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EXHIBIT 2.2
AGREEMENT AND
PLAN OF MERGER
BY AND AMONG
SONICBLUE INCORPORATED,
REPLAYTV, INC.
AND
REWIND ACQUISITION CORP.
Dated as of March 23, 2001
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TABLE OF CONTENTS
Page
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Article 1 THE MERGER ..................................................................... 2
1.1 The Merger .................................................................... 2
1.2 Effective Time ................................................................ 2
1.3 Effect of the Merger on Constituent Corporations .............................. 3
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation .............. 3
1.5 Directors and Officers of Surviving Corporation ............................... 3
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect on
Outstanding Securities of the Company ......................................... 3
1.7 Reservation of Shares ......................................................... 7
1.8 Adjustments to Exchange Ratios ................................................ 7
1.9 Fractional Shares ............................................................. 7
1.10 Dissenting Shares ............................................................. 7
1.11 Exchange Procedures ........................................................... 8
1.12 No Further Ownership Rights in Company Capital Stock .......................... 10
1.13 Withholding Rights ............................................................ 10
1.14 Lost, Stolen or Destroyed Certificates ........................................ 10
1.15 Tax Consequences .............................................................. 10
1.16 Exemption From Registration; California Permit ................................ 10
1.17 Taking of Necessary Action; Further Action .................................... 11
Article 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................................. 11
2.1 Organization and Qualification ................................................ 11
2.2 Authority Relative to this Agreement .......................................... 12
2.3 Capital Stock ................................................................. 12
2.4 No Subsidiaries ............................................................... 14
2.5 Directors and Officers ........................................................ 14
2.6 No Conflicts .................................................................. 15
2.7 Books and Records; Organizational Documents ................................... 15
2.8 Company Financial Statements .................................................. 16
2.9 Absence of Changes ............................................................ 16
2.10 No Undisclosed Liabilities .................................................... 20
2.11 Taxes ......................................................................... 20
2.12 Legal Proceedings ............................................................. 23
2.13 Compliance with Laws and Orders ............................................... 24
2.14 Employee Benefit Plans and Employee Matters ................................... 24
2.15 Real Property ................................................................. 28
2.16 Tangible Personal Property .................................................... 29
2.17 Intellectual Property ......................................................... 29
2.18 Contracts ..................................................................... 34
2.19 Insurance ..................................................................... 37
2.20 Affiliate Transactions ........................................................ 38
2.21 Employees; Labor Relations .................................................... 38
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2.22 Environmental Matters ......................................................... 40
2.23 {intentionally omitted} ....................................................... 41
2.24 Accounts Receivable ........................................................... 41
2.25 {intentionally omitted} ....................................................... 41
2.26 Other Negotiations; Brokers; Third Party Expenses ............................. 41
2.27 Banks and Brokerage Accounts .................................................. 42
2.28 Warranty Obligations .......................................................... 42
2.29 Foreign Corrupt Practices Act ................................................. 43
2.30 Financial Projections/Operating Plan .......................................... 43
2.31 Approvals ..................................................................... 43
2.32 Takeover Statutes ............................................................. 44
2.33 Permit Application; Information Statement ..................................... 44
2.34 No Solicitation ............................................................... 45
2.35 Disclosure .................................................................... 45
Article 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB ........................ 46
3.1 Organization and Qualification ................................................ 46
3.2 Capitalization ................................................................ 46
3.3 Authority Relative to this Agreement .......................................... 47
3.4 SEC Filings ................................................................... 47
3.5 Financial Statements .......................................................... 48
3.6 No Conflicts .................................................................. 48
3.7 Information to be Supplied by Parent .......................................... 49
3.8 Investment Advisors ........................................................... 49
3.9 Absence of Certain Changes .................................................... 49
3.10 Litigation .................................................................... 49
3.11 Governmental Authorization .................................................... 50
Article 4 CONDUCT PRIOR TO THE EFFECTIVE TIME ............................................ 50
4.1 Conduct of Business of the Company ............................................ 50
4.2 No Solicitation ............................................................... 53
Article 5 ADDITIONAL AGREEMENTS .......................................................... 54
5.1 Information Statement; Permit Application ..................................... 54
5.2 Stockholder Approval .......................................................... 56
5.3 Access to Information ......................................................... 56
5.4 Confidentiality ............................................................... 57
5.5 Expenses ...................................................................... 57
5.6 Public Disclosure ............................................................. 57
5.7 Approvals ..................................................................... 57
5.8 FIRPTA Compliance ............................................................. 58
5.9 Notification of Certain Matters ............................................... 58
5.10 Additional Documents and Further Assurances; Cooperation ...................... 58
5.11 Indemnification ............................................................... 58
5.12 Form S-8 ...................................................................... 59
5.13 NNM Listing of Additional Shares Application .................................. 59
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5.14 Company's Auditors ............................................................ 60
5.15 Benefit Arrangements .......................................................... 60
5.16 Takeover Statutes ............................................................. 60
5.17 Treatment as Reorganization ................................................... 60
5.18 Company Repurchases ........................................................... 61
5.19 Intellectual Property ......................................................... 61
Article 6 CONDITIONS TO THE MERGER ....................................................... 61
6.1 Conditions to Obligations of Each Party to Effect the Merger .................. 61
6.2 Additional Conditions to Obligations of the Company ........................... 62
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. ............ 63
Article 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; ESCROW
PROVISIONS .................................................................. 66
7.1 Survival of Representations, Warranties, Covenants and Agreements ............. 66
7.2 Escrow Provisions ............................................................. 66
Article 8 TERMINATION, AMENDMENT AND WAIVER .............................................. 75
8.1 Termination ................................................................... 75
8.2 Effect of Termination ......................................................... 76
8.3 Amendment ..................................................................... 77
8.4 Extension; Waiver ............................................................. 77
Article 9 MISCELLANEOUS PROVISIONS ....................................................... 78
9.1 Notices ....................................................................... 78
9.2 Entire Agreement .............................................................. 79
9.3 Further Assurances; Post-Closing Cooperation .................................. 79
9.4 Waiver ........................................................................ 79
9.5 Remedies ...................................................................... 80
9.6 Third Party Beneficiaries ..................................................... 80
9.7 No Assignment; Binding Effect ................................................. 80
9.8 Invalid Provisions ............................................................ 80
9.9 Governing Law ................................................................. 80
9.10 Waiver of Trial by Jury ....................................................... 81
9.11 Construction .................................................................. 81
9.12 Counterparts .................................................................. 81
9.13 Specific Performance .......................................................... 81
Article 10 DEFINITIONS ................................................................... 82
10.1 Definitions ................................................................... 82
10.2 Construction .................................................................. 96
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EXHIBITS
Exhibit A Form of Support Agreement
Exhibit B Form of Non-Competition Agreement
Exhibit C Form of Lock-Up Agreement
Exhibit D Form of Second Credit Agreement
Exhibit E Form of Certificate of Merger
Exhibit F Form of Stockholder Certificate
Exhibit G-1 Form of Parent and Merger Sub Officers' Certificate
Exhibit G-2 Form of Parent and Merger Sub Secretary's Certificate
Exhibit H Form of Parent Counsel Legal Opinion
Exhibit I-1 Form of Company Officers' Certificate
Exhibit I-2 Form of Company Secretary's Certificate
Exhibit J {intentionally omitted}
Exhibit K Form of Company Counsel Legal Opinion
Exhibit L {intentionally omitted}
Exhibit M Form of Stock Option Agreement
Exhibit N Restated Certificate of Incorporation of the Company
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AGREEMENT AND
PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of March
23, 2001, by and among SONICBLUE INCORPORATED, a Delaware corporation
("Parent"), REWIND ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub") and REPLAYTV, INC., a Delaware corporation
(the "Company"), and, with respect to Article 7 and Article 9 only, Xxxxxxx
Xxxxxxxx Xxxxxx III as Stockholder Agent, and CHASE MANHATTAN BANK & TRUST
COMPANY, NATIONAL ASSOCIATION, as Escrow Agent. Capitalized terms used and not
otherwise defined herein have the meanings set forth in Article 10.
RECITALS:
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement, and deem it advisable and in the best
interests of each corporation and its respective stockholders to consummate the
merger of Merger Sub with and into the Company upon the terms and subject to the
conditions of this Agreement (the "Merger").
B. As a condition and an inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, Parent and the Company concurrently
herewith have entered into the Stock Option Agreement in substantially the form
attached hereto as Exhibit M (the "Stock Option Agreement").
C. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, (i) all of the outstanding shares of
Company Common Stock and Company Preferred Stock which are issued and
outstanding immediately prior to the Effective Time of the Merger shall be
converted into the right to receive shares of Common Stock, par value $0.0001
per share, of Parent ("Parent Common Stock") and (ii) all Company Options and
Company Warrants then outstanding (whether vested or unvested) shall become
exercisable for Parent Common Stock, on the terms and subject to the conditions
set forth herein.
D. As a condition and an inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, certain stockholders of the Company
have concurrently herewith executed Support Agreements with Parent and Merger
Sub in substantially the form attached hereto as Exhibit A ("Support
Agreements") pursuant to which, among other things, such stockholders have
agreed to vote the shares of Company Capital Stock owned by them in favor of the
Merger.
E. As a condition and a further inducement to the willingness of Parent
and Merger Sub to enter into this Agreement, certain stockholders of the Company
have consented to the amendment and restatement of the Certificate of
Incorporation of the Company attached hereto as Exhibit N (the "Company Restated
Certificate of Incorporation") to (a) amend and restate the rights, preferences
and privileges of Company Preferred Stock and (b) approve an increase in the
number of authorized shares of Company Common Stock required for the Stock
Option
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Agreement. The parties intend that the Company Restated Certificate of
Incorporation will be filed with the Secretary of State of the State of Delaware
no later than March 27, 2001.
F. As a condition and a further inducement to Parent and Merger Sub
to enter into this Agreement, certain employees of the Company have concurrently
herewith entered into Non-Competition Agreements substantially in the form
attached hereto as Exhibit B (the "Non-Competition Agreements"), each of which
shall become effective at the Effective Time.
G. As a condition to the receipt of shares of Parent Common Stock in
exchange for shares of Company Capital Stock, the shares of Parent Common Stock
issued pursuant hereto shall be subject to a Lock-Up Agreement substantially in
the form attached hereto as Exhibit C.
H. Concurrently with the execution of this Agreement, and as a
condition to Parent's and the Company's willingness to enter into this
Agreement, Parent and the Company shall have entered into the Second Credit
Agreement substantially in the form attached hereto as Exhibit D, pursuant to
which Parent shall make loans to the Company on the terms set forth therein.
I. Parent, Merger Sub and the Company intend that the Merger shall
constitute a reorganization within the meaning of section 368(a) of the Code,
and in furtherance thereof intend that this Agreement shall be a "plan of
reorganization" within the meaning of sections 354(a) and 361(a) of the Code.
J. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
K. A portion of the shares of Parent Common Stock otherwise issuable
or reserved for issuance by Parent in connection with the Merger shall be placed
in escrow by Parent, the release of which amount shall be contingent upon
certain events and conditions, all as set forth in Article 7 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), intending to be legally bound hereby, the parties agree as
follows:
Article 1
THE MERGER
1.1 The Merger. At the Effective Time and upon the terms and subject
to the conditions of this Agreement and the applicable provisions of Delaware
Law, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation and a wholly owned subsidiary of Parent. The Company
is sometimes referred to herein as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1 hereof, the closing of the Merger (the "Closing") is expected to
take place on or about April 30, 2001 and will take place no later than five (5)
Business Days following satisfaction or
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waiver of the conditions set forth in Article 6, at the offices of Pillsbury
Winthrop LLP, 0000 Xxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another place
or time is agreed to by Parent and the Company. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger (or like instrument), in substantially the form attached
hereto as Exhibit E (the "Certificate of Merger"), with the Secretary of State
of the State of Delaware, in accordance with the relevant provisions of Delaware
Law (the time of acceptance by the Secretary of State of the State of Delaware
of such filing or such later time as may be agreed to by the parties and set
forth in the Certificate of Merger being referred to herein as the "Effective
Time").
1.3 Effect of the Merger on Constituent Corporations. At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Merger Sub and the Company shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of Merger Sub and the Company shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation.
(a) At the Effective Time, the certificate of incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by law and such certificate of incorporation and bylaws of
the Surviving Corporation.
(b) At the Effective Time, the bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by such bylaws, the certificate
of incorporation and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect
on Outstanding Securities of the Company. The maximum number of shares of Parent
Common Stock to be issued (including Parent Common Stock to be reserved for
issuance upon exercise of any of the Company Options and Company Warrants (if
any) to be assumed by Parent as provided herein) in exchange for the acquisition
by Parent of all shares of Company Capital Stock which are issued and
outstanding immediately prior to the Effective Time and all vested and unvested
Company Options and Company Warrants (if any) which are then outstanding (other
than Company Warrants which by their terms expire without payment, conversion,
adjustment or other consideration at the Effective Time) shall not exceed the
Aggregate Share Number. No adjustment shall be made in the Aggregate Share
Number as a result of any
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consideration (in any form whatsoever) received by the Company from the date
hereof to the Effective Time as a result of any exercise, conversion or exchange
of Company Options or Company Warrants. On the terms and subject to the
conditions of this Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, the Company or the holder
of any shares of the Company Capital Stock or Company Options or Company
Warrants, the following shall occur:
(a) Conversion of Company Capital Stock. Each share of Company
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Capital Stock to be cancelled pursuant to
Section 1.6(c) and any Dissenting Shares (as provided in Section 1.10)) shall be
cancelled, extinguished and converted automatically into the right to receive,
following the expiration or early termination of any waiting period under the
HSR Act which is applicable to the holder of such share at the Effective Time,
that number of shares of Parent Common Stock equal to the Common Stock Exchange
Ratio, the Series A Exchange Ratio, the Series B Exchange Ratio, the Series C
Exchange Ratio, the Series D Exchange Ratio, the Series E Exchange Ratio, the
Series F Exchange Ratio, the Series G Exchange Ratio or the Series H Exchange
Ratio, as the case may be (subject to Section 1.9) and for each share of Parent
Company Stock to be received, the Per Share Cash Consideration, if any, provided
for under the terms of this Agreement.
(b) Stock Restrictions. The shares of Parent Common Stock issued (i)
in exchange for shares of Company Capital Stock and (ii) upon exercise of
Company Options or Company Warrants will be subject to certain restrictions on
sale and transfer, all as more fully described in the Lock-Up Agreement, the
form of which is attached hereto as Exhibit C.
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each share
of Company Common Stock owned by Parent or the Company or any Subsidiary of
Parent or the Company immediately prior to the Effective Time shall be
automatically canceled and extinguished without any conversion thereof.
(d) Company Options and Company Stock Plans; Company Warrants. All
unexpired and unexercised Company Options and Company Warrants then outstanding,
whether vested or unvested, together with the Company Stock Plans, shall be
assumed by Parent in accordance with the provisions set forth below.
(i) Each unexpired and unexercised Company Option then
outstanding, whether vested or unvested, shall be, in connection with
the Merger, assumed by Parent, together with the Company Stock Plans.
Each Company Option so assumed by Parent under this Agreement shall
continue to have, and be subject to, the same terms and conditions as
were applicable to such Company Option immediately prior to the
Effective Time (including any repurchase rights or vesting provisions),
provided that (A) such Company Option shall be exercisable for that
number of whole shares of Parent
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Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Option
immediately prior to the Effective Time (assuming such Company Option
was exercisable in full) multiplied by the Common Stock Exchange Ratio
(rounded down to the nearest whole number of shares of Parent Common
Stock) and, for each share of Parent Common Stock into which such
Company Option is exercisable, the Per Share Cash Consideration, if any,
shall be payable upon exercise and (B) the per share exercise price for
the shares of Parent Common Stock issuable upon exercise of such assumed
Company Option shall be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company
Option was exercisable immediately prior to the Effective Time by the
Common Stock Exchange Ratio (rounded up to the nearest whole cent) It
is the intention of the parties that the Company Options assumed by
Parent shall qualify following the Effective Time as incentive stock
options as defined in section 422 of the Code to the same extent the
Company Options qualified as incentive stock options immediately prior
to the Effective Time. The provisions of this Section 1.6(d)(i) shall be
applied consistent with the intent described in the preceding sentence.
Within thirty (30) Business Days after the Effective Time, Parent will
issue to each person who immediately prior to the Effective Time was a
holder of a Company Option, a document evidencing the foregoing
assumption by Parent, in form and substance acceptable to the Company.
(ii) Each unexpired and unexercised Company Warrant then
outstanding, whether vested or unvested, shall be, in connection with
the Merger, assumed by Parent. Each Company Warrant so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same
terms and conditions as were applicable to such Company Warrant
immediately prior to the Effective Time (including any repurchase rights
or vesting provisions), provided that (A) such Company Warrant shall be
exercisable for that number of whole shares of Parent Common Stock equal
to the product of the number of shares of Company Capital Stock that
were issuable upon exercise of such Company Warrant immediately prior to
the Effective Time (assuming such Company Warrant was exercisable in
full) multiplied by the Exchange Ratio applicable to that class or
series of Company Capital Stock (rounded down to the nearest whole
number of shares of Parent Common Stock) and, for each share of Parent
Common Stock into which such Company Warrant is exercisable, the Per
Share Cash Consideration, if any, shall be payable upon exercise and (B)
the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Warrant shall be equal to
the quotient determined by dividing the exercise price per share of
Company Capital Stock at which such Company Warrant was exercisable
immediately prior to the Effective Time by the Exchange Ratio applicable
to that class or series of Company Capital Stock (rounded up to the
nearest whole cent) Within thirty (30) Business Days after the
Effective Time, Parent will issue to each person who immediately prior
to the Effective Time was a holder of a Company Warrant, a document
evidencing the foregoing assumption by Parent, in form and substance
acceptable to the Company.
(iii) Parent shall assume the Company's obligations, and shall
be assigned the Company's repurchase rights and repurchase options,
under any Restricted Stock Purchase Agreements entered into pursuant to
the 1997 Stock Plan and the 1999 Stock Plan (the "Company Stock Plans")
and the other
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restricted stock purchase agreements listed on Section 1.6(d)(iii) of
the Company Disclosure Schedule, true and correct copies of which have
been made available by the Company to Parent. Except as provided in
Section 1.6(d)(iv), any and all restrictions on the Company Restricted
Stock issued pursuant to the Company Stock Plans or such other
agreements which do not lapse in accordance with their terms shall
continue in full force and effect until such restrictions lapse pursuant
to the terms of such agreements, and any repurchase rights or repurchase
options which the Company has with respect to the Company Restricted
Stock shall also continue in full force and effect; provided, however,
that the per share repurchase price for the shares of Parent Common
Stock subject to any such repurchase right or repurchase option shall be
equal to the quotient determined by dividing the per share repurchase
price of such Company Restricted Stock immediately prior to the
Effective Time by the Exchange Ratio applicable to that class or series
of Company Capital Stock (rounded up to the nearest whole cent and
reduced by the amount of Per Share Cash Consideration, if any, paid by
Parent with respect to such share).
(iv) The Company agrees to take all actions necessary or
advisable to cause all Company Options, Company Warrants and Company
Restricted Stock to remain unchanged except for the conversion into
options, warrants or rights to purchase shares of Parent Common Stock as
provided for in this Section 1.6(d).
(e) Increase in Consideration. If the Closing Price is below $5.1613,
the Company shall have the right, but not the obligation, to terminate this
Agreement pursuant to Section 8.1, if, but only if, Parent does not increase the
value of the aggregate consideration to be offered to the Company's
securityholders (including the Aggregate Share Number) to at least eighty
million dollars ($80,000,000) (based on the Closing Price) In connection with
the potential increase in the aggregate consideration set forth in the preceding
sentence, Parent may issue (i) additional shares of Parent Common Stock in
excess of 15,500,000 shares (as adjusted pursuant to Section 1.8 hereof), (ii)
cash in lieu of additional shares of Parent Common Stock in excess of 15,500,000
shares (as adjusted pursuant to Section 1.8 hereof) or (iii) both shares of
Parent Common Stock and cash, such that the value of the aggregate number of
shares of Parent Common Stock (based on the Closing Price) combined with such
cash payments equals at least eighty million dollars ($80,000,000) In no event
shall Parent be required to issue more shares of Parent Common Stock than
15,500,000 shares (as adjusted pursuant to Section 1.8 hereof) The aggregate
amount of the cash payments made by Parent pursuant to this Section 1.6(e), if
any, is referred to herein as the "Aggregate Cash Amount." The aggregate amount
of the additional shares of Parent Common Stock offered by Parent pursuant to
this Section 1.6(e), if any, is referred to herein as the "Additional Share
Number."
(f) Capital Stock of Merger Sub. Each share of Common Stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted automatically into and become one (1) validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
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1.7 Reservation of Shares. Parent will reserve sufficient shares of
Parent Common Stock for issuance pursuant to Section 1.6.
1.8 Adjustments to Exchange Ratios. The Exchange Ratios shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock combination, stock dividend (including any dividend or distribution
of securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Parent Common Stock or Company Capital Stock the effective date of
which occurs after the date hereof and prior to the Effective Time.
1.9 Fractional Shares. No fraction of a share of Parent Common Stock
will be issued in the Merger, but in lieu thereof, each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall be entitled to receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (a)
such fraction, multiplied by (b) the Closing Price.
1.10 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with Delaware Law or
the California Code, as applicable, and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting
Shares") shall not be converted into or represent a right to receive Parent
Common Stock pursuant to Section 1.6, but the holder thereof shall only be
entitled to such rights as are granted by Delaware Law or the California Code,
as applicable.
(b) Notwithstanding the provisions of Section 1.10(a) above, if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Delaware Law or the California Code shall effectively withdraw or lose
(through failure to perfect or otherwise) the right to appraisal, then, as of
the later of (i) the Effective Time or (ii) the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive Parent Common Stock and for each share of Parent Common Stock
to be received, the Per Share Cash Consideration, if any, as provided in Section
1.6, without interest thereon, upon surrender to the Company of the certificate
representing such shares in accordance with Section 1.11.
(c) The Company shall give Parent (i) prompt notice of its receipt of
any written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to Delaware Law or the California Code and received by the
Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Delaware Law or the
California Code. The Company shall not, except with the prior written consent of
Parent or as may be required under applicable law, voluntarily make any payment
with respect to any demands for appraisal of Company Capital Stock or offer to
settle or settle any such demands.
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1.11 Exchange Procedures.
(a) Parent Common Stock. On the Closing Date, Parent shall deposit
with the Exchange Agent for exchange in accordance with Section 1.6(a), the
aggregate number of shares of Parent Common Stock issuable as of the Effective
Time in exchange for outstanding shares of Company Capital Stock as of the
Effective Time (excluding any shares of Parent Common Stock which may be issued
upon exercise of Company Options or Company Warrants) (the "Parent Closing Date
Shares"), the aggregate amount of cash equal to the product of the Parent
Closing Date Shares multiplied by the Per Share Cash Consideration, if any, and
cash in an amount sufficient to permit the payment of cash in lieu of fractional
shares pursuant to Section 1.9; provided, however, that, on behalf of the
holders of Company Capital Stock as of the Effective Time, Parent shall deposit
into an escrow account a number of shares of Parent Common Stock equal to the
Escrow Amount. The portion of the Escrow Amount contributed on behalf of each
holder of Company Capital Stock shall be in proportion to the aggregate number
of shares of Parent Common Stock which such holder would otherwise be entitled
to receive by virtue of ownership of outstanding shares of Company Capital
Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock (the
"Certificates") and which shares were converted into the right to receive shares
of Parent Common Stock (and cash, as the case may be) pursuant to Section 1.6,
(i) a letter of transmittal in customary form (which letter of transmittal shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Common Stock, cash in lieu of fractional shares and, for each share of Parent
Common Stock to be received, the Per Share Cash Consideration, if any. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions contained therein, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock
to be deposited in the Escrow Fund on such holder's behalf pursuant to Article
7) and, for each share of Parent Common Stock to be received by such holder, the
Per Share Cash Consideration, if any, to which such holder is entitled pursuant
to Section 1.6 and cash in lieu of fractional shares to which such holder is
entitled pursuant to Section 1.9, and the Certificate so surrendered shall be
canceled. As soon as practicable after the Effective Time, and subject to and in
accordance with the provisions of Article 7, Parent shall cause to be
distributed to the Escrow Agent a certificate or certificates (in such
denominations as may be requested by the Escrow Agent) representing that number
of shares of Parent Common Stock equal to the Escrow Amount, which certificate
or certificates shall be registered in the name of the Escrow Agent. Such shares
shall be beneficially owned by the holders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Parent as
provided in Article 7. Until surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Company Capital Stock will be
deemed from and after the Effective Time, for all corporate purposes, other than
the payment of
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dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Capital Stock shall have been so
converted (subject only to, if applicable, the expiration or early termination
of any waiting period under the HSR Act which is applicable to the holder of
such shares) and cash in lieu of fractional shares and, for each share of Parent
Common Stock to be received, the Per Share Cash Consideration, if any.
(c) Distributions With Respect to Unexchanged Shares of Company
Capital Stock. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this Section 1.11(c)) with respect to such whole shares of Parent Common Stock.
(d) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued pursuant to the Merger in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that (i) the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent designated
by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock in any name other than that of the
registered holder of the Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable and (ii) if requested by Parent, the Person surrendering such
Certificate shall provide Parent with an opinion of counsel, acceptable to
Parent, that such transfer does not violate state or federal securities laws.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 1.11, neither the Exchange Agent, the Surviving Corporation, Parent,
Merger Sub nor any party hereto shall be liable to a holder of shares of Company
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.12 No Further Ownership Rights in Company Capital Stock. All cash
consideration, if any, and all shares of Parent Common Stock issued upon the
surrender for exchange of shares of Company Capital Stock in accordance with the
terms hereof (including any cash in lieu of fractional shares) shall be deemed
to have been issued, and any cash consideration shall be deemed to have been
paid, in full satisfaction of all rights pertaining to such shares of Company
Capital Stock, and there shall be no further registration of transfers on the
records of the Company of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 1.
1.13 Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article 1 such amounts as it is required
to deduct and withhold with respect to the making
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of such payment under any provision of federal, state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Company
Capital Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
1.14 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue certificates representing
such shares of Parent Common Stock, cash in lieu of fractional shares and any
cash consideration, if applicable, in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof; provided, however, that Parent or the Exchange Agent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to provide an indemnity or
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.15 Tax Consequences. It is intended by the parties that the Merger
shall constitute a reorganization within the meaning of section 368(a) of the
Code. The parties hereto hereby adopt this Agreement as the "plan of
reorganization" within the meaning of sections 354(a) and 361(a) of the Code and
as described in sections 1.368-2(a) and 1.368.3(a) of the Income Tax
Regulations.
1.16 Exemption From Registration; California Permit Parent and the
Company intend that the shares of Parent Common Stock to be issued pursuant to
Section 1.6 in connection with the Merger will be issued in a transaction exempt
from registration under the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder (the "Securities Act"), by
reason of section 3(a)(10) thereof or, pursuant to Section 5.1(c) hereof, by
reason of section 4(2) of the Securities Act. Subject to the provisions of
Section 5.1(c) hereof, Parent and the Company intend that the shares of Parent
Common Stock to be issued pursuant to Section 1.6 in connection with the Merger
will be qualified under the California Code, pursuant to section 25121 thereof,
after a fairness hearing has been held pursuant to the authority granted by
section 25142 of such law (the "Fairness Hearing"), and such Fairness Hearing
shall also address the assumption by Parent of all Company Options and Company
Warrants pursuant to Section 1.6. Each of Parent and the Company shall use
commercially reasonable efforts (i) to file promptly following the execution and
delivery of this Agreement, an application for issuance of a permit pursuant to
section 25121 of the California Code to issue such securities and to assume such
Company Options, Company Warrants and Company Stock Purchase Rights required by
this Agreement to be assumed by Parent (the "California Permit") and (ii) to
obtain the California Permit as promptly as practicable thereafter.
1.17 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, or to effect the assignment to the
Surviving Corporation of any and all Company Intellectual Property created by a
founder, employee or consultant of the Company, or to complete and prosecute all
domestic and foreign
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patent filings related to such Company Intellectual Property, the officers and
directors of the Surviving Corporation are fully authorized to take, and will
take, all such lawful and necessary action so long as such action is not
inconsistent with this Agreement.
Article 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and Merger
Sub, subject to such exceptions as are specifically disclosed with respect to
specific numbered and lettered sections and subsections of this Article 2 in the
disclosure schedule and schedule of exceptions (the "Company Disclosure
Schedule") delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections contained in this
Agreement that it relates to. Applicable information so disclosed with
specificity on the Company Disclosure Schedule under one section or subsection
shall be deemed to be disclosed and incorporated into another section or
subsection under the Company Disclosure Schedule if the applicability of such
information is readily apparent to such other section or subsection.
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the state of
its incorporation, and has full corporate power and authority to conduct its
business as now conducted and as currently proposed to be conducted and to own,
use, license and lease its Assets and Properties. The Company is duly qualified,
licensed or admitted to do business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership, use, licensing or
leasing of its Assets and Properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for such
failures to be so duly qualified, licensed or admitted and in good standing that
could not reasonably be expected to have a Material Adverse Effect on the
Business or Condition of the Company. Section 2.1 of the Company Disclosure
Schedule sets forth each jurisdiction where the Company is so qualified,
licensed or admitted to do business and separately lists each other jurisdiction
in which the Company owns, uses, licenses or leases its Assets and Properties,
or conducts business or has employees or engages independent contractors.
2.2 Authority Relative to this Agreement. Subject only to the requisite
approval of the Merger and this Agreement and the transactions contemplated
hereby by the stockholders of the Company, the Company has full corporate power
and authority to execute and deliver this Agreement and the other agreements
which are attached (or forms of which are attached) as exhibits hereto (the
"Ancillary Agreements") to which the Company is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Company's board of directors has approved
this Agreement and declared its advisability. The execution and delivery by the
Company of this Agreement and the Ancillary Agreements to which the Company is a
party and the consumma-
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tion by the Company of the transactions contemplated hereby and thereby, and the
performance by the Company of its obligations hereunder and thereunder, have
been duly and validly authorized by all necessary action by the board of
directors of the Company, and no other action on the part of the board of
directors of the Company is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which the Company
is a party and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the Ancillary Agreements to which the
Company is a party have been or will be, as applicable, duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof (and, in the case of the Ancillary Agreements to
which Parent is a party, thereof) by Parent and/or the other parties thereto,
each constitutes or will constitute, as applicable, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
2.3 Capital Stock.
(a) As of the date of execution of this Agreement, the authorized
capital stock of the Company consists only of 75,000,000 shares of Common Stock,
$0.001 par value per share (the "Company Common Stock"), of which 10,225,450
shares of Common Stock are issued and outstanding as of the date hereof, and
35,677,301 shares of Preferred Stock, $0.001 par value per share (the "Company
Preferred Stock"). The designation and status of the Company Preferred Stock is
as follows: (i) 2,494,070 shares are designated as Series A Preferred Stock (the
"Company Series A Preferred Stock"), all of which are issued and outstanding as
of the date hereof, (ii) 2,580,644 shares are designated as Series B Preferred
Stock (the "Company Series B Preferred Stock"), 2,258,058 of which are issued
and outstanding as of the date hereof, (iii) 3,162,592 shares are designated as
Series C Preferred Stock (the "Company Series C Preferred Stock"), 3,162,584 of
which are issued and outstanding as of the date hereof, (iv) 10,200,000 shares
are designated as Series D Preferred Stock (the "Company Series D Preferred
Stock"), 10,193,544 of which are issued and outstanding as of the date hereof,
(v) 7,639,995 shares are designated as Series E Preferred Stock (the "Company
Series E Preferred Stock"), 7,633,329 of which are issued and outstanding as of
the date hereof, (vi) 5,627,267 shares are designated as Series F Preferred
Stock (the "Company Series F Preferred Stock"), all of which are issued and
outstanding as of the date hereof, (vii) 3,372,733 shares are designated as
Series G Preferred Stock (the "Company Series G Preferred Stock"), 2,090,907 of
which are issued and outstanding as of the date hereof, and (viii) 600,000
shares are designated as Series H Preferred Stock (the "Company Series H
Preferred Stock"), 571,009 of which are issued and outstanding as of the date
hereof. Upon the filing of the Company Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware, the authorized Company
Common Stock will consist of 125,000,000 shares of Company Common Stock. All of
the issued and outstanding shares of Company Common Stock and Company Preferred
Stock are validly issued, fully paid and nonassessable, and have been issued in
compliance with all applicable federal and state securities Laws. Except as
described above or as set forth in Section 2.3(a) of the Company Disclosure
Schedule, no shares of Company Common Stock or Company Preferred Stock are held
in treasury or are authorized or reserved for issuance.
(b) Section 2.3(b) of the Company Disclosure Schedule lists the name,
address and state of residence of each holder of Company Capital Stock (as
provided by such holder to the Company), and the number of shares of Company
Capital Stock held by such holder. Except as disclosed in Section 2.3(b) of the
Disclosure Schedule, there are no other shares of Company Capital Stock
outstanding.
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(c) With respect to any Company Common Stock or Company Preferred Stock
that has been issued and is currently outstanding subject to a repurchase option
on the part of the Company, Section 2.3(c) of the Company Disclosure Schedule
sets forth the holder thereof, the number and type of securities covered
thereby, and the vesting schedule thereof (including a specific description of
the circumstances under which such vesting schedule for each such security can
or will be accelerated).
(d) With respect to each Company Option, Company Warrant or other
agreements, arrangements or understandings to which the Company is a party
(written or oral) to issue any Options or any other equity securities with
respect to the Company, Section 2.3(d) of the Company Disclosure Schedule sets
forth the holder thereof, the number and type of securities issuable thereunder,
and, if applicable, the exercise price therefor, the term of the Company Option,
Company Warrant or arrangement and vesting schedule thereof (including a
specific description of the circumstances under which such vesting schedule for
each such security can or will be accelerated) Except as set forth in Section
2.3(d) of the Company Disclosure Schedule, there are no outstanding Company
Options, Company Warrants, Company Stock Purchase Rights, Restricted Stock
Purchase Agreements or shares of Company Restricted Stock or agreements,
arrangements or understandings to which the Company is a party (written or oral)
to issue any Options with respect to the Company. All of the Company Options and
Company Warrants were issued in compliance with all applicable federal and state
securities Laws.
(e) Except as set forth in Section 2.3(e) of the Company Disclosure
Schedule, there are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of Company Capital Stock created by statute, the certificate of incorporation or
bylaws of the Company, or any agreement or other arrangement to which the
Company is a party (written or oral) or to which it is bound and there are no
agreements, arrangements or understandings to which the Company is a party
(written or oral) pursuant to which the Company has the right to elect to
satisfy any Liability by issuing Company Common Stock or Equity Equivalents.
(f) The terms of the Company Stock Plans and the applicable stock option
agreements related to the outstanding Company Options permit the assumption or
substitution of options to purchase Parent Common Stock as provided in this
Agreement, without the consent or approval of the holders of such securities,
Company Stockholder Action or otherwise and without any acceleration of the
exercise schedule or vesting provisions in effect for those Company Options.
True and complete copies of (i) the forms of and (ii) the "cover pages"
(including the signature page of the optionee) of all agreements and instruments
relating to or issued under the Company Stock Plan have been provided to (or
made available to) Parent and such agreements and instruments have not been
amended, modified or supplemented, and there are no agreements to amend, modify
or supplement such agreements or instruments in any case from the form provided
to Parent. Except for the Support Agreements and as set forth in Section 2.3(f)
of the Company Disclosure Schedule, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement, arrangement or understanding between or among any Persons which
affects, restricts or relates to voting, giving of written consents, dividend
rights or transferability of shares with respect to the Company Capital Stock,
including any voting trust agreement or proxy.
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(g) Except as set forth in Section 2.3(g) of the Company Disclosure
Schedule, no debt securities of the Company are issued and outstanding. For
purposes of this Section 2.3(g), the term debt securities shall only include
promissory notes or like instruments.
2.4 No Subsidiaries. The Company has no (and prior to the Closing will
have no) Subsidiaries and does not (and prior to the Closing will not) otherwise
hold any equity, membership, partnership, joint venture or other ownership
interest in any Person other than its participation in a joint venture through
Charter Communication JV, LLC, a Delaware limited liability company.
2.5 Directors and Officers. The names of each director and officer of
the Company on the date hereof, and his or her position with the Company, are
listed in Section 2.5 of the Company Disclosure Schedule.
2.6 No Conflicts. The execution and delivery by the Company of this
Agreement and the Ancillary Agreements to which the Company is a party does not,
and the performance by the Company of its obligations under this Agreement and
the Ancillary Agreements to which the Company is a party and the consummation of
the transactions contemplated hereby and thereby do not and will not:
(a) except as disclosed in Section 2.6(c) of the Company Disclosure
Schedule, conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of the
Company;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 2.6(c) of the Company
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any Law or Order applicable to the Company or any of its Assets and Properties;
or
(c) except as disclosed in Section 2.6(c) of the Company Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute a default (or an event that, with or without notice or lapse of time
or both, would constitute a default) under, (iii) require the Company to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of (except for (A) the filing of the
Certificate of Merger, together with the required officers' certificates; (B)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state or federal securities
laws; and (C) such filings as may be required under the HSR Act), (iv) result in
or give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon the Company
or any of its Assets and Properties under or (vii) result in the loss of any
material benefit under, any of the terms, conditions or provisions of any
Material Contract or License to which the Company is a party or by which any of
the Company's Assets and Properties is bound.
2.7 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of the Company have been provided
or made available to
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Parent or its counsel prior to the execution of this Agreement, are complete and
correct in all respects and have been maintained in accordance with sound
business practices. Such minute books contain a true and complete record of all
actions taken at all meetings and by all written consents in lieu of meetings of
the directors, stockholders and committees of the board of directors of the
Company from the date of the Company's incorporation through the date hereof.
The Company has prior to the execution of this Agreement delivered to Parent
true and complete copies of its certificate of incorporation and bylaws, both as
amended through the date hereof. The Company is not in violation of any
provisions of its certificate of incorporation or bylaws.
2.8 Company Financial Statements.
(a) Section 2.8(a) of the Company Disclosure Schedule sets forth the
Company Financials. The Company Financials delivered to Parent are correct and
complete in all material respects and have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated and consistent
with each other (except as may be indicated in the notes thereto as delivered to
Parent prior to the date hereof, and, in the case of the Interim Financial
Statements, subject to normal year-end adjustments, which adjustments will not
be material in amount or significance) The Company Financials present fairly and
accurately (except as may be indicated in the notes thereto) the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject, in the case of the Interim Financial
Statements, to normal year-end adjustments, which adjustments will not be
material in amount or significance and except that the Interim Financial
Statements may not contain footnotes.
(b) Except as set forth in Section 2.8(b) of the Company Disclosure
Schedule, since December 31, 1999 there has been no change in any accounting
policies, principles, methods or practices, including any change with respect to
reserves (whether for bad debts, contingent liabilities or otherwise), of the
Company.
2.9 Absence of Changes. Since January 31, 2001, except as set forth in
Section 2.9 of the Company Disclosure Schedule, there has not been any Material
Adverse Effect upon the Business or Condition of the Company or any occurrence
or event which, individually or in the aggregate, could be reasonably expected
to have any Material Adverse Effect upon the Business or Condition of the
Company, except for (x) any intellectual property lawsuit filed by parties
disclosed to Parent on Schedule 6.3(j) prior to the date hereof, (y) any
decrease in the Company's cash balances or (z) the delay or cancellation of
orders for the Company's products from customers or distributors (or other
resellers) directly attributable to the announcement of the Merger. Since the
beginning of its 2001 fiscal year, the Company has operated its business
substantially in accordance with its Operating Plan (a copy of which has been
provided to Parent) In addition, without limiting the generality of the
foregoing, except as expressly contemplated or permitted by this Agreement
(including, but not limited to, activities not prohibited by Section 4.1 or as
otherwise consented to by Parent in writing) and except as disclosed in Section
2.9 of the Company Disclosure Schedule, since January 31, 2001:
(a) the Company has not entered into any Contract, commitment or
transaction or incurred any Liabilities outside of the Company's Ordinary Course
of Business;
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(b) the Company has not entered into any Contract in connection with any
transaction involving a Business Combination;
(c) there has not been any material amendment or other material
modification (or agreement to do so) or material violation of the terms of any
Material Contracts, except as described in Section 2.9(c) of the Company
Disclosure Schedule or any material amendments or modifications to such Material
Contracts that result in additional costs to the Company in excess of the costs
agreed to in such Material Contract;
(d) the Company has not entered into any transaction with any officer,
director, stockholder, Affiliate or Associate of the Company, other than (i)
pursuant to any Contract in effect on January 31, 2001 and disclosed to Parent
pursuant to (and identified in) Section 2.9(d), Section 2.18(a) or Section 2.20
of the Company Disclosure Schedule or (ii) pursuant to any contract of
employment and listed pursuant to Section 2.18(a) of the Company Disclosure
Schedule;
(e) no Action or Proceeding has been commenced or, to the knowledge of
the Company, threatened by or against the Company except as set forth in Section
2.9(e) of the Company Disclosure Schedule;
(f) the Company has not declared or set aside or paid any dividends on
or made any other distributions (whether in cash, stock or property) in respect
of any Company Capital Stock or Equity Equivalents, or effected or approved any
split, combination or reclassification of any Company Capital Stock or Equity
Equivalents or issued or authorized the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Company Capital Stock or
Equity Equivalents, or repurchased, redeemed or otherwise acquired, directly or
indirectly, any shares of Company Capital Stock or Equity Equivalents, except
repurchases of Company Capital Stock pursuant to agreements with Company
employees, officers, directors and consultants relating to repurchases at cost
upon termination of service with the Company except as set forth in Section
2.9(f) of the Company Disclosure Schedule;
(g) except for (i) the issuance of shares of Company Capital Stock upon
exercise or conversion of then-outstanding Company Options, Company Warrants or
Company Preferred Stock listed in Section 2.3(b) of the Company Disclosure
Schedule or (ii) the issuance of options available for grant under the Company's
existing Company Stock Plans in the Company's Ordinary Course of Business to
employees hired after December 31, 2000 on terms and in amounts consistent with
past practice, the Company has not issued, granted, delivered, sold or
authorized or proposed to issue, grant, deliver or sell, or purchased or
proposed to purchase, any shares of Company Capital Stock or Equity Equivalents
, except as set forth in Section 2.9(g) of the Company Disclosure Schedule;
(h) there has not been any amendment to the Company's certificate of
incorporation or bylaws other than the filing of the Company Restated
Certificate of Incorporation attached hereto as Exhibit N;
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(i) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any Company Intellectual Property other
than in the Company's Ordinary Course of Business;
(j) the Company has not made or agreed to make any disposition or sale
of, waiver of rights to, license or lease of, or incurrence of any Lien in an
amount exceeding one hundred thousand dollars ($100,000) individually or two
hundred fifty thousand dollars ($250,000) in the aggregate, on any Assets and
Properties of the Company, other than dispositions of inventory, subleases of
real property, or nonexclusive licenses of Company Intellectual Property, in the
Company's Ordinary Course of Business;
(k) the Company has not made or agreed to make any purchase of any
Assets and Properties of any Person other than (i) acquisitions of inventory, or
licenses of products, in the Company's Ordinary Course of Business and (ii)
other acquisitions in an amount not exceeding one hundred thousand dollars
($100,000) in the case of any individual item or two hundred fifty thousand
dollars ($250,000) in the aggregate;
(l) the Company has not made or agreed to make any capital expenditures
or commitments for additions to property, plant or equipment of the Company
constituting capital assets individually or in the aggregate in an amount
exceeding two hundred fifty thousand dollars ($250,000);
(m) the Company has not made or agreed to make any write-off or
write-down or made any determination to write off or write-down, or revalue, any
of the Assets and Properties of the Company (other than, in any case, a set-off
against any of the Assets or Properties of the Company), or change any reserves
or liabilities associated therewith, individually or in the aggregate in an
amount exceeding two hundred fifty thousand dollars ($250,000);
(n) the Company has not made or agreed to make any payment, discharge or
satisfaction, in an amount in excess of fifty thousand dollars ($50,000), in any
one case, or one hundred thousand dollars ($100,000) in the aggregate, of any
claim, Liability or obligation (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the Company's Ordinary Course of Business of Liabilities
reflected or reserved against in the Company Financials in an amount no more
than one hundred twenty-five percent (125%) of the amount reserved for such
Liabilities in the Company Financials.
(o) the Company has not incurred any Indebtedness or guaranteed any
Indebtedness in an aggregate amount exceeding fifty thousand dollars ($50,000)
or issued or sold any debt securities of the Company or guaranteed any debt
securities of others other than (i) in the Company's Ordinary Course of
Business, (ii) as contemplated by the Second Credit Agreement, or (iii) in
connection with outstanding indebtedness with existing trade creditors that is
converted to promissory notes, except as set forth in Section 2.9(o) of the
Company Disclosure Schedule;
(p) except pursuant to a Contract disclosed to Parent pursuant to
Section 2.9(d) or Section 2.18(a) of the Company Disclosure Schedule, as set
forth in the Company Financials or as set forth in Section 2.9(p) of the Company
Disclosure Schedule, the Company has not granted
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or approved any increase of greater than five percent (5%) in salary, rate of
commissions, rate of consulting fees or any other compensation of any current or
former officer, director, stockholder, employee, or independent contractor of,
or advisor or consultant to, the Company, other than the cash or stock payments
to employees of the Company set forth on Schedule 5.5 of this Agreement;
(q) the Company has not paid or approved the payment of any
consideration of any nature whatsoever that is in excess of twenty-five thousand
dollars ($25,000) (other than salary, commissions, consulting fees, customary
benefits or amounts reserved against in the Company Financials) to any current
or former officer, director, stockholder, employee or independent contractor of,
or consultant or advisor to, the Company, other than the cash or stock payments
to employees of the Company set forth on Schedule 5.5 of this Agreement or as
set forth in Section 2.9(q) of the Company Disclosure Schedule;
(r) the Company has not established or materially modified any (i)
targets, goals, pools or similar provisions under any Plan, employment Contract
or other employee compensation arrangement or independent contractor Contract or
other compensation arrangement or (ii) salary ranges, increased guidelines or
similar provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement, other than the cash or stock payments to employees of
the Company set forth on Schedule 5.5 of this Agreement;
(s) the Company has not adopted, entered into or terminated (partially
or completely), or materially amended or modified any Plan, except as set forth
in Section 2.9(s) of the Company Disclosure Schedule;
(t) the Company has not paid or agreed or made any commitment to pay any
discretionary or stay bonus, other than the cash or stock payments to employees
of the Company set forth on Schedule 5.5 of this Agreement;
(u) the Company has not made or changed any material election in respect
of Taxes, adopted or changed any accounting method in respect of Taxes, entered
into any tax allocation agreement, tax sharing agreement, tax indemnity
agreement or closing agreement, settlement or compromise of any claim or
assessment in respect of Taxes, or consented to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes with
any Taxing Authority or otherwise, other than in the Company's Ordinary Course
of Business;
(v) the Company has not made any change in accounting policies,
principles, methods, practices or procedures (including for bad debts,
contingent liabilities or otherwise, respecting capitalization or expense of
research and development expenditures, depreciation or amortization rates or
timing of recognition of income and expense);
(w) the Company has not commenced or terminated, or made any change in,
any line of business other than the change in the Company's business focus to a
software licensing business model as reflected in the business model adopted by
the Company in November 2000;
(x) the Company has not failed to renew any material insurance policy;
no material insurance policy of the Company has been cancelled or materially
amended; and the Company
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has given all notices and presented all claims (if any) under all such policies
in a timely fashion, except as set forth in Section 2.9(x) of the Company
Disclosure Schedule;
(y) there has been no material amendment or non-renewal of any of the
Company's Approvals, and the Company has used commercially reasonable efforts to
maintain such Approvals and has observed in all material respects all Laws and
Orders applicable to the conduct of the Company's business or the Company's
Assets and Properties;
(z) the Company has taken all action required to procure, maintain,
renew, extend or enforce any Company Intellectual Property, including submission
of required documents or fees during the prosecution of patent, trademark or
other applications for Registered Intellectual Property rights with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions where the Company has filed documents for such purpose;
(aa) there has been no physical damage, destruction or other casualty
loss (whether or not covered by insurance) affecting any of the real or personal
property or equipment of the Company individually or in the aggregate in an
amount exceeding one hundred thousand dollars ($100,000);
(bb) the Company has not repurchased, cancelled or modified (including
to accelerate, reduce or alter the consideration to be paid to the Company upon
the exercise of any outstanding Company Options, Company Warrants or other
Equity Equivalents or accelerate the vesting of any such Company Option, Company
Warrant, Company Stock Purchase Right or other Equity Equivalents) the terms of
any Company Capital Stock, Equity Equivalents, Company Options, Company Warrants
or other financial instrument that derives value from its convertibility into
Company Capital Stock or Equity Equivalents (except as contemplated by the
filing of the Company Restated Certificate of Incorporation attached hereto as
Exhibit N or as otherwise approved in writing by Parent prior to the date
hereof), other than transactions entered into in the Company's Ordinary Course
of Business and pursuant to either (i) contractual provisions or (ii) the
Company Stock Plans, in each case as in effect at the time of execution and
delivery of this Agreement; and
(cc) the Company has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in or cause or having the effect of any of the
foregoing, including with respect to any Business Combination not otherwise
restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the Company Financials (including the notes thereto) or as disclosed
in Section 2.10 of the Company Disclosure Schedule, there are no Liabilities of,
relating to or affecting the Company or any of its Assets and Properties, other
than Liabilities incurred (a) in the Company's Ordinary Course of Business since
the Audited Financial Statement Date or (b) in accordance with the provisions of
this Agreement, which, individually and in the aggregate, (i) are not material
to the Business or Condition of the Company, and (ii) are not for tort or for
breach of contract.
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2.11 Taxes. Except as set forth in Section 2.11 of the Company
Disclosure Schedule:
(a) All Tax Returns required to have been filed by or with respect to
the Company or any affiliated, consolidated, combined, unitary or similar group
of which the Company is or was a member (a "Relevant Group") have been duly and
timely filed (including any extensions), and each such Tax Return correctly and
completely reflects Tax liability and all other information required to be
reported thereon. All such Tax Returns are true, complete and correct in all
material respects. All Taxes due and payable by the Company or any member of a
Relevant Group, whether or not shown on any Tax Return, or claimed to be due by
any Tax Authority, for periods (or portions of periods) covered by the Company
Financials, have been paid or accrued on the balance sheet included in the
Company Financials, except as set forth in Section 2.11(a) of the Company
Disclosure Schedule.
(b) The Company has incurred no material liability for Taxes in the
period after the date of the balance sheet included in the Interim Financial
Statements other than in the Company's Ordinary Course of Business. The unpaid
Taxes of the Company (i) did not, as of the date of the balance sheet included
in the Interim Financial Statements, exceed by any material amount the reserve
for Liability for Income Tax (other than the reserve for deferred taxes
established to reflect timing differences between book and tax income) or Other
Tax set forth on the face of the balance sheet included in the Company
Financials and (ii) will not exceed by any material amount such reserve as
adjusted for operations and transactions in the ordinary course of business
through the Closing Date.
(c) Except as set forth in Section 2.11(c) of the Company Disclosure
Schedule, the Company is not a party to any agreement extending the time within
which to file any Tax Return. No claim has ever been made by a Taxing Authority
of any jurisdiction in which the Company or any member of any Relevant Group
does not file Tax Returns that the Company or such member is or may be subject
to taxation by that jurisdiction.
(d) Except as set forth in Section 2.11(d) of the Company Disclosure
Schedule, the Company and each member of any Relevant Group has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor or independent contractor.
(e) The Company does not have knowledge of any actions by any Taxing
Authority in connection with assessing additional Taxes against or in respect of
it or any Relevant Group for any past period. There is no dispute or claim
concerning any Tax Liability of the Company either (i) threatened, claimed or
raised by any Taxing Authority or (ii) of which the Company is otherwise aware.
There are no Liens for Taxes upon the Assets and Properties of the Company other
than Liens for Taxes not yet due. Section 2.11(e) of the Company Disclosure
Schedule indicates those Tax Returns, if any, of the Company and each member of
any Relevant Group that have been audited or examined by Taxing Authorities, and
indicates those Tax Returns of the Company and each member of any Relevant Group
that currently are the subject of audit or examination. The Company has
delivered to Parent complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company and
each member of any Relevant Group since the fiscal year ended December 31, 1997.
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(f) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company or with
respect to any Tax assessment or deficiency affecting the Company or any
Relevant Group.
(g) The Company has not received any written ruling related to Taxes or
entered into any agreement with a Taxing Authority relating to Taxes.
(h) Except as set forth in Section 2.11(h) of the Company Disclosure
Schedule, the Company has no liability for the Taxes of any Person other than
the Company (i) under section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign Law), (ii) as a transferee or
successor, (iii) by Contract or (iv) otherwise.
(i) The Company (i) has neither agreed to make nor is required to make
any adjustment under section 481 of the Code by reason of a change in accounting
method and (ii) is not a "consenting corporation" within the meaning of section
341(f)(1) of the Code.
(j) Except as set forth in Section 2.11(j) of the Company Disclosure
Schedule, the Company is not a party to or bound by any obligations under any
tax sharing, tax allocation, tax indemnity or similar agreement or arrangement.
(k) The Company is not involved in, subject to, or a party to any joint
venture, partnership, Contract or other arrangement that is treated as a
partnership for federal, state, local or foreign Income Tax purposes other than
as may be the case with respect to the Charter Communications JV, LLC.
(l) The Company was not included and is not includible in the Tax Return
of any Relevant Group with any corporation other than such a return of which the
Company is the common parent corporation.
(m) Except as set forth in Section 2.11(m) of the Company Disclosure
Schedule, the Company has not made any payments, is not obligated to make any
payments, nor is a party to any contract, agreement or arrangement covering any
current or former employee or consultant of the Company that under certain
circumstances could require it to make or give rise to any payments that are not
deductible as a result of the provisions set forth in section 280G of the Code
or the treasury regulations thereunder or would result in an excise tax to the
recipient of any such payment under section 4999 of the Code.
(n) Each material election with respect to income Taxes affecting the
Company are set forth in the Tax Returns of the Company.
(o) The Company is not nor has it ever been a United States real
property holding corporation within the meaning of section 897(c)(1)(A)(ii) of
the Code.
(p) None of the assets of the Company constitutes tax-exempt bond
financed property or tax-exempt use property, within the meaning of section 168
of the Code. The Company is not a party to any "safe harbor lease" that is
subject to the provisions of section 168(f)(8) of the
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Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to
any "long-term contract" within the meaning of section 460 of the Code.
(q)The Company has substantial authority for the treatment of, or has
disclosed (in accordance with section 6662(d)(2)B)(ii) of the Code) on its
federal income Tax Returns, all positions taken on its relevant federal income
Tax Returns that could give rise to a substantial understatement of federal
income Tax within the meaning of section 6662(d) of the Code.
2.12 Legal Proceedings.
(a) Except as set forth in Section 2.12(a) of the Company Disclosure
Schedule:
(i) there are no Actions or Proceedings pending (other than
Actions or Proceedings that may relate to indebtedness set forth in the
Company Financials or in Section 2.10 of the Company Disclosure
Schedule), relating to or affecting the Company or any of its Assets and
Properties;
(ii) to the knowledge of the Company, there are no Actions or
Proceedings (other than Actions or Proceedings that may relate to
indebtedness set forth in the Company Financials or in Section 2.10 of
the Company Disclosure Schedule) threatened against, relating to or
affecting the Company or any of its Assets and Properties;
(iii) there are no facts or circumstances known to the Company
that could reasonably be expected to give rise to any Action or
Proceeding against, relating to or affecting the Company or any of its
Assets and Properties (other than Actions or Proceedings that may relate
to indebtedness set forth in the Company Financials or in Section 2.10
of the Company Disclosure Schedule);
(iv) the Company has not received notice, and does not otherwise
have knowledge of any Orders outstanding against the Company; and
(v) the Company has not received notice and does not otherwise
have knowledge of any defects, dangerous or substandard conditions in
the products or materials sold, distributed, or currently proposed to be
sold or distributed by the Company that could cause bodily injury,
sickness, disease, death or damage to property, or result in loss of use
of property, or any claim, suit, demand for arbitration or notice
seeking damages for bodily injury, sickness, disease, death, or damage
to property, or loss of use of property.
(b) Prior to the execution of this Agreement, the Company has delivered
to Parent all responses of counsel for the Company to auditor's requests for
information for the preceding three (3) years (together with any updates
provided by such counsel) regarding Actions or Proceedings pending or threatened
against, relating to or affecting the Company. Section 2.12(b) of the Company
Disclosure Schedule sets forth all Actions or Proceedings relating to or
affecting, or, to the knowledge of the Company, threatened against, the Company
or any of its Assets and Properties during the three (3) year period prior to
the date hereof (other than those set forth in Section 2.12(a) of the Company
Disclosure Schedule).
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2.13 Compliance with Laws and Orders. Neither the Company nor any of
its directors, officers, agents or employees has violated, and to the Company's
knowledge no Affiliate has violated, in any material respect since the
incorporation of the Company, or is currently in default or violation in any
material respect under, any Law or Order applicable to the Company or any of its
Assets and Properties, and the Company is not aware of any claim of material
violation, or of any actual material violation, of any such Laws and Orders by
the Company since the incorporation of the Company.
2.14 Employee Benefit Plans and Employee Matters.
(a) Section 2.14(a) of the Company Disclosure Schedule sets forth the
name, current annual compensation rate (including bonus and commissions but not
including the cash payments to employees of the Company set forth on Schedule
5.5 of this Agreement), title (or position or function), current base salary or
wage rate, accrued bonus, accrued sick leave, accrued severance pay, accrued
vacation benefits, in each case as of January 31, 2001, for each present
officer, employee, independent contractor or consultant of the Company;
organizational charts of the Company; each collective bargaining, union or other
employee association agreement to which the Company is party or under which the
Company could have any material liability; each consulting, independent
contractor, employment, managerial, advisory, change in control, retention,
incentive, severance, bonus, relocation, expatriation, repatriation, visa and
work permit agreement, arrangement and understanding, whether written or oral,
between the Company and (i) any current employee, officer or director of, or any
independent contractor or consultant or advisor to, the Company, and (ii) any
former employee, officer or director of, or any independent contractor or
consultant or advisor to, the Company, under which the Company could have any
liability (collectively, the "Employment Agreements"); provided, however, that
Section 2.14(a) of the Company Disclosure Schedule need not include offer
letters the Company has entered into with its employees or consultants if the
Company is not obligated or cannot reasonably be expected to be obligated to pay
more than one hundred thousand dollars ($100,000) for any twelve (12) month
period to such employees or consultants; any reports and/or plans prepared or
adopted pursuant to the Equal Employment Opportunity Act of 1972, as amended;
and each Plan. The Company has no plan or commitment to establish any new Plan
or Employment Agreement, to modify any Plan or Employment Agreement (except to
the extent required by law or to conform any such Plan or Employment Agreement
to the requirements of applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to adopt or enter into
any Plan or Employment Agreement.
(b) For each Plan, each of the following is true:
(i) if such Plan is an employee pension benefit plan (as such
term is defined in ERISA section 3(2)) intended to qualify under the
Code, since 1993 the Plan has received at least one favorable
determination, opinion, notification or advisory letter as to its
qualification under the Code (or such a letter has been or will be
applied for prior to expiration of the applicable remedial amendment
period) from the IRS, and nothing has occurred, whether by action or
failure to act, that would cause the loss of such qualification or that
would result in material costs to the Company under the IRS's Employee
Plans Compliance Resolution System;
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(ii) the financial statements of the Company reflect all
employee liabilities arising under such Plan in a manner satisfying the
applicable requirements of Statement of Financial Accounting Standards
Nos. 87, 88, 106, 112, 123 and 132, each as applicable;
(iii) none of the Company, the members of the Controlled Group
or any other party has, with respect to any Plan, engaged in a
non-exempt prohibited transaction, as such term is defined in Code
section 4975 or ERISA section 406;
(iv) no event has occurred and no condition exists that could
subject the Company or Parent to any Tax under Chapter 43 of the Code or
to a fine under section 502(c) of ERISA;
(v) all contributions, insurance premiums or other payments
required as of the Effective Time have been paid;
(vi) there are no leased employees (as such term is defined in
section 414(n) of the Code) who must be taken into account for the
requirements of section 414(n)(3) of the Code, or, if there are such
employees, they are being taken into account for the requirements of
section 414(n)(3) of the Code and in accordance with the terms of the
applicable Plan;
(vii) there are no audits, inquiries or proceedings pending or,
to the knowledge of the Company, threatened by the IRS, DOL or other
governmental agency with respect to any Plan; and
(viii) each Plan (including any plan covering former employees
or directors of the Company) can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms,
without liability to the Company or Parent (other than ordinary
administrative expenses).
(c) Except as set forth in Section 2.14(c) of the Company Disclosure
Schedule, for each Plan and Employment Agreement, each of the following is true:
(i) there are no actions, suits or claims (other than routine
claims for benefits in the ordinary course) pending, or to the knowledge
of the Company, threatened or reasonably anticipated, and to the
knowledge of the Company, there are no facts that could give rise to any
such actions, suits or claims (other than routine claims for benefits in
the ordinary course);
(ii) the requirements of ERISA, the Code and all other
applicable laws, orders, rules and regulations have been complied with
in all material respects;
(iii) {intentionally omitted};
(iv) the execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated hereunder, either
alone or upon the occurrence of any additional or subsequent events,
will not constitute an
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event under any Plan, Employment Agreement, trust or loan that will or
may result in any payment (whether severance pay, a bonus or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee, director or officer of, or consultant or advisor, to the
Company, except as expressly required by this Agreement or under section
411(d)(3) of the Code. No payment or benefit that will or may be made by
the Company or any member of its Controlled Group with respect to any
such employee, director, officer, consultant or advisor shall be
characterized as a "parachute payment" within the meaning of section
280G(b)(2) of the Code.
(v) the Company has delivered to Parent current, accurate, true
and complete copies of all documents embodying each Employment Agreement
and Plan (including, without limitation, each amendment, trust agreement
and other funding or insurance instrument relating thereto) and with
respect to each Plan, to the extent applicable, copies of the most
recent: (A) summary plan description together with each summary of
material modifications thereto, if any, required under ERISA; (B) IRS
determination, opinion, notification and advisory letters and any
outstanding request, application and correspondence to or from the IRS
or the DOL with respect to any such application or letter; (C) Form 5500
and, if applicable, attached Schedule B (including any related actuarial
valuation report) with respect to the last three (3) plan years; (D) if
the Plan is funded, the most recent annual and periodic accounting of
Plan assets; (E) all material written agreements relating to each Plan,
including, without limitation, administrative service agreements and
group insurance contracts; (F) all communications material to any
employee, officer or director of, or consultant or advisor to, the
Company relating to any Plan, any proposed Plan, any Employment
Agreement and any proposed Employment Agreement, in each case relating
to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other
events that could result in any liability to the Company; (G) any "top
hat" plan notice to the DOL; (I) all correspondence to and from any
governmental agency relating to any Plan or Employment Agreement; (I)
certified financial statements; (J) collective bargaining agreements or
other such contracts; (K) {intentionally omitted}; (L) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for
each Plan; (M) Form 5310 and any related filings with the PBGC; (N) the
general notification to employees of their COBRA rights under Code
section 4980B and ERISA sections 601-609 and the form of letter(s)
distributed upon the occurrence of a COBRA qualifying event for each
Benefit Plan that is a "group health plan" as defined in Code section
5000(b)(1) and ERISA section 607(1); (O) the form of certificate for
HIPAA creditable coverage distributed in accordance with Code section
9801 and ERISA section 701, including, if applicable, the notice of
HIPAA rights issued to individuals for certification events occurring
between October 1, 1996 and May 31, 1997; and (P) all discrimination
tests for each Plan with respect to the last three plan years.
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(d) Neither the Company nor any other member of the Controlled Group
sponsors or maintains (or has ever sponsored or maintained) an "employee pension
benefit plan" (within the meaning of section 3(2) of ERISA) that is subject to
Title IV of ERISA or to the minimum funding requirements of section 412 of the
Code or Part 3 of Title I of ERISA.
(e) Neither the Company nor any other member of the Controlled Group
contributes or is obligated to contribute (or has ever been obligated to
contribute) to a "multiemployer plan" (within the meaning of section 4001(a)(3)
of ERISA).
(f) No Plan is intended to be an employee stock ownership plan (within
the meaning of section 4975(e)(7) of the Code) or a tax credit employee stock
ownership plan (within the meaning of section 409(a) of the Code).
(g) For each Plan that is an employee welfare benefit plan (within the
meaning of ERISA section 3(1)) (a "Welfare Plan"), each of the following is
true:
(i) each such Welfare Plan intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code meets
such requirements;
(ii) there is no voluntary employees' beneficiary association
within the meaning of sections 501(c)(9) and 505 of the Code (a "VEBA")
maintained with respect to any such Welfare Plan;
(iii) no such Welfare Plan is a "multiple employer welfare
arrangement" within the meaning of ERISA section 3(40);
(iv) each such Welfare Plan that is a "group health plan" (as
such term is defined in section 5000(b)(1) of the Code and section
607(1) of ERISA) complies in all material respects and has complied with
the applicable requirements of sections 4980B and 9801-9806 of the Code,
sections 601-734 of ERISA and the applicable provisions of the Social
Security Act and state law; and
(v) the Company and each other member of its Controlled Group
has, prior to the Effective Time, complied in all material respects with
the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of HIPAA, the requirements of the Women's Health
and Cancer Rights Act of 1998, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, or any amendment to each such
act or any similar provision of state law.
(h) No Plan provides, reflects or represents any liability to provide
retiree life insurance, retiree health or other retiree employee welfare
benefits to any Person for any reason, except as may be required by COBRA or
other applicable statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any current or former employee,
officer or director of, or any advisor or consultant to, the Company, either
individually or as a group, or to any other Person that such employee, officer
or director of, or any advisor or consultant to, the Company would be provided
with retiree health, life, or other welfare benefit, except to the extent
required by applicable law.
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(i) With respect to any Plan maintained outside the United States for
the purpose of providing or otherwise making available retirement benefits to
employees of the Company (collectively, the "Non-U.S. Plans"), each of the
following is true:
(i) each Non-U.S. Plan is in compliance in all material respects
with the laws, regulations, orders and rules applicable to such plan,
and each Non-U.S. Plan required to be registered has been registered and
has at all times been maintained in good standing with applicable
regulatory authorities;
(ii) each Non-U.S. Plan and related funding arrangement that is
intended to qualify for tax-favored or securities-registered status has
been reviewed and approved for such status by the appropriate government
authority (or has been submitted for such review and approval within the
applicable time period), and nothing has occurred and no condition
exists that is likely to cause the loss or denial of such tax-favored or
securities-registered status;
(iii) as of the most recent valuation date, there are no
unfunded benefit liabilities, and all employer and employee
contributions to such Non-U.S. Plan have required by applicable law or
by the terms of such Plan have been made, or, if applicable, accrued in
accordance with normal accounting practices; and
(iv) no legal action, suit or claim is pending or to the
knowledge of the Company threatened with respect to any Non-U.S. Plan
(other than claims in the ordinary course), and no fact or event exists
that could give rise to any such action, suit or claim.
2.15 Real Property.
(a) Section 2.15(a) of the Company Disclosure Schedule contains a true
and correct list of (i) each parcel of real property leased, utilized and/or
operated by the Company (as lessor or lessee or otherwise) (the "Leased Real
Property") and (ii) all Liens relating to or affecting any parcel of real
property referred to in clause (i) to which the Company is a party. The Company
owns no real property other than Company owned leasehold improvements, if any,
on the Leased Real Property.
(b) Subject to the terms of its respective leases, the Company has a
valid and subsisting leasehold estate in and the right to quiet enjoyment of
each of the Leased Real Properties for the full term of the leases (including
renewal periods) relating thereto. Each lease referred to in clause (i) of
Section 2.15(a) above is a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company and, to the Company's knowledge, of
each other Person that is a party thereto, and except as set forth in Section
2.15(b) of the Company Disclosure Schedule, there is no, and the Company has not
received notice of any, default (or any condition or event which, after notice
or lapse of time or both, would constitute a default) thereunder. The Company
does not owe brokerage commissions or finders fees with respect to any such
Leased Real Property, except to the extent that the Company may renew the term
of any such lease, in which case, any such commissions and fees would be in
amounts that are reasonable and customary for the spaces so leased, given their
intended use and terms.
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(c) Except as disclosed in Section 2.15(c) of the Company Disclosure
Schedule, all improvements on the Leased Real Property (i) comply with and are
operated in accordance with applicable laws (including Environmental Laws) and
all applicable Liens, Approvals, Contracts, covenants and restrictions and (ii)
are in all material respects in good operating condition and in a state of good
maintenance and repair, ordinary wear and tear excepted, and such improvements
are in all material respects adequate and suitable for the purposes for which
they are presently being used and there are no condemnation or appropriation
proceedings pending or, to the knowledge of the Company, threatened against any
of such real property or the improvements thereon.
(d) True and correct copies of the documents under which the Leased Real
Property is leased, subleased (to or by the Company or otherwise), utilized,
and/or operated (the "Lease Documents") have been delivered to Parent. The Lease
Documents are unmodified and in full force and effect, and there are no other
Contracts between the Company and any third party(ies), or, to the Company's
knowledge, by and among any third party(ies), claiming an interest in the
interest of the Company in the Leased Real Property or otherwise relating to the
use and occupancy of the Leased Real Property other than any Liens listed in
Section 2.15(a) of the Company Disclosure Schedule.
2.16 Tangible Personal Property. The Company is in possession of and
has good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Company Financials, other than property disposed of since such date in the
Company's Ordinary Course of Business and up to five hundred thousand dollars
($500,000) of furniture or equipment that the Company proposes to liquidate.
Except as disclosed in Section 2.16 of the Company Disclosure Schedule, all such
tangible personal property (including plant, property and equipment) is free and
clear of all Liens and is adequate and suitable in all material respects for the
conduct by the Company of its business as presently conducted, and is in good
working order and condition in all material respects, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
Laws.
2.17 Intellectual Property.
(a) Section 2.17(a) of the Company Disclosure Schedule lists all Company
Registered Intellectual Property (including all trademarks and service marks
that the Company has used with the intent of creating or benefiting from any
common law rights relating to such marks) and lists any proceedings or actions
pending as of the date hereof before any court or tribunal (including the PTO or
equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property.
(b) The Company has all requisite right, title and interest in or valid
and enforceable rights under Contracts or Licenses to use all Company
Intellectual Property necessary to the conduct of its business as currently
conducted.
(i) Except as set forth in Section 2.17(b)(i) of the Company
Disclosure Schedule, each item of Company Intellectual Property,
including all Company Registered Intellectual Property listed in Section
2.17(a) of the
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Company Disclosure Schedule, is owned exclusively by the Company
(excluding Intellectual Property licensed to the Company under any
License disclosed under Section 2.17(f) of the Company Disclosure
Schedule) and is free and clear of any Liens. Without limiting the
generality of the foregoing, the Company owns exclusively all
trademarks, service marks and trade names used by the Company in
connection with the operation or conduct of the business of the Company
as currently conducted, including the sale of any products or technology
or the provision of any services by the Company; provided, however, that
the Company may use trademarks, service marks and trade names of third
parties which are licensed to the Company, as disclosed under Section
2.17(f) of the Company Disclosure Schedule, or are in the public domain.
(ii) Without limiting the generality of the foregoing, to the
Company's knowledge and except as set forth in Section 2.17(b)(ii) of
the Company Disclosure Schedule, the Company owns exclusively all
trademarks, service marks and trade names used by the Company in
connection with the operation or conduct of the business of the Company
as currently contemplated to be conducted in the Operating Plan,
including the sale of any products or technology or the provision of any
services by the Company; provided, however, that the Company may use
trademarks, service marks and trade names of third parties which are
licensed to the Company, as disclosed under Section 2.17(f) of the
Company Disclosure Schedule, or are in the public domain.
(iii) Without limiting the generality of the foregoing, the
Company owns exclusively, and has good title to, each copyrighted work
that is a Company product and each other work of authorship that the
Company otherwise purports to own or is used by the Company in
connection with the operation or conduct of the business of the Company
as currently conducted or provision of services by the Company, other
than works disclosed under Section 2.17(f) of the Company Disclosure
Schedule.
(c) To the extent that any Company Intellectual Property has been
developed or created by any Person other than the Company, the Company has a
written agreement with such Person with respect thereto and the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment of any such
rights or (ii) has obtained a License under or to such Intellectual Property as
disclosed under Section 2.17(f) of the Company Disclosure Schedule.
(d) Except pursuant to agreements described in Section 2.17(d) of the
Company Disclosure Schedule, the Company has not transferred ownership of any
Intellectual Property that is or was Company Intellectual Property, to any other
Person.
(e) Except as set forth in Section 2.17(e) of the Company Disclosure
Schedule, the Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of the Company's business as it
currently is conducted, including the design, development, distribution,
marketing, manufacture, use, import, license, and sale of the products,
technology and services of the Company (including products, technology, or
services currently
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under development) To the Company's knowledge and except as set forth in Section
2.17(e) of the Company Disclosure Schedule, the Company Intellectual Property
constitutes all the Intellectual Property used in and/or necessary to the
conduct of the Company's business as currently contemplated to be conducted in
the Operating Plan, including the design, development, distribution, marketing,
manufacture, use, import, license, and sale of the products, technology and
services of the Company (including products, technology, or services currently
under development).
(f) Section 2.17(f)(i) of the Company Disclosure Schedule lists all
Contracts (including all inbound Licenses) to which the Company is a party that
grant licenses to Intellectual Property, other than standard Licenses for
off-the-shelf, shrink-wrap software or "open source" code that is commercially
available on reasonable terms to any Person for a license fee of no more than
five thousand dollars ($5,000) Except as set forth in Section 2.17(f)(ii) of the
Company Disclosure Schedule, the Company is not in breach of, nor has it failed
to perform under any of the foregoing Contracts and Licenses and, to the
Company's knowledge, no other party to such Contracts and Licenses is in
material breach of or has materially failed to perform thereunder.
(g) Section 2.17(g)(i) of the Company Disclosure Schedule lists all
Contracts, Licenses and agreements between the Company and any other Person,
other than standard Licenses for off-the-shelf, shrink-wrap software or "open
source" code that is commercially available on reasonable terms to any Person
for a license fee of no more than five thousand dollars ($5,000), wherein or
whereby the Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or Liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other Person of
the Intellectual Property of any Person other than the Company. Except as set
forth in Section 2.17(g)(ii) of the Company Disclosure Schedule, the Company is
not in breach of, nor has it failed to perform under any of the foregoing
Contracts, Licenses and agreements and, to the Company's knowledge, no other
party to such Contracts, Licenses and agreements is in breach of or has failed
to perform thereunder.
(h) Except as set forth in Section 2.17(h) of the Company Disclosure
Schedule, the operation of the business of the Company (i) as currently
conducted or (ii) to the Company's knowledge, as currently contemplated to be
conducted in the Operating Plan, including the Company's design, development,
use, import, manufacture and sale of the products, technology or services
(including products, technology or services currently under development) of the
Company, does not (A) infringe or misappropriate the Intellectual Property of
any Person, (B) violate any term or provision of any License or Contract
concerning such Intellectual Property (including any provision required by or
imposed pursuant to 35 U.S.C. Sections 200-212 in any License or Contract to
which the Company is a party requiring that products be manufactured
substantially in the United States ("Made-in-America Requirements")), (C)
violate the rights of any Person (including rights to privacy or publicity), or
(D) constitute unfair competition or an unfair trade practice under any Law, and
the Company has not received notice from any Person claiming that such operation
or any act, product, technology or service (including products, technology or
services currently under development) of the Company infringes or
misappropriates the Intellectual Property of any Person or constitutes unfair
competition or trade practices under any Law, including notice of third party
patent or other
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Intellectual Property rights from a potential licensor of such rights, nor is
the Company aware of any basis for any such claim.
(i) Each item of Company Registered Intellectual Property is valid and
subsisting, and all necessary registration, maintenance, renewal fees, annuity
fees and taxes in connection with such Registered Intellectual Property have
been paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions where the Company has filed documents for such purpose, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property. Section 2.17(i)(i) of the Company Disclosure Schedule lists all
actions that must be taken by the Company within one hundred eighty (180) days
from the date hereof, including the payment of any registration, maintenance,
renewal fees, annuity fees and taxes or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any Company Registered Intellectual Property. In each
case in which the Company has acquired ownership of any Intellectual Property
rights from any Person, the Company has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Intellectual
Property (including the right to seek past and future damages with respect to
such Intellectual Property) to the Company and, to the maximum extent provided
for by and required to protect the Company's ownership rights in and to such
Intellectual Property in accordance with applicable Laws, the Company has
recorded each such assignment of Registered Intellectual Property with the
relevant Governmental or Regulatory Authority, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any foreign jurisdiction
where the Company has filed documents for such purpose, as the case may be. To
the Company's knowledge, there are no facts or circumstances that would render
any Company Registered Intellectual Property invalid or unenforceable other than
as set forth on Section 2.17(i)(ii) of the Company Disclosure Schedule. Without
limiting the foregoing, to the Company's knowledge, no information, materials,
facts, or circumstances exists, including any information or fact that would
constitute prior art, that would render any of the Company Registered
Intellectual Property invalid or unenforceable, or would adversely effect any
pending application for any Company Registered Intellectual Property. The
Company has not misrepresented, or failed to disclose, and is not aware of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Registered Intellectual Property that would
constitute fraud or a material misrepresentation with respect to such
application or that would otherwise effect the validity or enforceability of any
Company Registered Intellectual Property.
(j) Except as set forth in Section 2.17(j) of the Company Disclosure
Schedule, there are no Contracts or Licenses between the Company and any other
Person with respect to Company Intellectual Property under which there is any
dispute (or, to the Company's knowledge, facts that may reasonably lead to a
dispute) known to the Company, including any dispute or facts that may
reasonably lead to a dispute regarding the scope of the Intellectual Property
Rights granted in such Contract or License, or performance under such Contract
or License, including with respect to any payments to be made or received by the
Company thereunder.
(k) To the knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property owned by the Company.
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(l) The Company has taken all commercially reasonable steps to protect
the Company's rights in confidential information and trade secrets of the
Company or provided by any other Person to the Company subject to a duty of
confidentiality. Without limiting the generality of the foregoing, the Company
has, and enforces, a policy requiring each employee, consultant and independent
contractor to execute proprietary information, confidentiality and invention and
copyright assignment agreements substantially in the form set forth as
Attachment 2.17(l) to the Company Disclosure Schedule, and all current and
former employees, consultants and independent contractors of the Company, except
as set forth in Section 2.17(l) of the Company Disclosure Schedule, have
executed such an agreement and copies of all such agreements have been provided
to Parent or made available to Parent for review.
(m) No Company Intellectual Property owned by the Company, or any
product, technology or service of the Company, or to the Company's knowledge,
any other Company Intellectual Property, is subject to any Order, Action or
Proceeding or "march in" rights that restricts, or that is reasonably expected
to restrict in any manner, the use, transfer or licensing of any Company
Intellectual Property by the Company or that may affect the validity, use or
enforceability of such Company Intellectual Property.
(n) Except as set forth in Section 2.17(n) of the Company Disclosure
Schedule, no (i) product, technology, service or publication of the Company,
(ii) material published or, to the Company's knowledge, distributed by the
Company or (iii) conduct or statement of Company constitutes obscene material, a
defamatory statement or material, false advertising or otherwise violates any
Law.
(o) Neither this Agreement nor any transactions contemplated by this
Agreement will result in Parent's or the Surviving Corporation granting any
rights or licenses with respect to the Intellectual Property of Parent or the
Surviving Corporation to any Person pursuant to any Contract to which the
Company is a party or by which any of its Assets and Properties are bound.
Neither this Agreement nor any transaction contemplated by this Agreement will
result in the loss of any ownership or License rights of the Company, prior to
the Closing Date, or the Surviving Corporation, from and after the Closing Date,
in any of the Company Intellectual Property or require or obligate Parent or the
Surviving Corporation (i) to grant to any third party any rights or licenses
with respect to any Company Intellectual Property; or (ii) to pay any royalties
or other amounts. Neither this Agreement nor any transaction contemplated by
this Agreement will give to any third party the right to terminate, in whole or
in part, any Contracts or Licenses to which the Company is a party with respect
to any Intellectual Property, except for the Contracts or Licenses set forth in
Section 2.17(o) of the Company Disclosure Schedule.
(p) Section 2.17(p) of the Company Disclosure Schedule sets forth a list
of (x) all software which the Company has licensed from any third party which is
used by the Company in its products, in providing services or otherwise in its
business (other than standard off-the-shelf, shrink-wrap software that is
commercially available on reasonable terms to any Person for a license fee of no
more than five thousand dollars ($5,000)) and (y) a list of all "freeware,"
"shareware" and "open source" code incorporated into any product now or
heretofore shipped by the Company. The Company has all rights necessary to the
use of such software, "freeware," "shareware" and "open source" code.
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(q) The Company's products comply in all material respects with all
feature specifications and performance standards set forth in the Company's
product data sheets. There are no outstanding claims (or, to the Company's
knowledge, facts that may reasonably lead to a claim) for breach of warranties
by the Company in connection with the foregoing. All product performance
comparisons heretofore furnished by the Company to customers or Parent are
accurate in all material respects as of the dates so furnished (except that, in
the case of product performance comparisons made as of a specified earlier date,
such comparisons shall be accurate as of such specified earlier date, and, in
the case of product performance comparisons superseded by a subsequent product
performance comparison furnished to the customer before the customer's
acquisition of a license on the product covered by the superseded comparison,
the superseding comparison shall be accurate in all material respects and the
superseded comparison shall be disregarded).
(r) The Company has taken all necessary and appropriate steps to protect
and preserve its exclusive ownership of Company Intellectual Property. The
Company has secured valid written assignments from all consultants and employees
who contributed to the creation or development of the Company Intellectual
Property. In the event that the consultant is concurrently employed by the
Company and a third party, the Company has taken additional steps to ensure that
any Company Intellectual Property developed by such a consultant does not belong
to the third party or conflict with the third party's employment agreement.
2.18 Contracts.
(a) Section 2.18(a) of the Company Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been provided to or made available to Parent prior to
the execution of this Agreement), to which the Company is a party or by which
any of its Assets and Properties is bound (such Contracts or other arrangements
as are required to be set forth in Section 2.18(a) of the Company Disclosure
Schedule being referred to herein as the "Material Contracts"):
(i) except as otherwise set forth in Section 2.14(a) of the
Company Disclosure Schedule, (a) all Contracts to which the Company is a
party (excluding Plans) providing for a commitment of employment or
consultant services for a specified or unspecified term, the name,
position and rate of compensation of each Person party to such a
Contract and the expiration date of each such Contract; and (b) any
written or unwritten representations, commitments, promises,
communications or courses of conduct involving an obligation of the
Company to make payments (with or without notice, passage of time or
both) to any Person in connection with, or as a consequence of, the
transactions contemplated hereby or to any employee who is disclosed in
Section 2.14(a) of the Company Disclosure Schedule (provided, however,
that such Contracts do not include offer letters the Company has entered
into with its employees or consultants if the Company is not obligated
or cannot reasonably be expected to be obligated to pay more than one
hundred thousand dollars ($100,000) for any twelve (12) month period to
such
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employees or consultants), other than with respect to salary or
incentive compensation payments in the Company's Ordinary Course of
Business;
(ii) all Contracts to which the Company is a party with any
Person containing any provision or covenant prohibiting or limiting the
ability of the Company to engage in any business activity or compete
with any Person or prohibiting or limiting the ability of any Person to
compete with the Company;
(iii) all partnership, joint venture, stockholders' or other
similar Contracts to which the Company is a party with any Person;
(iv) all Contracts to which the Company is a party relating to
Indebtedness in an amount of fifty thousand dollars ($50,000) or more of
the Company;
(v) any trust indenture, mortgage, promissory note, loan
agreement or other Contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with
GAAP;
(vi) all Contracts to which the Company is a party outside the
Company's Ordinary Course of Business as currently conducted or as
currently proposed to be conducted under which the Company is obligated
or can reasonably be expected to obligate the Company to pay more than
twenty-five thousand dollars ($25,000) in any twelve (12) month period
(A) with independent contractors, distributors, dealers, manufacturers'
representatives, sales agencies or franchisees, (B) with manufacturers
and equipment vendors, and (C) with respect to the sale of services,
products or both, to customers;
(vii) all guarantees of any Indebtedness made by the Company or
other obligations of the Company to any Person, including, but not
limited to, any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to,
the obligations, Liabilities or Indebtedness of any other Person;
(viii) all Contracts to which the Company is a party relating to
(A) the future disposition or acquisition of any Assets and Properties
with an aggregate value of one hundred thousand dollars ($100,000) or
more, and (B) any Business Combination;
(ix) all collective bargaining or similar labor contracts to
which the Company is a party;
(x) all Contracts to which the Company is a party that (A) limit
or contain restrictions on the ability of the Company to declare or pay
dividends on, to make any other distribution in respect of or to issue
or purchase, redeem or otherwise acquire its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell
any Assets and Properties, to change the lines
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of business in which it participates or engages, (B) require the Company
to maintain specified financial ratios or levels of net worth or other
indicia of financial condition or (C) require the Company to maintain
insurance in certain amounts or with certain coverages;
(xi) all Contracts to which the Company is a party that provides
for continuing research and development and/or design or other services
by the Surviving Corporation after the Closing Date;
(xii) all Employment Agreements (excluding any offer letters the
Company has entered into with its employees or consultants if the
Company is not obligated or cannot reasonably be expected to be
obligated to pay more than one hundred thousand dollars ($100,000) for
any twelve (12) month period to such employees or consultants) and all
Contracts disclosed in any part of Section 2.15, 2.16, 2.17 or Section
2.20(a)(i) of the Company Disclosure Schedule;
(xiii) all Contracts to which the Company is a party pursuant to
which the Company subsidizes the sale of its products or services; and
(xiv) all other Contracts not otherwise required to be disclosed
in Section 2.18(a) of the Company Disclosure Schedule which are material
to the Business or Condition of the Company as currently conducted or
currently proposed to be conducted.
(b) Except as set forth in Section 2.18(b) of the Company Disclosure
Schedule, each Material Contract is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms,
and to the knowledge of the Company, each other party thereto; and except as
disclosed in Section 2.18(b) of the Company Disclosure Schedule, to the
knowledge of the Company, no other party to such Material Contract is, nor has
received notice that it is, in violation or breach of or default under any such
Material Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Material Contract).
(c) Except as disclosed in Section 2.18(c) of the Company Disclosure
Schedule, the Company is not a party to or bound by any Material Contract that
has been or could reasonably be expected to be, individually or in the aggregate
with any other similar Material Contracts, materially adverse to the Business or
Condition of the Company as currently conducted or as currently proposed to be
conducted or that has been or could reasonably be expected to result,
individually or in the aggregate with any such other Material Contracts in
Losses to the Company or be materially adverse to the Business or Condition of
the Company as currently conducted or as currently proposed to be conducted.
(d) Except as disclosed in Section 2.18(d) of the Company Disclosure
Schedule, none of the Material Contracts (i) automatically terminates or allows
termination by the other party thereto upon consummation of the transactions
contemplated by this Agreement, (ii) contains any covenant or other provision
which limits the Company's ability to compete with any Person in any line of
business or in any area or territory, or (iii) is terminable by the Company upon
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thirty (30) days (or less) notice by the Company without penalty or obligation
to make payments based on such termination and which (A) require payments by the
Company in excess of fifty thousand dollars ($50,000) (either alone or pursuant
to a series of related contracts) or (B) require the Company (or the Surviving
Corporation) to provide services to any Person after the Closing.
(e) Section 2.18(e) of the Company Disclosure Schedule lists all
Contracts that contain a power of attorney or comparable delegation of
authority.
2.19 Insurance.
(a) Section 2.19(a) of the Company Disclosure Schedule contains a true
and complete list (including the names and addresses of the insurers and the
expiration dates thereof) of all liability, property, workers' compensation,
directors' and officers' liability and other insurance policies currently in
effect that insure any of the business, operations or employees of the Company
or affect or relate to the ownership, use or operation of any of the Assets and
Properties of the Company and that (i) have been issued to the Company or (ii)
to the knowledge of the Company, have been issued to any Person (other than the
Company) for the benefit of the Company. The insurance coverage provided by the
policies set forth in Section 2.19(a) of the Company Disclosure Schedule will
not terminate or lapse by reason of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements. Each policy listed in Section
2.19(a) of the Company Disclosure Schedule is valid and binding and in full
force and effect, all premiums due thereunder have been paid when due and
neither the Company or the Person to whom such policy has been issued has
received any notice of cancellation or termination in respect of any such policy
or is in default thereunder, and the Company has no knowledge of any reason or
state of facts that could reasonably be expected to lead to the cancellation of
such policies or of any threatened termination of, or material premium increase
with respect to, any of such policies. The insurance policies listed in Section
2.19(a) of the Company Disclosure Schedule, (i) in the light of the business,
location, operations and Assets and Properties of the Company are in amounts and
have coverages that are reasonable and customary for Persons engaged in similar
businesses and operations and having similar Assets and Properties and (ii) are
in amounts and have coverages as required by any Contract to which the Company
is a party or by which any of its Assets and Properties is bound.
(b) Section 2.19(b) of the Company Disclosure Schedule contains a list
of all claims over fifty thousand dollars ($50,000) made under any insurance
policies covering the Company in the last two (2) years. The Company has not
received notice that any insurer under any policy listed (or required to be
listed) in Section 2.19(b) of the Company Disclosure Schedule is denying,
disputing or questioning liability with respect to a claim thereunder or
defending under a reservation of rights clause. The Company has, in the
reasonable judgment of the Company, in the light of its business, location,
operations and Assets and Properties, maintained, at all times, without
interruption, appropriate insurance, both in scope and amount of coverages.
2.20 Affiliate Transactions.
(a) Except as disclosed in Section 2.9(d), Section 2.14(a), Section
2.20(a) or Section 2.21(b) of the Company Disclosure Schedule, (i) there are no
Contracts or Liabilities involving
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an amount in excess of sixty thousand dollars ($60,000) between the Company, on
the one hand, and (A) any current or former officer, director, stockholder, or
to the Company's knowledge, any Affiliate or Associate of the Company or (B) any
Person who, to the Company's knowledge, is an Associate of any such officer,
director, stockholder or Affiliate, on the other hand, (ii) the Company does not
provide or cause to be provided any assets, services or facilities of a value in
excess of sixty thousand dollars ($60,000) to any such current or former
officer, director, stockholder, Affiliate or Associate, (iii) neither the
Company nor any such current or former officer, director, stockholder, Affiliate
or Associate provides or causes to be provided any assets, services or
facilities to the Company of a value in excess of sixty thousand dollars
($60,000) and (iv) the Company does not beneficially own, directly or
indirectly, any Investment Assets of a value in excess of sixty thousand dollars
($60,000) of any such current or former officer, director, stockholder,
Affiliate or Associate.
(b) Except as disclosed in Section 2.20(b) of the Company Disclosure
Schedule, each of the Contracts and Liabilities listed in Section 2.20(a) of the
Company Disclosure Schedule were entered into or incurred, as the case may be,
on terms no less favorable to the Company (in the reasonable judgment of the
Company) than if such Contract or Liability was entered into or incurred on an
arm's length basis on competitive terms. Any Contract to which the Company is a
party and in which any director of the Company has a financial interest in such
Contract was approved by a majority of the disinterested members of the board of
directors of the Company and/or stockholders of the Company, as the case may be,
in accordance with section 144 of Delaware Law.
2.21 Employees; Labor Relations.
(a) The Company is not a party to any collective bargaining agreement
and there is no unfair labor practice or labor arbitration proceedings pending
with respect to the Company, or, to the knowledge of the Company, threatened,
and there are no facts or circumstances known to the Company that could
reasonably be expected to give rise to such complaint or claim. To the knowledge
of the Company, there are no organizational efforts presently underway or
threatened involving any employees of the Company or any of the employees
performing work for the Company but provided by an outside employment agency, if
any. There has been no work stoppage, strike or other concerted action by
employees of the Company.
(b) Each Person who is an employee of the Company is employed at will,
and no employee of the Company is represented by a union. Each Person who is an
independent contractor of the Company is properly classified as an independent
contractor for purposes of all employment related Laws and all Laws concerning
the status of independent contractors. Except as described in Section 2.21(b) of
the Company Disclosure Schedule, the completion of the transactions contemplated
by this Agreement will not result in any payment or increased payment becoming
due from the Company to any current or former officer, director, or employee of,
or consultant to, the Company, and to the knowledge of the Company no employee
of the Company has made any threat, or otherwise revealed an intent, to
terminate such employee's relationship with the Company, for any reason,
including because of the consummation of the transactions contemplated by this
Agreement. The Company is not a party to any agreement for the provision of
labor from any outside agency. To the knowledge of the Company, since January 1,
1998, there have been no claims by employees of such outside agencies, if any,
with
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regard to employees assigned to work for the Company, and no claims by any
governmental agency with regard to such employees.
(c) Since January 1, 1998, there have been no federal or state claims
based on sex, sexual or other harassment, age, disability, race or other
discrimination or common law claims, including claims of wrongful termination,
filed by any employees of the Company or by any of the employees performing work
for the Company but provided by an outside employment agency, and there are no
facts or circumstances known to the Company that could reasonably be expected to
give rise to such complaint or claim. The Company has complied in all material
respects with all laws related to the employment of employees and, except as set
forth in Section 2.21(c) of the Company Disclosure Schedule, since January 1,
1998, the Company has not received any notice of any claim that it has not
complied in any material respect with any Laws relating to the employment of
employees, including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination, the WARN Act, employee safety, or that
it is liable for any arrearages of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(d) The Company has no written policies and/or employee handbooks or
manuals except as described in Section 2.21(d) of the Company Disclosure
Schedule. True and correct copies of all of such written policies and/or
employee handbooks or manuals have been provided to Parent.
(e) To the knowledge of the Company, no officer, employee or consultant
of the Company is obligated under any Contract or other agreement or subject to
any Order or Law that would interfere with the Company's business as currently
conducted or as reasonably contemplated to be conducted. Neither the execution
nor delivery of this Agreement, nor the carrying on of the Company's business as
presently conducted or as reasonably contemplated to be conducted nor any
activity of such officers, employees or consultants in connection with the
carrying on of the Company's business as presently conducted or as reasonably
contemplated to be conducted, will conflict with or result in a breach of the
terms, conditions or provisions of, constitute a default under, or trigger a
condition precedent to any rights under any Contract or other agreement under
which any of such officer's, employees or consultants is now bound.
(f) Each employee, officer and consultant of the Company has executed a
Proprietary Information and Inventions Agreement. No current employee, officer
or consultant of the Company has excluded works or inventions with the Company
from his or her assignment of inventions pursuant to such employee, officer or
consultant's Proprietary Information and Inventions Agreement except as set
forth in Section 2.21(f) of the Company Disclosure Schedule.
2.22 Environmental Matters. Except as set forth in Section 2.22 of the
Company Disclosure Schedule:
(a) The Company possesses any and all Environmental Permits necessary to
or required for the operation of its business as currently conducted and as
reasonably contemplated to be conducted. The Company will obtain, prior to the
Closing, any Environmental Permits that must be obtained as of or immediately
after the Closing in order for the Surviving Corporation
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and/or the Company to conduct the business of the Company as it was conducted
prior to the Closing.
(b) The Company is in compliance with (i) all terms, conditions and
provisions of its Environmental Permits; and (ii) all Environmental Laws.
(c) Neither the Company nor any predecessor of the Company nor any
entity previously owned by the Company has received any notice of alleged,
actual or potential responsibility for, or any inquiry regarding, (i) any
Release or threatened or suspected Release of any Hazardous Material, or (ii)
any violation of Environmental Law and there is no outstanding civil, criminal
or administrative investigation, action, suit hearing or proceeding pending or
threatened against the Company pursuant to any Environmental Law.
(d) Neither the Company nor any predecessor of the Company nor any
entity previously owned by the Company has any obligation or liability with
respect to any Hazardous Material, including any Release or threatened or
suspected Release of any Hazardous Material and any violation of Environmental
Law, and there have been no events, facts or circumstances which could form the
basis of any such obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from, in, to,
on, or under any Site and no Hazardous Material is present in, on, about or
migrating to or from any Site.
(f) Neither the Company, nor any predecessor of the Company, nor any
entity previously owned by the Company, has transported or arranged for the
treatment, storage, handling, disposal or transportation of any Hazardous
Material at, from or to any Site or other location.
(g) No Site is a current or proposed Environmental Clean-up Site.
(h) There are no Liens under or pursuant to any Environmental Law on any
Site.
(i) There is no (i) underground storage tank, active or abandoned, (ii)
polychlorinated biphenyl containing equipment, (iii) asbestos-containing
material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any
Site. Any underground storage tank meets all current applicable upgrade
requirements.
(j) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted with respect to any Site which have
not been delivered to Parent prior to execution of this Agreement.
(k) The Company is not a party, whether as a direct signatory or as
successor, assign, third party beneficiary, guarantor or otherwise, to, and is
not otherwise bound by, any lease or other contract under which the Company is
obligated or may be obligated by any representation, warranty, covenant,
restriction, indemnification or other undertaking respecting Hazardous Materials
or under which any other person is or has been released respecting Hazardous
Materials.
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(l) The Company and any predecessors of the Company and any entity
previously owned by the Company have provided all notifications and warnings,
made all reports, and kept and maintained all records required pursuant to
Environmental Laws.
2.23 {intentionally omitted}.
2.24 Accounts Receivable. Except as set forth in Section 2.24 of the
Company Disclosure Schedule, and subject to any product returns, setoffs and
doubtful accounts, the accounts and notes receivable of the Company reflected on
the Company Financials, and all accounts and notes receivable arising subsequent
to the Financial Statement Date, (a) arose from bona fide sales transactions in
the ordinary course of business, consistent with past practice, and are payable
on ordinary trade terms, (b) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their respective terms, (c)
are not subject to any valid set-off or counterclaim and (d) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement.
2.25 {intentionally omitted}.
2.26 Other Negotiations; Brokers; Third Party Expenses.
(a) Neither the Company nor any of its officers, directors, employees,
agents, or, to the knowledge of the Company, any of its stockholders or
Affiliates (nor any investment banker, financial advisor, attorney, accountant
or other Person retained by or acting for or on behalf of the Company or any
such Affiliate) (i) has entered into any Contract that conflicts with any of the
transactions contemplated by this Agreement or (ii) has entered into any
Contract or had any discussions with any Person regarding any transaction
involving the Company which could result in Parent, the Company or any officer,
director, employee, agent or representative of any of them being subject to any
claim for liability to said Person as a result of entering into this Agreement
or consummating the transactions contemplated hereby.
(b) Except for Xxxxxx Xxxxxxx Xxxx Xxxxxx & Co., a copy of whose
engagement letter has been provided to Parent, there is no investment banker,
broker, financial advisor, finder or other intermediary which has been retained
by or is authorized to act on behalf of the Company or any of its Subsidiaries
who might be entitled to any broker's, finder's, financial advisor's or similar
fee or commission in connection with the transactions contemplated by this
Agreement.
(c) Section 2.26 of the Company Disclosure Schedule sets forth the
principal terms and conditions of any Contract with respect to, and a reasonable
estimate of, all Third Party Expenses expected to be incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby ("Estimated Third Party
Expenses").
2.27 Banks and Brokerage Accounts. Section 2.27 of the Company
Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship, (b) a
true and complete list and description of each such account, box and
relationship,
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indicating in each case the account number and the names of the respective
officers, employees, agents or other similar representatives of the Company
having signatory power with respect thereto and (c) a list of each Investment
Asset, the name of the record and beneficial owner thereof, the location of the
certificates, if any, therefor, the maturity date, if any, and any stock or bond
powers or other authority for transfer granted with respect thereto.
2.28 Warranty Obligations.
(a) Section 2.28(a) of the Company Disclosure Schedule sets forth (i) a
list of all forms of written warranties, guarantees and written warranty
policies of the Company in respect of any of the Company's products and
services, which are currently in effect (the "Warranty Obligations"), and the
duration of each such Warranty Obligation and (ii) a summary of statistical data
collected by the Company with respect to warranties, guarantees and warranty
policies of or relating to the Company's products and services. True and correct
copies of the Warranty Obligations have been delivered to Parent prior to the
execution of this Agreement.
(b) Except as disclosed in Section 2.28(b) of the Company Disclosure
Schedule, (i) there have not been any material deviations from the Warranty
Obligations, and no salesperson, employee or agent of the Company is authorized
to undertake obligations to any customer or other Person in excess of such
Warranty Obligations and (ii) the balance sheet included in the Interim
Financial Statements reflects adequate reserves for Warranty Obligations. All
products manufactured, designed, licensed, leased, rented or sold by the Company
(A) are and were free from material defects in construction and design and (B)
satisfy any and all Contract to which the Company is a party or other
specifications related thereto to the extent stated in writing in such Contracts
or specifications, in each case, in all material respects.
2.29 Foreign Corrupt Practices Act. Neither the Company, nor to the
knowledge of the Company, any agent, employee or other Person associated with or
acting on behalf of the Company has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other similar unlawful payment.
2.30 Financial Projections/Operating Plan.
(a) The Company has made available to Parent certain financial
projections with respect to the Company's business, which projections were
prepared for internal use only. The Company makes no representation or warranty
regarding the accuracy of such projections or as to whether such projections
will be achieved, except that the Company represents and warrants that such
projections were prepared in good faith and are based on assumptions believed by
the Company to be reasonable as of the date of preparation of the such
projections and of this Agreement.
(b) The Company has made available to Parent the written budget or other
written operating plan for the balance of fiscal 2001 and 2002 (the "Operating
Plan") The Company
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makes no representation or warranty regarding its ability to successfully
execute the Operating Plan, except that the Company represents and warrants that
the Operating Plan was prepared in good faith and is based on assumptions
believed by it to be reasonable as of the date of preparation of the Operating
Plan and of this Agreement.
2.31 Approvals.
(a) Section 2.31(a) of the Company Disclosure Schedule contains a list
of all material Approvals of Governmental or Regulatory Authorities relating to
the business conducted by the Company which are required to be given to or
obtained by the Company from any and all Governmental or Regulatory Authorities
in connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements (other than the filing of the Certificate
of Merger, together with the required officers' certificates, and such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under state or federal securities laws).
(b) Other than as listed in Section 2.6 of the Company Disclosure
Schedule, Section 2.31(b) of the Company Disclosure Schedule contains a list of
all material Approvals which are required to be given to or obtained by the
Company from any and all third parties other than Governmental or Regulatory
Authorities in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements.
(c) Except as set forth in Section 2.31(c) of the Company Disclosure
Schedule, the Company has obtained all material Approvals from Governmental or
Regulatory Authorities necessary to conduct the business conducted by the
Company in the manner as it is currently being conducted and there has been no
written notice received by the Company of any material violation or material
non-compliance with any such Approvals.
(d) The affirmative vote or consent of the holders of (i) a majority of
the shares of Company Common Stock and Company Preferred Stock outstanding (on
as "as converted to Company Common Stock" basis) as of the applicable record
date, voting together as a single class, (ii) a majority of the shares of
Company Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock and Series H Preferred Stock outstanding as of the applicable record date,
voting together (on an "as converted to Company Common Stock" basis) as a
separate class, and (iii) a majority of the shares of Company Series D Preferred
Stock outstanding as of the applicable record date, voting (on an "as converted
to Company Common Stock" basis) as a separate class, are the only votes of the
holders of any of the Company Capital Stock necessary to approve this Agreement
and the Merger. A list of the Major Stockholders of the Company is set forth on
Section 2.31(d) of the Company Disclosure Schedule.
(e) The affirmative vote or consent of the holders of (i) a majority of
the shares of Company Common Stock and Company Preferred Stock outstanding (on
as "as converted to Company Common Stock" basis) as of the applicable record
date, voting together as a single class, (ii) a majority of the shares of each
series of Company Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock and Series H Preferred Stock
outstanding as
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of the applicable record date, and (iii) a majority of the shares of Company
Common Stock outstanding as of the applicable record date, voting as a separate
class, is required in order to approve the Company Restated Certificate of
Incorporation attached hereto as Exhibit N as contemplated herein. The
affirmative vote or consent of the holders of a majority of the "Registrable
Securities" (as defined therein) is required to amend the Company's Eighth
Amended and Restated Investors' Rights Agreement, dated December 8, 2000, as
contemplated in the Support Agreement and the Stock Option Agreement.
2.32 Takeover Statutes. The Board of Directors of the Company has taken
the necessary action to make inapplicable to this Agreement, the Merger and the
transactions contemplated hereby, all Takeover Statutes applicable to the
Company.
2.33 Permit Application; Information Statement. The information supplied
by the Company for inclusion in the application for issuance of a California
Permit pursuant to which the shares of Parent Common Stock to be issued in the
Merger and the Company Options and Company Warrants to be assumed in the Merger
will be qualified under the California Code (the "Permit Application") shall not
at the time the Fairness Hearing is held pursuant to section 25142 of the
California Code and the time the qualification of such securities is effective
under section 25122 of the California Code 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 were made, not misleading. The information
supplied by the Company for inclusion in the information statement to be sent to
the stockholders of the Company in connection with the Company Stockholder
Action (such information statement as amended or supplemented is referred to
herein as the "Information Statement") shall not, on the date the Information
Statement is first mailed to the Company's stockholders, at the time of the
Company Stockholder Action and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies or written consents for the Company Stockholder Action which has become
false or misleading. Notwithstanding the foregoing, the Company makes no
representation, warranty or covenant with respect to any information supplied by
Parent which is contained in the Permit Application or the Information
Statement.
2.34 No Solicitation. Since February 2, 2001, the Company has not taken
nor has the Company permitted any of the Company's officers, directors,
employees, or to the knowledge of the Company, stockholders, attorneys,
investment advisors, agents, representatives, Affiliates or Associates
(collectively, "Representatives") to (directly or indirectly), take any of the
actions prohibited from being taken on or after the date of this Agreement by
Section 4.2 with any Person other than Parent and its designees.
2.35 Disclosure. No representation or warranty made by the Company
contained in this Agreement, and no statement contained in the Company
Disclosure Schedule or in any certificate, list or other writing furnished to
Parent pursuant to any provision of this Agreement (including the Company
Financials and the notes thereto) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or
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therein, in the light of the circumstances under which they were made, not
misleading. The Company has provided or made available to Parent all of the
Contracts and Licenses heretofore requested on behalf of Parent in writing, and
all other material information concerning the Company in the possession, custody
or control of the Company.
Article 3
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company,
subject to such exceptions as are specifically disclosed with respect to
specific numbered and lettered sections and subsections of this Article 3 in the
disclosure schedule and schedule of exceptions (the "Parent Disclosure
Schedule") delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, as follows:
3.1 Organization and Qualification. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of its state of incorporation. Each of Parent and Merger Sub has full corporate
power and authority to conduct its business as now conducted and as currently
proposed to be conducted and to own, use, license and lease its Assets and
Properties. Each of Parent and Merger Sub is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use, licensing or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
material adverse effect on the Business or Condition of Parent.
3.2 Capitalization. The authorized capital stock of Parent consists of
175,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred
stock, $.0001 par value per share ("Parent Preferred"), of which 500,000 shares
have been designated Series A Participating Preferred Stock ("Parent Series A
Preferred") As of February 28, 2001, (a) 93,485,127 shares of Parent Common
Stock were issued, 80,485,127 shares of Parent Common Stock were outstanding and
13,000,000 shares of Parent Common Stock were held in treasury, (b) 16,425,042
shares of Parent Common Stock were reserved for issuance pursuant to Parent's
stock option plans, stock option agreements and employee stock purchase plan, of
which 13,802,981 shares are subject to outstanding stock options, (c) 3,177,000
shares of Parent Common Stock were reserved for issuance pursuant to Parent
Common Stock purchase agreements, and (d) 5,374,611 shares of Parent Common
Stock were reserved for issuance upon conversion of Parent's five and
three-fourths percent (5-3/4%) Convertible Subordinated Notes due 2003. As of
the date of this Agreement, no shares of Parent Preferred are outstanding, and
500,000 shares of Parent Series A Preferred are reserved for issuance pursuant
to the Rights Agreement dated as of May 14, 1997 between Parent and The First
National Bank of Boston, as Rights Agent. The Parent Common Stock issuable in
connection with the Merger have been duly authorized, and, upon issuance in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable. Except as disclosed above, as of February 28, 2001, there are no
options, warrants, conversion rights, rights of exchange or other rights, plans,
agreements or commitments of any nature whatsoever (including, without
limitation, conversion or preemptive
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rights) providing for the purchase. issuance or sale of any shares of Parent
Common Stock or any securities convertible into or exchangeable for any shares
of Parent Common Stock, other than as contemplated by this Agreement.
3.3 Authority Relative to this Agreement. Each of Parent and Merger Sub
has full corporate power and authority to execute and deliver this Agreement and
the Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by each of Parent and Merger Sub of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby and the performance by each of Parent and Merger Sub of its
obligations hereunder and thereunder, have been duly and validly authorized by
all necessary action by the board of directors of each of Parent or Merger Sub,
and no other action on the part of the board of directors of either of Parent or
Merger Sub is required to authorize the execution, delivery and performance of
this Agreement and the Ancillary Agreements to which it is a party and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby. This Agreement and the Ancillary Agreements to which each of Parent
and Merger Sub is a party have been or will be, as applicable, duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery hereof (and, in the case of the Ancillary
Agreements to which Parent or Merger Sub is a party, thereof) by the Company
and/or the other parties thereto, constitutes or will constitute, as applicable,
a legal, valid and binding obligation of Parent or Merger Sub enforceable
against Parent or Merger Sub in accordance with its respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
3.4 SEC Filings.
(a) Parent has made available to the Company (i) its annual reports on
Form 10-K for its fiscal years ended December 31, 1997, 1998 and 1999, (ii) its
quarterly report on Form 10-Q for its quarter ended September 30, 2000, (iii)
its proxy or information statements relating to meetings of, or actions taken
without a meeting by, the stockholders of Parent held since December 31, 1999
and (iv) all of its other reports, statements, schedules and registration
statements filed with the SEC since December 31, 1999 (the documents referred to
in this Section 3.4(a) being referred to collectively as the "Parent SEC
Documents") Parent's quarterly report on Form 10-Q for its fiscal quarter ended
September 30, 2000 is referred to herein as the "Parent 10-Q."
(b) As of its filing date, each Parent SEC Document complied as to form
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act.
(c) As of its filing date, each Parent SEC Document filed pursuant to
the Exchange Act did not 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 made therein, in the light of the circumstances under
which they were made, not misleading.
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(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act as of the date such statement
or amendment became effective did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
3.5 Financial Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Parent (including any
related notes and schedules) included in its annual reports on Form 10-K and the
quarterly report on Form 10-Q referred to in Section 3.4(a) complied in all
material respects with applicable accounting rule and with the published rules
and regulations of the SEC with respect thereto and fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and their consolidated results
of operations and changes in financial position for the periods then ended
(subject to normal year-end adjustments and the absence of notes in the case of
any unaudited interim financial statements) For purposes of this Agreement,
"Parent Balance Sheet" means the consolidated balance sheet of Parent as of
September 30, 2000 set forth in the Parent 10-Q. There has been no change in
Parent's accounting policies except as described in the notes to the financial
statements contained in the Parent SEC Documents.
3.6 No Conflicts. The execution and delivery by each of Parent and
Merger Sub of this Agreement and the Ancillary Agreements to which it is a party
does not, and the performance by Parent and Merger Sub of its obligations under
this Agreement and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
Parent or Merger Sub;
(b) conflict with or result in a violation or breach of any Law or Order
applicable to Parent or Merger Sub or their respective Assets or Properties; or
(c) except as would not have a material adverse effect on the Business
or Condition of Parent, (i) conflict with or result in a violation or breach of,
(ii) constitute a default (or an event that, with or without notice or lapse of
time or both, would constitute a default) under, (iii) require Parent to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result of the terms of (except for (A) the filing of the
Certificate of Merger, together with the required officers' certificates; (B)
such consents approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state or federal securities laws;
and (C) such filings as may be required under the HSR Act), (iv) result in or
give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon Parent or
any of its Assets or Properties, or (vii) result in the loss of a material
benefit under, any of the terms, conditions or provisions of any Contract or
License to which Parent is a party or by which any of its Assets and Properties
are bound.
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3.7 Information to be Supplied by Parent. The information supplied by
Parent for inclusion in the Permit Application shall not either at the time the
Fairness Hearing is held pursuant to section 25142 of the California Code or the
time the qualification of such securities is effective under section 25122 of
the California Code, 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
were made, not misleading. The information supplied by Parent for inclusion in
the Information Statement shall not, on the date the Information Statement is
first mailed to the Company's stockholders, at the time of the Company
Stockholder Action and at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which it is made, not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies or written
consents for the Company Stockholder Action which has become false or
misleading. Notwithstanding the foregoing, Parent makes no representation,
warranty or covenant with respect to any information supplied by the Company
which is contained in any of the foregoing documents.
3.8 Investment Advisors. Except for Xxxxxx Brothers Inc., no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or similar fee or commission in
connection with this Agreement and the transactions contemplated hereby based on
arrangements made by or on behalf of Parent.
3.9 Absence of Certain Changes. Except as and to the extent disclosed
in Parent's SEC Documents filed prior to the date hereof, since the date of the
most recent consolidated balance sheet included in Parent's SEC Documents filed
prior to the date hereof, there has not been (a) any event, occurrence or
development of a state of circumstances or facts that, individually or in the
aggregate, has had or would be reasonably likely to have a material adverse
effect on Parent and its Subsidiaries, taken as a whole, or (b) any amendment or
change in Parent's Certificate of Incorporation or Bylaws.
3.10 Litigation. Except as disclosed in the Parent SEC Documents filed
prior to the date hereof, there are no Actions or Proceedings pending or, to the
knowledge of Parent, threatened against or affecting, Parent or any of its
Subsidiaries or any of their respective Assets and Properties which would
reasonably be expected to have a Material Adverse Effect on Parent.
3.11 Governmental Authorization. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the Ancillary
Agreements to which Parent or Merger Sub is a party and the consummation of the
transactions contemplated by this Agreement by Parent and Merger Sub require no
consent of, or filing with, any Governmental or Regulatory Authority other than
(a) the filing of the Certificate of Merger in accordance with Delaware Law, (b)
compliance with any applicable requirements of the HSR Act, (c) compliance with
any applicable requirements of the Exchange Act, (d) compliance with any
applicable requirements of the Securities Act and state securities laws, and (e)
other actions or filings which if not taken or made would not, individually or
in the aggregate, have a Material Adverse Effect on Parent.
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ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (unless the Company is
required to take such action pursuant to this Agreement or Parent shall give its
prior consent in writing which consent shall not be unreasonably withheld) to
carry on its business in the Company's Ordinary Course of Business and in any
event substantially consistent with the Operating Plan provided prior to the
date of this Agreement to Parent; any material deviations from, or material
modifications to, the Operating Plan shall be required to be approved in advance
by Parent), to pay its Liabilities and Taxes consistent with the Company's
Ordinary Course of Business, to perform other obligations when due consistent
with the Company's Ordinary Course of Business (other than Liabilities, Taxes
and other obligations, if any, contested in good faith through appropriate
proceedings or as set forth in Section 4.1 of the Company Disclosure Schedule),
and, to the extent consistent with such business, to use all commercially
reasonable efforts and institute all policies reasonably required to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, independent
contractors and other Persons having business dealings with it, all with the
express purpose and intent of preserving unimpaired its goodwill and ongoing
businesses at the Effective Time. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of Parent,
take or agree in writing or otherwise to take, any action that would make any of
its representations or warranties contained in this Agreement untrue or
incorrect in any material respect or prevent the Company from performing or
cause the Company not to perform its agreements and covenants hereunder or
knowingly cause any condition to Parent's closing obligations in Section 6.1 or
Section 6.3 not to be satisfied. Without limiting the generality of the
foregoing, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
except as set forth in the Company Disclosure Schedule or as required or
expressly permitted by this Agreement, the Company shall not do, cause or permit
any of the following, without the prior written consent of Parent:
(a) Charter Documents: cause or permit any amendments to its certificate
of incorporation or bylaws other than the filing of the Company Restated
Certificate of Incorporation attached hereto as Exhibit N, which Company
Restated Certificate of Incorporation shall be filed with the Secretary of State
of the State of Delaware no later than the close of business on March 27, 2001;
(b) Dividends; Changes in Capital Stock: declare or pay any dividend on
or make any other distribution (whether in cash, stock or property) in respect
of any of its capital stock, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it;
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(c) Stock Option Plans: accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
plans or authorize cash payments in exchange for any options or other rights
granted under any of such plans; or grant any Option with an exercise price of
less than the fair market value of the Company Common Stock on the date the
Option was granted (as determined in good faith by the Company's board of
directors), or grant any additional Company Options;
(d) Contracts: enter into any Contract or commitment, or violate, amend
or otherwise modify or waive any of the terms of any of its Contracts, other
than Contracts in the Company's Ordinary Course of Business which involve total
obligations of less than fifty thousand dollars ($50,000) and which are not
otherwise material to the business of the Company as currently conducted or as
reasonably contemplated to be conducted or any material amendments or
modifications to such Material Contracts that result in additional costs to the
Company in excess of the costs agreed to in such Material Contract;
(e) Issuance of Securities: issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of Company Capital Stock
or securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than the issuance
of shares of its Common Stock pursuant to the conversion of outstanding shares
of Company Preferred Stock and the exercise of Company Options or Company
Warrants outstanding as of the date hereof, except as set forth in Section
4.1(e) of the Company Disclosure Schedule;
(f) Intellectual Property: dispose of, license or transfer to any person
or entity any rights to any Company Intellectual Property other than
non-exclusive licenses in the Company's Ordinary Course of Business;
(g) Exclusive Rights: enter into or amend any agreement pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of the Company Intellectual Property;
(h) Dispositions: sell, lease, license or otherwise dispose of or
encumber any of the Company's properties or assets, except for (i) sales of
products, services or software (and related nonexclusive licenses) in the
Company's Ordinary Course of Business, (ii) the sale of furniture and equipment
by the Company in an amount up to five hundred thousand dollars ($500,000) and
(iii) subleases of the Company's real property;
(i) Indebtedness: incur any Indebtedness (not including any promissory
notes executed by the Company in connection with outstanding indebtedness with
existing trade creditors) for borrowed money or guarantee any such indebtedness
or issue or sell any debt securities or guarantee any debt securities of others,
other than as contemplated by this Agreement and the Second Credit Agreement;
(j) Payment of Obligations: pay, discharge or satisfy any Liability
arising other than in the Company's Ordinary Course of Business, other than the
payment, discharge or satisfaction
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of Liabilities reflected or reserved against in the Company Financials or as
specifically contemplated by this Agreement;
(k) Capital Expenditures: make any capital expenditures, capital
additions or capital improvements in excess of one hundred thousand dollars
($100,000);
(l) Insurance: reduce the amount of any insurance coverage provided by
existing insurance policies, other than the Company's directors' and officers'
insurance policy;
(m) Termination or Waiver: terminate or waive any right of substantial
value other than as set forth in Section 4.1(m) of the Company Disclosure
Schedule;
(n) Employee Benefit Plans; New Hires; Pay Increases: except as set
forth in Section 4.1(n) of the Company Disclosure Schedule, adopt or amend, or
make any promise to adopt or amend, employee benefit, stock purchase, severance,
change in control, retention, bonus or other compensation or option plan, or any
other similar plan, or hire, or make any promise to hire, any new director level
or officer level consultant or employee, pay, or make any promise to pay, any
special bonus or special remuneration to any employee, consultant or director or
increase, or make any promise to increase, the salaries, wage rates or
compensation of any employee or consultant;
(o) Severance Arrangements: grant any severance or termination pay (i)
to any director, officer or consultant or (ii) to any other employee except
payments made pursuant to standard written agreements outstanding on the date
hereof, except as required by applicable Law;
(p) Lawsuits: commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Parent prior to the
filing of such a suit, or (iii) for a breach of this Agreement;
(q) Acquisitions: acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;
(r) Taxes: make or change any election in respect of Taxes other than in
the Company's Ordinary Course of Business, adopt or change any accounting method
in respect of Taxes, file any Tax Return or any amendment to a Tax Return, enter
into any closing agreement, settle any claim or assessment in respect of Taxes,
or consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Revaluation: revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable (other than, in
any case, a set-off against any of the Assets or Properties of the Company), or
change any reserves or liabilities associated therewith, individually or in the
aggregate in an amount exceeding two hundred fifty thousand dollars ($250,000);
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(t) Other: take or agree in writing or otherwise to take, any of the
actions described in Section 4.1(a) through Section 4.1(s) above, or any other
action that would prevent the Company from performing, or cause the Company not
to perform, its covenants and agreements hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1,
the Company will not take (and since February 2, 2001 inclusive has not taken),
nor will the Company (and since February 2, 2001 inclusive has not permitted)
permit any of the Company's Representatives to (directly or indirectly), take
any of the following actions with any Person other than Parent and its
designees: (a) solicit, encourage, initiate, entertain, review or encourage any
proposals or offers from, or participate in or conduct discussions with or
engage in negotiations with, any Person relating to any offer, indication of
interest or proposal, oral, written or otherwise, formal or informal (a
"Competing Proposed Transaction"), with respect to any possible Business
Combination with the Company or any of its Subsidiaries (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized),
(b) provide information not customarily disclosed consistent with the Company's
past practices with respect to the Company or any of its Subsidiaries (whether
such Subsidiaries are in existence on the date hereof or are hereafter
organized) to any Person, other than Parent, relating to (or which the Company
believes or should reasonably know would be used for the purpose of formulating
an offer, indication of interest or proposal with respect to), or otherwise
assist, cooperate with, facilitate or encourage any effort or attempt by any
such Person with regard to, any possible Business Combination with the Company
or any Subsidiary of the Company (whether such Subsidiary is in existence on the
date hereof or is hereafter organized), (c) agree to or enter into a Contract
with any Person, other than Parent, providing for or approving a Business
Combination with the Company or any Subsidiary (whether such Subsidiary is in
existence on the date hereof or is hereafter organized), (d) make or authorize
any statement, recommendation, solicitation or endorsement in support of any
possible Business Combination with the Company or any Subsidiary (whether such
Subsidiary is in existence on the date hereof or is hereafter organized) other
than by Parent, or (e) authorize or permit any of the Company's Representatives
to take any such action. The Company shall immediately cease and cause to be
terminated any such contacts or negotiations with any Person relating to any
such transaction or Business Combination. In addition to the foregoing, if the
Company receives prior to the Effective Time or the termination of this
Agreement any offer, indication of interest or proposal (formal or informal,
oral, written or otherwise) relating to, or any inquiry or contact from any
Person with respect to, a Competing Proposed Transaction, the Company shall
promptly notify Parent thereof, and will keep Parent apprised on a current basis
of the status and details of any such offer, indication of interest or proposal
and of any modifications to the terms thereof; provided, however, that this
provision shall not in any way be deemed to limit the obligations of the Company
and its Representatives set forth in the second preceding sentence. Each of the
Company and Parent acknowledge that this Section 4.2 was a significant
inducement for Parent to enter into this Agreement and the absence of such
provision would have resulted in either (i) a material reduction in the
consideration to be paid to the stockholders of the Company in the Merger or
(ii) a failure to induce Parent to enter into this Agreement.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Information Statement; Permit Application.
(a) As soon as reasonably practicable after the execution of this
Agreement, the Company shall prepare, with the full cooperation of Parent, the
Information Statement for the stockholders of the Company to approve this
Agreement, the Certificate of Merger and the transactions contemplated hereby.
Parent and the Company shall each use commercially reasonable efforts to cause
the Information Statement to comply with applicable federal and state securities
laws requirements. Each of Parent and the Company agrees to provide promptly to
the other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. The Company will promptly advise Parent, and Parent will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent, as applicable, shall obtain knowledge of any
facts that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained or incorporated
by reference therein not misleading or to comply with applicable law. The
Information Statement shall contain the unanimous recommendation of the board of
directors of the Company that the Company's stockholders approve the Merger and
this Agreement and the conclusion of the board of directors that the terms and
conditions of the Merger are advisable and fair and reasonable to, and in the
best interests of, the stockholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company shall not include in the
Information Statement any information with respect to Parent or its affiliates
or associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
(b) As soon as reasonably practicable after the execution of this
Agreement, Parent shall prepare, with the full cooperation of the Company, and
file the Permit Application and a request for a Fairness Hearing to consider the
terms, conditions and fairness of the transactions contemplated by this
Agreement and the Merger. Parent and the Company shall each use commercially
reasonable efforts to cause the Permit Application to comply with the
requirements of applicable federal and state laws. Each of Parent and the
Company agrees to provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Permit Application, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation and completion of the Permit Application. The
Company will promptly advise Parent, and Parent will promptly advise the
Company, in writing if at any time prior to the Effective Time either the
Company or Parent, as applicable, shall obtain knowledge of any facts that might
make it necessary or appropriate to amend or supplement the Permit Application
in order to make the statements contained or incorporated by reference therein
not misleading or to comply with applicable law. Anything to the contrary
contained herein notwithstanding, Parent shall not include in the Permit
Application any information with respect to the Company or its
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affiliates or associates, the form and content of which information shall not
have been approved by the Company prior to such inclusion.
(c) In the event that the Commissioner of Corporations of the State of
California informs Parent or the Company of its determination not to (i) grant
the Fairness Hearing or (ii) issue the California Permit, then Parent and the
Company shall use commercially reasonable efforts to effect the issuance of the
shares of Parent Common Stock to be issued pursuant to Section 1.6 hereof in a
private placement pursuant to section 4(2) of the Securities Act on terms and
conditions that are reasonably satisfactory to Parent. The parties hereto
acknowledge and agree that in such event: (A) as a condition to effecting such
issuance as a private placement pursuant to section 4(2) of the Securities Act,
Parent shall be entitled to obtain from each stockholder of the Company a
Stockholder Certificate in the form attached hereto as Exhibit F (or such other
form as shall be reasonably satisfactory to Parent) (the "Stockholder
Certificate") and that Parent will be relying upon the representations made by
each stockholder of the Company in the applicable Stockholder Certificate in
connection with the issuance of Parent Common Stock to such stockholder, (B) at
the Closing, Parent shall execute and deliver a backup registration rights
agreement (the "Backup Registration Rights Agreement") granting Form S-3 (or
such other or successor form as shall be appropriate) registration rights with
respect to the shares subject to terms, condition, limitations, blackout periods
and postponement rights (as reasonably requested by Parent to accommodate other
potential acquisitions and significant corporate developments) reasonably
acceptable to the parties; (C) the shares of Parent Common Stock so issued
pursuant to Section 1.6 will not be registered under the Securities Act and will
constitute "restricted securities" within the meaning of the Securities Act; and
(D) the certificates representing the shares of Parent Common Stock shall bear
appropriate legends to identify such privately placed shares as being restricted
under the Securities Act, to comply with applicable state securities laws and,
if applicable, to notice the restrictions on transfer of such shares.
Notwithstanding the foregoing, if it is determined by Parent, in consultation
with the Company, that the issuance of the shares of Parent Common Stock to be
issued pursuant to Section 1.6 hereof cannot be effected pursuant to section
4(2) of the Securities Act or that the resale of such shares cannot be
registered pursuant to the filing of a Form S-3 with the SEC, Parent shall
prepare and Parent shall file with the SEC a registration Statement on a Form
S-4 (or such other or successor form as shall be appropriate), which shall
comply in form with applicable SEC requirements and shall use commercially
reasonable efforts to cause such registration statement to become effective as
soon thereafter as practicable.
5.2 Stockholder Approval. As soon as reasonably practicable following
the execution and delivery of this Agreement (and issuance of the California
Permit pursuant to Section 5.1, if applicable), the Company shall give written
notice of this Agreement and the proposed Merger to all Company stockholders and
shall use commercially reasonable efforts to take all other action necessary in
accordance with the Delaware Law and its certificate of incorporation and bylaws
to convene a meeting of the stockholders of the Company or to secure the written
consent of its stockholders ("Company Stockholder Action") The Company shall
submit this Agreement and the Certificate of Merger to its stockholders for
adoption whether or not the Company's board of directors determines at any time
subsequent to declaring its advisability that this Agreement is no longer
advisable and recommends that its stockholders reject it. The Company shall
consult with Parent regarding the date of the Company Stockholder Action and
shall not postpone or adjourn (other than for the absence of a quorum) any
meeting of the stockholders of the Company
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without the consent of Parent, which consent shall not be unreasonably withheld.
The Company shall use all commercially reasonable efforts required to solicit
and obtain from stockholders of the Company proxies or written consents in favor
of the Merger and this Agreement and shall take all other action necessary or
advisable to secure the vote or written consent of stockholders required to
effect the Merger. The materials submitted to the stockholders of the Company in
respect of the Merger shall have been subject to prior review and comment by
Parent and shall include (a) information regarding the Company, the terms of the
Merger and this Agreement, (b) the unanimous recommendation of the board of
directors of the Company that the Company's stockholders approve the Merger and
this Agreement and the transactions contemplated hereby and approve and execute
such other documents as may be required to satisfy the applicable requirements
of the Securities Act in connection with the issuance and sale of Parent Common
Stock in the Merger, (c) the conclusion of the board of directors of the Company
that the terms and conditions of the Merger are advisable, fair and reasonable
to, and in the best interests of, the Company's stockholders and (d) such other
documents as may be required to satisfy the applicable requirements of the
Securities Act in connection with the issuance and sale of Parent Common Stock
in the Merger.
5.3 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (a) give Parent and its officers, employees,
accountants, counsel, financing sources and other agents and representatives
reasonable access to all buildings, offices, and other facilities and to all
Books and Records of the Company, whether located on the premises of the Company
or at another location; (b) permit Parent to make such inspections as it may
reasonably require; (c) cause its officers to furnish Parent such financial,
operating, technical and product data and other information with respect to the
business and Assets and Properties of the Company as Parent from time to time
may reasonably request, including financial statements and schedules; (d) allow
Parent the opportunity to interview such employees and other personnel and
Affiliates of the Company with the Company's prior written consent, which
consent shall not be unreasonably withheld or delayed; and (e) assist and
cooperate with Parent in the development of integration plans for implementation
by Parent and the Surviving Corporation following the Effective Time; provided,
however, that no investigation pursuant to this Section 5.3 shall affect or be
deemed to modify any representation or warranty made by the Company herein.
Materials furnished to Parent pursuant to this Section 5.3 may be used by Parent
for strategic and integration planning purposes relating to accomplishing the
transactions contemplated hereby.
5.4 Confidentiality. The parties acknowledge that Parent and the
Company have previously executed a non-disclosure agreement dated November 10,
2000 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including all Company
management incentive or retention bonuses or payments paid in stock or cash, if
any (other than (a) the cash payments to employees of the Company set forth on
Schedule 5.5 of this Agreement or (b) the stock or options to be granted to
management as consideration for signing non-competition agreements with Parent
(the "Non-Competition Consideration") or any other stock or option grants to
employees, all as set forth on Schedule 5.5 of this Agreement), legal fees,
accounting fees,
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financial advisory or investment banking fees, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses. In the event the
Merger is consummated, Parent shall be responsible for the payment of all
reasonable Third Party Expenses incurred by the Company in connection with the
Merger (the "Transaction Fees"), up to a maximum amount of three million five
hundred thousand dollars ($3,500,000); provided, however, that for the purposes
of the foregoing maximum, any payments described in clause (b) above in excess
of the amounts set forth on Schedule 5.5 shall be counted towards the three
million five hundred thousand dollars ($3,500,000) limit. Notwithstanding
anything to the contrary contained in this Agreement, to the extent that the
Transaction Fees exceed three million five hundred thousand dollars ($3,500,000)
in the aggregate, such amount in excess of three million five hundred thousand
dollars ($3,500,000) shall be deemed a Loss for the purposes of this Agreement
and shall be immediately reimbursable to the Parent Indemnitees in accordance
with Article 7 (without regard to the Deductible and without counting towards
the Deductible).
5.6 Public Disclosure. Unless otherwise required by Law (including
federal and state securities laws) or, as to Parent, by the rules and
regulations of the NASD, prior to the Effective Time, no public disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless approved by Parent and the Company prior to release;
provided, however, that such approval shall not be unreasonably withheld or
delayed.
5.7 Approvals. Each of the Company and Parent shall use commercially
reasonable efforts to obtain all Approvals from Governmental or Regulatory
Authorities as may be required in connection with the Merger and the Company
shall use all commercially reasonable efforts to obtain all third party consents
under any of the Contracts or other agreements as may be reasonably required in
connection with the Merger (all of which third party Approvals are set forth in
the Company Disclosure Schedule) so as to preserve all rights of and benefits to
the Company thereunder and Parent shall provide the Company with such assistance
and information as is reasonably required to obtain such third party Approvals.
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
section 1.1445-2(c)(3) of the Income Tax Regulations, a properly executed notice
to the IRS required by section 1.897-2(b)(ii) in a form satisfactory to Parent
and either evidence satisfactory that the statement and notice have been
properly filed with the IRS or authorization for Parent so to file the statement
and notice.
5.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Closing Date and (b) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any
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notice pursuant to this Section 5.9 shall not limit or otherwise affect any
remedies available to the party receiving such notice.
5.10 Additional Documents and Further Assurances; Cooperation. Each
party hereto, at the request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
(including all action reasonably necessary to seek and obtain any and all
consents, waivers and approvals of any Governmental or Regulatory Authority or
Person required in connection with the Merger; provided, however, that Parent
shall not be obligated to consent to any divestitures or operational limitations
or activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such consent, waiver or
approval) as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby. Each
party agrees to use commercially reasonable efforts to cause the conditions set
forth in Article 6 to be satisfied, where the satisfaction of such conditions
depends on action or forbearance from action by such party.
5.11 Indemnification.
(a) From and after the Effective Time, Parent agrees that it (i) will
indemnify, defend and hold harmless each present and former director, officer,
employee, agent and representative of the Company (when acting in such capacity)
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time whether asserted or
claimed prior to, at or after the Effective Time, and (ii) fulfill and honor in
all respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its directors and officers as of the
Effective Time, to the fullest extent that the Company would have been permitted
under Delaware Law and its certificate of incorporation, bylaws and other
agreements in effect on the date hereof to indemnify such Person (and Parent
shall also advance expenses as incurred to the fullest extent permitted under
applicable law, the Company's certificate of incorporation, bylaws and such
other agreements in effect on the date hereof; provided, however, that the
Person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 5.11, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Parent or the Surviving
Corporation shall have the right to assume the defense thereof and Parent shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) Parent shall not be liable
for any settlement effected without its prior written consent; and provided,
further, that Parent shall not have any obligation hereunder to any Indemnified
Party if and when a court of competent jurisdiction shall ultimately determine,
and such determination shall have become
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final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(c) The provisions of this Section 5.11 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties and
their heirs and estates. Nothing in this Section shall limit in any way any
other rights to indemnification that any current or former director or officer
of the Company may have by contract or otherwise.
5.12 Form S-8. Parent shall file a registration statement on Form S-8
(or any successor or other appropriate form) for the shares of Parent Common
Stock issuable with respect to assumed Company Options no later than thirty (30)
days after the Effective Time to the extent the shares of Parent Common Stock
issuable upon exercise of such Company Options qualify for registration on Form
S-8 and shall use commercially reasonable efforts to maintain the effectiveness
of such registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Company
Options remain outstanding.
5.13 NNM Listing of Additional Shares Application. Prior to the
Effective Time, Parent shall, to the extent required by the rules of the NNM,
file with the NNM such documents as may be required with respect to the shares
of Parent Common Stock to be issued, and the shares of Parent Common Stock
required to be reserved for issuance in connection with the Merger, to the
effect that such shares may be traded immediately after the Effective Time.
5.14 Company's Auditors. The Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (a) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, (b) the review of any Company audit or review work
papers, including the examination of selected interim financial statements and
data, and (c) the delivery of such representations from the Company's
independent accountants as may be reasonably requested by Parent or its
accountants.
5.15 Benefit Arrangements. Parent covenants and agrees that after the
Closing Date, the employees of the Company shall be entitled to participate in
all the Plans covering the Company's employees immediately prior to the Closing
Date; provided that at any time the Parent may designate alternative plans or
arrangements that are comparable to the plans or arrangements that the Parent
offers to its similarly situated employees. For purposes of satisfying the terms
and conditions of the Plans (or any alternative plans or arrangements), Parent
shall give full credit for eligibility and vesting for each participant's period
of service at the Company prior to the Closing Date; provided, however, that the
parties agree and understand that employees of the Company shall not receive any
credit for such employees' period of service at the Company for the purposes of
Parent's sabbatical benefits. Parent agrees that it shall be responsible for
providing continued coverage under COBRA to any Company employee who is an "M&A
qualified beneficiary" as defined in Treasury Regulation section 54.4980B-9 with
respect to the transactions contemplated by this Agreement.
5.16 Takeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the board of directors of
the Company or Parent, as the case may be, will grant such approvals and take
such actions as are necessary so that the transactions
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contemplated by this Agreement and the Ancillary Agreements may be consummated
as promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate the effects of any Takeover Statute on any of the transactions
contemplated hereby.
5.17 Treatment as Reorganization. Neither Parent, Merger Sub nor the
Company shall take any action prior to or following the Closing that would cause
the Merger to fail to qualify as a "reorganization" within the meaning of
section 368(a) of the Code. The Company, Parent and Merger Sub shall report the
Merger for federal and applicable state income tax purposes consistent with the
treatment of the Merger as a reorganization under section 368(a) of the Code.
5.18 Company Repurchases. Except as set forth for the individuals
disclosed on Schedule 2.3(c) of the Company Disclosure Schedule, the Company
will exercise any rights that mature between the date hereof and the Effective
Time to repurchase any outstanding shares of Company Capital Stock at the price
at which such shares were issued.
5.19 Intellectual Property. The Company shall give Parent prompt notice
of any Person that shall have (a) commenced, or shall have notified the Company
that it intends to commence, an Action or Proceeding or (b) provided the Company
with notice, in either case which allege(s) that any of the Intellectual
Property, including the Company Intellectual Property, presently embodied, or
proposed to be embodied, in the Company's products, infringes or otherwise
violates the intellectual property rights of such Person or otherwise alleges
that the Company does not otherwise own or have the right to exploit such
Intellectual Property, including the Company Intellectual Property. The Company
shall cooperate with Parent in making arrangements, prior to the Closing Date,
to effect the assignment to the Company of all Company Intellectual Property
created by the Company's founders, employees and consultants, and to obtain the
cooperation of such Persons to complete all appropriate patent filings related
thereto. The Company shall take commercially reasonable actions to maintain,
perfect, preserve or renew the Company Registered Intellectual Property,
including the payment of any registration, maintenance, renewal fees, annuity
fees and taxes or the filing of any documents, applications or certificates
related thereto, and to promptly respond and prepare to respond to all requests,
related to the Company Registered Intellectual Property, received from
Governmental or Regulatory Authorities.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby including, without limitation, such Approvals
as may be required under the HSR Act, under the Securities Act and under any
state securities laws, shall have been timely obtained, except for any such
approvals the failure of which to obtain would not have a material adverse
effect on the Business or Condition of Parent or the Company; and any waiting
period applicable
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to the consummation of the Merger under the HSR Act (other than with respect to
the receipt of Parent Common Stock by a stockholder of the Company) shall have
expired or been terminated.
(b) No Injunctions or Regulatory Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental or Regulatory Authority or
other legal or regulatory restraint or prohibition preventing the consummation
of the Merger shall be in effect; nor shall there be any action taken, or any
Law or Order enacted, entered, enforced or deemed applicable to the Merger or
the other transactions contemplated by the terms of this Agreement that would
prohibit the consummation of the Merger or which would permit consummation of
the Merger only if certain divestitures were made or if Parent were to agree to
limitations on its business activities or operations. In the event an injunction
or other Order shall have been issued, each party agrees to use commercially
reasonable efforts to have such injunction or other Order lifted.
(c) Stockholder Approval. The Merger shall have been approved by the
requisite votes of the Company's stockholders in accordance with Delaware Law.
(d) Fairness Hearing and California Permit; Private Placement
Alternative; Form S-4 Alternative. The Fairness Hearing shall have been held by
the Commissioner of Corporations of the State of California and the California
Permit shall have been issued by the State of California. In the alternative,
pursuant to Section 5.1(c) hereof, each of the stockholders of the Company shall
have delivered an executed copy of the Stockholder Certificate, and Parent shall
be reasonably satisfied that the shares of Parent Common Stock to be issued in
connection with the Merger pursuant to Section 1.6(a) are issuable without
registration pursuant to section 4(2) of the Securities Act and SEC rules and
regulations promulgated thereunder and Parent shall have executed and delivered
to the Company the Backup Registration Rights Agreement. In the event that a
Form S-4 is filed by Parent pursuant to Section 5.1(c) hereof, such Form S-4
shall have been declared effective under the Securities Act and no stop order
suspending the effectiveness of such Form S-4 shall be in effect and no
proceedings for such purpose shall be pending before or threatened by the SEC.
(e) Listing of Additional Shares. If required by applicable Nasdaq
rules, the shares of Parent Common Stock issuable to stockholders of the Company
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Merger shall have been authorized for listing on
the NNM upon official notice of issuance.
(f) Legal Proceedings. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
6.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
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(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a Material Adverse Effect on the Business or
Condition of Parent; provided, however, that, for purposes of determining the
accuracy of such representations and warranties, all qualifications and
exceptions referring to a "Material Adverse Effect on Parent" and other
materiality qualifications and materiality exceptions contained in such
representations and warranties shall be disregarded. For purposes of this
condition, a decline in the trading price of Parent Common Stock, whether
occurring at any time or from time to time, as reported on the NNM or any other
automated quotation system or exchange shall not constitute the occurrence of an
event that has a Material Adverse Effect on the Business or Condition of Parent.
(b) Performance. Parent and Merger Sub shall have performed and complied
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Parent and Merger Sub
at or before the Closing.
(c) Officers' Certificates. Parent and Merger Sub shall have delivered
to the Company certificates, dated the Closing Date and executed by their
respective Presidents and Chief Executive Officers, substantially in the form
set forth in Exhibit G-1 hereto, and certificates, dated the Closing Date and
executed by the Secretary of Parent and Merger Sub, substantially in the form
set forth in Exhibit G-2 hereto.
(d) Legal Opinion. The Company shall have received a legal opinion from
Pillsbury Winthrop LLP, counsel to Parent, as to the matters set forth in
Exhibit H.
(e) Tax Opinion. The Company shall have received a written opinion from
Venture Law Group, a Professional Corporation, counsel to the Company, in form
and substance reasonably satisfactory to the Company, to the effect that the
Merger will constitute a reorganization within the meaning of section 368(a) of
the Code and such opinion shall not have been withdrawn. In rendering such
opinion, such counsel shall be entitled to rely upon certain representations of
officers of the Company, Parent and Merger Sub reasonably requested by counsel.
If the opinion referred to in this Section 6.2(e) is not delivered, such
condition shall be deemed to be satisfied if the Parent shall have received an
opinion from Pillsbury Winthrop LLP or another law firm selected by Parent and
reasonably acceptable to the Company. The Company will cooperate in obtaining
such opinion, including, without limitation, making (and requesting from
affiliates) appropriate representations with respect to relevant matters.
(f) No Material Adverse Changes. No event shall have occurred that has a
Material Adverse Effect on the Business or Condition of Parent or its
subsidiaries, since the date of execution of the Agreement. For purposes of this
condition, a decline in the trading price of Parent Common Stock, whether
occurring at any time or from time to time, as reported on the
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NNM or any other automated quotation system or exchange shall not constitute the
occurrence of an event that has a Material Adverse Effect on the Business or
Condition of Parent.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be accurate in all respects as
of the date of this Agreement and shall be accurate in all respects as of the
Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a Material Adverse Effect on the Business or
Condition of the Company; provided, however, that, for purposes of determining
the accuracy of such representations and warranties, (i) all qualifications and
exceptions referring to a "Material Adverse Effect on the Business or Condition
of the Company" and other materiality qualifications and exceptions contained in
such representations and warranties shall be disregarded and (ii) any update of
or modification to the Company Disclosure Schedule made or purported to have
been made after the date of this Agreement (other than to reflect actions taken
by the Company which are not in violation of the covenants of this Agreement)
shall be disregarded.
(b) Performance. The Company shall have performed and complied with in
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company on or before the
Closing Date.
(c) Officers' Certificates. The Company shall have delivered to Parent a
certificate, dated the Closing Date and executed by the President and Chief
Executive Officer of the Company, substantially in the form set forth in Exhibit
I-1 hereto, and a certificate, dated the Closing Date and executed by the
Secretary of the Company, substantially in the form set forth in Exhibit I-2
hereto.
(d) Third Party Consents. Parent shall have been furnished with evidence
reasonably satisfactory to it that the Company has obtained the consents,
approvals and waivers listed (or required to be listed) in Section 2.6 of the
Company Disclosure Schedule (except for such consents, approvals and waivers the
absence of which, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company), and that all such consents, approvals
and waivers are in full force and effect.
(e) Legal Opinion. Parent shall have received a legal opinion from
Venture Law Group, a Professional Corporation, legal counsel to the Company, as
to the matters set forth in Exhibit K.
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(f) Non-Competition Agreements. Each of the persons listed on Schedule
6.3(f) shall have executed and delivered to Parent a Non-Competition Agreement
and all of the Non-Competition Agreements shall be in full force and effect.
(g) Support Agreements. Each of the Major Stockholders shall have
executed and delivered to Parent a Support Agreement, and no breach of any
Support Agreement shall have occurred or be continuing.
(h) Employees. The four employees of the Company set forth on Schedule
6.3(h) shall continue to be employed by the Company at the Closing and shall not
have given any notice or other indication that they are not willing or do not
intend to be employed by Parent or a Subsidiary of Parent (as Parent shall
designate), following the Merger and one employee separately set forth on
Schedule 6.3(h) shall continue to be employed by the Company at Closing.. In
addition, at least seventy-five percent (75%) of the engineering and research
and development employees of the Company (excluding the employees identified on
Schedule 6.3(h)) employed as of the date of this Agreement shall continue to be
employed by the Company at the Closing and shall not have given any notice or
other indication that they are not willing or do not intend to be employed by
Parent or a Subsidiary of Parent (as Parent shall designate) following the
Merger.
(i) Stockholder Approval; Limitation on Dissent. Either (i) this
Agreement and the Merger shall have been approved by at least ninety-six percent
(96%) of the outstanding shares of Company Capital Stock (on an "as if converted
to Company Common Stock" basis) or (ii) holders of no more than four percent
(4%) of the outstanding shares of Company Capital Stock, on an "as if converted
to Company Common Stock" basis, shall have exercised, nor shall they have any
continued right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger (compliance
with clause (ii) hereof must be effected pursuant to section 262(d)(2) of the
Delaware Law, including, but not limited to, expiration of the twenty (20) day
period after mailing of the required notice).
(j) No Material Adverse Changes. No event shall have occurred that has a
Material Adverse Effect on the Business or Condition of the Company since the
date of execution of the Agreement. For purposes of this condition, the
following shall not be taken into account in determining whether there has been
or could be an occurrence of an event that has a Material Adverse Effect on the
Business or Condition of the Company: (i) any intellectual property lawsuit
arising out of the facts and circumstances disclosed to Parent on Schedule
6.3(j) prior to the date hereof, (ii) any decrease in the Company's cash
balances since the date hereof or (iii) the delay or cancellation of orders for
the Company's products from customers or distributors (or other resellers)
directly attributable to the announcement of the Merger. The parties agree and
acknowledge that the mere filing of an intellectual property lawsuit, in and of
itself, shall not be deemed to be an event that has a Material Adverse Effect on
the Business or Condition of the Company.
(k) Stockholder Approval of Certain Payments. Any agreements or
arrangements that may result in the payment of any amount that would not be
deductible by reason of section 280G of the Code shall have been approved by
such number of stockholders of the Company as is required by the terms of
section 280G(b)(5)(B) and shall be obtained in a manner that satisfies all
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applicable requirements of such section 280G(b)(5)(B) and the Proposed Income
Tax Regulations thereunder, including Q-7 of section 1.280G-1 of the Proposed
Income Tax Regulations; provided, however, that such stockholder approval
requirement shall not apply to such amounts of Non-Competition Consideration as
is determined by PriceWaterhouseCoopers LLP in a valuation report to be issued
to Parent and the Company prior to the Closing to be reasonable compensation for
the Non-Competition Agreements not to compete referred to in Section 6.3(f).
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to Section 5.3 or otherwise) or a waiver by Parent, Merger Sub
or the Company of any condition to Closing set forth in Article 6, each party
shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party contained in this Agreement or in
any instrument delivered pursuant to this Agreement. Except for (a) all of the
representations and warranties of the Company related to Intellectual Property
(which shall survive as set forth in the following sentence), (b) the covenant
contained in Section 5.11 (which shall survive for the period set forth therein)
and (c) Article 7 (which shall survive until termination of the escrow created
thereby and the satisfaction of any other obligations described therein), all of
the representations, warranties, covenants and agreements of the Company, Parent
and Merger Sub contained in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger and continue until the
eighteen (18) month anniversary of the Closing Date (the "General Expiration
Date") The representations and warranties of the Company related to Intellectual
Property shall survive the Merger and continue until the twenty-four (24) month
anniversary of the Closing Date (the "IP Expiration Date") Claims by Parent
based upon fraud shall survive and continue in full force and effect until
expiration of the statutes of limitations applicable to the underlying claim.
7.2 Escrow Provisions.
(a) Establishment of the Escrow Fund. As soon as reasonably practicable
after the Effective Time, the Escrow Amount, without any act of any stockholder,
will be deposited with the Escrow Agent (plus a proportionate share of any
additional shares of Parent Common Stock as may be issued upon any stock splits,
stock dividends or recapitalizations effected by Parent following the Effective
Time), such deposit to constitute the "Escrow Fund" to be governed by the terms
set forth herein. The portion of the Escrow Amount contributed on behalf of each
stockholder of the Company shall be in proportion to the aggregate number of
shares of Parent Common Stock which such holder would otherwise be entitled
under Section 1.6 hereof (excluding any shares of Parent Common Stock which such
holder would be entitled to receive upon exercise of Company Options or Company
Warrants after the Effective Time) Notwithstanding the references in this
Agreement to the "escrow" and the Escrow Fund, the parties acknowledge and agree
that the Escrow Agent is acting as a depositary and not as an escrow
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agent pursuant to this Article 7. During the term of this Agreement, the Escrow
Fund cash, if any, shall be invested and reinvested by the Escrow Agent, in a
time deposit or demand deposit or cash escrow account with the Escrow Agent.
Such investment shall earn interest at a rate tied to the average LIBOR, less
1.0% (i.e., 100 basis points) Such interest will be computed daily and credited
to the account monthly. The Escrow Agent shall have the right to liquidate any
investments held in order to provide funds necessary to make required payments
under this Agreement; provided, that the Escrow Agent shall notify Parent prior
to the liquidation of any investment in order to pay fees or expenses due under
this Agreement. The Escrow Agent in its capacity as escrow agent hereunder shall
not have any liability for any loss sustained as a result of any investment
liquidated prior to its maturity in accordance with this Agreement or for the
failure of Parent to give the Escrow Agent instructions to invest or reinvest
the Escrow Fund cash or any earnings thereon.
(b) Recourse to the Escrow Fund. The (i) IP Escrow Amount shall be
available to compensate Parent, Merger Sub and their respective officers,
directors, employees, agents and representatives (including the Surviving
Corporation; collectively, the "Parent Indemnitees") for any and all Losses
(whether or not involving a Third Party Claim), incurred or sustained by Parent
or any other Parent Indemnitee as a result of any inaccuracy in or breach (or
any claim by any third party alleging, constituting or involving an inaccuracy
or breach) of any representation, warranty, covenant or agreement of the Company
contained herein or in the Ancillary Agreements or in any instrument delivered
pursuant to this Agreement related to Intellectual Property of the Company ("IP
Losses") which becomes known to Parent during the Escrow Period and (ii) General
Escrow Amount shall be available to compensate the Parent Indemnitees for any
and all Losses (whether or not involving a Third Party Claim), incurred or
sustained by Parent or any other Parent Indemnitee as a result of any inaccuracy
in or breach (or any claim by any third party alleging, constituting or
involving an inaccuracy or breach) of any representation, warranty, covenant or
agreement of the Company contained herein or in the Ancillary Agreements or in
any instrument delivered pursuant to this Agreement which becomes known to
Parent during the Escrow Period including Losses resulting from Transaction Fees
in excess of $3,500,000 as described in the last sentence of Section 5.5 of this
Agreement; provided, however, that, except in the case of claims for Losses
resulting from a breach, violation or inaccuracy in or omission from any of the
representations and warranties of the Company set forth in Section 2.3 or the
related Sections of the Company Disclosure Schedule, the Parent Indemnitees may
not make any claims against the Escrow Fund unless the aggregate Losses
(including IP Losses) incurred or sustained exceed one hundred thousand dollars
($100,000) (the "Deductible") The dollar threshold of the Deductible set forth
in the immediately preceding proviso shall not apply to Losses (i) resulting
from any breach, violation or inaccuracy in or omission from any of the
representations and warranties of the Company set forth in Section 2.3 or the
related Sections of the Company Disclosure Schedule, which shall be recoverable
without respect to any threshold amount or (ii) as set forth in Section 5.5
hereof. Parent, Merger Sub and the Company each acknowledge that such Losses
(including IP Losses), if any, would relate to unresolved contingencies existing
at the Effective Time, which if resolved at the Effective Time would have led to
a reduction in the aggregate Merger consideration to be paid to the stockholders
of the Company. The stockholders of the Company shall not have any contractual
liability under this Agreement of any sort whatsoever in excess of the Escrow
Fund (and the Escrow Fund shall be the sole contractual remedy of the Parent
Indemnitees), except in the event of fraud or willful misconduct (i.e., an
intentional breach of a representation, warranty, covenant
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or agreement, but excluding a negligent or reckless breach) by the Company of
any of its representations, warranties, agreements or covenants contained in
this Agreement, the Ancillary Agreements or in any other instrument or document
required to be delivered pursuant to this Agreement in connection herewith. In
the event of such a fraudulent breach, Parent and Merger Sub shall have all
remedies available at law or in equity (including for tort) with respect to such
breach; provided, however, that, notwithstanding anything to the contrary
contained in this Agreement, in no event shall any stockholder of the Company
have any liability in excess of the Merger consideration received by such
stockholder in connection with the Merger or the proceeds, if any, received by
such stockholder in connection with the disposition of such Merger
consideration. In the event funds transfer instructions are given (other than in
writing at the time of execution of this Agreement), whether in writing, by
telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated in
Section 9.1 hereof, and the Escrow Agent may rely upon the confirmations of
anyone purporting to be the person or persons so designated. The persons and
telephone numbers for call-backs may be changed as set forth in Section 9.1
hereof, provided, however, that such changes shall only be binding when actually
received and acknowledged by the Escrow Agent. The parties to this Agreement
acknowledge that such security procedure is commercially reasonable. It is
understood that the Escrow Agent and the beneficiary's bank in any funds
transfer may rely solely upon any account numbers or similar identifying number
provided by either of the other parties hereto to identify (i) the beneficiary,
(ii) the beneficiary's bank, or (iii) an order it executes using any such
identifying number, even where its use may result in a Person other than the
beneficiary being paid, or the transfer of funds to a bank other than the
beneficiary's bank, or an intermediary bank designated.
(c) Escrow Period; Distribution of Escrow Fund upon Termination of
Escrow Period. Subject to the following requirements, the Escrow Fund shall be
in existence immediately following the Effective Time and shall terminate at
5:00 p.m., Pacific Time, on the General Expiration Date (with respect to the
General Escrow Amount) or the IP Expiration Date (with respect to the IP Escrow
Amount) (the period of time from the Effective Time through and including the
General Expiration Date or the IP Expiration Date, as the case may be, is
referred to herein as the "Escrow Period"); and all shares of Parent Common
Stock remaining in the Escrow Fund shall be distributed as set forth in this
Section 7.2(c); provided, however, that the Escrow Period shall not terminate
with respect to such amount (or some portion thereof) that is necessary in the
reasonable judgment of Parent, subject to the objection of the Stockholder Agent
and the subsequent arbitration of the matter in the manner as provided in
Section 7.2(g), to satisfy any unsatisfied claims under this Section 7.2
concerning facts and circumstances existing prior to the termination of such
Escrow Period which claims are specified in any Officer's Certificate delivered
to the Escrow Agent prior to termination of such Escrow Period. As soon as all
such unsatisfied claims, if any, have been resolved, the Escrow Agent shall
deliver to the stockholders of the Company the remaining portion of the Escrow
Fund not required to satisfy such unsatisfied claims. Deliveries of shares of
Parent Common Stock remaining in the Escrow Fund to the stockholders of the
Company pursuant to this Section 7.2(c) shall be made ratably in proportion to
their respective contributions to the Escrow Fund. Each stockholder of the
Company who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Closing Price. Parent shall use its
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commercially reasonable efforts to have such shares and cash delivered within
five (5) Business Days after such resolution. Each party hereto, except the
Escrow Agent, shall provide the Escrow Agent with their Tax Identification
Number (TIN) as assigned by the IRS. All interest or other income earned under
this Agreement shall be allocated and paid as provided herein and reported by
the recipient to the IRS as having been so allocated and paid.
(d) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or securities issued or
distributed by Parent ("New Shares") in respect of Parent Common Stock in the
Escrow Fund which have not been released from the Escrow Fund shall be added to
the Escrow Fund. New Shares issued in respect of shares of Parent Common Stock
which have been released from the Escrow Fund shall not be added to the Escrow
Fund but shall be distributed to the record holders thereof. Cash dividends on
Parent Common Stock shall not be added to the Escrow Fund but shall be
distributed to the record holders of the Parent Common Stock on the record date
set for any such dividend.
(iii) Each stockholder shall have voting rights with respect to
the shares of Parent Common Stock contributed to the Escrow Fund by such
stockholder (and on any voting securities added to the Escrow Fund in respect of
such shares of Parent Common Stock).
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before the
last day of the Escrow Period of a certificate signed by any officer of Parent
(an "Officer's Certificate"): (a) stating that Parent or another Parent
Indemnitee has paid or properly accrued or reasonably anticipates that it will
have to pay or accrue Losses, directly or indirectly, as a result of any
inaccuracy or breach (or any claim by any third party alleging, constituting or
involving an inaccuracy or breach) of any representation, warranty, covenant or
agreement of the Company contained in this Agreement or in any of the Ancillary
Agreements or in any instrument or agreement delivered pursuant to this
Agreement, and (b) specifying in reasonable detail the individual items of
Losses included in the amount so stated, the date each such item was paid or
properly accrued, or the basis for such anticipated liability, and the nature of
the misrepresentation, breach of warranty, agreement or covenant to which such
item is related and the relevant section number of this Agreement, the Escrow
Agent shall, subject to the provisions of Section 7.2(f), deliver to Parent out
of the Escrow Fund, as promptly as practicable, shares of Parent Common Stock
held in the Escrow Fund in an amount equal to such Losses. Where the basis for a
claim upon the Escrow Fund by Parent is that Parent reasonably anticipates that
it will pay or accrue a Loss, no payment will be made from the Escrow Fund for
such Loss unless and until such Loss is actually paid or accrued.
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(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(e)(i), the shares of Parent Common Stock shall be valued at the
Closing Price.
(f) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Stockholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amounts pursuant to Section 7.2(e) unless the Escrow Agent shall have received
written authorization from the Stockholder Agent to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of shares of Parent Common Stock from the Escrow Fund in accordance
with Section 7.2(e), provided that no such payment or delivery may be made if
the Stockholder Agent shall object in a written statement to the claim made in
the Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent prior to the expiration of such thirty (30) day period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Agent shall object in writing to any
claim or claims made in any Officer's Certificate, the Stockholder Agent and
Parent shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the Stockholder Agent and Parent
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and shall be furnished to the Escrow Agent. The Escrow
Agent shall be entitled to rely on any such memorandum and distribute shares of
Parent Common Stock from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation within forty-five (45) days after the Escrow Agent's receipt of the
Stockholder Agent's written objection to the claim pursuant to Section 7.2(f),
either Parent or the Stockholder Agent may demand arbitration of the dispute
unless the amount of the damage or loss is at issue in a pending Action or
Proceeding involving a Third Party Claim, in which event arbitration shall not
be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three arbitrators, one selected by Parent and one selected by the
Stockholder Agent, and the two arbitrators selected by Parent and the
Stockholder Agent shall select a third arbitrator. The arbitrators shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery of information relating to any dispute while allowing the
parties an opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel, limit or allow discovery as they shall deem appropriate given the nature
and extent of the disputed claim. The arbitrators shall also have the authority
to impose sanctions, including attorneys' fees and other costs incurred by the
parties, to the same extent as a court of law or equity, should the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to by a party without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall be binding
and conclusive upon the parties to this Agreement, and notwithstanding anything
in Section 7.2(f), the Escrow Agent shall be entitled to act in accordance with
such decision and make or withhold payments out of the Escrow Fund in accordance
therewith. Such decision
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shall be written and shall be supported by written findings of fact and
conclusions regarding the dispute which shall set forth the award, judgment,
decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration shall
be held in Santa Xxxxx County, California under the commercial rules of
arbitration then in effect of the American Arbitration Association. For purposes
of this Section 7.2(g), in any arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, Parent shall be
deemed to be the Non-Prevailing Party in the event that the arbitrators award
Parent less than the sum of one-half of the disputed amount of any Losses plus
any amounts not in dispute; otherwise, the stockholders of the Company as
represented by the Stockholder Agent shall be deemed to be the Non-Prevailing
Party. The Non-Prevailing Party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative costs of the arbitration and the
expenses, including reasonable attorneys' fees and costs, incurred by the other
party to the arbitration.
(h) Stockholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved by the stockholders
of the Company, effective upon such vote, and without further act of any
stockholder, Xxxxxxx Xxxxxxxx Xxxxxx III shall be appointed as agent and
attorney-in-fact (the "Stockholder Agent") for each stockholder of the Company
(except such stockholders, if any, as shall have perfected their appraisal or
dissenters' rights under Delaware Law or the California Code, as applicable),
for and on behalf of stockholders of the Company, to give and receive notices
and communications, to authorize delivery to Parent of shares of Parent Common
Stock from the Escrow Fund in satisfaction of claims by Parent, to object to
such deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Stockholder Agent for the accomplishment of
the foregoing. Such agency may be changed by the stockholders of the Company
from time to time upon not less than thirty (30) days prior written notice to
Parent; provided, however, that the Stockholder Agent may not be removed unless
holders of a two-thirds interest in the Escrow Fund agree to such removal and to
the identity of the substituted stockholder agent. Any vacancy in the position
of Stockholder Agent may be filled by approval of the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Stockholder Agent,
and the Stockholder Agent shall not receive compensation for his services.
Notices or communications to or from the Stockholder Agent pursuant to Section
9.1 hereof shall constitute notice to or from each of the stockholders of the
Company.
(ii) The Stockholder Agent shall not incur any liability with
respect to any action taken or suffered by him or omitted hereunder as
Stockholder Agent while acting in good faith and in the exercise of reasonable
judgment. The Stockholder Agent may, in all questions arising hereunder, rely on
the advice of counsel and for anything done, omitted or suffered in good faith
by the Stockholder Agent based on such advice, the Stockholder Agent shall not
be liable to anyone. The Stockholder Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Stockholder Agent.
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(iii) The Stockholder Agent shall have reasonable access to
information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Stockholder Agent shall treat confidentially
and not disclose any nonpublic information from or about the Company to anyone
(except on a need to know basis to individuals who agree in writing to treat
such information confidentially).
(i) Actions of the Stockholder Agent. A decision, act, consent or
instruction of the Stockholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Escrow Agent and Parent may rely upon any
such decision, act, consent or instruction of the Stockholder Agent as being the
decision, act, consent or instruction of every such stockholder of the Company.
The Escrow Agent and Parent are hereby relieved from any liability to any person
for any acts done by them in accordance with such decision, act, consent or
instruction of the Stockholder Agent.
(j) Third-Party Claims. In the event Parent becomes aware of a
third-party claim (a "Third Party Claim") which Parent reasonably expects may
result in a demand against the Escrow Fund, Parent shall notify the Stockholder
Agent of such claim, and the Stockholder Agent, as representative for the
stockholders of the Company, shall be entitled, at their expense, to participate
in any defense of such claim. Parent shall have the right in its sole discretion
to settle any Third Party Claim; provided, however, that if Parent settles any
Third Party Claim without the Stockholder Agent's consent (which consent shall
not be unreasonably withheld or delayed), Parent may not make a claim against
the Escrow Fund with respect to the amount of Losses incurred by Parent in such
settlement. In the event that the Stockholder Agent has consented to any such
settlement, the Stockholder Agent shall have no power or authority to object
under any provision of this Article 7 to the amount of any claim by Parent
against the Escrow Fund with respect to the amount of Losses incurred by Parent
in such settlement.
(k) Indemnification for Stockholder Agent. The stockholders of the
Company shall, severally and not jointly, on a pro rata basis based on their
proportionate ownership interests in the Company, indemnify, defend and hold the
Stockholder Agent harmless from and against any loss, damage, tax, liability and
expense that may be incurred by the Stockholder Agent arising out of or in
connection with the acceptance or administration of the Stockholder Agent's
duties, except as caused by the Stockholder Agent's gross negligence or willful
misconduct, including the legal costs and expenses of defending such Stockholder
Agent against any claim or liability in connection with the performance of the
Stockholder Agent's duties. The Stockholder Agent shall be entitled, but not
limited, to such indemnification from the Escrow Fund prior to any distribution
thereof to the stockholders of the Company, but after any distributions
therefrom to Parent.
(l) Escrow Agent's Duties.
(i) Limitation on Duties of Escrow Agent. The Escrow Agent shall
be obligated only for the performance of such duties as are specifically set
forth herein, and as set forth in any additional written escrow instructions
which the Escrow Agent may receive after the date of this Agreement which are
signed by an officer of Parent and the Stockholder Agent, and
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may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be liable
for any act done or omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith.
(ii) Compliance with Orders. The Escrow Agent is hereby expressly
authorized to comply with and obey Orders of any court of law or Governmental or
Regulatory Authority, notwithstanding any notices, warnings or other
communications from any party or any other Person to the contrary. In case the
Escrow Agent obeys or complies with any such Order, the Escrow Agent shall not
be liable to any of the parties hereto or to any other Person by reason of such
compliance, notwithstanding any such Order being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction or proper authority.
(iii) Limitations on Liability of Escrow Agent. The Escrow Agent
shall not be liable in any respect on account of (a) the identity, authority or
rights of the parties executing or delivering or purporting to execute or
deliver this Agreement or any documents or papers deposited or called for
hereunder; or (b) the expiration of any rights under any statute of limitations
with respect to this Agreement or any documents deposited with the Escrow Agent.
(iv) Good Faith of Escrow Agent. In performing any duties under
the Agreement, the Escrow Agent shall not be liable to any party for damages,
losses, or expenses, except for gross negligence or willful misconduct on the
part of the Escrow Agent. The Escrow Agent shall not incur any such liability
for (a) any act or failure to act made or omitted in good faith, or (b) any
action taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations or determining the scope of
any representative authority. In addition, the Escrow Agent may consult with
legal counsel in connection with the Escrow Agent's duties under this Agreement
and shall be fully protected in any act taken, suffered, or permitted by him,
her or it in good faith in accordance with the advice of counsel. The Escrow
Agent is not responsible for determining and verifying the authority of any
person acting or purporting to act on behalf of any party to this Agreement.
(v) Non-responsibility of Escrow Agent. If any controversy arises
between the parties to this Agreement, or with any other party, concerning the
subject matter of this Agreement, its terms or conditions, the Escrow Agent will
not be required to determine the controversy or to take any action regarding it.
The Escrow Agent may hold all documents and shares of Parent Common Stock and
may wait for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Escrow Agent's discretion, the Escrow
Agent may be required, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be liable for any damages.
Furthermore, the Escrow Agent may at its option, file an action of interpleader
requiring the parties to answer and litigate any claims and rights among
themselves. The Escrow Agent is authorized to deposit with the clerk of the
court all documents and shares of Parent Common Stock held in escrow, except all
costs, expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the
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interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vi) Indemnification of Escrow Agent. Parent and its successors
and assigns agrees to indemnify and hold the Escrow Agent harmless against any
and all Losses incurred by the Escrow Agent in connection with the performance
of the Escrow Agent's duties under this Agreement, including but not limited to
any litigation arising from this Agreement or involving its subject matter. In
no event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.
(vii) Resignation of Escrow Agent. The Escrow Agent may resign at
any time upon giving at least thirty (30) days written notice to the parties;
provided, however, that no such resignation shall become effective until the
appointment of a successor Escrow Agent which shall be accomplished as follows:
the parties shall use their reasonable best efforts to mutually agree on a
successor Escrow Agent within thirty (30) days after receiving such notice. If
the parties fail to agree upon a successor Escrow Agent within such time, the
Escrow Agent shall have the right to appoint a successor Escrow Agent authorized
to do business in the State of California. The successor Escrow Agent shall
execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor Escrow Agent as if originally named as
Escrow Agent. The Escrow Agent shall be discharged from any further duties and
liability under this Agreement.
(viii) Successor of Escrow Agent. Any company into which the
Escrow Agent may be merged or converted or with which it may be consolidated or
any company resulting from any merger, conversion or consolidation to which
Escrow Agent shall be a party or any company to which the Escrow Agent may sell
or transfer all or substantially all of its escrow/custody business shall be the
successor hereunder to the Escrow Agent without the execution or filing of any
paper or any further act; provided, however, such company must be eligible to
serve as Escrow Agent hereunder.
(m) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent. In the event that the conditions of this
Agreement are not promptly fulfilled, or if the Escrow Agent renders any service
not provided for in this Agreement, or if the parties request a substantial
modification of its terms, or if any controversy arises, or if the Escrow Agent
is made a party to, or intervenes in, any Action or Proceeding pertaining to
this escrow or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, and expenses occasioned by such default, delay, controversy or
Action or Proceeding. Parent agrees to pay these sums upon demand.
(n) When used in this Section 7.2, the phrase "stockholders of the
Company" means any holders of Company Common Stock at the Effective Time.
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Article 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective Time has
not occurred before 5:00 p.m. (Pacific Time) on June 30, 2001, or such later
date as may be agreed upon in writing by the parties (provided, however, that
the right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date); (ii) there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
(iii) there shall be any statute, rule, regulation or order enacted, promulgated
or issued or deemed applicable to the Merger by any Governmental or Regulatory
Authority that would make consummation of the Merger illegal;
(c) by Parent and Merger Sub if there shall be any action taken, or any
Law or Order enacted, promulgated or issued or deemed applicable to the Merger,
by any Governmental or Regulatory Authority, which would: (i) prohibit Parent's
or Merger Sub's ownership or operation of all or any portion of the business of
the Company or (ii) compel Parent or Merger Sub to dispose of or hold separate
all or any portion of the Assets and Properties of the Company as a result of
the Merger;
(d) by Parent if it and Merger Sub are not in material breach of their
respective representations, warranties, covenants and agreements under this
Agreement and there has been a material breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Company and
(i) the Company is not using its reasonable efforts to cure such breach, or has
not cured such breach within thirty (30) days, after notice of such breach to
the Company (provided, however, that, no cure period shall be required for a
breach which by its nature cannot be cured) and (ii) as a result of such breach
any of the conditions set forth in Section 6.1 or Section 6.3, as the case may
be, would not be satisfied prior to the Closing Date;
(e) by the Company if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a material breach of any representation, warranty, covenant or
agreement contained in this Agreement on the part of Parent or Merger Sub and
(i) Parent is not using its reasonable efforts to cure such breach, or has not
cured such breach within thirty (30) days, after notice of such breach to Parent
(provided, however, that no cure period shall be required for a breach which by
its nature cannot be cured), and (ii) as a result of such breach any of the
conditions set forth in Section 6.1 or Section 6.2, as the case may be, would
not be satisfied as of the Closing Date;
(f) by Parent and Merger Sub, if the Merger shall not have been approved
by the requisite votes or consents, as applicable, of the Company's stockholders
in accordance with Delaware Law at any meeting (or any adjournment thereof)
convened for the purpose of taking a
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vote with respect to the Merger or, in any solicitation of stockholder written
consents with respect to the Merger, within twenty (20) days after the record
date established for determining the stockholders of the Company entitled to
consent;
(g) by Parent and Merger Sub, if any of the individuals listed on
Schedule 6.3(h) cease to be employed by the Company;
(h) by Parent and Merger Sub, if, at any time, less than seventy-five
percent (75%) of the Company's engineering and research and development
employees of the Company employed as of February 2, 2001 (exclusive of those
listed on Schedule 6.3(h)), shall cease to be employed by the Company at the
Closing or if more than twenty-five percent (25%) of such employees shall have
given any notice that they are not willing to be employed by Parent or a
Subsidiary of Parent (as Parent shall designate) following the Merger;
(i) by the Company, if the Closing Price is less than $5.1613, and the
Parent does not notify the Company prior to the end of the second (2nd) market
trading day prior to the date of the Company Shareholder Action that Parent has
agreed to increase the value of the aggregate consideration to be offered to the
Company's securityholders to at least eighty million dollars ($80,000,000)
(based on the Closing Price) pursuant to Section 1.6(e) hereof; or
(j) by Parent and Merger Sub, if the Company has not filed the Company
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware by the close of business at such office on March 27, 2001.
8.2 Effect of Termination.
(a) In the event of a valid termination of this Agreement as provided in
Section 8.1, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Merger Sub or the Company, or
their respective officers, directors or stockholders or Affiliates or Associates
except as set forth in this Section 8.2; provided, however, that each party
shall remain liable for any breaches of this Agreement prior to its termination;
and provided further that, the provisions of Sections 5.4, 5.5, 8.2, Article 9
(exclusive of Section 9.3), and the applicable definitions set forth in Article
10 shall remain in full force and effect and survive any termination of this
Agreement.
(b) If Parent shall terminate this Agreement pursuant to Section 8.1(d),
then the Company shall reimburse Parent for Parent's reasonable out-of-pocket
expenses incurred in connection with the preparation, execution and performance
by Parent of this Agreement and the transactions contemplated hereby, including,
but not limited to, all Third Party Expenses incurred by Parent.
(c) If Parent shall terminate this Agreement (i) as a result of the
Company's breach of Section 4.2 or (ii) because a Company Triggering Event shall
have occurred, then the Company shall pay to Parent (by wire transfer of
immediately available funds not later than the date of termination of this
Agreement) an amount equal to three million dollars ($3,000,000) Except as
provided in Section 8.2(d), the fees provided for in this Section 8.2(c) are
intended to be liquidated damages and, as such, the fees are the sole and
exclusive remedy for any and all claims on any theory that might be asserted
with respect to any of the matters discussed in this
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Section 8.2(c), and no party hereto shall seek any additional damages or
remedies at law or in equity as a result or consequence of any such matter.
Acceptance by Parent of the payment referred to in the foregoing sentence shall
constitute conclusive evidence that this Agreement has been validly terminated
and upon acceptance of payment of such amount the Company shall be fully
released and discharged from any liability or obligation resulting from or under
this Agreement.
(d) Notwithstanding anything to the contrary, payment of fees provided
in Section 8.2(c) shall be in addition to payments made pursuant to Section
8.2(b) and shall not be in lieu of damages incurred in the event of a willful or
intentional breach of this Agreement by either party.
(e) If the Company shall terminate this Agreement pursuant to Section
8.1(e), then Parent shall reimburse the Company for the Company's reasonable
legal and accounting fees, the out-of-pocket expenses due and payable to the
Company's investment bankers, and any fees paid by the Company to Governmental
or Regulatory Authorities incurred in connection with the preparation, execution
and performance by the Company of this Agreement and the transactions
contemplated hereby.
8.3 Amendment. Except as is otherwise required by applicable law after
the stockholders of the Company approve the Merger and this Agreement, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that the consent of the Stockholder Agent and the Escrow Agent shall
not be required in connection with any amendment to this Agreement that does not
affect the rights and obligations of the Stockholder Agent or the Escrow Agent,
as applicable and provided, further, that an amendment made subsequent to
adoption of the Agreement by the stockholders of the Company or Merger Sub shall
not (i) alter or change the amount or kind of consideration to be received upon
conversion of the Company Capital Stock, (ii) alter or change any term of the
certificate of incorporation of the Surviving Corporation to be effected by the
Merger, or (iii) alter or change any of the terms and conditions of the
Agreement if such alteration or change would adversely affect the stockholders
of the Company or Merger Sub.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
Merger Sub and the Company may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations of the other party hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements, covenants or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
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Article 9
MISCELLANEOUS PROVISIONS
9.1. Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If to Parent to: SONICblue Incorporated
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive
Officer
with a copy (which shall not Pillsbury Winthrop LLP
constitute notice) to: 0000 Xxxxxxx Xxxxxx
Xxxx Xxxx XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. del Xxxxx
If to the Company to: ReplayTV, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive
Officer
with a copy (which shall not Venture Law Group
constitute notice) to: 0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx
If to the Stockholder Agent: Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxx Xxxxxx III
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Venture Law Group
with a copy (which shall not 0000 Xxxx Xxxx Xxxx
constitute notice) to: Xxxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx
If to the Escrow Agent: CHASE MANHATTAN BANK & TRUST COMPANY,
NATIONAL ASSOCIATION
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
and (c) if delivered by overnight courier to the address as provided in this
Section 9.1, be deemed given on the earlier of the first Business Day following
the date sent by such overnight courier or upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
9.1) Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
9.2 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule and the Parent Disclosure
Schedule, constitute the entire Agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect and shall survive any termination of this Agreement or the
Closing in accordance with its terms.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 Waiver Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or
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more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.
9.5 Remedies. All remedies, either under this Agreement or by Law or
otherwise afforded, will be cumulative and not alternative.
9.6 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Section 5.11 above or Article 7 above.
9.7 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.8 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.9 Governing Law. This Agreement, the Ancillary Agreements and any
other closing documents shall be governed by and construed in accordance with
the domestic laws of the State of California, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California; provided, however,
that the Merger shall be governed by Delaware Law.
9.10 Waiver of Trial by Jury. IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR
THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
9.11 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not
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be construed strictly or in favor of or against any party hereto but rather
shall be given a fair and reasonable construction without regard to the rule of
contra proferentem. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. The Escrow Agent may
execute this Agreement following the date hereof and prior to the Closing, and
such later execution, if so executed after the date hereof, shall not affect the
binding nature of this Agreement as of the date hereof between the other
signatories hereto.
9.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity. Except as otherwise provided herein (including as
set forth in Article 7), any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
Article 10
DEFINITIONS
10.1 Definitions. As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, complaint, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental or Regulatory
Authority.
"Additional Common Consideration Number" shall equal the product
obtained by multiplying (a) the Additional Share Number by (b) the quotient
obtained by dividing (i) the Common Stock Consideration Number by (ii) the sum
of (A) the Preferred Stock Consideration Number and (B) the Common Stock
Consideration Number.
"Additional Preferred Consideration Number" shall equal the product
obtained by multiplying (a) the Additional Share Number by (b) the quotient
obtained by dividing (i) the Preferred Stock Consideration Number by (ii) the
sum of (A) the Preferred Stock Consideration Number and (B) the Common Stock
Consideration Number.
"Additional Share Number" shall have the meaning ascribed thereto in
Section 1.6(e).
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"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) ten percent (10%) or
more of any class of equity securities of that Person or any of its Affiliates
or (ii) ten percent (10%) or more of any class of equity securities (including
any equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates, or (c) as to a corporation,
each director and officer thereof, and as to a partnership, each general partner
thereof, and as to a limited liability company, each managing member or
similarly authorized person thereof (including officers), and as to any other
entity, each Person exercising similar authority to those of a director or
officer of a corporation. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"Aggregate Cash Amount" shall have the meaning ascribed thereto in
Section 1.6(e).
"Aggregate Liquidation Preference" means the sum of (a) the number of
shares of Company Series A Preferred Stock outstanding (which for this purpose
shall be deemed to include any shares of Company Series A Preferred Stock, if
any, subject to unexpired and unexercised Company Options and Company Warrants)
as of the Effective Time multiplied by $0.1105; (b) the number of shares of
Company Series B Preferred Stock outstanding (which for this purpose shall be
deemed to include any shares of Company Series B Preferred Stock, if any,
subject to unexpired and unexercised Company Options and Company Warrants) as of
the Effective Time multiplied by $0.31; (c) the number of shares of Company
Series C Preferred Stock outstanding (which for this purpose shall be deemed to
include any shares of Company Series C Preferred Stock, if any, subject to
unexpired and unexercised Company Options and Company Warrants) as of the
Effective Time multiplied by $0.6323925; (d) the number of shares of Company
Series D Preferred Stock outstanding (which for this purpose shall be deemed to
include any shares of Company Series D Preferred Stock, if any, subject to
unexpired and unexercised Company Options and Company Warrants) as of the
Effective Time multiplied by $0.775; (e) the number of shares of Company Series
E Preferred Stock outstanding (which for this purpose shall be deemed to include
any shares of Company Series E Preferred Stock, if any, subject to unexpired and
unexercised Company Options and Company Warrants) as of the Effective Time
multiplied by $7.50; (f) the number of shares of Company Series F Preferred
Stock outstanding (which for this purpose shall be deemed to include any shares
of Company Series F Preferred Stock, if any, subject to unexpired and
unexercised Company Options and Company Warrants) as of the Effective Time
multiplied by $11.00; (g) the number of shares of Company Series G Preferred
Stock outstanding (which for this purpose shall be deemed to include any shares
of Company Series G Preferred Stock, if any, subject to unexpired and
unexercised Company Options and Company Warrants) as of the Effective Time
multiplied by $11.00; and (h) the number of shares of Company Series H Preferred
Stock outstanding (which for this purpose shall be deemed to include any shares
of Company Series H Preferred Stock, if any, subject to unexpired and
unexercised Company Options and Company Warrants) as of the Effective Time
multiplied by $9.90.
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"Aggregate Option Number" means the aggregate number of shares of
Company Common Stock which are issuable upon exercise in full of all unvested
and vested Company Options for Company Common Stock which remain outstanding and
have not been (or are not) exercised, converted, exchanged or expired as of the
Effective Time.
"Aggregate Share Number" means the sum of the Preferred Stock
Consideration Number, the Common Stock Consideration Number and the Additional
Share Number.
"Agreement" means this Agreement and Plan of Merger, including (unless
the context otherwise requires) the Exhibits and the Disclosure Schedules and
the certificates and instruments delivered in connection herewith, or
incorporated by reference, as the same may be amended or supplemented from time
to time in accordance with the terms hereof.
"Ancillary Agreements" has the meaning ascribed to it in Section 2.2.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or other
business organization of which such Person is an executive officer or partner or
is the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Audited Financial Statement Date" means December 31, 1999.
"Audited Financial Statements" means the audited consolidated balance
sheets of the Company as of each of the fiscal years ended December 31, 1997
through December 31, 1999, respectively, and the related audited consolidated
statements of operations, stockholders' equity and cash flows for each of the
fiscal years then ended, in each case, including the notes thereto together with
the notes thereto and the unqualified report of the Company's independent
accountants with respect thereto.
"Auditor" has the meaning ascribed thereto in Section 1.15.
"Backup Registration Rights Agreement" has the meaning ascribed to it in
Section 5.1(c)
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"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, (a) any
merger, consolidation, share exchange reorganization or other business
combination transaction to which such Person is a party (other than a
transaction involving such Person where the sole purpose of the transaction is
to change the Person's state of incorporation), (b) any sale, dividend, split or
other disposition of any capital stock or other equity interests of such Person
(except for issuances of common stock upon conversion of preferred stock
outstanding on the date hereof or upon the exercise of options or warrants
outstanding on the date hereof or issued in accordance with the covenants of
this Agreement), (c) any tender offer (including a self tender), exchange offer,
recapitalization, liquidation, dissolution or substantially similar transaction,
(d) any sale, dividend or other disposition of all or a material or significant
portion of the Assets and Properties of such Person (including by way of
exclusive license or joint venture formation, but excluding non-exclusive
licenses in connection with the sale of Company Intellectual Property in the
ordinary course of business consistent with past practice) or (e) the entering
into of any agreement or understanding, or the granting of any rights or
options, with respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in San Francisco, California are authorized or obligated to
close.
"Business or Condition of Parent" means the business, condition
(financial or otherwise), results of operations, or Assets and Properties of
Parent and its Subsidiaries, considered in the aggregate.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, or Assets and Properties of the
Company.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"California Permit" has the meaning ascribed to it in Section 1.16.
"Certificate of Merger" has the meaning ascribed to it in Section 1.2.
"Certificates" has the meaning ascribed to it in Section 1.11(b).
"Closing" means the closing of the transactions contemplated by Section
1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
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"Closing Price" means the average closing sales price of Parent Common
Stock as traded on the NNM and reported by The Wall Street Journal, for the ten
(10) consecutive market trading days commencing on the twelfth (12th) market
trading day prior to the date of the Company Stockholder Action and ending on
(inclusive) the third (3rd) market trading day prior to the date of the Company
Stockholder Action.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Common Stock Consideration Number" means seven million one hundred
twenty-nine thousand four hundred thirty (7,129,430) shares of Parent Common
Stock, subject to adjustment pursuant to Section 1.8.
"Common Stock Exchange Ratio" means the quotient obtained by dividing
(a) the sum of (i) the Common Stock Consideration Number and (ii) the Additional
Common Consideration Number by (b) the sum of (i) the Aggregate Option Number
and (ii) the aggregate number of shares of Company Common Stock actually
outstanding immediately prior to the Effective Time.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Capital Stock" means the Company Common Stock and the Company
Preferred Stock.
"Company Common Stock" has the meaning ascribed to it in Section 2.3(a).
"Company Disclosure Schedule" means the schedules delivered to Parent by
or on behalf of the Company, containing all lists, descriptions, exceptions and
other information and materials as are required to be included therein in
connection with the representations and warranties made by the Company in
Article 2 or otherwise.
"Company Financials" means the Audited Financial Statements and the
Interim Financial Statements.
"Company Indemnified Party" has the meaning ascribed to it in Section
5.11.
"Company Intellectual Property" shall mean any Intellectual Property
that (a) is owned by the Company; (b) is licensed to the Company; or (c) was
developed or created by or for the Company.
"Company Option(s)" means any Option to purchase Company Capital Stock,
excluding the Company Preferred Stock and the Company Warrants.
"Company Preferred Stock" has the meaning ascribed to it in Section
2.3(a).
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"Company Registered Intellectual Property" means all Registered
Intellectual Property owned by, filed in the name of, assigned to or applied for
by, the Company.
"Company Restated Certificate of Incorporation" has the meaning ascribed
to it in Recital E hereto.
"Company Restricted Stock" means shares of Company Capital Stock
purchased pursuant to an exercise of a Company Stock Purchase Right which are
subject to a repurchase option by the Company.
"Company Series A Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series B Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series C Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series D Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series E Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series F Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series G Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Series H Preferred Stock" has the meaning ascribed to it in
Section 2.3(a).
"Company Stock Plans" has the meaning ascribed to it in Section
1.6(d)(iii).
"Company Stock Purchase Right" means a right to purchase Company
Restricted Stock granted pursuant to the Company Stock Plans or otherwise.
"Company Stockholder Action" has the meaning ascribed to it in Section
5.2.
"Company Triggering Event" shall mean the occurrence of any of the
following: (a) the Board of Directors of the Company or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent such Board's recommendation in favor of, the adoption
and approval of the Agreement and the approval of the Merger; (b) the Company
shall have failed to include in the Information Statement the recommendation of
the Board of Directors of the Company in favor of the adoption and approval of
the Agreement and the approval of the Merger; (c) the Board of Directors of the
Company or any committee thereof shall have approved or recommended any
Competing Proposed Transaction with respect to the Company; or (d) a tender or
exchange offer relating to securities of the Company shall have been commenced
by a Person unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Exchange Act,
within ten Business Days after such tender or exchange offer is first published,
sent or given, a statement disclosing that the Company recommends rejection of
such tender or exchange offer.
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"Company Warrants" means any and all warrants to purchase Company
Capital Stock, including the warrants listed in Section 2.3 of the Company
Disclosure Schedule.
"Company's Ordinary Course of Business" means the Company's ordinary
course of business consistent with past practice or consistent with the
Company's current business plan.
"Competing Proposed Transaction" has the meaning ascribed to it in
Section 4.2.
"Confidentiality Agreement" has the meaning ascribed to it in Section
5.4.
"Contract" means any legally binding agreement, lease, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract or
business arrangement (whether written or oral).
"Controlled Group" has the meaning ascribed to it under the term "Plan"
in this Section 10.1.
"Costs" has the meaning ascribed to it under the term "Plan" in this
Section 5.11.
"Deductible" has the meaning ascribed thereto in Section 7.2(b).
"Delaware Law" means the Delaware General Corporation Law and all
amendments and additions thereto.
"Disclosure Schedules" means the Company Disclosure Schedule and the
Parent Disclosure Schedule.
"Dissenting Shares" has the meaning ascribed to it in Section 1.10(a).
"DOL" means the United States Department of Labor.
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Employment Agreement" has the meaning ascribed to it in
Section 2.14(a).
"Environment" means air, surface water, ground water, or land, including
land surface or subsurface, and any receptors such as persons, wildlife, fish,
biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites relating to investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding, or
investigation, formal or informal, related to or arising from any location at
which there has been a Release or threatened or suspected Release of a Hazardous
Material.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including the Comprehensive, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal Water
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Pollution Control Act, the Solid Waste Disposal Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the California Safe Drinking Water and Toxic
Enforcement Act.
"Environmental Permit" means any permit, license, approval, consent or
authorization required under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued by or
entered into with a Governmental or Regulatory Authority.
"Equity Equivalents" means securities (including Options to purchase any
shares of Company Capital Stock) which, by their terms, are or may be
exercisable, convertible or exchangeable for or into common stock, preferred
stock or other securities at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" means Chase Manhattan Bank & Trust Company, National
Association.
"Escrow Amount" means (a) the General Escrow Amount plus (b) the IP
Escrow Amount.
"Escrow Fund" has the meaning ascribed to it in Section 7.2(a).
"Escrow Period" has the meaning ascribed to it in Section 7.2(c).
"Estimated Third Party Expenses" has the meaning ascribed to it in
Section 2.26.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Exchange Agent" means Boston Equiserve.
"Exchange Ratios" means the Common Stock Exchange Ratio, the Series A
Exchange Ratio, the Series B Exchange Ratio, the Series C Exchange Ratio, the
Series D Exchange Ratio, the Series E Exchange Ratio, the Series F Exchange
Ratio, the Series G Exchange Ratio and the Series H Exchange Ratio. All of the
Exchange Ratios shall be rounded to six decimal places after zero.
"Fairness Hearing" has the meaning ascribed to it in Section 1.16.
"Financial Statement Date" means January 31, 2001.
"FMLA" means the Family Medical Leave Act of 1993, as amended.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"General Expiration Date" has the meaning ascribed to it in Section 7.1.
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"General Escrow Amount" means the sum of (a) the number of shares of
Parent Common Stock obtained by multiplying (i) the aggregate number of shares
of Parent Common Stock issuable by Parent at the Effective Time to holders of
Company Capital Stock in accordance with Section 1.6, including shares of Parent
Common Stock issuable pursuant to Section 1.6(e) (which does not include any
Parent Common Stock to be issued by Parent upon exercise of Company Options or
Company Warrants after the Effective Time), by (ii) 0.10 plus (b) the aggregate
amount of cash obtained by multiplying (i) the aggregate amount of cash issuable
by Parent at the Effective Time to holders of Company Capital Stock in
accordance with Section 1.6(e) (which does not include any cash to be issued by
Parent upon exercise of Company Options or Company Warrants after the Effective
Time) by (ii) 0.10.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the NASD.
"Hazardous Material" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any
chemicals, materials, substances or wastes which are now defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import under any
Environmental Law; or (c) any other chemical, material, substance, pollutant or
waste which is regulated by any Governmental or Regulatory Authority or which
could constitute a nuisance.
"HIPAA" means the Health Insurance Portability and Accounting Act of
1996.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Income Tax" means (a) any income, alternative or add-on minimum tax,
gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such Tax (domestic or
foreign); or (b) any liability of a Person for the payment of any taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. Section 1.1502-6 or comparable provisions of any
Taxing Authority in respect of a Tax Return of a Relevant Group or any Contract.
"Income Tax Regulations" means Part T of Title 26 of the United States
Code of Federal Regulations, promulgated under the Code.
"Indebtedness" of any Person means all obligations of such Person (a)
for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred
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purchase price of goods or services (other than trade payables or accruals
incurred in the ordinary course of business consistent with past practice of
such Person or as currently contemplated to be conducted by such Person), (d)
under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Information Statement" has the meaning ascribed to it in Section 2.33.
"Intellectual Property" means all trademarks and trademark rights, trade
names and trade name rights, service marks and service xxxx rights, service
names and service name rights, patents and patent rights, utility models and
utility model rights, copyrights, mask work rights, brand names, trade dress,
product designs, product packaging, business and product names, logos, slogans,
rights of publicity, trade secrets, inventions (whether patentable or not),
invention disclosures, improvements, processes, formulae, industrial models,
processes, designs, specifications, technology, methodologies, computer software
(including all source code and object code), firmware, development tools, flow
charts, annotations, all Web addresses, sites and domain names, all databases
and data collections and all rights therein, any other confidential and
proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to xxx for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"Interim Financial Statements" means the unaudited balance sheet of the
Company as of January 31, 2001, and the related unaudited statement of
operations for the one (1) month period ended on such date.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IP Escrow Amount" means the sum of (a) the number of shares of Parent
Common Stock obtained by multiplying (i) the aggregate number of shares of
Parent Common Stock issuable by Parent at the Effective Time to holders of
Company Capital Stock in accordance with Section 1.6, including shares of Parent
Common Stock issuable pursuant to Section 1.6(e) (which does not include any
Parent Common Stock to be issued by Parent upon exercise of Company Options or
Company Warrants after the Effective Time), by (ii) 0.10 plus (b) the aggregate
amount of cash obtained by multiplying (i) the aggregate amount of cash issuable
by Parent at the Effective Time to holders of Company Capital Stock in
accordance with Section 1.6(e) (which does not include any cash to be issued by
Parent upon exercise of Company Options or Company Warrants after the Effective
Time) by (ii) 0.10.
"IP Expiration Date" has the meaning ascribed to it in Section 7.1.
"IP Losses" has the meaning ascribed to it in Section 7.2(b).
"IRS" means the United States Internal Revenue Service or any successor
entity.
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"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Lease Documents" has the meaning ascribed to it in Section 2.15(d).
"Leased Real Property(ies)" has the meaning ascribed to it in Section
2.15(a).
"Liabilities" means all Indebtedness, obligations and other liabilities
of a Person, whether absolute, accrued, contingent (or based upon any
contingency), known or unknown, fixed or otherwise, or whether due or to become
due.
"LIBOR" means the London Interbank Offered Rate.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to xxx with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, license, covenant, condition, restriction, adverse claim,
levy, charge, option, equity, adverse claim or restriction or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses (including lost profits or diminution in value) and
expenses, including interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, including
fees and expenses of attorneys, incurred in connection with (a) the
investigation or defense of any Third Party Claims or (b) asserting or disputing
any rights under this Agreement against any party hereto or otherwise), net of
any insurance proceeds actually received (without any adverse effect on the
premiums paid for such insurance) or proceeds received by virtue of third party
indemnification.
"Made-in-America Requirements" has the meaning ascribed to it in Section
2.17(h).
"Major Stockholders" means the Company stockholders set forth on
Schedule 2.31(d) of the Company Disclosure Schedule.
"Material Adverse Effect" shall mean, with respect to any Person, any
event, change or effect that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to be materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects of such Person and its
subsidiaries, taken as a whole, or to prevent or materially delay consummation
of the Merger or otherwise prevent such entity and its subsidiaries from
performing their obligations under this Agreement.
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"Material Contracts" has the meaning ascribed to it in Section 2.18(a).
"Merger" has the meaning ascribed to it in Recital A to this Agreement.
"Merger Sub" has the meaning ascribed to it in the forepart to this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"New Shares" has the meaning ascribed to it in Section 7.2(d)(ii).
"NNM" means the distinct tier of The Nasdaq Stock Market referred to as
the Nasdaq National Market.
"Non-Competition Agreement" has the meaning ascribed to it in Recital D
to this Agreement.
"Non-Competition Consideration" has the meaning ascribed to it in
Section 5.5.
"Non-Prevailing Party" has the meaning ascribed to it in Section
7.2(g)(iii).
"Non-U.S. Plan" has the meaning ascribed to it in Section 2.14(i).
"Officer's Certificate" has the meaning ascribed to it in Section
7.2(e)(i).
"Operating Plan" has the meaning ascribed to it in Section 2.30(b).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than the Company Preferred Stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person, including any rights to participate in the
equity, income or election of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"Parent 10-Q" has the meaning ascribed to it in Section 3.4(a).
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"Parent Balance Sheet" has the meaning ascribed to it in Section 3.5.
"Parent Closing Date Shares" has the meaning ascribed to it in Section
1.11(a).
"Parent Common Stock" has the meaning ascribed to it in Recital C to
this Agreement.
"Parent Disclosure Schedule" has the meaning ascribed to it in the
forepart of Article 3.
"Parent Indemnitees" has the meaning ascribed to it in Section 7.2(b).
"Parent Preferred" has the meaning ascribed to it in Section 3.2.
"Parent SEC Documents" has the meaning ascribed to it in Section 3.4(a).
"Parent Series A Preferred" has the meaning ascribed to it in Section
3.2.
"PBGC" means the United States Pension Benefit Guaranty Corporation
established under ERISA.
"Permit" means any license, permit, franchise or authorization.
"Permit Application" has the meaning ascribed to it in Section 2.33.
"Per Share Cash Consideration" shall equal the quotient obtained by
dividing the Aggregate Cash Amount by the Aggregate Share Number.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" means each employee benefit or compensation plan, agreement,
policy, program or arrangement covering present or former employees, officers
and directors of, and advisors and consultants to, the Company, including but
not limited to "employee benefit plans" within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), stock purchase,
stock option or any other stock-based award, profit sharing, fringe benefit,
post-retirement health, health, life, vision and/or dental insurance coverage
(including any self-insured arrangement), disability benefit, supplemental
unemployment benefit, vacation benefit, change in control, retention, severance,
termination pay, bonus and deferred compensation plans, agreements or funding
arrangements (collectively, the "Plans"), whether written or oral and whether
sponsored, maintained or contributed to by (i) the Company or (ii) any other
organization that is a member of a controlled group of organizations (within the
meaning of section 414(b), (c), (m) or (o) of the Code) of which the Company is
a member (the "Controlled Group").
"Preferred Stock Consideration Number" means eight million three hundred
seventy thousand five hundred seventy (8,370,570) shares of Parent Common Stock,
subject to adjustment pursuant to Section 1.8.
"PTO" means the United States Patent and Trademark Office.
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"Registered Intellectual Property" shall mean all United States,
international and foreign: (a) patents and patent applications (including
provisional applications); (b) registered trademarks and service marks,
applications to register trademarks and service marks, intent-to-use
applications, other registrations or applications to trademarks or service
marks, including those in which common law rights are owned or otherwise
controlled; (c) registered copyrights and applications for copyright
registration; (d) any mask work registrations and applications to register mask
works; and (e) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section 2.11(a).
"Representatives" has the meaning ascribed to it in Section 2.34.
"Restricted Stock Purchase Agreement" means a Restricted Stock Purchase
Agreement in the form attached to the Company Stock Plans pursuant to which the
Company has sold Company Restricted Stock or issued Company Stock Purchase
Rights or as may otherwise been entered into by the Company prior to the date of
this Agreement.
"SEC" means the Securities and Exchange Commission or any successor
entity.
"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed or required to be filed with
the SEC by such Person pursuant to section 13(a) of the Exchange Act.
"Second Credit Agreement" means the Amended and Restated Credit
Agreement which amends the Credit Agreement dated February 2, 2001 by and
between Parent and the Company to be entered into concurrently with this
Agreement by and between the Company and Parent.
"Securities Act" has the meaning ascribed to it in Section 1.16.
"Series A Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $0.1105.
"Series B Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $0.31.
"Series C Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $0.6323925.
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"Series D Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $0.775.
"Series E Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $7.50.
"Series F Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $11.00.
"Series G Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $11.00.
"Series H Exchange Ratio" means the product of (a) the quotient obtained
by dividing (i) the sum of (A) the Preferred Stock Consideration Number and (B)
the Additional Preferred Consideration Number by (ii) the Aggregate Liquidation
Preference multiplied by (b) $9.90.
"Site" means any of the real properties currently or previously owned,
leased, occupied, used or operated by the Company, any predecessors of the
Company, or any entities previously owned by the Company, including all soil,
subsoil, surface waters and groundwater.
"Stockholder Agent" has the meaning ascribed to it in Section 7.2(h)(i).
"Stockholder Certificate" has the meaning ascribed to it in Section
5.1(c).
"Stock Option Agreement" has the meaning ascribed to it in Recital B to
this Agreement.
"Subsidiary" means any Person in which the Company or Parent, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least twenty percent (20%) of either the equity interest
in, or the voting control of, such Person, whether or not existing on the date
hereof.
"Support Agreement" has the meaning ascribed to it in Recital D to this
Agreement.
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
"Takeover Statute" means a "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States, including section 203 of the
Delaware Law.
"Tax" or "Taxes" means Income Taxes, Other Taxes or both, as the context
requires.
"Tax Laws" means the Code, federal, state, county, local or foreign laws
relating to Taxes and any regulations or official administrative pronouncements
released thereunder.
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"Tax Returns" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement or other document issued by, a
Taxing Authority in connection with any Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.2(j).
"Third Party Expenses" has the meaning ascribed to it in Section 5.5.
"Transaction Fee Consideration Number" shall mean the quotient obtained
by dividing (a) the result of (i) the Transaction Fees less (ii) three million
five hundred thousand dollars ($3,500,000) by (b) the Closing Price.
"Transaction Fees" shall have the meaning ascribed to it in Section 5.5.
"Warranty Obligations" has the meaning ascribed to it in Section 2.28.
10.2 Construction.
(a) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender and the neuter, (ii) words using the
singular or plural number also include the plural or singular number,
respectively, (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement as a whole and not to any
particular Article, Section or other subdivision, (iv) the terms "Article" or
"Section" or other subdivision refer to the specified Article, Section or other
subdivision of the body of this Agreement, (v) the phrases "ordinary course of
business" and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company, (vi) the words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP. When used herein, the terms
"party" or "parties" refer to Parent and/or Merger Sub, on the one hand, and the
Company, on the other, and the terms "third party" or "third parties" refers to
Persons other than Parent, Merger Sub or the Company.
(b) When used herein, the phrase "to the knowledge of" any Person, "to
the best knowledge of" any Person, "known to" any Person or any similar phrase,
means (i) with respect to any Person who is an individual, the actual knowledge
of such Person, (ii) with respect to any other Person, the actual knowledge of
the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as the officers and directors
of such Person, and (iii) in the case of each of (i) and (ii), the knowledge of
facts that such individuals should have after due inquiry. For this purpose,
"due inquiry" with respect to any matter means inquiry of and consultations with
(A) the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as such
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officers and directors, (B) other employees of and the advisors to such Person,
including legal counsel and outside auditors, who have principal responsibility
for the matter in question or are otherwise likely to have information relevant
to the matter, and (C) the stockholders owning more than twenty percent (20%) of
the equity interests, by vote or value, of such Person.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company, and with respect
to Article 7 and Article 9 only, the Stockholder Agent and the Escrow Agent,
have caused this Agreement to be signed by their duly authorized
representatives, all as of the date first written above.
REPLAYTV, INC. SONICBLUE INCORPORATED
By /s/ XXXXXXX XXXX By /s/ XXXXXX XXXXX
-------------------------------- ----------------------------------
Name Xxxxxxx Xxxx Name Xxxxxx Xxxxx
----------------------------- ---------------------------------
Title CEO Title VP and CTO
---------------------------- --------------------------------
REWIND ACQUISITION CORP. STOCKHOLDER AGENT
By /s/ XXXXXX XXXXX By /s/ XXXXXXX XXXXXXXX XXXXXX III
-------------------------------- ----------------------------------
Name Xxxxxx Xxxxx Name Xxxxxxx Xxxxxxxx Xxxxxx III
----------------------------- ---------------------------------
Title VP Title
---------------------------- --------------------------------
CHASE MANHATTAN BANK & TRUST
COMPANY, NATIONAL ASSOCIATION, as
escrow agent
By /s/ XXXXX XXXXXXX
--------------------------------
Name Xxxxx Xxxxxxx
------------------------------
Title Assistant Vice President
-----------------------------
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