AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of September 28, 1999 (the "Agreement Date") by and among
Netopia, Inc., a Delaware corporation ("Netopia"), SN Merger Corporation, a
Delaware corporation that is a wholly-owned subsidiary of Netopia ("Sub"), and
StarNet Technologies, Inc. a California corporation ("StarNet").
R E C I T A L S
A. The parties intend that, subject to the terms and conditions of this
Agreement, StarNet will be merged with and into Sub in a forward triangular
merger, with Sub to be the surviving corporation of such merger, all pursuant to
the terms and conditions of this Agreement and applicable law. The parties also
intend for such merger to be treated as a "reorganization" under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and to be treated
as a "purchase" transaction for accounting purposes.
B. Upon the effectiveness of the merger, (i) the common stock and
preferred stock of StarNet that is outstanding immediately before the
effectiveness of the merger will be converted into shares of the common stock of
Netopia and the cash consideration provided for herein, (ii) the unvested stock
options to purchase shares of StarNet's common stock that are outstanding
immediately before the effectiveness of the Merger will be replaced by options
to purchase shares of the common stock of Netopia and (iii) StarNet will be
merged with and into Sub, all as provided in this Agreement.
C. Concurrently herewith, Netopia shall enter into the Voting Agreement
and related Irrevocable Proxies (as defined below) with each holder of StarNet
Preferred Stock and each of the StarNet Founders.
A G R E E M E N T
THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1
CERTAIN DEFINITIONS
1. Definitions. As used in this Agreement, the following terms
will have the meanings set forth below or in the Sections referenced below:
1.1 "1933 Act": Section 2.2.2
1.2 "1934 Act": Section 2.2.2
1.3 "Applicable Law": Section 3.14.1
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1.4 "Balance Sheet": Section 3.8.1
1.5 "Balance Sheet Date" : Section 3.8.1
1.6 "Business" means the condition (financial or otherwise),
properties, assets, liabilities, business, operations or results of operations
of such entity and its subsidiaries, taken as a whole.
1.7 "Cash Amount Per Share" means the amount that is equal to the Total
Adjusted Cash Consideration divided by the StarNet Common Stock Equivalents
Outstanding.
1.8 "CCSL" means the California Corporate
Securities Law of 1968, as amended.
1.9 "Claim": Section 3.6
1.10 The "Closing" means the closing of the transactions
contemplated by this Agreemen to consummate the Merger.
1.11 The "Closing Date": Section 7.1.
1.12 "DGCL" means the Delaware General Corporation Law, as amended.
1.13 "Earn-Out Payments": Section 2.1.6.
1.14 The "Effective Time" means the date and time on which the
Merger first becomes legally effective under the laws of the State of Delaware
as a result of the filing with the Delaware Secretary of State of a Certificate
of Merger between Sub and StarNet in substantially the form of Exhibit A (the
"Certificate of Merger") together with any required officers' certificates.
1.15 "Escrow Agent": Section 2.4.1.
1.16 "Escrow Period": Section 2.4.1.
1.17 "Escrow Release Date": Section 11.1.
1.18 "Escrow Representative": Section 2.4.2.
1.19 "Escrow Shares": Section 2.4.1.
1.20 "Government Authority": Section 3.3.2.
1.21 "Information Statement" means an information statement to be
provided to StarNet's stockholders in connection with the consideration of the
approval and adoption of this Agreement, the Merger and the other transactions
contemplated hereby by StarNet's stockholders and the offering and issuance
of shares of Netopia Common Stock to StarNet's stockholders in the Merger.
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1.22 "Intellectual Property": Section 3.13.1
1.23 "knowledge," when used with reference to a party, means actual
knowledge of such party's officers and directors provided that such persons
shall have made due and diligent inquiry of those employees of such party whom
such officers and directors reasonably believe would have actual knowledge of
such matters.
1.24 "Material Adverse Change" when used with reference to any entity
or group of entities, means a material adverse change in the Business of a party
other than (a) a change arising or resulting, directly or indirectly, from
general industry, economic or stock market conditions or (b) a change that is
demonstrably shown to have been proximately caused by the public announcement
of, and the response or reaction of customers, vendors, licensors or employees
of such entity or group of entities to, this Agreement, the Merger or any of the
transactions contemplated by this Agreement; provided, however, that with
respect to Netopia, a reduction in the market price of Netopia Common Stock
shall not, in and of itself, constitute a Material Adverse Change with respect
to Netopia.
1.25 "Material Adverse Effect" when used with reference to any entity
or group of related entities, means any event, change or effect that is (or will
with the passage of time be) materially adverse to the Business of a party.
1.26 The "Merger" means the statutory merger of StarNet with and into
Sub to be effected pursuant to this Agreement.
1.27 "Netopia Ancillary Agreements" means, collectively, each
certificate to be delivered by Netopia or an officer or officers of Netopia at
the Closing pursuant to Article 8 of this Agreement and each agreement (other
than this Agreement) which Netopia is to enter into as a party thereto pursuant
to or in connection with this Agreement.
1.28 "Netopia Average Price Per Share" means $32.60, which is the
average of the closing prices per share of Netopia Common Stock as quoted on the
Nasdaq National Market System and reported in The Wall Street Journal for the
twenty-one (21) trading days during the thirty (30) day period beginning on
August 27, 1999 and ending September 27, 1999.
1.29 "Netopia Common Stock" means Netopia's Common Stock, $0.001 par
value per share.
1.30 "Netopia Disclosure Schedule": Article 4 preamble.
1.31 "Netopia Option": Section 2.2.1
1.32 "Record Date": Section 3.23
1.33 "Rights Agreement": Section 2.6.1
1.34 "SEC": Section 2.2.2
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1.35 "Shareholder Representation Letter": Section 9.16.
1.36 "StarNet Ancillary Agreements" means, collectively, the
Certificate of Merger, each certificate to be delivered by StarNet or an officer
or officers of StarNet at the Closing pursuant to Article 9 of this Agreement,
and each other agreement (other than this Agreement) which StarNet is to enter
into as a party, pursuant to or in connection with this Agreement.
1.37 "StarNet Articles" means the Articles of Incorporation of StarNet,
as amended, in effect immediately before the Effective Time.
1.38 "StarNet Common Stock" means StarNet's Common Stock, no par
value per share.
1.39 "StarNet Common Stock Equivalents Outstanding" means that number
of shares of StarNet Common Stock that is equal to the sum of (a) the total
number of shares of StarNet Common Stock that are issued and outstanding
immediately before the Effective Time, plus (b) the total number of shares of
StarNet Common Stock that are issuable upon conversion in full immediately
before the Effective Time of all the shares of StarNet Preferred Stock that are
issued and outstanding immediately before the Effective Time, plus (c) the total
number of shares of StarNet Common Stock ultimately issuable upon the exercise,
pursuant to Section 2.2.1, before the Effective Time of all vested and
exercisable StarNet Options.
1.40 "StarNet Disclosure Schedule": Section 3 preamble.
1.41 "StarNet Dissenting Shares" means any shares of any capital stock
of StarNet that (i) are outstanding immediately before the Effective Time and
qualify fully as "dissenting shares" within the meaning of Section 1300 et seq.
of the CCSL or other applicable law and (ii) with respect to which appraisal or
dissenter's rights to require the purchase of such dissenting shares for cash at
their fair value or fair market value in accordance with Section 1300 et seq. of
the CCSL or other applicable law have been duly and properly exercised and
perfected in connection with the Merger in accordance with the CCSL and other
applicable law.
1.42 "StarNet Engineering Employees": Section 6.8.
1.43 "StarNet Financial Statements": Section 3.8.1.
1.44 "StarNet Founders" means Xxxxxx Xxxxxx, Xxxxxx Xxxxxxx,
Xxxx Xxx and Xxxxxxxx Xxxxxxxx.
1.45 "StarNet IP Rights": Section 3.13.1.
1.46 "StarNet IP Rights Agreements": Section 3.13.2.
1.47 "StarNet Key Employees" means those persons who are identified
as key employees of StarNet on Exhibit J-2.
1.48 "StarNet Material Agreements": Section 3.11.
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1.49 "StarNet Option Exchange Ratio" means the Stock Amount Per Share,
plus a fraction of a share of Netopia Common Stock equal to the Cash Amount Per
Share divided by the Netopia Average Price Per Share.
1.50 "StarNet Options" means options to purchase shares of StarNet
Common Stock granted by StarNet under StarNet's 1997 Stock Plan (the "StarNet
Stock Plan").
1.51 "StarNet Preferred Stock" means StarNet's Preferred Stock, no par
value per share, of any series. "StarNet Series A Stock" means StarNet's
Series A Preferred Stock, no par value per share, and "StarNet Series B
Stock" means StarNet's Series B Preferred Stock, no par value per share.
1.52 "StarNet Rights Agreement": Section 3.4.3
1.53 "StarNet Stockholders" means, collectively, those persons (each
referred to individually as a "StarNet Stockholder") who, immediately before the
Effective Time (and giving effect to the exercise before the Closing of all
outstanding vested StarNet Options, as contemplated by Section 2.2.1 of this
Agreement) hold the shares of StarNet Common Stock and StarNet Preferred Stock
that are outstanding immediately before the Effective Time; provided, however,
that for purposes of Section 2.4 and Article 11 of this Agreement, the term
"StarNet Stockholders" excludes holders of StarNet Dissenting Shares who are not
issued shares of Netopia Common Stock in the Merger.
1.54 "Stock Amount Per Share" means that number of shares of
Netopia Common Stock that is equal to the Total Netopia Merger Shares divided by
the StarNet Common Stock Equivalents Outstanding.
1.55 "Sub Ancillary Agreements" means, collectively, the Certificate
of Merger, each certificate to be delivered by Sub or an officer or officers of
Sub at the Closing pursuant to Article 8 of this Agreement and each agreement
(other than this Agreement) which Sub is to enter into as a party, pursuant
to or in connection with this Agreement.
1.56 "Surviving Corporation": Section 2.5
1.57 "Tax" and "Taxes": Section 3.7.2
1.58 "Termination Date" means sixty (60) days following the
Agreement Date; provided, that if, following the filing by Netopia and StarNet
of pre-merger notification and report forms under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the regulations thereunder
(the "HSR Act"), Netopia or StarNet shall receive a formal request from the U.S.
Department of Justice or Federal Trade Commission for additional information
(i.e., a "second request") delivered under the HSR Act, then the Termination
Date shall mean the earlier of (i) December 31, 1999 and (ii) the date sixty
(60) days after Netopia and StarNet each deliver a response that substantially
complies with any such second request.
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1.59 "Total Adjusted Cash Consideration" means the amount equal to the
difference of the Total Cash Consideration less $1,234,246.50, the liquidation
preference payable to the holders of the StarNet Preferred Stock in accordance
with the StarNet Articles.
1.60 "Total Cash Consideration" means the amount equal to the
difference of Eight Million Four Hundred Thousand Dollars ($8,400,000.00) less
(i) $198,000 in license fee payments made by Netopia to StarNet, less (ii) any
additional license fee payments made by Netopia to StarNet before the Closing
and less (iii) any Excess Transaction Expenses (as defined in Section 12.7).
1.61 "Total Netopia Merger Shares" means that number of shares of
Netopia Common Stock (rounded to the nearest whole number of shares) obtained by
dividing Fourteen Million Six Hundred Thousand Dollars ($14,600,000.00) by the
Netopia Average Price Per Share.
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Article I will have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
PLAN OF REORGANIZATION
2.1 Conversion of Shares.
2.1.1 Conversion of Sub Stock. At the Effective Time, each
share of the Common Stock of Sub that is issued and outstanding immediately
before the Effective Time will, by virtue of the Merger and without the need for
any further action on the part of the holder thereof, remain one share of Sub
Common Stock after the Effective Time.
2.1.2 Conversion of StarNet Stock; Cancellation of Treasury
Shares. At the Effective Time (subject to the provisions of Section 2.1.4
regarding the payment of cash in lieu of fractional shares of Netopia Common
Stock):
(a) each share of StarNet Common Stock that is
issued and outstanding immediately before the Effective Time (other than any
StarNet Dissenting Shares as provided in Section 2.1.3) will, by virtue of
the Merger, and without the need for any further action on the part of the
holder thereof, be converted into the right to receive (i) that number of shares
of Netopia Common Stock that is equal to the Stock Amount Per Share and (ii)
an amount of cash equal to the Cash Amount Per Share;
(b) each share of StarNet Series A Stock that is
issued and outstanding immediately before the Effective Time (other than any
StarNet Dissenting Shares as provided in Section 2.1.3) will, by virtue of the
Merger, and without the need for any further action on the part of the
holder thereof, be converted into the right to receive (i) $0.10 per share plus
(ii) all declared but unpaid dividends on each share of Series A Preferred
Stock (of which there are none) plus (iii) that number of shares of Netopia
Common Stock that is equal to the product of the Stock Amount Per Share
multiplied by the total number of shares of StarNet Common Stock that are
issuable upon conversion in full immediately before the Effective Time of
such share of StarNet Series A Stock and (iv) an amount of cash equal to the
product of the Cash Amount Per Share multiplied by the total number of shares of
StarNet Common Stock that are issuable upon conversion in full immediately
before the Effective Time of such share of StarNet Series A Stock;
(c) each share of StarNet Series B Stock that is
issued and outstanding immediately before the Effective Time (other than
any StarNet Dissenting Shares as provided in Section 2.1.3) will, by
virtue of the Merger, and without the need for any further action on the
part of the holder thereof, be converted into the right to receive (i) $0.375
per share plus (ii) all declared but unpaid dividends on each share
of Series B Preferred Stock (of which there are none) plus (iii) that number of
shares of Netopia Common Stock that is equal to the product of the Stock Amount
Per Share multiplied by the total number of shares of StarNet Common Stock that
are issuable upon conversion in full immediately before the Effective Time of
such share of StarNet Series B Stock and (iv) an amount of cash equal to the
product of the Cash Amount Per Share multiplied by the total number of shares of
StarNet Common Stock that are issuable upon conversion in full immediately
before the Effective Time of such share of StarNet Series B Stock.
2.1.3 StarNet Dissenting Shares. Holders of StarNet Dissenting
Shares (if any) will be entitled to their appraisal rights under Section 1300 et
seq. of the CCSL and other applicable law with respect to such StarNet
Dissenting Shares, and such StarNet Dissenting Shares will not be converted into
shares of Netopia Common Stock or cash consideration in the Merger; provided,
however, that nothing in this Section is intended to remove, release, waive,
alter or affect any of the conditions to Netopia's and Sub's obligations to
consummate the Merger set forth in Section 9.8 or Section 9.9, or any other
provision of this Agreement relating to the StarNet Dissenting Shares; and
provided further, that shares of the capital stock of StarNet that are
outstanding immediately before the Effective Time respecting which dissenting
stockholders' rights of appraisal under Section 1300 et seq. of the CCSL or
other applicable law have not been properly perfected will, when such dissenting
stockholders' rights of appraisal can no longer be legally exercised under the
CCSL or other applicable law, be converted into Netopia Common Stock and cash as
provided in Section 2.1.2.
2.1.4 Fractional Shares; Rounding of Cash Payments. No
fractional shares of Netopia Common Stock will be issued in connection with the
Merger. In lieu thereof, each holder of StarNet Common Stock and each holder of
StarNet Preferred Stock who would otherwise be entitled to receive a fraction of
a share of Netopia Common Stock pursuant to Section 2.1.2, computed after
aggregating all shares of Netopia Common Stock to be received by such holder
pursuant to Section 2.1.2, will instead receive from Netopia, within ten (10)
business days after the Effective Time, an amount of cash (rounded to the
nearest whole cent) equal to the product obtained by multiplying (i) the Netopia
Average Price Per Share (as adjusted to reflect any Capital Change (as defined
in Section 2.3 below)) by (ii) the fraction of a share of Netopia Common Stock
that such holder would otherwise be entitled to receive. No fractions of a cent
will be paid in connection with the Merger and each holder of StarNet Common
Stock, and each holder of StarNet Preferred Stock who would otherwise be
entitled to receive a fraction of a cent pursuant to Section 2.1.2, computed
after aggregating all cash to be received by such holder pursuant to Section
2.1.2, will instead have such cash amount rounded down to the nearest whole
cent.
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2.1.5 Offset for Liabilities Due to StarNet. Netopia may
withhold, offset and reduce the amount of cash payable to any StarNet
Stockholder pursuant to this Article 2 by the entire amount of any liability or
debt of such StarNet Stockholder to StarNet that is outstanding as of the
Effective Time, together with any interest accrued thereon as of the Effective
Time, regardless of when such liability or debt, or accrued interest, is
otherwise due and payable to StarNet (including without limitation any
promissory note reflecting some or all of the purchase price of shares of
StarNet stock held by such Stockholder).
2.1.6 Potential Earn-Out Payments. In addition to the
consideration specified in Sections 2.1.2 above, holders of StarNet Common Stock
and StarNet Preferred Stock will be eligible to receive additional cash payments
upon achievement of specified performance milestones after the Closing Date (the
"Earn-Out Payments"), which milestones and cash payments are specified in
Exhibit K. Upon the achievement of each milestone, each holder of StarNet
Preferred Shares as of the date of closing will be eligible to receive a ratable
(based on the number of shares of StarNet Preferred Stock held immediately
before the Effective Time) portion of 25% percent of the cash payment specified
for that milestone in Exhibit K, and each holder of StarNet Common Shares as of
the date of closing will be eligible to receive a ratable (based on the number
of shares of StarNet Common Stock held immediately before the Effective Time)
portion of 75% percent of the cash payment specified. Netopia shall make each
cash payment within forty-five (45) days after achievement of each milestone or
end of the calendar year, as applicable.
2.2 StarNet Options.
2.2.1 Vested StarNet Options. Effective immediately prior to
the Effective Time and contingent upon consummation of the Merger, (a) all
StarNet Options listed on Schedule 2.2.1 shall become exercisable for the number
of shares of StarNet Common Stock set for forth in such Schedule, and (b) each
holder of a StarNet Option that is outstanding and vested immediately prior to
the Effective Time shall exercise such option and shall be entitled to receive
cash and Netopia Common Stock for the shares of StarNet Common Stock issued upon
exercise of the StarNet Option in accordance with Section 2.1 hereof.
2.2.2 Conversion of StarNet Options by Netopia. Each StarNet
Option that is outstanding and unvested immediately before the Effective Time
will, upon receipt of any necessary consents from the holders thereof and by
virtue of the Merger, be converted at the Effective Time to an option (a
"Netopia Option") issued under the Netopia 1996 Stock Option Plan (the "Netopia
Option Plan") to purchase, for each share of StarNet Common Stock issuable upon
the exercise of such StarNet Option immediately before the Effective Time, that
number of shares of Netopia Common Stock that is equal to the StarNet Option
Exchange Ratio, at an exercise price per such share of StarNet Common Stock
equal to the exercise price per share of StarNet Common Stock that was in effect
for such StarNet Option immediately before the Effective Time divided by the
StarNet Option Exchange Ratio; provided, however, that if the foregoing
calculation would result in an assumed and converted StarNet Option being
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converted into a Netopia Option that, after aggregating all the shares of
Netopia Common Stock issuable upon the exercise of such Netopia Option, would be
exercisable for a fraction of a share of Netopia Common Stock, then the number
of shares of Netopia Common Stock subject to such Netopia Option will be rounded
down to the nearest whole number of shares of Netopia Common Stock. The terms,
exercisability, status as an "incentive stock option" under Section 422 of the
Code (if applicable) or as a nonqualified stock option, and all other terms and
conditions of each StarNet Option that is converted into a Netopia Option in the
Merger will (except as otherwise expressly provided in the terms of such StarNet
Options), to the extent permitted by law, be unchanged and continue in effect
after the Effective Time, except that the vesting schedule for each StarNet
Option converted to a Netopia Option will, with respect to the portion of the
StarNet Option which has not vested as of the Closing Date, be on a quarterly
basis based on the commencement date as set forth in the original StarNet Stock
option agreement and shall vest over the remaining term of the vesting period in
accordance with the Netopia Option Plan. A StarNet Option holder's pre-Merger
employment service with StarNet will be credited to such holder for purposes of
applying any vesting schedule contained in the Netopia Option issued to such
holder upon the conversion of such StarNet Option in the Merger in order to
determine the number of shares of Netopia Common Stock that are exercisable
under such Netopia Option at any point in time. This Section is intended to meet
the requirements of Section 424(a) of the Code and shall be interpreted
consistent with such intent. Within 10 days after the Closing, Netopia will
issue to each person who, immediately prior to the Effective Time was a holder
of a StarNet Option that was outstanding and unvested, a document in form and
substance satisfactory to evidence the replacement option grants by Netopia.
2.2.3 Registration. The shares of Netopia Common Stock that
are subject to issuance upon exercise of the Netopia Options that are issued in
substitution of StarNet Options under Section 2.2.1, held by StarNet employees,
directors, officers and consultants will be included in a registration statement
on Form S-8 (or successor form) promulgated by the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended (the "1933
Act"). Netopia will use its best efforts to maintain the effectiveness of such
Form S-8 registration statement for so long as such Netopia Options remain
outstanding and Netopia Common Stock is registered under the Securities Exchange
Act of 1934, as amended (the "1934 Act").
2.3 Adjustments for Capital Changes. Notwithstanding the provisions of
Section 2.1 or Section 2.2, if at any time after the Agreement Date and before
the Effective Time, Netopia recapitalizes, either through a subdivision (or
stock split) of any of its outstanding shares of Netopia Common Stock into a
greater number of such shares, or a combination (or reverse stock split) of any
of its outstanding shares of Netopia Common Stock into a lesser number of such
shares, or reorganizes, reclassifies or otherwise changes its outstanding shares
of Netopia Common Stock into the same or a different number of shares of other
classes or series of Netopia capital stock (other than through a subdivision or
combination of shares provided for in the preceding clause), or declares a
dividend on its outstanding shares of Netopia Common Stock that is payable in
shares of Netopia Common Stock or in shares or securities convertible into or
exercisable or exchangeable for, shares of Netopia Common Stock without the
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payment of any consideration therefor (each, a "Capital Change"), then the
Netopia Average Price Per Share, the number of shares of Netopia Common Stock
into which each outstanding share of StarNet Common Stock and each share of
StarNet Preferred Stock is converted in the Merger, and the number of shares of
Netopia Common Stock issuable under each Netopia Option issued in the Merger
under Section 2.2, will each be proportionally and equitably adjusted to reflect
such Capital Change.
2.4 Escrow.
2.4.1 Escrow of Shares for Indemnification; Escrow Agreement.
At the Closing of the Merger, Netopia will withhold from the Total Netopia
Merger Shares that number of shares of Netopia Common Stock (rounded to the
nearest whole number of shares) obtained by dividing $1,000,000 by the Netopia
Average Price Per Share (such withheld shares of Netopia Common Stock being
hereinafter referred to as the "Escrow Shares") and will deliver certificates
representing such Escrow Shares to Greater Bay Trust Company or a similar
institution, as escrow agent (the "Escrow Agent"), to be held by the Escrow
Agent as security for the StarNet Stockholders' indemnification obligations
under Article 11 and pursuant to the provisions of an escrow agreement in
substantially the form of Exhibit B (the "Escrow Agreement") to be entered into
at the Closing by Netopia, the Escrow Agent, the StarNet Stockholders and Xxxxxx
Xxxxxx, who shall act as the representative of the StarNet Stockholders (the
"Escrow Representative"). The Escrow Shares will be withheld from each StarNet
Stockholder pro rata in the same proportion as the total number of shares of
Netopia Common Stock issuable to such StarNet Stockholder under Section 2.1.2
bears to the total number of shares of Netopia Common Stock issued to all
StarNet Stockholders under Section 2.1.2. The Escrow Shares will be represented
by stock certificates issued in the names of each of the StarNet Stockholders in
proportion to their respective interests in the Escrow Shares and will be held
by the Escrow Agent during that time period commencing on the Effective Time and
ending June 30, 2000 (the "Escrow Period").
2.4.2 Effect of StarNet Stockholder Approval Regarding Escrow
Shares; Escrow Representative. By their approval of the Merger, the StarNet
Stockholders will be conclusively deemed to have consented to, approved and
agreed to be personally bound by: (i) the provisions of Article 11; (ii) the
Escrow Agreement; (iii) the appointment of Xxxxxx Xxxxxx as the representative
of StarNet Stockholders (the "Escrow Representative") under the Escrow Agreement
and as the attorney-in-fact and agent for and on behalf of each StarNet
Stockholder as provided in the Escrow Agreement; and (iv) the taking by the
Escrow Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Escrow Representative under this
Agreement and/or the Escrow Agreement, including, without limitation, the
exercise of the power to: (a) authorize delivery to Netopia of Escrow Shares in
satisfaction of indemnity claims by Netopia or any other Indemnified Person (as
defined herein) pursuant to Article 11 and/or the Escrow Agreement; (b) agree
to, negotiate, enter into settlements and compromises of, demand arbitration of,
and comply with orders of courts and awards of arbitrators with respect to, such
claims or other rights; (c) arbitrate, resolve, settle or compromise any claim
made pursuant to or rights under Article 11; and (d) take all actions necessary
in the judgment of the Escrow Representative for the accomplishment of the
foregoing. Netopia shall, at its sole option and discretion, be entitled to
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condition the issuance of any cash and shares of Netopia Common Stock pursuant
to Section 2.1.2 to any StarNet Stockholder on its receipt of a written
instrument (including stock transfer powers) in form and substance reasonably
acceptable to Netopia. The Escrow Representative will have authority and power
to act on behalf of each StarNet Stockholder with respect to the Escrow
Agreement and the disposition, settlement or other handling of all claims under
or rights under Article 11 hereof or governed by the Escrow Agreement, and all
rights or obligations arising under the Escrow Agreement so long as all StarNet
Stockholders are treated in the same manner. The StarNet Stockholders will be
bound by all actions taken and documents executed by the Escrow Representative
in connection with the Escrow Agreement, and Netopia will be entitled to rely on
any action or decision of the Escrow Representative. In performing the functions
specified in this Agreement and the Escrow Agreement, the Escrow Representative
will not be liable to any StarNet Stockholder in the absence of gross negligence
or willful misconduct on the part of the Escrow Representative. Any
out-of-pocket costs and expenses reasonably incurred by the Escrow
Representative in connection with actions taken by the Escrow Representative
pursuant to the terms of the Escrow Agreement (including without limitation the
hiring of legal counsel and the incurring of legal fees and costs) will be paid
by the StarNet Stockholders to the Escrow Representative pro rata in proportion
to their respective percentage interests in the Escrow Consideration.
2.5 Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of StarNet will cease and StarNet
will be merged with and into Sub, and Sub will be the surviving corporation of
the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
pursuant to the terms of this Agreement and the Certificate of Merger;
(b) the Certificate of Incorporation of Sub will be amended
and restated to read as set forth in Exhibit C attached hereto, which will be
the Certificate of Incorporation of the Surviving Corporation immediately after
the Effective Time;
(c) the Bylaws of Sub will be amended to read as set forth in
the Bylaws attached as Exhibit D hereto, which will be the Bylaws of the
Surviving Corporation immediately after the Effective Time;
(d) each share of StarNet Common Stock and each share of
StarNet Preferred Stock that is issued and outstanding immediately before the
Effective Time will be converted into Netopia Common Stock and cash, and each
StarNet Option that is outstanding immediately before the Effective Time, will
be converted into a Netopia Option, in each case, as provided in this Article 2;
(e) each share of Sub Common Stock that is outstanding
immediately before the Effective Time will continue to represent one share of
Sub Common Stock as provided in Section 2.1.1;
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(f) the officers of the Surviving Corporation immediately
after the Effective Time will be the individuals who are the officers of Sub
immediately before the Effective Time, and each such individual shall,
immediately after the Effective Time, hold the same office or offices of the
Surviving Corporation as the office or offices that such individual held with
Sub immediately before the Effective Time;
(g) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time will be the individuals who are
the members of the Board of Directors of Sub immediately before the Effective
Time;
(h) the Merger will, from and after the Effective Time, have
all of the effects provided by applicable law.
2.6 Securities Laws Compliance; Registration Rights.
2.6.1 Issuance of Exchange Shares; Resale of Exchange Shares.
(a) Private Placement. Netopia intends to issue
Netopia Common Stock pursuant to a the shares of "private placement" under
Regulation D and/or Section 4(2) of the Securities Act and applicable state
securities laws. The Netopia Shares shall constitute "restricted securities"
within the meaning of the Securities Act. The certificates for Netopia Shares
to be issued in the Merger shall bear appropriate legends to identify such
shares as being restricted under the Securities Act, and, if applicable, to
notice the restrictions on transfer set forth in the Rights Agreement and the
Shareholder Representation Letter. StarNet shall use its best efforts to furnish
Netopia with such information concerning StarNet and the StarNet Stockholders
as Netopia may reasonably request in connection with establishing the
availability of federal and state private placement exemptions for any action
contemplated by this Section.
(b) Registration. Pursuant to the terms of the
Registration Rights Agreement in substantially the form attached as Exhibit F
(the "Rights Agreement"), Netopia shall file with the SEC a registration
statement on Form S-3 (or other applicable form) (the "Registration
Statement") to provide for the resale of the shares of Netopia Common Stock
issued in the Merger within the later of (i) 15 days after the day of Closing,
or (ii) five days after all documents required to be filed with the
Registration Statement (including without limitation required financial
statements and auditors' consents) have been made available to Netopia. The
Registration Statement will comply in all material respects with all applicable
requirements of the 1933 Act and the rules and regulations promulgated
thereunder. Netopia shall use its best efforts to respond to any comments of the
SEC and have the Registration Statement declared effective under the 1933 Act as
promptly as practicable after such filing. Netopia shall use its best efforts to
maintain the effectiveness of the Registration Statement for up to three hundred
and sixty-five (365) days from the effective date of the Registration Statement,
or earlier to the extent expressly permitted by the Rights Agreement, or when
all shares covered by the registration statement have been sold.
2.7 Reorganization. The parties intend to adopt this Agreement as a
plan of reorganization and to consummate the Merger in accordance with the
provisions of Section 368(a) of the Code. However, Netopia makes no
representations or warranty to StarNet or to any holder of StarNet securities
12
regarding the tax treatment of the Merger or whether the Merger will qualify as
a plan of reorganization under the Code, and StarNet acknowledges and agrees
that it and the StarNet Stockholders are relying on its own tax advisors in
connection with the Merger and the other transactions contemplated by this
Agreement. Notwithstanding the foregoing, neither Netopia nor StarNet has
intentionally taken or will intentionally take any action or will intentionally
fail to take any action, either before or after the Closing of the Merger, which
could reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code. Netopia shall report, and shall
cause the Surviving Corporation to report, the Merger for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
2.8 Further Assurances. If, at any time before or after the Effective
Time, Netopia believes or is advised that any further instruments, deeds,
assignments or assurances are reasonably necessary to consummate the Merger or
to carry out the purposes and intent of this Agreement at or after the Effective
Time, then Netopia, the Surviving Corporation and their respective officers and
directors may execute and deliver all such proper deeds, assignments,
instruments and assurances and do all other things necessary or desirable to
consummate the Merger and to carry out the purposes and intent of this
Agreement, in the name of StarNet or otherwise.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF STARNET
StarNet represents and warrants to Netopia that, except as set forth in
the disclosure schedule delivered by StarNet to Netopia on the date hereof (the
"StarNet Disclosure Schedule"), each of the following representations,
warranties and statements in this Article 3 are correct and complete as of the
date hereof.
3.1 Organization and Good Standing. StarNet is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. StarNet has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and as
proposed to be conducted; except where the failure to have such power and
authority would not, individually or in the aggregate, have a Material Adverse
Effect on StarNet, and is qualified to transact business, and is in good
standing, in each jurisdiction in which its failure to be so qualified would
have a Material Adverse Effect on StarNet's Business. StarNet has delivered to
Netopia true and correct copies of its currently effective Articles of
Incorporation and Bylaws, each as amended to date. StarNet is not in violation
of its Articles of Incorporation, Bylaws or other charter documents.
3.2 Subsidiaries. StarNet does not have any subsidiary or any equity or
ownership interest, whether direct or indirect, in any corporation, partnership,
limited liability company, joint venture or other business entity.
3.3 Power, Authorization and Validity.
3.3.1 Power and Authority. StarNet has all requisite corporate
power, capacity and authority to enter into, execute, deliver, and perform its
obligations under, this Agreement and all StarNet Ancillary Agreements, and
(subject to the approval of this Agreement, the Merger and any necessary
amendment to the StarNet Articles by StarNet's stockholders) to consummate the
Merger. The execution, delivery and performance by StarNet of this Agreement and
each of the StarNet Ancillary Agreements have been duly and validly approved and
authorized by all necessary corporate action on the part of StarNet's Board of
Directors in compliance with applicable law (including without limitation the
CCSL), and upon receipt of approval of the StarNet shareholders entitled to vote
on the record date, the StarNet Articles and Bylaws, each as amended.
3.3.2 No Government Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency, commission or other governmental authority (each, a
"Governmental Authority"), is necessary or required to be made or obtained by
StarNet to enable StarNet to lawfully execute and deliver, enter into, and to
perform its obligations under, this Agreement and each of the StarNet Ancillary
Agreements or to consummate the Merger, except for: (a) the filing of the
Certificate of Merger with the Delaware Secretary of State (and comparable
filings with the California Secretary of State), the receipt of a Tax Clearance
Certificate from the California Franchise Tax Board, and any such further
documents as may be required under the DGCL or CCSL to effect the Merger; and
(b) such filings as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
13
3.3.3 Enforceability. This Agreement and each of the StarNet
Ancillary Agreements are, or when executed by StarNet will be, assuming due
authorization, execution and delivery by Netopia and Sub, valid and binding
obligations of StarNet, enforceable against StarNet and the StarNet Stockholders
in accordance with their respective terms, subject only to the effect of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and (b) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
3.4 Capitalization of StarNet.
3.4.1 Outstanding Stock. As of the date of this Agreement, the
authorized capital stock of StarNet consists entirely of: (i) 17,107,030 shares
of StarNet Common Stock, of which 4,750,000 shares are issued and outstanding,
and (ii) 7,892,970 shares of StarNet Preferred Stock, of which (a) 6,000,000
shares have been designated Series A Stock, all of which are issued and
outstanding, and (b) 1,892,970 shares have been designated Series B Stock, of
which 1,691,324 shares are issued and outstanding. Except as expressly described
in the preceding sentence, no other shares of any capital stock of StarNet are
authorized, issued or outstanding. No fractional shares of StarNet Common Stock
or StarNet Preferred Stock are issued or outstanding; and StarNet holds no
treasury shares.
As of the Closing Date, there will have been no change in the
authorized and outstanding capital stock of StarNet as represented in the
foregoing sentences of this Section 3.4.1, other than the following changes if
made in compliance with this Agreement: (i) the issuance of shares of StarNet
Common Stock pursuant to the exercise of StarNet Options represented as being
outstanding on the Agreement Date in Section 3.4.2 or duly granted by StarNet
14
after the Agreement Date or (ii) the conversion, if any, into Common Stock of
any shares of StarNet Preferred Stock that are represented as being issued and
outstanding on the Agreement Date in this Section 3.4.1. All issued and
outstanding shares of StarNet's capital stock have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any claim,
lien, preemptive right, right of first refusal, right of first offer or right of
rescission, and have been offered and issued by StarNet in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of all applicable federal and state securities laws. A list of all holders of
StarNet's outstanding capital stock, and the total number of shares of StarNet
Common Stock and StarNet Preferred Stock (and the number of shares of each
series of StarNet Preferred Stock) owned by each such holder is set forth in
Schedule 3.4.1 to the StarNet Disclosure Schedule. No stockholder of StarNet
owes StarNet any money or other consideration representing any part of the
purchase price of any outstanding shares of StarNet's capital stock, including
without limitation any money due under a promissory note payable to StarNet,
except as set forth in Schedule 3.4.1 to the StarNet Disclosure Schedule.
StarNet has no liability to any stockholder for any dividends that have been
declared or accrued.
3.4.2 Options, Warrants or Rights. Except as set forth in
Section 3.4.1 hereof and for StarNet Options to purchase an aggregate total of
1,760,000 shares of StarNet Common Stock that are outstanding on the Agreement
Date (all of which StarNet Options were granted under the StarNet Stock Plan),
there are no options, warrants, convertible securities or other securities,
calls, commitments, conversion privileges, preemptive rights, rights of first
refusal, rights of first offer or other rights or agreements outstanding to
purchase or otherwise acquire (whether directly or indirectly) any shares of
StarNet's authorized but unissued capital stock or any securities convertible
into or exchangeable for any shares of StarNet's capital stock or obligating
StarNet to grant, issue, extend, or enter into any such option, warrant,
convertible security or other security, call, commitment, conversion privilege,
preemptive right, right of first refusal, right of first offer or other right or
agreement. To StarNet's knowledge, no person or entity holds, or has any option,
warrant or other right to acquire, any issued and outstanding shares of the
capital stock of StarNet from any holder of shares of the capital stock of
StarNet.
A total of 2,000,000 shares of StarNet Common Stock are reserved for
issuance under the StarNet Stock Plan. No options have been exercised under the
StarNet Stock Plan. As of the Agreement Date, a total of 353,955 shares of
StarNet Common Stock will be potentially issuable upon the exercise of all
vested options granted under the StarNet Stock Plan that are outstanding on the
Agreement Date. Attached as Schedule 3.4.2 to the StarNet Disclosure Schedule is
a true and complete list of all holders of all StarNet Options that are
outstanding on the Agreement Date, the number of StarNet Options held by each
such holder, the exercise price and vesting schedule (including whether such
vesting will be affected by this Agreement or the Merger) of each StarNet Option
held by each such person and the name of the StarNet option plan under which
each such option was granted. The StarNet Stock Plan and any change in (a) the
number of shares reserved under the StarNet Stock Plan or (b) the eligible
participants under the StarNet Stock Plan have each been duly and validly
approved by StarNet's Board of Directors and by StarNet's stockholders, and with
respect to the StarNet Stock Plan (or any such change) such stockholder approval
was obtained within one (1) year of the date on which the StarNet Stock Plan (or
such change) was approved by StarNet's Board of Directors.
15
3.4.3 No Voting Arrangements or Piggyback Registration Rights.
Except as set forth on Schedule 3.4.3 to the StarNet Disclosure Schedule,
StarNet (a) is not a party to or bound by any voting agreements, voting trusts,
proxies, preemptive rights, rights of first refusal, rights of first offer or
other restrictions (other than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of its outstanding stock or
other securities or to the conversion of any shares of its capital stock in the
Merger ("StarNet Rights Agreements"), except for the Voting Agreement (and
related Irrevocable Proxies) referred to in Section 3.22, and (b) is not under
any obligation to register under the 1933 Act any of its presently outstanding
shares of stock or other securities or any stock or other securities that may be
subsequently issued.
3.5 No Conflict. Neither the negotiation, execution and delivery of
this Agreement or any of the StarNet Ancillary Agreements by StarNet, nor the
consummation of the Merger or the performance by StarNet of its obligations
under this Agreement or any StarNet Ancillary Agreement, has conflicted with or
will conflict with, or (with or without notice or lapse of time, or both) result
in a termination, breach, impairment or violation of: (i) any provision of the
StarNet Articles or Bylaws as currently in effect; (ii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to StarNet or any of its assets or properties; or (iii) any
instrument, agreement, contract, undertaking, understanding, letter of intent,
memorandum of understanding or commitment (whether verbal or in writing) or
confidentiality agreement to which StarNet is a party or by which StarNet or any
of its assets or properties are bound. Neither StarNet's entering into this
Agreement nor the consummation of the Merger will give rise to, or trigger the
application of, any rights of any third party that would come into effect upon
the effectiveness of the Merger. Except as set forth in Section 3.5 of the
StarNet Disclosure Schedule, the consummation of the Merger by StarNet will not
require the consent, release, waiver or approval of any third party other than
the approval of StarNet's stockholders.
3.6 Litigation. There is no action, claim, suit, arbitration,
mediation, proceeding, or investigation (a "Claim") pending against StarNet (or
to the best of StarNet's knowledge, against any officer, director, employee or
agent of StarNet in their capacity as such or relating to their employment,
services or relationship with StarNet) before any court, administrative agency
or arbitrator, there is no reasonable basis for any Claim against StarNet or, to
the best of StarNet's knowledge, any of such persons, and, to StarNet's
knowledge, no such Claim has been threatened. There is no judgment, decree,
injunction, rule or order of any governmental entity or agency, court or
arbitrator outstanding against StarNet. There is no reasonable basis for any
person, firm, corporation or other entity to assert a Claim against StarNet
based upon: (a) StarNet's entering into this Agreement or any StarNet Ancillary
Agreement or consummating the Merger or any of the transactions contemplated by
this Agreement or any StarNet Ancillary Agreement; (b) any confidentiality or
similar agreement entered into by StarNet; (c) any claim that StarNet has agreed
to sell or dispose all or any substantial portion of its assets or business to
any party other than Netopia, whether by way of merger, consolidation, sale of
assets or otherwise; or (d) any wrongful failure by StarNet to issue any of its
stock or other securities to any party.
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3.7 Taxes.
3.7.1 Payment; No Unpaid Taxes. StarNet has timely filed all
federal, state, local and foreign tax returns required to be filed by it, has
timely paid all taxes required to be paid by it in respect of all periods for
which returns have been filed. StarNet has established an adequate accrual or
reserve for the payment of all taxes payable in respect of the periods
subsequent to the periods covered by its most recent applicable tax returns
through the Closing (which accrual or reserve as of the Balance Sheet Date is
fully reflected on the Balance Sheet, has made all necessary estimated tax
payments, and has no liability for taxes in excess of the amount so paid or
accruals or reserves so established. StarNet is not delinquent in the payment of
any tax or in the filing of any tax returns taking into account extensions of
time to file, and no deficiencies for any tax of StarNet have been threatened,
claimed, proposed or assessed against StarNet, or, to StarNet's knowledge, any
of the officers, employees or agents of StarNet in their capacity as such.
StarNet has not received any notification that any material issues have been
raised by (or are currently pending) before the Internal Revenue Service or any
other taxing authority (including but not limited to any sales or use tax
authority) regarding StarNet and no tax return of StarNet has ever been audited
by the Internal Revenue Service or any state or local taxing agency or
authority. No tax liens have been filed against any assets of StarNet other than
liens for taxes not yet due and payable or for taxes that StarNet is contesting
in good faith through appropriate procedures. StarNet has not filed any election
under Section 341(f) of the Code. StarNet has withheld with respect to each of
its employees and independent contractors all taxes, including but not limited
to federal and state income taxes, FICA, Medicare, FUTA and other taxes,
required to be withheld, and paid such withheld amounts to the appropriate tax
authority within the time prescribed by law.
3.7.2 Definition. For the purposes of this Agreement, the
terms "tax" and "taxes" include all federal, state, local and foreign income,
alternative or add-on minimum income, gains, franchise, excise, property,
property transfer, sales, use, employment, license, payroll, ad valorem,
documentary, stamp, withholding, occupation, recording, value added or transfer
taxes, governmental charges, fees, customs duties, levies or assessments
(whether payable directly or by withholding), and, with respect to any such
taxes, any estimated tax, interest, fines and penalties or additions to tax and
interest on such fines, penalties and additions to tax.
3.8 StarNet Financial Statements; No Undisclosed Liabilities.
3.8.1 Financial Statements.
(a) StarNet has delivered to Netopia
(i) StarNet's unaudited balance sheet as of September 30, 1998 and StarNet's
unaudited statement of operations, statement of cash flows and statement
of changes in stockholders' equity for the fiscal year ended September 30,
1998, (ii) StarNet's unaudited balance sheet as of July 31, 1999 and
StarNet's unaudited statements of operations for the ten month period ended on
July 31, 1999, and (iii) StarNet's unaudited balance sheet (the "Balance Sheet")
as of August 31, 1999 (the "Balance Sheet Date"), and StarNet's unaudited
statements of operations for the eleven (11) month period ended on the Balance
Sheet Date (all such financial statements of StarNet and the notes thereto are
17
hereinafter collectively referred to as the "StarNet Financial Statements"). The
StarNet Financial Statements (x) are derived from and in accordance with the
books and records of StarNet, (y) fairly present the financial condition of
StarNet at the dates therein indicated and the results of operations for the
periods therein specified and (z) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods (except for the absence of notes to such unaudited financial
statements and except that StarNet's unaudited financial statements are subject
to normal year-end audit adjustments).
(b) Accounts Receivable. The accounts receivable
shown on the StarNet Balance Sheet arose in the ordinary course of business
and have been collected or are collectible in the book amounts thereof, less
the allowance for doubtful accounts and returns provided for in the Balance
Sheet. Allowances for doubtful accounts and returnsare adequate and have been
prepared in accordance with generally accepted accounting principles. The
accounts receivable of StarNet arising after the date of the StarNet Balance
Sheet and prior to the date hereof arose, and the accounts receivable
arising prior to the Effective Time will arise, in the ordinary course of
business and have been collected or are collectible in the book amounts
thereof, less allowances for doubtful accounts and returns determined in
accordance with generally accepted accounting principles. No agreement for
deduction or discount has been made with respect to any accounts receivable.
(c) Inventory. All inventory of StarNet
reflected in the StarNet Balance Sheet or thereafter acquired by StarNet
consists of items that are good and merchantable and of a quality and quantity
presently usable and salable in the ordinary course of business, except
to the extent of any allowance for obsolescence reflected in the StarNet Balance
Sheet. All such inventory is valued at the lower of cost or market, with cost
being determined by using the first-in, first-out method in accordance with
generally accepted accounting principles consistently applied, and in any case
represents and will represent not less than the estimated net realizable value
thereof. Since the Balance Sheet Date there has not been any revaluation by
StarNet of any of its assets, including, without limitation, writing down the
value of capitalized inventory other than in the ordinary course of business.
3.8.2 No Undisclosed Liabilities. StarNet has no debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, except for (i) those shown on the
Balance Sheet, (ii) those that have been incurred after the Balance Sheet Date
in the ordinary course of StarNet's business, consistent with its past
practices, and (iii) those incurred in connection with the execution of this
Agreement. All reserves established by StarNet and set forth in or reflected in
the Balance Sheet are reasonably adequate. At the Balance Sheet Date, there were
no material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975) which are not adequately provided for in the Balance Sheet as
required by said Statement No. 5.
3.9 Title to Properties. StarNet has good and marketable title to all
of its assets and properties shown on the Balance Sheet (but excluding those
sold or disposed of since the Balance Sheet Date in the ordinary course of
business, none of which are material), free and clear of all mortgages, deeds of
18
trust, security interests, pledges, liens, charges, or other encumbrances of any
kind (other than (i) liens for current taxes that are not yet due and payable,
(ii) statutory mechanics', materialmens' and similar liens imposed by operation
of law for obligations incurred by StarNet in the ordinary course of its
business that are not material in amount and are not currently due and payable),
(iii) such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties and (iv) liens securing debt which is reflected on the
Balance Sheet). The machinery, vehicles, equipment and other tangible personal
property owned or leased by StarNet or used in its business are in good
condition and repair, normal wear and tear excepted, and all leases of real or
personal property to which StarNet is a party are fully effective and afford
StarNet peaceful and undisturbed leasehold possession of the real or personal
property that is the subject of the lease. StarNet does not own any real
property.
3.10 Absence of Certain Changes. Except as set forth in Section 3.10 of
the StarNet Disclosure Schedule, since the Balance Sheet Date, StarNet has
conducted its business in the ordinary course consistent with past practice and
there has not been with respect to StarNet any:
(a) Material Adverse Change in the Business of StarNet;
(b) amendment or change in the articles of incorporation
or Bylaws of StarNet;
(c) incurrence, creation or assumption by StarNet of (i) any
mortgage, deed of trust, security interest, pledge, lien, charge or other
encumbrance of any kind on any of the assets or properties of StarNet; or (ii)
any obligation or liability or any indebtedness for borrowed money;
(d) offer, issuance or sale of any debt or equity securities
of StarNet, or any options, warrants or other rights to acquire from StarNet,
directly or indirectly, any debt or equity securities of StarNet;
(e) payment or discharge by StarNet of any security interest,
lien, claim, or encumbrance of any kind on any asset or property of StarNet, or
the payment or discharge of any liability that was not either shown on the
Balance Sheet or incurred in the ordinary course of StarNet's business after the
Balance Sheet Date in an amount not in excess of $25,000 for any single
liability to a particular creditor;
(f) purchase, license, sale, assignment or other disposition
or transfer, or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer, of any of the assets,
properties or goodwill of StarNet other than a purchase, license, sale,
assignment or other disposition or transfer (or agreement therefor) made in the
ordinary course of StarNet's business that does not involve any transfer of
title of, or an exclusive license to, or the creation of any encumbrance on, any
software or other proprietary technology of StarNet;
19
(g) damage, destruction or loss of any property or asset,
whether or not covered by insurance, having (or likely with the passage of time
to have) a Material Adverse Effect on StarNet;
(h) declaration, setting aside or payment of any dividend on,
or the making of any other distribution in respect of, the capital stock of
StarNet, any split, combination or recapitalization of the capital stock of
StarNet or any direct or indirect redemption, purchase or other acquisition of
any capital stock of StarNet or any change in any rights, preferences,
privileges or restrictions of any outstanding security of StarNet;
(i) change or increase in the compensation payable or to
become payable to any of the officers, directors, or employees of StarNet, or
any bonus or pension, insurance or other benefit payment or arrangement
(including without limitation stock awards, stock option grants, stock
appreciation rights or stock option grants) made to or with any of such
officers, employees or agents except in connection with normal employee salary
or performance reviews or otherwise in the ordinary course of StarNet's
business;
(j) change with respect to the management, supervisory or
other key personnel of StarNet;
(k) obligation or liability incurred by StarNet to any of its
officers, directors or stockholders except for normal and customary compensation
and expense allowances payable to officers in the ordinary course of StarNet's
business;
(l) making by StarNet of any loan, advance or capital
contribution to, or any investment in, any officer, director or stockholder of
StarNet or any firm or business enterprise in which any such person had a direct
or indirect material interest at the time of such loan, advance, capital
contribution or investment;
(m) entering into, amendment of, relinquishment, termination
or non-renewal by StarNet of any StarNet Agreement (as defined in Section 3.11
hereof) other than in the ordinary course of its business or any written or oral
notice by the other party thereto of any material problems with StarNet's
services or performance under such StarNet Agreement or its desire to so amend,
relinquish, terminate or not renew any such StarNet Agreement;
(n) assertion by any subscriber(s) and/or customer(s) of
StarNet of any complaint regarding StarNet's services or products;
(o) material change in the manner in which StarNet extends
discounts, credits or warranties to customers;
(p) entering into by StarNet of any transaction, contract or
agreement that by its terms requires or contemplates a current and/or future
financial commitment, expense (inclusive of overhead expense) or obligation on
the part of StarNet involving in excess of $25,000 or that is not entered into
in the ordinary course of StarNet's business, or the conduct of any business or
operations other than in the ordinary course of StarNet's business;
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(q) any license, transfer or grant of a right under any
StarNet IP Rights (as defined in Section 3.13 below), other than those licensed,
transferred or granted in the ordinary course of StarNet's business consistent
with its past practices; or
(r) any agreement or arrangement made by StarNet to take any
action which, if taken before the Agreement Date, would have made any
representation or warranty of StarNet set forth in Article 3 of this Agreement
untrue or incorrect as of the date when made.
3.11 Contracts and Commitments/Licenses and Permits. For purposes of
this Agreement, "StarNet Agreement" means any of the following:
(a) any website hosting, website linking, content or data
sharing, data feed, information exchange, advertising, fee sharing, lead or
customer referral, commerce, co-branding, framing, service, order or transaction
processing or similar agreement;
(b) any distributor, OEM (Original Equipment Manufacturer),
VAR (Value Added Reseller), sales representative or similar agreement under
which any third party is authorized to sell, sublicense, lease, distribute,
market or take orders for, any product or technology of StarNet;
(c) any continuing contract for the future purchase, sale,
license, provision or manufacture of products, material, supplies, equipment or
services requiring payment to or from StarNet in an amount in excess of $25,000
per annum which is not terminable on ninety (90) or fewer days' notice without
cost or other liability to StarNet;
(d) any contract or commitment in which StarNet has granted or
received most favored customer pricing provisions or exclusive marketing or
on-line distribution rights relating to any product or service, group of
products or services, market or geographic territory;
(e) any contract providing for the development of software,
website content or other technology or intellectual property for StarNet, or the
license of any software, website content or other technology or intellectual
property to StarNet, which software, website content or other technology or
intellectual property is used or incorporated (or is contemplated by StarNet to
be used or incorporated) (i) in any product currently sold, licensed, leased,
distributed or marketed by StarNet or (ii) to provide any service currently
provided or marketed by StarNet (other than software generally available to the
public at a per copy license fee of less than $2,000 per copy);
(f) any joint venture or partnership contract or agreement or
other agreement which has involved or is reasonably expected to involve a
sharing of profits, expenses or losses with any other party;
(g) any contract or commitment for or relating to the
employment of any officer, employee or consultant of StarNet or any other type
of contract or understanding with any officer, employee or consultant of StarNet
that is not immediately terminable by StarNet without cost or other liability;
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(h) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a leasing transaction of a
type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(i) any lease or other agreement under which StarNet is lessee
of or holds or operates any items of tangible personal property or real property
owned by any third party and under which payments to such third party exceed
$25,000 per annum;
(j) any agreement or arrangement for the sale, licensing or
leasing of any assets, properties, products, services or rights having a value
in excess of $25,000;
(k) any agreement that restricts StarNet from engaging in any
aspect of its business, from participating or competing in any line of business
or market or that restricts StarNet from engaging in any business in any market
or geographic area;
(l) any StarNet IP Rights Agreement (as defined in
Section 3.13);
(m) any agreement relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any shares of capital
stock or other securities of StarNet or any options, warrants or other rights to
purchase or otherwise acquire any such shares of stock, other securities or
options, warrants or other rights therefor (or, in the case of any StarNet
Option, the StarNet Stock Plan, as such may be amended, and the forms of StarNet
Option agreements used by StarNet thereunder);
(n) consulting or similar agreement under which StarNet
provides any advice or services to a third party for an annual compensation to
StarNet of $25,000 per year or more;
(o) any contract with or commitment to any labor union;
(p) any contract or arrangement under which StarNet has made
any commitment to develop any new technology, to deliver any software currently
under development or to enhance or customize any software;
(q) any other agreement, contract, commitment or instrument
that is material to the business of StarNet or that involves a future commitment
by StarNet in excess of $25,000; and
(r) any Governmental Permit (as defined in Section 3.14.4).
Schedule 3.11 to the StarNet Disclosure Schedule sets forth a
list of each of the foregoing (i) written contracts, agreements, commitments or
other instruments to which StarNet is a party or to which StarNet or any of its
assets or properties is bound and (ii) licenses and permits held by StarNet,
that in each case are either in an amount in excess of $25,000 or are otherwise
material to the Business of StarNet (collectively, "StarNet Material
Agreements"). A true and complete copy of each StarNet Material Agreement
required by subsections (a) through (q) of this Section to be listed on Schedule
3.11 to the StarNet Disclosure Schedule and a copy of each Governmental Permit
required by subsection (r) of this Section to be listed on Schedule 3.11 to the
StarNet Disclosure Schedule has been delivered to Netopia's counsel.
22
3.12 No Breach or Default; No Consent Required; No Restrictions. As of
the date hereof, StarNet is not in material breach or violation of, or in
default under: (a) any StarNet Agreement; or (b) any other contract or agreement
(whether written or oral) binding on StarNet or to which StarNet is a party, the
breach, violation or default of which by StarNet could (i) adversely affect the
ability of StarNet or Netopia to effect the Merger, (ii) result in liability to
StarNet, the Surviving Corporation or Netopia as a result of consummation of the
Merger and/or the performance of their respective obligations under this
Agreement and such party's ancillary agreements or (iii) result in any liability
that would be material to StarNet (collectively, a "Significant Agreement").
StarNet does not have any liability for renegotiation of government contracts or
subcontracts, if any. Except as set forth in Schedule 3.12 to the StarNet
Disclosure Schedule, no consent or approval of any third party is required to
ensure that, following the Effective Time, any StarNet Agreement will continue
to be in full force and effect without any breach or violation thereof caused by
virtue of the Merger or by any other transaction called for by this Agreement or
any StarNet Ancillary Agreement. StarNet is not a party to, and no asset or
property of StarNet is bound or affected by, any judgment, injunction, order,
decree, contract, covenant or agreement (noncompete or otherwise) that restricts
or prohibits (or purports to restrict or prohibit) StarNet from freely engaging
in any business now conducted by any of them or from competing anywhere in the
world (including without limitation any contracts, covenants or agreements
restricting the geographic area in which StarNet may sell, license, market,
distribute or support any products or technology or provide services, or
restricting the markets, customers or industries that StarNet may address in
operating their respective businesses), or includes any grants by StarNet of
exclusive licenses. No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would reasonably
be expected to, (a) result in a violation or breach of any of the provisions of
any StarNet Agreement, (b) give any third party (i) the right to declare a
default or exercise any remedy under any StarNet Agreement, (ii) the right to a
rebate, chargeback, penalty or change in delivery schedule under any StarNet
Agreement, (iii) the right to accelerate the maturity or performance of any
obligation of StarNet under any StarNet Agreement, or (iv) the right to cancel,
terminate or modify any StarNet Agreement. StarNet has not received any notice
or other communication regarding any actual or possible violation or breach by
StarNet or the other party thereto of, or default by StarNet or the other party
thereto under, any StarNet Agreement.
3.13 Intellectual Property.
3.13.1 StarNet owns, or has the valid right or license to use,
possess, sell or license, all Intellectual Property (as defined below) necessary
or required for or used in the conduct of the business of StarNet as presently
conducted and as presently proposed to be conducted (such Intellectual Property
being hereinafter collectively referred to as the "StarNet IP Rights"), and such
rights to use, possess, sell or license are sufficient for such conduct of such
business. As used herein, the term "Intellectual Property" means, collectively,
all worldwide industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
registrations and applications therefor, trade dress rights, trade names,
23
service marks, service xxxx registrations and applications therefor, Internet
domain names, Internet and World Wide Web URLs or addresses, copyrights,
copyright registrations and applications therefor, mask work rights, mask work
registrations and applications therefor, franchises, licenses, inventions, trade
secrets, know-how, customer lists, supplier lists, proprietary processes and
formulae, software source code and object code, algorithms, net lists,
architectures, structures, screen displays, layouts, inventions, development
tools, designs, blueprints, specifications, technical drawings (or similar
information in electronic format) and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
programmers' notes, memoranda and records. Schedule 3.13 to the StarNet
Disclosure Schedule lists each item of Intellectual Property owned, and each
item of Intellectual Property licensed (excluding licensed "off the shelf" or
licensed "shrink-wrapped" software), by StarNet.
3.13.2 Neither the execution, delivery and performance of this
Agreement or the Certificate of Merger, nor the consummation of the Merger and
the other transactions contemplated hereby and/or by StarNet Ancillary
Agreements will (a) constitute a breach of or default under any instrument,
contract, license or other agreement governing any StarNet IP Right to which
StarNet is a party (collectively, the "StarNet IP Rights Agreements"), (b) cause
the forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any StarNet IP Right or (c) impair the right of StarNet or the
Surviving Corporation to use, possess, sell or license any StarNet IP Right or
portion thereof. There are no royalties, honoraria, fees or other payments
payable by StarNet to any third person by reason of the ownership, use,
possession, license, sale, marketing, advertising or disposition of any StarNet
IP Rights by StarNet.
3.13.3 Neither the manufacture, marketing, license, sale,
furnishing or intended use of any product or service currently licensed,
utilized, sold, provided or furnished by StarNet or currently under development
by StarNet violates or will violate any license or agreement between StarNet and
any third party or infringes, will infringe or misappropriates any Intellectual
Property Right of any other party; and there is no pending or, to the knowledge
of StarNet, threatened claim or litigation contesting the validity, ownership or
right of StarNet to use, possess, sell, market, advertise, license or dispose of
any StarNet IP Right, nor is there any reasonable basis for any such claim, nor
has StarNet received any notice asserting that any StarNet IP Right or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor is there any basis for any such
assertion.
3.13.4 No employee, consultant or independent contractor of
StarNet: (a) is in material violation of any term or covenant of any employment
contract, patent disclosure agreement, invention assignment agreement,
non-disclosure agreement, noncompetition agreement or any other contract or
agreement with any other party by virtue of such employee's, consultant's, or
independent contractor's being employed by, or performing services for, StarNet
using trade secrets or proprietary information of others, or that would be
reasonably likely to have a Material Adverse Effect on StarNet; or (b) has
developed any technology, software or other copyrightable, patentable, or
otherwise proprietary work for StarNet that is subject to any agreement under
which such employee, consultant or independent contractor has assigned or
otherwise granted to any third party any rights (including without limitation
Intellectual Property) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work or any Intellectual
Property related thereto. The employment of any employee of StarNet or the use
by StarNet of the services of any consultant or independent contractor does not
subject StarNet to any liability to any third party.
24
3.13.5 StarNet has taken all necessary and appropriate steps
to protect, preserve and maintain the secrecy and confidentiality of the StarNet
IP Rights and all of StarNet's ownership interests and proprietary rights
therein. All officers, employees and consultants of StarNet having access to
proprietary information of StarNet, its customers or business partners, have
executed and delivered to StarNet an agreement regarding the protection of such
proprietary information and the assignment of inventions to StarNet; and copies
of the form of all such agreements have been delivered to Netopia's counsel.
StarNet has secured valid and enforceable written assignments from all
consultants, contractors and employees who were involved in, or who contributed
to, the creation or development of any StarNet IP Rights, of the rights to such
contributions that StarNet does not already own by operation of law. No current
or former employee, officer, director, consultant or independent contractor of
StarNet has any right, license, claim or interest whatsoever in or with respect
to any StarNet IP Rights.
3.13.6 Schedule 3.13.6 to the StarNet Disclosure Schedule
contains a complete list of (i) all worldwide registrations of any patents,
copyrights, mask works, trademarks, service marks, Internet domain names or
Internet or World Wide Web URLs or addresses with any governmental or
quasi-governmental authority or other body, (ii) all applications,
registrations, filings and other formal actions made or taken pursuant to
federal, state and foreign laws by StarNet to secure, perfect or protect its
interest in StarNet IP Rights, including, without limitation, all patent
applications, copyright applications, and applications for registration of
trademarks and service marks, (iii) all unregistered copyrights, trademarks and
service marks. All patents, and all registered trademarks, service marks,
Internet domain names, Internet or World Wide Web URLs or addresses and
copyrights held by StarNet are valid, enforceable and subsisting.
3.13.7 Schedule 3.13.7 to the StarNet Disclosure Schedule
contains a complete list of (i) all licenses, sublicenses and other agreements
as to which StarNet is a party and pursuant to which any person or entity is
authorized to use any StarNet IP Rights, and (ii) all licenses, sublicenses and
other agreements as to which StarNet is a party and pursuant to which StarNet is
authorized to use any third party patents, trademarks, Internet domain names,
Internet or World Wide Web URLs or addresses, copyrights, or other Intellectual
Property right, including but not limited to software ("Third Party IP Rights")
which would otherwise be infringed by, or are incorporated in, or form a part
of, any product or service sold, licensed, distributed, provided or marketed by
StarNet. Any use by StarNet or its employees of any Intellectual Property right
of a third party, or any third party software, is pursuant to valid license or
similar agreements, and StarNet does not have any liability for unauthorized use
of third party software.
3.13.8 Neither StarNet nor any other party acting on its or
their behalf, has disclosed or delivered to any party, or permitted the
disclosure or delivery to any escrow agent or other party, of any StarNet Source
Code (as defined below). No event has occurred, and no circumstance or condition
25
exists, that (with or without notice or lapse of time) will, or would reasonably
be expected to, result in the disclosure or delivery to any party of any StarNet
Source Code (as defined below). Schedule 3.13.8 of the StarNet Disclosure
Schedule identifies each contract, agreement and instrument (whether written or
oral) pursuant to which StarNet has deposited, or is or may be required to
deposit, with an escrowholder or any other party, any StarNet Source Code and
further describes whether the execution of this Agreement or the consummation of
the Merger or any of the other transactions contemplated hereby, in and of
itself, would reasonably be expected to result in the release from escrow of any
StarNet Source Code. As used in this Section 3.13.8, "StarNet Source Code"
means, collectively, any software source code, or any material portion or aspect
of the software source code, or any material proprietary information or
algorithm contained in or relating to any software source code, of any StarNet
IP Rights or any other product marketed by StarNet.
3.13.9 To StarNet's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any StarNet IP Rights or any
Intellectual Property Right of StarNet by any third party, including any
employee or former employee of StarNet. Except with respect to certain OEM
(Original Equipment Manufacturer) agreements, as set forth in Schedule 3.13.9,
StarNet has not agreed to indemnify any person for any infringement of any
Intellectual Property of any third party by any product or service that has been
sold, licensed, leased, supplied, marketed, distributed, or provided by StarNet.
3.13.10 All software developed by StarNet and licensed by
StarNet to customers and all other products manufactured, sold, licensed, leased
or delivered by StarNet to customers and all services provided by StarNet to
customers on or before the Closing Date conform in all material respects to
applicable contractual commitments, express and implied warranties, product
specifications and product documentation and to any representations provided to
customers, and StarNet does not have any liability (and, to StarNet's knowledge,
there is no reasonable basis for any present or future Claim against StarNet
giving rise to any liability) for replacement or repair thereof or other damages
in connection therewith in excess of any reserves therefor reflected on the
Balance Sheet. Since January 1, 1999, StarNet has not had any of its respective
products returned by a purchaser thereof except for normal warranty returns
consistent with past history and those returns that would not result in a
reversal of any material amount of revenue recognized by StarNet on any of its
financial statements from such purchases. StarNet is not under any liability or
obligation, and no such outstanding claim has been made, with respect to the
return of inventory or products in the possession of customers, licensees,
distributors, retailers, or end users.
3.13.11 All of the software developed, owned, licensed
(excluding licensed "shrink wrapped" or licensed "off the shelf" software)
and/or marketed or distributed by StarNet or owned or developed by StarNet and
utilized in connection with products and services of StarNet is Year 2000
Compliant (as defined below). "Year 2000 Compliant" means, as applied to
software, that: (i) such software will operate and correctly store, represent
and process (including sort) all dates (including single and multi-century
formulas and leap year calculations), such that material errors will not occur
when the date being used is in the Year 2000, or in a year preceding or
following the Year 2000; (ii) such software has been written and tested to
support numeric and date transitions from the twentieth century to the
twenty-first century, and back (including without limitation all calculations,
aging, reporting, printing, displays, reversals, disaster and vital records
recoveries) without material error, corruption or impact to current and/or
26
future operations; and (iii) such software will function without material error
or interruption related to any date information, specifically including errors
or interruptions from functions which may involve date information from more
than one century.
3.14 Compliance with Laws.
3.14.1 StarNet has complied, and is now and at the Closing
Date will be in compliance with, all applicable federal, state, local or foreign
laws, ordinances, regulations, and rules, and all orders, writs, injunctions,
awards, judgments, and decrees applicable to it or to its assets, properties,
and business (and any regulations promulgated thereunder) (collectively,
"Applicable Law"), except where non-compliance with Applicable Laws would result
in liability (individually or in the aggregate) of less than $25,000.
3.14.2 StarNet has at all times made all consumer disclosures
required by Applicable Law and none of the disclosures made to consumers using
products or services of StarNet have been inaccurate, misleading or deceptive.
3.14.3 StarNet has at all times been in compliance with
Applicable Laws relating to the privacy of users of the products and services of
StarNet.
3.14.4 StarNet holds all permits, licenses and approvals from,
and has made all filings with, government (and quasi-governmental) agencies and
authorities, that are necessary for StarNet to conduct its present business
without any violation of Applicable Law ("Governmental Permits"), except where
any non-compliance with Governmental Permits would result in liability
(individually or in the aggregate) of less than $25,000, and all such
Governmental Permits are in full force and effect. StarNet has not received any
notice or other communication from any Governmental Authority (or
quasi-governmental authority) regarding (a) any actual or possible violation of
law or any Governmental Permit or any failure to comply with any term or
requirement of any Governmental Permit, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Permit.
3.14.5 Neither StarNet nor, to StarNet's knowledge, any
director, officer, agent or employee of StarNet, has, for or on behalf of
StarNet, (i) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, or (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended.
3.15 Certain Transactions and Agreements. To StarNet's knowledge, none
of the officers, directors, employees or stockholders of StarNet, nor any member
of their immediate families, has any direct or indirect ownership interest in
any firm or corporation that competes with, or does business with, or has any
contractual arrangement with, StarNet (except with respect to any interest in
less than one percent (1%) of the stock of any corporation whose stock is
publicly traded). None of said officers, directors, employees or stockholders or
27
any member of their immediate families, is a party to, or otherwise interested
in, any contract or informal arrangement with StarNet, except for normal
compensation for services as an officer, director or employee thereof that have
been disclosed to Netopia and except for agreements related to the purchase of
the stock of StarNet by, or the grant of StarNet Options to, such persons. None
of said officers, directors, employees, stockholders or family members has any
interest in any property, real or personal, tangible or intangible (including
but not limited to any StarNet IP Rights or any other Intellectual Property)
that is used in, or that pertains to, the business of StarNet, except for the
normal rights of a stockholder.
3.16 Employees, ERISA and Other Compliance.
3.16.1 StarNet is in compliance in all material respects with
all applicable laws, agreements and contracts relating to employment, employment
practices, immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters. A list of all
employees, officers and consultants of StarNet and their current title and/or
job description and compensation is set forth on Schedule 3.16.1 to the StarNet
Disclosure Schedule. StarNet does not have any employment contracts or
consulting agreements or contracts with a professional employer organization or
other entity which provides employee benefits to individuals that provide
services to StarNet currently in effect that are not terminable at will (other
than agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
3.16.2 StarNet (i) now is not, nor has ever been, subject to a
union organizing effort, (ii) is not subject to any collective bargaining
agreement with respect to any of its employees, (iii) is not subject to any
other contract, written or oral, with any trade or labor union, employees'
association or similar organization or (iv) does not have any current labor
disputes. StarNet has good labor relations, and has no knowledge of any facts
indicating that the consummation of the Merger or any of the other transactions
contemplated hereby will have a material adverse effect on such labor relations,
and has no knowledge that any of its key employees intends to leave their
employ. To StarNet's knowledge, all of the employees of StarNet are legally
permitted to be employed by StarNet in the United States of America in their
current job capacities. A list of all employees of StarNet is set forth on
Schedule 3.16.2 to the StarNet Disclosure which provides, with respect to each
employee, information as to that employee's citizenship, and, if not a citizen
of the United States, the status and duration of that employee's visa and/or
work permit, if any, providing a legal basis for employment.
3.16.3 StarNet does not have any pension plan which
constitutes, or has since the enactment of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") constituted, a "multiemployer plan"
as defined in Section 3(37) of ERISA. No pension plan of StarNet is subject to
Title IV of ERISA.
3.16.4 (a) Schedule 3.16.4 to the StarNet Disclosure Schedule
lists all employment and consulting agreements, all severance agreements,
pension, retirement, disability, medical, dental or other health plans, life
insurance or other death benefit plans, profit sharing, deferred compensation
agreements, stock, option, bonus or other incentive plans, vacation, sick,
holiday or other paid leave plans, severance plans or other similar employee
28
benefit plans maintained by StarNet or trade or business which is treated as a
single employer with StarNet within the meaning of Code Section 414(b), (c), (m)
or (o) (each an "ERISA Affiliate") (the "StarNet Benefit Arrangements"),
including without limitation all "employee benefit plans" as defined in Section
3(3) of ERISA. Except as disclosed in Schedule 3.16.4 to the StarNet Disclosure
Schedule, each of the Employee Plans, and its operation and administration, is
in compliance in all material respects with each of the respective Employee
Plans' terms and with all applicable federal, state, local and other
governmental laws and ordinances, orders, rules and regulations, including the
requirements of ERISA and the Code. Except as disclosed in Schedule 3.16.4 to
the StarNet Disclosure Schedule, all such Employee Plans that are "employee
pension benefit plans" (as defined in Section 3(2) of ERISA) which are intended
to qualify under Section 401(a) of the Code have received favorable
determination opinion, notification or advisory letters with respect to such
plans that such plans comply with the Tax Reform Act of 1986 or have remaining a
period of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a letter and make any amendments necessary to obtain a
favorable determination as to the qualified status of each such Employee Plan.
In addition, StarNet has never been a participant in any "prohibited
transaction," within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which
StarNet sponsors as employer or in which StarNet participates as an employer,
which would impose a material penalty on StarNet or which was not otherwise
exempt pursuant to Section 408 of ERISA (including, but not limited to, any
individual exemption granted under Section 408(a) of ERISA), or which could
result in an exercise tax under the Code. Except as disclosed in Schedule 3.16.4
to the StarNet Disclosure Schedule, no employee of StarNet and no person subject
to any StarNet health plan has made medical claims through such health plan
during the twelve months preceding the date hereof for more than $25,000 in the
aggregate.
(b) StarNet has delivered to Netopia or its counsel a
complete and correct copy of each StarNet Benefit
Arrangement.
(c) StarNet has timely filed and delivered to Netopia
and its counsel the most recent annual report (Form
5500) for each StarNet Benefit Arrangement that is an "employee benefit plan" as
defined under ERISA.
(d) All contributions due from StarNet with respect
to any of StarNet Benefit Arrangements have been made
or have been accrued on StarNet's financial statements, (including without
limitation the StarNet Financial Statements) and no further contributions will
be due or will have accrued thereunder as of the Closing Date.
3.16.5 There has been no amendment to, written interpretation
or announcement (whether or not written) by StarNet relating to, or change in
employee participation or coverage under, any StarNet Benefit Arrangement that
would increase materially the expense of maintaining such StarNet Benefit
Arrangement above the level of the expense incurred in respect thereof for
StarNet's fiscal year ended September 30, 1998. Each StarNet Benefit Arrangement
may be terminated effective immediately, and any benefits distributed
thereunder, without additional liability for premium or other payments (other
than benefit payments in the normal course of administration) and without
causing liquidation, surrender or any other fees or charges to be imposed on the
StarNet Benefit Arrangement, StarNet, or any participant or beneficiary of the
terminating StarNet Benefit Arrangement.
29
3.16.6 The group health plans (as defined in Section 4980B(g)
of the Code) that benefit employees of StarNet are in compliance, in all
material respects, with (a) the continuation coverage requirements of Section
4980B of the Code and Sections 601 through 608 of ERISA, (b) the Americans with
Disabilities Act of 1990, as amended, and (c) the Family Medical and Leave Act
of 1993, as amended, and the regulations thereunder, with respect to any of
StarNet Benefit Arrangements, covered employees, or qualified beneficiaries.
3.16.7 No benefit payable or which may become payable by
StarNet pursuant to any StarNet Benefit Arrangement or as a result of or arising
under this Agreement or the Certificate of Merger will constitute an "excess
parachute payment" (as defined in 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. StarNet is
not a party to any: (a) agreement with any officer or other key employee of
StarNet (i) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving StarNet in
the nature of the Merger or any of the other transactions contemplated by this
Agreement, the Certificate of Merger or any StarNet Ancillary Agreement, (ii)
providing any term of employment or compensation guarantee, or (iii) providing
severance benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment; or (b)
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 the Merger or any of the other transactions contemplated by
this Agreement, the Certificate of Merger or any StarNet Ancillary 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, the Certificate of Merger or
any StarNet Ancillary Agreement.
3.17 Corporate Documents. StarNet has made available to Netopia for
examination true and complete copies of all documents and information listed in
the StarNet Disclosure Schedule or in any schedule thereto or in any other
exhibit or schedule called for by this Agreement which have been requested by
Netopia's legal counsel, including, without limitation, the following: (a)
copies of the certificate of incorporation, bylaws or other organizational
agreements of StarNet as currently in effect; (b) the minute books containing
all records of all proceedings, consents, actions, and meetings of the
stockholders, board of directors and any committees thereof of StarNet; (c) the
stock ledger and journal reflecting all issuances and transfers of the stock of
StarNet; (d) all permits, orders, and consents issued by, and filings by StarNet
with, any regulatory agency with respect to StarNet, or any securities of
StarNet, and all applications for such permits, orders, and consents; and (e)
all the StarNet Material Agreements.
3.18 No Brokers. Neither StarNet nor any affiliate of StarNet is
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or the Certificate of Merger or in connection with
the Merger or any other transaction contemplated by this Agreement, and Netopia
will not incur any liability, either directly or indirectly, to any such
30
investment banker, broker, finder or similar party as a result of, any act or
omission of StarNet, any of its employees, officers, directors, stockholders,
agents or affiliates (except as provided in Section 12.7).
3.19 Books and Records.
3.19.1 The books, records and accounts of StarNet (a) are in
all material respects true, complete and correct, (b) have been maintained in
accordance with reasonable business practices and customary internal controls
procedures on a basis consistent with prior years, and (c) accurately and fairly
reflect the transactions and dispositions of the assets of StarNet.
3.19.2 StarNet has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (a)
transactions are executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements, and
(ii) to maintain accountability for assets; and (c) the amount recorded for
assets on the books and records of StarNet is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
3.20 Insurance. During the prior two years, StarNet has maintained, and
now maintains, policies of insurance and bonds of the type and in amounts that
are reasonably adequate and are customarily carried by persons conducting
businesses or owning assets similar in type and size to those of StarNet,
including without limitation all legally required workers' compensation
insurance and errors and omissions, casualty, fire and general liability
insurance. There is no material claim 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 timely paid and StarNet is otherwise in
compliance with the terms of such policies and bonds. StarNet has no knowledge
of any threatened termination of, or material premium increase with respect to,
any of such policies. All policies of insurance now held by StarNet are set
forth in Schedule 3.20 to StarNet Disclosure Schedule, together with the name of
the insurer under each policy, the type of policy, the policy coverage amount
and any applicable deductible.
3.21 Environmental Matters.
3.21.1 StarNet is in compliance with all applicable
Environmental Laws (as defined below), which compliance includes the possession
by StarNet of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. StarNet has not received any written notice or other written
communication, whether from a governmental body, citizens groups, employee or
otherwise, that alleges that StarNet is not in compliance with any Environmental
Law, and there are no circumstances that may prevent or interfere with the
compliance by StarNet with any current Environmental Law in the future. No
current or prior owner of any property leased or controlled by StarNet has
received any notice or other communication (in writing or otherwise), whether
from a government body, citizens group, employee or otherwise, that alleges that
31
such current or prior owner or StarNet is not in compliance with any
Environmental Law. All governmental authorizations currently held by StarNet
pursuant to any Environmental Law (if any) are identified in Schedule 3.21 of
StarNet Disclosure Schedule. StarNet does not have any liability under any
Environmental Law and has not handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could form the basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
StarNet giving rise to any liability for damage to any site, location, or body
of water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental Law. All
properties and equipment used in the business of StarNet has been free of
asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and other Material of
Environmental Concern.
3.21.2 For purposes of this Section 3.21: (i) "Environmental
Law" means any present federal, California, or local California statute, law, or
regulation relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Material of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law.
3.22 Voting Agreement; Irrevocable Proxies. Holders of at least 60% of
the issued and outstanding shares of StarNet Common Stock and Preferred Stock
have agreed in writing to vote for the approval and adoption of this Agreement,
the Merger and the other transactions contemplated hereby (and to vote against
proposals conflicting or inconsistent with this Agreement and the Merger)
pursuant to the voting agreement attached hereto in the form of Exhibit G
("Voting Agreement") and pursuant to Irrevocable Proxies in the form attached as
Exhibit A thereto ("Irrevocable Proxies").
3.23 Votes Required. The affirmative vote of the holders of at least
60% of the shares of StarNet Common Stock and shares of StarNet Preferred Stock
outstanding on the Record Date (as defined below), voting together as one class,
is the only vote of the holders of any of the shares of StarNet's capital stock
necessary to approve this Agreement and the other transactions contemplated
hereby. As used in this Section 3.23, the term "Record Date" means the record
date for determining those stockholders of StarNet who are entitled to vote at
the StarNet Stockholder Vote.
3.24 Board Approval. The Board of Directors of StarNet has unanimously
(i) approved and declared advisable this Agreement, the Merger and the other
transactions contemplated hereby, (ii) determined that the Merger is in the best
interests of the stockholders of StarNet and is on terms that are fair to such
stockholders and (iii) voted to submit this Agreement, the Merger and the other
32
transactions contemplated hereby to the vote and approval of StarNet's
stockholders.
3.25 No Existing Discussions. Neither StarNet nor any director,
officer, stockholder, employee or agent of StarNet is engaged, directly or
indirectly, in any discussions or negotiations with any third party relating to
any Alternative Transaction (as defined in Section 5.11) or in violation of any
agreement to which StarNet or its assets are bound relating to any Alternative
Transaction.
3.26 Disclosure.
(a) Neither this Agreement, its exhibits and schedules and the
StarNet Disclosure Schedule, nor any of the certificates or documents to be
delivered by StarNet to Netopia under this Agreement, or any other documents
delivered by StarNet to Netopia regarding StarNet's business (past or present),
or activities taken together, contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which such
statements were made, not misleading.
(b) None of the information supplied or to be supplied by or
on behalf of StarNet that relates to StarNet for inclusion in the Information
Statement will, as of the date the Information Statement is first sent to the
stockholders of StarNet in connection with the StarNet Stockholders Vote,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading; provided, that StarNet shall not be responsible for any statement,
information or omission relating to Netopia or Sub or any other information
supplied or to be supplied on behalf of Netopia.
3.27 Bank Accounts and Insurance. Section 3.27 of the StarNet
Disclosure Schedule sets forth the names and locations of all banks, trusts,
companies, savings and loan associations and other financial institutions at
which StarNet maintains deposit account or other accounts of any nature, the
names of all persons then authorized to draw on, or make withdrawals from, such
accounts and the amount of any funds then on deposit therein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NETOPIA AND SUB
Netopia and Sub hereby represent and warrant to StarNet that, except as
set forth in the letter addressed to StarNet from Netopia and dated as of the
Agreement Date which has been delivered by Netopia to StarNet concurrently
herewith (the "Netopia Disclosure Schedule"), each of the following
representations, warranties and statements in this Article 4 are true and
correct as of the Agreement Date and will be true and correct on and as of the
Closing Date:
4.1 Organization and Good Standing. Netopia is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
33
its properties and to carry on its business as now conducted and as proposed to
be conducted, except where the failure to have such power and authority would
not, individually or in the aggregate, have a Material Adverse Effect on
Netopia, and is qualified to transact business, and is in good standing, in each
jurisdiction in which its failure to be so qualified would have a Material
Adverse Effect on Netopia's Business. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as proposed to be conducted, except
where the failure to have such power and authority would not, individually or in
the aggregate, have a Material Adverse Effect on Sub, and is qualified to
transact business, and is in good standing, in each jurisdiction in which its
failure to be so qualified would have a Material Adverse Effect on Sub's
Business. Netopia owns all of the issued and outstanding stock of Sub.
4.2 Power, Authorization and Validity.
4.2.1 Power and Authority. Netopia has all requisite corporate
power, capacity and authority to enter into, execute, deliver and perform its
obligations under, this Agreement and all the Netopia Ancillary Agreements and
to issue the shares of Netopia Common Stock and Netopia Options in the Merger in
accordance with this Agreement. The execution, delivery and performance of this
Agreement and each of the Netopia Ancillary Agreements by Netopia have been duly
and validly approved and authorized by all necessary corporate action of
Netopia's Board of Directors in compliance with applicable law (including
without limitation the DGCL) and Netopia's Certificate of Incorporation and
Bylaws, each as amended. Sub has all requisite corporate power, capacity and
authority to execute, deliver and perform its obligations under this Agreement
and all the Sub Ancillary Agreements. The execution, delivery and performance of
this Agreement and each of the Sub Ancillary Agreements by Sub have been duly
and validly approved and authorized by all necessary corporate action of Sub's
Board of Directors and sole stockholder Sub in compliance with applicable law
(including without limitation the DGCL) and Sub's Certificate of Incorporation
and Bylaws, each as amended.
4.2.2 No Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency, commission or other Governmental Authority or any other
person or entity, governmental or otherwise, is necessary or required to be made
or obtained by Netopia or Sub to enable Netopia and Sub to lawfully execute and
deliver, enter into, and to perform their respective obligations under, this
Agreement, the Netopia Ancillary Agreements or the Sub Ancillary Agreements,
respectively, and for Sub to consummate the Merger, except for: (a) the filing
of the Certificate of Merger with the Delaware Secretary of State (and
comparable filings with the California Secretary of State) and any such further
documents as may be required under the DGCL or CCSL to effect the Merger; (b)
the filing by Netopia with the SEC or any state securities law authorities of
any notices or filings required in connection with the exemptions from the
registration or qualification requirements of the 1933 Act and/or applicable
state securities laws which Netopia relies on in issuing shares of Netopia
Common Stock pursuant to this Agreement; (c) the filing by Netopia of such
reports and information with the SEC under the 1934 Act and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection
with this Agreement, the Merger and the other transactions contemplated by this
Agreement; (d) such other filings as may be required by the Nasdaq Stock Market
with respect to the Merger and the other transactions contemplated by this
Agreement, and the issuance of the shares of Netopia Common Stock and the
Netopia Options to be issued by Netopia in the Merger; and (e) such filings, as
may be required under the HSR Act.
34
4.2.3 Enforceability. This Agreement and the Netopia Ancillary
Agreements are, or when executed by Netopia will be, assuming due authorization,
execution and delivery by StarNet, valid and binding obligations of Netopia,
enforceable against Netopia in accordance with their respective terms, except as
to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (b) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
This Agreement and the Sub Ancillary Agreements are, or when executed by Sub
will be, assuming due authorization, execution and delivery by StarNet, valid
and binding obligations of Sub, enforceable against Sub in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally and (b) rules
of law and equity governing specific performance, injunctive relief and other
equitable remedies.
4.3 No Conflict. Neither the execution and delivery of this Agreement
nor any of the Netopia Ancillary Agreements or Sub Ancillary Agreements by
Netopia or Sub, nor the consummation of the transactions contemplated hereby or
thereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of: (i) any
provision of the Certificate of Incorporation or Bylaws or other charter
documents of Netopia or Sub as currently in effect; (ii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Netopia or Sub or any of their respective assets or properties; or
(iii) any material mortgage, indenture, lease, contract, or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to which Netopia or Sub
is a party or by which Netopia or Sub or any of their respective assets are
bound.
4.4 Validity of Shares. The shares of Netopia Common Stock to be issued
pursuant to the Merger, when issued in accordance with the terms hereof and the
Certificate of Merger, will be duly authorized, validly issued, fully paid and
non-assessable and, subject to the accuracy of the representations made by
StarNet's shareholders to Netopia, will be issued in compliance with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the Merger.
4.5 Information Statement. None of the information supplied or to be
supplied by or on behalf of Netopia that relates to Netopia for inclusion in the
Information Statement will, as of the date such Information Statement is first
provided to the stockholders of StarNet in connection with the StarNet
Stockholders Vote (provided Netopia has first had an opportunity to review and
revise such Information Statement before it is provided to StarNet's
stockholders), contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading; provided, that Netopia shall not be responsible for any
statement, information or omission relating to StarNet or any other information
supplied or to be supplied on behalf of StarNet.
35
4.6 SEC Filings; Financial Statements. Netopia has made available to
StarNet accurate and complete copies of Netopia's Annual Report on Form 10-K for
the year ended September 30, 1998, each Quarterly Report on Form 10-Q filed by
Netopia since that date, and Netopia's Registration Statement on Form S-3
declared effective by the SEC on or about August 4, 1999 (the "Netopia SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a subsequent filing before the Agreement Date, then on the date of
such subsequent filing): (i) each of the Netopia SEC Documents complied in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act (as the case may be); and (ii) none of the Netopia SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of Netopia, including the notes thereto,
included in the Netopia SEC Documents (the "Netopia Financial Statements") were
complete and correct in all material respects as of their respective filing
dates, complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, included in Quarterly Reports on Forms 10-Q). The Netopia Financial
Statements fairly present the consolidated financial condition and operating
results of Netopia and its subsidiaries at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments). There has been no change in Netopia accounting
policies except as described in the notes to the Netopia Financial Statements.
4.7 Recent Developments. Since the effective date of Netopia's most
recent registration statement on Form S-3 filed with the SEC (August 4, 1999),
there has not been any development that has not otherwise been publicly
disclosed constituting a Material Adverse Change in the Business of Netopia.
4.8 Disclosure. Neither this Agreement, its exhibits and schedules, nor
any of the certificates or documents to be delivered by Netopia to StarNet under
this Agreement, or any other documents delivered by Netopia to StarNet regarding
Netopia's business (past or present), or activities taken together, contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained herein and therein, in light
of the circumstances under which such statements were made, not misleading.
36
ARTICLE 5
PRE-CLOSING COVENANTS OF STARNET
StarNet covenants and agrees with Netopia that during the time period
from the Agreement Date until the earlier to occur of (i) the Effective Time or
(ii) the termination of this Agreement in accordance with Article 10:
5.1 Advice of Changes. StarNet will promptly advise Netopia in writing
(a) of any event occurring after the Agreement Date that would render any
representation or warranty of StarNet contained in Article 3 of this Agreement,
if made on or as of the date of such event or the Closing Date, untrue or
inaccurate and (b) of any Material Adverse Change in StarNet's Business.
5.2 Maintenance of Business. StarNet will use its best efforts
consistent with past practices and policies to carry on and preserve its
business and its relationships with customers, advertisers, suppliers,
employees, and others with whom StarNet has contractual relations in
substantially the same manner as it has before the Agreement Date. If StarNet
becomes aware of a material deterioration in the relationship with any key
customer, key advertiser, key supplier or key employee, it will promptly bring
such information to the attention of Netopia in writing and, if requested by
Netopia, will exert its best efforts to promptly restore the relationship.
5.3 Conduct of Business. StarNet will continue to conduct its business
and maintain its business relationships in the ordinary and usual course, in
substantially the same manner as heretofore conducted, and StarNet will not,
without the prior written consent and approval (which may be given verbally to
be promptly followed by written confirmation) of Netopia:
(a) borrow or lend any money, other than reasonable and normal
advances to employees for bona fide travel expenses that are incurred in the
ordinary course of StarNet's business consistent with StarNet's past practices
or borrowings of money from Netopia;
(b) enter into any material transaction or agreement or take
any other action not in the ordinary course of StarNet's business;
(c) grant any lien, security interest, or other encumbrance on
any of its assets;
(d) sell, transfer or dispose of any of its assets except in
the ordinary course of StarNet's business consistent with StarNet's past
practices;
(e) enter into any material lease or contract for the purchase
or sale of any property, whether real or personal, tangible or intangible;
(f) pay any bonus, increased salary or special remuneration to
any officer, director, employee or consultant or enter into any new employment
or consulting agreement with any such person;
(g) change any of its accounting methods;
37
(h) declare, set aside or pay any cash or stock dividend or
other distribution in respect of its capital stock, redeem, repurchase or
otherwise acquire any of its capital stock or other securities (except for the
repurchase of stock from employees, directors, consultants or contractors of
StarNet in connection with the termination of their services with StarNet at the
original purchase price of such stock), pay or distribute any cash or property
to any stockholder or security holder of StarNet or make any other cash payment
to any stockholder or security holder of StarNet that is unusual, extraordinary,
or not made in the ordinary course of StarNet's business consistent with its
past practices;
(i) amend or terminate any contract, agreement or license to
which StarNet is a party except those amended or terminated in the ordinary
course of StarNet's business, consistent with its past practices, and which are
not material in amount or effect;
(j) guarantee or act as a surety for any obligation of any
third party;
(k) waive or release any material right or claim except in the
ordinary course of StarNet's business, consistent with StarNet's past practice;
(l) issue, sell, create or authorize any shares of its capital
stock of any class or series or any other of its securities, or issue, grant or
create any warrants, obligations, subscriptions, options, convertible
securities, or other commitments to issue shares of its capital stock or
securities ultimately exchangeable for, or convertible into, shares of its
capital stock; provided, however, that notwithstanding the foregoing, (a)
StarNet may issue shares of StarNet Common Stock issuable upon the exercise,
conversion or exchange of StarNet Options that are outstanding on the Agreement
Date in accordance with their terms as now in effect and (b) StarNet may grant
initial stock options to newly hired StarNet employees under the StarNet Stock
Plan in the ordinary course of StarNet's business in amounts, on terms and to
such employees, as are consistent with StarNet's past practices for granting
initial options to new employees; where each such StarNet Option has an exercise
price equal to the fair market value of StarNet Common Stock as of the date such
StarNet Option is granted, and the right to exercise such StarNet Option vests
on a vesting schedule consistent with past vesting practices, except that, with
respect to such StarNet Options granted after the Agreement Date, the vesting of
such StarNet Options shall not accelerate at any time by reason of the Merger or
this Agreement;
(m) subdivide or split or combine or reverse split the
outstanding shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or acquire, or
enter into any other business combination with, any corporation, partnership,
limited liability company or any other entity or enter into any negotiations,
discussions or agreement for such purpose;
(o) amend its articles of incorporation or Bylaws except as
expressly contemplated by this Agreement;
38
(p) license any of its technology or Intellectual Property, or
acquire any Intellectual Property (or any license thereto) from any third party
except for any such license granted or obtained in the ordinary course of
StarNet's business;
(q) materially change any insurance coverage;
(r) agree to any audit assessment by any tax authority or file
any federal or state income or franchise tax return unless copies of such
returns have first been delivered to Netopia for its review at a reasonable time
before filing (provided, however, that Netopia will not unreasonably withhold
its consent to any of the foregoing);
(s) modify or change the exercise or conversion rights or
exercise or purchase prices of any capital stock of StarNet, any StarNet stock
options, or accelerate or otherwise modify (i) the right to exercise any option,
warrant or other right to purchase any capital stock or other securities of
StarNet or (ii) the vesting or release of any shares of capital stock or other
securities of StarNet from any repurchase options or rights of refusal held by
StarNet or any other party or any other restrictions; or
(t) agree to do any of the things described in the preceding
clauses 5.3(a) through 5.3(s).
5.4 Waiver of Closing Conditions; Delivery of Certain Closing
Documents. On or before September 30, 1999, StarNet shall deliver to Netopia (i)
a written instrument confirming that the conditions to the obligation of StarNet
to consummate the Merger, as provided in Article 8 of this Agreement, have been
deemed to have been satisfied (and upon receipt by Netopia of such written
instrument, StarNet's power to terminate this Agreement, as provided in Section
10.2.3 of this Agreement, shall expire), and (ii) the certificates contemplated
by Sections 9.1, 9.2 and 9.3, dated as of September 30, 1999, executed copies of
the Non-Competition Agreements contemplated by Section 9.9(a) and (b), a copy of
the Escrow Agreement contemplated by Section 9.10 executed by the Representative
and substantially all of the StarNet Stockholders, a copy of the Rights
Agreement contemplated by Section 9.15 executed by substantially all of the
StarNet Stockholders, a copy of the Shareholder Representation Letter
contemplated by Section 9.16 executed by substantially all of the StarNet
Stockholders, evidence of termination of any StarNet Rights Agreement as
contemplated by Section 9.17, and evidence of termination of any outstanding
warrant to acquire shares of StarNet stock as contemplated by Section 9.18.
5.5 Information for Private Placement Exemptions. StarNet shall use its
best efforts to assist Netopia in obtaining and ascertaining the accuracy of all
information from StarNet's security holders deemed reasonably necessary by
39
Netopia and its counsel to establish the availability of an exemption or
exemptions from registration under Section 4(2) of the 1933 Act and/or
Regulation D promulgated under the 1933 Act for the issuance of Netopia Common
Stock and any other Netopia securities to StarNet security holders in connection
with the Merger.
5.6 Approval of StarNet's Stockholders. StarNet shall call and hold a
meeting of its stockholders or shall solicit the written consent of its
stockholders at the earliest practicable date to submit this Agreement and the
Merger and approval of any related agreements or transactions, including,
without limitation, any necessary amendment to the StarNet Articles, for the
consideration and approval of the stockholders of StarNet, which approval shall
be recommended by StarNet's Board of Directors (the vote taken at such meeting
of the stockholders of StarNet or by the solicitation of such written consent of
the stockholders of StarNet is hereinafter referred to as the "StarNet
Stockholder Vote"). Such meeting of StarNet's stockholders shall be called, held
and conducted, and any proxies or written consents shall be solicited, in
compliance with StarNet's Articles of Incorporation and Bylaws, both as amended,
and in compliance with applicable law. StarNet will cause the Information
Statement to be sent to the stockholders of StarNet in connection with a meeting
of StarNet's stockholders to be delivered to each stockholder of StarNet within
any time period required by StarNet's Articles of Incorporation and Bylaws, each
as amended, and/or required by applicable law. StarNet will not put any proposal
up for the vote of its stockholders (as part of the StarNet Stockholder Vote or
otherwise) other than the proposal to approve and adopt this Agreement, the
Merger and the other transactions contemplated hereby, including any necessary
amendment to the StarNet Articles, without obtaining Netopia's prior written
consent to do so, which consent will not be unreasonably withheld, consistent
with the provisions, purposes and intent of this Agreement.
5.7 Information Statement. StarNet will be solely responsible for any
statement, information or omission in the Information Statement relating to
StarNet to be sent to the stockholders of StarNet in connection with the StarNet
Stockholder Vote, and the information supplied or to be supplied by or on behalf
of StarNet that relates to StarNet for inclusion in the Information Statement to
be provided to the stockholders of StarNet in connection with the StarNet
Stockholder Vote will, as of the date such Information Statement is first
provided to the stockholders of StarNet, conform to the representation made by
StarNet in Section 3.26; provided, however, that StarNet shall not be
responsible for any statement, information or omission (including without
limitation information relating to Netopia) that was expressly supplied by
Netopia for use in the Information Statement that is contained in the
Information Statement, so long as such statement or information is not changed
from the form in which it was provided by Netopia to StarNet for inclusion in
the Information Statement (unless Netopia expressly approves such change).
5.8 Regulatory Approvals. StarNet will promptly execute and file, or
join in the execution and filing, of any application, notification or any other
document that may be necessary in order to obtain the authorization, approval or
consent of any Governmental Authority, whether federal, state, local or foreign,
which may be reasonably required, or which Netopia may reasonably request, in
connection with the consummation of the Merger or any other transactions
contemplated by this Agreement or any StarNet Ancillary Agreement. StarNet will
use its best efforts to obtain, and to cooperate with Netopia to promptly
obtain, all such authorizations, approvals and consents, including without
limitation, any approvals, authorizations, or consents under the HSR Act.
5.9 Necessary Consents. StarNet will use its best efforts to promptly
obtain such written consents and authorizations of third parties, give notices
to third parties and take such other actions as may be necessary or appropriate
in addition to those set forth in the foregoing Sections of this Article 5 in
order to effect the consummation of the Merger and the other transactions
contemplated by this Agreement and to enable Netopia to carry on StarNet's
business immediately after the Effective Time.
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5.10 Litigation. StarNet will notify Netopia in writing promptly after
learning of any Claim by or before any court, arbitrator or arbitration panel,
board or governmental agency, initiated by or against it, or known by it to be
threatened against StarNet or any of their officers, directors, employees or
stockholders in their capacity as such.
5.11 No Other Negotiations. During the time period commencing on the
Agreement Date and ending on the earlier to occur of (a) termination of this
Agreement in accordance with the provisions of Article 10 or (b) consummation of
the Merger, StarNet will not, and StarNet will not authorize, encourage or
permit any officer, director, employee, stockholder, affiliate or agent of
StarNet or any other person on StarNet's or their behalf to, directly or
indirectly: (i) solicit, initiate, encourage or induce the making, submission or
announcement of, any offer or proposal from any party concerning any Alternative
Transaction (as defined below) or take any other action that could reasonably be
expected to lead to an Alternative Transaction or a proposal therefor; (ii)
actively consider any inquiry, offer or proposal received from any party
concerning any Alternative Transaction; (iii) furnish any information regarding
StarNet to any person or entity in connection with or in response to any
inquiry, offer or proposal for or regarding any Alternative Transaction; (iv)
participate in any discussions or negotiations with any person or entity with
respect to any Alternative Transaction; (v) otherwise cooperate with, facilitate
or encourage any effort or attempt by any person or entity (other than Netopia)
to effect any Alternative Transaction; or (vi) execute, enter into or become
bound by any letter of intent, agreement, commitment or understanding between
StarNet and any third party that relates to, provides for or concerns any
Alternative Transaction. During the foregoing time period identified in the
preceding sentence, StarNet will promptly notify Netopia orally and in writing
of any inquiries or proposals received by StarNet or any of its directors,
officers, stockholders, employees or agents regarding any Alternative
Transaction and will identify the party making the inquiry or proposal and the
nature and terms of any inquiry or proposal. As used herein, the term
"Alternative Transaction" means any commitment, agreement or transaction
involving or providing for (a) the disposition of all or any substantial portion
of StarNet's business, assets or capital stock, whether by way of merger,
consolidation, sale of assets, sale of stock, stock exchange, tender offer
and/or any other form of business combination or (b) any initial public offering
of capital stock or other securities of StarNet pursuant to a registration
statement filed under the 1933 Act.
5.12 Access to Information. From the Agreement Date until the Closing,
StarNet will allow Netopia and its agents reasonable access during normal
business hours to the files, books, records, technology, contracts, personnel
(including officers and managers) and offices of StarNet, including, without
limitation, any and all information relating to StarNet's operations, taxes,
commitments, contracts, leases, licenses, and real, personal and intangible
property and financial condition, as Netopia and its agents shall reasonably
request, subject to the terms of the letter agreement between StarNet and
Netopia dated as of September 8, 1999 (the "Confidentiality Agreement"). StarNet
will use its best efforts to cause its accountants to cooperate with Netopia and
its agents in making available all financial information reasonably requested by
Netopia, including without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited by such accountants.
41
5.13 Satisfaction of Conditions Precedent. StarNet will use its best
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Article 9, and StarNet will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated in accordance with
this Agreement.
5.14 Blue Sky Laws. StarNet will use its best efforts to assist Netopia
to the extent necessary to comply with the securities and "blue sky" laws of all
jurisdictions which are applicable in connection with the Merger.
5.15 StarNet Dissenting Shares. As promptly as practicable after the
date of the StarNet Stockholder Vote and before the Closing Date, StarNet will
furnish Netopia with the name and address of each holder (or potential holder)
of any StarNet Dissenting Shares (if any) and the number of StarNet Dissenting
Shares (or potential StarNet Dissenting Shares) owned by each such holder.
StarNet shall not, except with the prior written consent of Netopia, make any
payment with respect to, or settle or offer to settle, any demands made
respecting appraisal or dissenter's rights.
5.16 Termination of StarNet Rights Agreements. StarNet shall use its
best efforts to terminate and cancel all StarNet Rights Agreements (other than
the Voting Agreement and the related Irrevocable Proxies) by no later than
immediately before the Effective Time.
5.17 Invention Assignment and Confidentiality Agreements. StarNet will
use its best efforts to obtain from each employee, contractor and consultant of
StarNet who has had access to any software, technology or copyrightable,
patentable or other proprietary works owned or developed by StarNet, or to any
other confidential or proprietary information of StarNet, or its clients, an
invention assignment and confidentiality agreement in a form reasonably
acceptable to Netopia, duly executed by such employee, contractor or consultant
and delivered to StarNet and/or Netopia.
5.18 StarNet Employee Plans and Benefit Arrangements. Upon the request
of Netopia, StarNet shall terminate any StarNet Benefit Plan immediately before
the Effective Time.
5.19 Closing of Merger. StarNet will not refuse to effect the Merger
if, on or before the Closing Date, all the conditions precedent to StarNet's
obligations to effect the Merger under Article 8 hereof have been satisfied or
waived by StarNet and Netopia elects to consummate the Merger.
5.20 Delivery of Tax Opinion. Counsel to StarNet, Venture Law Group,
shall at the Closing deliver to StarNet an opinion (which may be qualified based
on certain assumptions and given in reliance on certificates to be obtained from
StarNet and Netopia) that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code. Netopia shall also have provided
StarNet, if so requested, with customary representation letters in connection
with the issuance of the opinions.
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5.21 Payment of Accrued but Unpaid Salary. In connection with its
payroll period ending September 30, 1999, StarNet shall have paid all accrued
but unpaid compensation amounts for its officers and other employees, so that
after September 30, 1999 StarNet will not have any accrued but unpaid
compensation obligations with respect to prior periods for any of its officers
or employees.
5.22 Cancellation of Series B Preferred Warrant. StarNet shall cause
that certain outstanding warrant to acquire 200,000 shares of StarNet Series B
Preferred Stock to be canceled in its entirety upon the Closing.
ARTICLE 6
PRE-CLOSING COVENANTS OF NETOPIA
Netopia covenants and agrees that during the time period from the
Agreement Date until the earlier to occur of (i) the Effective Time or (ii) the
termination of this Agreement in accordance with Article 10:
6.1 Advice of Changes. Netopia will promptly advise StarNet in writing
of (a) any event occurring after the date of this Agreement that would render
any representation or warranty of Netopia or Sub contained in this Agreement, if
made on or as of the date of such event or the Closing Date, to be untrue or
inaccurate in any material respect, and (b) any Material Adverse Change in
Netopia's Business.
6.2 Waiver of Closing Conditions. On or before September 30, 1999,
Netopia shall deliver to StarNet (i) a written instrument confirming that the
conditions to the obligation of Netopia to consummate the Merger, as provided in
Article 9 of this Agreement, have been deemed to have been satisfied (and upon
receipt by StarNet of such written instrument, Netopia's power to terminate this
Agreement, as provided in Section 10.2.3 of this Agreement, shall expire), and
(ii) the certificates contemplated by Section 8.1, 8.2 and 8.4, dated as of
September 30, 1999, a copy of the Escrow Agreement contemplated by Section 9.10
executed by Netopia, a copy of the Rights Agreement contemplated by Section 8.7
executed by Netopia, and Netopia's offer, effective upon the Effective Time, an
offer of employment to the StarNet Engineering Employees pursuant to Section 6.8
and an offer to enter into the agreements contemplated by Section 8.11 with each
of the StarNet employees identified in Exhibit L who becomes a Netopia employee
immediately after the Effective Time.
6.3 Regulatory Approvals. Netopia will promptly execute and file, or
join in the execution and filing, of any application, notification or any other
document that may be necessary in order to obtain the authorization, approval or
consent of any Governmental Authority, whether federal, state, local or foreign,
which may be reasonably required or which StarNet may reasonably require, in
connection with the consummation of the Merger and the other transactions
contemplated by this Agreement and the Netopia Ancillary Agreements and Sub
Ancillary Agreements in accordance with the terms of this Agreement. Netopia
will use its best efforts to obtain and to cooperate with StarNet to obtain all
such authorizations, approvals and consents, including, without reservation, any
authorizations, approvals, or consents under the HSR Act.
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6.4 Necessary Consents. Netopia will use its best efforts to promptly
obtain such written consents and authorizations of third parties, give notices
to third parties and take such other actions as may be necessary or appropriate
in addition to those set forth in the foregoing Sections of this Article 6 in
order to effect the consummation of the Merger and the other transactions
contemplated by this Agreement.
6.5 Satisfaction of Conditions Precedent. Netopia will use its best
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Article 8, and Netopia will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated in accordance with
the terms of this Agreement.
6.6 Access to Information. At StarNet's request, appropriate Netopia
executive officers will meet with StarNet executive officers to provide certain
limited due diligence information to StarNet executive officers, subject to the
compliance by StarNet and such StarNet executive officers with the
Confidentiality Agreement and Netopia's xxxxxxx xxxxxxx policies.
6.7 Listing of Additional Shares. Prior to the Closing, Netopia shall
file with the Nasdaq Stock Market a Notification Form for Listing of Additional
Shares with respect to the shares of Netopia Common Stock issuable upon
conversion of StarNet Common Stock and StarNet Preferred Stock in the Merger and
upon exercise of the Netopia Options to be issued in the Merger.
6.8 Continued Employment of StarNet Engineering Employees. Each of
StarNet's Engineering Employees (the "StarNet Engineering Employees") who are
full-time employees of StarNet immediately before the Effective Date shall be
offered employment with Netopia with salaries, employment benefits, and other
terms of employment consistent with those afforded to Netopia employees at
similar levels of responsibility and authority.
6.9 Netopia Employee Option Plans and Benefit Arrangements. StartNet
employees who become Netopia employees after the Merger will participate in
Netopia's benefit arrangements and Netopia employee plans (the "Netopia
Benefits") in a similar manner as similarly situated Netopia employees. To the
extent consistent with the terms of the Netopia Benefits, the Netopia Benefits
shall give full credit for each participant's period of service with StarNet
before the Effective Time for all purposes for which such service was recognized
under StarNet's employee plans before the Effective Time.
6.10 Blue Sky Laws. Netopia shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the Merger.
6.11 Delivery of Tax Opinion. Counsel to Netopia, Fenwick & West, shall
have signed and delivered to Netopia an opinion (which may be qualified based on
certain assumptions and given in reliance on certificates to be obtained from
StarNet and Netopia) that the Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code. StarNet shall also have provided
Netopia, if so requested, with customary representation letters in connection
with the issuance of the opinions.
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ARTICLE 7
CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as provided
in Article 10 below, the closing of the transactions to consummate the Merger
(the "Closing") will take place at the offices of Fenwick & West LLP, Two Xxxx
Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 at 9 a.m., Pacific Standard Time as
soon as practicable after all of the conditions to Closing set forth in Articles
8 and 9 hereof have been satisfied and/or waived in accordance with this
Agreement, or on such other day as Netopia and StarNet may mutually agree on
(the "Closing Date"). Concurrently with the Closing, the Certificate of Merger
will be filed with the Delaware Secretary of State.
7.2 Exchange of Certificates.
7.2.1 At the Closing or as soon thereafter as reasonably
practicable, each holder of shares of StarNet Common Stock and/or StarNet
Preferred Stock will surrender the certificate(s) for such shares (each a
"StarNet Certificate"), duly endorsed to Netopia for cancellation as of the
Effective Time together with a duly executed stock assignment. At the Closing,
or as soon thereafter as practicable, subject to the receipt by Netopia or its
transfer agent of such StarNet Certificates and such written instrument, Netopia
or its transfer agent shall (a) issue to each tendering holder of a StarNet
Certificate a certificate for the number of shares of Netopia Common Stock (an
"Netopia Certificate") to which such holder is entitled pursuant to Section
2.1.2 (less the Escrow Shares of such holder that are to be withheld and placed
in escrow pursuant to Section 2.4 and the Escrow Agreement, and (b) pay by check
to each tendering holder cash in the amounts payable to such holder in
accordance with the provisions of Sections 2.1.2 and 2.1.4. At or about the
Closing Date, Netopia will deliver the Escrow Shares to the Escrow Agent
pursuant to the Escrow Agreement.
7.2.2 No Netopia Certificates for shares of Netopia Common
Stock issued pursuant to Section 2.1.2 and no cash payable under Section 2.1.2
or Section 2.1.4, and no dividends or distributions payable to holders of record
of Netopia Common Stock after the Effective Time, will be paid to the holder of
any unsurrendered StarNet Certificate unless and until the holder of such
unsurrendered StarNet Certificate surrenders such StarNet Certificate to Netopia
as provided above together with a duly endorsed stock assignment. Subject to the
effect, if any, of applicable escheat and other laws, following surrender of any
StarNet Certificate, there will be delivered to the person entitled thereto,
without interest, the amount of any dividends and distributions theretofor paid
with respect to Netopia Common Stock so withheld as of any date after the
Effective Time and before such date of delivery.
7.2.3 After the Effective Time there will be no further
registration of transfers on the stock transfer books of StarNet or its transfer
agent of any shares of capital stock of StarNet that were outstanding
immediately before the Effective Time. If, after the Effective Time, StarNet
Certificates are presented for any reason, they will be canceled and exchanged
as provided in this Section 7.2.
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7.2.4 Until StarNet Certificates representing shares of
StarNet Common Stock and/or StarNet Preferred Stock that are outstanding
immediately before the Effective Time are surrendered pursuant to Section 7.2.1
above, such StarNet Certificates shall, for all purposes, evidence only the
right to receive the number of shares of Netopia Common Stock and cash
consideration into which such shares of StarNet Common Stock and/or StarNet
Preferred Stock are convertible pursuant to Section 2.1.2.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF STARNET
StarNet's obligations to consummate the Merger hereunder are subject to
the fulfillment or satisfaction, on and as of the Closing, of each of the
following conditions (any one or more of which may be waived by StarNet, but
only in a writing signed by StarNet):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Netopia and Sub set forth in Article 4 (as qualified by the
Netopia Disclosure Schedule) (a) that are qualified as to materiality in Article
4 will be true and correct and (b) that are not qualified as to materiality in
Article 4 shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made at
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties shall be true and correct on and as of such
specified date or dates), and StarNet will have received a certificate to such
effect executed by an officer of Netopia.
8.2 Covenants. Netopia will have performed and complied in all material
respects with all of its covenants, obligations and conditions contained in
Article 6 that are to be performed on or before the Closing (to the extent that
such covenants require performance by Netopia on or before the Closing), and
StarNet will have received a certificate to such effect signed by an officer of
Netopia.
8.3 Requisite Approvals. This Agreement, the Merger and the other
transactions contemplated hereby shall have been duly and validly approved and
adopted by StarNet's stockholders, as required by applicable law and StarNet's
Articles of Incorporation and Bylaws.
8.4 No Material Adverse Change. There will not have been any Material
Adverse Change between the effective date of Netopia's most recent registration
statement on Form S-3 filed with the SEC and the Closing Date in the Business of
Netopia and its subsidiaries, taken as a whole, and StarNet will have received a
certificate to such effect signed by Netopia's President and Chief Financial
Officer.
8.5 Compliance with Law; No Legal Restraints; No Litigation. No
litigation or proceeding shall have been threatened or pending for the purpose
or with the probable effect of enjoining or preventing the consummation of the
Merger or any of the other material transactions contemplated by this Agreement.
There will not be issued, enacted or adopted, by any Governmental Authority, any
order, decree, temporary, preliminary or permanent injunction, legislative
enactment, statute, regulation, action or proceeding, or any judgment or ruling
by any court, arbitrator or Governmental Authority, that challenges, threatens,
prohibits, enjoins, restrains, or renders illegal the Merger.
46
8.6 Government Consents. Netopia, Sub and StarNet shall have obtained
from any Governmental Authority having jurisdiction over the parties and the
actions herein proposed to be taken, all approvals, waivers and consents, if
any, necessary to consummate the Merger and the several transactions
contemplated hereby, including such approvals, waivers and consents as may be
required under the Securities Act, under state Blue Sky laws and the HSR Act.
8.7 Registration. Netopia shall have entered into the Rights Agreement
with each StarNet Stockholder.
8.8 Opinion of Netopia's Counsel. StarNet shall have received a legal
opinion from Fenwick & West LLP, counsel to Netopia, in substantially the form
of Exhibit H.
8.9 Tax Opinion. StarNet shall have received from its counsel, Venture
Law Group, an opinion (which may be qualified based on certain assumptions and
given in reliance on certificates to be obtained from StarNet and Netopia) that
the Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code. Netopia and StarNet agree to provide counsel, if so
requested, with customary representation letters in connection with the issuance
of the opinions provided for under this Section 8.9 and Section 9.12 to the
extent that they are able to make such customary representations.
8.10 Certificate of Good Standing. StarNet shall have received a
certificate from the Secretary of State of the State of Delaware as to Netopia's
good standing and payment of all applicable taxes.
8.11 StarNet Employee Incentive Agreement. Netopia shall have offered
to enter into an agreement, substantially in the form of Exhibit L, with each of
the StarNet employees identified in Exhibit L.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF Netopia
Netopia's obligations to consummate the Merger hereunder are subject to
the fulfillment or satisfaction, on and as of the Closing, of each of the
following conditions (any one or more of which may be waived by Netopia, but
only in a writing signed by Netopia):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of StarNet set forth in Article 3 (as qualified by the StarNet
Disclosure Schedule) (a) that are qualified as to materiality in Article 3 will
be true and correct and (b) that are not qualified as to materiality in Article
3 shall be true and correct in all material respects, in each case on and as of
the Closing with the same force and effect as if they had been made at the
Closing Date (except for any such representations or warranties that, by their
terms, speak only as of a specific date or dates, in which case such
representations and warranties shall be true and correct on and as of such
specified date or dates), and Netopia will have received a certificate to such
effect executed by StarNet's President and Chief Financial Officer.
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9.2 Covenants. StarNet will have performed and complied in all material
respects with all of its covenants, obligations and conditions contained in
Article 5 on or before the Closing, and Netopia will have received a certificate
to such effect signed by StarNet's President and Chief Financial Officer.
9.3 No Material Adverse Change. There will not have been any Material
Adverse Change since the Balance Sheet Date in the Business of StarNet, and
Netopia will have received a certificate to such effect signed by StarNet's
President and Chief Financial Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. No
litigation or proceeding shall have been threatened or pending for the purpose
or with the probable effect of enjoining or preventing the consummation of the
Merger or any of the other material transactions contemplated by this Agreement.
There will not be issued, enacted or adopted by any Governmental Authority, any
order, decree, temporary, preliminary or permanent injunction, legislative
enactment, statute, regulation, action or proceeding, or any judgment or ruling
by any court, arbitrator or Governmental Authority, that challenges, threatens,
prohibits, enjoins, restrains, or renders illegal the Merger.
9.5 Government Consents. Netopia, Sub and StarNet shall have obtained
from any Governmental Authority having jurisdiction over the parties and the
actions herein proposed to be taken, all approvals, waivers and consents, if
any, necessary to consummate the Merger and the several transactions
contemplated hereby, including such approvals, waivers and consents as may be
required under the Securities Act, under state Blue Sky laws and the HSR Act.
9.6 Opinion of StarNet's Counsel. Netopia will have received a legal
opinion from Venture Law Group, counsel to StarNet, substantially in the form of
Exhibit I.
9.7 StarNet Stockholder Approval. This Agreement, the Merger and the
other transactions contemplated hereby will have been duly and validly approved
and adopted by the holders of StarNet Common Stock and StarNet Preferred Stock,
as required by applicable law and StarNet's Articles of Incorporation and
Bylaws.
9.8 Dissenting Shares. Less than 1% of the outstanding shares of
StarNet Common Stock and StarNet Preferred Stock as of the Record Date (on an
as-converted to StarNet Common Stock basis) will (a) not have affirmatively
voted in favor of the Merger and (b) accordingly be eligible to exercise or
perfect any statutory appraisal rights of dissenting stockholders under
applicable law.
9.9 Non-Competition Agreements.
(a) StarNet Founders. At the time of the Closing, Netopia will
have received from each of StarNet's Founders a fully executed copy of a
Non-Competition Agreement in the form of Exhibit J-1.
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(b) Key Employees. At the time of the Closing, Netopia will
have received from each of StarNet's Key Employees a fully executed copy of a
Non-Competition Agreement in the form of Exhibit J-2.
9.10 Escrow Agreement. Netopia will have received a fully executed copy
of the Escrow Agreement in the form of Exhibit B executed by the Escrow Agent,
the Escrow Representative, and each StarNet Stockholder.
9.11 Securities Laws. Netopia: (a) shall have received an executed
counterpart of the Investor Questionnaire executed by each StarNet Stockholder
who, immediately before the Effective Time, owns any shares of StarNet Common
Stock and/or StarNet Preferred Stock, each as constituted on the Agreement Date;
and (b) shall be reasonably satisfied that the issuance of shares of Netopia
Common Stock pursuant to Section 2.1.2 of this Agreement is exempt from the
registration requirements of the 1933 Act by virtue of the exemptions provided
by Section 4(2) of the 1933 Act and/or Regulation D under the 1933 Act; and any
exemptions from the registration and/or qualification requirements of applicable
state "blue sky" securities laws.
9.12 Continued Employment of Certain Personnel. Each of Xxxxxx Xxxxxx,
Xxxxxx Xxxxxxx, Xxxx Xxx, and Xxxxxxxx Xxxxxxxx who are currently employees of
StarNet (a) shall have continued to be employed as full-time employees of
StarNet at all times from the Agreement Date through the Effective Time and (b)
shall have accepted offers of continued employment with StarNet following the
Effective Time pursuant to written employment offer letters reasonably
satisfactory to Netopia.
9.13 Tax Opinion. Netopia shall have received a legal opinion from its
counsel, Fenwick & West LLP, (which may be qualified based on certain
assumptions and given in reliance on certificates to be obtained from StarNet
and Netopia) that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. Netopia and StarNet agree to provide
counsel, if so requested, with customary representation letters in connection
with the issuance of the opinions provided for under Section 8.9 and this
Section 9.11 to the extent that they are able to make such customary
representations.
9.14 Agreement to Offset. Netopia shall have received the written
agreement of each holder of StarNet Preferred Stock or StarNet Common Stock that
shall have any outstanding debt or liability to StarNet that the amount payable
to such holder pursuant to Section 2.1.2 may be reduced by the amount of such
debt or liability outstanding at the Effective Time, as contemplated by Section
2.1.6 (including any interest accrued pursuant to the terms of such debt or
liability).
9.15 Registration Rights Agreement. Each StarNet Stockholder shall
have entered into the Rights Agreement with Netopia.
9.16 Shareholder Representation Letter. Each StarNet Stockholder shall
have executed and delivered to Netopia a Shareholder Representation Letter in
the form and substance of Exhibit E attached hereto (the "Shareholder
Representation Letter").
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9.17 Termination of StarNet Rights Agreements. As of the Closing Date,
all StarNet Rights Agreements (other than the Voting Agreement and the related
Irrevocable Proxies) shall have been terminated and canceled.
9.18 No Outstanding StarNet Warrants. As of the Closing Date, any
outstanding warrants to purchase any shares of StarNet Preferred Stock or
StarNet Common Stock shall have been terminated.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination by Mutual Consent. This Agreement may be terminated at
any time before the Effective Time by the mutual written agreement of Netopia
and StarNet.
10.2 Unilateral Termination.
10.2.1 Either Netopia or StarNet, by giving written notice to
the other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger.
10.2.2 Either Netopia or StarNet, by giving written notice to
the other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Standard Time on the Termination Date; provided,
however, that the right to terminate this Agreement pursuant to this Section
10.2.2 shall not be available to any party whose failure to perform in any
material respect any of its obligations or covenants under this Agreement
results in the failure of any condition set forth in Article 8 or Article 9 or
if the failure of such condition results from facts or circumstances that
constitute a material breach of a representation or warranty made under this
Agreement by such party, if the other party has performed in all material
respects its obligations under this Agreement and if the representations and
warranties of such other party to this Agreement are true and correct in all
material respects as of the Termination Date.
10.2.3 Either Netopia or StarNet may terminate this Agreement
at any time before the Closing if the other has committed (or, in the case of a
termination by StarNet, Sub has committed) a material breach of (a) any of its
representations and warranties under Article 3 or Article 4 of this Agreement,
as applicable; or (b) any of its covenants under Article 5 or Article 6 of this
Agreement, as applicable, and has not cured such material breach within ten (10)
days after the party seeking to terminate this Agreement has given the other
party written notice of the material breach and its intention to terminate this
Agreement pursuant to this Section 10.2.3, provided, that the right to terminate
this Agreement pursuant to this Section 10.2.3 shall not be available if the
party seeking to terminate the Agreement is at that time in breach of this
Agreement.
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10.3 Liability for Termination. Termination of this Agreement by a
party (the "Terminating Party") in accordance with the provisions of this
Section 10 will not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS
11.1 Survival of Representations. All representations and warranties of
StarNet contained in this Agreement and the StarNet Ancillary Agreements will
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of Netopia, until that date (the "Escrow Release Date")
which is the earlier of (i) the termination of this Agreement or (ii) June 30,
2000; provided, however, that notwithstanding the foregoing, Netopia may seek
recovery of Special Damages (as defined below) at any time before the expiration
of the applicable statute of limitations relating to the claim. No
representations or warranties of Netopia contained in this Agreement, the
Netopia Disclosure Schedule or any Netopia Ancillary Agreement shall survive the
Closing, and all such representations and warranties shall expire at the
Effective Time. No representations or warranties of Sub contained in this
Agreement, the Sub Disclosure Schedule or any Sub Ancillary Agreement shall
survive the Closing, and all such representations and warranties shall expire at
the Effective Time.
11.2 Agreement to Indemnify. Subject to the provisions of Sections 11.3
and 11.4, each StarNet Stockholder will severally and not jointly indemnify and
hold harmless Netopia and the Surviving Corporation and their respective
officers, directors, agents, and employees, and each person, if any, who
controls or may control Netopia or the Surviving Corporation within the meaning
of the 1933 Act or the 1934 Act (each hereinafter referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons") from and against
any and all claims, demands, suits, actions, causes of actions, losses, costs,
damages, liabilities and expenses including, without limitation, attorneys'
fees, other professionals' and experts' fees and court or arbitration costs, as
reduced by amounts actually recovered under Netopia's insurance policies
(hereinafter collectively referred to as "Damages") incurred, resulting from or
and arising out of: (a) any inaccuracy, misrepresentation, breach of, or default
in, any of the representations, warranties or covenants given or made by StarNet
in this Agreement, the StarNet Disclosure Schedule or any certificate, document
or instrument required by this Agreement to be delivered by or on behalf of
StarNet or an officer of StarNet pursuant hereto (if such inaccuracy,
misrepresentation, breach or default existed at the Closing Date); or (b) any
Special Damages (as defined in Section 11.3). Except with respect to claims
arising from Special Damages, which may be raised after the Escrow Release Date,
any claim of indemnity made by an Indemnified Person under this Section 11.2
must be raised in a writing delivered to the Escrow Agent by no later than the
Escrow Release Date, and, if raised by such date, such claim shall survive the
Escrow Release Date until final resolution of such claim.
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11.3 Limitation.
11.3.1 Remedies Limited to Escrow Shares and Earn-Out
Payments. Except with respect to tort claims based on fraudulent conduct or
other willful misconduct on the part of StarNet or any officer, director,
employee, agent or stockholder of StarNet, in seeking indemnification for
Damages or Special Damages under this Article 11, the Indemnified Persons will
exercise their remedies solely with respect to the Escrow Shares pursuant to the
Escrow Agreement and by offsetting or withholding some or all of the Earn-Out
Payments specified in attached Exhibit K, and after the Closing Date no StarNet
Stockholder will have any other liability to an Indemnified Person for any
breach or default in connection with any of the representations, warranties,
covenants or agreements set forth in this Agreement (or any exhibit hereto), the
StarNet Disclosure Schedule, the Stockholder Representation Letter or the Voting
Agreement, except to the extent of such StarNet Stockholder's portion of the
Escrow Shares and/or his or her portion of the Earn-Out Payments. After the
Closing date, the remedies set forth in this Article 11 will be the exclusive
remedies of Netopia and the other Indemnified Persons against any StarNet
Stockholder based on any breach or default in connection with any of the
representations, warranties, covenants or agreements set forth in this Agreement
(or any exhibit hereto), the StarNet Disclosure Schedule, the Stockholder
Representation Letter or the Voting Agreement. Any and all Escrow Shares used to
satisfy indemnification for Damages under Section 11.2 shall be valued at a per
share value of the Netopia Average Price Per Share. In addition, the
indemnification provided for in Section 11.2 shall not apply unless and until
the aggregate Damages for which one or more Indemnified Persons seeks or has
sought indemnification hereunder exceeds a cumulative aggregate amount of (i)
$25,000, plus (ii) the amount, if any, by which StarNet's Audited Adjusted
Working Capital Account at September 30, 1999 exceeds StarNet's Unaudited
Adjusted Working Capital Account at September 30, 1999 (the "Basket"), in which
event StarNet Stockholders shall, subject to the foregoing limitations, be
liable to indemnify the Indemnified Persons for all Damages (including all
Damages below such threshold on a dollar for dollar basis).
11.3.2 Special Damages; Survival of Remedies Against Earn-Out.
Subject to the limitations of Section 11.3.1, the Indemnified Persons may seek
recovery of Special Damages at any time before the expiration of the applicable
statute of limitations relating to the claim. As used herein, "Special Damages"
means Damages resulting from (a) any fraudulent conduct or other willful
misconduct on the part of StarNet or any officer, director, employee, agent or
stockholder of StarNet, or breach of any provisions of any Voting Agreement or
Shareholder Representation Letter, or (b) any breach of the representations and
warranties made in Sections 3.7, 3.9, 3.13, or 3.14 of this Agreement.
11.4 Notice. Promptly after Netopia becomes aware of the existence of
any potential claim by an Indemnified Person for indemnity from StarNet
Stockholders under Section 11.2, Netopia will notify the Escrow Representative
of such potential claim in accordance with the Escrow Agreement. The failure of
Netopia to give, or delay by Netopia in giving, such notice will not affect any
rights or remedies of an Indemnified Person hereunder with respect to
indemnification for Damages except to the extent StarNet Stockholders are
materially prejudiced thereby. Netopia shall have the right to settle any claim
for which Netopia seeks indemnity from a StarNet Stockholder; provided, however,
that Netopia may not effect the settlement of any such claim without the consent
of the Escrow Representative, which consent shall not be unreasonably withheld.
52
11.5 September 30, 1999 Audit; Adjusted Working Capital Account.
Promptly after completion of StarNet's fiscal year ended September 30, 1999
("fiscal 1999"), StarNet shall (i) prepare and deliver to Netopia unaudited
balance sheet as of and for fiscal 1999 and (ii) prepare financial statements
audited by its independent auditor as of and for fiscal 1999. As soon as such
audited financial statements have been prepared, StarNet shall cause such
financial statements to be delivered to Netopia. StarNet's auditors shall also
review and confirm the calculation of the Adjusted Working Capital Account,
based on the methodology described in the next sentence. For purposes of this
Article 11, the term "Adjusted Working Capital Account" shall mean the amount of
StarNet's working capital (which excludes shareholders equity) as of a
particular date, excluding all tax accounts. If StarNet's Adjusted Working
Capital Account as reflected in its audited financial statements ("Audited
Adjusted Working Capital Account") as of September 30, 1999 is less than
StarNet's Adjusted Working Capital Account as reflected in its unaudited balance
sheets ("Unaudited Adjusted Working Capital Account") as of September 30, 1999,
then as provided in the Escrow Agreement, upon notice from Netopia to the Escrow
Agent, the Escrow Agent shall deliver to Netopia a number of Escrow Shares equal
to the amount of such difference, based on per share value equal to the Netopia
Average Price Per Share.
ARTICLE 12
MISCELLANEOUS
12.1 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by the laws of the State of California except for those provisions
governing conflict of laws, notwithstanding that one or more of the parties to
this Agreement is now, or may hereafter become, a resident or citizen of a
different State. Each party irrevocably consents to the exclusive jurisdiction
and venue of the state and federal courts for Alameda County, California in
connection with any action to enforce the provisions of this Agreement, to
recover damages or other relief for breach or default of this Agreement, or
otherwise arising under or by reason of this Agreement, and agrees that service
of process in any such action may be effected by the means provided in this
Agreement for delivery of notices.
12.2 Assignment; Binding Upon Successors and Assigns. Neither party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, then the remainder of this Agreement 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 the void or unenforceable provision.
53
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereunder will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
12.6 Amendment and Waivers. Any term or provision of this Agreement may
be amended only by the written consent of Netopia and StarNet. The observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a writing signed by
the party to be bound by such waiver. The waiver by a party of any breach hereof
or default in the performance hereof will not be deemed to constitute a waiver
of any other default or any succeeding breach or default. This Agreement may be
amended by the parties hereto as provided in this Section at any time before or
after approval of this Agreement by the stockholders of StarNet, but, after such
approval, no amendment will be made which by applicable law requires the further
approval of the stockholders of StarNet without obtaining such further approval.
At any time before the Effective Time, each of StarNet and Netopia, by action
taken by its Board of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other; (ii) waive any inaccuracies in the representations and warranties made to
it contained herein or in any document delivered pursuant hereto; and (iii)
waive compliance with any of the agreements or conditions for its benefit
contained herein. No such waiver or extension will be effective unless signed in
writing by the party against whom such waiver or extension is asserted. The
failure of any party to enforce any of the provisions hereof will not be
construed to be a waiver of the right of such party thereafter to enforce such
provisions.
12.7 Expenses. Each party will bear its respective legal and auditors'
fees and other expenses incurred with respect to this Agreement, the Merger and
the transactions contemplated hereby ("Transaction Expenses"); provided,
however, that the portion of StarNet's legal fees and expenses relating to this
Agreement and the transactions contemplated hereby that are included in
Transaction Expenses shall not exceed $100,000 (the "Permitted Transaction
Expenses"); and any such legal fees and expenses incurred by StarNet in excess
of $100,000 shall constitute "Excess Transaction Expenses" and shall decrease
the Total Cash Consideration as provided in Section 1.10.
12.8 Attorneys' Fees. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to recover, as
an element of the costs of suit and not as damages, reasonable attorneys' fees
to be fixed by the court (including without limitation, costs, expenses and fees
on any appeal). The prevailing party will be entitled to recover its costs of
suit, regardless of whether such suit proceeds to final judgment.
54
12.9 Notices. All notices and other communications required or
permitted under this Agreement will be in writing and will be either hand
delivered in person, sent by telecopier, sent by certified or registered first
class mail, postage pre-paid, or sent by nationally recognized express courier
service. Such notices and other communications will be effective upon receipt if
hand delivered or sent by telecopier, five (5) days after mailing if sent by
mail, and one (l) day after dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may notify the other
parties in accordance with this Section:
If to Netopia:
Netopia, Inc.
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
(000) 000-0000
Attention: Xxxxx X. Xxxxxx, Vice President and General Counsel
Fax Number: (000) 000-0000
with a copy to:
Fenwick & West, LLP
Xxx Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: C. Xxxxx Xxxxx, Esq.
Fax Number: (000) 000-0000
If to StarNet:
StarNet Technologies, Inc.
0000 X'Xxxxx Xxxxxx
Xxx Xxxx, XX, 00000
Attention: Xxxxxx Xxxxxx, President and CEO
Fax Number: (000) 000-0000
with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Tae Xxx Xxxx
Fax Number: (000) 000-0000
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 12.9.
12.10 Construction of Agreement. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
55
12.11 No Partnership. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other party. No party will hold itself out as having any authority or
relationship in contravention of this Section.
12.12 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.13 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof will be personal solely between the parties
to this Agreement.
12.14 Public Announcement. Upon execution of this Agreement, Netopia
and StarNet will issue a press release approved by both parties announcing the
Merger. Thereafter, Netopia may issue such press releases, and make such other
disclosures regarding the Merger, as it determines are required under applicable
securities laws or regulatory rules. Before the publication of such initial and
mutually agreed press release, neither party will make any public announcement
relating to this Agreement or the transactions contemplated hereby (except as
may be required by law) and StarNet will use its best efforts to prevent any
trading in Netopia Common Stock by its officers, directors, employees,
stockholders and agents. Neither Netopia nor StarNet will make any disclosures
regarding this Agreement or the Merger that would jeopardize Netopia's ability
to timely and lawfully issue the shares of Netopia Common Stock in the Merger
pursuant to the exemptions described in Section 2.6.
12.15 StarNet Disclosure Schedule. The StarNet Disclosure Schedule
shall be arranged in separate parts corresponding to the numbered and lettered
sections contained in Article 3, and the information disclosed in any numbered
or lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
Section in Article 3, and, except as otherwise indicated therein, shall not be
deemed to relate to or to qualify any other representation or warranty.
12.16 Confidentiality. StarNet and Netopia each confirm that they have
entered into the Confidentiality Agreement and that they are each bound by, and
will abide by, the provisions of such Confidentiality Agreement (except that
Netopia will cease to be bound by the Confidentiality Agreement after the Merger
becomes effective). If this Agreement is terminated, all copies of documents
containing confidential information of a disclosing party will be returned by
the receiving party to the disclosing party or be destroyed, as provided in the
Confidentiality Agreement.
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12.17 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Confidentiality Agreement. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.
[The remainder of this page has been intentionally left blank.]
57
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
NETOPIA, INC. STARNET TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxxx Xxxxxx
------------------------------------- ------------------------------------
Xxxx X. Xxxxxx, its President and CEO Xxxxxx Xxxxxx, its President and CEO
SN MERGER CORPORATION
By: /s/Xxxx X. Xxxxxx
-------------------------------------
Xxxx X. Xxxxxx, its President and CEO
[Signature Page to Agreement and Plan of Reorganization]
58
LIST OF EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Amended and Restated Certificate of Incorporation of SN Merger
Corporation
Exhibit D Bylaws of SN Merger Corporation
Exhibit E Shareholder Representation Letter
Exhibit F Registration Rights Agreement
Exhibit G Voting Agreement
Exhibit H Matters to be Covered in the Opinion of Fenwick & West, LLP
Exhibit I Matters to be Covered in the Opinion of Venture Law Group, LLP
Exhibit J-1 StarNet Founder Non-Competition Agreement
Exhibit J-2 StarNet Employee Non-Competition Agreement
Exhibit K Earn-Out Payments
Exhibit L Netopia Employee Incentive Agreement
50
