EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
APPLIED MICROSYSTEMS CORPORATION,
LIBRA NETWORKS, INC.,
XXXX TECHNOLOGIES, INC.
AND
SELLERS
May 22, 2002
LIST OF EXHIBITS
Exhibit A Schedule of XXXX Stockholders
Exhibit B Agreement of Merger
Exhibit C Promissory Note
Exhibit D Investor Representation Statement
Exhibit E Escrow Agreement
Exhibit F Purchaser Representative Documentation
Exhibit G Non-Competition Agreement
Exhibit H Form of Legal Opinion delivered by XXXX Counsel
Exhibit I Form of Legal Opinion delivered by Acquiror Counsel
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of May 22, 2002 by and among Applied Microsystems Corporation, a
Washington corporation ("Acquiror"), Libra Networks, Inc., a Washington
corporation ("Libra") and wholly owned subsidiary of Acquiror, XXXX
Technologies, Inc., a Delaware corporation ("XXXX"), and the holders of all of
the outstanding stock of XXXX as set forth on the form attached as Exhibit A
(collectively, the "XXXX Stockholders" and each a "XXXX Stockholder").
RECITALS
A. The Boards of Directors of XXXX, Acquiror and Libra believe it is in
the best interests of their respective companies and the shareholders of their
respective companies that XXXX and Libra combine into a single company through
the statutory merger of XXXX with and into Libra (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
XXXX Common Stock ("XXXX Common Stock") shall be converted into the right to
receive the Merger Consideration upon the terms and subject to the conditions
set forth herein.
C. XXXX, Acquiror and Libra desire to make certain representations and
warranties and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
1. Definitions.
1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquiror" has the meaning set forth in the introductory paragraph.
"Acquiror Common Stock" has the meaning set forth in Section 2.6(a).
"Acquiror Disclosure Schedule" has the meaning set forth in Section 4.
"Acquiror Indemnified Person" and "Acquiror Indemnified Persons" have
the meanings set forth in Section 8.2(b).
"Additional Escrow Shares" has the meaning set forth in Section 8.1(b).
"Agreement of Merger" has the meaning set forth in Section 2.1.
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"Average Closing Price" has the meaning set forth in Section 2.6(d).
"Certificates" has the meaning set forth in Section 2.7(a).
"Closing Date" has the meaning set forth in Section 2.2.
"Closing" has the meaning set forth in Section 2.2.
"Code" has the meaning set forth in Recital D.
"Confidential Information" has the meaning set forth in Section 3.10(i).
"Confidentiality Agreement" has the meaning set forth in Section 5.4.
"Copyrights" has the meaning set forth in Section 3.10(a)(iii).
"Damages" has the meaning set forth in Section 8.2(b).
"Delaware Law" has the meaning set forth in Section 2.1.
"Effective Time" has the meaning set forth in Section 2.2.
"Escrow Agent" has the meaning set forth in Section 8.1(a).
"Escrow Agreement" has the meaning set forth in Section 5.7.
"Escrow Fund" has the meaning set forth in Section 8.1(a).
"Escrow Notes" has the meaning set forth in Section 2.7(c).
"Escrow Period" has the meaning set forth in Section 8.3(a).
"Escrow Shares" has the meaning set forth in Section 2.7(c).
"Exchange Fund" has the meaning set forth in Section 2.7(b).
"Exchange Ratio" has the meaning set forth in Section 2.6(a).
"Governmental Entity" has the meaning set forth in Section 3.2.
"Intellectual Property" has the meaning set forth in Section 3.10(a).
"Issued Patents" has the meaning set forth in Section 3.10(a)(i).
"JAMS" has the meaning set forth in Section 8.6(a).
"Limitation" has the meaning set forth in Section 8.2(c).
"Material Adverse Effect" has the meaning set forth in Section 10.3.
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"Material Contract" has the meaning set forth in Section 3.14.
"Material" has the meaning set forth in Section 10.2.
"Merger" has the meaning set forth in Recital A.
"Merger Consideration" has the meaning set forth in Section 2.6(b).
"Libra" has the meaning set forth in the introductory paragraph.
"NASD" has the meaning set forth in Section 4.2.
"Non-Escrow Shares" has the meaning set forth in 8.2(d).
"Officer's Certificate" has the meaning set forth in Section 8.4.
"Patent Applications" has the meaning set forth in Section 3.10(a)(ii).
"Patents" has the meaning set forth in Section 3.10(a)(ii).
"Promissory Note Consideration" has the meaning set forth in Section
2.6(b).
"Registration Rights" has the meaning set forth in Section 9.
"Release Date" has the meaning set forth in Section 8.3(b).
"Returns" has the meaning set forth in Section 3.18(b).
"SEC" has the meaning set forth in Section 4.2.
"Securities Act" has the meaning set forth in Section 2.6(e).
"Stock Consideration" has the meaning set forth in Section 2.6(a).
"Surviving Corporation" has the meaning set forth in Section 2.1.
"XXXX" has the meaning set forth in the introductory paragraph.
"XXXX Balance Sheet" has the meaning set forth in Section 3.4.
"XXXX Balance Sheet Date" has the meaning set forth in Section 3.6.
"XXXX Common Stock" has the meaning set forth in Recital B.
"XXXX Disclosure Schedule" has the meaning set forth in Section 3.
"XXXX Financial Statements" has the meaning set forth in Section 3.4.
"XXXX Intellectual Property" has the meaning set forth in Section
3.10(c).
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"XXXX Stockholder" has the meaning set forth in the introductory
paragraph.
"XXXX Stockholders' Agent" has the meaning set forth in Section 8.7(a).
"REBA's Current Facilities" has the meaning set forth in Section 3.17.
"REBA's Facilities" has the meaning set forth in Section 3.17.
"Tax" and "Taxes" have the meanings set forth in Section 3.18(a).
"Termination Date" has the meaning set forth in Section 8.2(a).
"Third Party Intellectual Property" has the meaning set forth in Section
3.10(d).
"Trademarks" has the meaning set forth in Section 3.10(a)(iv).
"U.S. Person" has the meaning set forth in Section 6.2(h).
"Washington Law" has the meaning set forth in Section 2.1.
2. The Merger.
2.1 The Merger. At the Effective Time (as defined in Section 2.2
hereof) and subject to and upon the terms and conditions of this Agreement, the
Agreement of Merger attached hereto as Exhibit B (the "Agreement of Merger") and
the applicable provisions of the Washington Business Corporation Act
("Washington Law") and the Delaware General Corporation Law ("Delaware Law"),
XXXX shall be merged with and into Libra, the separate corporate existence of
XXXX shall cease and Libra shall continue as the surviving corporation (the
"Surviving Corporation").
2.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable, but
no later than two (2) business days, after the satisfaction or waiver of each of
the conditions set forth in Section 6 hereof, or at such other time as the
parties hereto agree (the "Closing Date"). The Closing shall take place at the
offices of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, XX 00000-0000, or at such other location as the parties hereto agree.
In connection with the Closing, the parties hereto shall cause the Merger to be
consummated by filing the Agreement of Merger, together with any required
certificates, with the Secretary of State of the State of Washington, in
accordance with the relevant provisions of Washington Law (the time of such
filing being the "Effective Time"). The parties shall also promptly cause a
Certificate of Merger to be filed with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of Delaware Law.
2.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Agreement of Merger and
the applicable provisions of Washington Law and Delaware Law. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises and all and every other
interest of XXXX and Libra shall vest in the Surviving Corporation, and
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all debts, liabilities, duties and obligations of XXXX and Libra shall become
the debts, liabilities, duties and obligations of the Surviving Corporation.
2.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Libra, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by Washington Law and such Articles of Incorporation.
(b) The Bylaws of Libra, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
2.5 Directors and Officers. At the Effective Time, the directors
and officers of Libra immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation, to serve until their
respective successors are duly elected or appointed and qualified.
2.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Libra, XXXX or the holders of
any of the following securities:
(a) Conversion of XXXX Capital Stock. Subject to adjustment
pursuant to Section 2.6(f), each share of XXXX Common Stock issued and
outstanding (after giving effect to the conversion, exchange or exercise, as the
case may be, of all securities convertible into, or exercisable or exchangeable
for, XXXX Common Stock, including all unexpired and unexercised options,
warrants or other rights to acquire XXXX Common Stock) immediately prior to the
Effective Time shall be converted, without any action on the part of the holders
thereof, into the right to receive that number of validly issued, fully paid and
nonassessable shares (the "Stock Consideration") of the Common Stock of Acquiror
("Acquiror Common Stock") which equals the amount obtained by dividing 350,000
by the total number of shares of XXXX Common Stock issued and outstanding
immediately prior to the Effective Time (after giving effect to the conversion,
exchange or exercise, as the case may be, of all securities convertible into, or
exercisable or exchangeable for, XXXX Common Stock, including all unexpired and
unexercised options, warrants or other rights to acquire XXXX Common Stock)(the
"Exchange Ratio"), subject to Section 2.6(d).
(b) Promissory Notes. Subject to adjustment pursuant to
Section 2.6(f), each XXXX Stockholder shall receive a promissory note
substantially in the form attached as Exhibit C (the "Promissory Note
Consideration") in the amount obtained by (i) dividing $178,000.00 by the total
number of shares of XXXX Common Stock issued and outstanding immediately prior
to the Effective Time (after giving effect to the conversion, exchange or
exercise, as the case may be, of all securities convertible into, or exercisable
or exchangeable for, XXXX Common Stock, including all unexpired and unexercised
options, warrants or other rights to acquire XXXX Common Stock), and (ii)
multiplying such number obtained pursuant to clause (i) above by the number of
shares of XXXX Common Stock owned by such XXXX Stockholder
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immediately prior to the Effective Time. The Stock Consideration and the
Promissory Note Consideration shall collectively be the "Merger Consideration."
(c) Adjustments to Exchange Ratio. The Exchange Ratio shall
be adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or XXXX Common Stock), reorganization, recapitalization or
other like change with respect to Acquiror Common Stock or XXXX Common Stock
occurring after the date hereof and prior to the Effective Time.
(d) Fractional Shares. No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of shares of XXXX
Common Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average of the closing prices of Acquiror
Common Stock as reported on the Nasdaq National Market during the twenty trading
days ending one day prior to the Effective Time (the "Average Closing Price").
(e) Certificate Legends. The shares of Acquiror Common Stock
to be issued pursuant to this Section 2.6 shall not have been registered and
shall be characterized as "restricted securities" under federal securities laws,
and under such laws such shares may be resold only in certain limited
circumstances without registration under the Securities Act of 1933, as amended
(the "Securities Act"). Each certificate evidencing shares of Acquiror Common
Stock to be issued pursuant to this Section 2.6 shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART,
OTHER THAN PURSUANT TO REGISTRATION UNDER SAID ACT OR IN CONFORMITY WITH
THE LIMITATIONS OF RULE 144 OR OTHER SIMILAR RULE OR EXEMPTION AS THEN
IN EFFECT, WITHOUT FIRST OBTAINING (I), IF REQUIRED BY THE COMPANY, A
WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, WHICH MAY BE
COUNSEL TO THE COMPANY, TO THE EFFECT THAT THE CONTEMPLATED SALE OR
OTHER DISPOSITION WILL NOT BE IN VIOLATION OF SAID ACT, OR (II) A
`NO-ACTION' OR INTERPRETIVE LETTER FROM THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT SUCH STAFF WILL TAKE NO ACTION IN
RESPECT OF THE CONTEMPLATED SALE OR OTHER DISPOSITION."
and any legends required by state securities laws.
(f) Adjustment for Liabilities. The Merger Consideration
shall be reduced at Closing by the amount (as determined by Acquiror) of any
liabilities of XXXX disclosed on the XXXX Disclosure Schedule. Such reduction
shall be apportioned equally to the Stock Consideration and the Promissory Note
Consideration.
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2.7 Surrender of Certificates.
(a) Exchange Procedures. From and after the Effective Time,
each holder of an outstanding certificate or certificates (the "Certificates")
which represented shares of XXXX Common Stock immediately prior to the Effective
Time shall have the right to surrender each Certificate to Acquiror (or at
Acquiror's option, to such agent or agents to be appointed by Acquiror), and to
receive promptly in exchange for all Certificates held by such holder: (i) a
certificate representing the number of whole shares of Acquiror Common Stock to
which the holder is entitled to less the number of shares of Acquiror Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Sections 2.7(c) and 8 hereof (which shall be based on the percentage of
aggregate Stock or Promissory Note consideration received as attributed to such
holder relative to the aggregate Stock or Promissory Note Consideration received
or attributed to all the XXXX Stockholders); (ii) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.6(c); (iii)
a Promissory Note representing the amount such holder shall be entitled to
receive pursuant to Section 2.6(b) less the amount of the Promissory Note to be
deposited in the Escrow Fund on such holder's behalf pursuant to Sections 2.7(c)
and 8 hereof (which shall be based on the percentage of aggregate Stock or
Promissory Note Consideration received as attributed to such holder relative to
the aggregate Stock or Promissory Note Consideration received or attributed to
all the XXXX Stockholders); and (iv) cash (without interest) in respect of
fractional shares as provided in Section 2.6(d), and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that prior to the Effective Time represented shares of XXXX Common
Stock will be deemed from and after the Effective Time, for all corporate
purposes other than the payment of dividends, to evidence the ownership of the
number of full shares of Acquiror Common Stock into which such shares of XXXX
Common Stock shall have been so converted, the right to receive the Promissory
Note Consideration in accordance with Section 2.6(b) and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 2.6(d).
(b) Transfers of Ownership. At the Effective Time, the stock
transfer books of the XXXX shall be closed, and there shall be no further
registration of transfers of XXXX Common Stock thereafter on the records of
XXXX. If any certificate for shares of Acquiror Common Stock and Promissory Note
Consideration are to be issued in a name other than that in which the
Certificate surrendered in exchange therefore is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock and Promissory Note
Consideration in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Acquiror or any
agent designated by it that such tax has been paid or is not payable.
(c) Escrow. At Closing, and subject to and in accordance
with the provisions of Section 8 hereof, Acquiror shall cause to be distributed
to the Escrow Agent (as defined in Section 8 hereof) (i) a certificate or
certificates representing 50% of the shares of Acquiror Common Stock to be
issued at the Closing (the "Escrow Shares"); and (ii) Promissory Notes
representing 50% of the Promissory Note Consideration (the "Escrow Notes"). The
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Escrow Shares shall be owned, beneficially and of record, by such holders and
such shares shall be held in escrow and shall be available to compensate
Acquiror for certain damages as provided in Section 8. To the extent not used
for such purposes, such shares shall be released, all as provided in Section 8.
2.8 No Further Ownership Rights in XXXX Common Stock. The Merger
Consideration delivered upon the surrender for exchange of shares of XXXX Common
Stock in accordance with the terms hereof (including any dividends,
distributions or cash paid in lieu of fractional shares) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of XXXX
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of XXXX Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 2.
2.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, Acquiror or its agents
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 Merger
Consideration (and dividends, distributions and cash in lieu of fractional
shares) as may be required pursuant to Section 2.6; provided, however, that
Acquiror may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Acquiror or the Surviving Corporation with
respect to the Certificates alleged to have been lost, stolen or destroyed.
2.10 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code.
2.11 Taking of Necessary Action; Further Action. Each of
Acquiror, Libra and XXXX will take all such reasonable and lawful action as may
be necessary or desirable in order to effectuate the Merger in accordance with
this Agreement as promptly as possible. If, at any time after the Effective
Time, 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
XXXX and Libra, the officers and directors of XXXX and Libra are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.
3. Representations and Warranties of XXXX and XXXX Stockholders. XXXX
and XXXX Stockholders represent and warrant to Acquiror and Libra that the
statements contained in this Section 3 are true and correct, except as disclosed
in the attached disclosure schedule referring to the representations and
warranties in this Agreement (the "XXXX Disclosure Schedule"). The disclosure in
any item in the XXXX Disclosure Schedule in a paragraph corresponding to the
numbered and lettered paragraphs contained in this Section 3 shall qualify only
the corresponding subsection in this Section 3 (except to the extent disclosure
in any numbered and lettered section of the XXXX Disclosure Schedule is
specifically cross-referenced in another numbered and lettered section of the
XXXX Disclosure Schedule).
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3.1 Organization, Standing and Power. XXXX is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. XXXX has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified and
in good standing could reasonably be expected to have a Material Adverse Effect
on XXXX. XXXX has delivered a true and correct copy of the Certificate of
Incorporation and Bylaws or other charter documents, as applicable, of XXXX,
each as amended to date, to Acquiror. The minute book of XXXX delivered to
Acquiror contains a materially complete and accurate summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of XXXX through the date of this Agreement, and reflect all
transactions referred to in such minutes accurately in all material respects.
XXXX is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws. XXXX has no Subsidiaries. XXXX does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
3.2 Authority. XXXX has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of XXXX subject only to the
approval of the Merger by the XXXX Stockholders as contemplated by Section
6.1(a). The affirmative vote of the holders of a majority of the shares of
REBA's Common Stock outstanding on the record date for the Written Consent of
Stockholders relating to this Agreement is the only vote of the holders of any
of REBA's Common Stock necessary under Delaware Law to approve this Agreement
and the transactions contemplated hereby. The Board of Directors of XXXX has
unanimously (a) approved this Agreement and the Merger; and (b) recommended that
the stockholders of XXXX approve this Agreement and the Merger. This Agreement
has been duly executed and delivered by XXXX and constitutes the valid and
binding obligation of XXXX enforceable against XXXX in accordance with its
terms, except that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and is subject to general principles of equity. This Agreement has
been, and the Escrow Agreement when executed and delivered in accordance with
the terms hereof will have been, duly executed and delivered by the XXXX
Stockholders and will constitute the valid and binding obligations of the XXXX
Stockholders enforceable against the XXXX Stockholders in accordance with their
terms, except that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and is subject to general principles of equity. The execution and
delivery of this Agreement by XXXX does not, and the consummation of the
transactions contemplated hereby will not conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any material obligation or loss of any material benefit under (i) any provision
of the Certificate of Incorporation or Bylaws of XXXX, as amended; or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to XXXX or any of its properties or
assets, in the case of clause (ii), except for such conflicts, violations,
defaults, rights of termination, cancellation or acceleration as would not
individually
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or in the aggregate, reasonably be expected to have a Material Adverse Effect on
XXXX. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to XXXX in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (aa) the filing of the Certificate of Merger, together with
the required officers' certificates, as provided in Section 2.2; (bb) filings
required under Regulation D of the Securities Act of 1933; (cc) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state securities laws and the securities laws
of any foreign country; and (dd) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
reasonably expected to have a Material Adverse Effect on XXXX and would not
reasonably be expected to prevent, or materially alter or delay, any of the
transactions contemplated by this Agreement.
3.3 Governmental Authorization. XXXX has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (a) pursuant to which XXXX
currently operates or holds any interest in any of its properties; or (b) that
is required for the operation of REBA's business or the holding of any such
interest and all of such authorizations are in full force and effect except
where the failure to obtain or have any such authorizations would not reasonably
be expected to have a Material Adverse Effect on XXXX.
3.4 Financial Statements. XXXX has delivered to Acquiror its
unaudited balance sheet as of December 31, 2001 (the "XXXX Balance Sheet") and
its unaudited balance sheet as of May 14, 2002 (collectively, the "XXXX
Financial Statements"). The XXXX Financial Statements fairly present the
consolidated financial condition and operating results of XXXX as of the dates
therein.
3.5 Capital Structure. The authorized capital stock of XXXX
consists of 20,000,000 shares of XXXX Common Stock, of which there were issued
and outstanding as of the date hereof, 3,000,000 shares, and 10,000,000 shares
of preferred stock of XXXX, of which as of that same date there were no issued
and outstanding shares of preferred stock of XXXX. All outstanding shares of
XXXX Common Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are not subject
to preemptive rights or rights of first refusal created by statute, the
Certificate of Incorporation or Bylaws of XXXX or any agreement to which XXXX is
a party or by which it is bound. Except for the rights created pursuant to this
Agreement, there are no other options, warrants, calls, rights, commitments or
agreements of any character to which XXXX is a party or by which it is bound,
obligating XXXX to issue, deliver, sell, repurchase or redeem or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of XXXX Common
Stock or any other class or series of capital stock of XXXX, or obligating XXXX
to xxxxx, extend, accelerate the vesting of, change the price of, or otherwise
amend or enter into any such option, warrant, call, right, commitment or
agreement. There are no other contracts, commitments or agreements relating to
voting, purchase or sale of REBA's capital stock (a) between or among XXXX and
any of its stockholders; and (b) to REBA's knowledge, between or among any of
REBA's stockholders.
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All shares of outstanding XXXX Common Stock were issued in compliance with all
applicable federal and state securities laws.
3.6 Absence of Certain Changes. Since December 31, 2001 (the
"XXXX Balance Sheet Date"), XXXX has conducted its business in the ordinary
course consistent with past practice and there has not occurred (a) any change,
event or condition (whether or not covered by insurance) that has resulted in,
or could reasonably be expected to result in, a Material Adverse Effect on XXXX;
(b) any acquisition, sale or transfer of any material asset of XXXX other than
in the ordinary course of business and consistent with past practice; (c) any
change in accounting methods or practices (including any change in depreciation
or amortization policies or rates) by XXXX or any revaluation by XXXX of any of
its assets; (d) any declaration, setting aside, or payment of a dividend or
other distribution with respect to the shares of XXXX or any direct or indirect
redemption, purchase or other acquisition by XXXX of any of its shares of
capital stock; (e) any Material Contract entered into by XXXX, other than in the
ordinary course of business and as provided to Acquiror or its counsel, or any
material amendment or termination of, or default under, any Material Contract to
which XXXX is a party or by which it is bound; (f) any amendment or change to
the Certificate of Incorporation or Bylaws of XXXX; (g) any increase in or
modification of the compensation or benefits payable or to become payable by
XXXX to any of its directors or employees; or (h) any negotiation or agreement
by XXXX to do any of the things described in the preceding clauses (a) through
(h) (other than negotiations with Acquiror and its representatives regarding the
transactions contemplated by this Agreement). At the Effective Time, there will
be no accrued but unpaid dividends on shares of REBA's capital stock.
3.7 Absence of Undisclosed Liabilities. XXXX has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent).
3.8 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any
Governmental Entity, foreign or domestic, or, to the knowledge of XXXX,
threatened against XXXX or any of its properties or any of its officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on XXXX. There is
no judgment, decree or order against XXXX, or, to the knowledge of XXXX, any of
its respective directors or officers (in their capacities as such), that could
prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on XXXX. All litigation to which XXXX is a party (or, to
the knowledge of XXXX, threatened to become a party) is described in Section 3.8
of the XXXX Disclosure Schedule.
3.9 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon XXXX that has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current or future business practice of XXXX, any acquisition of property by
XXXX or the conduct of business by XXXX as currently conducted.
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3.10 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual Property"
means:
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "Patent Applications" and,
with the Issued Patents, the "Patents");
(iii) all copyrights, copyrightable works,
semiconductor topography and mask work rights, including all rights of
authorship, use, publication, reproduction, distribution, performance
transformation, moral rights and rights of ownership of copyrightable works,
semiconductor topography works and mask works, and all rights to register and
obtain renewals and extensions of registrations, together with all other
interests accruing by reason of international copyright, semiconductor
topography and mask work conventions (collectively, "Copyrights");
(iv) trademarks, registered trademarks, applications
for registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered trade
names and applications for registrations of trade names (collectively,
"Trademarks") and domain name registrations;
(v) all technology, ideas, inventions, designs,
proprietary information, manufacturing and operating specifications, know-how,
formulae, trade secrets, technical data, computer programs, hardware, software
and processes; and
(vi) all other intangible assets, properties and rights
(whether or not appropriate steps have been taken to protect, under applicable
law, such other intangible assets, properties or rights).
(b) XXXX either owns and has good and marketable title to,
or possesses legally enforceable rights to use, all Intellectual Property used
in the business of XXXX as currently conducted or as proposed to be conducted by
XXXX. The Intellectual Property owned by and licensed to XXXX collectively
constitutes all of the Intellectual Property necessary to enable XXXX to conduct
its business as such business is currently being conducted. No current or former
officer, director, stockholder, employee, consultant or independent contractor
has any right, claim or interest in or with respect to any XXXX Intellectual
Property (as defined herein below). There is no unauthorized use, disclosure or
misappropriation of any XXXX Intellectual Property by any employee or, to REBA's
knowledge, former employee of XXXX or, to REBA's knowledge, by any other third
party. There are no royalties, fees or other payments payable by XXXX to any
Person under any written or oral contract or understanding by reason of the
ownership, use, sale or disposition of Intellectual Property.
(c) With respect to each item of Intellectual Property
incorporated into any product of XXXX or otherwise used in the business of XXXX
as currently conducted or as
12
proposed to be conducted by XXXX (except "off the shelf" or other software
widely available through regular commercial distribution channels at a cost not
exceeding $1,000 on standard terms and conditions, as modified for REBA's
operations) ("XXXX Intellectual Property"), Section 3.10 of the XXXX Disclosure
Schedule lists:
(i) all Patents and Patent Applications, all registered
Trademarks, and pending trademark registrations and all registered Copyrights,
including the jurisdictions in which each such Intellectual Property has been
issued or registered or in which any such application for such issuance and
registration has been filed; and
(ii) the following agreements relating to XXXX
Intellectual Property: all (A) exclusive licenses of Intellectual Property to or
from XXXX; (B) joint development agreements; (C) agreements by which XXXX grants
any ownership right to any XXXX Intellectual Property owned by XXXX; (D) orders
relating to Intellectual Property; and (E) options relating to any XXXX
Intellectual Property.
(d) Section 3.10 of the XXXX Disclosure Schedule contains an
accurate list as of the date of this Agreement of all licenses, sublicenses and
other agreements to which XXXX is a party and pursuant to which XXXX is
authorized to use any Intellectual Property owned by any third party, excluding
"off the shelf" or other software at a cost not exceeding $1,000 and widely
available through regular commercial distribution channels on standard terms and
conditions ("Third Party Intellectual Property").
(e) To REBA's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any XXXX Intellectual Property,
including any Third Party Intellectual Property, by any third party, including
any employee or former employee of XXXX. XXXX has not entered into any agreement
to indemnify any other person against any charge of infringement of any
Intellectual Property, other than indemnification provisions contained in
standard sales or agreements to end users arising in the ordinary course of
business, the forms of which have been delivered to Acquiror or its counsel.
(f) XXXX is not in breach of any license, sublicense or
other agreement relating to the XXXX Intellectual Property or Third Party
Intellectual Property. Neither the execution, delivery or performance of this
Agreement or any ancillary agreement contemplated hereby nor the consummation of
the Merger or any of the transactions contemplated by this Agreement will
contravene, conflict with or result in any limitation on the Acquiror's right to
own or use any XXXX Intellectual Property, including any Third Party
Intellectual Property.
(g) All Patents, registered Trademarks, registered service
marks and registered Copyrights held by XXXX are valid and subsisting. All
maintenance and annual fees have been fully paid and all fees paid during
prosecution and after issuance of any Patent comprising or relating to such item
have been paid in the correct entity status amounts. XXXX is not infringing,
misappropriating or making unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of any proprietary
asset owned or used by any third party. There is no proceeding pending or, to
REBA's knowledge, threatened, nor has any
13
claim or demand been made that challenges the legality, validity, enforceability
or ownership of any item of XXXX Intellectual Property or Third Party
Intellectual Property or alleges a claim of infringement of any Patents,
Copyrights, Trademarks or service marks, or violation of any trade secret or
other proprietary right of any third party. XXXX has not brought a proceeding
alleging infringement of XXXX Intellectual Property or breach of any license or
agreement involving Intellectual Property against any third party.
(h) All current and former officers and employees of XXXX
have executed and delivered to XXXX an agreement (containing no exceptions or
exclusions from the scope of its coverage) regarding the protection of
proprietary information and the assignment to XXXX of any Intellectual Property
arising from services performed for XXXX by such persons, the form of which has
been supplied to Acquiror or its counsel. All current and former consultants and
independent contractors to XXXX involved in the development, modification,
marketing and servicing of any XXXX Intellectual Property have executed and
delivered to XXXX an agreement in the form provided to Acquiror or its counsel
(containing no exceptions or exclusions from the scope of its coverage)
regarding the protection of proprietary information and the assignment to XXXX
of any Intellectual Property arising from services performed for XXXX by such
persons. No employee or independent contractor of XXXX is in violation of any
term of any patent disclosure agreement or employment contract or any other
contract or agreement relating to the relationship of any such employee or
independent contractor with XXXX. No current or former officer, director,
stockholder, employee, consultant or independent contractor has any right, claim
or interest in or with respect to any XXXX Intellectual Property.
(i) XXXX has taken all commercially reasonable and customary
measures and precautions necessary to protect and maintain the confidentiality
of all XXXX Intellectual Property (except such XXXX Intellectual Property whose
value would be unimpaired by public disclosure) and otherwise to maintain and
protect the full value of all XXXX Intellectual Property. All use, disclosure or
appropriation of Intellectual Property not otherwise protected by patents,
subject to patent applications or protected by copyright ("Confidential
Information") owned by XXXX by or to a third party has been pursuant to the
terms of a written agreement between XXXX and such third party. All use,
disclosure or appropriation by XXXX of Confidential Information not owned by
XXXX has been pursuant to the terms of a written agreement between XXXX and the
owner of such Confidential Information, or is otherwise lawful.
(j) XXXX is not subject to any proceeding or outstanding
decree, order, judgment or stipulation restricting in any manner the use,
transfer or licensing of any XXXX Intellectual Property by XXXX, or which may
affect the validity, use or enforceability of such XXXX Intellectual Property.
XXXX is not subject to any agreement that restricts in any material respect the
use, transfer, delivery or licensing by XXXX of the XXXX Intellectual Property.
3.11 Interested Party Transactions. XXXX is not indebted to any
director, officer, employee or agent of XXXX, and no such person is indebted to
XXXX.
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3.12 Complete Copies of Materials. XXXX has delivered or made
available true and complete copies of each document that has been requested by
Acquiror or its counsel in connection with their due diligence review of XXXX.
3.13 Material Contracts. All of REBA's Material Contracts are
listed in Section 3.14 of the XXXX Disclosure Schedule. With respect to each
Material Contract (a) the Material Contract is legal, valid, binding and
enforceable and in full force and effect with respect to XXXX, and to REBA's
knowledge is legal, valid, binding, enforceable and in full force and effect
with respect to each other party thereto, in either case subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; (b) the
Material Contract will continue to be legal, valid, binding and enforceable and
in full force and effect immediately following the Effective Time in accordance
with its terms as in effect prior to the Effective Time, subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; and (c)
neither XXXX nor, to REBA's knowledge, any other party, is in breach or default,
and no event has occurred that with notice or lapse of time would constitute a
breach or default by XXXX or, to REBA's knowledge, by any such other party, or
permit termination, modification or acceleration, under such Material Contract.
XXXX is not a party to any oral contract, agreement or other arrangement that if
written would constitute a Material Contract. "Material Contract" means any
contract, agreement or commitment to which XXXX is a party (i) with expected
receipts or expenditures in excess of $10,000; (ii) required to be listed
pursuant to Section 3.10(c)(ii) or Section 3.10(d); (iii) requiring XXXX to
indemnify any Person; (iv) granting any exclusive rights to any party; (v)
evidencing indebtedness for borrowed or loaned money, including guarantees of
such indebtedness; or (vi) that could reasonably be expected to have a Material
Adverse Effect on XXXX if breached by XXXX in such a manner as would (I) permit
any other party to cancel or terminate the same (with or without notice of
passage of time); (II) provide a basis for any other party to claim money
damages (either individually or in the aggregate with all other such claims
under that contract) from XXXX; or (III) give rise to a right of acceleration of
any material obligation or loss of any material benefit under such Material
Contract.
3.14 Employees and Consultants. Section 3.14 of the XXXX
Disclosure Schedule or a letter delivered to Acquiror by XXXX contains a list of
the names of all employees (including without limitation part-time employees and
temporary employees), leased employees, independent contractors and consultants
of XXXX, together with their respective salaries or wages, other compensation,
dates of employment and positions.
3.15 Title to Property. XXXX has good and marketable title to
all of its properties, interests in properties and assets, real and personal,
reflected in the XXXX Balance Sheet or acquired after the XXXX Balance Sheet
Date (except properties, interests in properties and assets sold or otherwise
disposed of since the XXXX Balance Sheet Date in the ordinary course of
business), or with respect to leased properties and assets, valid leasehold
interests therein, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (a) the lien of current taxes not
yet due and payable; (b) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use
15
of the properties subject thereto or affected thereby, or otherwise materially
impair business operations involving such properties; (c) liens securing debt
that is reflected on the XXXX Balance Sheet; and (d) such other mortgages,
liens, pledges, charges or encumbrances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on XXXX. All
properties used in the operations of XXXX are reflected in the XXXX Balance
Sheet to the extent required by generally accepted accounting principles. XXXX
currently does not lease any real property and since its inception has not
leased any real property. XXXX owns no real property.
3.16 Environmental Matters. XXXX is and has been in compliance
with all environmental laws relating to the properties leased or occupied by
XXXX at any time, and no discharge, emission, release, leak or spill of
hazardous materials has occurred that may or will give rise to liability of XXXX
under environmental laws.
3.17 Taxes.
(a) As used in this Agreement, the terms "Tax" and,
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, stamp transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity;
(b) XXXX has prepared and timely filed all returns,
estimates, information statements and reports required to be filed by XXXX with
any taxing authority ("Returns") relating to any and all Taxes concerning or
attributable to XXXX or its operations with respect to Taxes for any period
ending on or before the Closing Date and such Returns are true and correct in
all material respects and have been completed in accordance with applicable law;
(c) XXXX, as of the Effective Time, (i) will have paid all
Taxes shown to be payable on such Returns covered by Section 3.18(a); and (ii)
will have withheld with respect to its employees all Taxes required to be
withheld;
(d) There is no Tax deficiency outstanding or assessed or,
to REBA's knowledge, proposed against XXXX that is not reflected as a liability
on the XXXX Balance Sheet, nor has XXXX executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any Tax;
(e) XXXX has no liabilities for unpaid Taxes that have not
been accrued for or reserved on the XXXX Balance Sheet, whether asserted or
unasserted, contingent or otherwise and XXXX has no knowledge of any basis for
the assertion of any such liability attributable to XXXX, its assets or
operations;
(f) XXXX is not a party to any tax-sharing agreement or
similar arrangement with any other party, and XXXX has not assumed any
obligation to pay any Tax
16
obligations of, or with respect to any transaction relating to, any other person
or agreed to indemnify any other person with respect to any Tax;
(g) REBA's Returns have never been audited by a government
or taxing authority, nor is any such audit in process or pending, and XXXX has
not been notified of any request for such an audit or other examination;
(h) XXXX has never been a member of an affiliated group of
corporations filing a consolidated federal income tax return;
(i) XXXX has made available to Acquiror copies of all
Returns filed for all periods since REBA's inception;
(j) XXXX has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) apply to any disposition
of assets owned by XXXX;
(k) XXXX has not been at any time a United States Real
Property Holding Corporation within the meaning of Section 897(c)(2) of the
Code; and
(l) XXXX is not a party to any contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of XXXX that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 464 or 162(m) of the Code by XXXX or Libra
as an expense under applicable law.
3.18 Employee Matters. XXXX is in compliance with all currently
applicable laws and regulations respecting terms and conditions of employment,
including without limitation applicant and employee background checking,
immigration laws, discrimination laws, verification of employment eligibility,
employee leave laws, classification of workers as employees and independent
contractors, wage and hour laws, and occupational safety and health laws except
for such noncompliance that neither has nor would reasonably be expected to have
a Material Adverse Effect on XXXX. There are no proceedings pending or, to
REBA's knowledge, reasonably expected or threatened, between XXXX, on the one
hand, and any or all of its current or former employees, on the other hand,
including without limitation any claims for actual or alleged harassment or
discrimination based on race, national origin, age, sex, sexual orientation,
religion, disability, or similar tortious conduct, breach of contract, wrongful
termination, defamation, intentional or negligent infliction of emotional
distress, interference with contract or interference with actual or prospective
economic disadvantage. There are no claims pending, or, to REBA's knowledge,
reasonably expected or threatened, against XXXX under any workers' compensation
or long-term disability plan or policy. XXXX has no material unsatisfied
obligations to any employees, former employees, or qualified beneficiaries
pursuant to COBRA, HIPAA, or any state law governing health care coverage
extension or continuation. XXXX is not a party to any collective bargaining
agreement or other labor union contract, nor does XXXX know of any activities or
proceedings of any labor union to organize its employees. XXXX has provided all
employees with all wages, benefits, relocation benefits, stock options, bonuses
and incentives, and all other compensation that became due and payable through
the date of this Agreement.
17
3.19 Compliance With Laws. XXXX has complied with, is not in
violation of and has not received any notices of violation with respect to, any
federal state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business.
3.20 Brokers' and Finders' Fee. No broker, finder or investment
banker is entitled to brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with the Merger,
this Agreement or any transaction contemplated hereby.
3.21 Representations Complete. None of the representations or
warranties made by XXXX herein or in any Schedule or Exhibit hereto, including
the XXXX Disclosure Schedule, or certificate furnished by XXXX pursuant to this
Agreement or any written statement furnished to Acquiror pursuant hereto or in
connection with the transactions contemplated hereby, when all such documents
are read together in their entirety, contain, or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
4. Representations and Warranties of Acquiror and Libra. Acquiror and
Libra represent and warrant to XXXX that the statements contained in this
Section 4 are true and correct, except as disclosed in a document of even date
herewith and delivered by Acquiror to XXXX on the date hereof referring to the
representations and warranties in this Agreement (the "Acquiror Disclosure
Schedule"). The Acquiror Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
4, and the disclosure in any such numbered and lettered section of the Acquiror
Disclosure Schedule shall qualify only the corresponding section in this Section
4 (except to the extent disclosure in any numbered and lettered section of the
Acquiror Disclosure Schedule is specifically cross-referenced in another
numbered and lettered section of the Acquiror Disclosure Schedule.
4.1 Organization, Standing and Power. Each of Acquiror and Libra
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Washington. Each of Acquiror and Libra has the corporate
power to own its properties and to carry on its business as now being conducted
and as proposed to be conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified and
in good standing could reasonably be expected to have a Material Adverse Effect
on Acquiror. Acquiror and Libra have made available a true and correct copy of
the Articles of Incorporation and Bylaws of Acquiror and Libra, each as amended
to date, to XXXX. Neither Acquiror nor Libra is in violation of any provisions
of its Articles of Incorporation or Bylaws.
4.2 Authority. Acquiror has all requisite corporate power and
authority to enter into this Agreement, the Escrow Agreement and the Promissory
Notes and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement, the Escrow Agreement and the Promissory Notes and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquiror. Libra has
all requisite corporate power and authority to enter into this Agreement and to
18
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Libra.
This Agreement has been duly executed and delivered by Acquiror and Libra and
constitutes the valid and binding obligation of Acquiror and Libra enforceable
against Acquiror and Libra in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to creditors' rights generally, and subject to
general principles of equity. The Promissory Notes and the Escrow Agreement,
when executed and delivered, will constitute the valid and binding obligations
of Acquiror enforceable against Acquiror in accordance with their terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors' rights generally, and subject
to general principles of equity. All requisite shareholder approvals for the
transactions contemplated hereunder have been obtained. The execution and
delivery of this Agreement, the Escrow Agreement and the Promissory Notes do not
and the consummation of the transactions contemplated hereby and thereby will
not conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under (a) any provision of the Articles of Incorporation or
Bylaws of Acquiror or any of its Subsidiaries; or (b) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Acquiror or any of its Subsidiaries or their properties
or assets, except in the case of clause (b), for such conflicts, violations,
defaults, rights of termination, cancellation or acceleration as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Acquiror. No consent, approval, order or authorization of or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Acquiror and Libra or the
consummation by Acquiror and Libra of the transactions contemplated hereby,
except for (i) the filing of the Agreement of Merger, together with the required
officers' certificates, as provided in Section 2.2; (ii) the filing of a Form D
with the Securities and Exchange Commission in accordance with Regulation D
following the Effective Time; (iii) the filing of a Form 8-K with the Securities
and Exchange Commission ("SEC") and National Association of Securities Dealers
("NASD") within 15 days after the Closing Date; (iv) any filings as may be
required under applicable state securities laws and the securities laws of any
foreign country; (v) the filing with the Nasdaq Stock Market of a Notification
Form for Listing of Additional Shares with respect to the shares of Acquiror
Common Stock issuable upon conversion of the XXXX Common Stock in the Merger at
least 15 days prior to issuance of the Stock Consideration; and (vi) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, could not reasonably be expected to have a Material Adverse
Effect on Acquiror and could not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.
4.3 SEC Documents; Financial Statements. For purposes this
Section 4.3, "Acquiror SEC Documents" shall mean all statements, reports,
registration statements and other filings filed with the SEC by Acquiror since
March 27, 2002. As of their respective filing dates, all documents required to
be filed as exhibits to the Acquiror SEC Documents have been so filed, and all
material contracts so filed as exhibits are in full force and effect except
those which have expired in accordance with their terms, and neither Acquiror
nor any of its subsidiaries is in
19
default thereunder. As of their respective filing dates, the Acquiror SEC
Documents complied in all material respects with the requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Acquiror SEC Document prior to the date
hereof. The financial statements of Acquiror, including the notes thereto,
included in the Acquiror SEC Documents (the "Acquiror Financial Statements"),
compiled as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and consistent with each other (except as
may be indicated in the notes thereto or, in the case of unaudited statements
included in Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q of the
SEC). The Acquiror Financial Statements fairly present the consolidated
financial condition and operating results of Acquiror and its subsidiaries at
the dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no change in Acquiror's accounting policies except as described in the notes to
the Acquiror Financial Statements.
4.4 Issuance of Shares. The issuance and delivery of the
Acquiror Common Stock as Merger Consideration in accordance with this Agreement
has been duly authorized by all necessary corporate action on the part of
Acquiror, and, when issued at the Effective Time as contemplated hereby, such
shares of Acquiror Common Stock will be duly and validly issued, fully paid and
nonassessable. Such Acquiror Common Stock, when so issued and delivered in
accordance with the provisions of this Agreement, shall be free and clear of all
liens and encumbrances and adverse claims, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement, the Escrow
Agreement and under applicable securities laws and will not have been issued in
violation of Acquiror's Articles of Incorporation or Bylaws or any preemptive
rights or rights of first refusal or similar rights.
4.5 Capital Structure. The authorized capital stock of Acquiror
consists of 25,000,000 shares of Common Stock, $0.01 par value, and 5,000,000
shares Preferred Stock, $0.01 par value, of which there were issued and
outstanding as of the close of business on May 3, 2002, 7,182,262 shares of
Common Stock and no shares of Preferred Stock.
4.6 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any
Governmental Entity, foreign or domestic, or, to the knowledge of Acquiror or
Libra, threatened against Acquiror or Libra or any of their properties or any of
their officers or directors (in their capacities as such) that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on Acquiror or Libra. There is no judgment, decree or order against Acquiror or
Libra, or, to the knowledge of Acquiror or Libra, any of their respective
directors or officers (in their capacities as such), that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Acquiror or XXXX.
20
4.7 SEC Documents. Acquiror has filed each statement and report
and other filing required to be filed with the SEC by Acquiror between March 27,
2002 and the date hereof. In addition, Acquiror has made available to XXXX
through XXXXX all exhibits to Acquiror's SEC documents filed prior to the date
hereof.
4.8 Compliance with Laws. Acquiror and Libra have complied with,
are not in violation of and have not received any notices of violation with
respect to, any federal state, local or foreign statute, law or regulation with
respect to the conduct of their business, or the ownership or operation of their
business.
4.9 Brokers' and Finders' Fee. No broker, finder or investment
banker is entitled to brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with the Merger,
this Agreement or any transaction contemplated hereby.
4.10 Absence of Undisclosed Liabilities. Acquiror has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than those set forth or fully provided for in the Acquiror
Financial Statements.
4.11 Events Subsequent to Most Recent Fiscal Quarter End. Since
March 31, 2002, there has not been any change in the business financial
condition, operations or results of operations of Acquiror which would
constitute a Material Adverse Effect.
4.12 Representations Complete. None of the representations or
warranties made by Acquiror or Libra herein or in any Schedule hereto, including
the Acquiror Disclosure Schedule, or certificate furnished by Acquiror or Libra
pursuant to this Agreement, or any written statement furnished to XXXX pursuant
hereto or in connection with the transactions contemplated hereby, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
5. Additional Agreements.
5.1 Approval of Shareholders. XXXX shall have taken all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to obtain the unanimous written consent of the XXXX Stockholders
approving the Merger. The XXXX Stockholders agree to vote the shares of XXXX
capital stock owned by such stockholder in favor of the Merger.
5.2 Sale of Shares Pursuant to Regulation D. The parties hereto
acknowledge and agree that the shares of Acquiror Common Stock issuable to the
XXXX Stockholders pursuant to Section 2.6 hereof shall constitute "restricted
securities" within the Securities Act. The certificates of Acquiror Common Stock
shall bear the legends set forth in Section 2.6(e). It is acknowledged and
understood that Acquiror is relying on certain written representations made by
each stockholder of XXXX and by the Purchaser Representative for certain
stockholder. XXXX will use its best efforts to cause each XXXX Stockholder to
execute and deliver to Acquiror an Investor Representation Statement in the form
attached hereto as Exhibit D.
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5.3 No Modification of Representations or Warranties. No
information or knowledge obtained in any investigation by Acquiror shall affect
or be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that Acquiror and
XXXX have previously executed a confidentiality agreement dated November 13,
2001 (the "Confidentiality Agreement"), which Confidentiality Agreement is
hereby incorporated herein by reference and shall continue in full force and
effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this
Agreement, XXXX shall not issue any press release or otherwise make any public
statement or make any other public (or non confidential) disclosure (whether or
not in response to an inquiry) regarding the terms of this Agreement and the
transactions contemplated hereby, and shall not issue any such press release or
make any such statement or disclosure without the prior approval of Acquiror
(which approval shall not be unreasonably withheld).
5.6 Further Assurances. Acquiror and XXXX shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
effectuate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, each party to
this Agreement shall (a) make any filings and give any notices required to be
made and given by such party in connection with the Merger and the other
transactions contemplated by this Agreement; (b) use all reasonable efforts to
obtain any consent required to be obtained (pursuant to any applicable legal
requirement or contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this Agreement; and (c)
use all reasonable efforts to lift any restraint, injunction or other legal bar
to the Merger. Each party shall promptly deliver to the other a copy of each
such filing made, each such notice given and each such consent obtained by such
party during the period prior to the Effective Time. Each party, at the
reasonable request of the other party, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.7 Escrow Agreement. On or before the Effective Time, Acquiror,
Escrow Agent, the XXXX Stockholders and the XXXX Stockholders' Agent will
execute the Escrow Agreement contemplated by Section 8 in substantially the form
attached as Exhibit E ("Escrow Agreement").
5.8 Additional Issuance of Securities. Prior to the Effective
Time, XXXX shall not issue any XXXX Common Stock or securities convertible into,
or exercisable or exchangeable for, XXXX Common Stock, including the granting of
employee stock options.
5.9 Listing of Additional Shares. Prior to the Effective Time,
Acquiror shall file with the Nasdaq Stock Market a Notification Form for Listing
of Additional Shares with respect to the shares of Acquiror Common Stock
issuable upon conversion of the XXXX Common Stock in the Merger.
22
5.10 Non Solicitation Agreements. XXXX Stockholders shall
execute a Non-Competition and Non-Solicitation agreement in substantially the
form set forth as Exhibit G.
5.11 Blue Sky Laws. Acquiror shall take such steps as may be
necessary to comply with the securities and Blue Sky laws of all jurisdictions
that are applicable to the issuance of the shares of Acquiror Common Stock to be
issued in connection with the Merger. XXXX shall use all reasonable efforts to
assist Acquiror as may be necessary to comply with the Securities and Blue Sky
laws of all jurisdictions that are applicable in connection with the issuance of
the shares of Acquiror Common Stock to be issued in connection with the Merger.
5.12 Reorganization. Acquiror and XXXX shall each use its best
efforts to cause the business combination to be effected by the Merger to be
qualified as a "reorganization" described in Section 368 of the Code.
5.13 Indemnification.
(a) For a period of three years, the Surviving Corporation
will observe any indemnification and limitation on liability provisions now
existing in the XXXX Certificate of Incorporation or Bylaws for the benefit of
any individual who served as director or officer of XXXX at any time prior to
the Effective Time.
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or mergers into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its properties and assets
to any Person other than in the ordinary course of business or as part of a
securitization transaction, then, and in each case, proper provision shall be
made so that the successors and assigns of the Surviving Corporation, or an
Acquiror's option, Acquiror, shall assume the obligations of the Surviving
Corporation set forth in this Section 5.13.
6. Conditions to the Merger.
6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) No Governmental Litigation. There shall not be pending
or threatened any legal proceeding in which a Governmental Entity is or is
threatened to become a party or is otherwise involved, and neither Acquiror nor
XXXX shall have received any communication from any Governmental Entity in which
such Governmental Entity indicates the probability of commencing any legal
proceeding or taking any other action: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger; (ii) relating to the Merger and seeking
to obtain from Acquiror or XXXX, any damages or other relief that would be
material to Acquiror; (iii) seeking to prohibit or limit in any material respect
Acquiror's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to any of XXXX Common Stock; or (iv) that
would materially and adversely affect the right of Acquiror or XXXX to own the
assets or operate the business of XXXX. In addition, any and all notification
23
periods pursuant to the rules promulgated by the National Association of
Securities Dealers, Inc. or the Nasdaq Stock Market, Inc., shall have terminated
or expired and there shall not be pending or threatened any proceeding or
investigation concerning Acquiror or the securities of Acquiror by such
organization.
6.2 Additional Conditions to the Obligations of Acquiror and
Libra. The obligations of Acquiror and Libra to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. The
representations and warranties of XXXX in this Agreement shall be true and
correct in all material respects on and as of the date of this Agreement and on
and as of the Closing as though such representations and warranties were made on
and as of such time (except for such representations and warranties that speak
specifically as of the date hereof or as of another date, which shall be true
and correct as of such date).
(b) Performance of Obligations. XXXX shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Closing.
(c) Certificate of Officers. Acquiror and Libra shall have
received a certificate executed on behalf of XXXX by the chief executive officer
of XXXX certifying that the conditions set forth in Section 6.1(a), Section
6.2(a) and Section 6.2(b) have been satisfied.
(d) No Other Litigation. There shall not be pending any
legal proceeding (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by this
Agreement; (ii) relating to the Merger and seeking to obtain from Acquiror or
XXXX, any damages or other relief that would be material to Acquiror; (iii)
seeking to prohibit or limit in any material respect Acquiror's ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with
respect to any of XXXX Common Stock; or (iv) which would affect adversely the
right of Acquiror or XXXX to own the assets or operate the business of XXXX.
(e) Contribution of Debt Instruments. XXXX shall have
delivered evidence satisfactory to Acquiror of the contribution to XXXX of any
debt instruments owed to any XXXX Stockholder by XXXX.
(f) Approval of XXXX Stockholders. All of the shares of
REBA's Common Stock outstanding on the record date for the Written Consent of
Stockholders relating to this Agreement, the Escrow Agreement and the Merger
shall have voted affirmatively.
(g) Escrow Agreement. Escrow Agent and the XXXX
Stockholders' Agent shall have entered into an Escrow Agreement substantially in
the form attached hereto as Exhibit E.
(h) No Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any change in the financial condition,
properties, assets (including
24
intangible assets), liabilities, business, operations, results of operations or
prospects of XXXX, taken as a whole, that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on XXXX.
(i) Available Exemption; Investor Representation Statement;
Number of Stockholders. There shall be an exemption from registration under
applicable federal and state securities laws available for issuance of the Stock
Consideration, each of the REBA's Stockholders shall have delivered to Acquiror
a signed Investor Representation Statement in substantially the form attached
hereto as Exhibit D and each such Statement shall be in full force and effect,
and there shall be no more than thirty-five (35) XXXX Stockholders who are both
(i) U.S. persons as defined under Regulation S under the Securities Act (a "U.S.
Person"); and (ii) not "accredited investors" as defined in Rule 501 under the
Securities Act.
(j) Purchaser Representative. There shall be a Purchaser
Representative, as defined in Regulation D under the Securities Act, reasonably
satisfactory to Acquiror, representing each holder of XXXX Common Stock who is a
U.S. Person and not an "accredited investor" as defined in Rule 501 under the
Securities Act, and such holder and his or her Purchaser Representative shall
have executed and delivered documentation in substantially the form attached
hereto as Exhibit F.
(k) Transfer Taxes. XXXX shall have provided documentation,
satisfactory to Acquiror, evidencing the payment of any and all applicable
transfer or similar taxes.
(l) Non-Competition Agreements. The XXXX Stockholders shall
each have entered into Non-Competition Agreements in substantially the form
attached as Exhibit G.
(m) Opinion. Counsel for XXXX shall have delivered to
Acquiror an opinion in substantially the form attached hereto as Exhibit H.
6.3 Additional Conditions to Obligations of XXXX. The
obligations of XXXX and the XXXX Stockholders to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by XXXX:
(a) Representations, Warranties and Covenants. The
representations and warranties of Acquiror and Libra in this Agreement shall be
true and correct in all material respects on and as of the date of this
Agreement and on and as of the Closing Date as though such representations and
warranties were made on and as of such time (except for such representations and
warranties that speak specifically as of the date hereof or as of another date,
which shall be true and correct as of such date).
(b) Performance of Obligations. Acquiror and Libra shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Closing.
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(c) Certificate of Officers. XXXX shall have received a
certificate executed on behalf of Acquiror and Libra by the chief executive
officer of Acquiror and Libra, respectively, certifying that the conditions set
forth in Sections 6.3(a) and 6.3(b) have been satisfied.
(d) No Other Litigation. There shall not be pending any
legal proceeding i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by this
Agreement; and (ii) relating to the Merger and seeking to obtain from Acquiror
or XXXX, any damages or other relief that would be material to Acquiror.
(e) No Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any change in the financial condition,
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of XXXX, taken as a whole, that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on XXXX.
(f) Opinion. Counsel for Acquiror shall have delivered to
XXXX an opinion in substantially the form attached hereto as Exhibit I.
7. Termination, Amendment and Waiver.
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Section 7.1(b) through Section
7.1(d), by written notice by the terminating party to the other party):
(a) by the mutual written consent of Acquiror and XXXX;
(b) by either Acquiror or XXXX if the Merger shall not have
been consummated by June 30, 2002; provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date;
(c) by either Acquiror or XXXX if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, unless the party relying on such order, decree or ruling or other action
has not complied in all material respects with its obligations under this
Agreement; or
(d) by Acquiror or XXXX, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 6.1 or 6.2 (in the case of termination by Acquiror) or Section 6.1 or
6.3 (in the case of termination by XXXX) not to be satisfied and (ii) shall not
have been cured within fifteen (15) business days following receipt by the
breaching party of written notice of such breach from the other party, provided,
however, that
26
such notifying party shall not be able to terminate the Agreement if it is
likewise in breach of any such representation, warranty, covenant or agreement.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, there shall be no liability or obligation
on the part of Acquiror, XXXX, Libra or their respective officers, directors, or
stockholders, except to the extent that such termination results from the
willful breach by a party of any of its representations, warranties or covenants
set forth in this Agreement; provided, however, that the provisions of Sections
5.4, 5.5, 7.1 and 10 shall remain in full force and effect and survive any
termination of this Agreement.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
8. Escrow and Indemnification
8.1 Escrow Fund.
(a) At the Closing, the Escrow Shares and the Escrow Notes
shall be deposited with Escrow Agent (or other institution selected by Acquiror
with the reasonable consent of XXXX) as escrow agent (the "Escrow Agent"), such
deposit and any Additional Escrow Shares (as defined below) to constitute the
"Escrow Fund" and to be governed by the terms set forth herein and in the Escrow
Agreement attached hereto as Exhibit E. The Escrow Fund shall be available to
compensate Acquiror pursuant to the indemnification obligations of the XXXX
Stockholders. In the event Acquiror issues any Additional Escrow Shares (as
defined below), such shares will be issued in the name of the Escrow Agent and
delivered to the Escrow Agent in the same manner as the Escrow Shares delivered
at the Closing.
(b) Except for dividends paid in stock declared with respect
to the Escrow Shares ("Additional Escrow Shares"), which shall be treated as
Escrow Shares pursuant to Section 8.1(a) hereof, any cash dividends, dividends
payable in securities or other distributions of any kind, including in the event
of a stock split, merger, reclassification of Acquiror's shares or similar
transaction, made in respect of the Escrow Shares will be delivered to the XXXX
Stockholders on a pro rata basis. Each XXXX Stockholder will have voting rights
with respect to the Escrow Shares deposited in the Escrow Fund with respect to
such XXXX Stockholder so long as such Escrow Shares are held in escrow, and
Acquiror will take all reasonable steps necessary to allow the exercise of such
rights. While the Escrow Shares remain in the Escrow Agent's
27
possession pursuant to this Agreement, the XXXX Stockholders will retain and
will be able to exercise all incidents of ownership of said Escrow Shares which
are not inconsistent with the terms and conditions of this Agreement.
8.2 Indemnification.
(a) Survival of Warranties. All representations and
warranties made by XXXX herein, or in any certificate, schedule or exhibit
delivered pursuant hereto, shall survive the Closing and continue in full force
and effect until the third anniversary of the Closing Date (the "Termination
Date") at which time the representations, warranties and covenants of XXXX set
forth herein shall terminate. A claim against the XXXX Stockholders must be made
in writing to the XXXX Stockholders on or before the Termination Date specifying
the factual basis of such claim in reasonable detail to the extent then known by
the Acquiror Indemnified Person (as defined herein) making such claim.
(b) (i) Subject to the limitations set forth in this Section
8, the XXXX Stockholders will jointly and severally indemnify and hold harmless
Acquiror and the Surviving Corporation and their respective officers, directors,
agents, attorneys and employees, and each person, if any, who controls or may
control Acquiror or the Surviving Corporation within the meaning of the
Securities Act (individually an "Acquiror Indemnified Person" and collectively
the "Acquiror Indemnified Persons") from and against any and all losses, costs,
damages (excluding incidental and consequential damage, other than incidental
and consequential damages for which Acquiror or Surviving Corporation is liable
to third parties), liabilities and expenses arising from losses, claims,
demands, actions, causes of action, including, without limitation, reasonable
legal fees arising out of any breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by XXXX in
this Agreement, the XXXX Disclosure Schedule or any exhibit or schedule to this
Agreement (collectively, "Damages"). The sole remedy and recourse of the
Acquiror Indemnified Persons for Damages shall be indemnification pursuant to
this Section 8.
(ii) Except as expressly provided herein, nothing in
this Agreement shall limit the liability in amount or otherwise (a) of XXXX for
any breach of any representation, warranty or covenant if the Merger does not
close; (b) of any XXXX Stockholder in connection with any breach by such
stockholder of any representation or covenant in the Investor Representation
Statement delivered pursuant hereto; or (c) of XXXX with respect to fraud,
criminal activity or intentional breach of any covenant contained in this
Agreement.
(c) Threshold for Claims. No claim for Damages shall be made
under Section 8 unless the aggregate of Damages exceeds $10,000 for which claims
are made hereunder by the Acquiror Indemnified Persons, in which case the
Acquiror Indemnified Person shall be entitled to seek compensation for all
Damages without regard to the limitation set forth in this Section 8.2(c);
provided, however, that the aggregate indemnification obligation of XXXX and
XXXX Stockholders under this Agreement shall not exceed the aggregate value of
the Merger Consideration; provided, further, that in no event shall the
indemnity obligation of any XXXX Stockholder under this Section 8 exceed the
aggregate value of Merger Consideration such XXXX Stockholder has received or
may become entitled to receive.
28
(d) For the purposes of this Section 8 the "value of Merger
Consideration" will be limited to (i) $200,000 in cash (including any reduction
in the amount payable under any note constituting a portion of the Promissory
Note Consideration whether by application of indemnification rights, operation
of the provisions of the Escrow Agreement, exercise of any right of set-off or
otherwise) plus (ii) the return of the Escrow Shares (including any Additional
Escrow Shares); provided that, to the extent any Escrow Shares have been
converted into cash or other property, in lieu of returning such Escrow Shares,
the XXXX Stockholder may return the net proceeds, whether cash or other
property, received from the disposition of any Escrow Shares plus (iii) the
return of the shares of Acquiror Common Stock issued at the Closing and not
subject to escrow (the "Non-Escrow Shares"); provided that to the extent any
Non-Escrow Shares have been converted into cash or other property, in lieu of
returning such Non-Escrow Shares, the XXXX Stockholder may return the net
proceeds, whether cash or other property, received from the disposition of any
Non-Escrow Shares.
(e) Priority for Indemnification Claims. No claim for
Damages shall be made against the Non-Escrow Shares or the Promissory Notes not
subject to escrow unless and until the aggregate of Damages exceeds the value of
the Escrow Shares and the Escrow Notes.
(f) Subrogation. To the extent any Acquiror Indemnified
Person has a right to recover the amount of (or part of the amount of) any
claims such Acquiror Indemnified Person may seek to assert against a XXXX
Stockholder pursuant to this Section 8 by way of a claim against any third party
on the basis of the same or substantially similar facts or circumstances as gave
rise to the claim against the XXXX Stockholder, the Acquiror Indemnified Person
shall cause the XXXX Stockholder to be subrogated to the Acquiror Indemnified
Person in respect of its claim against any such third party. In such case the
XXXX Stockholder shall be entitled to conduct, in the name of the Acquiror
Indemnified Person, any claim, action, suit or other proceeding against that
third party and the Acquiror Indemnified Person shall make available or cause
its representatives and affiliates to make available to the XXXX Stockholder
such persons and all such information or materials as the XXXX Stockholder may
reasonably require for pursuing the claim against such third party, subject to
reimbursement for reasonable out of pocket expenses related thereto and without
unreasonable disruption of the business or operations of the Acquiror
Indemnified Person.
8.3 Escrow Period; Release From Escrow.
(a) The Escrow Fund shall terminate upon the expiration of
three years after the Effective Time ("Escrow Period"); provided, however, that
a portion of the Escrow Fund that, in the reasonable judgment of Acquiror
subject to the objection of the XXXX Stockholders' Agent and the subsequent
arbitration of the matter in the manner provided in Section 8.6 hereto, is
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate delivered to the Escrow Agent prior to termination of the Escrow
Period with respect to facts and circumstances existing prior to expiration of
the Escrow Period, shall remain in the Escrow Fund until such claims have been
resolved.
(b) Within three (3) business days after the Termination
Date (the "Release Date"), the Escrow Agent shall release from escrow to the
shareholders of XXXX their
29
pro rata portion of the Escrow Shares and Additional Escrow Shares, less with
respect to each such shareholder the number of Escrow Shares and Additional
Escrow Shares with a value (as determined pursuant to Section 8.4) equal to the
sum of (i) such shareholder's pro rata portion of any liability pursuant to an
Officer's Certificate (as defined below) delivered to Acquiror in accordance
with Section 8.4 in satisfaction of indemnification claims by Indemnitees and
(ii) such shareholder's pro rata portion of any liability subject to delivery to
Indemnitee in accordance with Section 8.3(a) with respect to any pending but
unresolved indemnification claims of Indemnitee. Any Escrow Shares and
Additional Escrow Shares held as a result of clause (ii) shall be released to
the shareholders of XXXX or released to Acquiror (as appropriate) promptly upon
resolution of each specific indemnification claim involved. Escrow Shares and
Additional Escrow Shares shall be released to the respective shareholders of
XXXX in proportion to their respective shares of the Merger Consideration.
Acquiror will take such action as may be necessary to cause such certificates to
be issued in the names of the appropriate persons. Certificates representing
Escrow Shares and Additional Escrow Shares so issued that are subject to resale
restrictions under applicable securities laws will bear legends to that effect.
No fractional shares shall be released and delivered from Escrow to the
shareholders of XXXX. In lieu of any fraction of an Escrow Share to which a XXXX
Stockholder would otherwise be entitled, such holder will receive from Acquiror
an amount of cash (rounded to the nearest whole cent) equal to the product of
such fraction multiplied by the Average Closing Price.
(c) No Escrow Shares or Additional Escrow Shares or any
beneficial interest therein may be pledged, sold, assigned or transferred,
including by operation of law, by any shareholder of XXXX except to another XXXX
Stockholder (which such shares remaining subject to escrow) or be taken or
reached by any legal or equitable process in satisfaction of any debt or other
liability of any such shareholder, prior to the delivery to such shareholder of
such shareholder's pro rata portion of the Escrow Fund by the Escrow Agent as
provided herein. Notwithstanding the above, upon obtaining Acquiror's consent
(which consent shall not be unreasonably withheld), a XXXX Stockholder may
instruct the Escrow Agent to dispose of all or a portion of the Escrow Shares
attributed to such XXXX Stockholder and hold the proceeds received upon such
disposition in the Escrow Fund pursuant to the terms of this Agreement and the
Escrow Agreement.
(d) The Escrow Agent is hereby granted the power to effect
any transfer of Escrow Shares contemplated by this Agreement. Acquiror will
cooperate with the Escrow Agent in promptly issuing stock certificates to effect
such transfers.
8.4 Claims Upon Escrow Fund. Upon receipt by the Escrow Agent on
or before the Release Date of a certificate signed by any officer of Acquiror
(an "Officer's Certificate") stating that Damages exist with respect to the
indemnification obligations of the shareholders of XXXX set forth in Section
8.2, and specifying in reasonable detail the individual items of such Damages
included in the amount so stated, the date each such item was paid, or properly
accrued or arose, and the nature of the misrepresentation, breach of warranty,
covenant or claim to which such item is related, the Escrow Agent shall, subject
to the provisions of this Section 8 and the Escrow Agreement, deliver to
Acquiror out of the Escrow Fund, as promptly as practicable, Acquiror Common
Stock or other assets held in the Escrow Fund having a value equal to such
Damages. For the purpose of compensating Acquiror for its Damages pursuant to
this Agreement, the Acquiror Common Stock in the Escrow Fund shall be valued at
the average
of the closing prices of Acquiror Common Stock as reported on the Nasdaq
National Market (or other exchange or quotation service) during the twenty
trading days ending one day prior to the date of receipt by the Escrow Agent of
an Officer's Certificate; provided, however, that such value shall not be less
than fifty percent of the Average Closing Price.
8.5 Objections to Claims.
(a) At the time of delivery of any Officer's Certificate to
the Escrow Agent, a duplicate copy of such Officer's Certificate shall be
delivered to the XXXX Stockholders' Agent (as defined below). For a period of
thirty (30) days after such delivery, the Escrow Agent shall make no delivery of
Acquiror Common Stock or other property pursuant to Section 8.4 hereof or the
Escrow Agreement unless the Escrow Agent shall have received written
authorization from the XXXX Stockholders' Agent to make such delivery. After the
expiration of such thirty (30) day period, the Escrow Agent shall make delivery
of the Acquiror Common Stock or other property in the Escrow Fund in accordance
with Section 8.4 hereof, provided that no such payment or delivery may be made
if the Shareholders' Agent shall object in a written statement to the claim made
in the Officer's Certificate, and such statement shall have been delivered to
the Escrow Agent and to Acquiror prior to the expiration of such thirty (30) day
period.
(b) In case the XXXX Stockholders' Agent shall so object in
writing to any claim or claims by Acquiror made in any Officer's Certificate,
Acquiror shall have thirty (30) days to respond in a written statement to the
objection of the XXXX Stockholders' Agent. If after such thirty (30) day period
there remains a dispute as to any claims, the Shareholders' Agent and Acquiror
shall attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the XXXX
Stockholders' Agent and Acquiror should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and shall distribute the Acquiror Common Stock or other property
from the Escrow Fund in accordance with the terms thereof.
8.6 Resolution of Conflicts and Arbitration.
(a) If no agreement can be reached after good faith
negotiation between the parties pursuant to Section 8.5, either Acquiror or the
Shareholders' Agent may, by written notice to the other, demand arbitration of
the matter unless the amount of the Damages is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted by one arbitrator.
Acquiror and the XXXX Stockholders' Agent shall agree on the arbitrator,
provided that if Acquiror and the XXXX Stockholders' Agent cannot agree on such
arbitrator, either Acquiror or XXXX Stockholders' Agent can request that
Judicial Arbitration and Mediation Services ("JAMS") select the arbitrator. The
arbitrator shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrator shall rule upon motions to compel or limit discovery and
shall have the authority to impose sanctions, including
31
attorneys' fees and costs, to the same extent as a court of competent law or
equity, should the arbitrator determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator shall be written,
shall be in accordance with applicable law and with this Agreement, and shall be
supported by written findings of fact and conclusion of law which shall set
forth the basis for the decision of the arbitrator. The decision of the
arbitrator as to the validity and amount of any claim in such Officer's
Certificate or Agent Certificate shall be binding and conclusive upon the
parties to this Agreement, and notwithstanding anything in Section 8 hereof, the
Escrow Agent and the parties shall be entitled to act in accordance with such
decision and the Escrow Agent shall be entitled to make or withhold payments out
of the Escrow Fund in accordance therewith.
(b) Judgment upon any award rendered by the arbitrator may
be entered in any court having jurisdiction. Any such arbitration shall be held
in King County, Washington under the commercial rules then in effect of the
American Arbitration Association. The non-prevailing Party to an arbitration
shall pay its own expenses, the fees of the arbitrator, any administrative fee
of JAMS, and the expenses, including attorneys' fees and costs, reasonably
incurred by the other party to the arbitration.
8.7 XXXX Stockholders' Agent.
(a) Each of the XXXX Stockholders hereby appoints Xxxx X.
Xxxxx as his or her agent ("XXXX Stockholders' Agent") as well as such XXXX
Stockholder's true and lawful attorney-in-fact to act for and on behalf of such
XXXX Stockholder in all matters relating to or arising out of this Agreement or
the Escrow Agreement and the liability or asserted liability of such XXXX
Stockholder hereunder or thereunder, including, specifically, but without
limitation (a) accepting and agreeing to the liability of such XXXX Stockholder
with respect to any indemnification claim, (b) disputing the liability of such
XXXX Stockholder, or the amount of such liability, with respect to any
indemnification claim and prosecuting and resolving such dispute, (c) accepting
the defense, compromise and settlement of any claim for Damages on behalf of
such XXXX Stockholder or refusing to accept the same, (d) settling and
compromising the liability of such XXXX Stockholder, (e) instituting and
prosecuting such actions as the XXXX Stockholders' Agent shall deem appropriate
in connection with any of the foregoing, (f) receiving notices and
communications, (g) authorizing delivery of Escrow Shares, Escrow Notes or other
property from the Escrow Fund to Acquiror in satisfaction of claims by Acquiror
or any Acquiror Indemnified Person, or objecting to such deliveries, and (h)
retaining legal counsel, accountants, appraisers and other advisers in
connection with any of the foregoing, all for the account of the XXXX
Stockholders, each XXXX Stockholder agreeing to be fully bound by the acts,
decisions and agreements of the XXXX Stockholders' Agent taken and done pursuant
to the authority herein granted. Such agency may be changed by the holders of a
majority in interest of the Escrow Fund from time to time upon not less than 10
days' prior written notice to Acquiror. No bond shall be required of the XXXX
Stockholders' Agent, and the XXXX Stockholders' Agent shall receive no
compensation for his services. Notices or communications to or from the XXXX
Stockholders' Agent shall constitute notice to or from each of the XXXX
Stockholders.
(b) Each XXXX Stockholder hereby agrees to indemnify and to
save and hold harmless the XXXX Stockholders' Agent from, and reimburse the XXXX
Stockholders' Agent for, any liability incurred by the XXXX Stockholders' Agent
based upon or arising out of
32
any act, whether of omission or commission, of the XXXX Stockholders' Agent
pursuant to the authority herein granted or granted pursuant to the Escrow
Agreement INCLUDING ACTS OF NEGLIGENCE ON THE PART OF THE XXXX STOCKHOLDERS'
AGENT other than acts, whether of omission or commission, of the XXXX
Stockholders' Agent that constitute fraud or willful misconduct, in the exercise
by the XXXX Stockholders' Agent of the authority herein granted.
(c) The XXXX Stockholders' Agent shall have reasonable
access to information about XXXX and the reasonable assistance of REBA's
officers and employees for purposes of performing his duties and exercising his
rights hereunder, provided that the XXXX Stockholders' Agent shall treat
confidentially and not disclose any nonpublic information from or about XXXX to
anyone (except on a need to know basis to individuals who agree to treat such
information confidentially).
(d) Acquiror acknowledges that Xx. Xxxxx may have a conflict
of interest with respect to his duties as XXXX Stockholders' Agent, and in such
regard the Xx. Xxxxx has informed Acquiror that he will act in the best
interests of the XXXX Stockholders.
8.8 Actions of the XXXX Stockholders' Agent. A decision, act,
consent or instruction of the XXXX Stockholders' Agent shall constitute a
decision of all XXXX Stockholders for whom shares of Escrow Shares or Escrow
Notes otherwise issuable to them are deposited in the Escrow Fund and shall be
final, binding and conclusive upon each such XXXX Stockholder, and the Escrow
Agent and Acquiror may rely upon any decision, act, consent or instruction of
the XXXX Stockholders' Agent as being the decision, act, consent or instruction
of each and every such XXXX Stockholder. The Escrow Agent and Acquiror are
hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the XXXX
Stockholders' Agent.
8.9 Third-Party Claims. In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall notify the XXXX Stockholders' Agent of such claim,
and the XXXX Stockholders' Agent and the XXXX Stockholders for whom shares of
Acquiror Common Stock otherwise issuable to them are deposited in the Escrow
Fund shall be entitled, at their expense, to participate in any defense of such
claim with the consent of Acquiror which shall not be unreasonably withheld.
Acquiror shall have the right in its sole discretion to settle any such claim.
In the event that the XXXX Stockholders' Agent has consented to any such
settlement, the XXXX Stockholders' Agent shall have no power or authority to
object under Section 8.5 or any other provision of this Section 8 to the amount
of any claim by Acquiror against the Escrow Fund for indemnity with respect to
such settlement.
8.10 Effect of Agreement. By his/her signature on this
Agreement, each XXXX Stockholder agrees that:
(a) The Acquiror Indemnified Parties shall be able to rely
conclusively on the instructions and decisions of the XXXX Stockholders' Agent
as to the settlement of any claims for indemnification by an Acquiror
Indemnified Party pursuant to this Agreement or the Escrow Agreement or any
other actions required or permitted to be taken by the XXXX Stockholders' Agent
hereunder or under the Escrow Agreement, and no XXXX Stockholder shall
33
have any cause of action against an Acquiror Indemnified Party to the extent an
Acquiror Indemnified Party has relied upon the instructions or decisions of the
XXXX Stockholders' Agent; and
(b) The provisions of this Section 8 and of the Escrow
Agreement shall be binding upon the executors, heirs, legal and personal agents,
successor trustees and successors of each XXXX Stockholder, and any references
in this Agreement or the Escrow Agreement to a XXXX Stockholder shall mean and
include the successors and assigns to the XXXX Stockholder's rights hereunder.
9. Registration Rights.
9.1 Piggyback Registration Rights. If Acquiror proposes to
register any shares of Acquiror Common Stock under the Securities Act (except
with respect to registration statements on Form X-0, X-0 or other registration
statements relating to any employee benefit plan or a corporate reorganization,
or another form not available for registering the Stock Consideration for sale
to the public), the acquiror shall notify all XXXX Stockholders in writing at
least thirty (30) days prior to filing any registration statement. Each XXXX
Stockholder desiring to include in any such registration statement all or any
part of the Stock Consideration held by such XXXX Stockholder shall, within
twenty (20) days after receipt of the above-described notice from Acquiror, so
notify Acquiror in writing, and in such notice shall inform Acquiror of the
number of shares of Acquiror Common Stock such XXXX Stockholder wishes to
include in such registration statement. If a XXXX Stockholder decides not to
include all of his/her/its Stock Consideration in any registration statement
thereafter filed by Acquiror, such XXXX Stockholder shall nevertheless continue
to have the right to include any Stock Consideration in any subsequent
registration statement or registration statements as may be filed by Acquiror
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.
9.2 Underwriting. If a registration statement under which
Acquiror gives notice under this Section 9 is for an underwritten offering, then
Acquiror shall so advise the XXXX Stockholder of Stock Consideration. In such
event, the right of any such XXXX Stockholder's Stock Consideration to be
included in a registration pursuant to this Section 9 shall be conditioned upon
such XXXX Stockholder's participation in such underwriting and the inclusion of
such XXXX Stockholder's Stock Consideration in the underwriting to the extent
provided herein. All XXXX Stockholders proposing to distribute their Stock
Consideration through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriter(s)
selected for such underwriting. Notwithstanding any other provision of this
Agreement, if the underwriter(s) determine(s) in good faith that marketing
factors require a limitation of the number of shares to be underwritten, then
the underwriter(s) may exclude shares (including Stock Consideration) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to Acquiror,
and second, to each of the XXXX Stockholders requesting inclusion of their Stock
Consideration in such registration statement on a pro rata basis based on the
total number of Stock Consideration then held by each such XXXX Stockholder;
provided, however, such limitation shall not cause the total number of Stock
Consideration held by the XXXX Stockholders to constitute less than twenty
percent (20%) of the total number of shares to be
34
included in the registration. If any XXXX Stockholder disapproves of the terms
of any such underwriting, such XXXX Stockholder may elect to withdraw therefrom
by written notice to Acquiror and the underwriter, delivered at least ten (10)
business days prior to the effective date of the registration statement. Any
Stock Consideration excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration.
9.3 Expenses. All expenses incurred in connection with a
registration pursuant to this Section 9 (excluding stock transfer taxes and
underwriters' and brokers' discounts and commissions), including, without
limitation all federal and "blue sky" registration and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for Acquiror
and the reasonable fees and disbursements of one (1) counsel for the selling
XXXX Stockholder or XXXX Stockholders, selected by them and reasonably
acceptable to Acquiror, shall be borne by Acquiror.
9.4 Transfer or Assignment of Registration Rights. The rights to
cause the Acquiror to register securities granted to a XXXX Stockholder by
Acquiror under this Agreement may be transferred or assigned by a XXXX
Stockholder, provided that the Acquiror is given written notice by such XXXX
Stockholder at the time of said transfer or assignment, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned, and
provided further that the transferee or assignee is not deemed by the Board of
Directors of the Acquiror, in its reasonable judgment, to be a competitor of
Acquiror; and provided further that the transferee or assignee assumes the
obligations of the XXXX Stockholder under this Agreement.
9.5 Indemnification. In the event any Stock Consideration is
included in a registration statement under this Agreement:
(a) To the extent permitted by law, Acquiror will indemnify
and hold harmless each XXXX Stockholder against any losses, claims, damages, or
liabilities caused by any untrue statement, or alleged untrue statement of a
material fact contained in such registration statement as amended or
supplemented, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished to Acquiror by any XXXX Stockholder for use therein;
provided, however, that the indemnity agreement contained in this subsection
9.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of Acquiror, which consent shall not be unreasonably withheld; provided,
further, that the foregoing indemnity agreement with respect to any preliminary
or final prospectus shall not inure to the benefit of any XXXX Stockholder from
which the person suffering such losses, claims, damages or liabilities purchased
any shares of Stock Consideration if a copy of the preliminary or final
prospectus (or the amended or supplemented prospectus if the Acquiror shall have
furnished any amendments or supplements thereto) was furnished to such XXXX
Stockholder in a timely manner and was not sent or given by or on behalf of such
XXXX Stockholder to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the shares of Stock
Consideration
35
to such person, and if the preliminary or final prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.
(b) To the extent permitted by law, each selling XXXX
Stockholder will indemnify and hold harmless Acquiror, each of its directors,
each of its officers who sign the registration statement, each person, if any,
who controls the Acquiror within the meaning of the Securities Act, any
underwriter, any other XXXX Stockholder selling securities in such registration
statement, and any controlling person of any such underwriter against any
losses, claims, damages, or liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, as amended or supplemented, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; but only with reference to information relating to such XXXX
Stockholder furnished in writing by or on behalf of such XXXX Stockholder
expressly for use in connection with such registration; provided, however, that
the indemnity agreement contained in this subsection 9.5(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage liability or action
if such settlement is effected without the consent of the XXXX Stockholder,
which consent shall not be unreasonably withheld; provided, further, that in no
event shall any indemnity under this subsection 9.5(b) exceed the aggregate
value of the Stock Consideration included in such registration statement.
(c) Promptly after receipt by an indemnified party under
this Section 9.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9.5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
9.5, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 9.5.
(d) If the indemnification provided for in this Section 9.5
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand
36
and of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations; provided, that in no event
shall any contribution by a XXXX Stockholder under this Subsection 9.5 (d)
exceed the net proceeds from the offering received by such XXXX Stockholder,
except in the case of willful fraud by such XXXX Stockholder. The relative fault
of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
9.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Stock Consideration to the public without registration, the Acquiror
agrees to:
(a) Make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) Use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Acquiror under the
Securities Act and the Exchange Act.
10. General Provisions.
10.1 Expenses; Transaction Fees. Whether or not the Merger is
consummated, all cash and expenses incurred in connection with the Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense; provided however, that Acquiror shall reimburse the XXXX Stockholders
for fees in connection with the Merger in an amount not to exceed Twenty
Thousand Dollars ($20,000) upon consummation of the Merger.
10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly delivered (i) upon receipt if
delivered personally; (ii) three (3) business days after being mailed by
registered or certified mail, postage prepaid, return receipt requested; (iii)
one (1) business day after it is sent by commercial overnight courier service;
or (iv) upon transmission if sent via facsimile with confirmation of receipt to
the parties at the following address (or at such other address for a party as
shall be specified upon like notice):
37
(a) if to Acquiror or Libra, to:
Applied Microsystems Corporation
0000 000xx Xxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Steel
Fax: (000) 000-0000
Tel: (000) 000-0000
(b) if to XXXX, to:
XXXX Technologies, Inc.
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy to:
Xxxxxx and Xxxxx, LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
(c) if to XXXX Stockholders' Agent, to:
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
10.3 Definitions. In this Agreement any reference to any event,
change, condition or effect being "material" with respect to any entity or group
of entities means any material event, change, condition or effect related to the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such
38
entity or group of entities. In this Agreement any reference to a "Material
Adverse Effect" with respect to any entity or group of entities means any event,
change or effect that is reasonably likely to be materially adverse to the
financial condition, properties, assets, liabilities, business, operations,
results of operations or prospects of such entity and its subsidiaries, taken as
a whole, but shall not include any of the following in and of themselves, either
alone or in combinations (i) any effect or change occurring as a result of (A)
general economic or financial conditions or (B) other developments which are not
unique to Acquiror or XXXX, as the case may be, but also affect other persons
who participate or are engaged in the lines of business in which Acquiror or
XXXX, as the case may be, participants or is engaged, (ii) any change or effect
on the financial condition, properties, assets, liabilities, business,
operations, results of operations, or prospects of Acquiror or XXXX, as the case
may be, following the date of this Agreement attributable to the announcement of
this Agreement or the transactions contemplated hereby, and (iii) any change or
effect on the financial condition, properties, assets, liabilities, business,
operations, results of operation or prospects of Acquiror or XXXX, as the case
may be, attributable to any information publicly disclosed in any Acquiror press
release or SEC filing. In this Agreement any reference to a party's "knowledge"
means such party's actual knowledge after reasonable inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.5 Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
exhibits and schedules hereto, including the XXXX Disclosure Schedule and the
Acquiror Disclosure Schedule, (a) together constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof except for the Confidentiality Agreement,
which shall continue in full force and effect, and Sections 2(c), 2(e) and 2(h)
of the Term Sheet between Acquiror and XXXX, dated April 22, 2002, and shall
survive any termination of this Agreement or the Closing, in accordance with
their terms; and (b) are not intended to confer upon any other person any rights
or remedies hereunder, and shall not be assigned by operation of law or
otherwise without the written consent of the other party.
10.6 Severability. In the event that any provision of this
Agreement, or the application thereof becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
39
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of Washington applicable to
parties residing in Washington, without regard applicable principles of
conflicts of law. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any court located within King County, Washington, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated hereby and it agrees that process may be served upon it in
any manner authorized by the laws of the State of Washington for such persons
and waives and covenants not to assert or plead any objection which it might
otherwise have to such jurisdiction and such process.
10.8 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
10.9 Amendment; Waiver. Any amendment or waiver of any of the
terms or conditions of this Agreement must be in writing and must be duly
executed by or on behalf of the party to be charged with such waiver. Any waiver
by XXXX, Acquiror or Libra must be approved by the Board of Directors of XXXX,
Acquiror or Libra, as the case may be. The failure of a party to exercise any of
its rights hereunder or to insist upon strict adherence to any term or condition
hereof on any one occasion shall not be construed as a waiver or deprive that
party of the right thereafter to insist upon strict adherence to the terms and
conditions of this Agreement at a later date. Further, no waiver of any of the
terms and conditions of this Agreement shall be deemed to or shall constitute a
waiver of any other term of condition hereof (whether or not similar).
10.10 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
40
IN WITNESS WHEREOF, XXXX, Acquiror, Libra, XXXX and the XXXX
Stockholders have caused this Agreement and Plan of Reorganization to be
executed and delivered by each of them or their respective officers thereunto
duly authorized, all as of the date first written above.
APPLIED MICROSYSTEMS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
XXXX TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------
Xxxx X. Xxxxx
President and Chief Executive Officer
LIBRA NETWORKS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
/s/ Xxxx X. Xxxxx
---------------------------------
XXXX X. XXXXX
/s/ Xxxxxx Ring
---------------------------------
XXXXXX RING
/s/ Xxxxxx Xxxxxxx
---------------------------------
XXXXXX XXXXXXX
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
41
EXHIBIT A
XXXX SHAREHOLDERS
Shareholder Shares
----------- ------
Xxxx X. Xxxxx 2,580,000
Xxxxxx Xxxxxxx 300,000
Xxxxxx Ring 120,000
42
TABLE OF CONTENTS
Page
----
1. Definitions...................................................................1
1.1 Certain Defined Terms..................................................1
2. The Merger....................................................................4
2.1 The Merger.............................................................4
2.2 Closing; Effective Time................................................4
2.3 Effect of the Merger...................................................4
2.4 Articles of Incorporation; Bylaws......................................5
2.5 Directors and Officers.................................................5
2.6 Effect on Capital Stock................................................5
2.7 Surrender of Certificates..............................................7
2.8 No Further Ownership Rights in XXXX Common Stock.......................8
2.9 Lost, Stolen or Destroyed Certificates.................................8
2.10 Tax Consequences.......................................................8
2.11 Taking of Necessary Action; Further Action.............................8
3. Representations and Warranties of XXXX and XXXX Stockholders..................8
3.1 Organization, Standing and Power.......................................9
3.2 Authority..............................................................9
3.3 Governmental Authorization............................................10
3.4 Financial Statements..................................................10
3.5 Capital Structure.....................................................10
3.6 Absence of Certain Changes............................................11
3.7 Absence of Undisclosed Liabilities....................................11
3.8 Litigation............................................................11
3.9 Restrictions on Business Activities...................................11
3.10 Intellectual Property.................................................12
3.11 Interested Party Transactions.........................................14
3.12 Complete Copies of Materials..........................................15
3.13 Material Contracts....................................................15
3.14 Employees and Consultants.............................................15
3.15 Title to Property.....................................................15
3.16 Environmental Matters.................................................16
3.17 Taxes.................................................................16
3.18 Employee Matters......................................................17
3.19 Compliance With Laws..................................................18
3.20 Brokers' and Finders' Fee.............................................18
3.21 Representations Complete..............................................18
4. Representations and Warranties of Acquiror and Libra.........................18
4.1 Organization, Standing and Power......................................18
4.2 Authority.............................................................18
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4.3 SEC Documents; Financial Statements...................................19
4.4 Issuance of Shares....................................................20
4.5 Capital Structure.....................................................20
4.6 Litigation............................................................20
4.7 SEC Documents.........................................................21
4.8 Compliance with Laws..................................................21
4.9 Brokers' and Finders' Fee.............................................21
4.10 Absence of Undisclosed Liabilities....................................21
4.11 Events Subsequent to Most Recent Fiscal Quarter End...................21
4.12 Representations Complete..............................................21
5. Additional Agreements........................................................21
5.1 Approval of Shareholders..............................................21
5.2 Sale of Shares Pursuant to Regulation D...............................21
5.3 No Modification of Representations or Warranties......................22
5.4 Confidentiality.......................................................22
5.5 Public Disclosure.....................................................22
5.6 Further Assurances....................................................22
5.7 Escrow Agreement......................................................22
5.8 Additional Issuance of Securities.....................................22
5.9 Listing of Additional Shares..........................................22
5.10 Non Solicitation Agreements...........................................23
5.11 Blue Sky Laws.........................................................23
5.12 Reorganization........................................................23
5.13 Indemnification.......................................................23
6. Conditions to the Merger.....................................................23
6.1 Conditions to Obligations of Each Party to Effect the Merger..........23
6.2 Additional Conditions to the Obligations of Acquiror and Libra........24
6.3 Additional Conditions to Obligations of XXXX..........................25
7. Termination, Amendment and Waiver............................................26
7.1 Termination...........................................................26
7.2 Effect of Termination.................................................27
7.3 Amendment.............................................................27
7.4 Extension; Waiver.....................................................27
8. Escrow and Indemnification...................................................27
8.1 Escrow Fund...........................................................27
8.2 Indemnification.......................................................28
8.3 Escrow Period; Release From Escrow....................................29
8.4 Claims Upon Escrow Fund...............................................30
8.5 Objections to Claims..................................................31
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8.6 Resolution of Conflicts and Arbitration...............................31
8.7 XXXX Stockholders' Agent..............................................32
8.8 Actions of the XXXX Stockholders' Agent...............................33
8.9 Third-Party Claims....................................................33
8.10 Effect of Agreement...................................................33
9. Registration Rights..........................................................34
9.1 Piggyback Registration Rights.........................................34
9.2 Underwriting..........................................................34
9.3 Expenses..............................................................35
9.4 Transfer or Assignment of Registration Rights.........................35
9.5 Indemnification.......................................................35
9.6 Rule 144 Reporting....................................................37
10. General Provisions...........................................................37
10.1 Expenses; Transaction Fees............................................37
10.2 Notices...............................................................37
10.3 Definitions...........................................................38
10.4 Counterparts..........................................................39
10.5 Entire Agreement; Nonassignability; Parties in Interest...............39
10.6 Severability..........................................................39
10.7 Governing Law.........................................................40
10.8 Rules of Construction.................................................40
10.9 Amendment; Waiver.....................................................40
10.10 Further Assurances....................................................40
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