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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
XXXXXXX.XXX, INC.
IZ ACQUISITION CORPORATION
XX.XXX INCORPORATED
AND
VIRTUAL GROUP LLC
JANUARY 21, 2000
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TABLE OF CONTENTS
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1. Certain Definitions..........................................................................................2
2. The Merger...................................................................................................5
2.1 Merger; Effective Time..............................................................................5
2.2 Closing.............................................................................................5
2.3 Effect of the Merger................................................................................5
3. Effect of Merger on the Capital Stock of the Constituent Corporations; Exchange of
Certificates; Additional Payments............................................................................6
3.1 Certain Definitions.................................................................................6
3.2 Exchange of Stock; Rights to Additional Payments....................................................6
3.3 Company Options and Warrants........................................................................6
3.4 Conversion of Sub Common Stock......................................................................7
3.5 Adjustments to Parent Common Stock..................................................................7
3.6 Fractional Shares...................................................................................7
3.7 Exchange of Certificates............................................................................7
3.8 Further Action......................................................................................9
3.9 Dissenters'Rights...................................................................................9
3.10 Dissenting Shares After Payment of Fair Value......................................................10
3.11 Tax Consequences...................................................................................10
4. Securities Act Compliance...................................................................................10
5. Representations and Warranties of the Company...............................................................10
5.1 Organization and Standing..........................................................................10
5.2 Authorization......................................................................................10
5.3 Subsidiaries.......................................................................................11
5.4 Capitalization.....................................................................................11
5.5 Title to Properties and Assets; Liens..............................................................11
5.6 Financial Statements...............................................................................11
5.7 Patents, Trademarks................................................................................12
5.8 Material Contracts and Commitments.................................................................12
5.9 Compliance with Other Instruments, Laws; No Instruments Burdensome.................................12
5.10 Litigation.........................................................................................13
5.11 Employees..........................................................................................13
5.12 Brokers or Finders.................................................................................13
5.13 Permits............................................................................................13
5.14 Employee Benefit Plans.............................................................................13
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TABLE OF CONTENTS
(CONTINUED)
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6. Representations and Warranties of Parent and Sub............................................................13
6.1 Organization and Standing..........................................................................13
6.2 Authorization......................................................................................13
6.3 Subsidiaries.......................................................................................14
6.4 Capitalization.....................................................................................14
6.5 SEC Filings........................................................................................15
6.6 Title to Properties and Assets; Liens..............................................................15
6.7 Patents, Trademarks................................................................................16
6.8 Material Contracts and Commitments.................................................................16
6.9 Compliance with Other Instruments, Laws; No Instruments Burdensome.................................16
6.10 Litigation.........................................................................................16
6.11 Employees..........................................................................................16
6.12 Brokers or Finders.................................................................................17
6.13 Permits............................................................................................17
6.14 Employee Benefit Plans.............................................................................17
7. Pre-Closing Covenants.......................................................................................17
7.1 General............................................................................................17
7.2 Notices and Consents...............................................................................17
7.3 Operation of Business..............................................................................17
7.4 Access to Information..............................................................................18
7.5 Notice of Developments.............................................................................18
7.6 Shareholder Approval...............................................................................18
7.7 Confidentiality....................................................................................18
7.8 FIRPTA Compliance..................................................................................19
7.9 Additional Documents and Further Assurances........................................................19
8. Post-Closing Covenants......................................................................................19
8.1 General............................................................................................19
8.2 Litigation Support.................................................................................20
8.3 Tax Free Reorganization............................................................................20
8.4 Employee Benefits..................................................................................20
8.5 Indemnification of Directors and Officers..........................................................21
9. Conditions to Obligations to Close..........................................................................22
9.1 Conditions to Parent's and Sub's Obligation to Close...............................................22
9.2 Conditions to the Company's Obligations............................................................23
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TABLE OF CONTENTS
(CONTINUED)
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10. Survival of Representations, Warranties and Covenants; Indemnity............................................25
10.1 Survival of Representations and Warranties.........................................................25
10.2 Indemnity..........................................................................................26
11. Termination.................................................................................................27
11.1 Termination of the Agreement.......................................................................27
11.2 Effect of Termination..............................................................................28
12. Miscellaneous...............................................................................................28
12.1 Press Releases and Public Announcements............................................................28
12.2 No Third-Party Beneficiaries.......................................................................28
12.3 Entire Agreement and Modification..................................................................28
12.4 Succession and Assignment..........................................................................29
12.5 Counterparts.......................................................................................29
12.6 Headings...........................................................................................29
12.7 Notices............................................................................................29
12.8 Governing Law......................................................................................30
12.10 Waivers............................................................................................30
12.11 Severability.......................................................................................31
12.12 Expenses...........................................................................................31
12.13 Construction.......................................................................................31
12.14 Disclosure Letters.................................................................................31
12.15 Attorneys'Fees.....................................................................................31
12.16 Further Assurances.................................................................................32
12.17 Time of Essence....................................................................................32
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EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Form of Parent Voting Agreement
Exhibit C Form of Company Voting Agreement
Exhibit D Form of Employment Agreement
Exhibit E Opinion of Company Counsel
Exhibit F Opinion of Parent Counsel
Exhibit G Form of Registration Rights Agreement
Exhibit H Certificate of Designation of Series F Preferred Stock
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "AGREEMENT") is entered into
as of January 21, 2000, by and among Xxxxxxx.xxx, Inc., a Minnesota corporation
("PARENT"), IZ Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of Parent ("SUB"), and XX.xxx Incorporated, a Delaware corporation
(the "COMPANY"), and, as to Sections 10.2 and12 only, Virtual Group LLC, a
Nevada limited liability company ("VG"). Parent, the Company, Sub and, where
applicable, VG, are sometimes referred to herein individually as a "PARTY" and
collectively as the "PARTIES."
RECITALS
A. Pursuant to the Certificate of Merger in the form attached hereto as
EXHIBIT A (the "CERTIFICATE OF MERGER") providing for the merger of Sub with and
into the Company (the "MERGER") pursuant to the Delaware General Corporation
Law, the shares of Company Capital Stock (as defined in SECTION 2.1 hereof)
issued and outstanding immediately prior to the Effective Time will be converted
into shares of Parent Preferred Stock (as defined in SECTION 2.1 hereof) and all
options and warrants to acquire capital stock of the Company will be converted
into rights to acquire Common Stock of Parent.
B. The Parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants made as an
inducement to the execution and delivery of this Agreement, and to serve as
conditions precedent to the consummation of the Merger.
C. The respective Boards of Directors of Parent, Sub and the Company have
approved and adopted this Agreement, and this Agreement is intended to be a plan
of reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE").
D. Concurrent with the execution of this Agreement, as a material
inducement to Parent and Sub, certain shareholders of the Company are entering
into voting agreements in the form of EXHIBIT B hereto (the "COMPANY VOTING
AGREEMENTS"), and employment agreements in the form of EXHIBIT D hereto (the
"EMPLOYMENT AGREEMENTS") and as a material inducement to the Company, certain
shareholders of Parent are entering into voting agreements in the form of
EXHIBIT C hereto (the "PARENT VOTING AGREEMENTS").
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
Parties do hereby agree as follows:
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AGREEMENT
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa). Certain other terms
are defined in the text of this Agreement.
"AFFILIATE" of a Person means any other Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with such Person.
"AVERAGE SHARE PRICE" means the average closing sales prices
of the Parent Common Stock as reported by the Nasdaq Small Cap Market for the
five (5) business days ending two business days prior to the Closing.
"BEST EFFORTS" means the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BUSINESS" means (i) in the case of the Company, the business
of retail e-commerce sales and integrated television and e-mail-based
merchandising, and (ii) in the case of Parent, the business of providing
outsourced e-mail marketing services.
"COMPANY COMMON STOCK" means shares of Common Stock of the
Company, $.001 par value.
"COMPANY PREFERRED STOCK" means shares of Preferred Stock of
the Company, $.001 par value.
"BUSINESS CONDITION" means the current business, financial
condition, results of operations and assets of a corporate entity.
"COMPANY DISCLOSURE LETTER" means the Company Disclosure
Letter delivered by the Company to Parent concurrently with the execution and
delivery of this Agreement, which specifically references any exceptions to the
representations and warranties of the Company set forth in SECTION 5 hereof.
"COMPANY INTELLECTUAL PROPERTY" means any Technology and
Intellectual Property Rights including the Company Registered Intellectual
Property Rights (as defined below) that are owned (in whole or in part) by or
exclusively licensed to the Company.
"COMPANY STOCKHOLDERS" means the stockholders of record of the
Company immediately prior to the Effective Time (other than the holders of
Dissenting Shares, if any).
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"CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement, including:
(a) the merger of Sub with and into the Company, the issuance
by Parent of the Parent Common Stock and Parent's acquisition and ownership of
the Company and exercise of control over the Company;
(b) the execution, delivery, and performance of the Employment
Agreements, the Voting Agreements, and the Affiliate Agreements and the
Non-Competition Agreement;
(c) the performance by Parent, the Company and Sub of their
respective covenants and obligations under this Agreement.
"GOVERNMENTAL BODY" means any:
(a) nation, province, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"KNOWLEDGE" --an individual will be deemed to have "KNOWLEDGE"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent officer or director would be expected to
discover or otherwise become aware of such fact or other matter in the course of
performing or complying with the responsibilities and obligations commonly
associated with such person's position.
(c) Parent will be deemed to have "KNOWLEDGE" of a particular
fact or other matter if an officer or director of Parent has Knowledge of such
fact or other matter. The Company will be deemed to have "KNOWLEDGE" of a
particular fact or other matter if an officer or director of the Company has
knowledge of such fact or other matter.
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"LEGAL REQUIREMENTS" means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle, of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
"MATERIAL ADVERSE EFFECT" shall mean as to the Company or
Parent, a material adverse effect on the current business, financial condition,
results of operations and assets of the Company or Parent, as the case may be
(other than as a result of (i) general economic or industry conditions or
conditions in the Company's or Parent's Business, as the case may be, or (ii)
performance by the Company or Parent, a the case may be, of its obligations
under, or the taking of any actions contemplated or permitted by, this
Agreement, (iii) changes in law or generally accepted accounting principles, or
(iv) the announcement or pendency of any of the Contemplated Transactions).
"MERGER CONSIDERATION" means a number of 425,000 shares of
Parent Preferred Stock; provided however that in the event that, prior to the
Closing, Parent acquires for cash 73,171 of the shares of Company Preferred
Stock held by Archery Venture Partners, L.P. in accordance with Section 8.8
hereof, then the Merger Consideration shall be reduced to 417,917 shares of
Parent Preferred Stock.
"ORDINARY COURSE OF BUSINESS": an action taken by either of
Parent or the Company will be deemed to have been taken in the "Ordinary Course
of Business" only if:
(a) such action is consistent with the past practices of such
Party and is taken in the ordinary course of the day-to-day operations of such
Party; and
(b) such action is not required to be authorized by the board
of directors of such Party or any committee or delegee thereof.
"PARENT DISCLOSURE LETTER" means the Parent Disclosure Letter
delivered by Parent to the Company concurrently with the execution and delivery
of this Agreement, which specifically references any exceptions to the
representations and warranties of Parent and Sub set forth in Section 6 hereof.
"PARENT PREFERRED STOCK" means shares of Series F Preferred
Stock of Parent, $.01 par value, with the rights, preferences and priviliges set
forth in the Certificate of Designation of Series F Preferred Stock of Parent
attached hereto as EXHIBIT H.
"PARENT SEC REPORTS" has the meaning set forth in SECTION 6.5.
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"PERSON" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"REPRESENTATIVES" means, with respect to a Person, that
Person's officers, directors, employees, accountants, counsel, investment
bankers, financial advisors, shareholders and other representatives.
"SEC" means the United States Securities and Exchange
Commission.
2. THE MERGER.
2.1 MERGER; EFFECTIVE TIME. Subject to the terms and
conditions of this Agreement and the applicable provisions of the Delaware
General Corporation Law ("DELAWARE LAW"), Sub will be merged with and into the
Company (the "MERGER"), the separate existence of Sub shall cease and the
Company shall continue as the surviving corporation and as a wholly owned
subsidiary of Parent. In accordance with the provisions of this Agreement, the
Certificate of Merger shall be filed with the Delaware Secretary of State in
accordance with Delaware Law and each issued and outstanding share of capital
stock of the Company ("COMPANY CAPITAL STOCK"), shall be converted into shares
of Parent Preferred Stock in the manner contemplated by SECTION 3. The Merger
shall become effective at the time of the acceptance of the Certificate of
Merger by the Delaware Secretary of State (the date of such acceptance being
hereinafter referred to as the "EFFECTIVE DATE" and the time of such acceptance
being hereinafter referred to as the "EFFECTIVE TIME").
2.2 CLOSING. The closing of the Merger (the "Closing") will
take place at the offices of Parent (i) on a date and at a time as mutually
agreed to by Parent and the Company as soon as practicable (and in any event
within two business days) after the date on which the last condition set forth
in Section 9 hereof shall have been satisfied or waived or (ii) at such other
time as Parent and the Company may mutually agree (the date on which the Closing
occurs being referred to as the "Closing Date").
2.3 EFFECT OF THE MERGER. At the Effective Time, (i) the
separate existence of Sub shall cease and Sub shall be merged with and into the
Company (Sub and the Company are sometimes referred to herein as the
"CONSTITUENT CORPORATIONS" and the Company after the Merger is sometimes
referred to herein as the "SURVIVING CORPORATION"), (ii) the Certificate of
Incorporation of Sub in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation; provided,
however, that Article I of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation is
XX.xxx Incorporated", (iii) the Bylaws of Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, (iv) the
directors of the Company shall be the directors of the Surviving Corporation
until their successors shall have been duly elected
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and qualified, (v) the officers of the Company shall be the initial officers of
the Surviving Corporation until their successors have been duly appointed and
qualified, (vi) each share of capital stock of Sub shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation, and (vii) the Merger shall, from and after
the Effective Time, have all the effects provided by applicable law.
3. EFFECT OF MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES; ADDITIONAL PAYMENTS.
3.1 Certain Definitions. For purposes of this SECTION 3, the
following terms shall be defined as set forth below:
"AGGREGATE COMMON NUMBER" means the sum of (A) the total
number of shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time; (B) the total number of shares of
Company Common Stock that are issuable upon the conversion of any shares of
Company Preferred Stock issued and outstanding immediately prior to the
Effective Time; (C) the total number of shares of Company Common Stock that are
issuable upon the conversion of any shares of Company Preferred Stock that are
issuable upon the exercise in full of all warrants to acquire shares of Company
Preferred Stock that are outstanding immediately prior to the Effective Time;
and (D) the total number of shares of Company Capital Stock that are issuable
upon the conversion or exercise in full of all convertible securities or options
(vested and unvested), warrants or other rights to acquire Company Capital Stock
that are outstanding immediately prior to the Effective Time other than
convertible securities or warrants referred to in clauses "(B)" or "(C)" of this
sentence.
"EXCHANGE RATIO" means the quotient obtained by dividing (x)
the Merger Consideration by (y) the Aggregate Common Number.
3.2 EXCHANGE OF STOCK; RIGHTS TO ADDITIONAL PAYMENTS. As of
the Effective Time, each share of Company Capital Stock that is issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares (as defined in SECTION 3.9 hereof) shall, by virtue of the Merger and
without any action on the part of the Company Stockholders, be converted into a
number of shares of Parent Preferred Stock equal to the Exchange Ratio.
3.3 COMPANY OPTIONS AND WARRANTS. At the Effective Time,
Parent shall assume the Company's 1999 Stock Plan (the "COMPANY PLAN"), and each
of the then outstanding options and warrants to purchase Company Capital Stock
whether vested or unvested (collectively, the "COMPANY OPTIONS") (including all
outstanding options granted under the Company Plan, and any individual non-plan
options and warrants) will by virtue of the Merger, and without any further
action on the part of any holder thereof, be assumed by Parent and converted
into an option or warrant, as the case may be, to purchase that whole number of
shares of Parent Preferred Stock determined by multiplying the number of shares
of Company Capital Stock subject to such Company
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Option at the Effective Time by the Exchange Ratio, at an exercise price per
share of Parent Preferred Stock equal to the exercise price per share of such
Company Option immediately prior to the Effective Time divided by the applicable
Exchange Ratio, rounded up the nearest cent. If the foregoing calculation
results in an assumed Company Option being exercisable for a fraction of a share
of Parent Preferred Stock, then the number of shares of Parent Preferred Stock
subject to such option will be rounded down to the nearest whole number of
shares. The term, exercisability, vesting schedule, vesting commencement date,
status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all other terms and conditions of the Company Options will
otherwise be unchanged (it being understood that the vesting of certain Company
Options will be accelerated in connection with the Merger in accordance with the
terms of existing agreements between the Company and certain individuals as
described in the Company Disclosure Letter).
3.4 CONVERSION OF SUB COMMON STOCK. Each share of common stock
of Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, no par value, of the Surviving Corporation.
Each stock certificate of Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
3.5 ADJUSTMENTS TO PARENT COMMON STOCK. The number of shares
of Parent Common Stock issuable hereunder and all other applicable definitions
and calculations hereunder (including the definition of Average Share Price)
shall be adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Preferred Stock or Parent Common Stock or Company
Capital Stock), reorganization, recapitalization or other like change with
respect to Parent Preferred Stock or Parent Common Stock or Company Capital
Stock occurring or becoming effective after the date hereof but prior to the
Closing.
3.6 FRACTIONAL SHARES. No fractional shares of Parent
Preferred Stock shall be issued in the Merger. In lieu thereof, any fractional
share shall be rounded up to the nearest whole share of Parent Preferred Stock.
3.7 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Closing Date, Parent
shall appoint Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP, to act as the exchange agent
(the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE PARENT PREFERRED STOCK. Promptly
after the Effective Date, Parent shall make available for exchange in accordance
with this SECTION 3, through such reasonable procedures as Parent may adopt, the
shares of Parent Preferred Stock issuable pursuant to SECTIONS 3.1 and 3.2
hereof in exchange for outstanding shares of Company Capital Stock.
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(c) EXCHANGE PROCEDURES. Within ten (10) days after the
Effective Date, the Exchange Agent shall mail 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")
whose shares are being converted into the Merger Consideration pursuant to
SECTIONS 3.1 and 3.2 hereof, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent (THE
"LETTER OF TRANSMITTAL") and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor the number
of shares of Parent Preferred Stock to which the holder of Company Capital Stock
is entitled pursuant to Sections 3.1 and 3.2 hereof. The Certificates so
surrendered shall forthwith be canceled. No interest will accrue or be paid to
the holder of any outstanding Company Capital Stock. From and after the
Effective Date, until surrendered as contemplated by this SECTION 3.7, each
Certificate shall be deemed for all corporate purposes to evidence the number of
shares of Parent Preferred Stock into which the shares of Company Capital Stock
represented by such Certificate have been converted.
(d) NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE
COMPANY. The Merger Consideration delivered upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Company Capital Stock. There shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of Company Capital
Stock which were outstanding immediately prior to the Effective Date. If, after
the Effective Date, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this SECTION
3.7.
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Preferred Stock 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 Preferred 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 Preferred 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 paid with respect to such whole shares of Parent
Preferred Stock.
(f) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Preferred Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
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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 Preferred 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.
(g) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that
any Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock as may be required pursuant to Sections 3.1 and 3.2 hereof.
(h) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 3.7, none of the Exchange Agent, the Surviving Corporation or any
Party hereto shall be liable to a holder of shares of Parent Preferred Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
3.8 FURTHER ACTION. Parent, Sub and the Company shall take all
such actions as may be necessary or appropriate in order to effect the Merger as
promptly as possible. If, at any time after the Effective Date, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company, the
officers and directors of such corporation are fully authorized in the name of
the corporation or otherwise to take, and shall take, all such action.
3.9 DISSENTERS' RIGHTS.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected dissenters' rights for such shares in accordance with Delaware Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("DISSENTING SHARES"), shall not be converted into or
represent a right to receive the Merger Consideration, but the holder thereof
shall only be entitled to such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her dissenters' rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration, without interest thereon, upon surrender of the
Certificate representing such shares.
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(c) The Company shall give Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands.
3.10 DISSENTING SHARES AFTER PAYMENT OF FAIR VALUE. Dissenting
Shares, if any, after payments of fair value in respect thereto have been made
to dissenting shareholders of the Company pursuant to Delaware Law, shall be
canceled.
3.11 TAX CONSEQUENCES. It is intended by the Parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code. Each Party has consulted with its own tax advisors and accountants
with respect to the tax consequences, respectively, of the Merger.
4. SECURITIES ACT COMPLIANCE. The shares of Parent Common Stock
issued in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), by reason of Section 4.2 thereof and/or Regulation D promulgated
thereunder. All shares of Parent Common Stock issuable upon conversion of the
Parent Preferred Stock shall be entitled to be registered subsequent to the
Closing pursuant to the Registration Rights Agreement in the form attached
hereto as EXHIBIT G to be entered into by the Company and the Company
Stockholders prior to the Closing. All shares of Parent Common Stock issuable
pursuant to Company Options issued pursuant to the Company Plan shall be
registered pursuant to a Registration Statement on Form S-8 in accordance with
Section 8.6 hereof.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Parent, except as disclosed in the Company Disclosure
Letter, as follows:
5.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its properties and assets, and to carry on
its business as presently conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the business conducted by it or the location of the properties owned or leased
by it make such qualification necessary, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition of the Company as a whole.
5.2 AUTHORIZATION. The Company has full power and authority to
execute and deliver this Agreement and all agreements and instruments delivered
pursuant hereto (the "ANCILLARY AGREEMENTS") to which it is a party, and,
subject to receipt of the requisite approval of its stockholders, to consummate
the transactions contemplated hereunder and to perform its obligations hereunder
and no other proceedings on the part of the Company are necessary to authorize
the
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execution, delivery and performance of this Agreement and the Ancillary
Agreements to which the Company is a party. This Agreement and the Ancillary
Agreements to which the Company is a party and the Contemplated Transactions
have been approved by the Company's Board of Directors. This Agreement and the
Ancillary Agreements to which the Company is a party constitute the valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms and conditions. Other than (i) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, and (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, the Company need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Body in order to consummate the transactions
contemplated by this Agreement.
5.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity.
5.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, of which 3,121,700 shares are
issued and outstanding as of the date hereof and 10,000,000 shares of Preferred
Stock of which 670,000 shares have been designated Series A Preferred Stock, of
which 619,500 are issued and outstanding as of the date hereof, 80,000 shares
have been designated Series A-1 Preferred Stock, all of which are issued and
outstanding as of the date hereof, and 600,000 shares of Series B Preferred
Stock of which 493,904 shares are issued and outstanding as of the date hereof.
The Company has reserved (a) sufficient shares of Common Stock for issuance upon
conversion of the Series A Preferred, Series A-1 Preferred, and Series B
Preferred, (b) 2,500,000 shares of Common Stock for issuance pursuant to the
Company Plan, of which 2,154,500 are subject to outstanding options as of the
date hereof, and (c) 502,748 shares of Common Stock for issuance upon exercise
of outstanding warrants as of the date hereof. Other than as set forth above,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal, or similar rights) or agreements,
orally or in writing, for the purchase or acquisition from the Company of any
shares of its capital stock.
5.5 TITLE TO PROPERTIES AND ASSETS; LIENS. The Company has good
and marketable title to its properties and assets, and has good title to all its
respective leasehold interests, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than (i) liens for current taxes not
yet due and payable, and (ii) possible minor liens and encumbrances which do not
in any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business.
5.6 FINANCIAL STATEMENTS. The Company has delivered to the
Purchaser its audited balance sheet and statement of operations as of and for
the period from inception through
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December 31, 1999 (the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles, except that the
Financial Statements are subject to year-end adjustments of a recurring and
routine nature, not material in amount. To its Knowledge, the Company does not
have any indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type in excess of $10,000 whether accrued, absolute, matured
or otherwise, which (i) has not been reflected in the Financial Statements, or
(ii) has not arisen since December 31, 1999 in the ordinary course of the
Company's business.
5.7 PATENTS, TRADEMARKS. The Company owns or has the right to use,
free and clear of all liens, charges, claims and restrictions, all trade
secrets, trademarks, service marks, trade names, copyrights, licenses, and
rights necessary to their business as now conducted and is not infringing upon
or otherwise acting adversely to the right or claimed right of, to the Company's
knowledge, any person under or with respect to any of the foregoing. The Company
has not received any written communications alleging that the Company has
violated any patent, trademark, service xxxx, trade name, copyright or trade
secret or other proprietary right of any other person or entity. The Company has
no knowledge of any infringement or improper use by any third party of any
trademark or copyright held by it, nor has the Company instituted any action,
suit or proceeding in which an act constituting an infringement of any such
trademark or copyright was alleged to have been committed by a third party.
5.8 MATERIAL CONTRACTS AND COMMITMENTS. The Company, nor, to the
Company's knowledge, any third party is in default under any material contract
or agreement (contracts or agreements with annual payment obligations of $20,000
or more) to which the Company is a party. All such contracts, agreements and
instruments are valid, binding and enforceable except as such enforceability may
be limited by equitable considerations, public policy or the laws governing
bankruptcy or insolvency, and in full force in effect and the consummation of
the transactions contemplated hereby does not require the consent of any party
to any such contract, agreement or instrument.
5.9 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS; NO INSTRUMENTS
BURDENSOME. The Company is not in violation of any term of its Certificate of
Incorporation, or in any material respect of any term or provision of any
material mortgage, indenture, contract, indebtedness, lease, agreement,
instrument, judgment or decree, and is not in violation of any order, statute,
rule or regulation applicable to the Company. The execution, delivery and
performance of and compliance with this Agreement and the consummation of the
transactions contemplated hereby shall not result in any violation of, or
conflict with, or constitute a default under the Certificate of Incorporation or
any of the foregoing agreements, instruments, judgments or decrees, or result in
the creation of, any material mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company.
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18
5.10 LITIGATION. There are no actions, suits, proceedings or
investigations pending or threatened in writing against the Company or its
properties before any court or governmental agency. The Company is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
5.11 EMPLOYEES. To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with the Company or any other party because of
the nature of the business conducted by the Company. The Company does not have
any collective bargaining agreements covering any of its employees.
5.12 BROKERS OR FINDERS. The Company has not incurred, and shall
not incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
5.13 PERMITS. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, taken as
a whole. The Company is not in default, in any material respect, under any of
such franchises, permits, licenses, or other similar authority.
5.14 EMPLOYEE BENEFIT PLANS. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Security Act of
1974.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and Sub
represent and warrant to the Company, except as disclosed in the Parent
Disclosure Letter, as follows:
6.1 ORGANIZATION AND STANDING. Parent and Sub are corporations
duly organized and existing under, and by virtue of, the laws of the State of
Minnesota and the State of Delaware, respectively, and are in good standing
under such laws. Parent has all requisite corporate power to own and operate its
properties and assets, and to carry on its business as presently conducted. Sub
was formed for the purpose of effecting the Merger and has concluded no other
business. Parent qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it make such qualification
necessary, except for jurisdictions in which the failure to so qualify would not
have a Material Adverse Effect on Parent.
6.2 AUTHORIZATION. Parent and Sub have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which they
are parties, and to consummate the Contemplated Transactions and to perform
their obligations hereunder and thereunder, and no
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other proceedings on the part of Parent or Sub are necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which they are parties. This Agreement and the Ancillary
Agreements to which they are parties and the Contemplated Transactions have been
approved by Parent's and Sub's Board of Directors. The consummation of the
Merger does not require the approval or consent of the shareholders of Parent.
This Agreement and the Ancillary Agreements to which they are parties constitute
the valid and legally binding obligations of Parent and/or Sub, enforceable
against Parent and/or Sub in accordance with their respective terms and
conditions. Other than (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, and (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
neither Parent nor Sub need give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any Governmental Body in order to
consummate the Contemplated Transactions.
6.3 SUBSIDIARIES. Parent has no subsidiaries or affiliated
companies other than the Subsidiary and does not otherwise own or control,
directly or indirectly, any other corporation, association or business entity.
6.4 CAPITALIZATION. The authorized capital stock of Parent
consists of 100,000,000 shares of Common Stock, of which 24,741,257 shares are
issued and outstanding as of the date hereof, and 761,500 shares of Preferred
Stock, of which 2,000 shares have been designated Series A 8% Preferred Stock,
none of which are issued and outstanding, 5,000 shares have been designated
Series B Preferred Stock, none of which are issued and outstanding, 2,000 shares
of Series C Preferred Stock none of which are issued and outstanding, 2,500
shares of Series D Preferred Stock, 1,000 of which are issued and outstanding,
and 750,000 of which have been designated Series E Preferred Stock, 350,000 of
which are issued and outstanding. The maximum aggregate number of shares of
Parent Common Stock issuable upon conversion of all issued and outstanding
shares of Preferred Stock of Parent is 1,335,986. The rights preferences and
privileges of the Series D Preferred Stock and Series E Preferred Stock of
Parent are as set forth in the Certificate of Designation of Series D Preferred
Stock and Certificate of Designation of Series E Preferred of Parent,
respectively, copies of which have been provided to the Company's counsel.
Parent has reserved (a) sufficient shares of Common Stock for issuance upon
conversion of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred, (b) 1,250,000 shares of Common Stock
for issuance pursuant to Parent's 1997 Stock Option and Compensation Plan, of
which 1,422,999 are currently subject to outstanding options, and 172,999 of
which remain subject to shareholder approval, (c) 250,000 shares of Common Stock
for issuance pursuant to Parent's 1998 Director Stock Option Plan, of which
198,333 shares are currently subject to outstanding options, and 48,333 of which
shares remain subject to shareholder approval, (d) a total of 2,039,601 shares
of Common Stock for issuance upon conversion of 4% Subordinated Convertible
Debentures of Parent and certain other convertible debt of Parent, (e) 8,109,223
shares of Common Stock for issuance upon exercise of outstanding warrants, (f)
2,600,000 shares of
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Common Stock issuable upon the exercise of the Class A Warrants issued as part
of the Parent's initial public offering and the partial exercise of the
underwriter's over-allotment, (g) 58,334 shares of Common Stock issuable upon
the exercise of certain directors' options and (h) as of the Closing will have
reserved sufficient shares of Parent Common Stock for issuance upon conversion
of the Parent Preferred Stock and exercise of the Company Options. Other than as
set forth above, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal or similar rights)
or agreements, orally or in writing, for the purchase or acquisition from Parent
of any shares of its capital stock.
6.5 SEC FILINGS. Parent has filed all forms, reports and documents
required to be filed with the SEC since December 31, 1997, and has heretofore
made available to the Company, in the form filed with the SEC, (i) its Annual
Report on Form 10-K for the fiscal year ended January 3, 1999, (ii) its
Quarterly Report on Form 10-Q for the periods ended March 31, 1999, June 30,
1999 and September 30, 1999, (iii) the proxy statements relating to all meetings
of stockholders held since December 31, 1997, (iv) its Current Reports on Form
8-K dated June 22, 1999, September 1, 1999 (as amended September 16, 1999),
September 30, 1999 and December 3, 1999, (v) its Registration Statements on Form
S-3 dated August 13, 1999, as amended, and December 21, 1999, and the
prospectuses filed pursuant to Rule 424(b) relating thereto, and (vi) any other
report or registration statements filed by it with the SEC since December 31,
1997 (collectively, the "Parent SEC Reports"). The Parent SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act, and the
Securities Exchange Act of 1934, as amended, and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of Parent, including the notes thereto, included in the SEC Documents
(the "Parent Financial Statements") have been prepared in accordance with the
published rules and regulations of the SEC applicable thereto, have been
prepared in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto) and present fairly the consolidated financial
position of Parent at the dates thereof and of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to the
absence of footnotes and to normal audit adjustments which will not be material
in amount). To its knowledge, Parent does not have any indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type in excess of
$10,000 whether accrued, absolute, matured or otherwise, which (i) has not been
reflected in the Parent Financial Statements, or (ii) has not arisen since
December 31, 1999 in the ordinary course of Parent's business.
6.6 TITLE TO PROPERTIES AND ASSETS; LIENS. Parent has good and
marketable title to its properties and assets, and has good title to all its
respective leasehold interests, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than (i) liens for current taxes not
yet due and payable, and (ii) possible minor liens and encumbrances which do not
in any
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case materially detract from the value of the property subject thereto or
materially impair the operations of Parent, and which have not arisen otherwise
than in the ordinary course of business.
6.7 PATENTS, TRADEMARKS. Parent owns or has the right to use,
free and clear of all liens, charges, claims and restrictions, all trade
secrets, trademarks, service marks, trade names, copyrights, licenses, and
rights necessary to its business as now conducted and is not infringing upon or
otherwise acting adversely to the right or claimed right of, to Parent's
knowledge, any person under or with respect to any of the foregoing. Parent has
not received any written communications alleging that Parent has violated any
patent, trademark, service xxxx, trade name, copyright or trade secret or other
proprietary right of any other person or entity. Parent has no knowledge of any
infringement or improper use by any third party of any trademark or copyright
held by it, nor has Parent instituted any action, suit or proceeding in which an
act constituting an infringement of any such trademark or copyright was alleged
to have been committed by a third party.
6.8 MATERIAL CONTRACTS AND COMMITMENTS. Neither Parent, nor, to
Parent's knowledge, any third party is in default under any material contract or
agreement (contracts or agreements with annual payment obligations of $20,000 or
more) to which Parent is a party. All such contracts, agreements and instruments
are valid, binding and enforceable except as such enforceability may be limited
by equitable considerations, public policy or the laws governing bankruptcy or
insolvency, and in full force in effect and the consummation of the transactions
contemplated hereby does not require the consent of any party to any such
contract, agreement or instrument.
6.9 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS; NO INSTRUMENTS
BURDENSOME. Parent is not in violation of any term of its Articles of
Incorporation, or in any material respect of any term or provision of any
material mortgage, indenture, contract, indebtedness, lease, agreement,
instrument, judgment or decree, and is not in violation of any order, statute,
rule or regulation applicable to Parent. The execution, delivery and performance
of and compliance with this Agreement and the consummation of the Contemplated
Transactions shall not result in any violation of, or conflict with, or
constitute a default under the Articles of Incorporation or any of the foregoing
agreements, instruments, judgments or decrees, or result in the creation of, any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of Parent.
6.10 LITIGATION. There are no actions, suits, proceedings or
investigations pending or threatened in writing against Parent or its properties
before any court or governmental agency. Parent is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by Parent currently pending or which Parent intends to initiate.
6.11 EMPLOYEES. To Parent's knowledge, no employee of Parent is in
violation of any term of any employment contract, patent disclosure agreement or
any other contract or agreement relating to the relationship of any such
employee with Parent or any other party because
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22
of the nature of the business conducted by Parent. Parent does not have any
collective bargaining agreements covering any of its employees.
6.12 BROKERS OR FINDERS. Parent has not incurred, and shall not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
6.13 PERMITS. Parent has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of Parent, taken as a
whole. Parent is not in default, in any material respect, under any of such
franchises, permits, licenses, or other similar authority.
6.14 EMPLOYEE BENEFIT PLANS. Parent does not have any Employee
Benefit Plan as defined in the Employee Retirement Security Act of 1974.
6.15 NO TAXABLE INCOME. Parent has never had any taxable income
and does not expect any taxable income during its current taxable year, which
year is expected to include the date on which the shareholders of Parent approve
the Merger.
7. PRE-CLOSING COVENANTS. With respect to the period between the
execution of this Agreement and the earlier of the termination of this Agreement
and the Effective Time:
7.1 GENERAL. Each of the Parties will use reasonable efforts to
take all actions and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable (including satisfaction, but not waiver, of
the closing conditions set forth in SECTION 9 below).
7.2 NOTICES AND CONSENTS. Each of the Parties will give any
notices to third parties and will use reasonable efforts to obtain any material
third party consents that are required in connection with the Merger. Each of
the Parties will give any notices to, make any filings with, and use its
reasonable efforts to obtain any authorizations, consents, and approvals of
Governmental Bodies required in connection with the Merger.
7.3 OPERATION OF BUSINESS. Each of the Parties will (a) conduct
its business only in the Ordinary Course of Business, (b) use reasonable efforts
to (i) preserve intact its current business organization, (ii) keep available
the services of the current officers, and employees of the Company, and (iii)
maintain the relations and good will with suppliers, customers, landlords,
creditors, agents, and others having business relationships with such Party, and
(c) confer with each other concerning operational matters of a material nature.
Prior to the earlier of the Effective Time or the termination of this Agreement,
without the prior written consent of Parent, the Company will not (i) issue more
than 200,000 shares of Company Common Stock or Company Preferred Stock or
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23
options or warrants to purchase more than than such number of shares of Common
Stock or Preferred Stock (other than shares issued upon exercise of outstanding
options or warrants), (ii) issue any stock options with an exercise price per
share which is less than the then-current market price of the Parent Common
Stock, after giving effect to the Exchange Ratio and the conversion ratio of the
Parent Preferred Stock into Parent Common Stock (assuming approval of the Merger
and related matters by the shareholders of Parent), (iii) obtain additional debt
financing with a principal amount in excess of $500,000 in the aggregate, (iv)
make or declare any dividend or distribution with respect to shares of Company
Common Stock or Company Preferred Stock, or (v) pay any bonus to, or increase
the base salary of, any officer of the Company, other than merit increases and
performance bonuses each in the ordinary course of business.
7.4 ACCESS TO INFORMATION. Each of the Company and Parent will
permit the other Party and its Representatives to have access at all reasonable
times, and in a manner so as not to interfere with its normal business
operations, to its business and operations (subject, in the case of Parent, to
compliance with applicable securities laws). Neither such access, nor any
investigation by any Party and its Representatives, shall in any way diminish or
otherwise affect such Party's right to rely on any representation or warranty
made by the other Parties hereunder.
7.5 NOTICE OF DEVELOPMENTS. Each of the Company and Parent will
use reasonable efforts to give prompt written notice to the other Party of any
material development causing a breach of any of its own representations and
warranties in SECTION 5 or SECTION 6 above, as the case may be. No disclosure
pursuant to this SECTION 7.5, however, shall be deemed to amend or supplement
the Company Disclosure Letter or the Parent Disclosure Letter, as the case may
be, or to prevent or cure any misrepresentation, breach of warranty, or breach
of covenant.
7.6 SHAREHOLDER APPROVAL. As promptly as practicable after the
date hereof, the Company shall take all actions necessary in accordance with
Delaware Law and its Amended and Restated Certificate of Incorporation and
bylaws to institute an action by written consent of the Shareholders of the
Company to approve the principal terms of the Merger. Unless so doing will cause
the Board of Directors to violate its fiduciary duties under applicable law, the
Board of Directors will unanimously recommend approval of the proposal to
approve the principal terms of the Merger by the Company Stockholders.
7.7 CONFIDENTIALITY. Each of the Parties hereto hereby agrees to
keep such information or Knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential. In this
regard, the Company acknowledges, and will instruct its and its employees and
agents with access to confidential information of Parent, that Parent's Common
Stock is publicly traded and that any information obtained during the course of
its due diligence could be considered to be material non-public information
within the meaning of federal and state securities laws. Accordingly, the
Company acknowledges and agrees not to, and will instruct its
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employees and agents with access to Parent's confidential information not to,
engage in any transactions in Parent's Common Stock in violation of applicable
xxxxxxx xxxxxxx laws.
7.8 FIRPTA COMPLIANCE. On 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 U.S. Treasury
Regulation Section 1.1445-2(c)(3).
7.9 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each Party hereto, at
the request of another Party hereto, shall execute and deliver such other
instruments and do and perform such other reasonable acts and things as may be
necessary or desirable for effecting completely the consummation of the
Contemplated Transactions.
8. POST-CLOSING COVENANTS. With respect to the period following the
Effective Time:
8.1 GENERAL. In case at any time after the Effective Time any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under SECTION 10.2
below).
8.2 SHAREHOLDER APPROVAL. As promptly as practicable after the date
hereof, Parent shall take all actions necessary in accordance with the Minnesota
Business Corporation Act and its Articles of Incorporation and bylaws to duly
call, give notice of, convene and hold a meeting of its shareholders to consider
and vote upon (i) a proposal to approve the principal terms of the Merger, (ii)
a proposal to approve the issuance of the Parent Preferred Stock and the shares
of Common Stock of Parent issuable upon conversion thereof, and (iii) the
election of a Board of Directors composed of the following persons: Xxxxx Xxxxx,
Xxxxxx Xxxxxx, Xxxx. Xxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxxxx,
Xxxxx Xxxxxxxx, Xxx Xxxxx and Xxxxx Xxxx. Parent shall set the record date for
such special meeting as soon as practicable following the date hereof. Parent
shall use reasonable efforts to solicit and obtain at or in advance of such
meeting the voting proxies from its shareholders sufficient to approve the
proposals set forth above. Parent will cause a Proxy Statement to be prepared,
filed with the SEC and submitted to the Parent Shareholders in accordance in all
material respects with all applicable laws and regulations. The Proxy Statement
will contain the unanimous recommendation of the Board of Directors of the
Company regarding each of the proposals set forth above. Parent has delivered to
the Company, concurrently with the execution of this Agreement, executed Voting
Agreements in the form attached hereto as Exhibit B from holders with beneficial
ownership of 90% of the number of outstanding shares of Parent Common Stock and
Parent Preferred Stock required to approve the proposals set forth above. Parent
shall provide the Proxy Statement to the Company and its counsel for review and
comment (and shall make such changes thereto as are reasonably requested by the
Company or its counsel), prior to providing the Proxy Statement to the SEC or
the Parent Shareholders.
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8.3 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time involving the Company or (B) arising out of Parent's
operation of the business of the Surviving Corporation following the Effective
Time in the manner in which it is presently conducted and planned to be
conducted, each of the other Parties will cooperate with the Party and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party.
8.4 TAX TREATMENT.
(a) It is the intent of the parties to this Agreement that the
Merger qualify as a tax-free reorganization under Section 368(a) of the Code,
and each of Parent, Sub, the Company and the Surviving Corporation covenants and
agrees not to take any actions inconsistent with such intent and agrees to use
best efforts to cause the Merger to qualify as a tax-free reorganization under
Section 368(a) of the Code. Each of Parent, Sub, the Company and the Surviving
Corporation agrees not to take any action from and after the Effective Time that
could reasonably be expected to cause the Merger not to be treated as a
"reorganization" under Section 368(a) of the Code.
(b) It is the intent of the parties to this Agreement that the
reduction in the Liquidation Value of the Parent Preferred Stock pursuant to
Section 4 of the Certificate of Designation attached hereto as Exhibit H upon
approval of the Merger and related matters by the shareholders of Parent, and
the increase in the Conversion Ratio of the Parent Preferred Stock pursuant to
Section 5(a) of such Certificate of Designation concurrently therewith, qualify
as a recapitalization within the meaning of Section 368(a)(1)(E) of the Code for
federal income tax purposes. Each of Parent, Sub, the Company and the Surviving
Corporation agree not to take any action that could reasonably be expected to be
inconsistent with such recapitalization qualification.
8.5 EMPLOYEE BENEFITS. Subject to any applicable legal, regulatory or
contractual limitations, Parent shall take all actions as are necessary to allow
employees of the Company who continue their employment with the Surviving
Corporation or who become employees of Parent or any subsidiary of Parent to
participate in the benefit programs of Parent to the same extent as similarly
situated employees of Parent, without undue delay after the Effective Time.
Without limiting the generality of the foregoing, (i) subject to any applicable
legal, regulatory or contractual limitations, to the extent that any employee of
the Company becomes eligible to participate in any employee benefit plan of
Parent after the Effective Time, Parent, the Surviving Corporation and their
subsidiaries shall credit such employee's service with the Company, to the same
extent as such service was credited under the similar employee benefit plans of
the Company immediately prior to
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the Effective Time, for purposes of determining eligibility to participate in
and vesting under, and for purposes of calculating the benefits under, such
employee benefit plan of Parent, and (ii) to the extent permitted by such
employee benefit plan of Parent and applicable law, Parent, the Surviving
Corporation and their subsidiaries shall waive any pre-existing condition
limitations, waiting periods or similar limitations under such employee benefit
plan of Parent and shall provide each such employee with credit for any
co-payments previously made and any deductibles previously satisfied.
8.6 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) For a period of five years from the Closing Date, Parent
shall, and shall cause the Surviving Corporation to, fulfill and honor all
rights to indemnification existing in favor of the current directors and
officers of the Company, as provided in the Company's Certificate of
Incorporation and Bylaws (as in effect as of the date of this Agreement) and as
provided in the indemnification agreements between the Company and such
directors and officers listed in SECTION 8.6 of the Company Disclosure Letter,
complete and correct copies of which have been provided to Parent.
(b) For five years after the Effective Time, Parent shall maintain
in effect directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy with scope and coverage similar to Parent's existing directors'
and officers' liability insurance coverage.
(c) All expenses, including attorneys' fees, which may be incurred
by any Party in connection with any action to enforce the indemnity and other
obligations provided for in this SECTION 8.6 shall be paid by the prevailing
party in such action.
(d) This SECTION 8.6 shall survive the consummation of the
transactions contemplated hereby, is intended to benefit and may be enforced by
the directors and officers of the Company, and shall be binding on all
successors and assigns of Parent and the Company.
8.7 REGISTRATION STATEMENT ON FORM S-8. As soon as practicable after
the Closing, and in any event within ten (10) business days thereafter, Parent
shall file with the SEC a registration statement on Form S-8, which registration
will register all shares of Parent Common Stock issued or issuable up exercise
of stock options issued under the Company's 1999 Stock Plan or upon conversion
of shares of Parent Preferred Stock issued or issuable up exercise of stock
options issued under the Company's 1999 Stock Plan.
8.8 PURCHASE OF COMPANY PREFERRED STOCK. As soon as practicable after
the date hereof, and in any event prior to the Closing, Parent shall purchase
from Archery Venture Partners, L.P. ("Archery") all shares of Company Preferred
Stock held by Archery for cash, at the original issuance price thereof ($4.10),
unless Archery declines to accept the Parent's offer to purchase such shares of
Company Preferred Stock.
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9. CONDITIONS TO OBLIGATIONS TO CLOSE.
9.1 CONDITIONS TO PARENT'S AND SUB'S OBLIGATION TO CLOSE. The
obligations of Parent and Sub to consummate the transactions to be consummated
by them in connection with the Closing is subject to satisfaction or waiver of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in SECTION 5 above shall be accurate as of the date of this
Agreement and on and as of the Closing Date (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (A)
any inaccuracies in such representations and warranties that do not and are not
reasonably expected to, in the aggregate, result in a Material Adverse Effect,
and (B) any update of or modification to the Company Disclosure Schedule made or
purported to have been made after the execution of this Agreement shall be
disregarded).
(b) COVENANTS. The Company shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing.
(c) NO ACTIONS. No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect) and no law, statute, ordinance,
rule, regulation or order shall have been enacted, enforced or entered which has
caused, or would reasonably be expected to cause, any of the effects under
clause (A) or (B) of this SECTION 9.1(C) to occur.
(d) CERTIFICATES. The Company shall have delivered to Parent a
certificate executed on behalf of the Company by its President and Secretary to
the effect that each of the conditions specified above in SECTION 9.1(A) to
9.1(C) (inclusive) is satisfied in all respects.
(e) GOVERNMENTAL AUTHORIZATIONS. The Parties shall have received
all authorizations, consents and approvals of governments and governmental
agencies referred to in SECTION 5.4 OR SECTION 7.2 above or disclosed in a
corresponding section in the Company Disclosure Letter, the lack of which would
have a Material Adverse Effect on the Company or Parent, or render the Merger or
the Contemplated Transactions unlawful.
(f) LEGAL OPINION. Parent shall have received from Wilson,
Sonsini, Xxxxxxxx & Xxxxxx, P.C., counsel to the Company, an opinion in form and
substance substantially as set forth in EXHIBIT E attached hereto, addressed to
Parent, and dated as of the Closing Date.
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(g) NO MATERIAL ADVERSE EFFECT. There shall not have occurred any
event having a Material Adverse Effect on the Company since the date hereof.
(h) VOTING AGREEMENTS. The Voting Agreements executed and
delivered to Parent by each of the Affiliates of the Company shall remain in
full force and effect.
(i) DISSENTERS' RIGHTS. As of the Effective Time, no more than
3.5% of the outstanding shares of Company Capital Stock shall be Dissenting
Shares.
(j) COMPLETION OF FINANCING. Parent shall have completed a sale of
shares of Parent Common Stock with proceeds to Parent of no less than $3.55
million (a "FINANCING"); provided however that Parent shall not be entitled to
assert the foregoing as a condition to closing unless Parent shall have used its
best efforts to complete the Financing without delay. For avoidance of doubt,
the foregoing obligation of Parent to use its best efforts to complete the
Financing may include sale of shares of Parent Common Stock and/or warrants at a
significant discount to the market price of the Parent Common Stock, provided
that Parent shall not be obligated to issue shares of Parent Common Stock at a
purchase price of less than $1.66 per share.
Parent may waive any condition (in whole or in part) specified in this
SECTION 9.1 if it executes a writing so stating at or prior to the Closing.
9.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligation of the
Company to consummated the transactions to be performed by it in connection with
the Closing is subject to satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in SECTION 6 above shall be accurate as of the date of this
Agreement, and on and as of the Closing Date (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (A)
any inaccuracies in such representations and warranties that do not and are not
reasonably expected to in the aggregate, result in a Material Adverse Effect
shall be disregarded, and (B) any update or modification to the Parent
Disclosure Schedule made or purported to have been made after execution of this
Agreement shall be disregarded).
(b) COVENANTS. Parent and Sub shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing.
(c) NO ACTIONS. No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect)
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and no law, statute, ordinance, rule, regulation or order shall have been
enacted, enforced or entered which has caused, or is reasonably expected to
cause, any of the effects under clause (A) or (B) of this Section 9.2(c) to
occur.
(d) CERTIFICATE. Parent shall have delivered to the Company a
certificate executed on behalf of Parent by its President or other duly
authorized officer to the effect that each of the conditions specified above in
Section 9.2(a) to 9.2(C) (inclusive) is satisfied in all respects.
(e) LEGAL OPINION. The Company shall have received from Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP, counsel to Parent an opinion in form and substance
substantially as set forth in EXHIBIT F attached hereto, addressed to the
Company Stockholders, and dated as of the Closing Date.
(f) SHAREHOLDER VOTE. The principal terms of the Merger shall have
been approved by the vote of Persons holding a majority of the outstanding
shares of Company Common Stock and a majority of the outstanding shares of
Company Preferred Stock (all series of which shall vote together as a single
class) as of the record date for Persons entitled to vote with respect to the
Merger;
(g) NO MATERIAL ADVERSE EFFECT. There shall not have occurred any
event having a Material Adverse Effect on Parent since the date hereof.
(h) AVERAGE CLOSING PRICE. The Average Closing Price of the Parent
Common Stock as of the Closing Date shall be not less than $2.75 per share (as
adjusted for stock splits, stock dividends and similar events).
(i) NASDAQ STATUS. As of the Closing Date, the Parent Common Stock
shall continue to be listed on the Nasdaq Small Cap Market, and Parent shall not
have received any notice from Nasdaq or otherwise have Knowledge of any
circumstances which would reasonably be expected to lead to a de-listing of the
Parent Common Stock, other than such circumstances which can be corrected
without causing any of the other conditions in this Section 9.1(b) to be
violated, or which may result from voluntary actions which Parent may choose to
undertake following the Closing.
(j) VOTING AGREEMENTS. The Voting Agreements executed and
delivered to the Company by each of the Affiliates of Parent shall remain in
full force and effect.
(k) NASDAQ LISTING. The shares of Parent Common Stock issuable
upon conversion of the Parent Preferred Stock issuable in connection with the
Merger shall have been authorized for listing on the Nasdaq Small Cap Market
upon official notice of issuance.
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(l) REGISTRATION RIGHTS AGREEMENT. Parent shall have executed and
delivered the Registration Rights Agreement in the form attached hereto as
EXHIBIT G and such Agreement shall be in full force and effect.
(m) EMPLOYMENT AGREEMENTS. Parent shall have executed and
delivered Employment Agreements in the form attached hereto as EXHIBIT D with
each of the following persons: Xxxxx Xxxxx, Xxxxxx Xxxxxxxxx and Xxxxx
Xxxxxxxxx, and such agreements shall remain in full force and effect.
(n) PURCHASE OF SHARES. Parent shall have completed the purchase
of all shares of Series B Preferred Stock of Parent held by Archery Venture
Partners, at the original issuance price of such shares, unless otherwise agreed
by Archery Venture Partners.
(o) ADDITIONAL VOTING AGREEMENTS. Either (i) holders of at least
52.5% of the outstanding shares of Common Stock and Preferred Stock of Parent
(on an as-converted basis) (which number of shares is sufficient to ensure
ratification of the Merger and approval of the issuance of the Parent Preferred
Stock and the shares of Common Stock of Parent issuable upon conversion thereof)
shall have executed and delivered Parent Voting Agreements to the Company;
provided however holder of up to 7.5% of the outstanding shares of Common Stock
and Preferred Stock of Parent (on an as-converted basis) may have execute
modified versions of the Parent Voting Agreement which do not contain the
provisions thereof prohibiting sale of transfer of the shares held by such
holders, or (ii) holders of at least 50.1% of the outstanding shares of Common
Stock and Preferred Stock of Parent (on an as-conerted basis) (which number of
shares is sufficient to ensure ratification of the Merger and approval of the
issuance of the Parent Preferred Stock and the shares of Common Stock of Parent
issuable upon conversion thereof) shall have executed and delivered Parent
Voting Agreements to the Company all of which contain provisions prohibiting the
sale or transfer of shares held by such holders.
(p) COMPLETION OF FINANCING. Parent shall have completed a sale of
shares of Parent Common Stock with proceeds to Parent of no less than $3.55
million.
(q) CERTIFICATE OF DESIGNATION. The Certificate of Designation of
the Parent Preferred Stock shall have been duly approved and filed with the
Secretary of State of the State of Minnesota.
The Company may waive any condition (in whole or in part) specified in
this SECTION 9.2 if it executes a writing so stating at or prior to the Closing.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNITY.
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants of
Parent and the Company contained in this Agreement to be performed prior to the
Effective Time, and all
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representations and warranties of Parent and the Company contained in this
Agreement or in any instrument delivered by Parent or the Company pursuant to
this Agreement, shall survive the Merger for a period ending one (1) year from
the Effective Time.
10.2 INDEMNITY.
(a) From and after the Closing Date, VC agrees to indemnify and
hold Parent and its Representatives and Affiliates (including the Company)
(collectively, the "PARENT INDEMNIFIED PERSONS") from and harmless against all
claims, losses, liabilities, damages, deficiencies, costs, expenses (including
reasonable attorneys' fees and expenses of investigation) and diminution in
value (hereinafter individually a "LOSS" and collectively "LOSSES") incurred by
the Parent Indemnified Persons as a result of (A) any inaccuracy or breach of a
representation or warranty of the Company contained in this Agreement (as
modified by the Company Disclosure Letter) or in any instrument delivered by the
Company pursuant to this Agreement, or (B) any failure by the Company to perform
or comply with any covenant contained in this Agreement that is required to be
performed or complied with by the Company prior to the Closing. From and after
the Closing Date, Parent and Sub, jointly and severally agree to indemnify and
hold the Company Stockholders and their respective Representatives and
Affiliates (collectively, the "COMPANY INDEMNIFIED PERSONS") from and harmless
against all Losses incurred by the Company Indemnified Persons as a result of
(A) any inaccuracy or breach of a representation or warranty of Parent or Sub
contained in this Agreement (as modified by the Parent Disclosure Letter) or in
any instrument delivered by Parent or Sub pursuant to this Agreement, or (B) any
failure by Parent or Sub to perform or comply with any covenant contained in
this Agreement that is required to be performed or complied with by it prior to
the Closing.
(b) Notwithstanding anything contained herein to the contrary,
other than as set forth in the last sentence of this paragraph, VC shall not
have any liability or obligation to indemnify or hold harmless any Parent
Indemnified Person for any Losses unless and until Losses are incurred which
would be indemnifiable under SECTION 10.2(A) above but for the provisions of
this SECTION 10.2(B) in an amount equal to or exceeding $500,000 in the
aggregate (the "BASKET AMOUNT"). At such time as Losses which meet the foregoing
threshold have been incurred and would be indemnifiable under SECTION 10.2(A)
above but for the provisions of this SECTION 10.2(B), Parent and Sub shall be
entitled to indemnification for all Losses in excess such threshold. Losses
resulting from fraudulent misrepresentations by the Company shall be
indemnifiable without regard to the Basket Amount.
(c) Notwithstanding, anything herein to the contrary, Parent's
aggregate liability under this Agreement for Losses incurred by the Company
Stockholders shall in no event exceed $20.5 million. Any such liability of
Parent may be satisfied by delivery of additional shares of Parent Common Stock,
based on the Average Closing Price as of the date of such delivery, but only if
such Average Closing Price is in excess of $2.00. Notwithstanding anything
herein to the
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contrary, VG's liability under this Agreement for Losses incurred by Parent
shall in no event exceed 50% of the value of the Merger Consideration received
by VG, valued based on the Average Closing Price as of the Closing Date. Any
such liability of VG may be satisfied by delivery of shares of Parent Preferred
Stock received in the Merger or shares of Parent Common Stock received upon
conversion thereof, based on the aforementioned Average Closing Price. VG agrees
that a certificates representing 50% the shares of Parent Preferred Stock issued
to VG, and the shares of Parent Common Stock issuable upon conversion thereof,
may bear a legend referring to VG's obligations under this Section 10.2 (the
"LEGEND"). All obligations of VG under this Agreement shall terminate on August
31, 2000. As promptly as practicable after such date, Parent shall cancel all
stock certificates submitted by VG bearing the Legend and issue to VG stock
certificates with like designations not bearing the Legend.
(d) None of the Parent Indemnified Persons will have recourse
against any of the Company Shareholders or any officer, director or affiliate of
the Company, or any of their respective officers, directors, shareholders or
affiliates, with respect to Losses incurred, except as specifically set forth in
this Section 10.2 with respect to VG. Any rights, remedies or claims the Parent
Indemnified Persons may now or hereinafter possess against any such persons or
their properties, whether direct or indirect, known or unknown, matured or
unmatured, whether under contract or by law, are hereby irrevocably waived and
will not be asserted.
11. TERMINATION.
11.1 TERMINATION OF THE AGREEMENT. The Parties may terminate this
Agreement as provided below:
(a) Parent and the Company may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Parent or the Company may terminate this Agreement by written
notice to the other Parties if: (i) the Closing has not occurred by (A) March
31, 2000, provided, however, that the right to terminate this Agreement under
this SECTION 11.1(B)(I) shall not be available to any Party whose action or
failure to act has been a principal cause of or resulted in the failure of the
Merger to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement; (ii) there shall be a final
nonappealable order of a court of competent jurisdiction 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 Body that would make consummation of the Merger illegal;
(c) Parent may terminate this Agreement by written notice to the
Company if neither it nor Sub is in breach of any representation, warranty,
covenant or agreement under this Agreement in a manner which would cause the
conditions to Closing set forth in SECTION 9.2(A) or 9.2(B) not to be satisfied,
and there has been a breach of any representation,
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warranty, covenant or agreement contained in this Agreement on the part of the
Company which would cause the conditions to Closing set forth in SECTION 9.1(A)
or 9.1(B) not to be satisfied, and such breach has not been cured within thirty
(30) calendar days after written notice to the Company; provided, however, that,
no cure period shall be required for a breach which by its nature cannot be
cured;
(d) the Company may terminate this Agreement by written notice to
Parent if it is not in breach of any representation, warranty, covenant or
agreement under this Agreement in a manner which would cause the conditions to
Closing set froth in SECTION 9.1(A) or 9.1(B) of this Agreement not to be
satisfied, and there has been a breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of Parent or Sub which
would cause the conditions to Closing set forth in SECTION 9.2(A) or 9.2(B) not
to be satisfied and such breach has not been cured within thirty (30) calendar
days after written notice to Parent; provided, however, that no cure period
shall be required for a breach which by its nature cannot be cured.
11.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 11.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party;
provided that each Party shall remain liable for any willful breaches of this
Agreement prior to its termination; and provided further that Section 7.7 hereof
shall survive any termination of this Agreement.
12. MISCELLANEOUS.
12.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party, which will not be unreasonably withheld or delayed; provided,
however, that Parent may make any public disclosure which counsel advises is
required by applicable law or exchange requirements or any listing or trading
agreement concerning its publicly-traded securities (in which case Parent will
use its Best Efforts to advise the Company prior to making the disclosure and
provide the Company with an opportunity to review and comment on such disclosure
in advance of public release).
12.2 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties, the Company
Stockholders and those Persons referred to in Sections 8.4, 8.5, 8.6 and 10.2,
and their respective successors and permitted assigns.
12.3 ENTIRE AGREEMENT AND MODIFICATION. This Agreement (including the
exhibits hereto) constitutes the entire agreement among the Parties with respect
to the subject matter hereof and supersede any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof. This Agreement may not be
amended prior to the Effective Time except by a written agreement executed by
all
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Parties and after the Effective Time except by a written agreement signed by
Parent and a majority in interest of the Company Stockholders.
12.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties.
12.5 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
12.6 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with receipt of transmission confirmation and with copy
by first class mail, postage prepaid, and shall be addressed to the intended
recipient as set forth below:
If to Parent:
Xxxxxxx.xxx, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Chief Executive Officer
Facsimile: 000-000-0000
Copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand LLP
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Facsimile: 000-000-0000
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If to the Company:
XX.xxx Incorporated
1041 N. Formosa Blvd., Suite 000, Xxxxx Xxxxxx Xxxx.
Xxxx Xxxxxxxxx, XX 00000
Attention: Xxx X. Xxxxx, Chairman & Chief Executive Officer
Facsimile: 310-___-___
Copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xx.
Xxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx/Xxxxxx Xxxxx
Facsimile: 000-000-0000
If to VC:
Virtual Capital LLC
X.X. Xxx 000
Xxxxxx Xxxx, XX 00000
Attention: Xxx X. Xxxxx
Facsimile: 000-000-0000
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties five (5) days' advance written notice to the other Parties pursuant to
the provisions above.
12.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
12.9 WAIVERS. The rights and remedies of the Parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the
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claim or right unless in writing signed by the other Party; (b) no waiver that
may be given by a Party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one Party will be deemed to
be a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
12.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
12.11 EXPENSES. Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the Contemplated Transactions. In the event the Merger is
consummated, Parent will bear the costs and expenses (including accounting and
legal fees and expenses) of the Company incurred in connection with this
Agreement and the Contemplated Transactions.
12.12 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
12.13 DISCLOSURE LETTERS.
(a) The disclosures in the Parent Disclosure Letter and the
Company Disclosure Letter, and those in any supplement thereto, will be deemed
to relate only to (i) the representations and warranties in the correspondingly
numbered Section of this Agreement or (ii) any other Section of this Agreement
to which such disclosures clearly relate, from the perspective of a reasonable
person without prior familiarity with Parent or the Company, as the case may be,
or the matters addressed in such representation and warranty.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Parent Disclosure Letter or the
Company Disclosure Letter (other than an exception expressly set forth in the
Company Disclosure Letter the Parent Disclosure Letter or the which is deemed to
relate to such representation or warranty pursuant to Section 12.14(a) above),
the statements in the body of this Agreement will control.
12.14 ATTORNEYS' FEES. If any legal proceeding or other action relating
to this Agreement is brought or otherwise initiated, the prevailing party shall
be entitled to recover
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reasonable attorneys fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
12.15 FURTHER ASSURANCES. The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
12.16 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
of the date first above written.
PARENT: XXXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxx X. Xxxx
------------------------------
Title: Chief Executive Officer
-----------------------------
COMPANY: XX.XXX INCORPORATED
By: /s/ Xxx X. Xxxxx
--------------------------------
Name: Xxx X. Xxxxx
------------------------------
Title: Chief Executive Officer
-----------------------------
SUB: IZ ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxx X. Xxxx
------------------------------
Title: Chief Executive Officer
-----------------------------
VG: VIRTUAL GROUP LLC
By: /s/ Xxx X. Xxxxx
--------------------------------
Name: Xxx X. Xxxxx
------------------------------
Title: President
-----------------------------
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
