EXHIBIT 4.7
MERGER AGREEMENT
BY AND AMONG
XXXXXXXX.XXX, INC.
XXXXXXXX.XXX WIRELESS, INC.
AND
AT XXXXXX.XXX, INC.
DATED MARCH 8, 2000
TABLE OF CONTENTS
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ARTICLE I THE MERGER..................................................... 2
1.1 The Merger..................................................... 2
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1.2 Effective Time................................................. 2
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1.3 Effect of the Merger........................................... 2
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1.4 Certificate of Incorporation; Bylaws........................... 2
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1.5 Directors and Officers......................................... 3
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1.6 Effect on Capital Stock........................................ 3
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1.7 Surrender of Certificates...................................... 5
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1.8 Stock Options.................................................. 6
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1.9 Assumption of Warrants......................................... 6
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1.10 No Fractional Shares........................................... 7
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1.11 Tax Treatment.................................................. 7
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1.12 Accounting Treatment........................................... 7
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1.13 Shares of Dissenting Stockholders.............................. 7
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1.14 Taking of Necessary Action; Further Action..................... 7
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 8
2.1 Organization................................................... 8
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2.2 Company Capital Structure...................................... 8
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2.3 Subsidiaries................................................... 9
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2.4 Authority...................................................... 9
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2.5 No Conflict.................................................... 9
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2.6 Consents....................................................... 9
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2.7 Company Financial Statements...................................10
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2.8 No Undisclosed Liabilities.....................................10
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2.9 No Changes.....................................................10
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2.10 Tax Matters....................................................12
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2.11 Restrictions on Business Activities............................14
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2.12 Title of Properties; Absence of Liens and Encumbrances;
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Condition of Equipment.......................................14
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2.13 Intellectual Property..........................................14
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2.14 Agreements, Contracts and Commitments..........................17
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2.15 Interested Party Transactions..................................19
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2.16 Governmental Authorization.....................................19
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2.17 Litigation.....................................................19
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2.18 Accounts Receivable; Inventory.................................20
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2.19 Minute Books...................................................20
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2.20 Brokers' and Finders' Fees.....................................20
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2.21 Employees; Employee Benefit Plans and Compensation.............20
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2.22 Insurance......................................................21
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2.23 Compliance with Laws...........................................21
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TABLE OF CONTENTS
(continued)
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2.24 Complete Copies of Materials...................................22
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2.25 Tax-Free Reorganization and Pooling............................22
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2.26 Required Vote..................................................22
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2.27 Representations Complete.......................................22
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........22
3.1 Organization, Standing and Power...............................22
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3.2 Authority......................................................22
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3.3 Capital Structure..............................................23
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3.4 SEC Documents; Parent Financial Statements.....................23
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3.5 No Conflict....................................................24
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3.6 Consents.......................................................24
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3.7 Tax-Free Reorganization and Pooling............................24
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3.8 No Shareholder Vote Required...................................24
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3.9 No Material Adverse Change.....................................24
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3.10 Litigation.....................................................24
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3.11 Representations Complete.......................................25
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ARTICLE IV ADDITIONAL AGREEMENTS..........................................25
4.1 Conduct of Business of the Company.............................25
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4.2 Access to Information..........................................27
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4.3 Confidentiality................................................27
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4.4 Exclusivity....................................................27
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4.5 Expenses.......................................................28
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4.6 Public Disclosure..............................................28
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4.7 Consents.......................................................28
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4.8 FIRPTA Compliance..............................................28
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4.9 Reasonable Efforts.............................................28
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4.10 Notification of Certain Matters................................28
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4.11 Company's Accountants..........................................28
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4.12 Tax Treatment; Accounting Treatment............................28
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4.13 Employee Benefits Matters......................................29
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4.14 Officers and Directors.........................................29
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4.15 Blue Sky Laws..................................................29
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ARTICLE V CONDITIONS TO THE MERGER.......................................29
5.1 Conditions to Obligations of Each Party to Effect the Merger...30
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5.2 Additional Conditions to Obligations of the Company............30
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5.3 Additional Conditions to the Obligations of Parent and
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Merger Sub...................................................31
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ARTICLE VI INDEMNIFICATION................................................32
6.1 Indemnification of Indemnified Parties.........................32
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TABLE OF CONTENTS
(continued)
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6.2 Defense of Third Party Claims..................................33
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6.3 Direct Claims..................................................33
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6.4 Limitations....................................................33
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6.5 Matters Not Subject to Minimum Loss............................34
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6.6 Escrow Arrangements............................................34
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6.7 No Waiver Relating to Claims for Fraud.........................35
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ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..............................35
7.1 Termination....................................................35
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7.2 Effect of Termination..........................................36
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7.3 Amendment......................................................36
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7.4 Extension; Waiver..............................................37
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ARTICLE VIII THE SELLER REPRESENTATIVE......................................37
8.1 Authorization of the Seller Representative.....................37
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8.2 Compensation; Exculpation; Indemnity...........................38
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8.3 Removal and Replacement of Seller Representative;
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Successor Seller Representative; Action by
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Seller Representative........................................39
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8.4 Reliance; Limitation as to Parent, Merger Sub and the Company..40
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ARTICLE IX GENERAL PROVISIONS.............................................40
9.1 Notices........................................................40
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9.2 Interpretation.................................................41
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9.3 Counterparts...................................................41
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9.4 Entire Agreement; Assignment...................................42
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9.5 Severability...................................................42
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9.6 Other Remedies.................................................42
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9.7 Governing Law..................................................42
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9.8 Rules of Construction..........................................42
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9.9 Specific Performance...........................................42
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9.10 Survival of Representations, Warranties and Agreement..........42
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9.11 Headings.......................................................43
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9.12 Waiver of Jury Trial...........................................43
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MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is made and entered into March
8, 2000 among Xxxxxxxx.xxx, Inc., a Delaware corporation ("Parent"),
Xxxxxxxx.xxx Wireless, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub") and At Xxxxxx.xxx, Inc., a Delaware
corporation (the "Company" and, together with Parent and Merger Sub,
individually a "Party" and collectively the "Parties").
RECITALS
A. The Board of Directors of each Party believes it is in the best
interests of each respective company and its stockholders that Parent acquire
the Company through the statutory merger of the Merger Sub with and into the
Company (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding shares
of the Company's (i) common stock (the "Company Common Stock"), (ii) Series A
Preferred Stock (the "Series A Preferred Stock"), (iii) Series B Preferred Stock
(the "Series B Preferred Stock"), (iv) Series C Preferred Stock (the "Series C
Preferred Stock") and (v) Series D Preferred Stock (the "Series D Preferred
Stock") and collectively with the Series A Preferred Stock, the Series B
Preferred and the Series C Preferred Stock, the "Company Preferred Stock" and,
together with the Company Common Stock, the "Company Stock"), each having a par
value of $0.001 per share shall be converted into the right to receive shares of
the common stock, par value $0.001 per share, of Parent ("Parent Common Stock").
C. A portion of the shares of Parent Common Stock otherwise issuable
by Parent in the Merger shall be placed in escrow by Parent, the release of
which amount shall be contingent upon certain events and conditions.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
E. For federal income tax purposes, the Parties intend to adopt a plan
or reorganization within the meaning of, and to cause the Merger to qualify as a
reorganization under, Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
F. For financial accounting purposes, the Parties intend that the
transactions under this Agreement (the "Transactions") will be accounted for as
a "pooling of interests" (a "Pooling Transaction") under United States generally
accepted accounting principles ("GAAP") and the rules, regulations and
interpretations of the Securities and Exchange Commission (the "SEC").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time and pursuant to this Agreement
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and the applicable provisions of the Delaware General Corporation Law (the
"Delaware Law"), Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. The Company as the surviving corporation after the Merger is sometimes
referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated
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pursuant to Section 7.1, the closing of the Merger (the "Closing") will take
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place as promptly as practicable, but no later than two business days following
satisfaction or waiver of the conditions set forth in Article V, at the offices
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of Parent, 000 Xxxxxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx 00000, unless another
place or time is agreed to by Parent and the Company. The date upon which the
Closing actually occurs is referred to as the "Closing Date." On the Closing
Date, the Parties shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of Delaware (the "Certificate
of Merger"). The date and time the Merger becomes effective in accordance with
the Delaware Law is referred to as the "Effective Date" or "Effective Time."
1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in this Agreement, the Certificate of Merger and
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of the Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is At Xxxxxx.xxx, Inc."
(b) The Bylaws of the Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
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1.5 Directors and Officers. The director(s) of Merger Sub immediately
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prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws. The Merger Sub's officers immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the Surviving
Corporation.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
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Merger and without any action on the part of Merger Sub or the Company or any of
their respective stockholders:
(a) Cancellation of Parent-Owned and Company-Owned Stock. Each
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share of Company Common Stock and Company Preferred Stock owned by Merger Sub,
Parent, the Company or any direct or indirect wholly-owned subsidiary of Parent
or of the Company immediately prior to the Effective Time (the "Excluded Company
Shares") shall be canceled and extinguished without any conversion thereof.
(b) Common Stock of Merger Sub. Each share of common stock of
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Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of the common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall from and
after the Effective Time evidence ownership of shares of capital stock of the
Surviving Corporation.
(c) Conversion of Company Stock. Subject to Section 1.10, each
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share of Company Stock issued and outstanding immediately prior to the Effective
Time (other than shares of Company Stock held by Dissenting Stockholders) shall
be converted into a fraction of a share of Parent Common Stock equal to the
Exchange Ratio (as defined in Section 1.6(e)). All such Company Stock, when so
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converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and the holder of a certificate ("Stock
Certificate") that, immediately prior to the Effective Time, represented
outstanding shares of Company Stock shall cease to have any rights with respect
thereto, except the right to receive, upon the surrender of such Stock
Certificate, (i) the Parent Common Stock (the "Merger Consideration") to which
such holder is entitled pursuant to this Section 1.6(c), (ii) certain dividends
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and other distributions in with Section 1.6(d), and (iii) cash in lieu of
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fractional shares Parent Common Stock in accordance with Section 1.10, without
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interest. Until surrendered as contemplated by Section 1.7, each Stock
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Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration as
contemplated by this Section 1.6(c). Notwithstanding the foregoing, if between
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the date of this Agreement and the Effective Time, the outstanding shares of
Company Stock or Parent Common Stock shall have been changed into a different
number of shares or a different class because of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Exchange Ratio with respect to such shares shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
After the Effective Time, the Stock
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transfer books of the Company shall be closed and there shall be no further
registration of transfers of Company Stock outstanding prior to the Effective
Time. If, at or after the Effective Time, Stock Certificates are presented to
the Surviving Corporation, they shall be canceled and exchanged as provided for,
and in accordance with the procedures set forth in this Section 1.6(c).
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(d) Dividends and Distributions on Merger Consideration. No
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dividends or other distributions declared or made after the Effective Time with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Stock Certificate with respect to the Merger Consideration
represented thereby until the holder of record of such Stock Certificate shall
surrender such Stock Certificate in accordance with Section 1.7. Subject to the
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effect of applicable laws, following surrender of any such Stock
Certificate there shall be paid to the record holder of the certificate or
certificates representing the Merger Consideration issued in exchange therefor,
without interest, (i) the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
Merger Consideration, and (ii) if the payment date for any dividend or
distribution payable with respect to such Merger Consideration has not occurred
prior to the surrender of such Stock Certificate, at the appropriate payment
date therefor, the amount of dividends or other distributions with a record date
after the Effective Time but prior to the surrender of such Stock Certificate
and a payment date subsequent to the surrender of such Stock Certificate.
(e) Certain Definitions. For purposes of this Agreement, the terms
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defined in this Section 1.6(e) shall have the meanings specified:
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"Company Warrants" means the warrants to purchase Company
Common Stock the number and termination date of which and exercise price
for are as listed on Schedule 1.6(e).
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"Dissenting Stockholder(s)" means holder(s) of Company Common
Stock who have validly perfected dissenters and appraisal rights under
Section 262 of the Delaware Law.
"Exchange Ratio" means the quotient of (i) 3,750,000 divided by
(ii) the Total Diluted Company Shares; provided that if the total expense
the Company incurs or will incur in connection with the Transactions
exceeds $6.5 million (including legal, accounting and investment banking
expenses of the Company) (the "Excess Expense"), then the number 3,750,000
shall be reduced by the quotient of the Excess Expense divided by 96.
"Person(s)" means any individual, partnership, limited
liability company, corporation, association, joint stock company, trust,
joint venture, labor organization, unincorporated organization or
Governmental Authority.
"Total Diluted Company Shares" means the sum of (i) the number
of shares of Company Common Stock outstanding as of the Effective Time
(excluding the Excluded Company Shares), (ii) the number of shares of
Company Common Stock into which the Company Preferred Stock outstanding as
of the Effective Time is convertible
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as of the Effective Time (excluding the Excluded Company Shares), (iii) the
number of shares of Company Common Stock for which the Company Options
outstanding as of the Effective Time and for which the Company has any
obligations as of the Effective Time to grant subsequent to the Effective
Time are exercisable for Company Common Stock as of the Effective Time
(assuming for these purposes that all such Company Options are fully
exercisable as of the Effective Time), (iv) the number of shares of Company
Common Stock for which the Company Warrants outstanding as of the Effective
Time which would not otherwise terminate as a result of the Transactions
and for which the Company has any obligation as of the Effective Time to
grant subsequent to the Effective Time are exercisable for Company Common
Stock as of the Effective Time (assuming for these purposes that all such
Company Warrants are fully exercisable as of the Effective Time), and (v)
the number of shares of Company Common Stock (without duplication) for
which all other derivative securities of the Company are exercisable for or
convertible into, directly or indirectly, as of the Effective Time.
1.7 Surrender of Certificates.
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(a) Exchange Procedures. At the Closing, or as soon as practicable
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thereafter, (i) the holders of Stock Certificates shall surrender to Parent all
certificates which immediately prior to the Effective Time represented all
outstanding shares of Company Stock, (ii) upon such surrender of such
Certificates the holder thereof shall be entitled to receive in exchange
therefor a certificate representing the Merger Consideration represented thereby
(less the Escrow Amount, which Parent shall deposit in an escrow account
pursuant to Section 6.6) and cash in lieu of fractional shares in accordance
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with Section 1.10, without interest, and (iii) the Stock Certificates so
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surrendered shall forthwith be canceled. The "Escrow Amount" for each holder of
one or more Stock Certificates shall equal the product of (1) the aggregate
Merger Consideration represented thereby, and (2) 0.10.
(b) Transfers of Ownership. If any certificate for shares of Parent
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Common Stock is to be issued in a name other than that in which the Stock
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Stock Certificate so surrendered will
have been properly endorsed and otherwise in proper form for transfer and that
the Person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required because of the issuance of
a certificate for shares of Parent Common Stock in any name other than that of
the registered holder of the Stock Certificate surrendered, or established to
the satisfaction of Parent or any agent designated by it that such tax has been
paid or is not payable.
(c) No Further Ownership Rights in Company Stock. All shares of
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Parent Common Stock issued upon the surrender for exchange of shares of Company
Stock in accordance with the terms hereof (including cash in lieu of fractional
shares) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Stock.
(d) Lost, Stolen or Destroyed Stock Certificates. If any Stock
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Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person
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claiming such Stock Certificate be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person or entity of a bond in
such reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, Parent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, and, if applicable, cash in lieu of fractional shares and unpaid
dividends and other distributions on any Merger Consideration deliverable in
respect thereof under this Agreement.
1.8 Stock Options.
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(a) Assumption of Options. At the Effective Time, automatically and
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without any action on the part of the holder thereof, each outstanding employee
or director stock option of the Company outstanding at the Effective Time (the
"Company Options") shall be assumed by Parent and become an option to purchase
that number of shares of Parent Common Stock obtained by multiplying the number
of shares of Company Common Stock issuable upon the exercise of such option by
the Exchange Ratio at an exercise price per share equal to the per share
exercise price of such option divided by the Exchange Ratio and otherwise upon
the same terms and conditions as such outstanding options to purchase Company
Common Stock, including to the extent such options were incentive stock options;
provided, however, that in the case of any option to which Section 421 of the
Code applies because of the qualifications under Sections 422 or 423 of the
Code, the exercise price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall comply with
Section 424(a) of the Code.
(b) Reservation of Shares. Parent shall take all corporate actions
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necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of Company Options assumed by Parent pursuant
to Section 1.8(a).
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(c) Form S-8. Within 30 days after Closing, Parent shall file a
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registration statement on Form S-8 (or any successor or other appropriate forms)
with respect to the shares of Parent Common Stock subject to Company Options and
shall use all reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
(d) Amendments to Plans. Each of the Company stock option plans
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providing for the issuance or grant of options in respect to the stock of
Company shall be assumed as of the Effective Time by Parent with such amendments
thereto as may be required to reflect the Merger, including the substitution of
Parent Common Stock for Company Common Stock thereunder.
1.9 Assumption of Warrants.
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(a) At the Effective Time, automatically and without any action on
the part of the holder thereof, Parent shall assume each Company Warrant
remaining outstanding following the Merger and it shall become a warrant to
purchase that number of shares of Parent Common Stock obtained by multiplying
the number of shares of Company Common Stock issuable upon the exercise of such
warrant by the Exchange Ratio at an exercise price per share equal to the per
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share exercise price of such warrant divided by the Exchange Ratio and otherwise
upon the same terms and conditions as the applicable warrant.
(b) Parent shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Warrants assumed by Parent pursuant to Section 1.9(a).
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1.10 No Fractional Shares. No fractional shares of Parent Common Stock
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shall be issued in the Merger and fractional share interests shall not entitle
the owner thereof to vote or to any rights of a stockholder of Parent. All
holders of fractional shares of Parent Common Stock shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying the
fraction of a share of Parent Common Stock to which such holder would otherwise
have been entitled by the closing sale price of Parent Common Stock on the
trading day prior to the Effective Time.
1.11 Tax Treatment. The Parties intend that the Merger shall constitute a
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tax free reorganization within the meaning of Section 368 of the Code.
1.12 Accounting Treatment. The Parties intend that the Merger will be
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accounted for as a "pooling of interests" in accordance with GAAP and the rules,
regulations and interpretations of the SEC.
1.13 Shares of Dissenting Stockholders. Any issued and outstanding shares
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of Company Common Stock a Dissenting Stockholder holds shall be converted into
the right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the Delaware Law; provided, however, shares
of Company Common Stock outstanding at the Effective Time and held by a
Dissenting Stockholder who shall, after the Effective Time, withdraw their
demand for purchase or lose their right of purchase as provided in the Delaware
Law, shall be deemed to be converted, as of the Effective Time, into the right
to receive the shares of Parent Common Stock, dividends and distribution, if
any, in accordance with Section 1.6(d), and cash in lieu of fractional shares in
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accordance with Section 1.10, without interest. The Company shall give Parent
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(A) prompt notice of any written demands it receives for purchase, withdrawals
of demands for purchase and any other instruments served pursuant to Section 262
of the Delaware Law, and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for purchase under Section 262 of the
Delaware Law. The Company will not voluntarily make any payment with respect to
any such demands for purchase and will not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
1.14 Taking of Necessary Action; Further Action. If, at any time after the
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Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company, Parent and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and the Company and Merger Sub
shall cause them to take, all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
schedules (referencing the appropriate section numbers) supplied by the Company
to Parent and attached hereto as Schedule 1 (the "Disclosure Schedules"), as
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follows:
2.1 Organization. The Company is a corporation duly incorporated and
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organized and is validly existing and in good standing under the laws of the
state of Delaware. The Company has the corporate power to own its properties and
to carry on its business as now being conducted. The Company is duly registered,
licensed or qualified as a foreign corporation and is in good standing under the
laws of each jurisdiction in which the failure to be so qualified could have a
material adverse effect on the business, assets, financial condition, results of
operations or prospects of the Company and its subsidiaries, if any, taken as a
whole (with reference to the Company or Parent, as applicable, hereinafter
referred to as a "Material Adverse Effect"). The Company has delivered a true
and correct officially certified copy of its Certificate of Incorporation and
Bylaws (together, the "Charter") to Parent.
2.2 Company Capital Structure. The authorized capital stock of the Company
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consists of (i) 75,000,000 shares of Company Common Stock of which as of the
date hereof (A) 7,040,735 shares are issued and outstanding, (B) 8,100,000
shares are reserved for issuance under Company Options approved from time to
time by the Board under the Company's stock option plan(s), (C) 1,604,537 shares
are reserved for issuance upon exercise of Company Warrants, (D) 12,800,000
shares are reserved for issuance upon conversion of the Series A Preferred
Stock, (E) 11,000,000 shares are reserved for issuance upon conversion of the
Series B Preferred Stock, (F) 15,000,000 shares are reserved for issuance upon
conversion of the Series C Preferred Stock and (G) 16,500,000 shares are
reserved for issuance upon conversion of the Series D Preferred Stock; and (ii)
55,300,000 shares of preferred stock, par value $0.001 per share of the Company
of which as of the date hereof (A) 12,800,000 shares have been designated Series
A Preferred Stock, 12,612,312 of which are issued and outstanding and 109,885 of
which are reserved for issuance upon exercise of Company Warrants, (B)
11,000,000 shares have been designated Series B Preferred Stock, 9,952,253 of
which are issued and outstanding and 350,000 of which are reserved for issuance
upon exercise of Company Warrants, (C) 15,000,000 shares have been designated
Series C Preferred Stock, 12,655,174 of which are issued and outstanding, (D)
16,500,000 shares have been designated Series D Preferred Stock, 12,084,645 of
which are issued and outstanding and 120,846 are reserved for issuance upon
exercise of Company Warrants, and (E) no shares of preferred stock of the
Company remain undesignated. All issued and outstanding shares of Company Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of or subject to any preemptive
right, or other rights to subscribe for or purchase shares, and are owned by the
holders set forth in Schedule 2.2 (the "Holders") free and clear of any pledge,
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lien, security interest, encumbrance, claim or other equitable or third-party
interest. As of the date of this Agreement, options to purchase 7,798,721
shares of Company Common Stock are granted and outstanding and options
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to purchase 1,197,680 shares of Company Common Stock are fully vested and
immediately exercisable. Other than the shares of Company Stock owned by the
Holders, there are no other outstanding interests, existing or contingent or
direct or indirect, in Company Common Stock. Other than the Preferred Stock, the
Company Options and the Company Warrants, there are no rights ("Company Rights")
of any character, written or oral, to which the Company is a party or by which
it is bound, obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of Company Common Stock or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such rights, including in favor of employees of the Company.
2.3 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or affiliated companies or any ownership interest(s) in any other
Person, and does not otherwise own and has never otherwise owned any shares in
the capital of or any interest in, or control, directly or indirectly, any other
corporation, partnership, association, joint venture or other business entity.
2.4 Authority. The Company has all requisite corporate power and authority
---------
to enter into this Agreement and the Related Agreements and to consummate the
Transactions. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the Transactions have been duly authorized by
all necessary corporate action on the part of the Company, and no further action
is required on the part of the Company to authorize the Merger, this Agreement,
the Related Agreements and the Transactions. This Agreement and the Related
Agreements have been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by the other Parties, constitutes
the valid and binding obligation of the Company, enforceable in accordance with
their respective terms, subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and to rules of law governing
specific performance, injunctive relief or other equitable remedies.
2.5 No Conflict. The execution and delivery of this Agreement and the
-----------
Escrow Agreement (the "Related Agreements") to which the Company is a party by
the Company do not, and, the consummation of the Transactions 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, modification or acceleration of any obligation or
loss of any benefit (any such event, a "Conflict") under (i) any provision of
the Charter, (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license to which the Company is
subject, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets, other than any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not impair the ability of the Company to consummate
the Transactions.
2.6 Consents. No consent, waiver, approval, order or authorization of, or
--------
registration, declaration or filing with, any court, administrative agency or
commission or other U.S. federal, state, province, county, local or other
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party, including a party to any agreement
with the Company (so as not to trigger any Conflict), is required by the Company
in connection with
-9-
the execution and delivery of this Agreement and any Related Agreements to which
the Company is a party or the consummation of the Transactions, except for such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings (i) as may be required under applicable securities
laws, (ii) as are set forth in Schedule 2.6, and (iii) such other
------------
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect on the Company or
impair its ability to consummate the Transactions.
2.7 Company Financial Statements.
----------------------------
(a) Schedule 2.7(a) includes the Company's unaudited financial
---------------
statements (balance sheets, income statements, changes in stockholders' equity
and cash flows) as of and for the calendar years ended December 31, 1999 (the
"Balance Sheet Date") and 1998, and the notes thereto, accompanied by the
reports thereon of Ernst & Young LLP, independent public accountants (the
"Financial Statements"). The Financial Statements have been prepared from, and
are in accordance with, the books and records of the Company and are complete
and have been prepared on the accrual basis accounting method (exclusive of
analysis of detailed software revenue recognition principles), applied on a
basis consistent throughout the periods indicated. Each of the Financial
Statements (including any notes thereto) was prepared in accordance with GAAP
consistently applied throughout the periods indicated (except as may be
indicated in the notes thereto). The Financial Statements present fairly the
financial position, operating results and changes in stockholders' equity and
cash flows of the Company as of the dates and for the periods indicated therein.
The balance sheet of the Company as of the Balance Sheet Date is hereinafter
referred to as the "December Balance Sheet." There shall be no capitalized
software development costs recorded in the Financial Statements or the December
Balance Sheet. The December Balance Sheet does not include any reserves, write-
offs or non-recurring charges in an amount that is inconsistent with the
Company's past practices.
2.8 No Undisclosed Liabilities. Except as reflected or reserved against in
--------------------------
the December Balance Sheet, as of the Balance Sheet Date, to the Company's
knowledge the Company did not have any liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type, whether
accrued, absolute, contingent, matured, unmatured or otherwise (whether or not
required to be reflected in financial statements in accordance with GAAP), which
in the aggregate exceeded $25,000, nor has the Company incurred any such
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement since the Balance Sheet Date, except for liabilities incurred in the
Ordinary Course of Business that, in the aggregate, do not exceed $25,000.
2.9 No Changes. Since the Balance Sheet Date, except as set forth on
----------
Schedule 2.9, there has not been, occurred or arisen any:
------------
(a) transaction by the Company except in the Ordinary Course of
Business as conducted on that date and consistent with past practice (which
practice has been reasonably and substantially consistent with the practices in
the Company's industry) ("Ordinary Course of Business");
-10-
(b) capital expenditure or commitment for capital expenditure by the
Company, either individually or in the aggregate, exceeding $25,000;
(c) destruction of, damage to or loss of any material assets of the
Company (whether or not covered by insurance) or loss of any business or
customers of the Company that (i) accounted for $25,000 or more of the Company's
revenues for fiscal year 1999 or (ii) is projected to account for $50,000 or
more of the Company's projected revenue for fiscal year 2000;
(d) except as specifically requested by Parent, change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by the Company;
(e) except as specifically requested by Parent, revaluation by the
Company of any of its assets, other than depreciation as required by GAAP;
(f) declaration, setting aside or payment of any dividends on or any
other distribution (whether in cash, stock or property) in respect of any
Company Stock or profits, or any split, combination or reclassification of
Company Stock or the issuance or authorization of the issuance of any securities
in respect of, in lieu of or in substitution for any share in the stated capital
of the Company, or the repurchase, redemption or other acquisition, directly or
indirectly, of any Company Stock or any Company Rights, other than in connection
with the Company's repurchase right under stock purchase or stock option
agreements with employees or consultants at cost;
(g) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or advisors,
or the declaration or payment, or commitment or obligation of any kind for the
payment, by the Company, of a bonus or other additional salary or compensation
to any such Person, except as made in the Ordinary Course of Business;
(h) sale, lease, license or other disposition of any of the assets or
properties of the Company, except sales of inventory and licenses of software
pursuant to the Company's standard license agreement, each in the Ordinary
Course of Business;
(i) amendment, termination, violation by it, or, to its knowledge,
violation of a counterparty of any distribution agreement or any material
contract, agreement or license to which the Company is a party or by which it is
bound, other than termination by the Company pursuant to the terms thereof in
the Ordinary Course of Business;
(j) loan by the Company to any Person, other than advances to its
employees for travel and business expenses in the Ordinary Course of Business,
or incurrence by the Company of any indebtedness other than trade debt in the
Ordinary Course of Business, guaranty by the Company of any indebtedness or debt
securities of others, or issuance or sale of any debt securities of the Company;
-11-
(k) waiver or release of any material right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, exceeding $2,500 in the aggregate;
(l) commencement or notice, or to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding by or against the Company,
or of any investigation of the Company or its affairs;
(m) to the Company's knowledge, any claim of ownership by a third
party of any Intellectual Property Asset or infringement by the Company of any
third party's intellectual property rights;
(n) issuance or sale by the Company of any Company Stock, Company
Rights or any other securities of the Company, except pursuant to the Company's
stock option plan or upon exercise or conversion of exercisable or convertible
securities and except in connection with the Company's Series D Preferred Stock
financing;
(o) change in pricing or royalties set or charged by the Company
other than in the Ordinary Course of Business; or
(p) any event or condition of any character, that has had or the
Company believes could be reasonably expected to have a Material Adverse Effect
on the Company.
2.10 Tax Matters.
-----------
(a) Definition of Taxes. For this Agreement, "Tax" or, collectively,
-------------------
"Taxes," means (i) any and all federal, state, province, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, goods and
services, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; and (ii) any liability for the payment of
any amounts of the type described in clause (i) as a result of any express or
implied obligation to indemnify any other Person or as a result of any
obligation under any agreement or arrangement with any other Person with respect
to such amounts, including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth on Schedule 2.10:
---------------------- -------------
(i) The Company as of the Effective Time will have prepared and
timely filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations, and such Returns
are true and correct and have been completed in accordance with applicable law.
-12-
(ii) The Company as of the Effective Time: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will have withheld and
timely remitted all income taxes and other Taxes required to be withheld and
remitted.
(iii) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency or reassessment outstanding, assessed,
notified or proposed against the Company, nor has the Company executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return is currently in
progress, nor has the Company been notified in writing of any request for such
an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the December Balance Sheet, whether asserted
or unasserted, contingent or otherwise, and the Company has no knowledge of any
basis for the assertion of any such liability attributable to the Company, its
assets or operations.
(vi) The Company has provided to Parent copies of all federal and
state income and all state sales and use Tax Returns for all periods since the
date of the Company's incorporation.
(vii) There are no liens, pledges, mortgages, charges, adverse
claims, security interests or other encumbrances of any sort ("Liens") on the
assets of the Company relating to or attributable to Taxes.
(viii) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, would give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or 162 of the Code.
(ix) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(x) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xi) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
-13-
(xiii) The Company has never been a member of an affiliated group
(as defined in Section 1504 of the Code or any similar provision of any state
tax law) or filed or been included on a combined, consolidated or unitary
Return.
2.11 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompetition or otherwise), commitment, judgment, injunction, order or decree
to which the Company is a party or which is otherwise binding upon the Company
that has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company, or the conduct of any business
activities by the Company.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
--------------------------------------------------------------------
Equipment.
---------
(a) Schedule 2.12(a) contains a complete and accurate list of all
----------------
real property owned or leased by the Company (the "Schedule 2.12 property").
(b) Except as disclosed in Schedule 2.12(b), there are no existing
----------------
contracts or other agreements relating to the Schedule 2.12 property to which
-------------
the Company is a party (the "Leases"), and the Company has delivered to Parent
or counsel of Parent true and complete copies of all of the Leases.
(c) Except as disclosed in Schedule 2.12(c), (i) assuming each party
----------------
to each such Lease other than the Company has validly authorized and executed
such Lease, each of the Leases is valid, (ii) neither the Company nor, to the
knowledge of the Company, any other party thereto is in default thereunder, nor
is there any event which with notice or lapse of time, or both, would constitute
a default thereunder by the Company or, to the knowledge of the Company, any
other party thereto and (iii) the Company has not received notice that any party
to any Lease intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. To the
knowledge of the Company, the other party to each such Lease validly authorized
and executed such Lease.
(d) The equipment and other tangible personal property owned or
leased by the Company (i) is adequate for the conduct of its business as
currently conducted, (ii) is in good operating condition, subject to normal wear
and tear, and (iii) has been reasonably maintained.
2.13 Intellectual Property.
---------------------
(a) Intellectual Property Assets. The term "Intellectual Property
----------------------------
Assets" includes any rights, licenses, liens, security interests, charges,
encumbrances, equities and other claims that the Company may have to claim
ownership, authorship or invention, to use, to object to or prevent the
modification of, to withdraw from circulation or control the publication or
distribution of any of the following worldwide used in its business as currently
conducted or proposed to be conducted:
-14-
(i) the names "XxXxxxxx.xxx, Inc.", "Global Mobility Systems,
Inc." and "Global Mobility Networks, Inc.", the domain names "xxxxxxxx.xxx",
"xxxxxxxx.xxx", "xxxxxxxxxxx.xxx", "xxxx.xxx" and "xxxx.xxx" and all fictitious
business names, trading names, corporate names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks") used in its
business as currently conducted or proposed to be conducted;
(ii) all patents, patent applications and business methods,
inventions and discoveries that may be patentable (collectively, "Patents") used
in its business as currently conducted or proposed to be conducted;
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights") used in its business as currently conducted
or proposed to be conducted; and
(iv) all know-how, trade secrets, confidential information,
customer lists, software (source code and object code), technical information,
data, process technology, plans, drawings, and blue prints (collectively, "Trade
Secrets") used in its business as currently conducted or proposed to be
conducted.
(b) Agreements. Schedule 2.13(b) contains a complete and accurate
---------- ----------------
list of all material contracts relating to the Intellectual Property Assets to
which the Company is a party or by which the Company is bound, except for any
license for commonly available software programs with a value of less than
$10,000 under which the Company is the licensee. There is no existing dispute or
disagreement with respect to any such agreement nor, to the knowledge of the
Company, has any such dispute or disagreement been threatened.
(c) Software. Schedule 2.13(c) contains a complete and accurate list
-------- ----------------
of all computer software and/or middleware developed by or for the Company
(collectively referred to as the "Software"). Except as set forth on Schedule
--------
2.13(c), all Software is owned by the Company free and clear of any Liens and no
-------
contractor, consultant or other third party has any claim of ownership in or to
the Software. The Company represents that any and all rights to the Software
shall be transferred to the Surviving Corporation at the Effective Time.
(d) Trade Secrets
-------------
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(ii) The Company has taken all reasonable precautions to protect
the secrecy, confidentiality and value of the Trade Secrets.
(iii) The Company has good title and to its knowledge an absolute
exclusive right to use the Trade Secrets. The Trade Secrets are not part of the
public knowledge or literature, and, to knowledge of the Company, have not been
used, divulged, or appropriated
-15-
either for the benefit of any third party or to the detriment of the Company. No
Trade Secret is subject to any adverse claim or to the Company's knowledge has
been challenged or threatened in any way.
(e) Originators, Programmers and Developers. Schedule 2.13(e)
--------------------------------------- ----------------
contains a complete and accurate list of all originators, developers or
programmers (other than employees), contractors or agents, who have written any
portion of or contributed to any development of the Software (collectively
referred to as the "Developers").
(f) Toolkits, Reused Code and Third-Party Software. Schedule 2.13(f)
---------------------------------------------- ----------------
of the Company Disclosure Schedule contains a complete and accurate list of all
code incorporated into the Software that was not specifically written or
developed for use in the Software (the "Preexisting Code"). This list includes
code from toolkits, from preexisting code written by the Developers and/or from
third-party software utilized to write or otherwise contribute to the
development of any of the Software. Upon consummation of the Merger, the
Surviving Corporation shall have at least a non-exclusive right to use any such
Preexisting Code and there are no third-party rights to such Preexisting Code
that will materially interfere with the Surviving Corporation's ownership and
use of the Software.
(g) Know-How Necessary for the Business.
-----------------------------------
(i) The Intellectual Property Assets are sufficient for the
operation of the Company's businesses as currently conducted. The Company is the
owner of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all Liens, and has the right to use without
payment to a third party all of the Intellectual Property Assets.
(ii) Except as set forth on Schedule 2.13(g), all former and
----------------
current employees of the Company have executed written agreements with the
Company that assign to the Company all rights to any inventions, improvements,
discoveries or information relating to the business of the Company. To the
Company's knowledge, no employee of the Company has entered into any agreement
that restricts or limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his or her work to anyone other than the
Company.
(h) Patents.
-------
(i) Schedule 2.13(h) contains a complete and accurate list and
----------------
summary description of all Patents and Patent applications. The Company is the
owner of all right, title, and interest in and to each of the Patents, free and
clear of all Liens.
(ii) None of the products manufactured and sold, nor any process
or know-how used, by the Company infringes or to the Company's knowledge is
alleged to infringe any patent or other proprietary right of any third party. To
its knowledge, there is no patent or patent application of any third party that
interferes or would be likely to interfere with the Company's use of any
Intellectual Property Asset.
-16-
(i) Trademarks.
----------
(i) Schedule 2.13(i) contains a complete and accurate list and
----------------
summary description of all Marks. The Company is the owner of all right, title,
and interest in and to each of the Marks, free and clear of all Liens.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office or with a corresponding state office are currently
in compliance with all formal legal requirements (including the timely post-
registration filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and, to the knowledge of the Company, no such
action is threatened with the respect to any of the Marks.
(iv) To the knowledge of the Company, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to knowledge of the Company, has
been challenged or threatened in any way. None of the Marks used by the Company
infringes or to the Company's knowledge is alleged to infringe any trade name,
trademark, or service xxxx of any third party.
(vi) All products and materials containing a Xxxx xxxx the
proper legal notice where permitted by law.
(j) Copyrights.
----------
(i) Schedule 2.13(i) contains a complete and accurate list and
----------------
summary description of all Copyrights. The Company is the owner of all right,
title, and interest in and to each of the Copyrights, free and clear of all
Liens.
(ii) All the Copyrights that have been registered are currently
in compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the Closing Date.
(iii) No Copyright is infringed or, to knowledge of the Company,
has been challenged or threatened in any way. None of the subject matter of any
of the Copyrights infringes or to the Company's knowledge is alleged to infringe
any copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
2.14 Agreements, Contracts and Commitments.
-------------------------------------
-17-
(a) Except as set forth on Schedule 2.14(a), the Company does not
----------------
have any continuing obligations under, nor is it a party to or bound by:
(i) any collective bargaining agreement, or any contract with
or commitment to any trade union, employee bargaining agent or affiliated
bargaining agent, and the Company has not conducted any negotiations with
respect to enter into any such contracts or commitments,
(ii) any agreement or arrangement that contains any severance
pay or post-employment liability or obligation or is otherwise required by
statute or case law to provide any of the foregoing,
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plan or arrangement,
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson, or any
consulting or sales agreement, contract or commitment with a firm or other
organization,
(v) any agreement or plan, including any stock option plan,
share appreciation rights plan or share purchase plan, any of the benefits of
which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the Transactions or the value of any of
the benefits of which will be calculated on the basis of any of the
Transactions,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property,
(viii) any agreement of indemnification or guaranty, other than
intellectual property indemnification to customers in the Ordinary Course of
Business,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any Person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $25,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of material assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(xii) any mortgage, indenture, loan or credit agreement,
security agreement or other agreement or instrument relating to the borrowing of
money or extension of credit, including guaranties referred to in clause (viii)
hereof,
-18-
(xiii) any purchase order or contract for the purchase of raw
materials, other than purchase orders made in the Ordinary Course of Business
and involving not more than $25,000,
(xiv) any distribution, joint marketing or development
agreement, or
(xv) any other agreement, contract or commitment that involves
$25,000 or more or is not cancelable without penalty within 30 days.
(b) Except as noted in Schedule 2.14(b), the Company has not
----------------
breached, violated or defaulted under, or received written notice that it has
breached, violated or defaulted under, any of the material terms or conditions
of any agreement, contract or commitment required to be set forth in Schedule
--------
2.14(a), (any such agreement, contract or commitment referenced in the preceding
-------
clause, a "Contract"), nor is the Company aware of any event that would
constitute such a breach, violation or default with the lapse of time, the
giving of notice or both. Each Contract is in full force and effect and, except
as otherwise disclosed in Schedule 2.14(b), is not subject to any default, of
----------------
which the Company is aware, by any party obligated to the Company pursuant
thereto. The Company has obtained, or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of parties to any Contract as are
required thereunder in connection with the Merger, or that are required to be
obtained in order for such Contract to remain in effect without modification
after the Merger.
2.15 Interested Party Transactions. Except as disclosed on Schedule 2.15,
----------------------------- -------------
no officer, director, employee or holder of Company Stock (or any spouse or
member of the immediate family of any of such Persons, or any trust, partnership
or corporation in which any of such Persons has or has had a material interest),
has directly or indirectly, (i) an interest in any Person which furnished or
sold, or furnishes or sells, services or products that the Company furnishes or
sells, or proposes to furnish or sell in an amount in excess of $10,000 per
year, or (ii) any interest in any Person that purchases from or sells or
furnishes to, the Company, any goods or services in an amount in excess of
$10,000 per year or (iii) a beneficial interest in any Contract set forth on
Schedules 2.14(a) or 2.14(b); provided, that passive ownership of no more than
----------------------------
5% of the outstanding stock of a corporation shall not be deemed an "interest in
any entity" for purposes of this Section 2.15.
------------
2.16 Governmental Authorization. Schedule 2.16 accurately lists each
-------------------------- -------------
material consent, license, permit, grant or other authorization issued to the
Company by a Governmental Entity (a) pursuant to which the Company currently
operates or holds any interest in any of its properties or (b) which is required
for the operation of its business or the holding of any such interest (herein
collectively called "Authorizations"). All Authorizations are in full force and
effect and constitute all Authorizations required to permit the Company to
operate or conduct its business or hold any interest in its properties or
assets.
2.17 Litigation. There is no action, suit, claim, proceeding or arbitration
----------
of any nature pending or threatened against the Company or any of its properties
or any of its officers, directors or stockholders in respect of the Company.
There is no investigation pending or threatened against the Company, its
properties or any of its officers, directors or stockholders in
-19-
respect of the Company by or before any Governmental Entity. No Governmental
Entity has at any time challenged or questioned the legal right of the Company
to manufacture, offer or sell any of its products in the present manner or style
thereof.
2.18 Accounts Receivable; Inventory.
------------------------------
(a) Set forth in Schedule 2.18(a) is a list of all accounts
----------------
receivable of the Company reflected on the December Balance Sheet ("Accounts
Receivable") along with a range of days elapsed since invoice as of the date of
the December Balance Sheet. All Accounts Receivable of the Company (i) arose in
the Ordinary Course of Business, (ii) represent bona fide indebtedness incurred
by the applicable account debtors in the amounts invoiced by the Company and
stated on its books and records, subject to collection and (iii) are not subject
to any defenses, counterclaims or claims for set off. The reserves against the
Accounts Receivable have been established in accordance with GAAP, and based
upon a review of such Accounts Receivable, the Company reasonably believes such
reserves to be adequate. No Person has any Lien on any of such Accounts
Receivable and no request or agreement for deduction or discount has been made
with respect to any of such Accounts Receivable. No such Accounts Receivable is
owed by a Person that the Company has knowledge that has sought the protection
of any bankruptcy or insolvency law or is the subject of any dispute as to
payment.
(b) The inventory of the Company, to the extent that it is reflected
on the Financial Statements and the inventory as the same shall exist on the
date hereof (other than the reserve established for the inventory reflected in
the Financial Statements), consisted and will consist of items which were and
will be of the usual quality and quantity necessary for the normal conduct of
the business of the Company and reasonably expected to be usable or saleable
within a reasonable period of time in the ordinary course of the business of the
Company. With respect to inventory in the hands of suppliers for which the
Company is committed as of the date hereof, such inventory is reasonably
expected to be usable in the Ordinary Course of Business of the Company as
currently being conducted.
2.19 Minute Books. The minute books of the Company made available to Parent
------------
or counsel for Parent are the only minute books of the Company and contain an
accurate summary of all formal meetings of directors (and committees thereof)
and stockholders or actions by written consent since the formation of the
Company.
2.20 Brokers' and Finders' Fees. Except as contemplated by Schedule 2.20,
---------------------------- -------------
the Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement, the Related Agreements or any
Transaction.
2.21 Employees; Employee Benefit Plans and Compensation. Schedule 2.21
-------------------------------------------------- -------------
lists each of the following which is sponsored, maintained or contributed to by,
or under which there is any liability of, the Company and which is for the
benefit of any current or former employee, officer, director, agent, consultant
or similar representative to the Company: (i) all employee benefit plans, as
such term is defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including employee benefit plans (such as
foreign plans) which
-20-
are not subject to the provisions of ERISA (each an "Employee Plan") and (ii)
each personnel policy, stock option plan, stock purchase plan, stock
appreciation right plan, phantom stock plan, collective bargaining agreement,
bonus plan or arrangement, incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation agreement or
arrangement, executive compensation or supplemental income arrangement,
consulting agreement, employee agreement, cafeteria plan, education assistance
plan, dependent care assistance plan and each other employee benefit plan,
agreement, arrangement, program, practice or understanding (each a "Company
Program" or "Company Agreement"). With respect to any employee benefit plan,
within the meaning of Section 3(3) of ERISA, which is subject to ERISA and which
is sponsored, maintained or contributed to, or has been sponsored, maintained or
contributed to within six years prior to the Closing Date, by the Company or any
member of the Controlled Group of Corporations (as defined in Section 1563 of
the Code) of which the Company is part, (a) no withdrawal liability, within the
meaning of Section 4201 of ERISA, has been incurred, which withdrawal liability
has not been satisfied, (b) no liability to the Pension Benefit Guarantee
Corporation has been incurred by the Company or any member of the Controlled
Group of Corporations of which the Company is part, which liability has not been
satisfied, (c) no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (d) all contributions (including installments) to such plan
required by Section 302 of ERISA and Section 412 of the Code have been timely
made. With respect to any kind of employee benefit plan, such plan has been
funded and maintained in compliance with all laws applicable thereto and the
requirements of such plan's governing documents.
2.22 Insurance. Schedule 2.22 lists all insurance policies and fidelity
--------- -------------
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company. Such insurance policies are
customary for similarly situated companies and reasonably satisfactory to ensure
the Company against the risks associated with its business. There is no claim by
the Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). There has been no threatened termination of, or material
premium increase with respect to, any of such policies.
2.23 Compliance with Laws. The Company has complied in all material
--------------------
respects with, is not in violation in any material respect of, and has not
received any notices of violation with respect to, any foreign, federal, state,
province or local statute, law or regulation (including any federal, state,
foreign or local law, rule or regulation, or any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment, health, safety or natural resources, including those relating to
(A) releases or threatened releases of hazardous substances or materials
containing hazardous substances or (B) the manufacture, handling, transport,
use, treatment, storage or disposal of hazardous substances or materials
containing hazardous substances) with respect to the conduct of its business, or
the ownership or operation of its business, assets or properties.
-21-
2.24 Complete Copies of Materials. The Company has delivered to Parent true
----------------------------
and complete copies of each agreement, contract, commitment or other document
(or summaries of same) that is referred to in the Disclosure Schedules or that
has been requested by Parent or its counsel.
2.25 Tax-Free Reorganization and Pooling. Neither the Company nor, to the
-----------------------------------
knowledge of the Company, any of its affiliates has taken or agreed to take any
action or failed to take any action which action or failure would prevent the
Merger and the other Transactions from being treated for financial accounting
purposes as a Pooling Transaction or would prevent the Merger from constituting
a reorganization within the meaning of section 368(a) of the Code.
2.26 Required Vote. The only vote of the holders of any class or series of
-------------
the Company's capital stock that will be necessary to consummate the Merger and
the other Transactions are as contemplated by the written consent attached as
Exhibit 2.26.
------------
2.27 Representations Complete. None of the representations or warranties
------------------------
made in this Article II (as modified by the Disclosure Schedules), nor any
----------
statement made in any schedule or certificate furnished by the Company pursuant
to this Agreement contains, as of the date hereof, any untrue statement of a
material fact, or omits, as of the date hereof, to state any material fact
necessary to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading. There is no event, fact or
condition that materially and adversely affects the business, assets, financial
condition or results of operations of the Company, or that reasonably could be
expected to do so, that has not been set forth in this Agreement or in the
Disclosure Schedules.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the
Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a Material Adverse Effect on Parent. Neither Parent nor Merger Sub is in
violation of any material provision of its Certificate of Incorporation or
Bylaws.
3.2 Authority. Parent and Merger Sub have all requisite corporate power and
---------
authority to enter into this Agreement, the Employment Agreements and the
Related Agreements and to consummate the Transactions. The execution and
delivery of this Agreement and the Related Agreements and the consummation of
the Transactions have been duly authorized by all
-22-
necessary corporate action on the part of Parent and Merger Sub. This Agreement
and the Related Agreements have been duly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and delivery by the
other parties hereto and thereto, constitute the valid and binding obligation of
Parent and Merger Sub, enforceable in accordance with their respective terms,
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.3 Capital Structure.
-----------------
(a) The authorized stock of Parent consists of 150,000,000 shares of
Parent Common Stock, of which 43,705,493 shares were issued and outstanding as
of February 28, 2000, and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, 1,000 shares of which are issued and outstanding
and are held by Parent. All such shares have been duly authorized, and all such
issued and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens other than any liens created by or
imposed upon the holders thereof, and were not issued in violation of or subject
to any preemptive right, or other rights to subscribe for or purchase shares.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid and nonassessable and
will be issued in compliance with all applicable federal and state securities
laws.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
------------------------------------------
made available to the Company true and complete copies of all reports or
registration statements filed by it with the SEC under the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), for all periods subsequent to June 24,
1999, all in the form so filed (all of the foregoing being collectively referred
to as the "SEC Documents"). As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and none of the SEC Documents
filed under the Exchange Act 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 document with the SEC and copies of such documents have been made
available to the Company or counsel for the Company. None of the SEC Documents
filed under the Securities Act contained an untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading at the time such SEC documents became
effective under the Securities Act. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto) and
present fairly the consolidated financial position of Parent at the dates
thereof and of its operations and cash flows
-23-
for the periods then ended (subject, in the case of unaudited statements, to
normal audit adjustments).
3.5 No Conflict. The execution and delivery of this Agreement and the
-----------
Related Agreements does not, and the consummation of the Transactions will not
result in a Conflict with (i) any provision of the Charter of Parent or Merger
Sub, (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license to which Parent or Merger
Sub is subject, or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or its properties or assets, other than
any such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not impair the ability of Parent or Merger Sub to
consummate the Transactions.
3.6 Consents. No consent, waiver, approval, order or authorization of, or
--------
registration, declaration or filing with, any Governmental Entity or any third
party, including a party to any agreement with Parent or Merger Sub (so as not
to trigger any Conflict), is required by or with respect to Parent or Merger Sub
in connection with the execution and delivery of this Agreement and the Related
Agreements or the consummation of the Transactions, except for such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings (i) as may be required under applicable securities laws, (ii) as are set
forth in Schedule 3.6, and (iii) such other consents, authorizations, filings,
------------
approvals and registrations which if not obtained or made would not have a
Material Adverse Effect on Parent or Merger Sub or impair their ability to
consummate the Transactions.
3.7 Tax-Free Reorganization and Pooling. Neither Parent, Merger Sub nor,
-----------------------------------
to the knowledge of Parent and Merger Sub, any of their affiliates have taken or
agreed to take any action or failed to take any action which action or failure
would prevent the Merger and the other Transactions from being treated for
financial accounting purposes as a Pooling Transaction or would prevent the
Merger from constituting a reorganization under section 368(a) of the Code.
3.8 No Shareholder Vote Required. No vote of the stockholders of Parent is
----------------------------
required by law, Parent's Charter or otherwise for Parent and Merger Sub to
enter into this Agreement and the Related Agreements and to consummate the
Merger and the Transactions.
3.9 No Material Adverse Change. Since December 31, 1999, Parent has
--------------------------
conducted its business in the ordinary course and there has not occurred any
damage to, destruction or loss of any assets of the Parent (whether or not
covered by insurance) that materially and adversely affects the financial
condition or business of Parent.
3.10 Litigation. Except as disclosed on Schedule 3.10, there is no action,
---------- -------------
suit, claim, proceeding or arbitration of any nature pending or threatened
against the Parent or any of its properties or any of its officers, directors or
stockholders in respect of the Parent. There is no investigation pending or
threatened against the Parent, its properties or any of its officers, directors
or stockholders in respect of the Parent by or before any Governmental Entity.
No Governmental Entity has at any time challenged or questioned the legal right
of the Parent to manufacture, offer or sell any of its products in the present
manner or style thereof.
-24-
3.11 Representations Complete. Except as disclosed on Schedule 3.10, none
------------------------ -------------
of the representations or warranties made in this Article III, nor any statement
-----------
made in any schedule or certificate furnished by Parent or Merger Sub pursuant
to this Agreement contains, as of the date hereof, any untrue statement of a
material fact, or omits, as of the date hereof, to state any material fact
necessary to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading. There is no event, fact or
condition that materially and adversely affects the business, assets, financial
condition or results of operations of the Company, or that reasonably could be
expected to do so, that has not been set forth in this Agreement or in the SEC
Documents or Parent Financial Statements.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Conduct of Business of the Company. From the date of this Agreement
----------------------------------
until the earlier of (i) the termination of this Agreement and (ii) the
Effective Time, the Company agrees (except to the extent that Parent shall
otherwise consent in writing) to carry on the business of the Company in the
Ordinary Course of Business, to pay its debts and Taxes when due, to pay or
perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practice and
policies to preserve intact the Company's present business organization, keep
available the services of its present officers and key employees and preserve
their relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of its business, and any material event involving the
Company or its business. Without limiting the generality of the foregoing and
except as expressly contemplated by this Agreement, the Company shall not,
without the prior written consent of Parent:
(a) Enter into any commitment or transaction not in the Ordinary
Course of Business;
(b) Transfer to any Person any rights to Intellectual Property Assets
(other than pursuant to end-user licenses, in the Company's standard form
entered into in the Ordinary Course of Business consistent with past practice);
(c) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
Ordinary Course of Business, or violate the terms of, any of the agreements set
forth or described in the Disclosure Schedules;
(e) Commence or settle any litigation;
-25-
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or Company Rights), other than (i) issuances of Company Common Stock upon
the exercise of options granted under the Company's 1997 Stock Option Plan, (ii)
issuances of securities issuable upon conversion or exercise of outstanding
convertible or exercisable securities, or (iii) the repurchase of shares of its
capital stock from employees at cost;
(g) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or Company Rights;
(h) Cause or permit any amendments to its Charter;
(i) Merge or consolidate with any corporation, partnership,
association or other business organization or entity or division thereof, or
acquire or agree to acquire by purchasing any assets or equity securities of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;
(j) Sell, lease, license or otherwise dispose of any of its properties
or assets, except in the Ordinary Course of Business and consistent with past
practice;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to standard
written agreements outstanding on the date hereof and set forth in the
Disclosure Schedules;
(m) (i) Adopt or amend any employee benefit plan, (ii) enter into any
employee benefit, stock option or other compensation agreement, extend
employment offers, (iii) pay or agree to pay any special bonus or special
remuneration to any director or employee, or (iv) increase the salaries or wage
rates of its employees;
(n) Revalue any of its assets, including writing down the value of
accounts receivable other than in the Ordinary Course of Business;
(o) Pay, discharge or satisfy, in an amount in excess of $5,000 (in
any one case) or $25,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the Ordinary Course of Business of
liabilities reflected or reserved against in the Financial Statements or
expenses consistent with the provisions of this Agreement incurred in connection
with any Transaction;
-26-
(p) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Enter into any strategic alliance, development or joint marketing
agreement or any other material agreement;
(r) Change any method of accounting or accounting practice, except for
any such change required by GAAP;
(s) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (r), or any other action (or omit to take
---------------
an action) that would prevent the Company from performing or cause the Company
not to perform its covenants hereunder or that would make any representation or
warranty of the Company hereunder inaccurate in any respect at, or as of any
time prior to, the Effective Time.
4.2 Access to Information. The Company shall afford Parent and its
---------------------
accountants, counsel and other representatives (collectively, the
"Representatives"), reasonable access during normal business hours during the
period prior to the Effective Time to (a) all of its properties, books,
contracts, commitments and records, and (b) all other information concerning its
business, properties and personnel (subject to restrictions imposed by
applicable law) as Parent may reasonably request, including access upon
reasonable request to employees, customers and vendors of the Company for due
diligence inquiry. The Company shall provide to Parent and its Representatives
copies of internal financial statements and other documents promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this Section 4.2 shall affect or be deemed to modify any representation or
-----------
warranty contained herein, or the conditions of the parties to consummate the
Merger.
4.3 Confidentiality. Each Party agrees that the information obtained in any
---------------
investigation pursuant to Section 4.2, or pursuant to the negotiation and
-----------
execution of this Agreement or the effectuation of the Transactions shall be
governed by the terms of the Nondisclosure Agreement dated February ___, 2000
between the Company and Parent (the "Nondisclosure Agreement").
4.4 Exclusivity. The Company will not and will use its best efforts to
-----------
cause its officers, directors, stockholders and advisors to not (a) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any equity interests or any substantial portion
of the assets of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Company will notify Parent
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing and the terms of any such proposal, offer,
inquiry, or contact.
-27-
4.5 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Third Party Expenses") incurred by a Party or any Person with an interest in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the Transactions shall be the obligation of the respective
party incurring such fees and expenses.
4.6 Public Disclosure. Unless otherwise required by law (including federal
-----------------
and state securities laws) or, as to Parent, by the rules and regulations of The
Nasdaq Stock Market, Inc. prior to the Effective Time, no disclosure (whether or
not in response to an inquiry) of the subject matter of this Agreement shall be
made by any Party unless approved by Parent prior to release, provided that such
approval shall not be unreasonably withheld.
4.7 Consents. The Company shall use its best efforts to obtain the
--------
consents, waivers, assignments and approvals under any of the Contracts as may
be required in connection with the Merger (all of such consents, waivers and
approvals having been set forth on Schedule 2.6) so as to preserve all rights of
and benefits to the Company thereunder.
4.8 FIRPTA Compliance. On or prior to the Closing Date, the Company shall
-----------------
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
4.9 Reasonable Efforts. Subject to the terms and conditions provided in
------------------
this Agreement, each Party shall use its reasonable best efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Transactions, to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other impediments or
delays, legal or otherwise, to consummate and make effective the Transactions
under this Agreement for the purpose of securing to the parties hereto the
benefits contemplated by this Agreement.
4.10 Notification of Certain Matters. Each Party shall give prompt notice
-------------------------------
to the other Party of (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of such Party contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of such Party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 4.10 shall not limit or otherwise affect any remedies available to
the Party receiving such notice.
4.11 Company's Accountants. The Company will use its reasonable best
----------------------
efforts to cause the Company's management and its independent accountants to
facilitate on a timely basis the preparation of unaudited financial statements
as required by Parent to comply with applicable SEC regulations and filings.
4.12 Tax Treatment; Accounting Treatment. Each Party shall use its
-----------------------------------
reasonable best efforts to cause the Merger to qualify, and shall not take, and
shall use all reasonable efforts to
-28-
prevent any subsidiary, director or officer of such Party from taking, any
actions which could prevent the merger from qualifying, as (i) a reorganization
under the provisions of Section 368(a) of the Code and (ii) a Pooling
Transaction.
4.13 Employee Benefits Matters. To the extent that service is relevant for
-------------------------
eligibility, vesting and (except as would result in a duplication of benefits)
benefit accruals under any employee benefit plan, program or arrangement
maintained by Parent, such plan, program or arrangement maintained by Parent
shall credit each employee of the Company (a "Company Employee") who
participates therein for service on or prior to the Effective time with the
Company. Parent agrees to offer to Company Employees benefits commensurate with
those benefits conferred to Parent employees similarly situated. In addition,
Parent shall (i) waive limitations on benefits relating to any pre-existing
conditions under any parent welfare benefit plan in which Company Employees may
participate and (ii) recognize, for purposes of annual deductible and out-of-
pocket limits under its medical and dental plan, deductible and out-of-pocket
expenses paid by Company Employees and their respective dependents under
Company's medical, dental and other healthcare plans in the calendar year in
which the Effective Time occurs.
4.14 Officers and Directors. Parent agrees that all rights to
----------------------
indemnification (including advancement of expenses) existing on the date hereof
in favor of the present or former officers, directors, and employees of the
Company (collectively, the "Indemnified Parties") with respect to actions taken
in their capacities as officers, directors and employees (other than actions
causing a breach of this Agreement) prior to the Effective Time as provided in
the Company's Certificate of Incorporation or Bylaws, employment agreements and
indemnification agreements shall survive the Merger and continue in full force
and effect for a period of six years following the Effective Time and shall be
guaranteed by the Parent and that Company's former and present officer and
directors shall be provided by Parent with the same level of indemnification as
currently exists for Parent's officers and directors. This Section 4.14 shall
survive the consummation of the Merger at the Effective Time, and is intended to
be for the benefit of, and shall be enforceable by, the Indemnified Parties,
their heirs and personal representative and shall be binding on the Surviving
Corporation and Parent and their respective successors and assigns.
4.15 Blue Sky Laws. Parent shall take such steps as may be necessary to
-------------
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger. The Company shall use its best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Common Stock in
connection with the Merger.
ARTICLE V
CONDITIONS TO THE MERGER
-29-
5.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each Party to effect the Merger shall be subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) Government Approvals. All approvals of Governmental Entities
--------------------
necessary to consummate the Transactions.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(c) Listing. The shares of Parent Common Stock issuable in the Merger
-------
shall have been approved for listing on The Nasdaq Stock Market, Inc., subject
only to official notice of issuance.
5.2 Additional Conditions to Obligations of the Company. The obligations of
---------------------------------------------------
the Company to consummate the Merger and the Transactions shall be subject to
the satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Parent and Merger Sub contained in this Agreement shall be true and correct
in all material respects (except for those representations and warranties
(including those with respect to the Parent Financial Statements) which are by
their terms qualified by a standard of materiality, which representations and
warranties shall be true and correct in all respects) on and as of the Effective
Time with the same force and effect as if made on and as of the Effective Time,
and the Company shall have received certificates to such effect signed on behalf
of Parent and Merger Sub by duly authorized officers of Parent and Merger Sub.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) Tax Opinion. The Company shall have received an opinion from
-----------
Venture Law Group, P.C. to the effect that the Merger will constitute a
reorganization under section 368(a) of the Code, and such opinion shall not have
been withdrawn. In rendering such opinion, counsel shall be entitled to rely
upon, among other things, reasonable assumptions as well as representations of
Parent, Merger Sub and the Company and certain stockholders of the Company.
(d) Registration Rights Agreement. Parent shall have executed and
-----------------------------
delivered to each Holder a Registration Rights Agreement in the form of Exhibit
-------
5.2(d).
------
-30-
(e) Legal Opinion. The Company shall have received from Akin, Gump,
-------------
Xxxxxxx, Xxxxx & Xxxx, L.L.P., counsel to Parent, an opinion dated the Closing
Date covering the matters set forth on Exhibit 5.2(e).
--------------
(f) Listing. The Parent Common Stock issuable in the Merger shall have
-------
been approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
(g) Options. The parties set forth on Schedule 5.2(g) shall have been
------- ---------------
granted options in such amounts as set forth on Schedule 5.2(g) (which shall
---------------
total 550,000 shares) to purchase Parent Common Stock on Parent's standard terms
and conditions, at an exercise price equal to the fair market value of Parent
Common Stock on the Effective Date.
5.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
-----------------------------------------------------------------
obligations of Parent and Merger Sub to consummate the Merger and the
Transactions shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in this Agreement shall be true and correct in all
material respects (except for those representations and warranties (including
those with respect to the Financial Statements) which are by their terms
qualified by a standard of materiality, which representations and warranties
shall be true and correct in all respects) on and as of the Effective Time
(without regard to any updates to the Disclosure Schedule, unless otherwise
agreed by Parent) with the same force and effect as if made on and as of the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by a duly authorized officer of the
Company.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by a duly authorized officer of the Company.
(c) Third Party Consents. Any and all consents, assignments, approvals
--------------------
and waivers listed on Schedule 2.6 shall have been obtained.
------------
(d) Escrow Agreement. The Escrow Agreement shall have been duly
----------------
executed and delivered by parties thereto and shall be in full force and effect.
(e) Affiliate Letters. Each Person who is, as of the Effective Time,
-----------------
an "affiliate" of the Company for purposes of Rule 145 under the Securities Act
or under applicable SEC accounting releases with respect to pooling of interest
accounting treatment shall have executed and delivered to Parent a written
agreement in the form of Exhibit 5.3(e)r.
---------------
(f) Employment Agreement. No Company employee, as of the Closing, who
--------------------
has executed an employment agreement with Parent or a subsidiary thereof (an
"Employment
-31-
Agreement"), shall have provided Parent with reason to believe that such
employee will not be willing to perform under his or her Employment Agreement.
(g) Pooling. Parent shall have received from Ernst & Young LLP a
-------
written opinion dated the Effective Date to the effect that the Transactions,
including the Merger when effected in accordance with the terms hereof, shall be
accounted for in the consolidated financial statements of Parent and its
subsidiaries as a Pooling Transaction.
(h) Tax Opinion. Parent shall have received an opinion from Akin,
-----------
Gump, Strauss, Xxxxx & Xxxx, L.L.P. to the effect that the Merger will
constitute a reorganization under section 368(a) of the Code, and that such
opinion shall not have been withdrawn. In rendering such opinion, counsel shall
be entitled to rely upon, among other things, reasonable assumptions as well as
representations of Parent, Merger Sub and the Company and certain stockholders
of the Company.
(i) Legal Opinions. Parent shall have received from Venture Law Group,
--------------
P.C., counsel to the Company, an opinion dated the Closing Date covering the
matters set forth on Exhibit 5.3.
-----------
(j) Dissenting Shares. The holders of no more than 5% of Company
-----------------
Common Stock (calculated on a fully converted basis) shall have exercised their
right to dissent from the Merger under the Delaware Law.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification of Indemnified Parties. By virtue of the approval of
--------------------------------------
this Agreement and the Merger by the Company's Board of Directors and approval
of this Agreement by the Company's stockholders pursuant to the Company's
Charter and the applicable provisions of the Delaware Law, each of the Company's
stockholders shall be deemed to have agreed that, from and after the Effective
Time and subject to the provisions of this Article, each of the Company's
stockholders shall, jointly and severally, indemnify and hold harmless the
Parent, each of Parent's affiliates, and each officer, director and employee of
Parent and its affiliates (the "Indemnified Parties") from and against any and
all damages, losses, claims, liabilities, assessments, judgments, taxes,
demands, charges, suits, penalties, costs and expenses (including court costs
and reasonable attorneys' and experts' fees and expenses incurred in
investigating, preparing for and participating in any litigation, action or
proceeding, including any litigation, action or proceeding brought to enforce
the terms and provisions of this Article) that arise out of (a) any failure of
any of the representations or warranties made by the Company under this
Agreement to be true and accurate at the time as of which they are made; or (b)
any breach or default by the Company of any covenant or agreement made by the
Company under this Agreement and which is required to be performed by the
Company at or prior to the Effective Time ("Indemnified Costs").
-32-
6.2 Defense of Third Party Claims.
-----------------------------
(a) An Indemnified Party shall give prompt written notice to any
Person who is obligated to provide indemnification under Section 6.1 (an
-----------
"Indemnifying Party") of the commencement or assertion of any action,
proceeding, demand or claim by a third party (collectively, a "Third Party
Action") in respect of which such Indemnified Party shall seek indemnification
hereunder; provided, however, that an Indemnified Party shall be deemed to have
given such notice to each of the Company's stockholders if such Indemnified
Party gives such notice to the Seller Representative. Any failure so to notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it, he or she may have to such Indemnified Party under this
Article unless, and only to the extent that, the failure to give such notice
materially and adversely prejudices such Indemnifying Party.
(b) The Indemnifying Party shall be entitled, at its own expense, to
participate in the defense of such Third Party Action.
(c) The Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into or making any settlement, compromise,
admission, or acknowledgment of the validity of such Third Party Action or any
liability in respect thereof if such settlement, compromise, admission, or
acknowledgment (i) would impose injunctive or other equitable relief against the
Indemnified Party, or (ii) could, in the reasonable opinion of the Indemnified
Party, have a Material Adverse Effect on such Indemnified Party.
(d) No Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect of such Third Party Action.
6.3 Direct Claims. In any case in which an Indemnified Party seeks
-------------
indemnification hereunder which is not subject to Section 6.2 because no Third
-----------
Party Claim is involved (a "direct action"), the Indemnified Party shall notify
the Indemnifying Party in writing of any Indemnified Costs which such
Indemnified Party claims are subject to indemnification under the terms hereof.
Subject to Section 6.4(b) and 6.4(d), failure of the Indemnified Party to
--------------
exercise promptness in such notification shall not amount to a waiver of such
claim.
6.4 Limitations. The following provisions shall limit the indemnification
-----------
obligations hereunder:
(a) Minimum Loss. Subject to Section 6.5, no Indemnifying Party shall
------------ -----------
be required to indemnify an Indemnified Party for Indemnified Costs unless and
until the aggregate amount of all Indemnified Costs for which all Indemnified
Parties (taken together), are otherwise entitled to indemnification pursuant to
this Article exceeds $500,000 (the "Minimum Loss"). After the Minimum Loss is
exceeded, such Indemnified Parties shall be entitled to be paid the entire
amount of any Indemnified Costs from the first dollar of Indemnified Costs,
subject to the limitations on recovery and recourse set forth in this Section
-------
6.4.
---
-33-
(b) Limitation as to Time. No Indemnifying Party shall be liable for
---------------------
any Indemnified Costs pursuant to this Article unless a written claim for
indemnification in accordance with Section 6.2 or 6.3 is given by the
Indemnified Party to the Indemnifying Party with respect thereto on or before
5:00 p.m., Santa Barbara, California time on the first anniversary of the
Closing Date (the "Expiration Date"), except that this time limitation shall be
two years for claims based upon a breach of the representations and warranties
made in Section 2.2.
-----------
(c) Liability Cap. Without limiting any of the foregoing provisions of
-------------
this Section 6.4, the Parties hereby agree that (i) the maximum liability of a
-----------
particular Holder under this Article for Indemnified Costs shall in no event
exceed the value of the Parent Common Stock held in escrow for such Holder
pursuant to the Escrow Agreement valued as of the Effective Time, except that
the limitation set forth in this Section 6.4(c) shall not (A) apply to claims
--------------
based upon a breach of the representations and warranties made in Section 2.2 or
-----------
(B) limit the liability of any officer, director or stockholder of the Company
for such Person's fraud or intentional misrepresentation as set forth in Section
-------
6.7. Except as contemplated above, resort to the Escrow Fund shall be the
---
exclusive contractual remedy of Parent for any Damages if the Merger closes.
(d) Materiality. For purposes of determining (i) whether an
-----------
indemnifying Party shall be required to indemnify an Indemnified Party under
this Article, (ii) the aggregate amount of Minimum Loss suffered by an
Indemnified Party, or (iii) the aggregate amount of Indemnified Costs suffered
by an Indemnified Party, each representation and warranty (whether made as of
the date of this Agreement or made on and as of the Closing Date) contained in
this Agreement for which indemnification is sought hereunder shall be read
(including for purposes of determining whether a breach of such representation
or warranty has occurred) without regard to, and as if such representation or
warranty did not contain, materiality qualifications that may be contained
therein.
(e) Sole and Exclusive Remedy. Each Party acknowledges and agrees
-------------------------
that, after the Closing, notwithstanding any other provision of this Agreement
to the contrary, such Party's sole and exclusive remedy with respect to
Indemnified Costs shall be in accordance with, and limited by, the provisions
set forth in this Article.
6.5 Matters Not Subject to Minimum Loss. Notwithstanding any of the
-----------------------------------
provisions set forth in Section 6.4, the parties hereby agree that Section
----------- -------
6.4(a) shall not limit in any way the obligations of the Company's stockholders
------
to indemnify the Indemnified Parties for Indemnified Costs arising out of claims
based upon a breach of representations and warranties made in Sections 2.9(f),
---------------
2.9(g), 4.1(f), 4.1(g) and 4.1(l).
------ ------ ------ ------
6.6 Escrow Arrangements. At the Effective Time, the Escrow Amount shall be
-------------------
placed in an escrow fund (the "Escrow Fund"), to be governed by the terms of the
Escrow Agreement. The Escrow Fund shall be available to compensate Indemnified
Parties for Indemnified Costs. An Indemnified Party may not receive any shares
from the Escrow Fund unless and until Officer's Certificates (as defined in
Section 5 of the Escrow Agreement) identifying Indemnified
-34-
Costs, have been delivered to the Escrow Agent as provided in Section 5 of the
Escrow Agreement. The terms and conditions of the Escrow Fund shall be set forth
more fully in an Escrow Agreement in the form attached hereto as Exhibit 6.6
-----------
(the "Escrow Agreement").
6.7 No Waiver Relating to Claims for Fraud. The liability of any Party
--------------------------------------
under Article VI shall be in addition to, and not exclusive of, any other
----------
liability that such Party may have at law or equity based on such party's such
Party fraudulent acts or omissions. None of the provisions set forth in this
Agreement, including the provisions set forth in Section 6.4(a) (relating to
--------------
Minimum Loss), Section 6.4(b) (relating to limitations on the time during which
--------------
a claim for indemnification may be brought), or Section 6.4(c) (relating to a
--------------
cap on liability), shall be deemed a waiver by any Party of any right or remedy
which such Party may have at law or equity based on any other Party's willful
breach of any covenant set forth in this Agreement or any Party's fraudulent
acts or omissions, nor shall any such provisions limit, or be deemed to limit,
(a) the amounts of recoveries sought or awarded in any claim based on any other
Party's willful breach of any covenant set forth in this Agreement or any
Party's fraudulent acts or omissions, (b) the time period during which a claim
based on any other Party's willful breach of any covenant set forth in this
Agreement or any Party's fraudulent acts or omissions may be brought, or (c) the
recourse which any party may seek against another party with respect to a claim
based on any other Party's willful breach of any covenant set forth in this
Agreement or any Party's fraudulent acts or omissions; provided, that with
respect to such rights and remedies at law or equity, the Parties further
acknowledge and agree that none of the provisions of this Section 6.7 nor any
-----------
reference to this Section 6.7 throughout this Agreement, shall be deemed a
-----------
waiver of any defenses which may be available in respect to actions or claims
based on any other Party's willful breach of any covenant set forth in this
Agreement or any Party's fraudulent acts or omissions, including defenses of
statutes of limitations or limitations of damages.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Except as provided in Section 7.2, this Agreement may be
----------- -----------
terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred by May 31, 2000 (provided that the right to terminate this Agreement
under this Section 7.1(b) (i) shall not be available to any Party whose willful
--------------
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date and
provided further that if a request for additional information is received from a
Governmental Entity pursuant to the HSR Act, such date shall be extended to the
90th day following acknowledgment by such Governmental Entity that Parent and
the Company have complied with such request); (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or
-35-
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity that would make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent;
(d) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Company and
as a result of such breach the conditions set forth in Section 5.3(a) or 5.3(b),
-------------- ------
as the case may be, would not then be satisfied; provided, however, that if such
-------- -------
breach is curable by the Company within 30 days through the exercise of its
reasonable best efforts, then for so long as the Company continues to exercise
such reasonable best efforts Parent may not terminate this Agreement under this
Section 7.1(d) unless such breach is not cured within 30 days (but no cure
--------------
period shall be required for a breach which by its nature cannot be cured);
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and as a result of such breach the conditions set forth in
Section 5.2(a) or 5.2(b), as the case may be, would not then be satisfied;
-------------- ------
provided, however, that if such breach is curable by Parent or Merger Sub
-------- -------
within 30 days through the exercise of its reasonable best efforts, then for so
long as Parent or Merger Sub continues to exercise such reasonable best efforts
the Company may not terminate this Agreement under this Section 7.1(e) unless
--------------
such breach is not cured within 30 days (but no cure period shall be required
for a breach which by its nature cannot be cured). Where action is taken to
terminate this Agreement pursuant to this Section 7.1, it shall be sufficient
-----------
for such action to be authorized by the Board of Directors of the party taking
such action.
7.2 Effect of Termination. If this Agreement terminates as provided in
---------------------
Section 7.1, this Agreement shall forthwith become void, and there shall be no
-----------
liability or obligation on the part of Parent, Merger Sub or the Company, or
their respective officers, directors or stockholders; provided, that each Party
--------
shall remain liable for any breaches of this Agreement prior to its termination;
and provided further, that Sections 4.3 and 4.5 and Article IX 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 by or on behalf of the respective Boards of Directors of Parent and
the Company at any time prior to the Effective Time; provided, however, that,
-------- -------
after the approval of and adoption of this Agreement and the Merger by the
Holders, no amendment may be made which would reduce the
-36-
amount or change the Merger Consideration. This Agreement may not be amended
except in a writing signed by the Company, Parent and Merger Sub.
7.4 Extension; Waiver. At any time prior to the Effective Time, Parent and
-----------------
Merger Sub, on the one hand, and the Company, on the other, to the extent
legally allowed, may (i) extend the time for the performance of any of the
obligations of the other Party, (ii) waive any inaccuracies in the
representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such Party contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such Party.
ARTICLE VIII
THE SELLER REPRESENTATIVE
By virtue of the approval of this Agreement and the Merger by the Company's
Board of Directors and approval of this Agreement by the Holders pursuant to the
Company's Articles of Incorporation and Bylaws and the applicable provisions of
the Delaware Law, each of the Holders shall be deemed to have agreed that:
8.1 Authorization of the Seller Representative. Xxxxxx Xxxxx (the "Seller
------------------------------------------
Representative") (and each successor appointed in accordance with Section 8.3)
-----------
hereby is appointed, authorized and empowered to act, on behalf of the Holders,
in connection with, and to facilitate the consummation of the Transactions, and
in connection with the activities to be performed on behalf of the Holders under
this Agreement and the Escrow Agreement, for the purposes and with the powers
and authority hereinafter set forth in this Article VIII and in the Escrow
------------
Agreement, which shall include the power and authority:
(a) To execute and deliver the Escrow Agreement (with such
modifications or changes therein as to which the Seller Representative, in its
reasonable discretion, shall have consented to) and to agree to such amendments
or modifications thereto as the Seller Representative, in its reasonable
discretion, may deem necessary or desirable to give effect to the matters set
forth in this Article VIII;
------------
(b) To execute and deliver such waivers and consents in connection
with this Agreement and the consummation of the Transactions as the Seller
Representative, in its reasonable discretion, may deem necessary or desirable to
give effect to the intentions of this Agreement;
(c) As the Seller Representative of the Holders, to enforce and
protect the rights and interests of the Holders and to enforce and protect the
rights and interests of the Holders arising out of or under or in any manner
relating to this Agreement and the Escrow Agreement (including in connection
with any and all claims for indemnification brought by an Indemnified Party
under Article VI) and, in connection therewith, to (i) assert any claim or
----------
institute any
-37-
action, proceeding or investigation; (ii) investigate, defend, contest or
litigate any claim, action, proceeding or investigation initiated by any
Indemnified Party, or any other Person, against the Holders and/or the Escrow
Amount, and receive process on behalf of any or all of the Holders in any such
claim, action, proceeding or investigation and compromise or settle on such
terms as the Seller Representative shall determine to be appropriate, give
receipts, releases and discharges on behalf of all of the Holders with respect
to any such claim, action, proceeding or investigation; (iii) file any proofs,
debts, claims and petitions as the Seller Representative may deem advisable or
necessary; (iv) settle or compromise any claims asserted under Article VI; (v)
----------
assume, on behalf of all of the Holders, the defense of any claim that is the
basis of any claim asserted under Article VI; and (vi) file and prosecute
----------
appeals from any decision, judgment or award rendered in any of the foregoing
actions, proceedings or investigations, it being understood that the Seller
Representative shall not have any obligation to take any such actions, and shall
not have liability for any failure to take any such action;
(d) To enforce payment from the Escrow Account on behalf of the
Company's stockholders, in the name of the Seller Representative or, if the
Seller Representative so elects, upon at least 15 days' prior written notice to
the Holders and in the absence of written instructions to the contrary, in the
names of one or more of the Holders;
(e) To cause to be paid out of the Escrow Account the full amount of
any judgment or judgments and legal interest and costs awarded in favor of any
Indemnified Party arising out of the indemnification provisions set forth in
Article VI;
----------
(f) To refrain from enforcing any right of the Holders or any of them
and/or of the Seller Representative arising out of or under or in any manner
relating to this Agreement or the Escrow Agreement;
(g) To make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the Seller
Representative, in its sole and absolute discretion, may consider necessary or
proper or convenient in connection with or to carry out the activities described
in paragraphs (a) through (f) above and the Transactions.
The grant of authority provided for in this Section 8.1: (i) is coupled
-----------
with an interest and is being granted, in part, as an inducement to the Company,
Parent and Merger Sub to enter into this Agreement and shall be irrevocable and
survive the death, incompetency, bankruptcy or liquidation of any Holder and
shall be binding on any successor thereto; (ii) subject to the provisions of
Section 8.3 below, may be exercised by the Seller Representative acting by
-----------
signing as Seller Representative of each of the Company's stockholders; and
(iii) shall survive any distribution from the Escrow Agent.
8.2 Compensation; Exculpation; Indemnity.
------------------------------------
(a) The Seller Representative shall not be entitled to any fee,
commission or other compensation for the performance of its service hereunder,
but shall be entitled to the payment of
-38-
all of its out-of-pocket expenses incurred as Seller Representative, and in
furtherance of the foregoing, may pay or cause to be paid or reimburse itself
for the payment of any and all such expenses out of any amounts to be released
from the Escrow Account for the benefit of the Holders.
(b) In dealing with this Agreement, the Escrow Agreement and any
instruments, agreements or documents relating thereto, and in exercising or
failing to exercise all or any of the powers conferred upon the Seller
Representative hereunder or thereunder, (i) the Seller Representative shall not
assume any, and shall incur no, responsibility whatsoever to any Holder because
of any error in judgment or other act or omission performed or omitted hereunder
or in connection with the Agreement or Escrow Agreement; and (ii) the Seller
Representative shall be entitled to rely on the advice of counsel, public
accountants or other independent experts experienced in the matter at issue, and
any error in judgment or other act or omission of the Seller Representative
pursuant to such advice shall in no event subject the Seller Representative to
liability to the Company, any of the Holders, Parent, Merger Sub, the Surviving
Corporation or any other Person.
8.3 Removal and Replacement of Seller Representative; Successor Seller
------------------------------------------------------------------
Representative; Action by Seller Representative.
-----------------------------------------------
(a) If the Seller Representative is unable or unavailable to perform
their duties hereunder, a Seller Representative, who shall be a Holder or a
representative of a non-individual Holder, or, if after the Effective Time,
shall have been a Holder or a representative of a non-individual Holder
immediately prior to the Effective Time, shall be appointed by the Holders who,
immediately prior to the Effective Time, shall be appointed by the Holders who,
immediately prior to the Effective Time, hold a majority of the Company Common
Stock and Company Preferred Stock (calculated on an as converted basis), unless
such Person is unable or unwilling to accept such appointment.
(b) Any Seller Representative, or all of them, may be removed at any
time by a written notice delivered by the Holders who, immediately prior to the
Effective Time, hold a majority of the Company Common Stock and Company
Preferred Stock (calculated on an as converted basis) to the Seller
Representative, the other Holders, Parent and the Surviving Corporation. A
Seller Representative so removed shall be replaced promptly by Holders who,
immediately prior to the Effective Time, hold a majority of the Company Common
Stock and Company Preferred Stock (calculated on an as converted basis) by
written notice delivered to all of the Holders and Parent.
(c) If any successor Seller Representative is appointed as
contemplated in Sections 8.3(a) or 8.3(b), written notice of such appointment
-------------------------
executed by the Holders who, immediately prior to the Effective Time, hold a
majority of the Company Common Stock and Company Preferred Stock (calculated on
an as converted basis) shall be delivered to the Seller Representative, the
Company's other Holders and Parent. Any successor Seller Representative shall
have all of the authority and responsibilities conferred upon or delegated to a
Seller Representative pursuant to this Article VIII.
------------
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8.4 Reliance; Limitation as to Parent, Merger Sub and the Company.
-------------------------------------------------------------
(a) Parent, Merger Sub, the Company and Surviving Corporation may
conclusively and absolutely rely, without inquiry, and until the receipt of
written notice of a change of the Seller Representative under Section 8.3 may
-----------
continue to rely, without inquiry, upon the action of the Seller Representative
as the action of each Holder in all matters referred to in this Article VIII.
------------
(b) Each Party acknowledges and agrees that, except as set forth in
this Section 8.4, the provisions of this Article VIII create no binding
----------- ------------
obligations between Parent, Merger Sub and the Surviving Corporation, on
the one hand, and the Holders, on the other hand; provided, however, that
if Parent is given written notice of the appointment of a successor Seller
Representative as contemplated in Section 8.3, Parent, Merger Sub and the
-----------
Surviving Corporation shall be obligated to recognize, and shall only be
able to so rely upon the action of, such successor Seller Representative as
the Seller Representative for all purposes under this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be mailed by certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Xxxxxxxx.xxx, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxxx Xxxxx, Xxxxx Tower
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
-40-
XxXxxxxx.xxx, Inc.
00000 X.X. 0xx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone No.: (425) 372-____
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Venture Law Group, P.C.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Seller Representative
___________________________
___________________________
Attention:_________________
Telephone No.:_____________
Facsimile No.:_____________
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. As used in this Agreement, the phrases "to a Party's
knowledge," "a Party is not aware," and similar phrases shall mean the knowledge
of such Party, or of the officers and directors of such Party, after careful
consideration of the matters set forth in the representation that is so
qualified and a reasonably diligent review of all files, documents, agreements
and other materials in such Person's possession or subject to his or her
control. The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 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
Party and delivered to the other Party, it being understood that all parties
need not sign the same counterpart.
-41-
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
----------------------------
Exhibits hereto, the Related Agreements and the documents and instruments and
other agreements among the Parties referenced herein and therein (including the
Nondisclosure Agreement): (a) constitute the entire agreement among the Parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other Person any
rights or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise except as otherwise specifically provided, except that Parent and
Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
9.5 Severability. If any provision of this Agreement or the application
------------
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The Parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a Party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such Party, and the exercise by a Party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each Party agrees that process may be served upon them in any manner authorized
by the laws of the State of Delaware for such Persons and waives and covenants
not to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
9.8 Rules of Construction. The Parties agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the Party drafting such agreement or document.
9.9 Specific Performance. The Parties agree that irreparable damage would
--------------------
occur if any provision of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Therefore, the Parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Time is of the essence in the performance of a Party's obligations hereunder.
9.10 Survival of Representations, Warranties and Agreement. Regardless of any
-----------------------------------------------------
investigation at any time made by or on behalf of any Party or of any
information any Party may
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have in respect thereof, each of the representations and warranties made by
Parent, Merger Sub or the Company hereunder or pursuant hereto or in connection
with the Transactions shall survive the Closing, but shall terminate at 5:00
p.m., Santa Barbara, California time on the Expiration Date, other than the
representations and warranties made by the Company in Section 2.2, which
-----------
representations and warranties shall survive until the first anniversary of the
Expiration Date. Following the date of termination of a representation or
warranty, no claim can be brought with respect to a breach of such
representation or warranty, but no such termination shall affect any claim for a
breach of a representation or warranty that was asserted before the date of
termination. To the extent that such are performable after the Closing, each
covenant and agreement contained in this Agreement shall survive the Closing for
the period stated or, if no such period is stated, such covenant or agreement
shall survive indefinitely.
9.11 Headings. The descriptive headings contained in this Agreement are
--------
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement
9.12 Waiver of Jury Trial. Each of Parent, Merger Sub and the Company
--------------------
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of Parent, Merger Sub or the Company
in the negotiation, administration, performance and enforcement thereof.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
AT XXXXXX.XXX, INC. XXXXXXXX.XXX, INC.
By: _____________________________ By: ________________________________________
Xxxxxxx Xxxxxxxx, Chief Xxxx XxxXxxxxxx, Chief Executive Officer
Executive Officer
XXXXXXXX.XXX WIRELESS, INC.
By: ________________________________________
Xxxx XxxXxxxxxx, Chief Executive Officer
INDEX OF EXHIBITS
Exhibit Description
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Exhibit 5.2(d) Form of Registration Rights Agreement
Exhibit 5.2(e) Form of Opinion of Akin, Gump, Strauss,
Xxxxx & Xxxx, L.L.P.
Exhibit 5.3(e) Form of Affiliate Letter
Exhibit 5.3(j) Form of Opinion of Venture Law Group
Exhibit 6.6 Form of Escrow Agreement
