to recover from the Escrow Funds prior to any distribution to the
shareholders of the Company for any Third Party Expenses incurred by the
Securityholder Agent in performing his duties hereunder.
(h) ACTIONS OF THE SECURITYHOLDER AGENT. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of all the shareholders for whom a portion of the Escrow Amount otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each of such shareholders, and the Escrow Agent and Parent
may rely upon any such decision, act, consent or instruction of the
Securityholder Agent as being the decision, act, consent or instruction of each
every such shareholder of the Company. The Escrow Agent and Parent are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Securityholder
Agent.
(i) THIRD-PARTY CLAIMS. In the event Parent becomes aware of
a third-party claim which Parent intends to assert for a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim and the
Securityholder Agent shall have the right to appoint counsel to participate in
such matter at the cost of the shareholders of the Company. Parent shall have
the right in its sole discretion to settle any such claim; provided, however,
that except with the consent of the Securityholder Agent, no settlement of any
such claim with third-party claimants shall alone be determinative of the amount
of any claim against the Escrow Fund.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall not be liable for any act done or omitted hereunder as
Escrow Agent while acting in good faith and in the exercise of reasonable
judgment, and any act taken, suffered, or permitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court of law,
notwithstanding any notices, warnings or other communications from any of the
parties hereto or any other person to the contrary. In case the Escrow Agent
obeys or complies with any such order, judgment or decree of any court, the
Escrow Agent shall not be liable to any of the parties hereto or to any other
person by reason of such compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
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(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in connection with
Escrow Agent's duties under this Agreement. The Escrow Agent is not responsible
for determining and verifying the authority of any person acting or purporting
to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent xxxxx xxx be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damages.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, and disbursements
that may be imposed on Escrow Agent or incurred by Escrow Agent in connection
with the performance of his/her duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its subject
matter.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a successor escrow agent
within thirty (30) days after receiving such notice. If the parties fail to
agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the State of California. The successor escrow agent shall execute and deliver
an instrument accepting such appointment in form and substance acceptable to
Parent and Securityholder Agent and it shall, without further acts, be vested
with all the estates, properties, rights, powers, and duties of the predecessor
escrow agent as if originally named as escrow agent. The predecessor escrow
agent shall be discharged
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from any further duties and liability under this Agreement upon the execution by
such successor of such agreement.
(k) FEES. All fees of the Escrow Agent for performance of
its duties hereunder shall be paid by Parent. It is understood that the fees
and usual charges agreed upon for services of the Escrow Agent shall be
considered compensation for ordinary services as contemplated by this Agreement.
In the event that the conditions of this Agreement are not promptly fulfilled,
or if the Escrow Agent renders any service not provided for in this Agreement,
or if the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(l) EXCLUSIVE REMEDY. Except for acts constituting fraud,
intentional misrepresentation or other willful misconduct, the Escrow Fund
provided for in this Article VII shall represent the exclusive remedy in respect
of any claim for indemnity or breach of this Agreement by the Company or its
shareholders following the Closing.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Subject to the provisions of Sections 8.2 and 8.3
below, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has
not occurred before 5:00 p.m. (Pacific time) on January 15, 1999 (provided that
the right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the primary cause of, or resulted in, the failure of the Effective Time
to occur on or before such date); (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any governmental
entity that would make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate all or a material portion of the business or assets of the Company
or Parent as a result of the Merger;
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(d) by Parent if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and (i) such breach has not been cured within ten (10)
business days after written notice to the Company (provided that, no cure period
shall be required for a breach which by its nature cannot be cured), and (ii) as
a result of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as
the case may be, would not then be satisfied;
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and (i) such breach has not been cured within
five (5) business days after written notice to Parent (provided that, no cure
period shall be required for a breach which by its nature cannot be cured), and
(ii) as a result of such breach the conditions set forth in Section 6.2(a) or
6.2(b), as the case may be, would not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 TERMINATION FEE.
(a) PARENT TERMINATION FEE. In the event this Agreement is
terminated (i) by Parent other than pursuant to Section 8.1 above or (ii) by the
Company pursuant to Section 8.1(e) above, then Parent shall immediately pay the
Company $1,000,000 by wire transfer or certified or official bank check in
immediately available funds; provided, however, that if Parent terminates this
Agreement principally due to its reasonable belief that the Merger will not be
accounted for as a pooling of interests and such belief is not based on actions
taken by the Company after the date of this Agreement or actions or events
concerning the Company not disclosed to Parent prior to the date of this
Agreement, then Parent shall pay the Company such $1,000,000 termination fee.
Such payment shall be liquidated damages for any such termination of this
Agreement.
(b) COMPANY TERMINATION FEE. In the event this Agreement is
terminated by Parent pursuant to Section 8.1 above due to the failure of any of
the conditions set forth in Sections 6.3(e), 6.3(j) or 6.3(k), the Company shall
immediately pay to Parent $500,000 by wire transfer or certified or official
bank check in immediately available funds.
8.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company, or their respective officers, directors or stockholders,
provided that each party shall remain liable for any breaches of this Agreement
prior to its termination; and provided further that, the provisions of Sections
5.3 and 5.4 and Articles VIII and IX (other than Section 9.1) of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
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8.4 AMENDMENT. Except as is otherwise required by applicable law
after the shareholders of the Company approve this Agreement, this Agreement may
be amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided, however, that
Parent may in its sole discretion amend this Agreement and all related
agreements to the extent necessary to provide for the consummation of the
acquisition of the Company contemplated hereby through the statutory merger of
the Company with and into Parent.
8.5 EXTENSION; WAIVER. At any time prior to the Effective Time,
Parent and Merger Sub, on the one hand, and the Company, on the other, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
consummation of the Merger and shall (except to the extent that survival is
necessary to resolve unsatisfied claims) terminate one (1) year after the
Closing Date.
9.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Netscape Communications Corporation
000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
AtWeb, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxxxx Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.3 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Parent and Merger Sub may assign their respective rights and delegate their
respective obligations hereunder to their respective affiliates.
9.6 SEVERABILITY. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees that process may be served upon them
in any manner authorized by the laws of the State of California for such persons
and waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.9 ARBITRATION. As to any disputes or controversies arising out of,
relating to, or in connection with the Agreement not otherwise covered by the
Article VII hereof:
(a) The parties shall attempt in good faith to agree upon the
rights of the respective parties with respect to any dispute or controversy
arising out of, relating to, or in connection with this Agreement or the
interpretation, validity, construction, performance, breach or complete
termination thereof.
(b) If no such agreement can be reached after good faith
negotiation, either of the parties may demand arbitration of the matter (except
any such dispute or controversy related to
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Article VII or Section 2.11 or 2.15 of this Agreement) and the matter shall be
settled by arbitration conducted by one arbitrator. Parent and the Company
shall agree on the arbitrator; provided that if Parent and the Company cannot
agree on one arbitrator, either Parent or the Company can request that the JAMS
select the arbitrator. The arbitrator selected by the JAMS shall determine the
dispute in accordance with this Section 9.9. The arbitrator shall set a limited
time period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrator, to discover relevant information from the opposing
parties about the subject matter of the dispute. The arbitrator shall rule upon
motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a court of
competent law or equity, should the arbitrator determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator
shall be final, conclusive and binding upon the parties to this Agreement. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrator.
(c) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Santa Xxxxx County, California under the rules then in effect of JAMS. For
purposes of this Section 9.9, in any arbitration hereunder, the non-prevailing
Party to an arbitration shall pay its own expenses, the fees of the arbitrator,
the administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
9.10 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
9.11 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Securityholder Agent (but only as to Articles VII and IX for Securityholder
Agent) have caused this Agreement to be signed by their duly authorized
respective officers, all as of the date first written above.
NETSCAPE COMMUNICATIONS ATWEB, INC.
CORPORATION
By: /s/ Xxxxx X.X. Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------------- -----------------------------------
Name: Xxxxx X.X. Xxxxxx Name: Xxxxxx Xxxxxxxx
Title: EVP and CAO Title: Chief Executive Officer
SECURITYHOLDER AGENT FIFI ACQUISITION CORPORATION
/s/ Xxxxxx Xxxxxxxx By: /s/ Xxxxx X.X. Xxxxxx
----------------------------------- -----------------------------------
Name: Xxxxxx Xxxxxxxx Name: Xxxxx X.X. Xxxxxx
Title: President
[COUNTERPART SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION (this
"AMENDMENT") is made and entered into as of December 4, 1998 by and among
Netscape Communications Corporation, a Delaware corporation ("PARENT"), Fifi
Acquisition Corporation, a California corporation and a wholly-owned
subsidiary of Parent ("MERGER SUB"), and AtWeb, Inc., a California
corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the respective Boards of Directors of each of the Company,
Parent and Merger Sub are parties to that certain Agreement and Plan of
Reorganization, dated as of November 10, 1998 (the "REORGANIZATION
AGREEMENT");
WHEREAS, America Online, Inc., a Delaware corporation ("AOL"), Apollo
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
AOL ("NEWCO"), and Parent have entered into that certain Agreement and Plan
of Merger dated November 23, 1998 (the "AOL REORGANIZATION AGREEMENT"),
whereby their respective companies and their respective stockholders will
enter into a business combination by means of the merger of Newco with and
into Parent under the terms described therein (the "AOL MERGER"); and
WHEREAS, the parties hereto have agreed to amend the Reorganization
Agreement to reflect the manner in which the AOL Merger impacts the timing of
the filing of a Registration Statement on Form S-3 to cover the resale of the
shares of Parent Common Stock issued to the holders of Company Capital Stock
under the terms described in the Reorganization Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. Capitalized terms which are used herein without
definition, but which are defined in the Reorganization Agreement shall have
the same meanings herein as therein defined.
2. AMENDMENT TO THE REORGANIZATION AGREEMENT
2.1 Section 5.1 (d) of the Reorganization Agreement is
hereby amended by deleting Section 5.1 (d) in its entirety and substituting
the following therefor:
(d) REGISTRATION STATEMENT ON FORM S-3. Parent shall use its
commercially reasonable efforts to file, within 5 days following the publication
of Parent's financial results for the quarter ended
January 31, 1999, a Registration Statement on Form S-3 with the SEC covering
the resale of the shares of Parent Common Stock issued to holders of Company
Capital Stock pursuant to the Merger; provided, however, that Parent shall
not be obligated to file a Registration Statement on Form S-3 if the
following conditions are met: (i) the SEC has raised no further comments to
that certain Registration Statement on Form S-4 filed by AOL relating to the
AOL Merger and such Registration Statement has been declared effective or the
SEC has confirmed that it is prepared to declare such Registration Statement
effective upon the request of AOL; (ii) the applicable waiting period under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 relating to the AOL
Merger shall have expired or been terminated; and (iii) Parent reasonably
expects the closing of the AOL Merger to occur within twenty (20) days
following the publication of Parent's financial results for the quarter ended
January 31, 1999. Any such registration shall be subject to the terms and
conditions set forth in the Declaration of Registration Rights attached
hereto as ANNEX A.
3. AMENDMENT TO THE FORM OF DECLARATION OF REGISTRATION RIGHTS
3.1 EXHIBIT E to the Reorganization Agreement is hereby
deleted and replaced in its entirety with the Form of Declaration of
Registration Rights attached hereto as ANNEX A.
4. NO OTHER AMENDMENTS. Except as expressly provided in this
Amendment, all of the terms and conditions of the Reorganization Agreement
remain unchanged and are ratified and confirmed in all respects, and the terms
and conditions of the Reorganization Agreement, as amended hereby, remain in
full force and effect.
5. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of California regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof. Each of the parties hereto irrevocably consents to
the exclusive jurisdiction of any state or federal court within the State of
California, in connection with any matter based upon or arising out of this
Amendment or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of
California for such persons and waives and covenants not to assert or plead
any objection which they might otherwise have to such jurisdiction and such
process.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, Parent, Merger Sub, and the Company have caused
this Agreement to be signed by their duly authorized respective officers, all
as of the date first written above.
NETSCAPE COMMUNICATIONS ATWEB, INC.
CORPORATION
By:/s/ Xxxxx X.X. Xxxxxx By:/s/ Xxxxxx Xxxxxxxx
-------------------------------------- --------------------------------
Name: Xxxxx X.X. Xxxxxx Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President and Title: Chief Executive Officer
Chief Administrative Officer
FIFI ACQUISITION CORPORATION
By:/s/ Xxxxx X.X. Xxxxxx
--------------------------------------
Name: Xxxxx X.X. Xxxxxx
Title: President
[SIGNATURE FOR AMENDMENT NO. 1 TO REORGANIZATION AGREEMENT]
ANNEX A
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NETSCAPE COMMUNICATIONS CORPORATION
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("DECLARATION") is made as of
December 31, 1998 by Netscape Communications Corporation, a Delaware corporation
("PARENT"), for the benefit of shareholders of AtWeb, Inc., a California
corporation (the "COMPANY"), acquiring shares of Common Stock of Parent pursuant
to that certain Agreement and Plan of Reorganization dated as of November 10,
1998, as amended by Amendment No. 1 to the Agreement and Plan of Reorganization
dated as of December 4, 1998 (collectively, the "REORGANIZATION AGREEMENT"), by
and among Parent, Fifi Acquisition Corporation, a California corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and the Company.
1. DEFINITIONS. As used in this Declaration:
a. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
b. "SECURITIES ACT" means the Securities Act of 1933, as amended.
c. "FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which similarly permits
inclusion or incorporation of substantial information by reference to
other documents filed by Parent with the Commission.
d. "HOLDER" means: (i) a shareholder of the Company to whom shares
of Registrable Securities are issued pursuant to the Reorganization
Agreement, for so long as such holder continues to hold such shares,
or (ii) a transferee of Registrable Securities by a Holder, to whom
registration rights under this Declaration are assigned pursuant to
Section 9 of this Declaration.
e. "REGISTRABLE SECURITIES" means for each Holder the shares of
Parent Common Stock issued to such Holder pursuant to the
Reorganization Agreement, together with all other shares of Parent
Common Stock issued in respect thereof (by way of stock split,
dividend or otherwise), and for all Holders the aggregate of all
Registrable Securities held by all such Holders. Registrable
Securities shall not include any shares of Parent Common Stock
transferred by a Holder pursuant to Section 10 hereof to any person
who does not agree to be bound by the terms of this Declaration.
f. "SEC" means the Securities and Exchange Commission.
Capitalized terms not otherwise defined herein have the meanings given to
them in the Reorganization Agreement.
2. REGISTRATION. Parent shall use its commercially reasonable efforts to
cause the Registrable Securities to be held by each Holder following the
Merger to be registered under the Securities Act so as to permit the resale
thereof, and in connection therewith shall use all commercially reasonable
efforts to prepare and file with the SEC within five (5) days following the
publication of Parent's financial results for the quarter ended January 31,
1999, and shall use its commercially reasonable efforts to cause to become
effective as soon as practicable thereafter, a registration statement on
Form S-3 or on such other form as is then available under the Securities
Act covering the Registrable Securities; provided, however, that Parent
shall not be obligated to file a Registration Statement on Form S-3 if the
following conditions are met: (i) the SEC has raised no further comments to
that certain Registration Statement on Form S-4 filed by America Online,
Inc., a Delaware corporation ("AOL"), relating to the business combination
described in that certain Agreement and Plan of Merger dated November 23,
1998, by and among AOL, Apollo Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of AOL, and Parent (the "AOL MERGER") and
such Registration Statement has been declared effective or the SEC has
confirmed that it is prepared to declare such Registration Statement
effective upon the request of AOL; (ii) the applicable waiting period under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 relating to the
AOL Merger shall have expired or been terminated; and (iii) Parent
reasonably expects the closing of the AOL Merger to occur within twenty
(20) days following the publication of Parent's financial statements for
the quarter ended January 31, 1999; provided further, however, that each
Holder shall provide all such information and materials to Parent and take
all such action as may be required in order to permit Parent to comply with
all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement. Such
provision of information and materials is a condition precedent to the
obligations of Parent pursuant to this Declaration. Parent shall not be
required to effect more than one (1) registration under this Declaration.
The offering made pursuant to such registration shall not be underwritten.
3. POSTPONEMENT OF REGISTRATION. Notwithstanding Section 2 above, Parent
shall be entitled to postpone the declaration of effectiveness of the
registration statement prepared and filed pursuant to Section 2 for a
reasonable period of time, but not in excess of thirty (30) calendar days
after the date the SEC has informed Parent that the registration statement
will not be reviewed or that the SEC has no further comments with regard to
the registration statement, if the Board of Directors of Parent, acting in
good faith, determines that there exists material nonpublic information
about Parent which the Board does not wish to disclose in a registration
statement (due to the fact that the Board believes that such disclosure is
not in the best interests of Parent or Parent's stockholders) which
information would otherwise be required by the Securities Act to be
disclosed in the registration statement to be filed pursuant to Section 2
above.
-2-
4. OBLIGATIONS OF PARENT. Subject to the limitations of Sections 2, 3, 5
and 11, Parent shall (i) keep the registration statement filed in
accordance with Section 2 hereof effective until the earlier of (A) one (1)
year after the Effective Time of the Merger or (B) such time as all
Registrable Securities have been sold hereunder; (ii) prepare and file with
the SEC such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities proposed to be registered in such
registration statement; (iii) furnish to each Holder such number of copies
of any prospectus (including any preliminary prospectus and any amended or
supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably
request in order to effect the offering and sale of the shares of the
Registrable Securities to be offered and sold, but only while Parent shall
be required under the provisions hereof to cause the registration statement
to remain current; and (iv) use its commercially reasonable efforts to
register or qualify the shares of the Registrable Securities covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request (provided that Parent
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process
in any such jurisdiction where it has not been qualified).
5. SELLING PROCEDURES. Any sale of Registrable Securities pursuant to
the registration statement filed in accordance with Section 2 hereof shall
be subject to the following conditions and procedures:
a. STOCKHOLDER NOTICE. The selling Holder shall provide written
notice ("STOCKHOLDER NOTICE") to Parent no less than five (5) business
days prior to such Holder's intended sale. Within three (3) business
days of receipt of the Stockholder Notice, Parent will inform such
Holder in writing if the registration statement and final prospectus
then on file with the SEC is current and otherwise complies with the
Securities Act such that sales may be made thereunder. After receipt
of notice from Parent that the registration statement is current and
complies with the Securities Act, such Holder shall then have ten (10)
business days to sell the Registrable Securities proposed to be sold,
unless the notice from Parent specifies that no sale may be made until
the date of intended sale as specified in the Stockholder Notice, in
which case such Holder must wait until the date of the intended sale
to make such sale and such Holder shall have ten (10) business days
thereafter to make such sale. After such ten (10) day period, the
seller shall once again comply with the procedures set forth in this
Section 5.a prior to any further sales;
b. UPDATING THE PROSPECTUS. If Parent informs the selling Holder
that the registration statement or final prospectus then on file with
the SEC is not current or otherwise does not comply with the
Securities Act, Parent shall use commercially reasonable efforts to
promptly provide to the selling Holder a current prospectus that
complies with the Securities Act on or before the date of the intended
sale of the Registrable Securities as disclosed in the Stockholder
Notice; provided, however, that
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Parent shall have the right to delay the preparation of a current
prospectus that complies with the Securities Act on three (3) separate
occasions for up to thirty (30) days on each occasion without
explanation to such Holder;
c. BLACKOUT PERIODS. Holders who become employees of Parent agree
to be bound by Parent's Xxxxxxx Xxxxxxx Policy as such may be in
effect from time to time for so long as such Holders remain employees
of Parent and are subject to such policy;
d. GENERAL. Notwithstanding the foregoing, Parent shall notify each
Holder (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the
registration statement for amendments or supplements to the
registration statement or related prospectus or for additional
information relating to the registration statement, (ii) of the
issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose, (iii) of the receipt by Parent of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, or (iv) of the happening of any event which makes any
statement made in the registration statement or related prospectus or
any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making
of any changes in the registration statement or prospectus so that, in
the case of the registration statement, it will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the prospectus, it will not
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. In such event, Parent may suspend use of the prospectus
on written notice to each Holder, in which case each Holder shall not
dispose of Registrable Securities covered by the registration
statement or prospectus until copies of a supplemented or amended
prospectus are distributed to the Holders or until the Holders are
advised in writing by Parent that the use of the applicable prospectus
may be resumed. Parent shall use its commercially reasonable efforts
to ensure that the use of the prospectus may be resumed as soon as
practicable. Parent shall use its commercially reasonable efforts to
obtain the withdrawal of any order suspending the effectiveness of the
registration statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
securities for sale in any jurisdiction, at the earliest practicable
moment. Parent shall, upon the occurrence of any event contemplated
by clause (iv), prepare a supplement or post-effective amendment to
the registration statement or a supplement to the related prospectus
or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder, such prospectus
will not contain an untrue statement
-4-
of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
6. AVAILABILITY OF FORM S-3. Parent represents that it is currently
eligible to utilize Form S-3.
7. EXPENSES. Parent shall pay all of the out-of-pocket expenses
incurred, other than underwriting or selling discounts and commissions, in
connection with the registration of Registrable Securities pursuant to this
Declaration, including, without limitation, all SEC, National Association
of Securities Dealers, Inc. and blue sky registration and filing fees,
printing expenses, transfer agents' and registrars' fees, and the
reasonable fees and disbursements of Parent's outside counsel and
independent accountants.
8. INDEMNIFICATION. In the event of any offering registered pursuant to
this Declaration:
a. INDEMNIFICATION BY PARENT. Parent will indemnify each Holder and
each underwriter, agent, attorney and affiliate of a Holder, against
all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, final prospectus, or any
amendment or supplement thereto, incident to any offering registered
pursuant to this Declaration, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any
violation by Parent of any rule or regulation promulgated under the
Securities Act or state securities laws applicable to Parent in
connection with any such registration, and subject to Section 8(c),
will reimburse each such Holder, and each underwriter, agent, attorney
and affiliate of such Holder, for any legal and any other
out-of-pocket expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage,
liability or action, provided that Parent will not be liable in any
such case to the extent that any such claim, loss, damage, or
liability arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission made in reliance upon
and in conformity with written information furnished to Parent by such
Holder or an affiliate of such Holder and stated to be specifically
for use therein.
b. INDEMNIFICATION BY HOLDERS. Each Holder will indemnify Parent,
each of its directors and officers, each underwriter, each of Parent's
legal counsel and independent accountants, each person who controls
Parent or any of such persons within the meaning of Section 15 of the
Securities Act, and each other Holder and each affiliate of such other
Holder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any such registration
-5-
statement, final prospectus, or any amendment or supplement thereto,
incident to any offering registered pursuant to this Declaration or
based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse Parent, such
other Holders, such directors, officers, underwriters, legal counsel,
independent accountants or control persons for any legal or any other
expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, final prospectus, or
any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to Parent by such Holder
and stated to be specifically for use therein; provided, however, that
the obligations of each Holder hereunder shall be several and not
joint and shall be limited to an amount equal to the respective gross
proceeds (before expenses and commissions) from the sale of
Registrable Securities by such Holder as contemplated herein.
c. DEFENDING CLAIMS. Each party entitled to indemnification under
this Section 8 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party receives written notice of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent, but only to
the extent, that the Indemnifying Party's ability to defend against
such claim or litigation is impaired as a result of such failure to
give notice. Notwithstanding the foregoing sentence, the Indemnified
Party may retain its own counsel to conduct the defense of any such
claim or litigation, and shall be entitled to be reimbursed by the
Indemnifying Party for expenses incurred by the Indemnified Party in
defense of such claim or litigation (as such expenses are incurred and
within thirty days of demand by the Indemnified Party for
reimbursement), in the event that the Indemnifying Party does not
assume the defense of such claim or litigation within thirty (30) days
after the Indemnifying Party receives notice thereof from the
Indemnified Party. Further, an Indemnifying Party shall be liable for
amounts paid in settlement of any such claim or litigation only if the
Indemnifying Party consents in writing to such settlement (which
consent shall not be unreasonably withheld). No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which involves any admission of fault or
responsibility, imposes any restriction or positive obligation on the
Indemnified Party
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or which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party a release from
all liability with respect to such claim or litigation.
d. CONTRIBUTION. If the indemnification provided for in this
Section 8 from the Indemnifying Party is unavailable to an Indemnified
Party hereunder in respect of any claim, loss, damage or liability
referred to herein, then the Indemnifying Party, to the extent such
indemnification is unavailable, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such claims, losses, damages or
liabilities in such proportion as is appropriate to reflect the
relative benefit to, or fault of, the Indemnifying Party and
Indemnified Parties in connection with the actions that resulted in
such claims, losses, damages and liabilities. The relative fault of
such Indemnifying Party and Indemnified Parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such Indemnifying Party or
Indemnified Parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
claims, losses, damages or liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this paragraph were determined
by PRO RATA allocation or by any other method of allocation that does
not take account of the equitable considerations referred to above in
this paragraph. No party guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any party.
e. The obligations of Parent and each Holder under this Section 8
shall survive the completion of any offering of stock in a
registration statement under this Declaration and shall also survive
the termination of this Declaration under Section 12 hereof.
9. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. Parent agrees to:
a. use all commercially reasonable efforts to file with the SEC in a
timely manner all reports and other documents required of Parent under
the Securities Act and the Exchange Act; and
b. furnish to each Holder forthwith upon request (i) a written
statement by Parent that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, or that it
qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time that it so qualifies), (ii) a copy of the most
recent annual or quarterly report of Parent and (iii) such other
information as may be
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reasonably requested in availing each Holder of any rule or regulation
of the SEC which permits the selling of any such securities pursuant
to Form S-3.
10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights of a Holder pursuant to
this Declaration may be assigned by a Holder to a transferee of Registrable
Securities only if: (a) Parent is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee and a copy of a duly executed written instrument in form
reasonably satisfactory to Parent pursuant to which such transferee assumes
all of the obligations and liabilities of its transferor hereunder, agrees
itself to be bound hereby and provides Parent with such reasonable
information as Parent may request to permit the transferee to sell such
Registrable Securities pursuant to the registration statement filed in
accordance with Section 2 hereof, and (b) immediately following such
transfer, the disposition of such Registrable Securities by the transferee
is restricted under the Securities Act.
11. AMENDMENT OF REGISTRATION RIGHTS. The Holders of a majority of the
Registrable Securities then outstanding may, with the consent of Parent,
amend the registration rights granted hereunder.
12. TERMINATION. The registration rights set forth in this Declaration
shall terminate with respect to a Holder (and the shares held by such
Holder shall cease to constitute Registrable Securities) on the date which
is one year following the Effective Time of the Merger.
13. OBLIGATIONS OF HOLDERS. By exercising any rights hereunder, each
Holder shall be deemed to assume all obligations of a Holder hereunder as
though such Holder were a signatory hereto. Parent may require Holders to
execute an instrument whereby such Holders expressly assume all obligations
of Holders hereunder as a condition precedent to any obligations of Parent
hereunder.
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