AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of November 30, 1999, by and among Xxxxx.xxx, Inc., a
Delaware corporation ("Xxxxx.xxx"), Xxxxx.xxx Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Xxxxx.xxx ("AAC"), North Sky, Inc.,
a Delaware corporation ("North Sky"), and Dalita Stay and Makers LLC, a Utah
limited liability company, the sole stockholders of North Sky (collectively, the
"Stockholders").
RECITALS
WHEREAS, Xxxxx.xxx, AAC, North Sky and the Stockholders each have
determined to engage in the transactions contemplated hereby, pursuant to which
(i) AAC will merge with and into North Sky and (ii) each issued and outstanding
share of capital stock of North Sky shall be converted into shares of Xxxxx.xxx
capital stock in the manner herein described;
WHEREAS, the respective Boards of Directors of North Sky, Xxxxx.xxx
and AAC, and the Stockholders and Xxxxx.xxx, as the sole stockholder of AAC,
have each approved this Agreement and the transactions contemplated hereby; and
WHEREAS, the parties intend for the transactions contemplated by
this Agreement to qualify as a plan of reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
THE MERGER
1.1 Surviving Corporation; Effective Time.
(a) At the Closing (as defined in Section 7.1) and subject to
the terms and conditions of this Agreement, AAC shall be merged with and into
North Sky (the "Merger") in accordance with the Delaware General Corporation Law
(the "DGCL"), whereupon the separate existence of AAC shall cease, and North Sky
shall be the surviving corporation (the "Surviving Corporation").
(b) Simultaneously with the Closing, North Sky and AAC shall
file a certificate of merger (the "Certificate of Merger") in the office of the
Secretary of State of the State of Delaware in accordance with the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed in Delaware (the date of such filing being hereinafter referred to as the
"Effective Date" and the time of such filing being hereinafter referred to as
the "Effective Time"). It is the intention of the parties that this Agreement
shall constitute an agreement of merger under the DGCL. From and after the
Effective Time, North
Sky shall possess all the rights, privileges, powers and franchises and be
subject to all of the restrictions, disabilities and duties of both North Sky
and AAC, as provided under the DGCL.
1.2 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of North Sky shall be amended and restated at and as of
the Effective Time to read as did the Certificate of Incorporation and Bylaws of
AAC immediately prior to the Effective Time (except that the name of the
surviving corporation, North Sky, Inc., shall remain unchanged), until
thereafter amended in accordance with applicable law.
1.3 Directors and Officers. From and after the Effective Time, the
directors and officers of North Sky, as the surviving corporation, shall be the
individuals designated in Schedule 1.3 hereto.
1.4 Conversion of Shares. As of the Effective Time, by virtue of the
Merger, automatically and without any action on the part of any holder thereof:
(a) Each issued and outstanding share of North Sky common
stock, $0.0001 par value per share (the "Shares"), shall
be converted into the quotient obtained upon dividing
(x) {752,942} by (y) {the sum of (i) 7,383,000 and (ii)
the number of shares of North Sky common stock issuable
upon conversion of all outstanding convertible debt
securities of North Sky (the number of such shares being
518,379 as of November 29,1999 and (iii) the number of
shares of North Sky common stock issuable upon exercise
of vested options (after giving effect to acceleration)
to purchase shares of North Sky common stock immediately
following the Effective Time under the North Sky 1997
Stock Option Plan (the "North Sky Stock Option Plan")
(the number of such shares being 3,355,875, provided the
Effective Date is on or prior to December 18, 1999) and
(iv) 605,000} (the "Exchange Ratio") shares of
Xxxxx.xxx's common stock, $0.001 par value per share
(the "Xxxxx.xxx Common Stock").
(b) The shares of Xxxxx.xxx Common Stock to be issued
pursuant to Section 1.4(a) shall be adjusted to reflect
fully the effect of any stock split, reverse split,
stock dividend, reorganization, recapitalization or
other like change with respect to the capital stock of
either Xxxxx.xxx or North Sky occurring after the
execution of this Agreement and prior to the Effective
Time.
(c) Fractional shares of Xxxxx.xxx Common Stock will not be
issued in connection with the conversion of the Shares
into shares of Xxxxx.xxx Common Stock and the Shares
converted pursuant to subsection (a) above shall be
rounded up to the nearest whole number of shares of
Xxxxx.xxx Common Stock.
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1.5 Exchange of Certificates.
(a) At the Closing and subject to the terms of the Escrow
Agreement (as defined below), upon receipt of the certificates representing the
Shares, AAC shall deliver to each Stockholder and each other holder of common
stock of North Sky in exchange therefor a certificate for the number of shares
of Xxxxx.xxx Common Stock to which such holder is entitled pursuant to Section
1.4 (subject to any Escrowed Amounts (as defined in Section 1.6)). Certificates
representing the shares of Xxxxx.xxx Common Stock to be issued pursuant to
Section 1.4 shall include an appropriate Securities Act of 1933 legend (Rule 144
legend) providing that the stock evidenced by the certificates are restricted
securities.
(b) All Xxxxx.xxx Common Stock delivered to the Stockholders,
the other holders of common stock of North Sky or the Escrow Agent (as defined
below) in exchange for the Shares in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Shares. After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of North Sky of certificates representing
any North Sky capital stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates representing North
Sky capital stock are presented for any reason, they shall be cancelled and
exchanged as provided in this Section 1.5.
1.6 Escrow. Prior to the Effective Time, Xxxxx.xxx, AAC, North Sky,
the Stockholders and First Union National Bank (the "Escrow Agent") shall have
entered into an Escrow Agreement substantially in the form attached hereto as
Exhibit A (the "Escrow Agreement"). Pursuant to the terms and conditions of the
Escrow Agreement, upon the Closing Xxxxx.xxx shall deliver 35,150 of the shares
of Xxxxx.xxx Common Stock that the Stockholders are otherwise eligible to
receive pursuant to Section 1.4 (the "Escrowed Amounts") to the Escrow Agent for
deposit in the Escrow Account (as defined in the Escrow Agreement) for the
purpose of securing various obligations of North Sky and the Stockholders set
forth in this Agreement and the Escrow Agreement. The Escrowed Amounts shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrowed Amounts shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Escrow Agreement.
1.7 Employee Benefit Plans; Assumption of Options. At the Effective
Time, the North Sky Stock Option Plan, and each outstanding option to purchase
shares of North Sky common stock under the North Sky Stock Option Plan, whether
vested or unvested, will be assumed by Xxxxx.xxx. Schedule 1.7 hereto sets forth
a true and complete list as of the date hereof of all holders of outstanding
options under the North Sky Stock Option Plan and includes the number of shares
of North Sky Common Stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. On the
Closing Date, North Sky shall deliver to Xxxxx.xxx an updated Schedule 1.7
hereto current as of such date. Each such option so assumed by Xxxxx.xxx under
this Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the North Sky Stock Option Plan, and the applicable
stock option agreement immediately prior to the Effective Time, except that (i)
such option will be exercisable for that number of whole shares of Xxxxx.xxx
common stock equal to the product of the number of shares of North Sky common
stock that were issuable upon
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exercise of such option immediately prior to the Effective Time multiplied by
the Exchange Ratio and rounded to the nearest whole number of shares of
Xxxxx.xxx common stock, and (ii) the per share exercise price for the shares of
North Sky common stock issuable upon exercise of such assumed option will be
equal to the quotient determined by dividing the exercise price per share of
North Sky common stock at which such option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded to the nearest whole cent.
Consistent with the terms of the North Sky Stock Option Plan, and the documents
governing the outstanding options under such stock option plan, the Merger will
not terminate any of the outstanding options under the North Sky Stock Option
Plan but will accelerate the exercisability and vesting of some of the options
as set forth in Schedule 1.7 hereto. It is the intention of the parties that the
options so assumed by Xxxxx.xxx qualify, to the maximum extent permissible,
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent such options qualified as incentive stock options
prior to the Effective Time. Within 15 business days after the Effective Time,
Xxxxx.xxx will issue to each person who, immediately prior to the Effective Time
was a holder of an outstanding option under the North Sky Stock Option Plan a
document in form and substance satisfactory to North Sky evidencing the
foregoing assumption of such option by Xxxxx.xxx.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF XXXXX.XXX AND AAC
Each of Xxxxx.xxx and AAC, jointly and severally, agrees with, and
represents and warrants to North Sky and each of the Stockholders as follows:
2.1 Organization. Each of Xxxxx.xxx and AAC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
2.2 Power and Authority. Each of Xxxxx.xxx and AAC has all requisite
corporate power and authority to enter into this Agreement and all other
documents contemplated hereby (collectively, the "Xxxxx.xxx Documents") and to
consummate the transactions contemplated hereby. The Xxxxx.xxx Documents have
been duly executed and delivered by each of Xxxxx.xxx and AAC, have been
authorized by all necessary corporate action of each of Xxxxx.xxx and AAC and
constitute the legal, valid and binding obligations of each of Xxxxx.xxx and
AAC, enforceable against Xxxxx.xxx and AAC in accordance with their terms,
except as such enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable principles.
2.3 Reports; Financial Statements. Xxxxx.xxx has furnished to North
Sky true and complete copies of its registration statement on Form S-1 as
initially filed on December 30, 1998, together with all amendments thereto
including its financial statements for the period ended December 31, 1996 and
the years ended December 31, 1997 and December 31, 1998, contained therein,
together with each registration statement, prospectus, report, proxy statement
or information statement prepared by Xxxxx.xxx since its initial public offering
on March 24, 1999, including Xxxxx.xxx's Quarterly Report on Form 10-Q for the
quarter ended September
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30, 1999 in the form (including exhibits, annexes and any amendments thereto)
filed with the Securities and Exchange Commission ("SEC") (collectively,
including any such reports filed subsequent to the date of this Agreement,
"Xxxxx.xxx's SEC Reports"). As of their respective dates, Xxxxx.xxx's SEC
Reports complied as to form with all applicable requirements under the
Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations thereunder and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein not misleading. Each of the consolidated
balance sheets included in or incorporated by reference into Xxxxx.xxx's SEC
Reports (including the related notes and schedules) fairly presents the
consolidated balance sheet of Xxxxx.xxx and its subsidiaries as of its date and
each of the consolidated statements of income, shareholders' investment and cash
flows included in or incorporated by reference into Xxxxx.xxx's SEC Reports
(including any related notes and schedules) fairly presents the consolidated
results of operations, statement of shareholders' investment and cash flows, as
the case may be, of Xxxxx.xxx and its subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to the absence of notes
(to the extent permitted by the rules applicable to form 10-Q) and to normal
year-end adjustments that will not be material in amount or effect), in each
case in accordance with GAAP consistently applied during the periods involved,
except as may be noted therein.
2.4 No Conflict or Default. Except where such violation, conflict or
breach would not result in a Material Adverse Effect (defined below in Section
3.1), neither the execution and delivery of this Agreement or any of the
documents to be delivered hereunder, nor compliance with the terms and
provisions hereof or thereof, will violate any statute, regulation or ordinance
of any governmental authority, or conflict with or result in the breach of any
term, condition or provision of (i) the Certificate of Incorporation or Bylaws
of Xxxxx.xxx, or (ii) of any agreement, deed, contract, mortgage, indenture,
writ, order, decree, legal obligation or instrument to which Xxxxx.xxx is a
party, or constitute a default (or an event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder, or result in
the creation or imposition of any material lien, charge, encumbrance or
restriction of any nature whatsoever.
2.5 Consents and Approvals. Except for the filing of the Certificate
of Merger and any applicable federal or state securities filings (including,
without limitation, the filing with the Securities and Exchange Commission of
the Form S-3 Registration Statement and the Form S-8 Registration Statement, as
such terms are defined in Sections 4.7 and 4.8 hereof, respectively), and the
consent of Xxxxxxxxx Xxxxxx & Xxxxxxxx Securities Corporation to the filing of
the Form S-8 Registration Statement and the issuance of the shares of Xxxxx.xxx
Common Stock in connection with the Merger, and except for such consents,
approvals or filings which, if not obtained or made, would not have a Material
Adverse Effect (as such term is defined in Section 3.1 hereof) on Xxxxx.xxx or
AAC and would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement, no consent, approval, order, authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any non-governmental third
party on the part of Xxxxx.xxx or AAC is required in connection with the
execution, delivery and performance by Xxxxx.xxx and AAC of this Agreement or
the consummation of the transactions contemplated hereby.
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2.6 Brokers or Finders. Neither Xxxxx.xxx nor AAC has incurred, or
will incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.7 Capitalization. As of September 30, 1999, the authorized capital
stock of Xxxxx.xxx consisted of (a) 50,000,000 shares of common stock, par value
$.0001 per share, of which (i) 12,288,418 shares were issued and outstanding,
(ii) 65,860 were issuable upon exercise of outstanding warrants and (iii)
2,778,071 were issuable upon exercise of then outstanding options (of which
options to purchase 833,006 shares were then exercisable) and (b) 5,000,000
shares of preferred stock, par value $.0001 per share, none of which were issued
and outstanding. All of the outstanding shares of capital stock of Xxxxx.xxx
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
2.8 Absence of Certain Changes. Since September 30, 1999, there has
not been:
(a) Any event that may reasonably have a Material Adverse
Effect on Xxxxx.xxx; or
(b) Any declaration, setting aside or payment of dividends or
distributions in respect of the capital stock of Xxxxx.xxx, or any
split-up or other recapitalization in respect of the capital stock of
Xxxxx.xxx or any direct or indirect redemption, purchase or other
acquisition of any such capital stock of Xxxxx.xxx or any agreement to do
any of the foregoing;
(c) Any change in the accounting methods, practices or
policies followed by Xxxxx.xxx from those in effect during the past year;
(d) Any change or amendment to the Certificate of
Incorporation or Bylaws of Xxxxx.xxx; or
(e) Any alteration in any term of any outstanding securities,
including stock options, of Xxxxx.xxx, except for such changes which would
not have a Material Adverse Effect on Xxxxx.xxx.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NORTH SKY
North Sky represents and warrants to each of Xxxxx.xxx and AAC that:
3.1 Organization and Corporate Authority. North Sky is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. Schedule 3.1 hereto sets forth all states in which North Sky
is qualified to do business, and North Sky has requisite corporate power and
authority to carry on its business and is qualified to do business in each state
where the conduct of its business requires such qualification, except where the
failure to be so qualified is not reasonably likely to have a Material Adverse
Effect. For purposes of this Agreement, "Material Adverse Effect" means, with
respect to any person or
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entity, a material adverse effect on the financial condition, assets and
liabilities (taken together), results of operations or business of such person
or entity and its subsidiaries, taken as a whole; provided, however, that none
of the following shall be deemed to constitute, and shall not be taken into
account in determining the occurrence of, a Material Adverse Effect with respect
to a person or entity: (i) any effect arising from or relating to general
business or economic conditions which does not affect such person or entity in
any materially disproportionate manner, or (ii) any effect relating to or
affecting the software or internet industries, which does not effect such person
or entity in a disproportionate manner and (iii) any effect arising from or
relating to the announcement or pendency of the Merger.
3.2 Power and Authority. North Sky has all requisite corporate power
and authority to enter into this Agreement and all other documents contemplated
hereby (collectively, the "North Sky Documents") and to consummate the
transactions contemplated hereby. The North Sky Documents have been duly
executed and delivered by North Sky, have been authorized by all necessary
corporate action of North Sky and constitute legal, valid and binding
obligations of North Sky, enforceable against North Sky in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equitable
principles.
3.3 Capitalization.
(a) The authorized capital stock of North Sky consists of (a)
20,000,000 shares of common stock, par value $.0001 per share, of which
(i) 7,383,000 shares are presently issued and outstanding, (ii) 5,222,500
shares are issuable upon the exercise of currently outstanding options
under the North Sky Stock Option Plan (of which options to purchase
3,355,875 shares shall be vested on the Closing Date, provided the Closing
Date occurs on or before December 18, 1999) and (iii) 518,379 shares are
issuable upon conversion of outstanding convertible debt securities as of
November 29, 1999, and (b) 2,000,000 shares of preferred stock, par value
$.0001 per share, none of which have been issued. All such shares of
issued and outstanding stock are owned of record and beneficially by the
Stockholders. Schedule 3.3(a) hereto sets forth the number of shares of
North Sky common stock held by the Stockholders and the number of shares
of North Sky common stock issuable upon conversion of outstanding
convertible debt securities currently held by the individuals or entities
set forth therein (the "Convertible Debtholders"). All outstanding shares
of North Sky capital stock have been duly authorized and validly issued
and are fully paid and nonassessable. There have been no additional shares
of capital stock of North Sky that have been issued or that are presently
outstanding and, except as set forth on Schedule 3.3(b) hereto, there are
no other subscriptions, options, warrants, conversion rights, rights of
exchange or other rights, plans, agreements or commitments of any nature
whatsoever (including, without limitation, conversion or preemptive
rights) providing for the purchase, issuance, transfer, registration or
sale of any shares of North Sky's capital stock or any securities
convertible into or exchangeable for any shares of North Sky capital
stock. All of the shares of North Sky's capital stock, and all securities
exercisable for or convertible into North Sky's capital stock, issued by
North Sky have been issued pursuant to valid exemptions from registration
under all federal and state securities laws and there are no outstanding
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obligations of North Sky to repurchase, redeem or otherwise acquire any of
the shares of capital stock issued by North Sky. Schedule 3.3(b) hereto
sets forth the names of all optionees under the North Sky Stock Option
Plan, detailing the number of options, exercise price and vesting schedule
(including acceleration) of such options. North Sky hereby agrees to
provide updated versions of Schedule 3.3(a) and Schedule 3.3(b) on, and as
of, the Closing Date.
(b) All outstanding options to purchase shares of North Sky's
common stock under the North Sky Stock Option Plan were granted as
incentive stock options, and immediately prior to the Effective Time will
be incentive stock options, as such term is defined in the Code.
3.4 Subsidiaries. North Sky does not presently own, directly or
indirectly, any interest in any other corporation, association, joint venture or
other business entity.
3.5 Financial Statements; Financial Records. North Sky has delivered
to Xxxxx.xxx and AAC its audited financial statements (balance sheet, statement
of operations and statement of cash flows) as of, and for the years ended,
December 31, 1996, December 31, 1997 and December 31, 1998 (the "Audited
Financial Statements"), and will deliver to Xxxxx.xxx and AAC prior to the
Effective Time, its unaudited financial statements (balance sheet, statement of
operations and statement of cash flows) as of, and for the nine-month period
ended, September 30, 1999 (for which North Sky shall have performed a review in
accordance with Statements of Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants and delivered a
review report thereon to Xxxxx.xxx and AAC) (the "Unaudited Financial
Statements", and the Audited Financial Statements and Unaudited Financial
Statements are collectively referred to herein as the "Financial Statements").
The Unaudited Financial Statements will not differ materially from the draft
balance sheet, statement of operations and statement of cash flows of North Sky
as of, and for the nine-month period ended, September 30, 1999, previously
provided by North Sky to Xxxxx.xxx. The Financial Statements have been, and will
be, prepared in accordance with GAAP (except that the unaudited financial
statements will not have notes thereto) consistently applied throughout the
periods involved, except, with respect to the audited Financial Statements only,
as may be noted therein. The Financial Statements fairly present the financial
condition and operating results of North Sky as of the dates, and for the
periods, indicated therein, subject, with respect to the unaudited Financial
Statements, to normal year-end audit adjustments which are not expected to be
material. North Sky maintains and will continue to maintain an adequate system
of internal controls established and administered in accordance with generally
accepted accounting principles. The internal books and records of North Sky from
which the Financial Statements were derived do not contain any information which
is materially false or misleading and were maintained substantially in
accordance with generally accepted accounting principles.
3.6 Absence of Certain Changes. Except as set forth in Schedule 3.6
hereto, since September 30, 1999, there has not been:
(a) Any event that may reasonably have a Material Adverse
Effect on North Sky;
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(b) Any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement
(including, without limitation, the granting of stock options (or the
alteration of the terms of any stock option grants), restricted stock
awards or stock appreciation rights) made to, for or with any of North
Sky's directors, employees or contractors;
(c) Any declaration, setting aside or payment of dividends or
distributions in respect of the capital stock of North Sky, or any
split-up or other recapitalization in respect of the capital stock of
North Sky or any direct or indirect redemption, purchase or other
acquisition of any such capital stock of North Sky or any agreement to do
any of the foregoing;
(d) Any issuance, transfer, sale or pledge by North Sky of any
shares of its capital stock or other securities (whether debt, equity, a
combination thereof or otherwise) or of any commitment, option, right or
privilege under which North Sky is or may become obligated to issue any
shares of its capital stock or other securities;
(e) Any alteration in any term of any outstanding securities,
including stock options of North Sky;
(f) Any change in the accounting methods, practices or
policies followed by North Sky from those in effect during the past year;
(g) Any sale, assignment, or transfer of any North Sky Rights
(as defined in Section 3.12 below);
(h) Any change in or amendment to the Certificate of
Incorporation or Bylaws of North Sky; or
(i) Any agreement or commitment, whether written or oral, by
North Sky to do any of the things described in this Section 3.6.
3.7 Liabilities. Except as set forth in Schedule 3.7 hereto, North
Sky does not have, and as of the Closing Date (as defined below) will not have,
any liabilities or obligations of any kind that, in the aggregate, exceed Fifty
Thousand Dollars ($50,000.00) (whether absolute or contingent or accrued),
except for accounts payable incurred in the ordinary course of business as
disclosed in Schedule 3.19 hereto.
3.8 Litigation. As of the date hereof, no litigation, arbitration or
other proceeding is pending or, to the best knowledge of North Sky, threatened
by or against North Sky, its properties or assets, the capital stock of North
Sky or its officers, directors or stockholders before any court or any
government agency, and, to the best knowledge of North Sky, no facts exist which
might form the basis for any such litigation, arbitration or proceeding. North
Sky, to its knowledge, is not the subject of any investigation for violation of
any laws, regulations or administrative orders applicable to its business by any
governmental authority or any other person. There is no judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against North Sky or either of
the Stockholders, their respective properties or assets or the capital stock of
North Sky
9
or which in any manner challenges or seeks to prevent enjoin, alter or
materially delay any of the transactions contemplated hereby. There is no
action, suit, proceeding or investigation by North Sky or the Stockholders
currently pending or that is currently contemplated.
3.9 No Conflict or Default. Except as set forth in Schedule 3.9
hereto, and except where such violation, conflict or breach would not result in
a Material Adverse Effect, neither the execution and delivery of this Agreement
or any of the documents to be delivered hereunder, nor compliance with the terms
and provisions hereof or thereof, will violate any statute, regulation or
ordinance of any governmental authority, or conflict with or result in the
breach of any term, condition or provision of (i) the Certificate of
Incorporation or Bylaws of North Sky, or (ii) any agreement, deed, contract,
mortgage, indenture, writ, order, decree, legal obligation or instrument to
which either of the Stockholders is a party or by which any of them are or may
be bound, or (iii) of any agreement, deed, contract, mortgage, indenture, writ,
order, decree, legal obligation or instrument to which North Sky is a party, or
constitute a default (or an event which, with the lapse of time or the giving of
notice, or both, would constitute a default) thereunder, or result in the
creation or imposition of any material lien, charge, encumbrance or restriction
of any nature whatsoever.
3.10 Consents and Approvals. Except for the contracts set forth on
Schedule 3.10 hereto and in connection with the filing of the Certificate of
Merger, and except for such consents, approvals or filings which, if not
obtained or made, would not have a Material Adverse Effect on North Sky and
would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement, no consent, approval, order, authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any non-governmental third
party on the part of North Sky or either of the Stockholders is required in
connection with the execution, delivery and performance by North Sky and the
Stockholders of this Agreement, the consummation of the transactions
contemplated hereby.
3.11 Taxes.
(a) North Sky has duly elected to be treated as a S
corporation under the Code and all pertinent state tax laws, and has been
qualified and treated as a S corporation for federal and state income tax
purposes since the date of its organization. North Sky will continue to be
treated as a S corporation until the Effective Time and will not revoke or
terminate its S corporation status prior to the Effective Time.
(b) North Sky has (i) duly and timely filed or caused to be
filed all Federal, state and local tax returns, statements, reports and
forms required to be filed by North Sky and will duly and timely file or
cause to be filed all such applicable tax returns, statements, reports and
forms required to be filed prior to the Effective Date which relate to
North Sky or with respect to which North Sky is liable or otherwise in any
way subject, including, without limitation, any income, property, sales,
use, franchise, added value, withholding, and social security taxes, and
all such tax returns (including all amendments thereto) (A) are and will
be complete, accurate and in accordance in all material respects with all
legal requirements applicable thereto and (B) as of the time of filing,
correctly reflected or will correctly reflect the facts regarding the
income, business
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assets, operations, activities, status or other matters of North Sky
required to be shown thereon, (ii) paid or will pay, when due, all taxes
shown to be due and payable on such returns, or pursuant to any assessment
or otherwise, and (iii) properly accrued, charged or established adequate
reserves on the Financial Statements for all unpaid taxes arising in
respect of any fiscal year of North Sky. No tax liabilities, disallowances
or assessments relating to the business, assets or employees or
independent contractors of North Sky have been assessed as of the date
hereof, and, to the best knowledge of North Sky and the Stockholders,
there is no basis for any such liabilities, disallowances or assessments.
North Sky is not delinquent in the payment of any taxes which would result
in the imposition of any charge, lien, encumbrance or adverse claim of any
kind whatsoever on North Sky, its properties or assets or the capital
stock of North Sky. North Sky has properly withheld and/or paid all
withholding, employment or other similar taxes and all unemployment
compensation and similar obligations required to be withheld or paid. The
Stockholders will be responsible for filing any tax return relating to the
business of North Sky conducted prior to the Closing, including any tax
returns covering the S corporation short taxable year end by reason of the
Merger (subject to Xxxxx.xxx's approval, which shall not be unreasonably
withheld).
3.12 Intellectual Property Rights.
(a) Schedule 3.12 hereto sets forth a list of all patents,
patent applications, trade names, trademarks, service marks, brandmarks,
copyrights, trade secrets, proprietary software and other intellectual
property rights owned by, licensed or used in the business of North Sky,
or which are registered in the name of North Sky (collectively, the "North
Sky Rights"). Except as set forth on Schedule 3.12, North Sky has full
title and ownership of, or has license to, the North Sky Rights. To the
knowledge of North Sky, no third party has any ownership right, title,
interest, claim or lien on any of the North Sky Rights (except pursuant to
the agreements between North Sky and such party).
(b) Except as set forth in Schedule 3.12 hereto, to the
knowledge of North Sky, there are no outstanding options, licenses,
sublicenses or agreements of any kind relating to the North Sky Rights nor
are there any options, licenses, sublicenses or agreements of any kind
with respect to the patents, trademarks, trade names, copyrights, trade
secrets, rights, or other intellectual property or other proprietary
rights of any other person or entity which relate to the business of North
Sky and there has been no disposition, license, sublicense or disclosure
of the North Sky Rights or any portion thereof.
(c) To the knowledge of North Sky, North Sky has not violated
or infringed, and North Sky has not received any communications alleging
that North Sky (or any of its employees or consultants) has violated or
infringed or, by conducting its business as proposed, would violate or
infringe, any intellectual property of any other person or entity.
(d) North Sky has taken reasonable security measures to
protect the secrecy, confidentiality and value of the North Sky Rights.
Any employee or other
11
person who, either alone or in concert with others, developed, invented,
discovered, derived, programmed or designed any of the North Sky Rights or
any part thereof, or who has knowledge of or access to information
relating to it, has been put on notice that the North Sky Rights is
proprietary to North Sky and not to be divulged or misused and has
assigned all of his or her rights relating to the North Sky Rights to
North Sky. No claim of ownership or legal title or interest in or with
respect to the North Sky Rights by or against any employee or other person
who had access to the North Sky Rights has been made in writing or, to the
knowledge of North Sky, now exists. All employees (including leased
employees) and consultants of North Sky have signed an Employee
Proprietary Information and Inventions Agreement in the form attached
hereto as Exhibit D. No third party (other than a licensor under a license
to North Sky) has access to the source code versions of any of the North
Sky Rights or is otherwise in a position to duplicate or make any
unauthorized use of such source code versions.
(e) North Sky is not aware that any employees or independent
contractors of North Sky are obligated under any contract or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would, after the date of Closing, interfere
with the unrestricted use of the North Sky Rights. To the knowledge of
North Sky, neither the execution nor delivery of this Agreement, nor the
carrying on of North Sky's business by the employees and independent
contractors of North Sky following the Closing, will conflict with or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under
which any of such employees is now obligated.
(f) North Sky is Year 2000 Compliant (except for such
non-compliance that would not be reasonably expected to have a Material
Adverse Effect on North Sky). As used herein, Year 2000 Compliant means
that each item of software used in its business, and each of the other
North Sky Rights, is designed effectively and without error to record,
store, process, calculate, verify and present calendar dates falling on or
after (and, if applicable, spans of time including) January 1, 2000, and
before December 31, 2049, and that each such item will calculate any
information (including information imported from, or exported to, other
programs or systems) dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance,
as it records, stores, processes, calculates and presents calendar dates
on or before December 31, 1999, or calculates any information dependent on
or relating to such dates.
3.13 Compliance with Law. North Sky has complied and is in
compliance in all material respects with all applicable federal, state and local
laws, statutes, licensing requirements, rules and regulations, including those
that relate to environmental, employment, labor and other matters, except for
any non-compliance that would not have a Material Adverse Effect on North Sky.
3.14 Brokers or Finders. North Sky has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
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3.15 Employees/Contractors. North Sky has furnished to Xxxxx.xxx a
true and complete list setting forth the names and annual salaries of all
current employees and independent contractors.
3.16 Bank Accounts North Sky has furnished to Xxxxx.xxx a true and
complete list in Schedule 3.16 hereto setting forth the names and addresses of
all banks, other institutions and state governmental departments at which North
Sky has accounts, deposits or the like, and the names of all persons authorized
to draw on or give instructions with respect thereto or holding a
power-of-attorney on behalf of North Sky. All cash held in such accounts is not
subject to any restriction or limitation as to withdrawal.
3.17 Title to Properties and Assets; Leases. Schedule 3.17 hereto
sets forth the real estate and all material items of tangible personal property,
including fixed assets and equipment, owned or leased by North Sky or used in
the operation of the business of North Sky. Except as set forth in Schedule
3.17, North Sky owns, or has a valid right to use, its assets and real estate
and property free and clear of all mortgages, liens, claims and encumberances.
With respect to the property and assets it leases or licenses, North Sky is in
compliance with such leases or licenses in all respects, except for any
non-compliance that would not have a Material Adverse Effect on North Sky.
3.18 Accounts Receivable. Schedule 3.18 hereto contains a summary of
the accounts receivable of North Sky as of the date of this Agreement, together
with an aging schedule of such accounts receivable.
3.19 Accounts Payable. Schedule 3.19 hereto contains a summary of
the accounts payable of North Sky as of the date of this Agreement, all of which
arose in the normal and ordinary course of the business of North Sky.
3.20 Contracts. Schedule 3.20 hereto contains a complete list of
each contract or agreement to which North Sky is a party or which relates to the
operation of the business of North Sky with a present value greater than Fifty
Thousand Dollars ($50,000.00). Each of these contracts or agreements is a legal,
binding and enforceable obligation by or against North Sky, except as such
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles. To North Sky's knowledge,
no party with whom North Sky has an agreement or contract is in material default
thereunder or has breached any term or provision thereof. North Sky is not in
material default in respect of any contract or agreement listed on Schedule
3.20.
3.21 Interested Party Transactions. Except as set forth on Schedule
3.21 hereto, neither North Sky nor any of its subsidiaries has entered into any
contract or agreement with, or has any understanding with, or is indebted to,
any director, stockholder, officer, employee or agent of North Sky or any of its
subsidiaries (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to North Sky
or any of its subsidiaries (collectively, "Interested Party Transactions").
Except as set forth on Schedule 3.21 hereto, neither North Sky nor the
Stockholders, to its knowledge, has any direct or indirect ownership interest in
any corporation, partnership or other entity with which
13
North Sky is affiliated or with which North Sky has a business relationship, or
any corporation, partnership or other entity that competes with North Sky;
provided, however, that nothing in this Section 3.21 shall prevent any such
person from owning up to Two Percent (2%) of the outstanding stock of any
company which is publicly traded. The terms of all Interested Party Transactions
are no less favorable to North Sky than those that North Sky would have obtained
had such transactions been entered into in an arms-length manner with
independent third parties.
3.22 Insurance. North Sky has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. Schedule 3.22 hereto sets forth all
insurance policies currently maintained by North Sky, together with the
providers and the termination dates of such policies.
3.23 Domain Ownership. Schedule 3.23 hereto sets forth all Internet
domains of which North Sky is the registered owner.
3.24 Representations Complete. None of the representations and
warranties made by North Sky or the Stockholders herein, nor any statement made
in any Exhibit, Schedule or certificate furnished pursuant to this Agreement,
contains or will contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein, or necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading.
ARTICLE 4
CERTAIN COVENANTS AND AGREEMENTS
4.1 Conduct of Business by North Sky. During the period from the
date of this Agreement to the Closing Date, North Sky shall conduct its
operations, only according to its ordinary and usual course of business and will
use its best efforts to preserve intact its business organization, keep
available the services of its officers and employees and maintain satisfactory
relationships with clients and others having business relationships with North
Sky. During the period from the date of this Agreement to the Closing Date,
North Sky shall confer on a regular and frequent basis with one or more
designated representatives of Xxxxx.xxx to report material operational matters
and to report the general status of ongoing operations. North Sky shall
immediately notify Xxxxx.xxx of any emergency or other change in the normal
course of its business or in the operation of its properties and of any
complaints, investigations or hearings (or communications indication that the
same may be contemplated), adjudicatory proceedings, budget meetings or
submissions involving North Sky and permit Xxxxx.xxx's representatives prompt
access to all materials prepared in connection therewith. Further:
(a) From the date hereof until the Closing, neither North Sky
nor the Stockholders shall, without Xxxxx.xxx's prior express written
consent, which consent shall not be unreasonably withheld, or except as
expressly permitted hereby:
(i) incur any additional indebtedness for borrowed money
relating to North Sky, or guarantee any indebtedness or obligation
of any other party;
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(ii) issue, redeem or purchase any of North Sky's
capital stock or securities convertible into North Sky capital stock
or grant or issue any options, warrants or rights to subscribe for
North Sky capital stock or securities convertible into North Sky
capital stock or commit to do any of the foregoing;
(iii) enter into, amend or terminate any agreement or
arrangement relating to North Sky, except in the ordinary course of
business, provided the dollar amount involved is less than $10,000
per occurrence;
(iv) increase the compensation payable or to become
payable to any of North Sky's officers, employees or agents,
including, without limitation, the payment or obligation to pay any
bonus, pension, retirement or insurance proceeds to such persons, or
adopt or amend any employee benefit plan or arrangement;
(v) hire, or enter into any employment contract or
agreement with, any existing or prospective employee or contractor;
(vi) cancel, without full payment, any note, loan or
other obligation owing to North Sky;
(vii) acquire or dispose of any properties or assets
used in the business of North Sky, except in the ordinary course of
business, provided the dollar amount involved is less than $10,000
per occurrence;
(viii) create or suffer to be imposed any lien,
mortgage, security interest or other charge on or against North
Sky's properties or assets;
(ix) make or adopt any change in the Certificate of
Incorporation or Bylaws of North Sky as in force and effect on the
date hereof;
(x) take any action, or omit to take any action, within
their reasonable control, that would cause, and shall promptly
notify Xxxxx.xxx in writing of any event or occurrence which cause,
any of the representations and warranties set forth in Article 3
hereof to become untrue, incomplete, or inaccurate in any material
respect as or prior to the Closing Date; or
(xi) make or revoke any material tax election or settle
any material tax claim.
(b) From the date hereof until the Closing, or except as
expressly permitted hereby, North Sky shall, unless otherwise expressly
consented to in writing by Xxxxx.xxx:
(i) maintain North Sky's existing insurance policies and
shall not take any action to terminate or modify those insurance
policies;
15
(ii) maintain North Sky's books and records consistent
with past practices and policies and in accordance with GAAP;
(iii) maintain in good working condition, ordinary wear
and tear excepted, and in compliance in all material respects with
all applicable laws and regulations, all fixed assets owned, leased
or operated, as the case may be, by North Sky;
(iv) observe and perform, and remain in compliance with,
North Sky's obligations in agreements and contracts; and
(v) maintain compliance with the terms and conditions of
all North Sky Rights and use its best efforts to maintain all such
North Sky Rights in full force and effect.
4.2 Necessary Consents. Following public announcement of the
transaction and prior to the Closing, each of the parties hereto shall use their
best efforts to obtain such written consents and releases, and shall take such
other actions as may be necessary or appropriate to allow the consummation of
the transactions contemplated hereby and to allow the continuation of North
Sky's business by Xxxxx.xxx after the Closing as conducted at the date hereof.
4.3 Access to Information. North Sky shall give Xxxxx.xxx and AAC
and their respective accountants, legal counsel and other representatives
(collectively, the "Requesting Parties") reasonable access, during normal
business hours with reasonable advance notice, throughout the period prior to
the Closing, to all of the properties, books, contracts, commitments and records
relating to the business, assets and liabilities of North Sky, and shall furnish
the Requesting Parties during such period all such information concerning its
affairs as the Requesting Parties may reasonably request; provided, that any
furnishing of such information pursuant hereto or any investigation by a
Requesting Party shall not affect such Requesting Party's right to rely on the
representations, warranties and covenants made by North Sky or the Stockholders
in this Agreement. Pending the Closing, each Requesting Party shall hold in
confidence all information so obtained and will use such information only for
purposes related to the transactions contemplated hereby. Each Requesting Party
further agrees that, pending the Closing, it will not disclose any such
information to any third party except upon the prior written consent of North
Sky, or except as required by law or except to its accountants, legal counsel or
other representatives who have agreed to maintain the confidentiality of such
information. If the transactions contemplated hereby are not consummated, the
Requesting Party shall return all data to North Sky and continue to honor the
foregoing confidentiality and non-disclosure covenants for a period of three (3)
years. Such obligation of confidentiality shall not extend to any information
(i) which is shown to be or to have been generally known to others engaged in
the same trade or business as North Sky; (ii) previously known to the Requesting
Party prior to the start of discussions leading to the execution of this
Agreement; (iii) obtained by the Requesting Party in good faith from third
parties who are not obligated to maintain the information confidential; (iv)
that is or shall be public knowledge through no act or omission by the
Requesting Party or any of its directors, officers, employees, or
representatives; or (v) that is required to be disclosed pursuant to any law,
rule or regulation or pursuant to any order or decree
16
of any appropriate court or governmental agency or pursuant to any disclosure
obligations set forth in the federal securities laws.
4.4 Other Negotiations. Xxxxx.xxx, North Sky and the Stockholders
agree that the "no-shop" letter dated October 6, 1999 (the "No-Shop Letter")
shall remain in full force and effect; provided, however, that if the Closing
shall not have occurred on or prior to December 15, 1999, the No-Shop Letter
shall terminate and be of no further effect as of such date, unless this
Agreement shall have been extended pursuant to Section 9.1 hereof. In addition,
until December 15, 1999, Xxxxx.xxx will not solicit or effect an alternative
transaction or a transaction that could have the effect of delaying or deterring
consummation of the acquisition contemplated by this Agreement.
4.5 Certain Defaults; Litigation. North Sky and the Stockholders
will give prompt notice to the other parties of:
(a) any notice of default received by such party subsequent to
the date of this Agreement and prior to the Closing under any instrument
or agreement to which such party or its assets is a party or by which it
is bound, which default could, if not remedied, result in a Material
Adverse Effect or which would render incorrect or misleading any
representation made herein, and
(b) any suit, action, proceeding or investigation instituted
or threatened against or affecting such party subsequent to the date of
this Agreement and prior to the Closing which, if adversely determined,
could result in a Material Adverse Effect or which would render incorrect
or misleading any representation made herein.
4.6 S Corporation Status. North Sky and the Stockholders shall take
no action inconsistent with North Sky's status as an S corporation under the
Code until the Effective Date and shall maintain North Sky's status as an S
corporation until the Effective Date.
4.7 Form S-3. Xxxxx.xxx agrees to file with the Securities and
Exchange Commission a registration statement on Form S-3 (the "Form S-3
Registration Statement") as soon as permissible but not later than April 1,
2000, and will use its reasonable best efforts to cause the Form S-3
Registration Statement to be declared effective as soon as possible to permit
the resale of the Xxxxx.xxx Common Stock issued in the Merger; provided,
however, that the Stockholders and Convertible Debtholders shall be subject to
the terms of the Stockholder Lockup Agreements (as such term is defined in
Section 5.21 hereof), notwithstanding the filing of the Form S-3 Registration
Statement. Notwithstanding the foregoing, in the event Xxxxx.xxx is not eligible
to use Form S-3 prior to April 1, 2000, Xxxxx.xxx shall use its reasonable best
efforts to file a registration statement on Form S-1 by April 15, 2000, and to
cause such registration statement on Form S-1 to be declared effective as soon
thereafter as possible to permit the resale of the Xxxxx.xxx Common Stock issued
in the Merger.
4.8 Form S-8. Xxxxx.xxx agrees to file with the Securities and
Exchange Commission, no later than five (5) business days after the Closing, a
registration statement on Form S-8 (the "Form S-8 Registration Statement")
covering the shares of Xxxxx.xxx common stock issuable pursuant to outstanding
options under the North Sky Stock Option Plan assumed
17
by Xxxxx.xxx. North Sky shall cooperate with and assist Xxxxx.xxx in the
preparation of such registration statement.
4.9 Optionholder Lockup Agreements. Prior to the Effective Time,
North Sky shall use its reasonable best efforts to cause each holder of options
under the North Sky Option Plan being assumed by Xxxxx.xxx to enter into an
Optionholder Lockup Agreement, in the form attached hereto as Exhibit B (the
"Optionholder Lockup Agreement"), pursuant to which, amongst other things, such
optionholder shall agree to not sell, transfer or otherwise dispose of the
shares of Xxxxx.xxx common stock to be received by such holder upon exercise of
his or her options for the periods of time set forth in the Optionholder Lockup
Agreement.
4.10 Directors' and Officers' Indemnification. For six years after
the Effective Time, Xxxxx.xxx and the Surviving Corporation (or any successor to
the Surviving Corporation) shall indemnify, defend and hold harmless each
present and former officer and director of North Sky, and each person who
becomes any of the foregoing prior to the Effective Time (each, a "North Sky
Indemnified Party") against all losses, claims, damages, liabilities, costs,
fees and expenses, including reasonable fees and disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the written consent of
Xxxxx.xxx or the Surviving Corporation) arising out of actions or omissions
occurring at or prior to the Effective Time to the full extent required or
permitted under applicable law, the terms of the Certificate of Incorporation or
Bylaws of North Sky, as in effect at the date hereof; provided, that, in the
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims shall continue
until disposition of any and all such claims. Notwithstanding the foregoing,
each of the Stockholders hereby agrees that she or it will not make any claim
for indemnification against any of Xxxxx.xxx or the Surviving Corporation by
reason of the fact that she or it was a director, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether such claim is pursuant to
any statute, charter documents, bylaw, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim, or demand brought by Xxxxx.xxx
or the Surviving Corporation against such Stockholder pursuant to Article 8 of
this Agreement.
4.11 Employee Matters.
(a) Xxxxx.xxx agrees that, except as otherwise agreed by
Xxxxx.xxx and North Sky, those individuals who are employed by,
consultants to, or leased employees of, North Sky immediately prior to the
Effective Time shall become or continue to be employees or consultants, as
the case may be, of North Sky as of the Effective Time (each such
individual, an "Affected Employee," and collectively, the "Affected
Employees"), on terms and conditions no less favorable to the Affected
Employees than the terms and conditions in effect immediately prior to the
Effective Time or, if applicable, prior to the termination of the
agreement with Stewardship Financial pursuant to Section 5.22 hereof. The
respective salaries for certain of the Affected Employees are set forth on
Schedule 4.11(a) hereto. Xxxxx.xxx shall not require the relocation of any
Affected Employee as a condition to such employment, or continued
employment.
18
(b) On or as soon as practicable following the Effective Time,
Affected Employees shall be eligible to participate in those benefit plans
and programs maintained for similarly situated employees of Xxxxx.xxx (or
in substantially similar programs), on substantially the same terms
applicable to similarly situated employees of Xxxxx.xxx and to the extent
that such plans and programs provide the following benefits:
medical/dental/vision care, life insurance, disability income, sick pay,
holiday and vacation pay, 401(k) plan coverage, Code Section 125 benefit
arrangements, bonus, profit-sharing or other incentive plans, pension or
retirement programs, dependent care assistance, severance benefits and
employee stock option and stock purchase plans.
(c) Effective as of the Effective Time, Xxxxx.xxx shall grant
options to Affected Employees (in addition to the options assumed pursuant
to Section 1.7 hereof), in accordance with Schedule 4.11(c) attached
hereto. Such options shall be subject to Xxxxx.xxx's standard vesting
schedule.
(d) Xxxxx.xxx shall, or shall cause North Sky to, give
Affected Employees full credit for purposes of eligibility, vesting and
benefit accrual (except to the extent giving such credit would result in
the duplication of benefits) under any employee benefit plans or
arrangements maintained by Xxxxx.xxx or North Sky for such Affected
Employees' service with North Sky or any subsidiary to the same extent
recognized by North Sky or such subsidiary immediately prior to the
Effective Time.
(e) Xxxxx.xxx shall, or shall cause North Sky to, (i) waive
all limitations as to preexisting conditions exclusions and waiting
periods with respect to participation and coverage requirements applicable
to the Affected Employees under any welfare benefit plans in which such
Affected Employees may be eligible to participate after the Effective
Time, other than limitations or waiting periods that are already in effect
with respect to such Affected Employees and that have not been satisfied
as of the Effective Time under any welfare plan maintained for the
Affected Employees immediately prior to the Effective Time, and (ii)
provide each Affected Employee with credit for any co-payments and
deductibles paid or due prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare
plans that such Affected Employees are eligible to participate in after
the Effective Time.
4.12 Tax Matters. The parties hereto agree to (i) prepare or cause
to be prepared all tax returns in accordance with the treatment of the Merger as
a reorganization under section 368(a) of the Code (unless not permissible under
law) and (ii) use their reasonable best efforts, whether before or after the
Effective Time, to cause the Merger to qualify as a "reorganization" within the
meaning of section 368(a) of the Code.
4.13 Xxxxxxx Stay and Dalita Stay Guaranties. Xxxxx.xxx agrees to
use its reasonable best efforts to cause the guaranties executed by Xxxxxxx Stay
or Dalita Stay and set forth on Schedule 4.13 hereto to be canceled, and North
Sky and the Stockholders shall cooperate with Xxxxx.xxx to cause such
cancellation.
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ARTICLE 5
CONDITIONS PRECEDENT TO
OBLIGATIONS OF XXXXX.XXX AND AAC
The obligations of Xxxxx.xxx and AAC to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of all the following conditions, unless expressly waived in writing by
Xxxxx.xxx and AAC:
5.1 Representations and Warranties True; Schedules Delivered.
(a) The representations and warranties set forth in Article
3 hereof and subject to a materiality or a Material
Adverse Effect exception shall have been true and
correct at and as of the Closing as though such
representations and warranties were made on and as of
that date. The Schedules referred to herein shall have
been completed and provided to Xxxxx.xxx and shall be in
form and substance reasonably satisfactory to Xxxxx.xxx
and its counsel.
(b) The representations and warranties set forth in Article
3 hereof and not subject either to a materiality or a
Material Adverse Effect exception shall have been true
and correct at and as of the Closing as though such
representations and warranties were made on and as of
that date, except as long as any failure of any such
representations and warranties to be true and correct,
taken as a whole, would not reasonably be expected to
have a Material Adverse Effect on North Sky.
5.2 Covenants Performed. North Sky and the Stockholders shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by North Sky or the Stockholders on or before the Closing. For purposes of
this Section 5.2, the failure of each Stockholder and Convertible Debtholder to
enter into the Stockholder Lockup Agreement, or the failure of each holder of
options under the North Sky Stock Option Plan to enter into the Optionholder
Lockup Agreement, shall be deemed to be material.
5.3 Certificate. Xxxxx.xxx shall have received from North Sky a
certificate from the officers of North Sky, dated the Closing Date, certifying,
in such detail as Xxxxx.xxx and its counsel may reasonably request, that the
conditions specified in this Article 5 have been satisfied.
5.4 North Sky Stockholders. The requisite approval of the
stockholders of North Sky shall have been obtained.
5.5 Intentionally omitted.
5.6 Intentionally omitted.
20
5.7 No Actions. No action or proceeding shall have been instituted
by any person, entity or governmental agency which, in any such case, has a
reasonable probability of resulting in (i) the obtaining of material damages
from North Sky or (ii) an order, judgment or decree restraining, prohibiting or
rendering unlawful the consummation of the transactions contemplated hereby.
5.8 No Material Adverse Effect. During the period from November 30,
1999 to the Closing Date, there shall not have been any Material Adverse Effect
on North Sky.
5.9 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to Xxxxx.xxx and its counsel, and Xxxxx.xxx shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
5.10 Delivery of Documents. Xxxxx.xxx shall have received all
documents and other items to be delivered by North Sky under Section 7.2.
5.11 Illegality or Legal Constraint. No statute, rule, regulation,
executive order, decree, injunction or restraining order shall have been
enacted, promulgated or enforced (and not repealed, superseded or otherwise made
inapplicable) by any court or governmental authority which prohibits the
consummation of the transactions contemplated hereby (each party agreeing
promptly to use its reasonable best efforts to have any such order, decree or
injunction lifted).
5.12 Required Consents. All consents, approvals and waivers from
Utah Technology Finance Corporation and Novell, Inc. necessary to the
transactions as contemplated hereby shall have been obtained.
5.13 Resignation of Directors. The directors of North Sky shall have
submitted their resignations in writing to Xxxxx.xxx which shall be effective as
of the Closing Date, except that Xxx Xxxxxxxx shall remain on the board of
directors of North Sky for so long as he is the Chief Executive Officer of
Surviving Corporation.
5.14 Intentionally omitted.
5.15 Escrow Agreement. Xxxxx.xxx, AAC, North Sky, the Stockholders
and the Escrow Agent shall have entered into the Escrow Agreement.
5.16 Financial Statements. North Sky shall have provided Xxxxx.xxx
and AAC with the Unaudited Financial Statements (for which Unaudited Financial
Statements North Sky shall have performed a review in accordance with Statements
of Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants and shall have delivered a review report thereon
to Xxxxx.xxx and AAC), and such Unaudited Financial Statements shall not differ
materially from the draft balance sheet, statement of operations and statement
of cash flows of North Sky as of, and for the nine-month period ended, September
30, 1999, previously provided by North Sky to Xxxxx.xxx.
21
5.17 Cancellation and Termination of Interested Party Transactions.
All Interested Party Transactions, including, without limitation, the $130,000
owed by North Sky to Stewardship Financial, shall have been canceled and
terminated prior to the Effective Date.
5.18 Intentionally omitted.
5.19 Media Metrix. North Sky shall have provided Xxxxx.xxx with
documentation sufficient to ensure that Xxxxx.xxx shall receive credit from
Media Metrix for all visits to all websites owned by North Sky during the month
of November, 1999 and thereafter.
5.20 Stockholder Lockup Agreement. Each Stockholder and Convertible
Debtholder shall have entered into a Stockholder Lockup Agreement substantially
in the form attached hereto as Exhibit C (the "Stockholder Lockup Agreement").
5.21 Optionholder Lockup Agreement. Each holder of options under the
North Sky Stock Option Plan being assumed by Xxxxx.xxx shall have entered into
Optionholder Lockup Agreement.
5.22 Employees; Stewardship Financial. North Sky shall have
terminated its agreement with Stewardship Financial, and all individuals who, as
of the date hereof, are being leased by North Sky through Stewardship Financial
shall have become employees of North Sky no later than the Effective Time.
5.23 Sale of Xxxxx.xxx Common Stock. Dalita Stay shall have entered
into a letter agreement with Xxxxx.xxx pursuant to which Dalita Stay agrees to
use her reasonable best efforts to sell any shares of Xxxxx.xxx common stock
held by her through an account with Xxxxx Xxxxx Xxxxxx & Company, LLC.
5.24 No-Hire Agreement. Xxxxxxx Stay and the Stockholders shall have
entered into a No-Hire Agreement with Xxxxx.xxx, substantially in the form
attached hereto as Exhibit E.
5.25 Investor Representations. Each Stockholder and each other
holder of common stock of North Sky shall have represented to Xxxxx.xxx that
such Stockholder or other holder of common stock of North Sky, as the case may
be, is (i) acquiring the shares of Xxxxx.xxx Common Stock for investment for
such person's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such person has no present
intention of selling, granting any participation in, or otherwise distributing
the same and (ii) an "Accredited Investor" as defined in Securities and Exchange
Commission Rule 501 of Regulation D.
5.26 Conversion of Indebtedness. All convertible indebtedness of
North Sky shall have been canceled and converted into shares of North Sky common
stock.
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ARTICLE 6
CONDITIONS PRECEDENT TO
OBLIGATIONS OF NORTH SKY AND THE STOCKHOLDERS
The obligations of North Sky and the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or before the Closing, of all the following conditions, unless expressly waived
in writing by North Sky and the Stockholders:
6.1 Representations and Warranties True.
(a) The representations and warranties set forth in Article
2 hereof and subject to a materiality or a Material
Adverse Effect exception shall have been true and
correct at and as of the Closing as though such
representations and warranties were made on and as of
that date. The Schedules referred to herein shall have
been completed and provided to Xxxxx.xxx and shall be in
form and substance reasonably satisfactory to Xxxxx.xxx
and its counsel.
(b) The representations and warranties set forth in Article
2 hereof and not subject either to a materiality or a
Material Adverse Effect exception shall have been true
and correct at and as of the Closing as though such
representations and warranties were made on and as of
that date, except as long as any failure of any such
representations and warranties to be true and correct,
taken as a whole, would not reasonably be expected to
have a Material Adverse Effect on Xxxxx.xxx.
6.2 Covenants Performed. Each of Xxxxx.xxx and AAC shall have
performed, satisfied, and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by Xxxxx.xxx or AAC on or before the Closing.
6.3 Delivery of Documents. North Sky shall have received all
documents and other items to be delivered by Xxxxx.xxx and AAC under Section
7.3.
6.4 Intentionally omitted.
6.5 Certificate. North Sky and the Stockholders shall have received
from Xxxxx.xxx and AAC a certificate from the officers of Xxxxx.xxx and AAC,
dated the Closing Date, certifying, in such detail as North Sky and its counsel
may reasonably request, that the conditions specified in this Article 6 have
been satisfied.
6.6 No Material Adverse Effect. During the period from November 30,
1999 to the Closing Date, there shall not have been any Material Adverse Effect
on Xxxxx.xxx.
6.7 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments
23
incident to such transactions shall be in form and substance reasonably
satisfactory to North Sky, the Stockholders and their counsel, and North Sky and
the Stockholders shall have received all such counterpart originals or certified
or other copies of such documents as it may reasonably request.
6.8 Illegality or Legal Constraint. No statute, rule, regulation,
executive order, decree, injunction or restraining order shall have been
enacted, promulgated or enforced (and not repealed, superseded or otherwise made
inapplicable) by any court or governmental authority which prohibits the
consummation of the transactions contemplated hereby (each party agreeing
promptly to use its reasonable best efforts to have any such order, decree or
injunction lifted). There shall be no pending legal action, suit or proceeding
regarding the transactions contemplated hereby.
6.9 Cancellation of Xxxxxxx Stay and Dalita Stay Guaranties.
Xxxxx.xxx shall have provided evidence reasonably satisfactory to North Sky and
its counsel that the guaranties executed by Xxxxxxx Stay or Dalita Stay and set
forth on Schedule 4.13 hereto have been canceled.
6.10 Opinion of Tax Counsel. North Sky shall have received an
opinion from Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP (Skadden, Arps")
substantially to the effect that the Merger will qualify as a reorganization
within the meaning of section 368(a) of the Code. In rendering such opinion,
Skadden, Arps may require, request and rely upon representation letters from
North Sky, Xxxxx.xxx and AAC, and North Sky, Xxxxx.xxx and AAC agree to provide
Xxxxxxx Xxxx with such representation letters as Skadden, Arps may reasonably
request.
6.11 No Actions. No action or proceeding shall have been instituted
by any person, entity or governmental agency which, in any such case, has a
reasonable probability of resulting in an order, judgment or decree restraining,
prohibiting or rendering unlawful the consummation of the transactions
contemplated hereby.
ARTICLE 7
CLOSING
7.1 Time and Place. The closing of the Merger (the "Closing") shall
occur at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000 at 8:00 a.m. Mountain Standard
Time on the earliest practicable date after the conditions of Articles 5 and 6
shall have been met or at such other time and date to which the parties may
agree in writing (the "Closing Date").
7.2 Deliveries by North Sky and the Stockholders. At the Closing,
North Sky and the Stockholders shall execute and deliver or cause to be executed
and delivered to Xxxxx.xxx:
(a) Corporate Documents. The Certificate of Incorporation of
North Sky, certified by the Secretary of State of Delaware as of a recent
date, and the Bylaws of North Sky, certified by the Secretary of North Sky
as in effect as of the Closing Date;
(b) Certificate of Good Standing; Foreign Qualification; Tax
Clearances. North Sky shall have delivered to Xxxxx.xxx a certificate from
the Secretary of State of
24
the State of Delaware to the effect that North Sky is in good standing in
Delaware and listing all charter documents of North Sky on file,
certificates from the Secretary of State of the State of Utah and all
other states where North Sky conducts its business, to the effect that
North Sky is qualified to do business in such states, and certificates
from the franchise tax board (or other appropriate agency) from all
jurisdictions where North Sky has paid or owed any taxes in the last five
(5) years, to the effect that North Sky has paid all taxes due in such
jurisdictions;
(c) Resolutions. A copy of the resolutions of the Board of
Directors of North Sky certified by the Secretary of North Sky as having
been duly and validly adopted and being in full force and effect,
authorizing execution and delivery of this Agreement and performance of
the transactions contemplated hereby by North Sky;
(d) Secretary's Certificate. Xxxxx.xxx shall have received a
certificate of the Secretary of North Sky, in form and substance
satisfactory to Xxxxx.xxx and its counsel, certifying (i) that attached
thereto are true and complete copies of the Certificate of Incorporation
and Bylaws of North Sky, as amended to the Closing Date; (ii) that
attached thereto are true and complete copies of the resolutions of the
Board of Directors of North Sky authorizing the execution, delivery and
performance of this Agreement and any other documents, instruments and
certificates required to be executed by it in connection herewith and
approving the consummation of the transaction in the manner contemplated
hereby; and (iii) such other matters as Xxxxx.xxx may reasonably request;
(e) Certificates Representing Shares; Cancellation of
Indebtedness. The Stockholders shall have provided Xxxxx.xxx with the
certificates representing the Shares. North Sky shall have provided
Xxxxx.xxx with originals of all documents and instruments representing
convertible debt securities of North Sky held by them, and all such debt
securities shall have been canceled;
(f) Books and Records. All of the minute books, stock ledgers
and similar corporate records of North Sky;
(g) Intentionally omitted.
(h) Consent. Evidence that all consents, releases, approvals,
or authorizations of or notifications to Utah Technology Finance
Corporation or Novell, Inc. required to effect the Merger and to
consummate the transactions contemplated hereby have been obtained by
North Sky;
(i) North Sky Board and Officer Positions. Evidence that all
directors of North Sky as of the date hereof, except for Xxx Xxxxxxxx,
have resigned;
(j) Intentionally omitted.
(k) Escrow Agreement. The Escrow Agreement;
(l) Financial Statements. North Sky shall have provided
Xxxxx.xxx and AAC with the Unaudited Financial Statements (balance sheet,
statement of operations
25
and statement of cash flows) as of, and for the nine-month period ended,
September 30, 1999 (for which Unaudited Financial Statements North Sky
shall have performed a review in accordance with Statements of Standards
for Accounting and Review Services issued by the American Institute of
Certified Public Accountants and shall have delivered a review report
thereon to Xxxxx.xxx and AAC);
(m) Instruments Representing Indebtedness. Original instrument
and documents representing the convertible debt securities held by the
Convertible Debtholders and any documentation relating to Interested Party
Transactions;
(n) Employee Proprietary Information and Inventions
Agreements. The Employee Proprietary Information and Inventions
Agreements, executed by each employee (including leased employee) and
consultant of North Sky;
(o) Lockup Agreements. The Stockholder Lockup Agreements and
the Optionholder Lockup Agreements; and
(p) Other Documents. Such other documents and instruments as
Xxxxx.xxx or its counsel shall deem reasonably necessary to consummate the
transactions contemplated hereby.
All documents delivered to Xxxxx.xxx shall be in form and substance
reasonably satisfactory to Xxxxx.xxx and its counsel.
7.3 Deliveries of Xxxxx.xxx. At the Closing, Xxxxx.xxx shall execute
and deliver or cause to be executed and delivered to North Sky simultaneously
with delivery of the items referred to in Section 7.2 above:
(a) Resolutions. A copy of the resolutions of the Board of
Directors of each of Xxxxx.xxx and AAC, certified by the Secretary thereof
as having been duly and validly adopted and being in full force and
effect, authorizing execution and delivery of this Agreement and
performance of the transactions contemplated hereby by Xxxxx.xxx and AAC;
(b) Escrow Agreement. The Escrow Agreement;
(c) Xxxxx.xxx Common Stock. Subject to the Escrow Agreement,
Xxxxx.xxx will deliver to the Stockholders the Xxxxx.xxx Common Stock; and
(d) Cancellation of Xxxxxxx Stay Guaranties. Evidence
satisfactory to North Sky that the guaranties executed by Xxxxxxx Stay or
Dalita Stay and set forth on Schedule 6.9 hereto are cancelled and no
longer in full force and effect.
All documents delivered to North Sky shall be in form and substance
reasonably satisfactory to North Sky.
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ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Stockholders. Subject to the terms and
conditions set forth herein, from and after the Effective Time, each
Stockholder, jointly and severally, shall indemnify Xxxxx.xxx and its respective
directors, officers, employees, agents or advisors, or any of their respective
successors and assigns, in respect of, and hold each of them harmless against,
any and all demands, claims, debts, actions, assessments, judgements,
settlements, sanctions, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, known or unknown, due or to become due
or otherwise), monetary damages, fines, taxes, fees, penalties, interest
obligations, deficiencies, losses and expenses (including, without limitation,
amounts paid in settlement, interest, court costs, costs of investigators,
reasonable fees and expenses of attorneys, accountants, financial advisors and
other experts, and other expenses of litigation) ("Damages", provided, however,
that Damages shall not include any consequential, speculative or punitive
damages incurred by an Indemnified Person (as defined in Section 8.3) unless
actually paid to a third party as a result of a third party claim), incurred or
suffered by them:
(a) resulting from, relating to, arising out of or
constituting any breach of representation or warranty or failure to
perform any covenant or agreement of North Sky or the Stockholders
contained, or referred to, in this Agreement, the Escrow Agreement or in
the certificates delivered pursuant to Section 7.2 herein;
(b) resulting from or arising out of any breach of any
representation or failure to perform any covenants of the Stockholders
contained in the Stockholder Lockup Agreements; or
(c) to the extent permitted by law, resulting from, relating
to, or arising out of any Violation (as defined in Section 8.2(b) hereof),
in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information
furnished by such Stockholder expressly for use in connection with the
Form S-3 Registration Statement (or the registration statement on Form
S-1, in the event Xxxxx.xxx is not eligible to use Form S-3); and each
such Stockholder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to
this Section 8.1(c), in connection with investigating or defending any
claim resulting from, relating to, or arising out of any Violation;
provided, however, that the indemnity agreement contained in this Section
8.1(c) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without
the consent of the Stockholder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this
Section 8.1(c) exceed the gross proceeds from the offering received by
such Stockholder.
8.2 Indemnification by Xxxxx.xxx and AAC. Xxxxx.xxx and the
Surviving Corporation, jointly and severally, shall indemnify the Stockholders
and hold each of them harmless against, any and all Damages incurred or suffered
by them:
27
(a) resulting from, relating to, arising out of or
constituting any breach of representation or warranty or any failure to
perform any covenant or agreement of Xxxxx.xxx or AAC contained, or
referred to, in this Agreement and the Escrow Agreement; or
(b) to the extent permitted by law, resulting from, relating
to, or arising out of any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in the Form S-3
Registration Statement (or the registration statement on Form S-1, in the
event Xxxxx.xxx is not eligible to use Form S-3), including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and Xxxxx.xxx and
the Surviving Corporation will pay to each Stockholder, as incurred, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any claim resulting from, relating to, or
arising out of any Violation; provided, however, that the indemnity
agreement contained in this Section 8.2(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if
such settlement is effected without the consent of Xxxxx.xxx and the
Surviving Corporation (which consent shall not be unreasonably withheld),
nor shall Xxxxx.xxx or the Surviving Corporation be liable in any such
case for any such loss, claim, damage, liability, or action to the extent
that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any Stockholder.
8.3 Method of Asserting Claims.
(a) All claims for indemnification by any party entitled to
make such claim hereunder (or any of their affiliated parties (each an
"Indemnified Person")) pursuant to this Article 8 shall be made in accordance
with the provisions of this Section 8.3 and the Escrow Agreement.
(b) The Indemnified Person shall give prompt written
notification to the party obligated to provide such indemnification (the
"Indemnifying Person") of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article 8 may be sought; provided, however, that no delay on the part of the
Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person from any liability or obligation under this Article 8 unless
such notification delay shall prejudice the Indemnifying Person. Within 30 days
after delivery of such notification, the Indemnifying Person may, upon written
notice thereof to the Indemnified Person, assume control of the defense of such
action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Person (and the Indemnified Person agrees to execute such documents
as are necessary to permit the Indemnifying Person to control such defense). If
the Indemnifying Person does not so assume control of such defense, the
Indemnified Person shall control such defense. The party not controlling such
defense may participate therein at its own cost and expense; provided, that if
the Indemnifying Person assumes control of such defense and the Indemnified
Person is advised by counsel in writing that the Indemnifying Person and the
28
Indemnified Person may have materially conflicting interests or different
defenses available with respect to such action, suit or proceeding, the
reasonable fees and expenses of counsel to the parties shall be considered
"Damages" for purposes of this Agreement. The party controlling such defense
shall keep the other party advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. An Indemnified
Person shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnifying Person. The Indemnifying
Person shall not agree to any settlement or the entry of a judgment in any
action, suit or proceeding without the prior written consent of the Indemnified
Person, which shall not be unreasonably withheld (it being understood that it is
reasonable to withhold such consent if, among other things, the settlement or
the entry of a judgment (A) lacks a complete release of the Indemnified Person
for all liability with respect thereto or (B) imposes any liability or
obligation on the Indemnified Person).
(c) The Escrowed Amounts (as defined in the Escrow Agreement)
shall be used to satisfy all Damages of any and all parties pursuant to the
provisions of the Escrow Agreement; provided, however, that with respect to any
claims relating to taxes (including, without limitation, those relating to
Section 3.11 herein), the Stockholders shall be jointly and severally liable for
the entire amount of such claims, including any such amounts in excess of the
Escrowed Amounts.
8.4 Survival and Limitations.
(a) Except with respect to the representations and warranties
contained in Sections 3.3(b) and 3.11, the representations and warranties of
North Sky and the Stockholders set forth in Article 3 above and the
indemnification obligations set forth in this Article 8 with respect to such
representations and warranties of North Sky and the Stockholders (i) shall
survive the Effective Date and the consummation of the transactions contemplated
hereby and continue for a period of twelve (12) months after the Effective Date
and (ii) shall not be affected by any examination made for or on behalf of
Xxxxx.xxx or AAC or the knowledge of any of Xxxxx.xxx's or AAC's officers,
directors, stockholders, employees or agents.
(b) The representations and warranties of North Sky set forth
in Section 3.11 shall survive the Effective Date and the consummation of the
transactions contemplated hereby and shall continue for seven (7) years in full
force and effect in accordance with their terms. (c) The representations and
warranties of North Sky set forth in Section 3.3(b) hereof shall survive the
Effective Date and the consummation of the transactions contemplated hereby and
shall continue for three (3) years in full force and effect in accordance with
their terms.
(d) The representations and warranties of Xxxxx.xxx and AAC
set forth in Article 2 above shall survive the Effective Date and the
consummation of the transactions contemplated hereby and continue for a period
of twelve (12) months after the Effective Date.
29
(e) Except with respect to the representations and warranties
of North Sky set forth in Sections 3.3(b) and 3.11 hereof, and except as set
forth in Section 8.4(f) hereof, the date on which any particular representation,
warranty or indemnification obligation of any party hereto terminates shall be
referred to herein and in the Escrow Agreement as the "Termination Date". If a
notice of a claim is given in accordance with the notice provisions of this
Agreement or the Escrow Agreement before the Termination Date, then
(notwithstanding the occurrence of the Termination Date) the representation,
warranty or indemnification obligation applicable to such claim shall survive
until, but only for purposes of, the resolution of such claim.
(f) The indemnification obligations contained in Sections
8.1(c) and 8.2(b) hereof shall survive until the termination of the statute of
limitations with respect thereto.
8.5 Limitations on Indemnification by Stockholders. The
Stockholders' obligation to provide indemnification is subject to the following
limitations:
(a) No indemnification shall be made by the Stockholders
unless the aggregate amount of damages exceeds One Hundred Thousand Dollars
($100,000.00); provided, however, that in the event the aggregate amount of
Damages exceeds One Hundred Thousand Dollars ($100,000.00), each Stockholder,
jointly and severally, shall indemnify Xxxxx.xxx and the Surviving Corporation
for the entire amount of Damages; and
(b) Except with respect to any claims relating to taxes
(including, without limitation, those relating to Section 3.11 hereof), the
Stockholders' aggregate liability for Damages shall not exceed the value of the
assets held pursuant to the Escrow Agreement. If a claim for indemnification
under Section 8.1(a) is brought for a breach of the representation and warranty
contained in Section 3.3(b) following termination of the Escrow Agreement, the
aggregate liability for Damages for such claim shall not exceed the Fair Market
Value (as defined in the Escrow Agreement) of the Escrow Property (as defined in
the Escrow Agreement) distributed to the Stockholders (if any) upon termination
of the Escrow Agreement.
8.6 No Duplication; Sole Remedy.
(a) Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.
(b) Except in the event of actual fraud committed by a
Stockholder, the rights of Xxxxx.xxx to indemnification as provided in Section
8.1, for a breach of representations, warranties, covenants or agreements, shall
constitute Xxxxx.xxx's sole remedy for such a breach against the Stockholders,
and the Stockholders shall have no other liability or damages to Xxxxx.xxx
resulting from such breach.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Termination of Agreement. All parties hereto agree to use their
reasonable best efforts to fulfill the requirements of Articles 5 and 6 as soon
as practicable. If any precondition to the completion of the transactions
contemplated hereby as set forth in Articles 5
30
and 6 is not fulfilled on or prior to December 15, 1999, which date may be
extended by mutual written agreement of the parties, this Agreement shall be
null and void and have no further effect and no party shall have any liability
to any other party as a result of such termination, except as to such matters as
are specified to survive the termination of this Agreement.
9.2 Further Assurances. At the request of any of the parties hereto,
and without further consideration, each party agrees to execute such documents
and instruments and to do such further acts as may be necessary or desirable to
effectuate the transactions contemplated hereby including, without limitation,
that the principals of North Sky shall cooperate with Xxxxx.xxx in the
preparation of any short-year tax returns required of North Sky as a result of
this transaction.
9.3 Each Company to Bear Own Costs. Each of North Sky and Xxxxx.xxx
shall pay all costs and expenses incurred or to be incurred by it in negotiating
and preparing this Agreement and in closing and carrying out the transactions
contemplated hereby; provided, however, that Xxxxx.xxx shall reimburse North Sky
and the Stockholders for the reasonable legal fees and expenses (not to exceed
$25,000 in the aggregate) and the reasonable accounting fees and expenses (not
to exceed $35,000 in the aggregate) incurred by them in negotiating and
preparing this Agreement in the event this Agreement is terminated.
9.4 Headings. The subject headings of the Articles and Sections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
9.5 Entire Agreement; Waivers. Except as set forth in Section 4.4
hereof, this Agreement and the Exhibits and Schedules hereto constitute the
entire agreement between the parties pertaining to the contemporaneous
agreements, representations, and understandings of the parties. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by all parties. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
9.6 Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
9.7 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and thereto and their respective heirs, executors,
administrators, successors and assigns.
9.8 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service
31
if served personally on the party to whom notice is to be given, on the date of
transmittal of services via telecopy to the party to whom notice is to be given,
or on the third day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
To Xxxxx.xxx
or AAC at: Xxxxx.xxx, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
Senior Vice President, Corporate Development
Telecopy No: (000) 000-0000
With a copy to: Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxx, Esq.
Telecopy No: (000) 000-0000
To North Sky at: North Sky, Inc.
0000 Xxxxx Xxxxxxxxxx Xxx
Xxxxx X-0000
Xxxx, Xxxx 00000
Attn: Xxxx Xxxxx
Telecopy No: (000) 000-0000
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Telecopy No: (000) 000-0000
Any party may change its address for purposes of this paragraph by giving notice
of the new address to each of the other parties in the manner set forth above.
9.9 Attorneys' Fees. If any party to this Agreement shall bring any
action, suit, counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the Prevailing Party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in bringing and prosecuting such Action
and/or enforcing any order, judgment, ruling or award granted as part of such
Action. "Prevailing Party" within the meaning of this Section 9.9 includes,
without limitation, a party who agrees to dismiss an Action upon the other
party's payment of all or a portion of the sums allegedly due or performance of
the covenants allegedly breached, or who obtains substantially the relief sought
by it.
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9.10 Governing Law. The terms of this Agreement shall be governed by
the laws of the State of New York, without regard to principles of choice or
conflicts of laws.
9.11 Dispute Resolution. In the event that a dispute shall ever
arise between the parties, the parties agree to act in good faith to attempt to
resolve such dispute. In consideration for the mutual promises of each party,
the parties agree that, in the event of any dispute, the parties shall meet
within 10 days of a written request by a party for such a meeting. The party
requesting the meeting shall set forth in detail the nature of the dispute.
Within the period outline above, the parties shall meet and attempt in good
faith to resolve the dispute. If, and only if, the dispute remains unresolved
through the foregoing process, the parties agree that all actions or proceedings
arising in connection with this Agreement shall be tried and litigated
exclusively in the State and Federal courts located in the Borough of Manhattan
in New York, New York. The aforementioned choice of venue is intended by the
parties to be mandatory and not permissive in nature, thereby precluding the
possibility of litigation between the parties with respect to or arising out of
this Agreement in any jurisdiction other than that specified in this Section
9.11. Each party hereby waives any right it may have to assert the doctrine of
forum non conveniens or similar doctrine or to object to venue with respect to
any proceeding brought in accordance with this paragraph, and stipulates that
the State and Federal courts located in the Borough of Manhattan in New York,
New York shall have in personam jurisdiction and venue over each of them for the
purposes of litigating any dispute, controversy or proceeding arising out of or
related to this Agreement. Each party hereby authorizes and accepts service of
process sufficient for personal jurisdiction in any action against it as
contemplated by this Section 9.11 by registered or certified mail, return
receipt requested, postage prepaid, to its address for the giving of notices as
set forth in this Agreement. Any final judgment rendered against a party in any
action or proceeding shall be conclusive as to the subject of such final
judgment and may be enforced in other jurisdictions in any manner provided by
law.
9.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
9.13 Severability. All provisions contained herein are severable and
in the event that any of them shall be held to be to any extent invalid or
otherwise unenforceable by any court of competent jurisdiction, such provision
shall be construed as if it were written so as to effectuate to the greatest
possible extent the parties' expressed intent; and in every case the remainder
of this Agreement shall not be affected thereby and shall remain valid and
enforceable, as if such affected provision were not contained herein.
9.14 Construction of Agreement; Knowledge. The words "include,"
"includes," and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." For purposes of this Agreement, and
except as provided in the following sentence, the term "knowledge," when used in
reference to a corporation means the actual knowledge of the executive officers
of such corporation after such officers shall have made inquiry that is
customary and appropriate under the circumstances to which reference is made,
and when used in reference to an individual means the actual knowledge of such
individual after the individual shall have made inquiry that is customary and
appropriate under the circumstances to which reference is made.
33
9.15 Publicity. The parties shall cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the transactions contemplated hereby. Neither North Sky nor the
Stockholders shall issue or make, or cause to have issued or made, any press
release or announcement concerning the transactions contemplated hereby without
the advance approval in writing of the form and substance thereof by Xxxxx.xxx
and AAC.
9.16 Mutual Drafting. This Agreement is the joint product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of such parties, and shall not be
construed for or against any party hereto.
9.17 Specific Performance and Other Remedies. The parties hereto
each acknowledge that the rights of each party to consummate the transactions
contemplated hereby are special, unique and of extraordinary character, and
that, in the event that any party violates or fails or refuses to perform any
covenant or agreement made by it herein, the non-breaching party may be without
an adequate remedy at law. The parties each agree, therefore, that in the event
that either party violates or fails or refuses to perform any covenant or
agreement made by such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Reorganization as of the date first above written.
XXXXX.XXX, INC.
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Its: President and CEO
XXXXX.XXX ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Its: President and Secretary
NORTH SKY, INC.
By: /s/ Xxxx Xxxxx
----------------------------------------
Its: Chief Financial Officer
DALITA STAY
/s/ Dalita Stay
--------------------------------------------
MAKERS LLC
By: /s/ Xxxxxxx Stay
----------------------------------------
Its: Manager
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EXHIBITS AND SCHEDULES TO
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
XXXXX.XXX, XXXXX.XXX ACQUISITION CORP.,
NORTH SKY, INC.,
DALITA STAY AND MAKER LLC
EXHIBITS:
EXHIBIT A - ESCROW AGREEMENT
EXHIBIT B - OPTIONHOLDER LOCKUP AGREEMENT
EXHIBIT C STOCKHOLDER LOCKUP AGREEMENT
EXHIBIT D - EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
EXHIBIT E - NO-HIRE AGREEMENT
SCHEDULES:
SCHEDULE 1.3 - DIRECTORS AND OFFICERS
SCHEDULE 1.7 - EMPLOYEE BENEFIT PLANS; ASSUMPTION OF OPTIONS
SCHEDULE 3.1 - ORGANIZATION AND CORPORATE AUTHORITY
SCHEDULE 3.3(a) - NORTH SKY COMMON STOCKHOLDERS
SCHEDULE 3.3(b) - ADDITIONAL SHARES OF COMMON STOCK
SCHEDULE 3.6 - ABSENCE OF CERTAIN CHANGES
SCHEDULE 3.7 - LIABILITIES
SCHEDULE 3.9 NO CONFLICT OR DEFAULT
SCHEDULE 3.10 - CONTRACTS AND APPROVALS
SCHEDULE 3.12 - INTELLECTUAL PROPERTY RIGHTS
SCHEDULE 3.16 - BANK ACCOUNTS
SCHEDULE 3.17 - TITLE TO PROPERTIES AND ASSETS; LEASES
SCHEDULE 3.18 - ACCOUNTS RECEIVABLE
SCHEDULE 3.19 - ACCOUNTS PAYABLE
SCHEDULE 3.20 - CONTRACTS
SCHEDULE 3.21 - INTERESTED PARTY TRANSACTIONS
SCHEDULE 3.22 - INSURANCE
SCHEDULE 3.23 - DOMAIN OWNERSHIP
SCHEDULE 4.11(a) - AFFECTED EMPLOYEES
SCHEDULE 4.11(c) - OPTIONS TO AFFECTED EMPLOYEES
SCHEDULE 4.13 - XXXXXXX STAY AND DALITA STAY
GUARANTEES
36
