Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NEXTWAVE WIRELESS INC.,
IPW, LLC,
IPWIRELESS, INC.
AND
X. XXXXXX XXXXXXXX
AS THE STOCKHOLDER REPRESENTATIVE
DATED AS OF APRIL 6, 2007
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 6, 2007
(this "AGREEMENT"), by and among NextWave Wireless Inc., a Delaware corporation
("PARENT"), IPW, LLC, a limited liability company existing under the laws of
Delaware and a wholly-owned subsidiary of Parent ("MERGER SUB"), IPWireless,
Inc., a Delaware corporation (the "COMPANY"), and X. Xxxxxx Xxxxxxxx as the
Stockholder Representative.
WHEREAS, the respective Boards of Directors of Parent and the
Company and the Board of Managers of Merger Sub have approved and declared
advisable this Agreement and the merger of Merger Sub with and into the Company
(the "MERGER"), with the Company being the surviving entity in the Merger, upon
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Merger is a deemed liquidation of the Company
pursuant to Article IV, Section (B)(2)(c) of the Company's Twelfth Amended and
Restated Certificate of Incorporation;
WHEREAS, the Board of Directors of the Company has recommended
the adoption of this Agreement to the stockholders of the Company, and
concurrently with the execution and delivery of this Agreement, stockholders of
the Company holding shares with voting power sufficient to approve the Merger in
accordance with the DGCL and the Company's Certificate of Incorporation and
Bylaws have adopted this Agreement and approved the Merger;
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be deemed a direct
taxable purchase of stock from the stockholders of the Company for United States
federal income tax purposes;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions.
(a) For purposes of this Agreement, the following terms shall
have the meanings specified in this Section 1.1:
"2007 EARNOUT AMOUNT" means the lesser of (i) 30% of the
Booked Revenue for the TDtv Business and the Public Safety Business recorded
after the date hereof but prior to the end of calendar year 2007 or (ii)
$7,488,000; provided, however, that no such amounts shall become payable until
the later of such time that the Company makes delivery, the customers completes
satisfactory acceptance testing and the Company receives payment under the
applicable orders or contracts giving rise to the Booked Revenue.
"2007 EARNOUT MERGER CONSIDERATION AMOUNT" means the 2007
Earnout Amount less the Employee Incentive Plan 2007 Earnout Allocation Amount
less the Special Acquisition Bonus 2007 Earnout Allocation Amount.
"2007 EARNOUT PER SHARE AMOUNT" means the amount determined by
dividing (i) the 2007 Earnout Merger Consideration Amount by (ii) the Series C-3
Shares Outstanding.
"2008 EARNOUT AMOUNT" means (a) zero, in the event Shipped
Revenue for the TDtv Business and the Public Safety Business achieved during
calendar year 2008 is less than $65,859,000 or, (b) in the event Shipped Revenue
for the TDtv Business and the Public Safety Business achieved during calendar
year 2008 is greater than or equal to $65,859,000, the lesser of (i) 36.8% of
Shipped Revenue for the TDtv Business and the Public Safety Business in excess
of $65,859,000 achieved during calendar year 2008 or (ii) $24,234,000.
"2008 EARNOUT MERGER CONSIDERATION AMOUNT" means the 2008
Earnout Amount less the Employee Incentive Plan 2008 Earnout Allocation Amount
less the Special Acquisition Bonus 2008 Earnout Allocation Amount.
"2008 EARNOUT PER SHARE AMOUNT" means the amount determined by
dividing (i) the 2008 Earnout Merger Consideration Amount by (ii) the Series C-3
Shares Outstanding.
"2009 EARNOUT AMOUNT" means (a) zero, in the event Shipped
Revenue for the TDtv Business and the Public Safety Business achieved during
calendar year 2009 is less than $144,793,000 or, (b) in the event Shipped
Revenue for the TDtv Business and the Public Safety Business achieved during
calendar year 2009 is greater than or equal to $144,793,000, the lesser of (i)
36.8% of Shipped Revenue for the TDtv Business and the Public Safety Business in
excess of $144,793,000 achieved during calendar year 2009 or (ii) $53,279,000.
"2009 EARNOUT MERGER CONSIDERATION AMOUNT" means the 2009
Earnout Amount less the Employee Incentive Plan 2009 Earnout Allocation Amount
less the Special Acquisition Bonus 2009 Earnout Allocation Amount.
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"2009 EARNOUT PER SHARE AMOUNT" means the amount determined by
dividing (i) the 2009 Earnout Merger Consideration Amount by (ii) the Series C-3
Shares Outstanding.
"ADDITIONAL CONSIDERATION PER SHARE AMOUNT" means the amount
determined by dividing (i) the Additional Merger Consideration Amount by (ii)
the Series C-3 Shares Outstanding.
"ADDITIONAL ESCROW AMOUNT" means $21,000,000, which shall be
represented by a combination of (a) cash and (b) validly issued, fully paid and
nonassessable shares of Parent Common Stock, as set forth in Section 3.1(k);
provided that $6,000,000 of such amount shall exclusively be available to cover
Intellectual Property Payments pursuant to Section 9.2 (the "IP ESCROW").
"ADDITIONAL MERGER CONSIDERATION AMOUNT" means the Additional
Total Consideration less the Employee Incentive Plan Additional Allocation
Amount less the Special Acquisition Bonus Additional Allocation Amount.
"ADDITIONAL TOTAL CONSIDERATION" means an amount equal to (a)
$50,000,000, in the event the Northrop Grumman Shipped Revenue is greater than
or equal to $35,000,000, or (b) $50,000,000 times a fraction, the numerator of
which is the Northrop Grumman Shipped Revenue and the denominator of which is
$35,000,000, in the event the Northrop Grumman Shipped Revenue is less than
$35,000,000, in each such case less the Additional Escrow Amount if the
Additional Total Consideration is paid prior to the Expiration Date.
"AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person, and
the term "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Section 1504 of the Code or any comparable or analogous group under
state, local or foreign Law.
"ALLOCATIONS SPREADSHEET" means the spreadsheet prepared by
the Company and provided to Parent within three (3) Business Days of the date
hereof that sets forth: (i) for each Plan Participant, the portion of the
Employee Incentive Plan Payments he or she is entitled to receive under the
terms of the Employee Incentive Plan and this Agreement, together with such Plan
Participant's contributions to the Escrow Fund based on his, her or its Pro Rata
Portion; (ii) for each holder of Preferred Stock, the portion of the Initial
Merger Consideration Amount he, she or it is entitled to receive under the terms
of this Agreement (including the cash component of the Initial Merger
Consideration Amount), together with each Participating Stockholder's
contributions to the Escrow Fund based on his, her or its Pro Rata Portion, and
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(iii) for each Bonus Participant, the portion of the Special Acquisition Bonus
Initial Allocation Amount he or she is entitled to receive under the terms of
the Special Acquisition Bonus, together with such participant's contribution to
the Escrow Fund based on his, her or its Pro Rata Portion. In the event of any
conflict between the final Allocations Spreadsheet delivered at Closing and the
terms of this Agreement that allocate the amounts listed in clauses (i), (ii)
and (iii) in the preceding sentence, the Allocations Spreadsheet shall govern,
and further, in order to comply with applicable securities Laws, Parent may pay
cash to any Person in lieu of shares of Parent Common Stock.
"AVERAGE PARENT STOCK PRICE" means an amount equal to the
average of the per share closing price of Parent Common Stock on the NASDAQ
Global Market (as reported by Bloomberg, or, if not reported thereby, any other
authoritative source) for the 30 consecutive trading days ending with the third
trading day immediately preceding: (i) the Closing Date, in the case of the
Initial Merger Consideration Amount, the Employee Incentive Plan Initial
Allocation Amount and the Special Acquisition Bonus Initial Allocation Amount;
(ii) the actual payment date, in the case of the Additional Merger Consideration
Amount, the 2007 Earnout Merger Consideration Amount, the Special Acquisition
Bonus 2007 Earnout Allocation Amount, the 2008 Earnout Merger Consideration
Amount, the Special Acquisition Bonus 2008 Earnout Allocation Amount, the 2009
Earnout Merger Consideration Amount, the Special Acquisition Bonus 2009 Earnout
Allocation Amount, the Employee Incentive Plan Initial Allocation Stock Amount,
the Employee Incentive Plan Additional Allocation Amount, the Special
Acquisition Bonus Additional Allocation Amount, the Employee Incentive Plan 2007
Earnout Allocation Amount, the Employee Incentive Plan 2008 Earnout Allocation
Amount and the Employee Incentive Plan 2009 Earnout Allocation Amount; or (iii)
the date of the Officer's Certificate, in connection with Section 9.3(b).
"BONUS PARTICIPANT" means Xxx Xxxxxx as a participant in the
Special Acquisition Bonus.
"BOOKED REVENUE" means (i) amounts payable pursuant to
purchase orders placed by customers after the date hereof and prior to December
31, 2007 in connection with the Public Safety Business or the TDtv Business,
(ii) up-front or fixed license fees payable to the Company in connection with
licenses granted to third parties after the date hereof and prior to December
31, 2007 that enable such third parties to engage in the Public Safety Business
or the TDtv Business, and (iii) proceeds from the sale of the Public Safety
Business or TDtv Business, where the agreement for such sale was entered into
after the date hereof and prior to December 31, 2007; provided, however, that
Booked Revenue shall exclude nonrecurring engineering expense payments
associated with the TDtv business, as well as amounts payable in connection with
the Company's Northrop Grumman purchase order number PG10452, dated October 16,
2006 - October 24, 2006, and any replacements, extensions or modifications of
such purchase order; and provided further that any new business or increase to
the size of such purchase order shall constitute Booked Revenue. Booked Revenue
shall include Booked Revenue of the Company, the Successor Corporation or any
successor to the relevant Public Safety Business or TDtv Business, so long as
such business is owned by Parent or any affiliate of Parent, plus (i) Booked
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Revenue of licensees of the Company who are licensees of the Company as of the
date hereof, (ii) Booked Revenue of licensees of the Company who become
licensees of the Company after the date hereof but prior to Closing (provided
that Parent has consented thereto), and (iii) Booked Revenue of licensees of the
Successor Corporation (or any successor to the relevant Public Safety Business
or TDtv Business so long as such business is owned by Parent or any affiliate of
Parent) who become licensees after the Closing; provided that Booked Revenue of
any of such licensees shall only include the portion of the amount payable that
is used to determine the royalty or license fee that the licensee pays to the
Company. No amounts included in Booked Revenue shall be included in Shipped
Revenue.
"BUSINESS DAY" means any day of the year on which national
banking institutions in California and New York are open to the public for
conducting business and are not required or authorized to close.
"CASH CAP" means $25,000,000 in cash.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMON STOCK" means the Common Stock of the Company, par
value $0.001 per share.
"COMPANY STOCK OPTION" means each option to purchase shares of
Common Stock or other right to receive shares of Common Stock granted under the
IPWireless, Inc. 1999 Stock Plan.
"COMPANY STOCKHOLDERS" means the holders of any shares of
Common Stock or Preferred Stock issued and outstanding immediately prior to the
Effective Time, after giving effect to any conversions, if any, of Preferred
Stock or Convertible Notes at or prior to the Effective Time and any option or
warrant exercises, if any, at or prior to the Effective Time.
"CONTRACT" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, commitment or other legally binding arrangement
or agreement, whether written or oral.
"CONVERTIBLE NOTES" means the convertible notes issued in
connection with the Convertible Note and Warrant Purchase Agreement, dated
September 26, 2006.
"DISCLOSURE LETTER" means the Disclosure Letter of the
Company, as delivered in connection with this Agreement.
"EARNOUT AMOUNT" means the 2007 Earnout Amount, the 2008
Earnout Amount, or the 2009 Earnout Amount, as applicable.
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"EARNOUT MERGER CONSIDERATION AMOUNT" means the 2007 Earnout
Merger Consideration Amount, the 2008 Earnout Merger Consideration Amount or the
2009 Earnout Merger Consideration Amount, as applicable.
"EMPLOYEE INCENTIVE PLAN" means the IPWireless, Inc. Employee
Incentive Plan, as the same may be amended from time to time in accordance with
the terms of this Agreement.
"EMPLOYEE INCENTIVE PLAN 2007 EARNOUT ALLOCATION AMOUNT" means
the Adjusted Aggregate Plan Amount (as such term is defined in the Employee
Incentive Plan) payable (if any) pursuant to the Employee Incentive Plan as a
result of the payment of the 2007 Earnout Amount.
"EMPLOYEE INCENTIVE PLAN EARNOUT ALLOCATION AMOUNT" means the
2007 Employee Incentive Plan Earnout Allocation Amount, the 2008 Employee
Incentive Plan Earnout Allocation Amount, or the 2009 Employee Incentive Plan
Earnout Allocation Amount, as applicable.
"EMPLOYEE INCENTIVE PLAN 2008 EARNOUT ALLOCATION AMOUNT" means
the Adjusted Aggregate Plan Amount payable (if any) pursuant to the Employee
Incentive Plan as a result of the payment of the 2008 Earnout Amount.
"EMPLOYEE INCENTIVE PLAN 2009 EARNOUT ALLOCATION AMOUNT" means
the Adjusted Aggregate Plan Amount payable (if any) pursuant to the Employee
Incentive Plan as a result of the payment of the 2009 Earnout Amount.
"EMPLOYEE INCENTIVE PLAN ADDITIONAL ALLOCATION AMOUNT" means
the Adjusted Aggregate Plan Amount payable pursuant to the Employee Incentive
Plan as a result of the payment of the Additional Total Consideration.
"EMPLOYEE INCENTIVE PLAN INITIAL ALLOCATION AMOUNT" means the
Adjusted Aggregate Plan Amount payable pursuant to the Employee Incentive Plan
as a result of the Initial Closing Consideration.
"EMPLOYEE INCENTIVE PLAN PAYMENTS" means, collectively, the
Employee Incentive Plan Initial Allocation Amount, the Employee Incentive Plan
Additional Allocation Amount, the Employee Incentive Plan 2007 Earnout
Allocation Amount, the Employee Incentive Plan 2008 Earnout Allocation Amount
and the Employee Incentive Plan 2009 Earnout Allocation Amount.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGREEMENT" means that certain Escrow Agreement to be
entered into on the Closing Date by and among Parent, the Stockholder
Representative and the Escrow Agent (as therein defined), substantially in the
form of Exhibit A hereto.
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"ESCROW AMOUNT" means the Initial Escrow Amount and the
Additional Escrow Amount.
"EXCHANGE AGENT" means the party reasonably acceptable to
Parent and the Company selected to act as exchange agent pursuant to an Exchange
Agent Agreement (or similar) to be entered into by and among Parent, the Company
and the Stockholder Representative prior to the Effective Time.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time.
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"INDEBTEDNESS" of any Person means, without duplication, (i)
the principal of and premium (if any) and prepayment penalties (if any) in
respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payable and other accrued current liabilities arising in the Ordinary Course of
Business); (iii) all obligations of such Person under leases required to be
capitalized in accordance with GAAP; (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction; and (v) all obligations of the type referred to in
clauses (i) through (iv) of any Persons for the payment of which such Person is
responsible or liable or for which any property or asset of such Person is
secured by a Lien under any legally binding obligation, including as obligor,
guarantor, surety or otherwise.
"INDEMNIFICATION" of any Person means such indemnification
rights as set forth in Article IX of this Agreement.
"INDEMNIFIED PARTY" means any Person entitled to exercise such
indemnification rights as set forth in Article IX of this Agreement.
"INITIAL CASH AMOUNTS" mean the Series C-1 Cash Amount, the
Series D Cash Amount, the Series C-3 Initial Cash Amount, the Employee Incentive
Plan Initial Allocation Cash Amount and the Special Acquisition Bonus Initial
Allocation Cash Amount.
"INITIAL CLOSING CONSIDERATION" means $100,000,000 (subject to
adjustment, as provided in Section 3.7) less 50% of the Transaction Expenses
outstanding as of the Closing in excess of $3,000,000.
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"INITIAL ESCROW AMOUNT" means $5,000,000 (subject to
adjustment, as provided in Section 3.7), which shall be represented by a
combination of (a) cash and (b) validly issued, fully paid and nonassessable
shares of Parent Common Stock, as set forth in Section 3.1(k).
"INITIAL MERGER CONSIDERATION AMOUNT" means the sum of the
Series C-1 Cash Amount plus the Series C-3 Initial Total Amount plus the Series
D Total Amount.
"INTELLECTUAL PROPERTY" means any rights available with
respect to the Technology under patent, copyright, trade secret or trademark law
or any other statutory provision or common law doctrine, and also domain names.
"INTELLECTUAL PROPERTY PAYMENTS" means royalty payments in
respect of the usage of third party Intellectual Property rights incorporated in
any Company products shipped on or prior to the Closing Date, but excluding any
Company products shipped thereafter, pursuant to a license or other agreement
entered into after the Closing Date, provided, however, that the royalty rate
applied to Company products shipped on or prior to the Closing Date shall be the
same as the rate applied to comparable Company products shipped after the
Closing Date.
"IRS" means the United States Internal Revenue Service.
"KEY EMPLOYEES" means those individuals identified as key
employees on Schedule 1.1 of the Company Disclosure Letter.
"KNOWLEDGE" means (i) with respect to the Parent, the actual
knowledge of the individual(s) listed on Schedule 1.1 and such knowledge as
would reasonably be expected to be known by such individuals in the ordinary and
usual course of the performance of their professional responsibilities, and (ii)
with respect to the Company, the actual knowledge of the individuals listed on
Schedule 1.1 and such knowledge as would reasonably be expected to be known by
such individual(s) in the ordinary and usual course of the performance of their
professional responsibilities.
"LAW" means any foreign, federal, state or local law
(including common law), statute, code, ordinance, rule, regulation or other
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
"LEGAL PROCEEDING" means any judicial, administrative or
arbitral actions, suits, proceedings (public or private) or claims or
proceedings by or before a Governmental Body.
"LIABILITY" means any debt, loss, damage, adverse claim,
liability or obligation (whether direct or indirect, known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or
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unliquidated, or due or to become due, and whether in contract, tort, strict
liability or otherwise).
"LIEN" means any lien, mortgage, encumbrance, security
interest, claim, lease, charge, or pledge that is not a Permitted Exception.
"LOSSES" means any and all damages, losses, Liabilities, Taxes
and Tax Losses (including any Taxes incurred or resulting from receipt of a
payment in respect of an indemnifiable Loss but reduced by any Tax benefit
actually realized and utilized by the end of the taxable year in which payment
in respect of the indemnifiable Loss is received, determined using a "with and
without" approach), obligations, costs and expenses, and any and all claims,
demands or suits (by any Person, including any Governmental Body), including the
costs and expenses of any and all actions, suits, proceedings, demands,
assessments, judgments, settlements and compromises relating thereto and
including reasonable attorneys' and other advisors' fees, costs and expenses
incurred in connection therewith; provided, that Losses shall not include any
accounts payable of the Company and Company Subsidiaries recorded on the Closing
Statement.
"MANAGEMENT TEAM" means Xxxxxxx Xxxxx, Xxxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxxx X. Xxxxx, Xxxxx Xxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxx Xxxxx, Xxx
Xxxxxxxx and Xxxx Xxxxxxx.
"MATERIAL ADVERSE EFFECT" means, with respect to any party,
any condition, change, situation or set of circumstances that has had or would
reasonably be expected to have a material adverse effect on (i) the business,
assets, properties, liabilities, financial condition, operations, or results of
operations of such party and its Subsidiaries, taken as a whole, or (ii) the
ability of such party to consummate the Merger and the other transactions
contemplated by this Agreement or perform its material obligations under this
Agreement or the Company Documents, if applicable; provided, however, that a
Material Adverse Effect shall not include any condition, change, situation or
set of circumstances or effect relating to (A) the impact on the Company's
customers, suppliers, distributors or employees relating to public announcement
of this Agreement or the transactions contemplated hereby, (B) any actions
required to be taken in compliance with the terms of this Agreement, (C) any
change in Law or GAAP applicable or potentially applicable generally to the
wireless communications industries in which the party or its Subsidiaries
operate, (D) changes generally affecting the wireless communications industries
in which the party or its Subsidiaries operate (except with respect to changes
that disproportionately affect the party or its Subsidiaries relative to other
participants in the industries in which the party and its Subsidiaries operate),
(E) changes in economic conditions (including changes in the prevailing interest
rates) in the United States or the United Kingdom (except with respect to
changes that disproportionately affect the party or its Subsidiaries relative to
other participants in the wireless communications industries in which the party
and its Subsidiaries operate) or (F) any attack on, or by, outbreak or
escalation of hostilities or acts of terrorism involving, the United States, or
any declaration of war by the United States Congress or any hurricane or other
natural disaster that does not disproportionately affect the party or its
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Subsidiaries relative to other participants in the wireless communications
industries in which the party and its Subsidiaries operate.
"MERGER CONSIDERATION PAYMENTS" means, collectively, the
payment of the Initial Merger Consideration Amount, the Additional Merger
Consideration Amount, the 2007 Earnout Merger Consideration Amount, the 2008
Earnout Merger Consideration Amount and the 2009 Earnout Merger Consideration
Amount.
"NEW YORK PUBLIC SAFETY PROJECT" means the creation and
maintenance of a city-wide mobile wireless broadband network in New York City
that will be used by public safety workers for communication and response
services.
"NORTHROP GRUMMAN SHIPPED REVENUE" means the amount of payment
received by the Company and its Subsidiaries from Northrop Grumman or its
Affiliates on or prior to June 30, 2008 (i) in connection with product sales by
the Company for the New York Public Safety Project for which the product has
been delivered by the Company (it being understood that if delivery and payment
occur at different times, Northrop Grumman Shipped Revenue shall be deemed to
occur at the time that the later of delivery or payment occur), or (ii) for
software maintenance.
"ORDER" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award of a Governmental Body.
"ORDINARY COURSE OF BUSINESS" means the ordinary and usual
course of day-to-day operations of the business of the Company and the Company
Subsidiaries through the date of this Agreement consistent with past practice.
"PARENT COMMON STOCK" means the common stock, par value $0.001
per share, of Parent.
"PARTICIPATING STOCKHOLDERS" shall mean the holders of Series
C-3 Preferred Stock, and to the extent that the portion of the Initial Closing
Consideration received by holders of the Series C-3 Preferred Stock is
inadequate to fund the Initial Escrow Amount, the holders of the Series D
Preferred Stock.
"PERMITS" means any approvals, authorizations, consents,
licenses, permits or certificates granted or issued by a Governmental Body.
"PERMITTED EXCEPTIONS" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance which have been made available to Parent; (ii) statutory liens
for current Taxes, assessments or other governmental charges not yet delinquent
or the amount or validity of which is being contested in good faith by
appropriate proceedings provided that adequate reserves have been set aside on
the books and records of the Company or the Company Subsidiaries in accordance
with GAAP; (iii) mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the Ordinary Course of Business that are not material to
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the business, operations and financial condition of the assets of the Company so
encumbered; (iv) zoning, entitlement and other land use and environmental
regulations by any Governmental Body, provided that such regulations have not
been violated by the Company; (v) statutory or common law liens to secure
obligations to landlords, lessors or renters under leases or rental agreements;
(vi) deposits or pledges made in connection with, or to secure payment of,
workers' compensation, unemployment insurance or similar programs mandated by
applicable Law; (vii) liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; (viii) liens in favor of other financial institutions
arising in connection with the Company's deposit accounts or securities accounts
held at such institutions to secure customary fees, charges, and the like; and
(ix) liens granted in the Ordinary Course of Business to, or accounts receivable
assigned to in the Ordinary Course of Business, the Company's contract
manufacturing partners.
"PERSON" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, Governmental Body or other entity.
"PRE-CLOSING TAX PERIOD" means any taxable year or period (or
portion thereof) that ends on or before the Closing Date.
"PREFERRED STOCK" means, collectively, the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series C-1 Preferred
Stock, Series C-3 Preferred Stock, Series C-4 Preferred Stock, and Series D
Preferred Stock of the Company.
"PRIME RATE" means the Prime Rate as published in the Wall
Street Journal on the applicable measurement date.
"PRO RATA PORTION" means, (a) with respect to the Initial
Escrow Amount, (x) for each Participating Stockholder, the ratio of (i) the
amount of the Series C-3 Initial Total Amount to which such Person is entitled
pursuant to Section 3.1 over (ii) the Series C-3 Initial Total Amount (and if
the holders of the Series D Preferred Stock are required to fund a portion of
the Initial Escrow Amount, the ratio of (A) the amount of the Series D Total
Amount which such holder is entitled pursuant to Section 3.1 over (B) the Series
D Total Amount), (y) for each Plan Participant, such Plan Participant's pro rata
share (based on Participant Shares held under the Employee Incentive Plan) of
$150,000, and (z) for the Bonus Participant, the amount by which the Special
Acquisition Bonus would be reduced as a result of reducing the Initial Closing
Consideration by $5,000,000, and (b) with respect to the Additional Escrow
Amount, for each Participating Stockholder, Plan Participant and Bonus
Participant, the ratio of (i) the amount of Additional Total Consideration to
which such Person is entitled pursuant to Section 3.1 over (ii) the Additional
Total Consideration.
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"PROJECTED WORKING CAPITAL" means the Company's projected
Working Capital as at various dates, as set forth in Exhibit H hereto. If the
Closing Date occurs between one of the dates listed in Exhibit H, the applicable
Projected Working Capital shall be determined by linear interpolation (ignoring
days other than Business Days).
"PUBLIC SAFETY ACTIVITIES" means the planning, funding,
preparation and training for, and/or provision of activities, goods, and/or
services that are predominantly and traditionally understood to be within the
scope of governmental functions relating to the health or safety of members of
the public or to the protection or preservation of public or private properties
or resources, such as, without limitation: (a) any and all activities of all
branches of organized governmental military forces and government security
organizations (such as the United States Central Intelligence Agency), including
the deployment, operation and maintenance of communications systems at army,
navy and air force military bases; (b) prevention of, and reaction to, epidemics
or other threats to public health; and (c) protecting and promoting public
safety through police, fire departments, emergency medical services, disaster
assistance, emergency food aid, or the provision of emergency shelter, whether
such activities, goods, or services are engaged in or provided by governments or
their agencies or (except with respect to clause (a) above) by non-profit
civilian agencies in the substantial absence of, or as a supplement to,
governments capable of doing so.
"PUBLIC SAFETY BUSINESS" means the business of licensing,
selling, offering for sale, marketing, developing, installing and/or maintaining
any application or implementation of TD-CDMA-based wireless system(s) for use in
the course of or in support of Public Safety Activities, including the sale or
license of infrastructure, chipsets, devices, modules, Software, Intellectual
Property or other components. Public Safety Business shall also include such
business activities in connection with quasi-commercial applications conducted
through or in partnership with companies whose primary business is defense
and/or government contracting, including without limitation Northrop Grumman,
Lockheed Xxxxxx, General Dynamics, XXXX and Singapore Technologies; such
business activities may include but are not limited to aeronautical, public
transportation and satellite applications.
"RECEIVABLES" means any and all accounts receivable, notes and
other amounts receivable from third parties by the Company or any of the Company
Subsidiaries.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock
of the Company, par value $0.001 per share.
"SERIES B PREFERRED STOCK" means the Series B Preferred Stock
of the Company, par value $0.001 per share.
"SERIES C-1 PREFERRED STOCK" means the Series C-1 Preferred
Stock of the Company, par value $0.001 per share.
12
"SERIES C-1 CASH AMOUNT" means the cash amount determined by
dividing (a) the value of the Series C-1 "Remaining Current Dividend" as defined
in the Company Certificate of Incorporation by (b) the Series C-1 Shares
Outstanding.
"SERIES C-1 SHARES OUTSTANDING" means the number of shares of
Series C-1 Preferred Stock outstanding immediately prior to the Effective Time.
"SERIES C-3 PREFERRED STOCK" means the Series C-3 Preferred
Stock of the Company, par value $0.001 per share.
"SERIES C-3 INITIAL CASH AMOUNT" means the cash amount
determined by dividing (a) 25% of the Series C-3 Initial Total Amount by (b) the
Series C-3 Shares Outstanding; provided, however, if any portion of the Series
C-3 Initial Cash Amount would exceed the Cash Cap, taking into account all other
cash amounts to be paid by Parent to the Company Stockholders, Plan Participants
and Bonus Participant as of the Effective Time, such portion shall be paid in
shares of Parent Common Stock equal to the amount of the excess attributable to
the Series C-3 Initial Cash Amount divided by the Average Parent Stock Price.
"SERIES C-3 INITIAL STOCK AMOUNT" means the number of shares
of Parent Common Stock determined by dividing (a) the quotient determined by
dividing (1) 75% of the Series C-3 Initial Total Amount by (2) the Average
Parent Stock Price by (b) the Series C-3 Shares Outstanding.
"SERIES C-3 INITIAL TOTAL AMOUNT" means the Initial Closing
Consideration less the Employee Incentive Plan Initial Allocation Amount less
the Series C-1 Cash Amount less the Series D Total Amount and less the Special
Acquisition Bonus Initial Allocation Amount.
"SERIES C-3 SHARES OUTSTANDING" means the number of shares of
Series C-3 Preferred Stock outstanding immediately prior to the Effective Time.
"SERIES C-4 PREFERRED STOCK" means the Series C-4 Preferred
Stock of the Company, par value $0.001 per share.
"SERIES D PREFERRED STOCK" means the Series D Preferred Stock
of the Company, par value $0.001 per share.
"SERIES D CASH AMOUNT" means the cash amount determined by
dividing (a) 25% of the Series D Total Amount by (b) the Series D Shares
Outstanding; provided, however, if any portion of the Series D Cash Amount would
exceed the Cash Cap, taking into account all other cash amounts to be paid by
Parent to the Company Stockholders, Plan Participants and Bonus Participant as
of the Effective Time, such portion shall be paid in shares of Parent Common
Stock equal to the amount of the excess attributable to the Series D Cash Amount
divided by the Average Parent Stock Price.
13
"SERIES D SHARES OUTSTANDING" means the number of shares of
Series D Preferred Stock outstanding immediately prior to the Effective Time
(after giving effect to the automatic conversion of the Convertible Notes into
shares of Series D Preferred Stock and the exercise of warrants to purchase
Series D Preferred Stock).
"SERIES D STOCK AMOUNT" means the number of shares of Parent
Common Stock determined by dividing (a) the quotient determined by dividing (1)
75% of the Series D Total Amount by (2) the Average Parent Stock Price by (b)
the Series D Shares Outstanding.
"SERIES D TOTAL AMOUNT" means the product of (a) $2.86750
times (b) the Series D Shares Outstanding, provided that such amount shall not
exceed the Initial Closing Consideration less the Series C-1 Cash Amount, less
the Employee Incentive Plan Initial Allocation Amount, less the Special
Acquisition Bonus Initial Allocation Amount.
"SHIPPED REVENUE" means (i) the amount of payment received in
connection with product sales by the Company for which the product has been
delivered (it being understood that if delivery and payment occur at different
times, Shipped Revenue shall be deemed to occur at the time that the later of
delivery or payment occur), plus (ii) fees received for software maintenance
plus (iii) up-front or fixed license fees received in connection with licenses
granted to third parties that enable such third parties to engage in the Public
Safety Business or the TDtv Business plus (iv) proceeds from the sale of the
Public Safety Business or TDtv Business; provided, however, that Shipped Revenue
shall not include (a) any nonrecurring engineering expense payments or service
payments made in connection with product sales, (b) amounts payable in
connection with the Company's Northrop Grumman purchase order number PG10452,
dated October 16, 2006 - October 24, 2006, and any replacements, extensions or
modifications of such purchase order; and provided further that any new business
or increase to the size of such purchase order shall constitute Booked Revenue,
or (c) amounts paid or payable pursuant to Booked Revenue; and provided,
further, that the amount of Shipped Revenue that is subject to holdbacks or
deferred payment terms shall not be included in Shipped Revenue until the amount
subject to holdback or deferred payment has been received. Shipped Revenue shall
include Shipped Revenue of the Company, the Successor Corporation or any
successor to the relevant Public Safety Business or TDtv Business, so long as
such business is owned by Parent or any affiliate of Parent, plus (i) Shipped
Revenue of licensees of the Company who are licensees of the Company as of the
date hereof, (ii) Shipped Revenue of licensees of the Company who become
licensees of the Company after the date hereof but prior to Closing (provided
that Parent has consented thereto), and (iii) Shipped Revenue of licensees of
the Successor Corporation (or any successor to the relevant Public Safety
Business or TDtv Business so long as such business is owned by Parent or any
affiliate of Parent) who become licensees after the Closing; provided that
Shipped Revenue of any of such licensees shall only include the amount of cash
received by such licensee that is used to determine the royalty or license fee
that the licensee pays to the Company. If any equipment covered by Shipped
Revenue has been delivered late and the Chief Executive Officer of the Surviving
Corporation certifies to the Stockholder Representative that penalties or
14
liquidated damages have been invoiced for such late delivery or have not been
invoiced but are likely to be claimed, in either case in accordance with the
terms of the agreement with the customer (as such terms and agreement exist on
the date hereof), then Shipped Revenue shall be reduced by the penalties or
liquidated damages that have been so invoiced or are so likely to be claimed;
provided, however, any reduction in the Additional Total Consideration or
Earnout Amounts resulting from a reduction in Shipped Revenue caused by
penalties or liquidated damages that have not been invoiced but have been
certified as likely to be claimed shall be placed into an escrow account
acceptable to Parent and the Stockholder Representative until (i) such time that
the penalties or liquidated damages are invoiced, at which time the associated
amount held in escrow shall be released to Parent, (ii) such time that the
penalties or liquidated damages are no longer payable by way of agreement with
the customer, at which time the associated amount held in escrow shall be
released to the Participating Stockholders, Plan Participants and Bonus
Participant in accordance with Sections 3.3 or 3.4 below, or (iii) December 31,
2009, at which time the associated amount held in escrow shall be released to
the Participating Stockholders, Plan Participants and Bonus Participant in
accordance with Sections 3.3 or 3.4 below.
"SOFTWARE" means any and all computer programs, whether in
source code or object code form, together with all related documentation.
"SPECIAL ACQUISITION BONUS" means the bonus described in the
Amended and Restated Amendment to Offer Letter dated March 28, 2007 between the
Company and Xxx Xxxxxx.
"SPECIAL ACQUISITION BONUS 2007 EARNOUT ALLOCATION AMOUNT"
means the Special Acquisition Bonus payable (if any) as a result of the payment
of the 2007 Earnout Amount.
"SPECIAL ACQUISITION BONUS 2008 EARNOUT ALLOCATION AMOUNT"
means the Special Acquisition Bonus payable (if any) as a result of the payment
of the 2008 Earnout Amount.
"SPECIAL ACQUISITION BONUS 2009 EARNOUT ALLOCATION AMOUNT"
means the Special Acquisition Bonus payable (if any) as a result of the payment
of the 2009 Earnout Amount.
"SPECIAL ACQUISITION BONUS ADDITIONAL ALLOCATION AMOUNT" means
the Special Acquisition Bonus payable (if any) as a result of the payment of the
Additional Total Consideration.
"SPECIAL ACQUISITION BONUS EARNOUT ALLOCATION AMOUNT" means
the Special Acquisition Bonus 2007 Earnout Allocation Amount, the Special
Acquisition Bonus 2008 Earnout Allocation Amount and the Special Acquisition
Bonus 2009 Earnout Allocation Amount.
15
"SPECIAL ACQUISITION BONUS INITIAL ALLOCATION AMOUNT" means
the Special Acquisition Bonus payable (if any) as a result of the payment of the
Initial Closing Consideration.
"SPECIAL ACQUISITION BONUS PAYMENTS" means, collectively, the
Special Acquisition Bonus Initial Allocation Amount, the Special Acquisition
Bonus Additional Allocation Amount, the Special Acquisition Bonus 2007 Earnout
Allocation Amount, the Special Acquisition Bonus 2008 Earnout Allocation Amount
and the Special Acquisition Bonus 2009 Earnout Allocation Amount.
"STRADDLE PERIOD" means any taxable year or period that
includes, but does not end on, the Closing Date.
"SUBSIDIARY" means any Person of which any other Person
directly or indirectly owns voting securities, other voting rights or voting
partnership interests which are sufficient to elect at least a majority of such
first Person's board of directors or other governing body (or, if there are no
such voting interests, the second Person directly or indirectly owns 50% or more
of the equity interests of such first Person).
"TAKEOVER PROPOSAL" means any inquiry, proposal or offer from
any Person or "group" (as defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended, (the "Exchange Act")), other than Parent and its
Subsidiaries, relating to any (A) direct or indirect acquisition (whether in a
single transaction or a series of related transactions) of assets of the Company
and the Company Subsidiaries (including securities of Subsidiaries) equal to 10%
or more of the Company's consolidated assets or to which 10% or more of the
Company's revenues or earnings on a consolidated basis are attributable, (B)
direct or indirect acquisition (whether in a single transaction or a series of
related transactions) of 10% or more of any class of equity securities of the
Company, (C) tender offer or exchange offer that if consummated would result in
any Person or "group" (as defined in Section 13(d) of the Exchange Act)
beneficially owning 10% or more of any class of equity securities of the Company
or (D) merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of the Company Subsidiaries; in each case, other than the
transactions contemplated by this Agreement.
"TAX RETURN" means any return, report or statement required to
be filed with respect to any Tax (including any schedules or attachments
thereto, and any amendment thereof), including any information return, claim for
refund, amended return or declaration of estimated Tax, and including, where
permitted or required, combined, consolidated or unitary returns for any group
of entities that includes the Company, any of the Company Subsidiaries, or any
of their Affiliates.
"TAXES" means (i) all federal, state, local or foreign taxes,
including all net income, gross receipts, capital, sales, use, ad valorem, value
added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, national
insurance or health, excise, severance, stamp, occupation, property and
16
estimated taxes, customs duties, fees and charges in the nature of taxes,
imposts, levies, assessments and other taxes of any kind whatsoever, (ii) all
interest, penalties, fines, additions to tax or additional amounts imposed by
any Taxing Authority in connection with any item described in clause (i), and
(iii) any liability in respect of any items described in clauses (i) and/or (ii)
payable by reason of Contract, assumption, transferee liability, operation of
Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor
thereof of any analogous or similar provision under Law) or otherwise.
"TAXING AUTHORITY" means the IRS and any other Governmental
Body responsible for the administration of any Tax.
"TDTV BUSINESS" means the business of licensing, selling,
offering for sale, marketing, developing, installing and/or maintaining any
application or implementation of a wireless system for use in the delivery of
broadcast or multicast services, including the sale or license of
infrastructure, chipsets, devices, modules, Software, Intellectual Property or
other components.
"TECHNOLOGY" means, collectively, all designs, formulae,
algorithms, procedures, methods, techniques, ideas, know-how, Software,
programs, subroutines, tools, inventions, creations, improvements, works of
authorship and other similar materials, and all recordings, graphs, drawings,
reports, analyses, and other writings, and any other embodiments of the above,
in any form whether or not specifically listed herein, and all related
technology, that are used in, incorporated or embodied in or displayed by any of
the foregoing or used in the design, development, reproduction, maintenance or
modification of any of the foregoing.
"T-MOBILE AGREEMENTS" means the following agreements between
the Company and T-Mobile, as such agreements are in effect as of the date of
this Agreement: (i) a Frame Agreement on Terms and Conditions for the Supply of
Equipment dated May 20, 2004, as amended by that Amendment 1 to Frame Agreement
on Terms and Conditions for the Supply of Equipment dated June 29, 2006,
Amendment 2 to Frame Agreement on Terms and Conditions for the Supply of
Equipment dated August 21, 2006, Amendment 3 to Frame Agreement on Terms and
Conditions for the Supply of Equipment dated October 30, 2006 and Amendment 4 to
Frame Agreement on Terms and Conditions for the Supply of Equipment dated
February 2007 (subject to the Clarification in relation to Amendment 4 to Frame
Agreement on Terms and Conditions for the Supply of Equipment dated February
2007) and (ii) a Frame Agreement for the Supply of Equipment dated May 20, 2005,
as amended by that Amendment 1 to Frame Agreement for the Supply of Equipment
dated July 1, 2005 and Amendment 2 to Frame Agreement for the Supply of
Equipment dated October 30, 2006.
"T-MOBILE" means T-Mobile Czech Republic a.s. or its
Affiliates.
"TRANSACTION EXPENSES" means all costs, fees or other expenses
incurred by the Company or the Company Subsidiaries on or prior to the Closing
Date in connection with the negotiation and execution of this Agreement and the
17
consummation of the transactions contemplated by this Agreement, whenever
incurred by the Company or the Company Subsidiaries on or prior to the Closing
Date, including all such costs, fees and expenses of counsel, advisors, brokers,
finders and investment bankers, auditors and accountants and any bonus payments,
severance payments, retention payments or other amounts payable to employees in
regard to such contemplated transaction or the Merger hereunder (other than
payments under the Employee Incentive Plan or the Special Acquisition Bonus,
which shall be excluded from calculating Transaction Expenses); provided,
however, that only audit fees in excess of $150,000 incurred by the Company in
connection with the audit of its 2006 Financial Statements shall be included in
Transaction Expenses.
"TREASURY REGULATIONS" means the regulations promulgated under
the Code.
(b) Terms Defined Elsewhere in this Agreement. For purposes of
this Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
Agreement Preamble
Balance Sheet 5.7
Balance Sheet Date 5.7
Certificate 3.5(a)
Certificate of Merger 2.3
Closing 2.2
Closing Date 2.2
Closing Working Capital 3.7(b)
Closing Statement 3.7(b)
COBRA 5.16(d)
Common Stock 3.1
Company Preamble
Company Documents 5.2(a)
Company Material Adverse Effect 5.1
Company Plans 5.16(a)
Company Stock 5.4(a)
Company Subsidiary 5.5
Confidentiality Agreement 7.9
Deductible 9.2
Dispute Notice 3.7(c)
Dissenting Shares 3.6(a)
DGCL 2.1
Earnout Period 7.19
Effective Time 2.3
Employees 5.16(a)
End Date 4.1(a)
Environmental Laws 5.23(a)
18
Term Section
---- -------
ERISA Affiliate 5.16(a)
Escrow Agent 3.1(k)
Escrow Fund 3.1(k)
Escrow Period 9.3(b)
Estimated Working Capital 3.7(a)
Excess Shares 3.6(b)
Expiration Date 9.1(a)
EU 5.23(b)
Final Closing Working Capital 3.7(f)
Financial Statements 5.7
Foreign Antitrust Laws 5.3(b)
Foreign Plan 5.16(g)
Group Relief 5.10(hh)
HSR Act 5.3(b)
Independent Accountant 3.7(d)
Information Statement 7.17
IPWireless Stock Bonus Plan 7.11(c)
Material Contracts 5.14
Merger Recitals
Merger Sub Preamble
Merger Sub LLC Interests 3.1
Multiemployer Plan 5.16(b)
Non-Competition Agreement 8.1(o)
Officer's Certificate 9.3(b)
Owned Registered IP 5.12(a)
Parent Preamble
Parent Balance Sheet 6.10
Parent Common Stock
Parent Disclosure Letter Article VI
Parent Documents 6.2
Parent Indemnified Parties 9.2(a)
Parent Indemnifiable Losses 9.2(a)
Parent Material Adverse Effect 6.1
Parent SEC Reports 6.10
Parent Stock Plans 6.5(b)
Plan Participant 3.1(f)
Pre-Closing Statement 3.7(a)
Pre-Closing Tax Return 7.15(a)
Registration Statement 7.18
Representatives 7.7(a)
RoHS 5.23(b)
SEC 6.5(c)
Securities Act 5.14
Shares 3.6(a)
19
Term Section
---- -------
Stockholder Consents 5.2(d)
Stockholder Representative 10.1(a)
Stockholder Representative Documents 10.1(h)
Surviving Corporation 2.1
Taxes Xxx 0000 5.10(hh)
Tax Losses 9.5(a)
Tax Refund 5.10(hh)
TCGA 1992 5.10(cc)
Third-Party Interests 5.5
Title IV Plans 5.16(b)
United States 5.10(s)
Unresolved Claim 9.3(b)
WEEE 5.23(b)
Working Capital 3.7(a)
VATA 5.10(ee)
(c) Other Definitional and Interpretive Matters. Unless
otherwise expressly provided in this Agreement, for purposes of this Agreement,
the following rules of interpretation shall apply:
(i) Calculation of Time Period. When calculating the
period of time before which, within which or following which
any act is to be done or step taken pursuant to this
Agreement, the date that is the reference date in calculating
such period shall be excluded. If the last day of such period
is a non-Business Day, the period in question shall end on the
next succeeding Business Day.
(ii) Dollars. Any reference in this Agreement to $ or
dollars shall mean U.S. dollars.
(iii) Exhibits/Schedules. The Exhibits and Schedules
annexed to this Agreement, including the Company Disclosure
Letter, are hereby incorporated and made a part hereof and are
an integral part of this Agreement. Any capitalized terms used
in any Schedule or Exhibit but not otherwise defined therein
shall be defined as set forth in this Agreement.
(iv) Gender and Number. Any reference in this
Agreement to gender shall include all genders, and words
imparting the singular number only shall include the plural
and vice versa.
(v) Headings. The provision of a Table of Contents,
the division of this Agreement into Articles, Sections and
other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All
references in this Agreement to any "Section" are to the
corresponding Section of this Agreement unless otherwise
20
specified. All references in this Agreement to any "Schedule"
are to schedules included in the Company Disclosure Letter.
(vi) Herein. The words such as "HEREIN,"
"HEREINAFTER," "HEREOF," and "HEREUNDER" refer to this
Agreement as a whole and not merely to a subdivision in which
such words appear unless the context otherwise requires.
(vii) Including. The word "INCLUDING" or any
variation thereof means "INCLUDING, WITHOUT LIMITATION", and
shall not be construed to limit any general statement that it
follows to the specific or similar items or matters
immediately following it.
(viii) The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and, in the
event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as jointly drafted
by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), Merger Sub shall be merged with and into
the Company at the Effective Time. Following the Effective Time, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation in the Merger (the "SURVIVING Corporation") and shall
succeed to and assume all the rights and obligations of Merger Sub in accordance
with the DGCL. References to the Company following the Effective Time shall be
deemed to be to the Surviving Corporation.
2.2 Closing. Subject to the satisfaction of the conditions set
forth in Sections 8.1 and 8.2 (or the waiver thereof by the party entitled to
waive that condition), the closing of the Merger (the "CLOSING") shall take
place at the offices of Weil, Gotshal & Xxxxxx LLP located at 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (or at such other place as the parties may designate)
at 10:00 a.m. (New York time) on a date to be specified by the parties, which
date shall be no later than the second (2nd) Business Day after the satisfaction
or waiver of each condition to the Closing set forth in Article VIII (other than
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of such conditions), unless another time or date,
or both, are agreed to in writing by the parties hereto. The date on which the
Closing shall be held is referred to in this Agreement as the "CLOSING DATE."
2.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file a
certificate of merger (the "CERTIFICATE OF MERGER") executed in accordance with
21
the relevant provisions of the DGCL and, as soon as practicable on or after the
Closing Date, shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or at
such other time as Parent and the Company shall agree and shall specify in the
Certificate of Merger (the time the Merger becomes effective being the
"EFFECTIVE TIME").
2.4 Effects of the Merger. The Merger shall have the effects
set forth in the DGCL.
2.5 Certificate of Incorporation and By-laws.
(a) The certificate of incorporation of the Surviving
Corporation shall be amended at the Effective Time to be in the form of Exhibit
B and, as so amended, such certificate of incorporation shall be the certificate
of incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.
(b) The bylaws of the Company, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
2.6 Directors. The managers of Merger Sub immediately prior to
the Effective Time, shall be the directors of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation, as the case may be.
2.7 Officers. The officers of Merger Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified in accordance with the certificate of incorporation
and bylaws of the Surviving Corporation, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE
SECURITIES OF THE COMPANY AND MERGER SUB
3.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of (i) (A) any shares of the Company's common stock, par
value $0.001 per share (the "COMMON STOCK"), or (B) any shares of Preferred
Stock, or (ii) any limited liability company interests of Merger Sub ("MERGER
SUB LLC INTERESTS"), the following shall occur:
22
(a) LLC Interests of Merger Sub. The Merger Sub LLC Interests
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchangeable as a whole for 1,000 shares of common stock of
the Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation. From and after the Effective Time,
all certificates representing Merger Sub LLC Interests shall be deemed for all
purposes to represent the number of shares of common stock of the Surviving
Corporation into which they were converted in accordance with the immediately
preceding sentence.
(b) Cancellation of Treasury Stock. Each share of Common Stock
and Preferred Stock issued and outstanding immediately prior to the Effective
Time that is owned by the Company (as treasury stock or otherwise) shall
automatically be cancelled and retired and shall cease to exist, and no cash or
other consideration shall be delivered or deliverable in exchange thereof.
(c) Series C-1 Preferred Stock of the Company. Subject to
Sections 3.5(f) and 9.3, each share of Series C-1 Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
such stock to be cancelled pursuant to Section 3.1(b) and any Dissenting Shares)
shall be converted into the right to receive an amount in cash, without
interest, equal to the Series C-1 Cash Amount.
(d) Series D Preferred Stock of the Company. Subject to
Sections 3.5(f), 3.5(g) and 9.3, each share of Series D Preferred Stock issued
and outstanding immediately prior to the Effective Time (other than any shares
of such stock to be cancelled pursuant to Section 3.1(b) and any Dissenting
Shares) shall be converted into the right to receive (1) an amount in cash,
without interest, equal to the Series D Cash Amount and (2) a number of shares
of Parent Common Stock equal to the Series D Stock Amount.
(e) Series C-3 Preferred Stock of the Company. Subject to
Sections 3.3, 3.5(f), 3.5(g) and 9.3, each share of Series C-3 Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than any
shares of such stock to be cancelled pursuant to Section 3.1(b) and any
Dissenting Shares) shall be converted into the right to receive (subject to
adjustment pursuant to Section 3.7):
(i) (1) an amount in cash, without interest, equal to
the Series C-3 Initial Cash Amount and (2) a number of shares
of Parent Common Stock equal to the Series C-3 Initial Stock
Amount; and
(ii) an amount equal to the 2007 Earnout Per Share
Amount, the 2008 Earnout Per Share Amount, the 2009 Earnout
Per Share Amount and the Additional Consideration Per Share
Amount, which Earnout Amounts shall be payable either in cash,
without interest, or in shares of Parent Common Stock based on
the applicable Average Parent Stock Price, or a combination
thereof; provided, that Parent shall have the right to make
such election with respect to 75% of any Earnout Amount and
23
the Stockholder Representative shall have the right to make
such election with respect to 25% of any Earnout Amount, and
with respect to the Additional Consideration Per Share Amount,
100% of such amount shall be payable at the election of Parent
either in cash, without interest, or in Shares of Parent
Common Stock based on the applicable Average Parent Stock
Price.
(f) Employee Incentive Plan. Subject to Sections 3.5(f),
3.5(g) and 9.3, the Employee Incentive Plan Initial Allocation Amount, the
Employee Incentive Plan Additional Allocation Amount and the Employee Incentive
Plan Earnout Allocation Amount shall be issued and paid to the applicable
participants of the Employee Incentive Plan (the "PLAN PARTICIPANTS") as
follows:
(i) at the Effective Time, either, or a combination
of, a number of shares of Parent Common Stock and cash,
without interest, equal to the Employee Incentive Plan Initial
Allocation Amount; provided that all Plan Participants who are
not members of the Management Team shall be paid 100% cash and
all members of the Management Team shall be paid in cash
and/or shares of Parent Common Stock in the same proportion
paid to holders of Series C-3 Preferred and Series D Preferred
with respect to the Series C-3 Initial Total Amount and the
Series D Total Amount, respectively;
(ii) at the time set forth in Section 3.3 below,
either, or a combination of, a number of shares of Parent
Common Stock and cash, without interest, equal to the Employee
Incentive Plan Additional Allocation Amount; provided that all
Plan Participants who are not members of the Management Team
shall be paid 100% cash and all Plan Participants who are
members of the Management Team shall be paid in cash and/or
shares of Parent Common Stock, in the same proportion paid to
holders of Series C-3 Preferred with respect to the Additional
Merger Consideration Amount;
(iii) within the time period set forth in Section 3.4
below, either, or a combination of, a number of shares of
Parent Common Stock and cash, without interest, equal to the
Employee Incentive Plan 2007 Earnout Allocation Amount;
provided that all Plan Participants who are not members of the
Management Team shall be paid 100% cash and all Plan
Participants who are members of the Management Team shall be
paid in cash and/or shares of Parent Common Stock, in the same
proportion paid to holders of Series C-3 Preferred with
respect to the 2007 Earnout Amount;
(iv) within the time period set forth in Section 3.4
below, either, or a combination of, a number of shares of
Parent Common Stock and cash, without interest, equal to the
Employee Incentive Plan 2008 Earnout Allocation Amount;
provided that all Plan Participants who are not members of the
Management Team shall be paid 100% cash and all Plan
Participants who are members of the Management Team shall be
paid in cash and/or shares of Parent Common Stock, in the same
24
proportion paid to holders of Series C-3 Preferred with
respect to the 2008 Earnout Amount; and
(v) within the time period set forth in Section 3.4
below, either, or a combination of, a number of shares of
Parent Common Stock and cash, without interest, equal to the
Employee Incentive Plan 2009 Earnout Allocation Amount;
provided that all Plan Participants who are not members of the
Management Team shall be paid 100% cash and all Plan
Participants who are members of the Management Team shall be
paid in cash and/or shares of Parent Common Stock, in the same
proportion paid to holders of Series C-3 Preferred with
respect to the 2009 Earnout Amount.
(g) Special Acquisition Bonus. Subject to Sections 3.5(f),
3.5(g) and 9.3, the Special Acquisition Bonus Initial Allocation Amount, the
Special Acquisition Bonus Additional Allocation Amount and the Special
Acquisition Bonus Earnout Allocation Amount shall be paid to the Bonus
Participant:
(i) at the Effective Time, a combination of a number
of shares of Parent Common Stock and cash, without interest,
equal to the Special Acquisition Bonus Initial Allocation
Amount, in the same proportion paid to holders of the Series
C-3 Preferred and Series D Preferred with respect to the
Series C-3 Initial Total Amount and the Series D Total Amount,
respectively;
(ii) at the time set forth in Section 3.3 below,
either, or a combination of, a number of shares of Parent
Common Stock and cash, without interest, equal to the Special
Acquisition Bonus Additional Allocation Amount to be paid in
cash, without interest, and/or shares of Parent Common Stock,
in the same proportion paid to holders of Series C-3 Preferred
with respect to the Additional Merger Consideration Amount;
(iii) within the time period set forth in Section 3.4
below, either, or a combination of, a number of shares of
Parent Common Stock and cash, without interest, equal to the
Special Acquisition Bonus 2007 Earnout Allocation Amount to be
paid in cash and/or shares of Parent Common Stock, in the same
proportion paid to holders of Series C-3 Preferred with
respect to the 2007 Earnout Amount;
(iv) within the time period set forth in Section 3.4
below, either, or a combination of, a number of shares of
Parent Common Stock and cash, without interest, equal to the
Special Acquisition Bonus 2008 Earnout Allocation Amount to be
paid in cash and/or shares of Parent Common Stock, in the same
proportion paid to holders of Series C-3 Preferred with
respect to the 2008 Earnout Amount; and
(v) within the time period set forth in Section 3.4
below, either, or a combination of, a number of shares of
Parent Common Stock and cash, without interest, equal to the
25
Special Acquisition Bonus 2009 Earnout Allocation Amount to be
paid in cash and/or shares of Parent Common Stock, in the same
proportion paid to holders of Series C-3 Preferred with
respect to the 2009 Earnout Amount.
Notwithstanding any provisions in this Agreement to the
contrary, (i) the Initial Merger Consideration Amount, the Employee Incentive
Plan Initial Allocation Amount and the Special Acquisition Bonus Initial
Allocation Amount shall not in the aggregate exceed $100,000,000 (subject to
adjustment, as provided in Section 3.7) and the amount of cash included in such
amount shall not exceed $25,000,000, (ii) the amounts identified in clause (i)
together with the Additional Merger Consideration Amount, the remaining Employee
Incentive Plan Payments, the remaining Special Acquisition Bonus Payments, the
2007 Earnout Amount, the 2008 Earnout Amount and the 2009 Earnout Amount shall
not in the aggregate exceed $235,000,000 (it being understood for purposes of
calculating any of these amounts that the Parent Common Stock shall be valued
using the values established at the time of issuance as provided elsewhere in
this Agreement), (iii) Parent shall have no obligation to issue shares of Parent
Common Stock hereunder to any Person who has not provided Parent or the Company
with a duly executed accredited investor certificate in the form previously
approved by Parent, and shall, in lieu thereof make payment therefor in cash,
(iv) in respect of any Earnout Amount, Parent shall not issue shares of Parent
Common Stock under this Agreement if the effect of doing so would reasonably be
expected to result in a violation of Nasdaq Marketplace Rule 4350(i), and shall
in lieu thereof make payment therefor in cash, and (v) Parent shall have no
obligation to pay cash in excess of $4,464,412 in aggregate to Plan Participants
who are not members of the Management Team in connection with the Employee
Incentive Plan Payments. From and after the Effective Time, Parent shall cause
the Company to pay all Employee Incentive Plan Payments and Special Acquisition
Bonus Payments (including by providing the Company with sufficient funds and/or
shares of Parent Common Stock to make timely payment thereof).
(h) Series C Preferred Stock, Series B Preferred Stock, Series
A Preferred Stock and Common Stock. Each share of Series C Preferred Stock,
Series B Preferred Stock, Series A Preferred Stock and Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
such stock to be cancelled pursuant to Section 3.1(b) and any Dissenting Shares)
shall be cancelled as of the Effective Time and shall have no right to receive
any portion of any payments provided for in this Agreement or other amount.
(i) Company Stock Options.
(i) All Company Stock Options will become, pursuant
to their respective terms, fully vested and exercisable prior
to the Effective Time. Holders of the Company Stock Options
shall be given the opportunity to exercise their Company Stock
Options effective prior to the Effective Time. All Company
Stock Options that remain unexercised and outstanding as of
26
the Effective Time will be cancelled and null and void
pursuant to their respective terms as of the Effective Time.
(ii) Following the Effective Time, no holder of
Company Stock Options, or any participant in or beneficiary of
any of the Company Plans, will have any right to acquire or
receive any equity securities or other interests of the
Surviving Corporation or any Subsidiary thereof, or any other
consideration.
(j) Warrants. All warrants issued by the Company that are not
exercised prior to the Effective Time will terminate and expire as of the
Effective Time. Prior to the Effective Time, the Company shall take all actions
necessary to effectuate such termination at the Effective Time and shall deliver
the cancelled warrant certificates to the Parent at the Closing.
(k) Escrow Fund. Notwithstanding the provisions of Sections
3.1(a)-(f), Parent shall (i) (1) at the Closing, (A) withhold from each
Participating Stockholder a portion of the Initial Closing Consideration
otherwise allocable to such Participating Stockholder equal to his, her or its
Pro Rata Portion of the Initial Escrow Amount, (B) withhold from each Plan
Participant, his, her or its Pro Rata Portion of the Initial Escrow Amount, and
(C) withhold from each Bonus Participant, his, her or its Pro Rata Portion of
the Initial Escrow Amount, and (2) if Additional Total Consideration is paid
prior to the Expiration Date, withhold from (A) each Participating Stockholder a
portion of the Additional Escrow Amount otherwise allocable to such
Participating Stockholder equal to his, her or its Pro Rata Portion of the
Additional Escrow Amount, (B) withhold from each Plan Participant, his, her or
its Pro Rata Portion of the Additional Escrow Amount, and (C) withhold from each
Bonus Participant, his, her or its Pro Rata Portion of the Additional Escrow
Amount, and (ii) cause such withheld amounts and shares to be deposited with a
mutually agreed upon escrow agent (the "ESCROW AGENT"), in accordance with the
terms of the Escrow Agreement and Article IX (the "ESCROW FUND"); provided,
however, if Additional Total Consideration is paid after the Expiration Date and
Parent has suffered Parent Indemnifiable Losses under Section 9.2 in excess of
the Initial Escrow Amount, Parent shall deduct from (A) each Participating
Stockholder his, her or its Pro Rata Portion of such Parent Indemnifiable
Losses, not to exceed the Additional Escrow Amount otherwise allocable to such
Participating Stockholder, (B) withhold from each Plan Participant, his, her or
its Pro Rata Portion of such Parent Indemnifiable Losses, not to exceed the
Additional Escrow Amount otherwise allocable to such Plan Participant and (C)
withhold from each Bonus Participant, his, her or its Pro Rata Portion of such
Parent Indemnifiable Losses, not to exceed the Additional Escrow Amount
otherwise allocable to such Bonus Participant. The Participating Stockholders
shall have the sole and exclusive right to exercise any and all voting and
consensual rights and powers, and shall be entitled to receive and retain any
and all cash dividends, accruing to an owner of such Participating Stockholder's
respective portion of the shares of Parent Common Stock pursuant to the terms of
the Escrow Agreement. For income tax purposes, the Participating Stockholders
shall be deemed the owners of their portion of the Escrow Fund, all earnings on
investments of the Participating Stockholders' portion of the cash deposited by
Parent shall be reported by the applicable Participating Stockholder, and the
27
Participating Stockholders will be responsible for paying all taxes on such
earnings. The parties hereto acknowledge and agree that they will not treat any
portion of a payment to the Participating Stockholders from the Escrow Fund upon
release of the amounts held pursuant to the Escrow Agreement as a payment of
interest to the Participating Stockholders by Parent, except as otherwise
required by a taxing authority. The parties shall instruct the Escrow Agent to
disburse funds to the Stockholder Representative for payment to the
Participating Stockholders within thirty (30) days following each calendar year
in an amount equal to the net amount of all earnings on investments of such cash
deposit held in the Escrow Fund allocable to the Participating Stockholders
earned in such calendar year multiplied by forty-five percent (45%).
3.2 Allocations Spreadsheet. Three (3) Business Days prior to
the Closing Date, the Company shall deliver to Parent an updated draft of the
Allocations Spreadsheet reflecting (i) the deduction of (x) the Transaction
Expenses deducted from the calculation of the Initial Closing Consideration and
(y) the Initial Escrow Amount as determined pursuant to Section 3.1(k), and (ii)
the Average Parent Stock Price. At the Closing, the Company shall deliver to
Parent the final Allocations Spreadsheet, which shall be prepared in
consultation with Parent in order that Parent may confirm the information
contained therein, setting forth the final calculation of the amounts for
distribution in accordance with Section 3.1.
3.3 Additional Consideration Spreadsheet. Within ten (10)
Business Days following the earlier of (a) the date the Northrop Grumman Shipped
Revenue first equals or exceeds $35,000,000 or (b) June 30, 2008, Parent shall
deliver to the Stockholder Representative a statement setting forth its
calculation of the Northrop Grumman Shipped Revenue, the Additional Total
Consideration, the allocation of the Additional Total Consideration among the
holders of Series C-3 Preferred Stock in accordance with Section 3.1, the
allocation of the Employee Incentive Plan Additional Allocation Amount among the
Plan Participants and the allocation of the Special Acquisition Bonus Additional
Allocation Amount among those entitled to the Special Acquisition Bonus,
together with such supporting documentation as is reasonably necessary to
determine the accuracy of such calculations and allocations (the "ADDITIONAL
CONSIDERATION SPREADSHEET"). The Stockholder Representative shall notify Parent,
within twenty (20) Business Days of its receipt of the Additional Consideration
Spreadsheet, of any objections to the calculations and allocations set forth
therein. If the Stockholder Representative agrees with the calculations and
allocations set forth in the Additional Consideration Spreadsheet by providing
written notice thereof to Parent or does not raise any written objection thereto
to Parent within such twenty (20) Business Day period, Parent, within five (5)
Business Days thereafter, shall deliver or cause to be delivered to each
Participating Stockholder, Plan Participant and Bonus Participant, either a cash
amount and/or a certificate (or evidence of shares in book entry form)
representing that number of whole shares of Parent Common Stock (and cash in
lieu of fractional shares, if any) such holder is entitled to receive in
accordance with Section 3.1(e), Section 3.1(f)(ii) and Section 3.1(g)(ii) and as
set forth in the Additional Consideration Spreadsheet. In the event the
28
Stockholder Representative objects to the calculations or allocations set forth
in the Additional Consideration Spreadsheet, the parties shall resolve the
dispute pursuant to the procedures set forth in Section 9.3(e). Parent shall
have no obligation to make any cash payments or issue any shares of Parent
Common Stock under this Section 3.3 until a final determination has been made
pursuant to Section 9.3(e).
3.4 Earnout Consideration Spreadsheets. As promptly as
reasonably practicable following the end of each of the calendar years 2007,
2008 and 2009, but not later than the earlier of (a) 120 days following the end
of such calendar year or (b) the date of completion of the audit of Parent's
financial statements for such calendar year, Parent shall deliver to the
Stockholder Representative a statement setting forth its calculation of the
applicable Shipped Revenue, the applicable Earnout Amount, the applicable
Earnout Merger Consideration Amount, the applicable Employee Incentive Plan
Earnout Allocation Amount, the Special Acquisition Bonus Earnout Allocation
Amount and the allocation of such amounts to the Participating Stockholders, the
Plan Participants and the Bonus Participant in accordance with this Agreement,
together with such supporting documentation as is reasonably necessary to
determine the accuracy of such calculations and allocations (each, an "EARNOUT
CONSIDERATION SPREADSHEET"). The Stockholder Representative shall, within twenty
(20) Business Days of its receipt of each Earnout Consideration Spreadsheet,
notify Parent of any objections to the calculations and allocations set forth
therein. If the Stockholder Representative agrees with the calculations and
allocations set forth in such Earnout Consideration Spreadsheet by providing
written notice thereof to Parent or does not raise any written objection thereto
to Parent within such twenty (20) Business Day period, Parent shall, within five
(5) Business Days thereafter, deliver or cause to be delivered to each
Participating Stockholder, each Plan Participant and Bonus Participant a cash
amount and/or a certificate (or evidence of shares in book entry form)
representing that number of whole shares of Parent Common Stock (and cash in
lieu of fractional shares, if any, and, at the election of Parent, cash in lieu
of any shares of Parent Common Stock in order to comply with applicable
securities Laws) such person is entitled to receive in accordance with this
Agreement and as set forth in such Earnout Consideration Spreadsheet. In the
event the Stockholder Representative objects to the calculations or allocations
set forth in an Earnout Consideration Spreadsheet, the parties shall resolve the
dispute pursuant to the procedures set forth in Section 9.3(e). Parent shall
have no obligation to make any cash payments or issue any shares of Parent
Common Stock under this Section 3.4 until a final determination has been made
pursuant to Section 9.3(e). Notwithstanding the foregoing, in the event that at
the time of payment of the 2007 Earnout Amount such amount still has the
potential to increase as a result of the Company's receipt of additional
payments associated with Booked Revenue included in the 2007 Earnout Amount,
then additional Earnout Consideration Spreadsheets shall be delivered and the
foregoing process shall be repeated on a monthly basis with respect to the 2007
Earnout Amount until the earlier of (i) such time that the maximum 2007 Earnout
Amount has been achieved, or (ii) December 31, 2009.
3.5 Exchange of Certificates.
29
(a) Exchange Procedure. Promptly after the Effective Time, but
no later than ten (10) Business Days after the Effective Time, Parent shall
mail, or shall cause to be mailed, to each Participating Stockholder, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates formerly representing any shares of
Company Stock (the "CERTIFICATES") shall pass, only upon delivery of the
Certificates to Parent), substantially in the form of Exhibit C attached hereto
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the applicable Merger consideration, any
dividends or other distributions to which holders of Certificates are entitled
pursuant to Section 3.5(b) and cash in lieu of any fractional Parent Common
Stock to which such holders are entitled pursuant to Section 3.5(g). Upon
surrender of a Certificate for cancellation to Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions (and such other customary documents as may reasonably be required
by Parent), the holder of such Certificate shall be entitled to receive in
exchange therefor (A) the applicable cash payment, (B) a certificate
representing that number of shares of Parent Common Stock that such holder has
the right to receive pursuant to the provisions of this Article III after taking
into account all the shares of Company Stock then held by such holder under all
such Certificates so surrendered, (C) any dividends or other distributions to
which such holder is entitled pursuant to Section 3.5(b) and (D) cash in lieu of
any fractional Parent Common Stock to which such holder is entitled pursuant to
Section 3.5(g), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of shares of Company Stock that is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a Person
other than the Person in whose name the Certificate so surrendered is
registered, if, upon presentation to Parent, such Certificate shall be properly
endorsed or shall otherwise be in proper form for transfer and the Person
requesting such issuance shall have paid any transfer and other taxes required
by reason of the issuance of Parent Common Stock to a Person other than the
registered holder of such Certificate or shall have established to the
reasonable satisfaction of the Surviving Corporation that such tax either has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.5(a), each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive the applicable Merger Consideration
Payments, any dividends or other distributions to which the holder of such
Certificate is entitled pursuant to Section 3.5(b) and cash in lieu of any
fractional Parent Common Stock to which such holder is entitled pursuant to
Section 3.5(g), in each case, without interest.
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock that
the holder thereof has the right to receive upon the surrender thereof, and no
cash payment in lieu of any fractional shares of Parent Common Stock shall be
paid to any such holder pursuant to Section 3.5(g), in each case until the
holder of such Certificate shall surrender such Certificate in accordance with
this Article III. Following surrender of any Certificate in accordance with this
30
Article III, there shall be paid to the record holder thereof, without interest,
(i) promptly following the time of such surrender, the amount of cash payable in
lieu of any fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 3.5(g) and the amount of dividends or other
distributions, payable with respect to that number of whole shares of Parent
Common Stock issuable in exchange for such Certificate pursuant to this Article
III, with a record date after the Effective Time and paid with respect to Parent
Common Stock prior to such surrender, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(c) Transfer Books; No Further Ownership Rights in Company
Stock. All shares of Parent Common Stock issued upon the surrender for exchange
of Certificates in accordance with the terms of this Article III (including any
dividends or other distributions paid pursuant to Section 3.5(b) and cash paid
in lieu of any fractional shares pursuant to Section 3.5(g)) shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Stock previously represented by such Certificates (other than
any right to receive Additional Merger Consideration Amounts, Earnout Merger
Consideration Amounts and amounts that may be released from escrow pursuant to
this Agreement), and at the close of business on the day on which the Effective
Time occurs, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Stock that
were outstanding immediately prior to the Effective Time. From and after the
Effective Time, the holders of Certificates that evidenced ownership of shares
of Company Stock outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares, except as otherwise provided for
herein or by applicable Law. If, at any time after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
III.
(d) Lost, Stolen or Destroyed Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if reasonably required by Parent in lieu of the Person's
agreement to indemnify Parent, the posting by such Person of a bond, in such
reasonable amount as Parent may direct, as indemnity against any claim that may
be made against it with respect to such Certificate, Parent will issue, in
exchange for such lost, stolen or destroyed Certificate, the applicable Merger
consideration, and cash in lieu of any fractional shares of Parent Common Stock
to which such holder would be entitled pursuant to Section 3.5(g), in each case
pursuant to this Agreement.
(e) No Liability. Notwithstanding any provision of this
Agreement to the contrary, none of the Surviving Corporation, Parent or the
Company shall be liable to any Person in respect of any shares of Parent Common
Stock (or dividends or other distributions with respect thereto) or cash in lieu
of any fractional shares of Parent Common Stock or cash from the Escrow Fund, in
31
each case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law.
(f) Withholding Taxes. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable to a holder of shares of
Company Stock pursuant to this Agreement or a Plan Participant or a Bonus
Participant such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Code, or under any provision of
state, local or foreign tax Law. To the extent amounts are so withheld and paid
over to the appropriate taxing authority, Parent and the Exchange Agent shall be
treated as though they withheld from the type of consideration from which
withholding is required, an appropriate amount otherwise payable pursuant to
this Agreement to any such Person in order to provide for such withholding
obligation and such withheld amounts shall be treated for the purposes of this
Agreement as having been paid to such Person. If withholding is required from
shares of Parent Common Stock, Parent shall be treated as having sold such
consideration for an amount of cash equal to the fair market value of such
consideration at the time of such deemed sale and paid such cash proceeds to the
appropriate taxing authority. For the purposes of reporting compensation income
and calculating the applicable income and employment tax withholding with
respect to the payments to the Plan Participants and the Bonus Participant, the
Company shall be deemed the owner of the portion of the Escrow Fund allocable to
the Plan Participants and Bonus Participants and the applicable information
reporting and the timing and amount subject to income and employment tax
withholding shall be based upon the amounts actually received by the Plan
Participants and the Bonus Participant, whether paid by the Escrow Agent or by
the Company or Parent. Furthermore, the Company shall be entitled to an annual
distribution of forty-five percent (45%) of the amount of the earnings on such
Plan Participants' and Bonus Participant's investments of the cash portion of
the Escrow Fund.
(g) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
Merger Consideration Payments, no dividends or other distributions of Parent
shall relate to such fractional shares and such fractional shares will not
entitle the owner thereof to vote or to any rights of a stockholder of Parent.
In lieu of such fractional shares, Parent shall pay to each holder of a
Certificate (at such time as Parent is required to deliver any applicable Merger
consideration to such holder) an amount in cash equal to the product obtained by
multiplying (A) the fractional share to which such holder (after taking into
account all shares of Company Stock held at the Effective Time by such holder)
would otherwise be entitled by (B) the applicable Average Parent Stock Price.
(h) Tax Treatment. The parties agree that a portion of the
consideration paid post-closing pursuant to this Article III shall be treated as
interest pursuant to Section 483 of the Code.
3.6 Appraisal Rights.
32
(a) Notwithstanding anything in this Agreement to the
contrary, shares of Common Stock or Preferred Stock (the "SHARES") that are
issued and outstanding immediately prior to the Effective Time and which are
held by a stockholder who did not vote in favor of the Merger (or consent
thereto in writing) and who is entitled to demand and properly demands appraisal
of such shares pursuant to, and who complies in all respects with, the
provisions of Section 262 of the DGCL (the "DISSENTING STOCKHOLDERS"), shall not
be converted into or be exchangeable for the right to receive the Merger
consideration (the "DISSENTING SHARES"), but instead such holder shall be
entitled to payment of the fair value of such Shares in accordance with the
provisions of Section 262 of the DGCL (and at the Effective Time, such
Dissenting Shares shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and such holder shall cease to have any
rights with respect thereto, except the right to receive the fair value of such
Dissenting Shares in accordance with the provisions of Section 262 of the DGCL),
unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost rights to appraisal under the DGCL. If any
Dissenting Stockholder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's Shares shall thereupon be treated as
if they had been converted into and become exchangeable for the right to
receive, as of the Effective Time, the applicable Merger Consideration Payments
for each such Share, in accordance with Section 3.1(c), without any interest
thereon. The Company shall give Parent (i) prompt notice of any written demands
for appraisal of any Shares, attempted withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to, or settle, or offer or agree to
settle, any such demand for payment.
(b) If the Dissenting Shares represent more than five percent
(5%) of the outstanding Shares of Company Stock (the excess being the "EXCESS
SHARES"), then an adjustment shall be made to the relative proportion of cash
and Shares of Parent Common Stock in the Initial Merger Consideration Amount
such that the amount of shares of Parent Common Stock will be increased and the
amount of cash will be decreased by the amount of cash that would have been paid
on account of the Excess Shares had those shares received all cash in the
transaction (to the extent such shares were entitled to receive a portion of the
Initial Merger Consideration Amount pursuant to the terms of this Agreement),
with such adjustment being reflected in the final Allocations Spreadsheet.
3.7 Working Capital Adjustment
(a) No later than three (3) days prior to the Closing Date,
the Company shall cause to be prepared and delivered to Parent the Pre-Closing
Statement (as defined below) and a certificate based on such Pre-Closing
Statement setting forth the Company's calculation of estimated Closing Working
Capital (as defined below). The pre-closing statement (the "PRE-CLOSING
STATEMENT") shall present the Company's estimate of Working Capital as of the
33
close of business on the Closing Date ("ESTIMATED WORKING CAPITAL"). "WORKING
CAPITAL" means the cash, cash equivalents, accounts receivable (including
recoverable value added Tax), inventory held for sale and trial equipment of the
Company and its Subsidiaries (but excluding deferred revenue and deferred
inventory cost), reduced by the accounts payable of the Company and its
Subsidiaries (exclusive of Transaction Expenses and any amounts payable with
respect to the Employee Incentive Plan or the Special Acquisition Bonus), in
each case as determined in accordance with GAAP, applied using the same
accounting methods, practices, principles, policies and procedures, with
consistent classifications that were used in the preparation of the Company's
audited Financial Statements delivered in satisfaction of Section 8.1(1). Parent
and the Company shall agree on the calculations set forth in the Pre-Closing
Statement prior to the Closing Date. For the purposes of the calculations in
this Section 3.7(a), the absolute value of any negative numbers shall be used.
(i) If the Estimated Working Capital is less than the
product of (x) 0.85 and (y) the Projected Working Capital as
of the Closing Date, the Initial Escrow Amount shall be
reduced by the difference between (1) such product and (2) the
Estimated Working Capital, with such cash and shares of Parent
Common Stock being retained by Parent and no longer being
available as Initial Closing Consideration.
(ii) If the Estimated Working Capital is greater than
the Projected Working Capital as of the Closing Date, the
Initial Closing Consideration shall be increased by the excess
of (1) the Estimated Working Capital over (2) the Projected
Working Capital if such excess is the result of cash reflected
on the Pre-Closing Statement obtained through the issuance
after the date hereof of equity of the Company or debt
convertible into equity of the Company at or prior to the
Effective Time issued in compliance with Section 7.2(b)(ii).
(b) As promptly as practicable, but no later than sixty (60)
days after the Closing Date, Parent shall cause to be prepared and delivered to
the Stockholder Representative the Closing Statement (as defined below) and a
certificate based on such Closing Statement setting forth Parent's calculation
of Closing Working Capital (as defined below). The closing statement (the
"CLOSING STATEMENT") shall present the actual Working Capital as of the close of
business on the Closing Date ("CLOSING WORKING CAPITAL").
(c) Subsequent to the Closing and upon reasonable notice,
Parent and the Surviving Corporation shall afford to the officers, employees,
accountants, counsel and other representatives of the Stockholder Representative
reasonable access during normal working hours to the Surviving Corporation's
properties, books, Contracts and records reasonably necessary to evaluate the
Closing Statement, and Parent and the Surviving Corporation shall furnish
promptly to the Stockholder Representative, pursuant to a customary
confidentiality agreement, all such information concerning the business,
properties, books, Contracts, records and personnel (including outside auditor
34
work papers) as the Stockholder Representative may reasonably request for the
purposes of evaluating the Closing Statement. Parent and the Surviving
Corporation shall make available to the officers, employees, accountants,
outside auditors, counsel and other representatives of the Stockholder
Representative upon the reasonable request of the Stockholder Representative and
during normal working hours all officers, employees accountants, outside
auditors, counsel and other representatives or agents of the Surviving
Corporation and Parent for discussion of such matters pertaining to the Closing
Statement as the Stockholder Representative may reasonably request. If the
Stockholder Representative disagrees with Parent's calculation of Closing
Working Capital delivered pursuant to Section 3.7(b), the Stockholder
Representative may, within thirty (30) days after delivery of the Closing
Statement to the Stockholder Representative, deliver a notice to Parent (a
"DISPUTE Notice") stating that the Stockholder Representative disagrees with
such calculation and specifying in reasonable detail those items or amounts as
to which the Stockholder Representative disagrees and the basis therefore. Upon
expiration of such thirty-day period, if the Stockholder Representative has not
provided a Dispute Notice in accordance with this Section 3.7(c), the
Stockholder Representative shall be deemed to have agreed with the calculation
of Closing Working Capital delivered pursuant to Section 3.7(b).
(d) If a Dispute Notice shall be duly delivered pursuant to
Section 3.7(c), the Stockholder Representative and Parent shall, during the
fifteen (15) days following such delivery, use their commercially reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the Closing Working Capital. If during such
period the Stockholder Representative and Parent are unable to reach such
agreement, they shall promptly thereafter cause Deloitte & Touche or such other
independent accounting firm as shall be mutually agreed by Parent and
Stockholder Representative, as the case may be (the "INDEPENDENT Accountant"),
to review this Agreement and the disputed items or amounts for the purpose of
calculating Closing Working Capital (it being understood that in making such
calculation, the Independent Accountant shall be functioning as an expert and
not as an arbitrator). Each of Parent and the Stockholder Representative agrees
that it shall not engage or agree to engage the Independent Accountant to
perform any services other than as the Independent Accountant pursuant hereto
until the Closing Statement and Final Closing Working Capital (as defined below)
have been finally determined pursuant to this Section 3.7. Each party agrees to
execute, if requested by the Independent Accountant, a reasonable engagement
letter. Parent and the Stockholder Representative shall cooperate with the
Independent Accountant and promptly provide all documents and information
reasonably requested by the Independent Accountant. In making such calculation,
the Independent Accountant shall consider only those items or amounts in the
Closing Statement and Parent's calculation of Closing Working Capital as to
which the Stockholder Representative has indicated it disagrees in its Dispute
Notice. The Independent Accountant shall deliver to the Stockholder
Representative and Parent, as promptly as practicable (but in any case no later
than thirty (30) days from the date of engagement of the Independent
Accountant), a report setting forth such calculation. Such report shall be
deemed a final arbitration award that is binding on Parent and the Stockholder
35
Representative, and neither Parent nor the Stockholder Representative shall seek
further recourse to courts or other tribunals, other than to enforce such
report. The cost of the Independent Accountant's review and report shall be
borne equally by Parent and the Stockholder Representative.
(e) The Stockholder Representative, Parent and the Company
shall, and shall cause their respective representatives to, cooperate and assist
in the preparation of the Closing Statement and the calculation of Closing
Working Capital and in the conduct of the review referred to in this Section
3.7, including by making available to the extent necessary books, records, work
papers and personnel.
(f) (i) If Final Closing Working Capital is less than the
product of (x) 0.85 and (y) the Projected Working Capital as of the Closing
Date, Parent shall be entitled to withdraw from the Escrow Fund, and the
Stockholder Representative shall instruct the Escrow Agent to release from the
Escrow Fund, an amount equal to difference between (1) such product and (2)
Final Closing Working Capital; provided, however, that such amount to be
released from the Escrow Fund shall be reduced by the amount not deposited into
the Escrow Fund and retained by Parent pursuant to Section 3.7(a)(i); and
provided further, that such amount to be released to Parent from the Escrow Fund
shall be increased by the amount of any increase in the Initial Closing
Consideration effected pursuant to Section 3.7(a)(ii). For the purposes of the
calculations in this Section 3.7(f), the absolute value of any negative numbers
shall be used.
(ii) If Final Closing Working Capital is greater than
the Projected Working Capital as of the Closing Date, and if
such excess is the result of cash reflected on the Pre-Closing
Statement obtained through the issuance after the date hereof
of equity of the Company or debt convertible into equity of
the Company at or prior to the Effective Time issued in
compliance with Section 7.2(b)(ii), the Initial Closing
Consideration shall be increased by the amount of the excess
and distributed in accordance with the Allocations Spreadsheet
in the manner and with interest as provided in Section 3.7(g);
provided, however, that the amount of such payment shall be
reduced by the amount of any increase in the Initial Closing
Consideration effected pursuant to Section 3.7(a)(ii); and
provided further, that the amount of such payment shall be
increased by the amount not deposited into the Escrow Fund and
retained by Parent pursuant to Section 3.7(a)(i).
(iii) If it is determined that Final Closing Working
Capital should not result in any adjustment to the Escrow Fund
or the Initial Closing Consideration, and an adjustment was
made pursuant to Section 3.7(a)(i) or Section 3.7(a)(ii), (A)
Parent shall deposit, on its behalf and on behalf of the
Company, in the Escrow Fund an amount equal to the amount not
deposited into the Escrow Fund and retained by Parent pursuant
to Section 3.7(a)(i) or (B) Parent shall be entitled to
withdraw from the Escrow Fund, and the Stockholder
Representative shall instruct the Escrow Agent to release from
the Escrow Fund, an amount equal to the amount of any increase
in the Initial Closing Consideration effected pursuant to
Section 3.7(a)(ii).
36
(iv) "FINAL CLOSING WORKING CAPITAL" means Closing
Working Capital (i) as shown in Parent's calculation set forth
in the Closing Statement delivered pursuant to Section 3.7(b)
if no Dispute Notice with respect thereto is duly delivered
pursuant to Section 3.7(c); or (ii) if a Dispute Notice is
delivered, (A) as agreed by the Stockholder Representative and
Parent pursuant to Section 3.7(d) or (B) in the absence of
such agreement, as shown in the Independent Accountant's
calculation delivered pursuant to Section 3.7(d).
(g) Any payment by Parent or Company to the Exchange Agent
pursuant to the first sentence of this Section 3.7(f) shall be made within one
(1) Business Days after the Final Closing Working Capital has been determined by
wire transfer by Parent or Company to the Exchange Agent of immediately
available funds to the account designated in writing by the Exchange Agent in
accordance with the Allocations Spreadsheet. The amount of any payment to be
made pursuant to this Section 3.7 shall bear interest from and including the
Closing Date to but excluding the date of payment at the Prime Rate during the
period from the Closing Date to the date of payment. Such interest shall be
payable at the same time as the payment to which it relates and shall be
calculated daily on the basis of a year of 365 days and the actual number of
days elapsed.
ARTICLE IV
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the Effective Time as follows:
(a) At the election of either Parent or the Company on or
after August 31, 2007 (the "END DATE") if the Closing shall not have occurred by
the close of business on such date; provided, however, that the right to
terminate this Agreement under this Section 4.1(a) shall not be available to any
party who is in material default of any of its obligations hereunder;
(b) by mutual written consent of Parent and the Company (in
the case of the Company, as evidenced by the approval of the Board of Directors
of the Company);
(c) by either Parent or the Company if (i) there shall be in
effect a final nonappealable Order of a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby or (ii) there shall be any Law enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Body that would make consummation of the Merger illegal;
(d) (by Parent, so long as Parent is not in material breach of
its representations, warranties, covenants or agreements under this Agreement,
if there shall have been a material breach of any representation, warranty,
covenant or agreement of the Company set forth in this Agreement, which breach
37
would give rise to a failure of a condition set forth in Sections 8.1(a), 8.1(b)
or 8.1(c) and is incapable of being cured or, if capable of being cured, shall
not have been cured within twenty (20) Business Days following receipt by the
Company of notice of such breach from Parent; or
(e) by the Company, so long as the Company is not in material
breach of its representations, warranties, covenants or agreements under this
Agreement, if there shall have been a material breach of any representation,
warranty, covenant or agreement of Parent set forth in this Agreement, which
breach would give rise to a failure of a condition set forth in Sections 8.2(a)
or 8.2(b) and is incapable of being cured or, if capable of being cured, shall
not have been cured within twenty (20) Business Days following receipt by Parent
of notice of such breach from the Company.
4.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 4.1, written notice thereof shall be given
to the other party or parties, specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void (other than this Section 4.2 and Article X, all of which shall survive
termination of this Agreement); provided, however, that nothing contained herein
shall relieve any party from liability for fraud or any willful breach hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent
and Merger Sub on the date hereof that, subject to such exceptions and
disclosures as set forth in the disclosure letter supplied by the Company to
Parent dated as of the date hereof (the "COMPANY DISCLOSURE LETTER") (it being
understood and agreed that the disclosure set forth in a specific section or
subsection of the Company Disclosure Letter shall qualify the representations
and warranties set forth in the corresponding section and subsection of this
Article V (whether or not a specific cross-reference is included therein) if and
to the extent that it is reasonably apparent on the face of such disclosure that
such disclosure applies to such other section or subsection):
5.1 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now
conducted. The Company is duly qualified or authorized to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which it owns or leases real property and each other jurisdiction in which
the conduct of its business or the ownership of its properties requires such
qualification or authorization, except where the failure to be so qualified,
authorized or in good standing would not have a Material Adverse Effect with
respect to the Company (a "COMPANY MATERIAL ADVERSE EFFECT"). The Company is not
subject to the requirements of Section 2115(b) of the California Corporations
Code.
38
5.2 Authorization of Agreement.
(a) The Company has all requisite power, authority and legal
capacity to execute and deliver this Agreement, the Escrow Agreement and the
certificates referred to in Section 8.1 (together with this Agreement, the
"COMPANY DOCUMENTS") and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each of the Company
Documents by the Company, the Company's performance of its obligations hereunder
and thereunder and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by its Board of
Directors and, subject to obtaining the Stockholder Consents, no other corporate
action on the part of the Company is necessary to authorize the execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby.
(b) Each Company Document has been duly and validly executed
and delivered by the Company and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each of the other Company Documents when so executed and delivered will
constitute, legal, valid and binding obligations of the Company, as applicable,
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(c) The Board of Directors of the Company, at a meeting duly
called and held at which all the directors of the Company were present in person
or by telephone (or, in lieu of a meeting, by the written consent of the
directors of the Company), duly and unanimously adopted resolutions (i)
approving and declaring advisable this Agreement, the Merger and the other
transactions contemplated by this Agreement, (ii) directing that the adoption of
this Agreement be submitted to the Company Stockholders and (iii) recommending
that the Company Stockholders adopt this Agreement, which resolutions have not
been subsequently rescinded, modified or withdrawn in any way.
(d) Schedule 5.4(a) sets forth a true, correct and complete
list of the Company Stockholders as of the date hereof. The Company has
delivered to Parent true, correct and complete copies of the irrevocable written
consents approving the Merger, which are valid and effective under Section 228
of the DGCL, of (i) the holders of a majority of the outstanding shares entitled
to vote of Common Stock and Preferred Stock, voting together as a single class;
(ii) the holders of a majority of the outstanding shares entitled to vote of
Series C Preferred Stock, Series C-3 Preferred Stock and Series C-4 Preferred
Stock, voting together as a single class; (iii) the holders of a majority of the
outstanding shares entitled to vote of Series C-3 Preferred Stock and Series D
Preferred Stock, voting together as a single class; and (iv) the holders of a
majority of the outstanding shares entitled to vote of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series C-3 Preferred Stock
and Series C-4 Preferred Stock, voting together as a single class (collectively,
39
the "STOCKHOLDER CONSENTS"). The Stockholder Consents are the only approval of
holders of any class or series of Company capital stock necessary or required
(under applicable Law, the Company's certificate of incorporation and bylaws, or
otherwise) to approve this Agreement and the transactions contemplated hereby,
including the Merger. The Stockholder Consents are in full force and effect and
are valid and effective under Section 228 or the DGCL. Each Company Stockholder
who has delivered a Stockholder Consent is an "accredited investor" within the
meaning of Regulation D under the Securities Act and has certified as to such
status to the Company.
5.3 Conflicts; Consents of Third Parties.
(a) Other than the consents, waivers, approvals, Orders,
Permits, authorizations, declarations, filings and notifications which are
disclosed in Schedule 5.3(b), none of the execution and delivery by the Company
of this Agreement or the other Company Documents, the consummation by the
Company of the Merger and the transactions contemplated hereby or thereby, or
compliance by the Company with any of the provisions hereof or thereof will
conflict with, or result in any violation of, default or breach (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or give rise to any obligation of the Company to make any payment under,
or to the increased, additional, accelerated or guaranteed rights or
entitlements of any Person under, or result in the creation of any Liens upon
any of the properties or assets of Company or any Company Subsidiary under, any
provision of (i) the certificate of incorporation and by-laws or comparable
organizational documents of the Company or any Company Subsidiary; (ii) any
Intellectual Property, Technology, Material Contract or Permit to which the
Company or any Company Subsidiary is a party or by which any of the properties
or assets of the Company or any Company Subsidiary are bound; (iii) any Order of
any Governmental Body applicable to the Company or any Company Subsidiary or any
of the properties or assets of the Company or any Company Subsidiary; or (iv)
any applicable Law; except in the case of clauses (ii), (iii) or (iv), any
conflict, violation, default, breach, termination, cancellation, acceleration,
guarantee, loss of benefit or Lien that would not, individually or in the
aggregate, be material to the Company and its Subsidiaries, taken as a whole.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of the Company or any Company
Subsidiary in connection with (x) the execution and delivery of this Agreement
or the other Company Documents by the Company, the compliance by the Company
with any of the provisions hereof or thereof, or the consummation by the Company
of the Merger or the other transactions contemplated hereby or thereby, or (y)
the continuing validity and effectiveness immediately following the Closing of
any Permit or Material Contract of the Company or any Company Subsidiary, except
for (i) those consents and filings set forth on Schedule 5.3(b), (ii) any
notices required to be filed under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), (iii) the filings required under, and
40
in compliance with, other applicable requirements of non-U.S. laws intended to
prohibit, restrict or regulate actions or transactions having the purpose or
effect of monopolization, restraint of trade or harm to competition
(collectively, "FOREIGN ANTITRUST LAWS"), (iv) the filing of the Certificate of
Merger with the Delaware Secretary of State pursuant to the DGCL, and (v) any
consent, waiver, approval, Order, Permit, authorization, declaration, filing or
notification the failure of which to be obtained or made, individually or in the
aggregate, would not, individually or in the aggregate, be material to the
Company and its Subsidiaries, taken as a whole.
5.4 Capitalization.
(a) The authorized capital stock of the Company consists of:
(i) 385,000,000 shares of Common Stock, par value
$0.001 per share, of which 17,561,475 shares are issued and
outstanding, and 18,895,401 shares are subject to Company
Stock Options, and
(ii) 298,500,000 shares of Preferred Stock, par value
$0.001 per share, consisting of:
(A) 7,500,000 shares of Series A Preferred
Stock, of which 7,452,000 shares are issued
and outstanding;
(B) 33,900,000 shares of Series B Preferred
Stock, of which 33,573,321 shares are issued
and outstanding;
(C) 27,000,000 shares of Series C Preferred
Stock, of which 2,975,169 shares are issued
and outstanding;
(D) 2,800,000 shares of Series C-1 Preferred
Stock, of which 2,683,161 shares are issued
and outstanding;
(E) 123,000,000 shares of Series C-3 Preferred
Stock, of which 90,483,668 shares are issued
and outstanding; and
(F) 20,000,000 Shares of Series C-4 Preferred
Stock, of which no shares are issued and
outstanding.
(G) 84,300,000 shares of Series D Preferred
Stock, of which 21,205,953 shares are issued
and outstanding.
All of the issued and outstanding shares of Common Stock and
Preferred Stock (the "Company Stock") have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the Company
41
Stockholders as set forth in Schedule 5.4(a), which includes each Company
Stockholder's residency.
(b) Except as set forth above, immediately before the
Effective Time, there will be no outstanding shares of capital stock of the
Company or securities, directly or indirectly, convertible into, or exchangeable
or exercisable for, shares of capital stock of the Company or any outstanding
phantom stock rights, stock appreciation rights, restricted stock awards,
dividend equivalent awards, or other stock-based awards or rights relating to or
valued by reference to the capital stock of the Company or the dividends paid on
the capital stock of the Company, and there are no calls, rights (including
preemptive rights), commitments or agreements (including employment, termination
and similar agreements) to which the Company is a party or by which either of
them is bound, in any case obligating the Company to issue, deliver, sell,
purchase, redeem or acquire, any debt or equity securities of the Company, or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. None of the outstanding shares of capital
stock of the Company are subject to, or were issued in violation of, preemptive
or other similar rights.
5.5 Subsidiaries. Schedule 5.5 sets forth with respect to each
direct or indirect Subsidiary of the Company (each, a "COMPANY SUBSIDIARY"), the
jurisdiction in which it is incorporated or organized, the jurisdictions, if
any, in which it is qualified to do business, the number of shares of its
authorized capital stock, the number and class of shares thereof duly issued and
outstanding, the names of all stockholders or other equity owners and the number
of shares of stock owned by each stockholder or the amount of equity owned by
each equity owner. Each Company Subsidiary is a duly organized and validly
existing corporation or other entity in good standing under the laws of the
jurisdiction of its incorporation or organization and is duly qualified or
authorized to do business as a foreign corporation or entity and is in good
standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or
authorization, except where the failure to hold such foreign qualifications or
authorizations has not had, and would not reasonably be expected to have, a
Company Material Adverse Effect. Each Company Subsidiary has all requisite
corporate or entity power and authority to own its properties and carry on its
business as presently conducted. The outstanding shares of capital stock or
equity interests of each Company Subsidiary are validly issued, fully paid and
non-assessable, and all such shares or other equity interests represented as
being owned by the Company are owned by it free and clear of any and all Liens
and are not subject to any option, right of first refusal, proxy, voting trust
or agreement, or transfer restriction under any shareholder or similar
agreement, except as set forth in Schedule 5.5. No shares of capital stock are
held by any Company Subsidiary as treasury stock. There is no existing option,
warrant, call, right or Contract to which any Company Subsidiary is a party
requiring, and there are no convertible securities of any Company Subsidiary
outstanding which upon conversion would require, the issuance of any shares of
capital stock or other equity interests of any Company Subsidiary or other
securities convertible into shares of capital stock or other equity interests of
any Company Subsidiary. Other than the Company Subsidiaries, neither the Company
42
nor any Company Subsidiary owns, directly or indirectly, any shares of capital
stock or equity or ownership interests in any other Person (collectively,
"THIRD-PARTY INTERESTS"). Neither the Company nor any Company Subsidiary have
any rights to, or are bound by any commitment or obligation to, acquire by any
means, directly or indirectly, any Third-Party Interests or to make any
investment in, or contribution or advance to, any Person.
5.6 Corporate Records.
(a) The Company has delivered to Parent true, correct and
complete copies of the certificates of incorporation (each certified by the
Secretary of State or other appropriate official of the applicable jurisdiction
of organization) and by-laws (each certified by the secretary, assistant
secretary or other appropriate officer) or comparable organizational documents
of the Company and each of the Company Subsidiaries.
(b) The minute books of the Company and each Company
Subsidiary previously made available to Parent or its counsel contain true,
correct and complete records of all meetings and accurately reflect in all
material respects all other corporate action of the stockholders and board of
directors (including committees thereof) of the Company and the Company
Subsidiaries. The stock certificate books and stock transfer ledgers of the
Company and the Company Subsidiaries previously made available to Parent are
true, correct and complete.
5.7 Financial Statements. The Company has furnished to Parent
a true, correct and complete copy of (i) the audited consolidated financial
statements of the Company and the Company Subsidiaries as at and for the years
ended December 31, 2004 and December 31, 2005, each of which includes a
statement of cash flows and statement of operations for each such fiscal year
and a balance sheet as at the last day thereof and (ii) the unaudited
consolidated financial statements of the Company and the Company Subsidiaries as
at and for the fiscal year ended December 31, 2006, which includes a statement
of cash flows and statement of operations for such fiscal year and a balance
sheet as at the last day thereof (collectively, the financial statements
referred to in clauses (i) and (ii) above are the "FINANCIAL STATEMENTS"). The
Financial Statements were prepared from the books and records of the Company and
present fairly in all material respects the financial condition and results of
operations of the Company and the Company Subsidiaries, as at the dates and for
the periods indicated, and have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto and except
that the unaudited Financial Statements are subject to normal, customary
year-end and audit adjustments and may not contain notes required by GAAP). The
unaudited consolidated balance sheet of the Company and the Company Subsidiaries
as at December 31, 2006 is referred to herein as the "BALANCE SHEET" and
December 31, 2006 is referred to herein as the "BALANCE SHEET DATE."
5.8 No Undisclosed Liabilities. Neither the Company nor any
Company Subsidiary has any material Indebtedness or Liabilities of any kind
required to be reflected in or reserved against in balance sheets prepared in
accordance with GAAP other than those (i) fully reflected in or reserved against
43
in the Balance Sheet, (ii) incurred in the Ordinary Course of Business since the
Balance Sheet Date, subject to compliance with Section 7.2, (iii) constituting
accrued and unpaid Transaction Expenses, if any, or (iv) used to determine Final
Closing Working Capital.
5.9 Absence of Certain Developments. Except as expressly
contemplated by this Agreement, since the Balance Sheet Date through the date of
this Agreement (i) the Company and the Company Subsidiaries have conducted their
respective businesses only in the Ordinary Course of Business and (ii) there has
not been any Company Material Adverse Effect. Without limiting the generality of
the foregoing, since the Balance Sheet Date:
(a) there has not been any loss with respect to the tangible
property and assets of the Company or any Company Subsidiary having a
replacement cost of more than $50,000 for any single loss or $100,000 for all
such losses;
(b) there has not been any declaration, setting aside or
payment of any dividend or other distribution in respect of any shares of
capital stock of the Company or any repurchase, redemption or other acquisition
by the Company or any Company Subsidiary of any outstanding shares of capital
stock or other securities of, or other ownership interest in, the Company or any
Company Subsidiary;
(c) neither the Company nor any Company Subsidiary has awarded
or paid any bonuses to employees of the Company or any Company Subsidiary with
respect to the fiscal year ended December 31, 2006, except to the extent
previously disclosed to Parent in writing, or entered into any employment,
deferred compensation, severance or similar agreement other than employment
offer letters for at-will employment (nor amended any such agreement) or agreed
to increase the compensation payable or to become payable by it to any of the
Company's or any Company Subsidiary's directors, officers, employees, agents or
representatives or agreed to increase the coverage or benefits available under
any severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such directors, officers, employees,
agents or representatives;
(d) there has not been any change by the Company or any
Company Subsidiary in Tax reporting or accounting principles, methods or
policies nor has the Company or any Company Subsidiary made any adjustment to
its books and records, or recharacterized any assets or liabilities, except as
may have been required by GAAP (provided that such changes are disclosed on
Schedule 5.9(d));
(e) neither the Company nor any of the Company Subsidiaries
has failed to pay and discharge current Liabilities except in the Ordinary
Course of Business or where disputed in good faith by appropriate proceedings,
and has not accelerated the payment or maturity date of any current Liabilities
of the Company or any of the Company Subsidiaries and has not accelerated the
44
collection of any accounts receivable of the Company or any of the Company
Subsidiaries;
(f) neither the Company nor any Company Subsidiary has made
any loans, cash advances, or capital contributions to, or investments in, any
Person or paid any fees or expenses to any stockholder of the Company or any
director, officer, partner, stockholder or Affiliate of the Company or any
Company Subsidiary, other than reimbursement of ordinary course travel and
entertainment expenses incurred in the Ordinary Course of Business;
(g) neither the Company nor any Company Subsidiary has
mortgaged, pledged or been subjected to any Lien on any of its assets, or
acquired any assets or sold, assigned, transferred, conveyed, leased or
otherwise disposed of any material assets of the Company or any Company
Subsidiary, except for assets acquired or sold, assigned, transferred, conveyed,
leased or otherwise disposed of in the Ordinary Course of Business;
(h) neither the Company nor any Company Subsidiary has
discharged or satisfied any Lien, or paid any obligation or Liability in excess
of $50,000 individually or $100,000 in the aggregate, except in the Ordinary
Course of Business;
(i) neither the Company nor any Company Subsidiary has
canceled or compromised any debt or pending claim or amended, canceled,
terminated, relinquished, waived or released any Material Contract or material
right except in the Ordinary Course of Business;
(j) neither the Company nor any Company Subsidiary has made or
committed to make any capital expenditures or capital additions or betterments
in excess of $50,000 individually or $100,000 in the aggregate;
(k) neither the Company nor any Company Subsidiary has issued,
created, incurred, assumed or guaranteed any Indebtedness in excess of $50,000
individually or $100,000 in the aggregate;
(l) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property, except licenses
granted to customers and partners in the Ordinary Course of Business;
(m) neither the Company nor any Company Subsidiary has
received notice of, instituted or settled any material Legal Proceeding; and
(n) none of Company or any of the Company Subsidiaries has
agreed, committed, arranged or entered into any understanding to do anything set
forth in this Section 5.9.
5.10 Taxes.
45
(a) The Company and each of the Company Subsidiaries have (i)
duly and timely filed all Tax Returns required to be filed by or on behalf of it
in all jurisdictions in which such Tax Returns are required to be filed (after
giving effect to any duly obtained extensions of time in which to make such
filings), all such Tax Returns are true, complete and accurate in all material
respects, and the Company and the Company Subsidiaries have maintained, to the
extent required by law and the Company's and the Company Subsidiaries' internal
policies, all documentation supporting the positions taken thereon, and have at
all times used permitted accounting methods and periods in computing its Tax
liability, (ii) timely paid all Taxes due and payable or claimed or asserted in
writing by any Taxing Authority to be due and payable (except to the extent of
any accrual for Taxes established on the Financial Statements) and (iii) with
respect to any period for which Tax Returns have not yet been filed or for which
Taxes are not yet due or owing (including contingent Tax liabilities, but
excluding deferred Tax liabilities established to reflect timing differences
between book and Tax income), made accruals in accordance with GAAP for the full
amount of such Taxes on its Financial Statements with respect to periods up to
the date of the Financial Statements (whether or not it has or may have a right
of reimbursement against another Person). All required estimated Tax payments
sufficient to avoid any underpayment penalties have been made by or on behalf of
the Company and the Company Subsidiaries. The Company and the Company
Subsidiaries have disclosed on their Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income tax
within the meaning of Section 6662 of the Code (or any corresponding state,
local or foreign law). Neither the Company nor any of the Company Subsidiaries
has participated in any reportable or listed transaction as defined in Section
6011 of the Code.
(b) The Company and each of the Company Subsidiaries have
complied in all material respects with all applicable Laws relating to the
collection and withholding of Taxes, and has duly and timely paid over to the
appropriate Taxing Authority all amounts required to be so collected and
withheld and paid under all applicable Laws.
(c) Schedule 5.10(c) lists (i) all types of Taxes paid, and
all types of Tax Returns filed, by or on behalf of the Company and the Company
Subsidiaries and (ii) all jurisdictions that impose such Taxes and/or a duty to
file such Tax Returns. No claim has been made, either in writing or to the
Knowledge of the Company or any Company Subsidiary, by any Taxing Authority in a
jurisdiction where the Company or the Company Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by, or required to file any Tax
Return in, that jurisdiction.
(d) The Company has made available to the Parent true and
complete copies of all (i) audit reports issued with respect to the six year
period prior to the date of this Agreement relating to any Taxes due from or
with respect to the Company and each of the Company Subsidiaries and (ii)
material Tax Returns of the Company and each of the Company Subsidiaries for all
taxable periods ending on or after December 31, 2003 and estimated tax
calculations for the taxable period ending on or after December 31, 2006.
46
(e) Since December 31, 2004, neither the Company nor any
Company Subsidiary prepared any Tax Return in a manner which is not consistent
with past practice with respect to the treatment of items on such Tax Return or
filed any amendment to a Tax Return that will or may increase the liability of
the Company or any Company Subsidiary after the Closing, incurred any liability
for Taxes other than in the ordinary course of business, or settled any claim or
assessment in respect of Taxes.
(f) Except as provided under Treasury Regulation Section
1.451-5, there is no item of income, gain, loss or deduction of the Company or
each of the Company Subsidiaries for Tax purposes that was received, incurred or
accrued prior to the Closing that will be required under applicable Tax Law to
be reported for a taxable period beginning after the Closing Date. The Company
has included all "deferred revenue" reflected in the Financial Statements in
taxable income in accordance with Treasury Regulation Section 1.451-5.
(g) The Company and each of the Company Subsidiaries have (i)
neither agreed to nor are required to make any adjustments pursuant to Section
481(a) of the Code, (ii) no Knowledge that any Taxing Authority has proposed any
such adjustment, and (iii) neither filed for an automatic change, nor have an
application pending with any Taxing Authority requesting permission for any
change in accounting method.
(h) The Company and each of the Company Subsidiaries have not
executed, entered into, given written consent to, nor are the subject matter of,
any written agreement with, or obtained or applied for any written consents or
written clearances or any other Tax rulings from, nor has there been any written
agreement executed or entered into on behalf of any of them with any Taxing
Authority, relating to material Taxes, including any IRS private letter rulings
or comparable rulings of any Taxing Authority and closing agreements pursuant to
Section 7121 of the Code or any predecessor provision thereof or any similar
provision of any Law.
(i) The Company and each of the Company Subsidiaries (i) are
not a party to any agreement extending the time within which to file any Tax
Return which has not yet been filed, (ii) have not granted any extension of the
statute of limitations for the assessment or collection of Taxes, which
extension is still in effect, and (iii) have not granted to any Person any power
of attorney that is currently in force with respect to any Tax matter.
(j) None of the Company's nor the Company Subsidiaries'
federal income tax returns have been audited, and no action, suit, proceeding,
investigation or audit with respect to Taxes of any type is pending or, to the
Knowledge of the Company or the Company Subsidiaries, threatened. There are no
outstanding assessments, claims or deficiencies for any material Taxes of the
Company or each of the Company Subsidiaries that have been proposed, asserted or
assessed, either in writing or to the Knowledge of the Company or the Company
47
Subsidiaries. No issue has been raised by a Taxing Authority in any prior
examination of the Company or each of the Company Subsidiaries which, by
application of the same or similar principles, could reasonably be expected to
result in a material proposed deficiency for any subsequent taxable period.
(k) All stock transfer Taxes levied or payable with respect to
all transfers of shares of the Company and the Company Subsidiaries prior to the
date hereof have been paid and appropriate transfer Tax stamps affixed.
(l) The Company and each of the Company Subsidiaries (i) are
not nor have ever been a member of any Affiliated Group that filed or was
required to file an affiliated, consolidated, combined or unitary Tax Return
other than one in which the Company is the common parent, (ii) do not have any
liability for the Taxes of another Person under Treasury Regulation Section
1.1502-6 (or any comparable provision of state, local or foreign Law) except
with respect to the Company and another Company Subsidiary, (iii) do not have
any liability for Taxes of any other Person as a transferee or successor, or by
Contract or otherwise and (iv) are not a party to a Tax sharing, indemnity
allocation or similar agreement or arrangement (whether or not written).
(m) The Company and each of the Company Subsidiaries have not
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two (2) years prior to the date of this Agreement or (B) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement.
(n) No property owned by the Company or any of the Company
Subsidiaries is (i) "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code, or (ii) "tax-exempt bond financed property" within the
meaning of Section 168(g)(5) of the Code.
(o) None of the intangible assets, intellectual property, or
know-how owned by the Company or any of the Company Subsidiaries were created or
acquired by the Company or any of the Company Subsidiaries before 1994.
(p) Neither the Company nor any of the Company Subsidiaries
has been a "United States real property holding corporation" within the meaning
of Section 897 of the Code during the five year period ending on the Closing
Date.
(q) None of the assets or liabilities of the Company is a debt
obligation that (i) was issued with "original issue discount" as that term is
defined in Section 1273(a) of the Code in excess of $50,000; (ii) is a
"registration-required obligation" as defined in Section 163(f)(2) of the Code;
(iii) is an "applicable high yield discount obligation" as defined in Section
163(i)(1) of the Code; (iv) is a "disqualified debt instrument" as defined in
Section 163(l)(2) of the Code, or (v) is "corporate acquisition indebtedness"
within the meaning of Section 279(b) of the Code.
48
(r) The Company does not have any elections in effect for
federal income tax purposes under Sections 108, 338, 441, 472, 1017, 1033 or
4977 of the Code or under any similar provisions of state, local, or foreign
Law.
(s) The Company and each of the Company Subsidiaries
incorporated in the United States of America (the "UNITED STATES") do not have a
permanent establishment in any country other than the United States nor is
subject to tax in a jurisdiction outside the United States.
(t) The Company and each of the Company Subsidiaries have (i)
complied with all record keeping and reporting obligations under Section 6038 of
the Code (or any comparable provision of state or local Law) with respect to its
ownership of and transactions with its foreign affiliates, (ii) established
"arms length" intercompany pricing arrangements that satisfy the requirements
set by the applicable Law such that no transfer pricing amount will be denied as
deductions or will be considered to have created income to the Company or any
Company Subsidiary of a type other than that specified in the transfer pricing
arrangement and (iii) maintained appropriate documentation for all transfer
pricing arrangements.
(u) The Company has not, within the scope of Section 999 of
the Code, participated in or cooperated with any international boycott or been
requested to do so in connection with any transaction or proposed transaction.
(v) The Company has never treated any of the Company
Subsidiaries as (i) a foreign investment company (within the meaning of former
Section 1246(b) of the Code), or (ii) a passive foreign investment company
(within the meaning of Section 1297 of the Code).
(w) None of the Company Subsidiaries that are not incorporated
in the United States (i) has, or ever had, a permanent establishment outside the
country of its incorporation, (ii) is, or ever has been, subject to Tax in any
jurisdiction other than its jurisdiction of incorporation, (iii) is engaged in a
United States trade or business for federal income tax purposes, (iv) holds
"United States Property" within the meaning of Section 956 of the Code or (v)
has generated subpart F income.
(x) The Company is not subject to any gain recognition
agreement under Section 367 of the Code.
(y) The Company does not have an overall foreign loss within
the meaning of Section 904(f) of the Code.
(z) The Company would not be required to include any amount in
income under Section 951 of the Code with respect to any of its Company
Subsidiaries were its Company Subsidiaries' taxable year deemed closed on the
Closing Date.
49
(aa) IPWireless UK Limited would not incur any balancing
charge on the disposal of any asset (or class of assets in respect of which a
separate computation for capital allowances is required, whether as a result of
an election or otherwise) if that asset (or all the assets in that class) were
disposed of for consideration equal to the book value adopted for Balance Sheet
purposes for that asset (or that class of assets).
(bb) No chargeable gain would arise in respect of any asset of
IPWireless UK Limited (i) treated as such on the Balance Sheet if that asset
were to be disposed of for consideration equal to the value attributed thereto
in the Balance Sheet; or (ii) acquired after the Balance Sheet Date if that
asset were to be disposed of for consideration equal to the consideration given
for its acquisition, in each case, disregarding any statutory rights to claim
any allowance or relief other than amounts deductible under Section 38 of the
Taxation of Chargeable Gains Xxx 0000 ("TCGA 1992").
(cc) Schedule 5.10(cc) contains details of each asset owned at
the date of this Agreement by IPWireless UK Limited in relation to which a
charge to United Kingdom corporation Tax might at any time in the six years from
and including the date of this Agreement arise under Section 179 of TCGA 1992.
(dd) IPWireless UK Limited is registered for the purposes of
the Value Added Tax Act 1994 (the "VATA").
(ee) IPWireless UK Limited is not a member of a group of
companies for the purposes of Section 43 of the VATA.
(ff) IPWireless UK Limited is not under an obligation to pay
nor has it since the Balance Sheet Date paid or agreed to pay any compensation
for loss of office or any gratuitous payment not deductible in computing its
income for the purposes of corporation tax.
(gg) IPWireless UK Limited is not liable to make a payment for
group relief ("GROUP RELIEF") under Chapter IV, Part X of the Income and
Corporation Taxes Act 1988 (the "TAXES ACT 1988") or tax refund under Section
102 of the Finance Xxx 0000 ("TAX REFUND") surrendered to it or to surrender
Group Relief or Tax Refund, and there is no arrangement by which IPWireless UK
Limited may become liable to repay a sum paid to it for the surrender of Group
Relief or Tax Refund.
(hh) IPWireless UK Limited has not without the prior consent
of H.M. Treasury caused, permitted or entered into a transaction specified in
Section 765 of the Taxes Xxx 0000.
(ii) For the purposes of Section 768 of the Taxes Act 1988
(change of ownership of a company - disallowance of trading losses) (i) within
the three years ending on the date of this Agreement there has been no major
change in the nature or conduct of a trade carried on by IPWireless UK Limited;
50
and (ii) the scale of the activities in a trade carried on by IPWireless UK
Limited has not become small or negligible.
(jj) IPWireless UK Limited has not entered into or been a
party to any schemes or arrangements which have as their main purpose, or one of
their main purposes, the avoidance of any liability to pay any Taxes.
(kk) For purposes of this Section 5.10, any reference to the
Company or the Company Subsidiaries shall be deemed to include any person that
merged with or was liquidated into the Company or the Company Subsidiaries,
respectively.
5.11 Property and Assets. Each of the Company and the Company
Subsidiaries has good and marketable title to all of the tangible properties and
assets used by it in the conduct of its business, including all tangible
properties and assets reflected in the Financial Statements, except those
disposed of since the Balance Sheet Date in the Ordinary Course of Business.
None of such tangible properties or assets is subject to any Lien other than
Permitted Exceptions and those specifically identified on the Financial
Statements or on Schedule 5.11. The Company owns no real property.
5.12 Technology and Intellectual Property.
(a) Schedule 5.12(a) sets forth a complete and accurate list
(as of the date of this Agreement) of: (i) each issued patent owned by the
Company or any of the Company Subsidiaries, (ii) each pending patent application
filed by or on behalf of the Company or any of the Company Subsidiaries, (iii)
each trademark registration, service xxxx registration, and copyright
registration owned by the Company or any of the Company Subsidiaries, (iv) each
application for trademark registration, service xxxx registration, and copyright
registration made by or on behalf of the Company or any of the Company
Subsidiaries, (v) each domain name registered by or on behalf of the Company or
any of the Company Subsidiaries ((i) through (v) collectively referred to as
"OWNED REGISTERED IP"), and (vi) each material trade name, d/b/a, unregistered
trademark, and unregistered service xxxx used by the Company or any of the
Company Subsidiaries in connection with its business.
(b) Except with respect to licenses of Software (i) generally
available for an annual or one-time license fee of no more than $25,000, (ii)
distributed as "freeware" or "shareware" or (iii) distributed via Internet
access without charge, Schedule 5.12(b) sets forth a complete and accurate list
(as of the date of this Agreement) of all agreements pursuant to which the
Company or any of the Company Subsidiaries licenses in or otherwise is
authorized to use any Technology or Intellectual Property used in the businesses
of the Company and the Company Subsidiaries. Neither the Company nor the Company
Subsidiaries is in default or breach under any material provision of any such
licenses and authorizations, nor is the Company or any Company Subsidiary in
default or breach of any license relating to open source or public library
Software used in the development or modification of any Software distributed by
the Company where the result of such default or breach may be to (i) affect the
51
ownership of such Software by the Company or any Company Subsidiary or (ii)
impose a duty on the Company or any Company Subsidiary to disclose proprietary
source code of such Software to third parties. The Company has delivered to
Parent correct, complete and current copies of all such agreements. Except
pursuant to the agreements described in clause (i) above or identified on
Schedule 5.12(b), neither the Company nor any of the Company Subsidiaries is
required, obligated, or under any liability whatsoever to make any payments in
excess of $25,000 per year by way of royalties, fees or other express payment
terms of the applicable agreements, to any third party with respect to use of
any Technology or Intellectual Property.
(c) Except as are not and are not reasonably expected to be
material to the Company and the Company Subsidiaries, to the Knowledge of the
Company (i) the Company and the Company Subsidiaries own or otherwise have
sufficient rights in and to all Software used in and necessary to conduct the
business of the Company and the Company Subsidiaries as presently conducted
including, without limitation, the design, development, manufacture, use,
import, marketing, sale, distribution, and provision of Software and services
provided by the Company and the Company Subsidiaries; and (ii) the Company and
the Company Subsidiaries own or otherwise have sufficient rights in and to all
Technology (other than Software) and Intellectual Property used in and necessary
to conduct the business of the Company and the Company Subsidiaries as presently
conducted including, without limitation, the design, development, manufacture,
use, import, marketing, sale, distribution, and provision of the products,
technology and services currently offered or proposed to be offered by the
Company and the Company Subsidiaries.
(d) All Owned Registered IP (other than patents and patent
applications) which is material to the business of the Company as presently
conducted is owned entirely by the Company and the Company Subsidiaries, is
valid and subsisting, and all patents and patent applications owned by the
Company which are material to the business of the Company as presently conducted
are owned entirely by the Company and the Company Subsidiaries and are valid and
subsisting. All necessary registration, maintenance, renewal, and other relevant
filing fees due through the date hereof in connection with the Owned Registered
IP have been timely paid and all necessary documents and certificates in
connection therewith have been timely filed with the relevant patent, copyright,
trademark, or other authorities in the United States or foreign jurisdictions,
as the case may be, for the purposes of maintaining such Owned Registered IP in
full force and effect. Schedule 5.12(d) sets forth a list, as of the date of
this Agreement, of all filings, estimated payments (other than legal fees) or
similar actions that must be taken by the Company within 120 days following the
date hereof for the purposes of obtaining, maintaining, perfecting or renewing
any such registrations and applications.
(e) Except for the need to make and obtain those filings and
consents set forth in Schedule 5.3(b), neither the Company nor any of the
Company Subsidiaries is, nor will it be, in material breach or default (or event
which, with the giving of notice or lapse of time, or both, would become a
default) of any agreement relating to any Intellectual Property of the Company
52
or any of the Company Subsidiaries or any third party as a result of the
execution and delivery of this Agreement, the performance of its obligations
under this Agreement, or the operation of its business as currently conducted
except where such breach or defaults, individually and in the aggregate, would
not be expected to be material to the Company and the Company Subsidiaries taken
as a whole. Neither the execution, delivery, or performance of this Agreement,
the consummation of the transactions contemplated by this Agreement, nor the
conduct of the business and operations of the Company and the Company
Subsidiaries as presently conducted will result in: (i) Parent's granting to any
third party any right to any Technology or Intellectual Property owned by, or
licensed to, the Company and the Company Subsidiaries, (ii) Parent's being bound
by, or subject to, any non-compete or similar restriction on its ability to
conduct its business, or (iii) giving any Person any rights of termination,
amendment, acceleration or cancellation of any material license or similar
agreement relating to any Intellectual Property to which the Company or any of
the Company Subsidiaries will be a party as of the Closing or by which any of
its assets as of the Closing will be bound or affected as of the Closing.
(f) Schedule 5.12(f) sets forth a complete and accurate list
(as of the date of this Agreement) of all agreements pursuant to which the
Company or any of the Company Subsidiaries has licensed a third party to use any
Technology or Intellectual Property owned or licensed by the Company or any of
the Company Subsidiaries.
(g) Schedule 5.12(g) sets forth a complete and accurate list
(as of the date of this Agreement) of all agreements pursuant to which the
Company or any of the Company Subsidiaries has expressly agreed to indemnify a
third party against a charge of infringement or misappropriation of any
Intellectual Property of another Person.
(h) There are no agreements between the Company or any of the
Company Subsidiaries and any third party relating to any Intellectual Property
of the Company or any of the Company Subsidiaries or any third party under which
there is (as of the date of this Agreement), or, to the Knowledge of the
Company, is expected (as of the date of this Agreement) to be, any material
dispute regarding the scope or performance of such agreement.
(i) Except as contemplated under this Agreement, neither the
Company nor any of the Company Subsidiaries has transferred title to, or granted
any exclusive license or right to use, or authorized joint ownership of, any
Technology or Intellectual Property of the Company or any of the Company
Subsidiaries, to any Person.
(j) Except as would not be material to the Company and the
Company Subsidiaries taken as a whole, to the Knowledge of the Company, neither
the Company nor any of the Company Subsidiaries, nor the manufacture, use, offer
for sale, sale, importation by, or distribution by the Company or the Company
Subsidiaries of any of their products has infringed or misappropriated any
copyright, or patent right of any third party, and neither the Company nor any
of the Company Subsidiaries has engaged in any operation or act that constitutes
unfair competition or unfair trade practices against any third party. The
53
Company has not received any written notice, nor, to the Knowledge of the
Company, any oral notice, of any alleged infringement of, or been notified of
the existence of, any potentially adverse patent.
(k) There is no action, suit, proceeding, hearing,
investigation, notice or complaint pending or, to the Knowledge of the Company,
threatened, before any court or tribunal (including, without limitation, the
United States Patent and Trademark Office or equivalent authority anywhere in
the world) relating to any of the Company's or any of the Company Subsidiaries'
Technology or Intellectual Property, nor has any claim or demand been made that
challenges the validity, enforceability, use or ownership of any of such
Technology or Intellectual Property or alleges any infringement,
misappropriation, violation, or unfair competition or trade practices
(including, without limitation, any claim that the Company or any of the Company
Subsidiaries must license or refrain from using any Technology or Intellectual
Property of any third party), nor, to the Knowledge of the Company, is there any
basis for any such claim or demand.
(l) To the Knowledge of the Company, no third party has
infringed or misappropriated any of Company's or any of the Company
Subsidiaries' Technology or Intellectual Property where the same would be
material to the Company and the Company Subsidiaries taken as a whole. The
Company has not brought any action, suit or proceeding or asserted any claim
(other than claims that have been resolved to the Company's satisfaction)
against any Person for infringing or misappropriating any of Company's or any of
the Company Subsidiaries' Technology or Intellectual Property.
(m) None of the Company's or any of the Company Subsidiaries'
owned Technology or Intellectual Property are subject to any outstanding
injunction, decree, order, judgment, ruling, settlement agreement, or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Company or any of the Company Subsidiaries or affects the validity, use
or enforceability of any such Technology or Intellectual Property.
(n) The Company and the Company Subsidiaries have taken
reasonable steps to protect the Company's and the Company Subsidiaries' rights
in their confidential information and trade secrets, except where a failure to
do so would not be material to the Company and the Company Subsidiaries taken as
a whole. The Company and the Company Subsidiaries have executed valid written
agreements with all of their employees who have contributed to the development
of the Technology and Intellectual Property of the Company and the Company
Subsidiaries, in which such employees have, to the maximum extent permitted by
law, assigned to the Company or the Company Subsidiaries all their rights in and
to all Technology and Intellectual Property they may develop in the course of
their employment and agreed to hold all trade secrets and confidential
information of the Company and the Company Subsidiaries in confidence both
during and after their employment. The Company and the Company Subsidiaries have
executed valid written agreements with all consultants and contractors who have
been retained in connection with the development of Technology and Intellectual
Property by which the consultants and contractors have assigned to the Company
54
or the Company Subsidiaries all their rights in and to such Technology and
Intellectual Property and agreed to hold all trade secrets and confidential
information of the Company and the Company Subsidiaries in confidence both
during and after the term of their engagements, except where a failure to do so
would not be material to the Company and the Company Subsidiaries taken as a
whole.
(o) No trade secrets, or other confidential information, owned
by the Company or any of the Company Subsidiaries the confidentiality of which
is material to their businesses as currently conducted have been authorized to
be disclosed or have actually been disclosed by the Company or any of the
Company Subsidiaries to any of their employees or any third party other than
pursuant to a written non-disclosure or confidentiality agreement (or any
agreement containing a non-disclosure or confidentiality provision) that
adequately protects the proprietary interests of the Company and the Company
Subsidiaries in and to such trade secrets and confidential information.
(p) No government funding and no facilities of a university,
college, other educational institution or research center were used in the
development of any Intellectual Property owned by the Company or any of the
Company Subsidiaries where, as a result of such funding or the use of such
facilities, the government or any university, college, other educational
institution or research center has any rights in such Intellectual Property. To
the Knowledge of the Company, no current or former employee, consultant or
independent contractor of the Company or any of the Company Subsidiaries who
contributed to the creation or development of any Intellectual Property owned by
the Company or any of the Company Subsidiaries has performed services for the
government or a university, college, or other educational institution or
research center during a period of time during which such employee, consultant
or independent contractor was also performing services for the Company or any of
the Company Subsidiaries.
(q) As of the date of this Agreement, the Company has no
Knowledge of any facts or circumstances that would render any Intellectual
Property owned by the Company or any of the Company Subsidiaries the validity or
enforceability of which is material to their businesses invalid or
unenforceable, or would adversely affect any pending application or registration
with respect to any Intellectual Property owned by the Company or any of the
Company Subsidiaries where such application or registration is material to their
businesses.
(r) No open source or public library Software, including, but
not limited to, any version of any Software licensed pursuant to any GNU public
license, has been incorporated into any distributed products of the Company or
any of the Company Subsidiaries. To the extent that any open source or public
library Software was incorporated into or utilized by any products of the
Company or any of the Company Subsidiaries, such open source or public library
Software is not linked to the source code for the proprietary Software owned by
the Company or the Company Subsidiaries in any manner that would require
disclosure of the Company's proprietary source code to third parties.
55
(s) To the Knowledge of the Company, none of the Software
owned by the Company and the Company Subsidiaries contains any program routine,
device, or other undisclosed feature, including, without limitation, a time
bomb, virus, drop-dead device, malicious logic, worm, trojan horse, bug, error,
defect or trap door, that is designed to delete, disable, deactivate, interfere
with, or otherwise harm the Software or the hardware, data, or computer programs
or codes of a user of such Software, or that is designed to provide access or
produce modifications not authorized by such user.
5.13 Insurance. Set forth in Schedule 5.13 is a list of all
insurance policies and all fidelity bonds held by the Company or any of the
Company Subsidiaries setting forth, in respect of each such policy, the policy
name, policy number, carrier, term, type and amount of coverage and annual
premium. The insurance policies listed on Schedule 5.13 are in full force and
effect and the Company has timely paid all applicable premiums thereunder. To
the Knowledge of the Company, no event relating to the Company or any of the
Company Subsidiaries has occurred which would reasonably be expected to result
in a retroactive upward adjustment in premiums under any such insurance policies
or which would reasonably be expected to result in a prospective upward
adjustment in such premiums. Excluding insurance policies that have expired
without renewal and been replaced in the Ordinary Course of Business, no
insurance policy of the Company or the Company Subsidiaries has been cancelled
within the last two (2) years and no written threat has been made to the Company
to cancel any insurance policy of the Company or any of the Company Subsidiaries
during such period. To the Knowledge of the Company, no event has occurred,
including the failure by the Company or any of the Company Subsidiaries to give
any notice or information or the Company or any of the Company Subsidiaries
giving any inaccurate or erroneous notice or information, which materially
limits or impairs the rights of the Company or any of the Company Subsidiaries
under any such insurance policies.
5.14 Material Contracts and Obligations. Schedule 5.14 sets
forth a list of all material Contracts (the "MATERIAL CONTRACTS") to which the
Company or any of the Company Subsidiaries is a party or by which it is bound as
of the date of this Agreement, including: (a) each Contract which requires
future expenditures by the Company or any of the Company Subsidiaries in excess
of $50,000; (b) all items required to be listed on Schedule 5.16(a); (c) any
Contract to which any stockholder, officer or director of the Company or any of
the Company Subsidiaries, or any "affiliate" or "associate" (as such terms are
defined in the rules and regulations promulgated under the Securities Act) of
such Persons is a party; (d) any indenture, loan or credit agreement, note
agreement, deed of trust, mortgage, security agreement, promissory note or other
Contract relating to or evidencing Indebtedness in excess of $50,000; (e) any
lease or agreement (other than Intellectual Property and Technology licenses)
under which the Company or any of the Company Subsidiaries is lessee of or holds
or operates any tangible property, real or personal, owned by any other Person
56
under which payments to such Person exceed $50,000 per annum; (f) any lease or
agreement (other than Intellectual Property and Technology licenses) under which
the Company or any of the Company Subsidiaries is lessor or permits any Person
to hold or operate any property, real or personal, owned or controlled by the
Company or any of the Company Subsidiaries; (g) any agreement granting any
option to purchase assets, or acquire a license, preemptive right, right of
first refusal or similar right to any Person; (h) any covenant not to compete or
similar restriction on its ability to conduct a business and any standstill
agreements; (i) any Contract with customers or business partners of the Company
or any of the Company Subsidiaries the loss of which would be material to the
Company or the Company Subsidiaries, taken as a whole; (j) any Contract that
contains a "most favored nation" or similar preferential pricing term; and (k)
any agreement to register securities under the Securities Act of 1933, as
amended (the "SECURITIES ACT"). The Company has made available to Parent copies
of all of the Material Contracts (or written summaries in the case of oral
Contracts). All of the Material Contracts are in full force and effect with
respect to the Company or the Company Subsidiaries, and are valid and binding
obligations of the Company or the Company Subsidiaries, enforceable against the
Company or the Company Subsidiaries in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity). Neither the Company
nor any of the Company Subsidiaries is in default under any material provision
of any such Material Contracts and, to the Knowledge of the Company, no other
party to any such Contract is in default under any material provision thereof.
As of the date of this Agreement, neither the Company nor any of the Company
Subsidiaries has received any written communication from any other party to any
Material Contracts stating that such other party has decided or plans to
terminate or otherwise discontinue such Contract.
5.15 Compliance. The Company and each of the Company
Subsidiaries has complied, in all material respects, with all Laws and Orders
applicable to its business and has procured all Permits required thereby. There
is no term or provision of any Lien or Order binding upon the Company that has
had or would reasonably be expected to have a Company Material Adverse Effect.
To the Knowledge of the Company, none of the employees of the Company or any of
the Company Subsidiaries is in violation of any contract or covenant (either
with the Company or with another entity) relating to employment, patent, other
proprietary information disclosure, non-competition, or non-solicitation, except
for any violation which, individually or in the aggregate, would not be material
to the Company and its Subsidiaries, taken as a whole.
5.16 Employee Benefits.
(a) Schedule 5.16(a) sets forth a correct and complete list of
all "employee benefit plans" (as defined in Section 3(3) of ERISA), and all
other employee benefit plans, programs, agreements, policies, arrangements or
payroll practices (other than any plans, programs, agreements, policies, schemes
arrangement or payroll practices that are governed by, and do not provide for
benefits in excess of those mandated by, the laws of a foreign jurisdiction),
including bonus plans, employment, consulting or other compensation agreements
with current employees, officers and directors (other than employment offer
57
letters for at-will employment and proprietary information and invention
assignment agreements), collective bargaining agreements, incentive, equity or
equity-based compensation, or deferred compensation arrangements, change in
control, termination or severance plans or arrangements, stock purchase,
severance pay, sick leave, vacation pay, salary continuation, hospitalization,
medical insurance, life insurance and scholarship plans and programs maintained
by the Company or any of the Company Subsidiaries or to which the Company or any
of the Company Subsidiaries contributed or is obligated to contribute thereunder
for the benefit of any current employees, officers and directors of the Company
or any of the Company Subsidiaries or for the benefit of any former employees,
officers or directors of the Company or any of the Company Subsidiaries that
terminated service (the "EMPLOYEES") (collectively, the "COMPANY PLANS"),
maintained by the Company or any of the Company Subsidiaries and any trade or
business (whether or not incorporated) that would be treated as under common
control or as a single employer, with any of them under Section 414(b), (c), (m)
or (o) of the Code (each, an "ERISA AFFILIATE") or to which the Company or any
ERISA Affiliate contributed or, for the six (6) years immediately preceding the
Closing Date has been obligated to contribute thereunder. The Company has made
available to Parent true, correct, and complete copies of all the Company Plans,
as amended (or, where oral, written summaries of the material terms thereof)
(b) None of the Company Plans that is an "employee pension
plan" (as defined in Section 3(2) of ERISA) (i) is subject to Title IV of ERISA
or Section 412 of the Code (the "TITLE IV PLANS"). (ii) is a "multiemployer
plan" (as defined in Section 3(37) of ERISA (a "MULTIEMPLOYER PLAN"), or (iii)
is or has been subject to Sections 4063 or 4064 of ERISA, and for the six (6)
years immediately preceding the Closing Date, neither the Company nor its ERISA
Affiliates has maintained, been obligated to contribute to or otherwise incurred
an obligation with respect to a Title IV Plan or a Multiemployer Plan.
(c) The Company Plans have been operated, administered and
maintained in all material respects in accordance with their terms and
applicable Laws. Each Company Plan intended to be qualified under Section 401(a)
of the Code and any related trust thereunder intended to be exempt from Federal
income taxation under Section 501(a) of the Code has either (i) applied for a
favorable determination letter, prior to the expiration of the requisite
remedial amendment period under applicable Treasury Regulations or IRS
pronouncements, but has not yet received a response; (ii) obtained at least one
favorable determination, notification, advisory and/or opinion letter, as
applicable, from the IRS on which the Company is entitled to rely, as to its
qualified status; or (iii) still has a remaining period of time to apply for
such a determination letter from the IRS and to make any amendments necessary to
obtain a favorable determination, and nothing has occurred with respect to the
operation of such Company Plan that would reasonably be expected to cause the
revocation of such most recent determination (if any), or the imposition of any
material liability, penalty or tax under ERISA or the Code.
58
(d) Except as otherwise provided in Schedule 5.16(d), none of
the Company Plans provides for post-employment life or health insurance,
benefits or coverage for any participant or any beneficiary of a participant,
except as may be required under Section 4980B of the Code or Part 6 of Subtitle
B of Title I of ERISA or under any similar state law (collectively, "COBRA"),
and except at the expense of the participant or the participant's beneficiary.
Each of the Company and any ERISA Affiliate which maintains a "group health
plan" within the meaning of Section 5000(b)(1) of the Code has complied with the
notice and continuation requirements of COBRA.
(e) Except as set forth in Schedule 5.16(e), as contemplated
by this Agreement or the transactions contemplated hereby, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will or may reasonably be expected to (i) result in any
payment becoming due to any Employee, (ii) increase any benefits otherwise
payable under any Company Plan or Title IV Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits under any
Company Plan or Title IV Plan.
(f) (i) Except as set forth in Schedule 5.16(f)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not constitute an event under any Company Plan,
employee agreement, trust or loan that will or may reasonably be expected to
result in any payment (whether of severance pay or otherwise and including
forgiveness of indebtedness), acceleration, vesting, distribution, increase in
benefits under any Company Plan or employee arrangement or compensation to any
Employee, or obligation to fund compensation or benefits with respect to any
Employee. (ii) Except as set forth in Schedule 5.16(f)(ii), no payment or
benefit which will or may be made under any Company Plan or Company employee
agreement in connection with the consummation of the transactions contemplated
hereby by the Company or Parent or any of their respective affiliates with
respect to any Employee will be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code.
(g) Except as otherwise set forth in Schedule 5.16(g), with
respect to any employee benefit plans, programs, agreements, policies, schemes
arrangement or payroll practices that are maintained for Employees outside of
the United States (each a "FOREIGN PLAN"): (i) each Foreign Plan and the manner
in which it has been administered satisfies all applicable Laws, in all material
respects, (ii) all contributions to each Foreign Plan required through the
Closing have been and will be made (or accrued) by the Company, (iii) each
Foreign Plan is either fully funded (or fully insured, as applicable) based upon
generally accepted local actuarial and accounting practices and procedures or
adequate accruals for each Foreign Plan have been made in the Company's
financial statements, (iv) there are no pending investigations, to the Knowledge
of the Company, by any Governmental Body involving any Foreign Plan nor any
pending claims (except for claims for benefits payable in the normal operation
of the Foreign Plans), suits or proceedings against any Foreign Plan or
asserting any rights or claims to benefits under any Foreign Plan; and (v) the
consummation of the transactions contemplated by this Agreement will not by
itself create or otherwise result in any material liability with respect to any
59
Foreign Plan. Without derogating from the above, the Company's obligations to
provide severance pay to its employees are fully funded or have been properly
provided for in the Company's financial statements. All other liabilities of the
Company relating to its employees (excluding liabilities for illness pay) were
properly accrued in the Company's financial statements.
5.17 Labor and Employment Matters.
(a) Neither the Company nor any of its Subsidiaries are a
party to or bound by any collective bargaining contract, collective labor
agreement or other contract or arrangement with a labor union, trade union or
other organization involving any of its employees, or, except for Company Plans
listed in Schedule 5.16(a), is otherwise required (under any legal requirement,
under any contract or otherwise) to provide benefits or working conditions
beyond the minimum benefits and working conditions required by law to be
provided pursuant to rules and regulations of any jurisdiction in which the
Company and its subsidiaries have employees, and the Company has not been
officially informed in writing that any petition has been filed or proceeding
instituted by an employee or group of employees of the Company, or any of its
Subsidiaries, with any Governmental Body seeking recognition of a bargaining
representative. Except as set forth in Schedule 5.16(f)(i), (f)(ii) or (g),
neither the Company nor any of its Subsidiaries have or are subject to, and no
employee of the Company or any of its Subsidiaries benefits from, any extension
order or any contract or arrangement with respect to termination of employment.
All of the employees of the Company and its subsidiaries are "at will" employees
subject to the termination notice provisions included in employment agreements
or applicable Law.
(b) (A) To the Company's Knowledge, there is no labor strike,
dispute, slow down or stoppage pending or threatened against the Company or any
of its Subsidiaries; (B) neither the Company nor any of its subsidiaries has
received in the last twenty-four (24) months any written demand letters, civil
rights charges, suits or drafts of suits with respect to claims made by or on
behalf of any of their respective employees which would be reasonably expected
to have a Company Material Adverse Effect; and (C) to the Company's Knowledge,
there are no pending claims, civil rights charges, suits or drafts of suits with
respect to claims made by or on behalf of its employees.
(c) All amounts that the Company or any Company Subsidiary is
legally or contractually required either (A) to deduct from its employees'
salaries or to transfer to such employees' pension or provident, life insurance,
incapacity insurance, continuing education fund or other similar fund as
required by any Company Plan, or (B) to withhold from their employees' salaries
and pay to any Governmental Body as required by applicable Laws have, in each
case, been duly deducted, transferred, withheld and paid, and neither the
Company nor any of its Subsidiaries has any outstanding obligation to make any
such deduction, transfer, withholding or payment.
(d) The Company is not liable for any material payment to any
trust or other fund or to any Governmental Body with respect to unemployment
compensation benefits, social security or other benefits or obligations for
60
Employees (other than routine payments to be made in the Ordinary Course of
Business).
(e) The Company and its Subsidiaries are in compliance with
all Laws and regulations pertaining to the payment of wages and overtime and
with all Laws and Orders relating to the employment of labor, except for such
non-compliance as will not be material to the Company and the Company
Subsidiaries taken as a whole.
(f) Schedule 5.17(f)(i) contains a true and complete list as
of the date hereof of the employees employed by the Company and its
Subsidiaries, indicating the title of any agreements concerning such employees
and a listing of the rate of all current salary and bonuses payable by the
Company or its Subsidiaries to each such employee. The Company has made
available to Parent a copy of each employment, consulting or independent
contractor agreement, confidentiality/assignment of inventions agreement and/or
non-competition agreement entered into with an employee or service provider of
the Company or its Subsidiaries. Except as set forth on Schedule 5.17(f)(ii),
each such consulting agreement entered into by the Company is substantially in
the standard form of consulting agreement previously provided to Parent.
5.18 Litigation. Except as set forth in Schedule 5.18, there
is no Legal Proceeding pending or, to the Knowledge of the Company, threatened
against the Company or any of the Company Subsidiaries (or pending or, to the
Knowledge of the Company, threatened, against any of the officers, directors or
employees of the Company or any of the Company Subsidiaries with respect to
their business activities on behalf of the Company), or to which the Company or
any of the Company Subsidiaries is otherwise a party before any Governmental
Body, other than any Legal Proceeding which is not reasonably expected be
material to the Company and the Company Subsidiaries taken as a whole. Neither
the Company nor any Company Subsidiary is subject to any Order (other than
Orders of general applicability to the Company's industry or business). Neither
the Company nor any Company Subsidiary is engaged in any legal action to recover
monies due it or for damages sustained by it.
5.19 Related Party Transactions. No officer or director of the
Company or any of the Company Subsidiaries (i) owns any direct or indirect
interest of any kind in, or controls or is a director, officer, employee or
partner of, or consultant to, or lender to or borrower from or has the right to
participate in the profits of, any Person which is (A) a competitor, supplier,
customer, landlord, tenant, creditor or debtor of the Company or any of the
Company Subsidiaries, (B) engaged in a business substantially similar to the
business of the Company or any of the Company Subsidiaries, or (C) a participant
in any transaction to which the Company or any of the Company Subsidiaries is a
party or (ii) is a party to any Contract with the Company or any of the Company
Subsidiaries; provided, however, that the foregoing shall exclude the ownership
of not more than two percent (2%) of the outstanding equity securities of a
corporation whose stock is listed on a stock exchange.
61
5.20 Banks. Schedule 5.20 contains a complete and correct list
of the names and locations of all banks in which Company or any Company
Subsidiary has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto.
5.21 State Take Over Statutes. Neither Section 203 of the DGCL
nor any other state takeover or similar statute or regulation is applicable to
this Agreement, the Merger or the other transactions contemplated by this
Agreement.
5.22 Financial Advisors. Except as set forth on Schedule 5.22,
no Person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Company in connection with the transactions contemplated by this
Agreement and no Person is entitled to any fee or commission or like payment in
respect thereof. Schedule 5.22 sets forth all Transaction Expenses for which the
Company is liable and includes the Company's good faith estimate of all
Transaction Expenses it expects to incur from the date of this Agreement through
the Closing Date.
5.23 Environmental Matters.
(a) Except as set forth on Schedule 5.23 and except for those
matters that are not, and would not reasonably be expected to be material to the
Company and the Company Subsidiaries, taken as a whole, (i) each of the Company
and the Company Subsidiaries is in compliance with all applicable laws relating
to the environment or the protection thereof ("ENVIRONMENTAL LAWS"), (ii) there
is no investigation, suit, claim, action or proceeding relating to or arising
under Environmental Laws that is pending or, to the Knowledge of the Company,
threatened against the Company or any of the Company Subsidiaries or any real
property owned, operated or leased by the Company or any of the Company
Subsidiaries, and (iii) neither the Company nor any of the Company Subsidiaries
has received any written notice of or entered into any obligation, liability,
order, settlement, judgment, injunction or decree involving uncompleted,
outstanding or unresolved requirements relating to or arising under
Environmental Laws.
(b) Without limiting the generality of Section 5.23(a), except
as would not reasonably be expected to be material to the Company and the
Company Subsidiaries, the Company and the Company Subsidiaries are in and have
been in compliance with the laws and regulations in each European Union ("EU")
member state implementing EU Directive 2002/95/EC on the Restriction of Use of
Hazardous Substances in Electrical and Electronic Equipment ("ROHS") and EU
Directive 2002/96/EC on Waste from Electrical and Electronic Equipment ("WEEE")
and have developed and implemented programs to maintain compliance.
5.24 Receivables. All Receivables reflected on the Balance
Sheet (other than those identified as inter-company receivables) (i) arose from
the sale of services or products to Persons who are not Affiliates of the
Company or any Company Subsidiary in the Ordinary Course of Business and (ii)
are to the Knowledge of the Company collectible, subject to any reserves
therefor set forth on the Balance Sheet. Except as set forth on Schedule 5.24,
62
neither the Company nor any Company Subsidiary has received written notice of
any claims of set-off or other defenses or counterclaims to any such Receivable,
other than normal cash discounts accrued in the Ordinary Course of Business.
Except as set forth on Schedule 5.24, neither the Company nor any Company
Subsidiary has any lien subsisting over any part of its present or future
revenues.
5.25 Outstanding Obligations. The aggregate amount of all
obligations due by the Company to Venture Lending & Leasing III, Inc. and
Solectron Corporation and their affiliates does not exceed $23,000,000.
5.26 UTStarcom Agreement. The Second Amended and Restated
License Agreement between the Company and UTStarcom, Inc., dated May 18, 2006,
provides for UTStarcom's right to make, have made, sell and distribute, among
other things, the Company's V2 and V4 Node B base stations and end-user devices
based on the Company's SOC1 and SOC2 ASICs and the Company's SOC2.1 Chipset.
Future versions of the Company's Node B base station (such as the Company's V5
base station) and the Company's ASIC and chipset (such as the Company's SOC3
ASIC) are not covered by such License Agreement.
5.27 No Other Representations, Etc. Except for the
representations and warranties contained in this Article V (as modified by the
Company Disclosure Letter), neither the Company nor any other Person makes any
other express or implied representation or warranty with respect to the Company,
the Company Subsidiaries or the transactions contemplated by this Agreement, and
the Company disclaims any other representations or warranties, whether made by
the Company or any of its Affiliates, officers, directors, employees, agents or
representatives. Except for the representations and warranties contained in this
Article V (as modified by the Company Disclosure Letter), the Company hereby
disclaims all liability and responsibility for any representation, warranty,
projection, forecast, statement, or information made, communicated, or furnished
(orally or in writing) to Parent, Merger Sub or any of their Affiliates or
representatives (including any opinion, information, projection, or advice that
may have been or may be provided to Parent by any director, officer, employee,
agent, consultant, or representative of the Company or any of its Affiliates).
The disclosure of any matter or item in the Company Disclosure Letter shall not
be deemed to constitute an acknowledgement that any such matter is required to
be disclosed.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company on
the date hereof, that subject to such exceptions and disclosures as set forth in
the disclosure letter supplied by Parent to the Company dated as of the date
hereof (the "PARENT DISCLOSURE LETTER") (it being understood and agreed that the
disclosure set forth in a specific section or subsection of the Parent
Disclosure Letter shall qualify the representations and warranties set forth in
the corresponding section and subsection of this Article VI (whether or not a
63
specific cross-reference is included therein) if and to the extent that it is
reasonably apparent on the face of such disclosure that such disclosure applies
to such other section or subsection):
6.1 Organization and Good Standing. Each of Parent and Merger
Sub is a corporation or limited liability company, duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite entity power and authority to own, lease and operate
properties and carry on its business as now conducted. Parent is duly qualified
or authorized to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the conduct of its business or the
ownership of its properties requires such qualification or authorization, except
where the failure to be so qualified, authorized or in good standing has not had
and would not reasonably be expected to have a Material Adverse Effect with
respect to Parent (a "PARENT MATERIAL ADVERSE EFFECT").
6.2 Authorization of Agreement. Each of Parent and Merger Sub
has full corporate or limited liability company power and authority to execute
and deliver this Agreement and each other agreement, document, instrument or
certificate contemplated by this Agreement or to be executed by Parent and/or
Merger Sub in connection with the consummation of the transactions contemplated
hereby and thereby (the "PARENT DOCUMENTS"), and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by each
of Parent and Merger Sub of this Agreement and each of the Parent Documents have
been duly authorized by all necessary corporate or limited liability company
action on behalf of Parent and Merger Sub and no other corporate or limited
liability company action on the part of Parent or Merger Sub is necessary to
authorize the execution, delivery and performance by Parent and Merger Sub of
this Agreement and the consummation by them of the transactions contemplated
hereby, including the Merger. This Agreement has been, and each Parent Document
will be at or prior to the Closing, duly executed and delivered by each of
Parent and Merger Sub and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each Parent Document when so executed and delivered will constitute, the
legal, valid and binding obligation of each of Parent and Merger Sub,
enforceable against it in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
6.3 Conflicts; Consents of Third Parties.
(a) Neither of the execution, delivery and performance by
Parent and Merger Sub of this Agreement and of the Parent Documents, the
consummation of the transactions contemplated hereby or thereby, including the
Merger, by Parent and Merger Sub, nor the compliance by Parent and Merger Sub
with any of the provisions hereof or thereof will (i) conflict with, or result
in the breach of, any provision of the certificate of organization, operating
64
agreement, certificate of incorporation or by-laws of Parent or Merger Sub, (ii)
conflict with, violate, result in the breach of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other obligation to
which Parent is a party or by which Parent or its properties or assets are bound
or (iii) violate any Law or Order of any Governmental Body by which Parent is
bound, except, in the case of clauses (ii) and (iii), for such violations,
breaches or defaults as would not, individually or in the aggregate, be material
to Parent and its Subsidiaries, taken as a whole.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body, including any consent, waiver or approval of any Parent
stockholder, is required on the part of Parent and Merger Sub in connection with
the execution and delivery of this Agreement or the Parent Documents or the
compliance by Parent and Merger Sub with any of the provisions hereof or
thereof, except for (i) those consents and filings set forth on Schedule 6.3(b),
(ii) any notices required to be filed under the HSR Act, (iii) the filings
required under, and in compliance with, other applicable requirements of Foreign
Antitrust Laws, (iv) the filing of the Certificate of Merger with the Delaware
Secretary of State pursuant to the DGCL, (v) in connection with official notice
of authorization for listing the Parent Common Stock to be issued at the
Effective Time on the NASDAQ Global Market and (vi) any consent, waiver,
approval, Order, Permit, authorization, declaration, filing or notification the
failure of which to be obtained or made, individually or in the aggregate, would
not, individually or in the aggregate, be material to Parent and Parent
Subsidiaries, taken as a whole.
6.4 Compliance with Laws. Parent and Merger Sub are, and have
been at all times since April 13, 2005, in compliance with all applicable laws.
There is no term or provision of any Lien or Order binding upon the Company that
has had or would reasonably be expected to have a Parent Material Adverse
Effect.
6.5 Charter Documents; Capitalization.
(a) Parent has delivered to the Company true, correct and
complete copies of its certificate of incorporation (certified by the Delaware
Secretary of State) and its bylaws (certified by the secretary, assistant
secretary or other appropriate officer of Parent), each of Parent's certificate
of incorporation and bylaws as currently in effect.
(b) The authorized capital stock of Parent consists of:
(i) 400,000,000 shares of Parent Common Stock and
(ii) 25,000,000 shares of Parent Preferred Stock, par value
$0.001 per share. As of March 29, 2007, (i) 84,470,085 shares
of Parent Common Stock were issued and outstanding and (ii)
355,000 shares of Parent Preferred Stock were issued and
outstanding. As of such date, 19,777,348 shares of Parent
Common Stock were reserved for issuance, of which 17,183,743
were reserved for issuance upon the exercise of granted and
outstanding options under the NextWave Wireless Inc. 2005
Stock Incentive Plan, the NextWave 2007 New Employee Stock
65
Incentive Plan, the PacketVideo Corporation 2005 Equity
Incentive Plan, the Cygnus Communications, Inc. 2004 Stock
Option Plan and the Go Networks Inc. Stock Bonus Plan (the
"PARENT STOCK PLANS") and upon exercise of the Parent's
outstanding warrants and 2,593,605 were available for future
option grants.
All shares of Parent Common Stock deliverable pursuant to this
Agreement have been duly authorized and, when issued as contemplated by this
Agreement, will be validly issued, fully paid, nonassessable and free of
preemptive rights, and issued in compliance with applicable federal and state
securities laws.
(c) Except as disclosed in its filings with the Securities and
Exchange Commission (the "SEC") pursuant to Sections 13 and 15 of the Exchange
Act, there is no existing option, warrant, call, right or Contract of any
character to which Parent is a party requiring, and there are no securities of
Parent outstanding which upon conversion or exchange would require, the
issuance, sale or transfer of any additional shares of capital stock or other
equity securities of Parent or other securities convertible into, exchangeable
for or evidencing the right to subscribe for or purchase shares of capital stock
or other equity securities of Parent. Parent is not a party to any voting trust
or other Contract with respect to the voting, redemption, registration under the
Securities Act, sale, transfer or other disposition of the capital stock or
other equity securities of Parent.
6.6 Merger Sub. Merger Sub is a direct, wholly-owned entity of
Parent, which the parties agree should be disregarded as a separate entity for
federal income tax purposes (and the Parent will not file an election to treat
the Merger Sub as a corporation for federal income tax purposes), was formed
solely for the purpose of engaging in the transaction contemplated by this
Agreement, has engaged in no other business activities, and has no material
assets or liabilities and has conducted its operations only as expressly
contemplated hereby. Parent owns beneficially and of record all outstanding
capital and other equity interests of Merger Sub free and clear of any Liens and
no other Person holds any capital and other equity interests of Merger Sub, nor
has any rights to acquire any interest in Merger Sub.
6.7 Financial Statements. At the time they were filed with the
SEC, the consolidated financial statements of Parent included in Parent's Annual
Report on Form 10-K for the year ended December 31, 2006 complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as then in effect, had
been prepared in accordance with GAAP, applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented the consolidated financial position of Parent and its Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. Parent has no Indebtedness or Liabilities of
any kind required to be reflected in or reserved against in balance sheets
prepared in accordance with GAAP other than those (i) fully reflected in or
reserved against in the Parent Balance Sheet or (ii) incurred in the ordinary
course of business since the Parent Balance Sheet Date. There are no known
66
Liabilities not reflected on the Parent Balance Sheet which would reasonably be
expected to be material to the Parent and Parent Subsidiaries, taken as a whole.
6.8 Litigation. There are no Legal Proceedings pending or, to
the Knowledge of Parent, threatened, against Parent or any Parent Subsidiary
that are reasonably likely to prohibit or restrain the ability of Parent and
Merger Sub to enter into this Agreement or consummate the transactions
contemplated hereby or that would reasonably be expected to be material to the
Parent and Parent Subsidiaries taken as a whole.
6.9 Financial Advisors. No Person has acted, directly or
indirectly, as a broker, finder or financial advisor for either Parent or Merger
Sub in connection with the transactions contemplated by this Agreement and no
Person is entitled to any fee or commission or like payment in respect thereof.
6.10 SEC Filings. Parent, or its predecessor, NextWave
Wireless, LLC, has filed with the SEC all forms, reports and documents required
to be filed by Parent since April 13, 2005 (collectively, the "PARENT SEC
Reports"). As of their respective dates, the Parent SEC Reports (including any
Parent SEC Reports filed after the date of this Agreement until the Closing) (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Reports and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent's Subsidiaries is required to file any forms, reports
or other documents with the SEC. The audited balance sheet of Parent contained
in Parent SEC Reports as of December 31, 2006 is hereinafter referred to as the
"PARENT BALANCE SHEET."
6.11 S-3 Eligibility. Parent will be eligible on June 30, 2007
to file registration statements on Form S-3, including but not limited to
satisfying the "Registrant Requirements" of General Instruction I.A. to Form S-3
as such Form S-3 is in effect as of the date of this Agreement.
6.12 Absence of Certain Changes or Events. Except as expressly
contemplated by this Agreement, since the date of the Parent Balance Sheet
through the date of this Agreement, there has not been (i) any Parent Material
Adverse Effect, (ii) any material change by Parent in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP or
Regulation S X under the Exchange Act, or (iii) any material revaluation by
Parent of any of its assets, including writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course of business.
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6.13 No Other Representations, Etc. Except for the
representations and warranties contained in this Article VI (as modified by the
Parent Disclosure Letter), neither the Parent, Merger Sub nor any other Person
makes any other express or implied representation or warranty with respect to
Parent, Merger Sub, the Subsidiaries of Parent or the transactions contemplated
by this Agreement, and Parent and Merger Sub disclaims any other representations
or warranties, whether made by Parent or any of its Affiliates, officers,
directors, employees, agents or representatives. Except for the representations
and warranties contained in this Article VI (as modified by the Parent
Disclosure Letter), Parent hereby disclaims all liability and responsibility for
any representation, warranty, projection, forecast, statement, or information
made, communicated, or furnished (orally or in writing) to the Company or any of
its Affiliates or representatives (including any opinion, information,
projection, or advice that may have been or may be provided to the Company by
any director, officer, employee, agent, consultant, or representative of Parent
or any of its Affiliates). The disclosure of any matter or item in the Parent
Disclosure Letter shall not be deemed to constitute an acknowledgement that any
such matter is required to be disclosed.
ARTICLE VII
COVENANTS
7.1 Access to Information.
(a) The Company agrees that, after the date hereof and prior
to the Effective Time, Parent shall be entitled, through its officers, employees
and representatives (including its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of the Company and
the Company Subsidiaries and such examination of the books, records and
financial condition of the Company and the Company Subsidiaries as it reasonably
requests and to make extracts and copies of such books and records. Any such
investigation and examination shall be conducted during regular business hours
and under reasonable circumstances, and the Company shall reasonably cooperate,
and shall cause the Company and the Company Subsidiaries to reasonably
cooperate, with all such reasonable requests. No investigation by Parent prior
to or after the date of this Agreement shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Company contained in
this Agreement or the other Company Documents. In order that Parent may have
full opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may reasonably request of the affairs of the
Company and the Company Subsidiaries, the Company shall use commercially
reasonable efforts to cause the officers, employees, consultants, agents,
accountants, attorneys and other representatives of the Company and the Company
Subsidiaries to cooperate fully with such representatives in connection with
such review and examination. The Company consents to Parent contacting and/or
meeting with the customers listed on Schedule 7.1 in connection with the
foregoing and to discuss the Company's standing, performance and condition and
issues related to the consummation of the transactions contemplated by this
Agreement; provided that the Company is given reasonable advance notice and an
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opportunity to participate in any such contact or meeting and that the parties
cooperate as to how the contact or meeting should be conducted. Notwithstanding
any other provision hereof, neither the Company nor any of the Company
Subsidiaries shall be required to provide access to or to disclose information
in such a manner as would (A) jeopardize the attorney-client privilege of the
institution in possession or control of such information or (B) contravene any
Law or Order.
7.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise contemplated by this Agreement or
permitted with the prior written consent of Parent (which consent is sufficient
if evidenced by an email from Parent's chief executive officer, chief financial
officer or chief legal counsel or otherwise required by Law or Order, during the
period from the date of this Agreement to the Effective Time, the Company shall,
and shall cause the Company Subsidiaries to:
(i) conduct the respective businesses of the Company
and the Company Subsidiaries only in the Ordinary Course of
Business;
(ii) use its commercially reasonable efforts to (A)
preserve its present business operations, organization and
goodwill of the Company and the Company Subsidiaries and (B)
preserve its present relationship with Persons having material
business dealings with the Company and the Company
Subsidiaries;
(iii) use its commercially reasonable efforts to
maintain (A) all material assets and properties of the Company
and the Company Subsidiaries in their current condition,
ordinary wear and tear excepted and (B) insurance upon all of
the properties and assets of the Company and the Company
Subsidiaries in such amounts and of such kinds comparable to
that in effect on the date of this Agreement;
(iv) give all required notices of the transactions
contemplated by this Agreement and use its commercially
reasonable efforts to obtain all third party consents material
to the Company's business that are necessary or advisable in
order to consummate the transactions contemplated by this
Agreement;
(v) not take any action which would reasonably be
expected to adversely affect the ability of the parties to
consummate the transactions contemplated by this Agreement;
(vi) at the Parent's request, take reasonable steps
to terminate any Company Plan that is intended to be qualified
under Section 401(a) and (k) of the Code, such plan
termination to become effective before the Effective Time; and
(vii) to provide Parent with all Tax Returns of the
Company and the Company Subsidiaries at least twenty (20) days
prior to their due date for Parent's review and consent, which
consent shall not be unreasonably withheld.
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(b) Except as otherwise expressly provided in this Agreement
or permitted with the prior written consent of Parent (which consent shall not
be unreasonably withheld or delayed, and is sufficient if evidenced by an email
from Parent's chief executive officer, chief financial officer or chief legal
counsel) or otherwise required by Law or Order, during the period from the date
of this Agreement to the Effective Time, the Company shall not and shall not
permit the Company Subsidiaries to:
(i) except to the extent required by the Company's
currently effective certificate of incorporation, declare, set
aside, make or pay any dividend or other distribution (whether
in cash, stock or property) in respect of the capital stock of
the Company or repurchase, redeem or otherwise acquire any
outstanding shares of the capital stock or other securities
of, or other ownership interests in, the Company or any of the
Company Subsidiaries, except in connection with the exercise
of repurchase rights or rights of first refusal in favor of
the Company with respect to shares of Common Stock;
(ii) transfer, issue, sell or dispose of any shares
of capital stock or other securities of the Company or any of
the Company Subsidiaries or grant options, warrants, calls or
other rights to purchase or otherwise acquire shares of the
capital stock or other securities of the Company or any of the
Company Subsidiaries, except pursuant to obligations existing
on the date of this Agreement and previously disclosed to
Parent provided, however, that the Company shall be permitted
to issue for cash, equity securities of the Company or
convertible debt instruments that convert automatically into
equity of the Company at the Closing or warrants to purchase
equity of the Company that terminate upon the Closing, if and
only if (A) the investors acquiring such securities consent to
the terms of the Merger and do not have any right to prohibit
or delay consummation of the Merger, (B) the terms of such
financing are commercially reasonable, and the terms and all
documents relating thereto are provided to Parent sufficiently
in advance of consummating such financing, (C) Parent shall
have declined to provide such financing and (D) the aggregate
amount of equity and debt raised does not exceed $3,500,000;
provided, however, that if the Closing has not occurred on or
prior to May 31, 2007, this amount shall be increased to
$7,000,000.
(iii) effect any recapitalization, reclassification,
stock split or like change in the capitalization of the
Company or any of the Company Subsidiaries;
(iv) (A) increase the annual level of compensation of
any employee of the Company or any of the Company
Subsidiaries, (B) increase the annual level of compensation
payable or to become payable by the Company or any of the
Company Subsidiaries to any of their respective executive
officers, (C) grant any unusual or extraordinary bonus,
benefit or other direct or indirect compensation to any
employee, director or consultant, (D) increase the coverage or
benefits available under any Company Plan (or create any new
similar plan) or otherwise modify or amend or terminate any
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such plan or arrangement or (E) enter into any collective
bargaining, employment, deferred compensation, severance,
consulting, non-competition or similar agreement (or amend any
such agreement) to which the Company or any of the Company
Subsidiaries is a party or involving a current or former
director, officer or employee of the Company or any of the
Company Subsidiaries;
(v) incur or assume any Indebtedness (other than
existing Indebtedness or as provided in clause (ii) above);
(vi) except for Permitted Exceptions, subject to any
Lien or otherwise encumber or permit, allow or suffer to be
encumbered, any of the properties or assets (whether tangible
or intangible), or any shares of capital stock of the Company
or any of the Company Subsidiaries;
(vii) acquire any material properties or assets or
sell, assign, license, transfer, convey, lease or otherwise
dispose of any of the material properties or assets of the
Company and the Company Subsidiaries, including Intellectual
Property;
(viii) enter into or agree to enter into any merger
or consolidation with, any corporation or other entity, or
invest in, make a loan, material advance or capital
contribution to, or otherwise acquire the securities of any
other Person, except in connection with the exercise of
repurchase rights or rights of first refusal in favor of the
Company with respect to shares of Common Stock;
(ix) cancel or compromise any material debt or claim
or waive or release any material right of the Company or any
of the Company Subsidiaries except in the Ordinary Course of
Business and except for the extension of the maturity date
under the Convertible Promissory Notes issued by the Company
in September and October 2006;
(x) enter into any commitment for capital
expenditures of the Company and its Subsidiaries in excess of
$50,000 for any individual commitment and $100,000 for all
commitments in the aggregate;
(xi) enter into, modify or terminate any labor or
collective bargaining agreement of the Company or any of its
Subsidiaries or, through negotiation or otherwise, make any
commitment or incur any liability to any labor organization
with respect to the Company or any of its Subsidiaries;
(xii) permit the Company or any of the Company
Subsidiaries to enter into any transaction or to enter into,
modify or renew any Contract which would be a Material
Contract if entered into prior to the date hereof or that
would reasonably be expected to have a Material Adverse
Effect;
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(xiii) except for transfers of cash pursuant to
normal cash management practices in the Ordinary Course of
Business, permit the Company or any of the Company
Subsidiaries to make any investments in or loans to, or pay
any fees or expenses to (other than pursuant to existing
Contracts or policies), or enter into or materially modify any
Contract with any Affiliate of the Company or any of the
Company Subsidiaries, or any director, officer or employee of
the Company or any of the Company Subsidiaries (other than
Contracts with new employees in the Ordinary Course of
Business);
(xiv) make or revoke any material election in respect
of Taxes, change any accounting method in respect of material
Taxes, prepare any Tax Return in a manner which is not
consistent with past practice with respect to the treatment of
items on such Tax Return, file any amendment to a Tax Return
that will or may more than immaterially increase the liability
of the Company or any Company Subsidiary after the Closing,
incur any liability for Taxes other than in the Ordinary
Course of Business, settle any material claim or assessment in
respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any material claim or
assessment in respect of Taxes or surrender any right to claim
a refund of Taxes or obtain or enter into any Tax ruling or
agreement with any Taxing Authority;
(xv) enter into any Contract, understanding or
commitment that restrains, restricts, limits or impedes the
ability of the Company or any Company Subsidiary to compete
with or conduct any business or line of business in any
geographic area or enter into, modify, amend or terminate any
Contract which if so entered into, modified, amended or
terminated would be reasonably be expected to have a Material
Adverse Effect;
(xvi) terminate, amend, restate, supplement or waive
any rights under any Material Contract or Permit that would
reasonably be expected to have a Material Adverse Effect; and
(xvii) agree to do anything prohibited by this
Section 7.2.
7.3 Notice of Changes. The Company and Parent shall promptly
advise the other party orally and in writing of (i) any representation or
warranty made by it (and, in the case of Parent, made by Merger Sub) contained
in this Agreement becoming untrue or inaccurate in any material respect if such
would give rise to a failure of a condition set forth in Section 8.1(a) or
Section 8.1(b) or (ii) the failure of it (and, in the case of Parent, of Merger
Sub) to comply with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement.
7.4 Fees and Expenses. Except as provided below, all fees and
expenses incurred in connection with this Agreement, the Merger and the
transactions contemplated herein, including the Transaction Expenses, shall be
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paid by the party incurring such fees or expenses. Notwithstanding the
foregoing, all Transaction Expenses (outstanding as of the Closing) up to
$3,000,000 shall be paid by the Company, and all Transaction Expenses
(outstanding as of the Closing) in excess of $3,000,000 shall be paid as
follows: 50% of all such Transaction Expenses shall be paid by the Company, and
50% shall be deducted from the Initial Closing Consideration. The Company shall
use its commercially reasonable efforts to deliver to Parent, no later than
three (3) Business Days prior to the Closing Date, pay-off letters in respect of
the Transaction Expenses from any and all third-party service providers to whom
payments are required to be made by the Company and the Company Subsidiaries, as
the case may be, in connection with the transactions contemplated by this
Agreement and from each holder of the Convertible Notes. The pay-off letters
shall provide that the amounts set forth therein represent payment in full for
all fees and expenses payable by the Company and the Company Subsidiaries with
respect to all Transaction Expenses. At the Effective Time, Parent shall
disburse to the Persons indicated on the Allocations Spreadsheet amounts equal
to the Transaction Expenses.
7.5 Commercially Reasonable Efforts; Regulatory Approvals.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
reasonably necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
(b) In connection with and without limiting Section 7.5(a),
each of the Company and its Board of Directors and Parent and its Board of
Directors shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement and (ii) if any state takeover statute or similar statute becomes
applicable to this Agreement, the Merger or any of the other transactions
contemplated by this Agreement, take all action necessary to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
7.6 Transaction Related Litigation. The Company shall give
Parent the opportunity to participate in the defense or settlement of any
stockholder litigation or other third-party litigation against the Company
and/or its directors relating to the transactions contemplated by this
Agreement, and no such settlement shall be agreed to without Parent's prior
written consent, such consent not to be unreasonably withheld or delayed.
7.7 No Solicitation by the Company; Etc.
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(a) The Company shall, and the Company shall cause the Company
Subsidiaries to, and each shall use its reasonable best efforts to cause its
respective directors, officers, employees, investment bankers, financial
advisors, attorneys, accountants, agents and other representatives
(collectively, "REPRESENTATIVES") to, immediately cease and cause to be
terminated any discussions or negotiations with any Person conducted heretofore
with respect to a Takeover Proposal, and use reasonable best efforts to obtain
the return from all such Persons or cause the destruction of all copies of
confidential information previously provided to such parties by the Company, the
Company Subsidiaries or Representatives. The Company shall not, and shall not
permit its Representatives or the Company Subsidiaries to directly or indirectly
(i) solicit, initiate, knowingly facilitate or encourage (including by way of
furnishing information) any inquiries or proposals that constitute, or may
reasonably be expected to lead to, any Takeover Proposal, (ii) other than
informing Persons of the existence of the provisions contained in this Section
7.7, participate in any discussions or negotiations with any third party
regarding any Takeover Proposal or (iii) enter into any agreement related to any
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the foregoing restrictions by the Company Subsidiaries or
Representatives shall be deemed to be a breach of this Section 7.7 by the
Company.
(b) In addition to the other obligations of the Company set
forth in this Section 7.7, the Company shall promptly advise Parent, in writing,
and in no event later than 24 hours after receipt, if any proposal, offer,
inquiry or other contact is received by, any information is requested from, or
any discussions or negotiations are sought to be initiated or continued with,
the Company in respect of any Takeover Proposal, and shall, in any such notice
to Parent, indicate the identity of the Person making such proposal, offer,
inquiry or other contact and the terms and conditions of any proposals or offers
or the nature of any inquiries or contacts (and shall include with such notice
copies of any written materials received from or on behalf of such Person
relating to such proposal, offer, inquiry or request), and thereafter shall
promptly keep Parent informed of all material developments affecting the status
and terms of any such proposals, offers, inquiries or requests (and the Company
shall provide Parent with copies of any additional written materials received
that relate to such proposals, offers, inquiries or requests) and of the status
of any such discussions or negotiations.
7.8 Indemnification; Insurance.
(a) The right to indemnification conferred upon the officers
and directors of the Company and the Company Subsidiaries by such company's
certificate of incorporation or other organizational documents as in effect as
of the date hereof shall include to the fullest extent not prohibited by Law the
right to be paid by the Company for any expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that if the
DGCL or other applicable Law requires, the payment of such expenses incurred by
a director or officer in his or her capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding shall be made
74
only upon delivery to the Company of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
the certificate of incorporation or other organizational document of Company or
the Company Subsidiary.
(b) Parent will arrange and pay for a six (6) year run-off
director and officer liability insurance policy, effective as of the Closing,
for the benefit of the directors and officers of the Company prior to the
Closing Date. The run-off policy will provide continuing liability coverage,
equivalent as to limits, deductibles and other features to the current director
and officer liability insurance policy, for claims made against the directors
and officers of the Company prior to the Closing Date during the term of the
policy following the Closing Date for actions taken by or omitted to be taken by
them prior to the Closing Date.
(c) Notwithstanding Section 7.8(b), all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors or officers of the Company as provided in the Company's certificate of
incorporation, the Company's bylaws or any written indemnification agreement
between such directors or officers and the Company (in each case, as in effect
on the date hereof), unless otherwise released, shall be assumed by the
Surviving Corporation (and its successors and assigns) in the Merger, without
further action, as of the Effective Time and shall survive the Merger and shall,
following the Closing, continue in full force and effect in accordance with
their terms and shall not be amended, repealed or otherwise modified for a
period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder of indemnified parties, unless such
modification is required by Law.
(d) If the Surviving Corporation or any of its successors or
assigns shall (i) consolidate with or merge into any other Person and shall not
be the continuing or surviving Person of such consolidation or merger or (ii)
transfer all or substantially all of its properties and assets to any Person,
then, in each such case, proper provisions shall be made so that the successors
and assigns of the Surviving Corporation, assume all of the obligations of the
Surviving Corporation set forth in this Section 7.8 and if Surviving Corporation
fails to perform such obligations, Parent shall be responsible for the
performance of such obligations.
(e) The provisions of this Section 7.8 shall survive the
consummation of the Merger and (i) are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party and his or her heirs and
representatives and (ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such Person may have by
contract or otherwise. The obligations of Parent or the Surviving Corporation
under this Section 7.8 shall not be terminated or modified in such a manner as
75
to adversely affect the rights of any Indemnified Party under this Section 7.8
without the consent of such affected Indemnified Party. Parent shall cause the
Surviving Corporation to perform all of the obligations of the Surviving
Corporation under this Section 7.8 and if Surviving Corporation fails to perform
such obligations, Parent shall be responsible for the performance of such
obligations.
7.9 Confidentiality. Except for disclosures expressly
permitted by the terms of the Confidentiality Agreement, dated effective as of
November 8, 2006, between Parent and the Company (as it may be amended from time
to time, the "CONFIDENTIALITY AGREEMENT"), Parent shall hold, and shall cause
its officers, employees, accountants, counsel, financial advisors and other
Representatives to hold, all information received from the Company, directly or
indirectly, in confidence in accordance with the Confidentiality Agreement.
7.10 Publicity. None of the Company or Parent shall issue any
press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior written approval of
the other party hereto, which approval will not be unreasonably withheld or
delayed, unless disclosure is otherwise required by applicable Law, provided
that, to the extent required by applicable Law, the party intending to make such
release shall use its reasonable best efforts consistent with such applicable
Law to consult with the other party with respect to the text thereof.
7.11 Employee Matters.
(a) Subject to Section 7.12, Parent covenants and agrees that
for a period of one year following the Closing, it will not reduce the salary
(rate of wages) of or make an adverse change in the position held by any of the
employees of the Company and the Company Subsidiaries who were employed
immediately prior to the Closing; provided, however, that such employees shall
continue their employment on an "at-will" basis following the Closing.
(b) For a period of one year following the Closing, or such
longer period of time required by applicable Law, Parent shall cause to be
provided to employees of the Company or any of the Company Subsidiaries the
Company Plans (and Foreign Plans, if applicable) which are welfare benefit plans
or with coverage under other welfare benefit plans comparable in the aggregate
to such Company Plans (and Foreign Plans, if applicable) immediately prior to
the Closing; provided, that for purposes of eligibility for participation and
vesting within such other welfare benefit plans, employees of the Company or any
of the Company Subsidiaries shall receive credit for all of their service with
the Company and the Company Subsidiaries to the same extent such service was
recognized under the corresponding or similar Company Plan (and Foreign Plan, if
applicable).
(c) Parent shall establish an employee retention stock pool
(the "IPWIRELESS STOCK BONUS PLAN") consisting of shares of Parent Common Stock
for employees, officers and consultants of the Company, having an aggregate
value of $7,000,000 at the time of issuance as determined pursuant to the terms
of the IPWireless Stock Bonus Plan, as set forth in Exhibit D.
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7.12 Employee Agreements. The Company will use its
commercially reasonable efforts to cause Xxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxxx
and Xxxxx Xxxxxx to enter into the form of the Non-Competition Agreement set
forth as Exhibit F. The Company will not be obligated to offer to any such
employee any consideration as an inducement or consideration to enter into the
Non-Competition Agreement and will not be obligated to terminate the employment
of any employee who declines to execute the Non-Competition Agreement.
7.13 Options. The Board of Directors of the Company shall make
such amendments and adjustments to, or make such determinations with respect to,
the Company Stock Options as are necessary to implement the provisions of
Section 3.1(i). Without limiting the foregoing, subject to applicable Laws, the
Company shall take all actions necessary to ensure that, following the Effective
Time, the Company will not be bound by any options, stock appreciation rights,
warrants or other rights or agreements which would entitle any Person, other
than Parent and its Subsidiaries, to own any capital stock of the Surviving
Corporation or to receive any payment in respect thereof. Prior to the Effective
Time, the Company shall take all actions necessary to terminate the IPWireless
Inc. 1999 Stock Plan, such termination to be effective at or before the
Effective Time.
7.14 Board of Directors.
(a) Parent shall appoint Xxxxxxx Xxxxx to the Board of
Directors of Parent on or prior to Closing (the "DESIGNATED DIRECTOR"). The
Designated Director shall be included in the slate of nominees to be recommended
by such Board of Directors to Parent's stockholders for election as a director
at each meeting of stockholders of Parent at which directors of the class of
which the Designated Director is a member are to be elected. In the event that
Xxxxxxx Xxxxx shall cease to serve as a director of Parent for any reason, a
successor designated by the Stockholder Representative shall be appointed to the
Board of Directors immediately following such cessation of service. Such
successor thereafter shall be included in the slate of nominees to be
recommended by such Board of Directors to Parent's stockholders for election as
a director at each meeting of stockholders of Parent at which directors of the
class of which the Designated Director is a member are to be elected.
(b) The Chief Executive Officer of Parent or, at such
officer's designation, Xxxxxxx Xxxxx shall hold quarterly meetings with the
Stockholder Representative and such other representatives of former holders of
Preferred Stock of the Company (not to exceed four individuals) as may be
designated by the Stockholder Representative for purposes of discussing the
business of Parent, including its Subsidiaries that operate the Public Safety
Business and the TDtv Business. Such meetings shall be held during normal
business hours at a location mutually acceptable to the participants. During
such meetings, Parent shall provide to the Stockholder Representative and such
former holders recent income statements and balance sheets for such business as
well as such other information as is reasonably requested by such attendees for
purposes of understanding the results of operations and financial condition of
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such business. To the extent that any such information is non-public, Parent may
precondition the provision of such information on the execution of a customary
confidentiality agreement by each of the attendees.
(c) The provisions of this Section 7.14 shall remain in full
force and effect until, and shall automatically terminate after, payment of the
2009 Earnout Amount.
7.15 Tax Matters.
(a) Tax Returns. Parent shall cause to be prepared and filed
in a timely manner all Tax Returns relating to the Company and any of the
Company Subsidiaries with respect to any Pre-Closing Tax Period or Straddle
Period that have not been filed on or before the Closing Date ("PRE-CLOSING TAX
RETURN"). Such Pre-Closing Tax Returns shall be prepared, and each item thereon
treated, in a manner consistent with past practices employed with respect to the
Company and the Company Subsidiaries (except to extent the Parent determines
there is no reasonable basis in law therefore or determines that a Tax Return
cannot be so prepared and filed or an item so reported without being subject to
penalties). With respect to any Pre-Closing Tax Return, the Stockholder
Representative shall have the right to review and consent to such Pre-Closing
Tax Returns prior to the filing of such Pre-Closing Tax Returns, such consent
not to be unreasonably withheld.
(b) Taxable Merger. Unless otherwise required by Law, the
parties hereto shall treat the Merger as a direct taxable purchase of stock from
the stockholders of the Company for United States federal income tax purposes
and the parties hereto shall not treat the Merger as a reorganization under
Section 368 of the Code and the Treasury Regulations promulgated thereunder for
any Tax reporting purposes. Parent shall not take, and shall omit from taking,
and will cause the Company after the Closing not to take or omit from taking any
action that could cause the Merger to qualify as a reorganization with the
meaning of Section 368(a) of the Code.
(c) Actions on the Closing Date and Tax Elections. Neither the
Company nor any Company Subsidiary will take, and the Parent will not permit
either the Company or any Company Subsidiary to take, any action on the Closing
Date after the Closing that could result in any income Tax Liability to the
Company or any Company Subsidiary on the Closing Date other than any action
taken in the ordinary course of business consistent with past practices of the
Company or the Company Subsidiary, as the case may be; provided, however, that
the foregoing shall not preclude Parent from making a Section 338(g) election
under the Code, and in the event such an election is made on or after the
Closing Date, any Tax Liability arising therefrom shall not be considered a Loss
subject to Indemnification.
(d) Application for Waiver of Singapore Continuity
Requirement. The Company shall cause each Company Subsidiary that has unabsorbed
capital allowances or losses for Singapore tax purposes to take any and all
actions reasonably necessary to apply for and to use commercially reasonable
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efforts to obtain a waiver from the Ministry of Finance in Singapore of the
continuity of ownership requirement provided for in Sec. 23 and Sec. 37(2)(a) of
the Income Tax Act of Singapore, provided, however, that such waiver(s) need not
be obtained prior to Closing.
7.16 Reservation and Listing of Parent Common Stock. Effective
at or prior to the Effective Time, Parent shall reserve (free from preemptive
rights) out of its reserved but unissued shares of Parent Common Stock
sufficient shares of Parent Common Stock to provide for the issuance by Parent
of all shares of Parent Common Stock that may be issued as a result of the
Merger and the transactions contemplated hereby. Parent shall take all action
necessary to cause the shares of Parent Common Stock to be issued at the
Effective Time to be approved for listing on the NASDAQ Global Market at or
prior to the Effective Time and will take all action necessary to cause any
additional shares of Parent Common Stock to be issued after the Effective Time
pursuant to this Agreement to be approved for listing on the NASDAQ Global
Market prior to their issuance.
7.17 Information Statement. Promptly after the execution of
this Agreement, the Company shall prepare, in consultation with Parent, an
information statement (the "INFORMATION STATEMENT") which describes the
principal terms of this Agreement, and the transactions contemplated hereby, and
in accordance with Section 262 of the DGCL (a) notifies the Company Stockholders
whose approval of this Agreement and the transactions contemplated hereby has
not been obtained of the approval of this Agreement, the Merger and the
transactions contemplated hereby by the Board of Directors of the Company and
(b) provides copies of the applicable dissenters' rights statutes and a
description of the procedure to be followed. The Company shall mail or cause to
be mailed the Information Statement to such Company Stockholders, at their
address of record on the books of the Company, promptly upon completion thereof.
The Company shall not cause the Information Statement to be distributed without
Parent's approval, which shall not be unreasonably withheld or delayed;
provided, that Parent shall in no way be responsible for any of the content of
the Information Statement except as it pertains to and has been supplied in
writing by Parent for inclusion therein.
7.18 Registration Statement. Parent shall file with SEC a
registration statement covering the resale of the Parent Common Stock (the
"REGISTRATION STATEMENT") to be issued on the Closing Date within five (5)
Business Days after Parent becomes eligible to use a Registration Statement on
Form S-3 and to have the Registration Statement declared effective by the SEC as
soon as practicable thereafter and otherwise comply with the terms of the
Registration Rights Agreement.
7.19 Operation of the Surviving Corporation. From the
Effective Time through December 31, 2009 (the "EARNOUT PERIOD"), Parent shall
not take any action, or fail to take any action, the primary purpose of which is
to prevent or reduce generation of Shipped Revenues sufficient to enable payment
of the maximum Earnout Amount payable under this Agreement.
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7.20 280G Shareholder Vote. Prior to the Effective Time, the
Company will use commercially reasonable efforts to seek a stockholder vote on
the right of any "disqualified individual" (as defined in Section 280G(c) of the
Code) to receive or retain any and all payments that could be deemed "parachute
payments" under Section 280G of the Code as a result of the merger, on the
following terms and conditions interpreted in a manner which complies with
Section 280G of the Code and the regulations thereunder: (i) the Company will
use commercially reasonable efforts to obtain from any such disqualified
individual a waiver of the right to receive any payments contingent on the
Merger solely to the extent required to comply Section 280G of the Code and the
regulations thereunder if the requisite stockholder approval pursuant to Section
280G(b)(5) of the Code is not obtained, and (ii) the Company will use
commercially reasonable efforts to solicit timely stockholder approval in form
and substance and pursuant to such disclosure as will be sufficient to satisfy
the shareholder approval requirements of Section 280G(b)(5) of the Code as
interpreted under the regulations, including the requirement that the Merger not
be contingent, or otherwise conditioned, on stockholder approval of the waived
payments.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions (any or all of which may
be waived by Parent and Merger Sub in whole or in part to the extent permitted
by applicable Law):
(a) the representations and warranties of the Company
contained in Article V that are qualified as to materiality shall be true and
correct in all respects and those that are not qualified as to materiality shall
be true and correct in all material respects, in each case as of the Closing as
though made at and as of the Closing, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties that are qualified as to materiality shall be
true and correct in all respects on and as of such earlier date and those that
are not qualified as to materiality shall be true and correct in all material
respects on and as of such earlier date).
(b) the representations and warranties of the Company
contained in Sections 5.2 and 5.4 (as adjusted for stock issuances arising from
the exercise of options, warrants or rights disclosed in Schedule 5.4 of the
Company Disclosure Letter) are true and correct in all respects as of the
Closing;
(c) the Company shall have performed and complied in all
material respects with all obligations and agreements required in this Agreement
to be performed or complied with by it prior to the Closing Date, and Parent
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shall have received copies of such corporate resolutions and other documents
evidencing the performance thereof as Parent may reasonably request;
(d) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby, and there shall not be
pending any Legal Proceeding seeking to restrain or prohibit the consummation of
the Merger or seeking a material amount for damages in connection with the
transactions contemplated hereby and which Legal Proceeding has a reasonable
likelihood of success;
(e) the Key Employees and no less than 90% of the Company's
employees listed on Schedule 8.1(e) shall continue to be employed by the Company
on the Closing Date;
(f) Parent shall have received a certificate of the Company
signed by the Chief Operating Officer or Chief Financial Officer of the Company,
in form and substance reasonably satisfactory to Parent, dated the Closing Date,
to the effect that each of the conditions specified above in Sections 8.1(a)-(e)
have been satisfied in all respects;
(g) Parent shall have received a certification from the
Company on behalf of the Company Stockholders, dated no more than 30 days prior
to the Closing Date and signed by a responsible corporate officer of the
Company, that the Company is not, and has not been at any time during the five
years preceding the date of such certification, a United States real property
interests, as defined in Section 897(c)(2) of the Code;
(h) the Stockholder Consents shall be in full force and effect
and shall be valid and effective under Section 228 of the DGCL;
(i) Parent shall have received written resignations of each of
the directors of the Company;
(j) the Escrow Agent and the Stockholder Representative shall
have duly entered into, executed and delivered to the other party thereto the
Escrow Agreement, substantially in the form of Exhibit A (with such changes as
may be required by the Escrow Agent);
(k) Company Stockholders holding no more than ten percent
(10%) of the Company Stock shall have exercised appraisal or similar rights
under applicable Law with respect to its, her or his shares by virtue of the
Merger;
(l) the Company shall have delivered to Parent the audited
consolidated balance sheet of the Company and the Company Subsidiaries as of
December 31, 2006 and audited statements of operations and cash flows of the
Company and the Company Subsidiaries for the year ended December 31, 2006;
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(m) the Company shall have obtained all consents, waivers and
approvals referred to on Schedule 5.3(b), each such consent, waiver and approval
being in form and substance reasonably satisfactory to Parent and not requiring
as a term thereof or condition thereto any adverse condition or requirement on
the conduct of business by the Company, any of the Company Subsidiaries, Parent
or any of its Subsidiaries, and the applicable waiting period under the HSR Act
shall have expired or been terminated;
(n) each officer and director of the Company and the holders
of 90% of the issued and outstanding shares of Preferred Stock immediately prior
to the Effective Time shall have duly entered into, executed and delivered to
Parent the release agreement, substantially in the form attached hereto as
Exhibit E;
(o) the Non-Competition Agreement (the "NON-COMPETITION
AGREEMENT"), substantially in the form attached hereto as Exhibit F, shall have
been entered into by the Key Employees, and such agreements shall remain in full
force and effect;
(p) (i) all Company Stock Options shall have been terminated
and each holder of a Company Stock Option shall have either exercised such
option or such option shall be cancelled and null and void under its terms or
the terms of the plan pursuant to which it was granted, and (ii) the Company
shall deliver the cancelled warrants pursuant to Section 3.1(j);
(q) the Company shall have delivered, or caused to be
delivered, to Parent certificates of good standing as of a recent date with
respect to the Company issued by the Secretary of State of the State of Delaware
and for each state in which the Company is qualified to do business as a foreign
corporation;
(r) the Parent Common Stock to be issued at the Effective Time
shall have been authorized for listing on the NASDAQ Global Market upon official
notice of issuance;
(s) Parent shall have received a certification from the
Company, signed by a responsible corporate officer of the Company certifying
that the Key Employees are employed by the Company as of the Closing Date; and
(t) (i) each "disqualified individual" referred to in Section
7.20, shall have waived the right to receive any payments contingent on the
Merger to the extent required to comply Section 280G of the Code and the
regulations thereunder if the requisite stockholder approval (as described in
subsection 7.20(iii)) is not obtained, or (ii) the requisite stockholder
approval with respect thereto shall have been obtained.
8.2 Conditions Precedent to the Obligations of the Company.
The obligations of the Company to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, prior to or on the Closing Date,
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of each of the following conditions (any or all of which may be waived by the
Company in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of Parent contained in
Article VI that are qualified as to materiality shall be true and correct in all
respects and those that are not qualified as to materiality shall be true and
correct in all material respects, in each case as of the Closing as though made
at and as of the Closing, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties that are qualified as to materiality shall be
true and correct in all respects on and as of such earlier date, and those that
are not qualified as to materiality shall be true and correct in all material
respects on and as of such earlier date);
(b) Parent shall have performed and complied in all respects
with all obligations and agreements required by this Agreement to be performed
or complied with by Parent on or prior to the Closing Date;
(c) the Company shall have received a certificate signed by
the Chief Executive Officer of Parent, in form and substance reasonably
satisfactory to the Company, dated the Closing Date, to the effect that each of
the conditions specified above in Sections 8.2(a)-(c) have been satisfied in all
respects;
(d) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby;
(e) the applicable waiting period under the HSR Act shall have
expired or been terminated;
(f) the Parent Common Stock to be issued at the Effective Time
shall have been authorized for listing on the NASDAQ Global Market upon official
notice of issuance; and
(g) the Registration Rights Agreement, substantially in the
form attached hereto as Exhibit G shall have been duly entered into, executed
and delivered by Parent and the stockholder signatories thereto.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties.
(a) The representations and warranties of the Company
contained in this Agreement shall survive the Closing until 5:00 p.m. Eastern
time on the twelve (12) month anniversary of the Closing Date (the "EXPIRATION
DATE"). Any claim for a Loss asserted in good faith on or prior to the
Expiration Date which sets forth in a written notice in reasonable detail (based
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on the facts then available) the nature and estimated scope of such claim will
be timely made for purposes hereof. Any claim for indemnification with respect
to any of such matters, other than with respect to Section 5.12, that is not
asserted by notice to the other party on or prior to the Expiration Date may not
be pursued and is hereby irrevocably waived after such time.
(b) All covenants and agreements made by the parties to this
Agreement which contemplate performance following the Closing Date shall survive
the Closing Date in accordance with their terms. All covenants and agreements
that contemplate performance prior to the Closing Date shall not survive the
Closing Date; provided, however, that if any such covenant or agreement is
breached on or prior to the Closing Date, the non-breaching party shall retain
all rights and remedies hereunder with respect to such breach following the
Closing Date.
9.2 Indemnification.
(a) Subject to the provisions of this Article IX, the Escrow
Fund shall be available as the sole and exclusive remedy to indemnify, defend
and hold harmless Parent, the Surviving Corporation, and their respective
subsidiaries, directors, officers, employees, consultants, independent
contractors, agents and representatives (the "PARENT INDEMNIFIED PARTIES") from
and against any and all Losses (irrespective of whether or not such Losses arise
out of or in connection with a third party claim) to the extent, but only to the
extent, relating to, resulting from or arising out of:
(i) any breach of any of the representations and
warranties made by the Company in Article V of this Agreement;
(ii) any breach of any covenant or other agreement on
the part of the Company under this Agreement or any other
Company Document,
(iii) any Tax Losses;
(iv) any penalties paid in cash or in-kind or
credited by the Company to T-Mobile in connection with
Purchase Orders placed on the Company by T-Mobile under the
T-Mobile Agreements prior to the date of this Agreement;
(v) any claims brought by any Company Stockholder or
other equity holder of the Company's capital stock in
connection with the Merger and the other transactions
contemplated in this Agreement; or
(vi) any Intellectual Property Payments
such foregoing Losses being referred to herein as "PARENT INDEMNIFIABLE LOSSES;"
provided, however, that, (x) the Parent Indemnified Parties may not recover any
amount for Parent Indemnifiable Losses arising from the inaccuracies of, or
breaches of, the representations or warranties contained herein unless and until
the aggregate amount of all Parent Indemnifiable Losses exceeds $100,000 (the
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"DEDUCTIBLE"), and only with respect to such amounts in excess of the
Deductible, provided, however, that the Deductible shall not apply with respect
to any Tax Losses, and (y) the sole recourse for Parent Indemnifiable Losses for
which the Parent Indemnified Parties shall be entitled to indemnification shall
be to the Escrow Fund; provided further that the Parent Indemnified Parties may
not recover Parent Indemnifiable Losses in excess of $20,000,000 in the
aggregate; provided further, that the IP Escrow shall be the sole recourse to
cover Losses incurred by Parent Indemnified Parties as a result of Intellectual
Property Payments. For purposes of calculating Losses hereunder, after a breach
or claim referred to in Section 9.2(a)(i), (ii) or (iv) has been established,
any materiality or Material Adverse Effect qualifications in the
representations, warranties, covenants and agreements shall be ignored for such
purposes. Notwithstanding any of other provision of this Agreement, no claim for
Parent Indemnifiable Losses may be made after the Expiration Date.
9.3 Escrow Arrangements.
(a) Escrow Fund. The Escrow Amount shall be available to
compensate the Parent Indemnified Parties for any claims by such parties for any
Losses incurred or sustained by them and for which they are entitled to recovery
under this Article IX.
(b) Escrow Period; Distribution upon Termination of Escrow
Period. Subject to the following requirements, the Escrow Fund shall be in
existence as of the Closing and shall terminate at 5:00 p.m., Eastern time, on
the Expiration Date (the "ESCROW PERIOD") and will be distributed to the Company
Stockholders; provided, however, that the Escrow Period shall not terminate with
respect to 100% of the amount of any unsatisfied claims specified in any
Officer's Certificate delivered in good faith to the Escrow Agent prior to the
Expiration Date with respect to facts and circumstances existing prior to the
Expiration Date (each, an "UNRESOLVED CLAIM"). As soon as all such claims have
been resolved, the Escrow Agent shall deliver to the Exchange Agent, on behalf
of the applicable Company Stockholders, the remaining portion of the Escrow
Amount, if any, not required to satisfy such Unresolved Claims. For the purposes
hereof, "OFFICER'S CERTIFICATE" shall mean a certificate signed by any officer
of Parent and delivered to the Escrow Agent and the Stockholder Representative:
(1) stating that Parent has paid, incurred, sustained or accrued, or reasonably
anticipates that it will have to pay, incur, sustain or accrue, Losses, (2)
specifying in reasonable detail the individual items of Losses included in the
amount so stated, the date each such item was paid, incurred, sustained or
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
and (3) identifying the amount of cash and/or the number of shares of Parent
Common Stock to be delivered to Parent in compensation for such Losses.
Notwithstanding any other provision of this Agreement, Parent Indemnifiable
Losses do not include, and no Parent Indemnified Party may seek to recover
indemnification or other relief for, consequential damages, lost profits or
exemplary or punitive damages (unless such damages or loss profits are incurred
by a Parent Indemnified Party as a result of a third party claim). The number of
shares of Parent Common Stock to be delivered to Parent in compensation for any
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Losses pursuant to this Section 9.3(b) shall be equal to the quotient of (x) the
amount of compensation to be delivered for the Losses certified in an Officer's
Certificate minus the amount of cash to be delivered for such Losses, divided by
(y) the then Average Parent Stock Price.
(c) Claims for Indemnification. Upon receipt by the Escrow
Agent at any time on or before the Expiration Date of an Officer's Certificate,
the Escrow Agent, subject to the provisions of Section 9.3(d), shall deliver to
Parent, as promptly as practicable, an amount of cash, number of shares of
Parent Common Stock or combination of the foregoing as determined by the
Stockholder Representative, from the Escrow Fund equal to the amount of Losses
set forth in such Officer's Certificate; provided, however, that to the extent
an Officer's Certificate alleges only the basis for anticipated Losses, no
amount shall be distributed until such Losses are actually paid, incurred or
sustained. If the Stockholder Representative does not object in writing within
the 30-day period set forth in Section 9.3(d) after delivery by Parent of the
Officer's Certificate to the Stockholder Representative, such failure to so
object shall constitute an irrevocable acknowledgment by the Stockholder
Representative on behalf of the Company Stockholders that the Indemnified Party
is entitled to the full amount of the claim for Losses set forth in such
Officer's Certificate; provided, however, that to the extent an Officer's
Certificate alleges only the basis for anticipated Losses, no amount shall be
distributed until such Losses are actually paid, incurred or sustained by a
Parent Indemnified Party (notwithstanding the Stockholder Representative's
failure to object in writing).
(d) Objections to Claims against the Escrow Fund. At the time
of delivery of any Officer's Certificate to the Escrow Agent, a duplicate copy
of such certificate shall be delivered to the Stockholder Representative, and
for a period of thirty (30) days after such delivery, the Escrow Agent shall
make no delivery to Parent of any portion of the Escrow Amount pursuant to
Section 9.3(c) unless the Escrow Agent shall have received written authorization
from the Stockholder Representative to make such delivery. After the expiration
of such thirty (30)-day period, the Escrow Agent shall make payment pursuant to
Section 9.3(c), provided that no such payment may be made if the Stockholder
Representative shall object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent prior to the expiration of such thirty (30)-day period.
(e) Resolution of Conflicts; Arbitration.
(i) If the Stockholder Representative shall object in
writing to any claim or claims made in any Officer's
Certificate to recover Losses from the Escrow Fund within
thirty (30) days after delivery of such Officer's Certificate,
then the Stockholder Representative and Parent shall attempt
in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the
Stockholder Representative and Parent should so agree, a
memorandum setting forth such agreement shall be prepared and
signed by both parties and, in the case of a claim against the
Escrow Fund, shall be furnished to the Escrow Agent. The
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Escrow Agent shall be entitled to rely on any such memorandum
and make distributions from the Escrow Fund in accordance with
the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation and prior to sixty (60) days after delivery
of an Officer's Certificate, either Parent or the Stockholder
Representative may demand arbitration of the matter unless the
amount of the Loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to
arbitration, and in either such event the matter shall be
settled by arbitration conducted by one arbitrator mutually
agreeable to Parent and the Stockholder Representative. In the
event that, within thirty (30) days after submission of any
dispute to arbitration, Parent and the Stockholder
Representative cannot mutually agree on one arbitrator, then,
within fifteen (15) days after the end of such thirty (30)-day
period, Parent and the Stockholder Representative shall each
select one arbitrator. The two arbitrators so selected shall
select a third arbitrator. If one party but not the other
fails to select an arbitrator during this fifteen (15)-day
period, then the parties agree that the arbitration will be
conducted by the one arbitrator selected by the party which
has made such a selection.
(iii) Any such arbitration shall be held in San
Francisco, California, under the rules and procedures then in
effect of the American Arbitration Association. The
arbitrator(s) shall determine how all expenses relating to the
arbitration shall be paid, including the respective expenses
of each party, the fees of each arbitrator and the
administrative fee of the American Arbitration Association.
The arbitrator or arbitrators, as the case may be, shall set a
limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgment of the
arbitrator or a majority of the three arbitrators, as the case
may be, to discover relevant information from the opposing
parties about the subject matter of the dispute. The
arbitrator, or a majority of the three arbitrators, as the
case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions,
including attorneys' fees and costs, to the same extent as a
competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial
justification or that discovery was refused or objected to
without substantial justification. The decision of the
arbitrator or a majority of the three arbitrators, as the case
may be, as to the validity and amount of any claim in such
Officer's Certificate shall be final, binding, and conclusive
upon the parties to this Agreement. Such decision shall be
written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree
or order awarded by the arbitrator(s), and the Escrow Agent
shall be entitled to rely on, and make distributions from the
Escrow Fund in accordance with, the terms of such award,
judgment, decree or order as applicable. Within ten (10) days
of a decision of the arbitrator(s) requiring payment by one
party to another, such party shall make the payment to such
other party.
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(iv) Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction.
The foregoing arbitration provision shall apply to, and shall
be the exclusive remedy for, any dispute between the
Stockholder Representative and the Parent Indemnified Party
under this Article IX, whether relating to claims upon the
Escrow Fund or to the other indemnification obligations set
forth in this Article IX.
(f) Third-Party Claims.
(i) In the event Parent becomes aware of a
third-party claim which Parent reasonably believes may result
in a demand against the Escrow Fund, Parent shall promptly
thereafter notify the Stockholder Representative in writing of
such claim. The Stockholder Representative shall have the
right to elect to assume the defense of such claim unless (x)
the Losses arising from such claim may reasonably be expected
to exceed the Escrow Amount (with the shares of Parent Common
Stock then held in escrow being valued, on a per share basis,
at the then Average Parent Stock Price), (based solely on the
damages alleged by the third party, if any damages are
alleged) or (y) the claim seeks relief which would limit or
otherwise adversely affect the conduct of business by the
Surviving Corporation. Failure by the Stockholder
Representative to notify Parent of its election to assume the
defense of any such claim or litigation by a third party
within twenty-five (25) days after notice thereof has been
given to the Stockholder Representative shall be deemed a
waiver by the Stockholder Representative of its right to
assume the defense of such claim or litigation, and the Parent
shall have the right to retain its own counsel, without
prejudice to its right of indemnification under this
Agreement. All claims for legal fees and expenses or other
Losses against the Escrow Fund for which Parent is entitled to
indemnification pursuant to this Section 9.3(f) shall be
subject to, and shall be exclusively resolved through, the
claims processing and dispute procedures set forth in this
Section 9.3.
(ii) The Stockholder Representative, if it is
entitled to and does assume the defense, shall retain counsel
reasonably satisfactory to Parent to defend such claim and
shall pay the fees and disbursements of such counsel with
regard thereto. If the Stockholder Representative elects to
assume the defense, the obligations under Article IX of this
Agreement shall include taking all steps that the Stockholder
Representative deems reasonably necessary in the
investigation, defense or settlement of such claim or
litigation (including the retention of legal counsel);
provided, however, that (x) the Stockholder Representative
shall first consult with Parent regarding such settlement, (y)
no settlement may be made by the Stockholder Representative
without the consent in writing of Parent, which shall not be
unreasonably withheld or delayed, unless such settlement (i)
releases Parent from any liability in respect thereof, (ii)
does not include any admission of culpability on the part of
Parent and (iii) does not impose an injunction or other
equitable relief upon Parent, the Surviving Corporation or the
Company Subsidiaries or otherwise impose affirmative or
negative covenants on Parent, the Surviving Corporation or the
Company Subsidiaries and (z) the Stockholder Representative
shall not enter into any settlement with respect to Taxes
without Parent's consent, which shall not be unreasonably
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withheld or delayed. If the Stockholder Representative elects
to assume the defense, the Stockholder Representative shall
permit Parent to participate in such defense or settlement
through separate counsel chosen by Parent, with the fees and
expenses of such separate counsel borne by Parent; provided,
however, that in the event Parent shall conclude (upon the
advice of counsel) that there may be legal defenses or rights
available to it which are different from, in actual conflict
with, or additional to those available to the Stockholder
Representative, Parent shall be entitled to select separate
counsel to act on its behalf and the Stockholder
Representative shall instruct the Escrow Agent to pay the
reasonable separate counsel fees and other reasonable expenses
related thereto from the Escrow Fund. Any Losses caused by or
arising out of any settlement or any Order respecting any
third party claim shall be satisfied exclusively by a Parent
claim against the Escrow Fund and Parent shall be solely
responsible for any such amount in excess of the then
available Escrow Fund. In the event that the Stockholder
Representative has consented in writing to any settlement, the
Company Stockholders shall have no power or authority to
object under any provision of this Article IX to any claim for
an amount less than or equal to the amount of such settlement
by Parent against the Escrow Fund with respect to such
settlement.
(iii) Parent, if Parent is entitled to and does
assume the defense, shall retain counsel reasonably
satisfactory to the Stockholder Representative to defend such
claim and shall pay the fees and disbursements of such counsel
with regard thereto. If Parent elects to assume the defense,
the obligations under Article IX of this Agreement shall
include taking all steps Parent deems reasonably necessary in
the investigation, defense or settlement of such claim or
litigation (including the retention of legal counsel) and
holding the Stockholder Representative harmless from and
against any and all Losses caused by or arising out of any
settlement approved by the Parent or any judgment in
connection with such claim or litigation; provided, however,
that Parent shall first consult with the Stockholder
Representative regarding such settlement. If Parent elects to
assume the defense of such third-party claim or litigation,
Parent shall permit the Stockholder Representative to
participate in such defense or settlement through separate
counsel chosen by the Stockholder Representative, with the
fees and expenses of such separate counsel borne by such the
Stockholder Representative; provided, however, that in the
event the Stockholder Representative shall conclude (upon the
advice of counsel) that there may be legal defenses or rights
available to it which are different from, in actual conflict
with, or additional to those available to Parent, the
Stockholder Representative shall be entitled to select
separate counsel to act on its behalf and the Stockholder
Representative shall pay the reasonable separate counsel fees
and other reasonable expenses related thereto and, such fees
and expenses will be paid from the Escrow Fund.
(g) The failure of the indemnified party to give reasonably
prompt notice of any indemnification claim shall not release, waive or otherwise
affect the indemnifying party's obligations with respect thereto except to the
89
extent that the indemnifying party can demonstrate actual loss and prejudice as
a result of such failure.
9.4 Exclusive Remedy. From and after the Effective Time,
resort to indemnification pursuant to this Article IX and the Escrow Fund shall
be the exclusive right and remedy of Parent Indemnified Parties for any Loss
arising out of or related to any breach of, or dispute or claim relating to,
this Agreement or to the transactions contemplated by this Agreement or any
matter that is otherwise indemnifiable hereunder if the Merger contemplated
hereby is consummated or that constitutes a claim or cause of action against any
Company Stockholder. Except for claims for equitable relief and claims with
respect to fraud solely against the Person or Persons committing or alleged to
have committed such fraud, recovery from the Escrow Fund shall be the sole and
exclusive remedy of the Parent Indemnified Parties for any breach of, or dispute
or claim relating to, any provision of this Agreement or any matter that is
otherwise indemnifiable hereunder if the Merger contemplated hereby is
consummated or that constitutes a claim or cause of action against any Company
Stockholder.
9.5 Tax Losses.
(a) For purposes of this Agreement, "TAX LOSSES" means any and
all Losses attributable to Taxes (or the non-payment thereof) of the Company and
the Company Subsidiaries for all Pre-Closing Tax Periods (including the portion
of any Straddle Period attributable to the Pre-Closing Tax Period).
(b) For purposes of allocating income, gain, deductions and
losses attributable to the period up to and including the Effective Time for a
Straddle Period, (i) real, personal and intangible property Taxes shall be
allocated on a per diem basis, (ii) exemptions, allowances or deductions that
are calculated on an annual basis, such as the deduction for depreciation, will
be apportioned ratably between such periods on a per diem basis and (iii) other
Taxes (including income taxes and taxes in lieu of income taxes to the extent
not governed by clause (ii)), shall be allocated based on a closing of the books
as of the close of business on the Closing Date (including, without limitation,
a closing of the books on the Closing Date for purposes of allocating income,
gain, deductions and losses attributable to the Company).
9.6 Tax Treatment of Indemnity Payments. The Company and
Parent agree to treat any indemnity payment made pursuant to this Article IX as
an adjustment to the Merger Consideration Payments for federal, state, local and
foreign income tax purposes unless a contrary treatment is required under
applicable Law.
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ARTICLE X
MISCELLANEOUS
10.1 Stockholder Representative.
(a) X. Xxxxxx Xxxxxxxx (the "STOCKHOLDER REPRESENTATIVE") is
hereby appointed as the Stockholder Representative hereunder to give and receive
notices and communications, to authorize payment to any Parent Indemnified Party
from the Escrow Fund in satisfaction of claims and Losses by a Parent
Indemnified Party, to object to such payments, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims or
Losses, to receive payments on behalf of the Company Stockholders due and owing
pursuant to this Agreement and acknowledge receipt thereof, to waive any breach
or default of Parent or Merger Sub under this Agreement following the Effective
Time, to calculate the Allocations Spreadsheet, to receive service of process on
behalf of the Company Stockholders in connection with any claims under this
Agreement or any related document or instrument, and to take all other actions
that are either (i) necessary or appropriate in the judgment of the Stockholder
Representative for the accomplishment of the foregoing or (ii) specifically
mandated by the terms of this Agreement; provided, however, that such agency
shall apply only to matters affecting all or most of the Company Stockholders
and any matter that affects only an individual Company Stockholder shall be
addressed by Parent and such Company Stockholder. Such agency may be changed by
the Company Stockholders from time to time upon not less than ten (10) days
prior written notice to Parent; provided, however, that the Stockholder
Representative may not be removed unless holders of a majority in interest of
the Escrow Fund agree to such removal and to the identity of the substituted
agent. A vacancy in the position of Stockholder Representative may be filled by
the holders of a majority in interest of the Escrow Fund. No bond shall be
required of the Stockholder Representative, and the Stockholder Representative
shall not receive any compensation for its services. Notices or communications
to or from the Stockholder Representative shall constitute notice to or from the
Company Stockholders.
(b) Except for intentional fraud, the Stockholder
Representative shall not be liable for any act done or omitted hereunder as
Stockholder Representative. Pursuant to the following sentence, and to the
fullest extent permitted by applicable Law, the Company Stockholders shall be,
severally based on such Company Stockholder's [Pro Rata Portion] of the Merger
Consideration and not jointly, obligated to indemnify the Stockholder
Representative and hold the Stockholder Representative harmless against any
loss, liability or expense incurred without gross negligence or bad faith on the
part of the Stockholder Representative and arising out of or in connection with
the acceptance or administration of the Stockholder Representative's duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Stockholder Representative. At the time of distribution pursuant
to Section 9.3(c) to the Company Stockholders of any proceeds remaining in the
Escrow Fund, the Stockholder Representative shall be entitled to deduct and
withhold from such income and gains included in such distribution to pay and
91
reimburse fees and expenses of third parties incurred or expected to be incurred
in connection with its role as Stockholder Representative pursuant to this
Agreement.
(c) The grant of authority provided for in this Section 10.1
is coupled with an interest and is being granted, in part, as an inducement to
Parent and Merger Sub to enter into this Agreement and the Escrow Agreement, and
(i) shall be irrevocable and survive the death, incompetency, bankruptcy or
liquidation of the Company or any Company Stockholder shall be binding on any
successor thereto and (ii) shall survive the delivery of an assignment by any
Company Stockholder of the whole or any fraction of his, her or its interest in
the Escrow Fund.
(d) In connection with the performance of its obligations
hereunder and under the Escrow Agreement, the Stockholder Representative shall
have the right at any time and from time to time to select and engage, at the
cost and expense of the Company Stockholders (as contemplated by Section
10.1(b)), attorneys, accountants, investment bankers, advisors, consultants and
clerical personnel and obtain such other professional and expert assistance, and
maintain such records, as the Stockholder Representative may deem necessary or
desirable and incur other out-of-pocket expenses related to performing its
services hereunder. For purposes of enabling the Stockholder Representative to
exercise his rights and discharge his obligations hereunder and only to such
extent, including responding to any claim for indemnification or offset provided
by Article IX, from the Effective Time until all Earnout Amounts have been paid
(or are no longer payable) and any outstanding Parent Indemnifiable Losses have
been satisfied, upon the reasonable request of the Stockholder Representative
(upon reasonable advance notice and during normal working hours), Parent and the
Surviving Corporation shall (i) afford to the officers, employees, accountants,
counsel and other representatives of the Stockholder Representative reasonable
access during normal working hours to the Surviving Corporation's and Parent's
properties, books, contracts, records and information (including outside auditor
work papers) relating to the business of the Surviving Corporation (whether on
by the Surviving Corporation or another entity under Parent's control) and (ii)
make available to, and cause to cooperate, all officers, accountants, counsel
and other representatives or agents of such business. Notwithstanding the
foregoing, neither the Surviving Corporation nor Parent shall be required to
provide access to or disclose information in such a manner as would (A)
jeopardize the attorney-client privilege of the entity in possession or control
of such information or (B) contravene any Law or Order.
(e) In dealing with this Agreement, the Escrow Agreement and
any instruments, agreements or documents relating thereto, and in exercising or
failing to exercise all or any of the powers conferred upon the Stockholder
Representative hereunder or thereunder, (i) the Stockholder Representative and
its agents, counsel, accountants and other representatives shall not assume any,
and shall incur no, responsibility whatsoever (in each case, to the extent
permitted by applicable Law) to the Company Stockholders, Parent or the
Surviving Corporation by reason of any error in judgment or other act or
omission performed or omitted hereunder or in connection with this Agreement,
92
the Escrow Agreement or any such other agreement, instrument or document other
than with respect to intentional fraud of the Stockholder Representative, and
(ii) the Stockholder Representative shall be entitled to rely in good faith on
the advice of counsel, public accountants or other independent experts
experienced in the matter at issue, and any error in judgment or other act or
omission of the Stockholder Representative pursuant to such advice shall in no
event subject the Stockholder Representative to liability to the Company
Stockholders, Parent or the Surviving Corporation.
(f) All of the immunities and powers granted to the
Stockholder Representative under this Agreement shall survive the Closing and/or
any termination of this Agreement and the Escrow Agreement.
(g) A decision, act, consent or instruction of the Stockholder
Representative, including an extension or waiver of this Agreement pursuant to
Article IV or Section 10.6, as applicable, shall constitute a decision of the
Company Stockholders and shall be final, binding and conclusive upon the Company
Stockholders; and the Escrow Agent, Parent and the Surviving Corporation may
rely upon any such decision, act, consent or instruction of the Stockholder
Representative as being the decision, act, consent or instruction of the Company
Stockholders. The Escrow Agent, Parent and the Surviving Corporation are hereby
relieved from any Liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the Stockholder
Representative.
(h) The Stockholder Representative has all requisite power,
authority and legal capacity to execute and deliver this Agreement and each
other agreement, document, or instrument or certificate contemplated by this
Agreement to be executed by the Stockholder Representative in connection with
the consummation of the transactions contemplated by this Agreement (together
with this Agreement, the "STOCKHOLDER REPRESENTATIVE DOCUMENTS"), and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and each of the Stockholder Representative Documents
by the Stockholder Representative, the performance of its respective obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all required action on the part
of the Stockholder Representative. This Agreement has been, and each of the
Stockholder Representative Documents will be at or prior to the Closing, duly
and validly executed and delivered by the Stockholder Representative and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the Stockholder
Representative Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Stockholder Representative enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
93
10.2 Specific Performance. The Company and Parent acknowledge
and agree that the breach of this Agreement by the other party would cause
irreparable damage to Parent or the Company, as the case may be, and that Parent
or the Company, as the case may be, will not have an adequate remedy at law.
Therefore, the obligations of the Company and the obligations of Parent under
this Agreement shall be enforceable by a decree of specific performance issued
by any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
10.3 Submission to Jurisdiction; Consent to Service of
Process.
(a) Except for matters governed by Section 9.3(e), the parties
hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or
state court located within the State of Delaware over any dispute arising out of
or relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action proceeding related thereto shall be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
delivery of a copy thereof in accordance with the provisions of Section 10.7.
10.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and performed in such state without reference to any conflict of
law principle.
10.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and the
Confidentiality Agreement and (b) except for the provisions of Sections 7.8 and
Article IX, are not intended to confer upon any Person other than the parties
hereto any rights or remedies.
10.6 Amendment and Waivers. This Agreement may be amended,
supplemented or changed by the parties hereto; provided, however, that there
shall be made no amendment that by Law requires further approval by the Company
Stockholders without such approval having been obtained. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
94
as a further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. Any agreement on the part of a party to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. A termination of this Agreement pursuant to
Section 4.1 or an amendment or waiver of this Agreement shall, in order to be
effective, require, in the case of Parent or the Company, action by its Board of
Directors. All remedies hereunder are cumulative and are not exclusive of any
other remedies provided by law.
10.7 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
facsimile (with written confirmation of transmission) or (iii) one business day
following the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to the Company, to
IPWireless, Inc.
0000 Xxxxxxx Xxxxx, Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: CFO and General Counsel
With a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention, Xxxx X. Xxxxxxxx, Esq.
If to the Stockholder Representative, to:
X. Xxxxxx Xxxxxxxx
c/o Oak Hill Capital Partners
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile: (000)000-0000
95
With a copy to:
Keystone, Inc.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX XX 00000
Facsimile: (000)000-0000
Attention: Xxxxx Xxxx
If to Parent or Merger Sub, to:
NextWave Wireless Inc.
00 Xxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
10.8 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any law or
public policy, all other terms or provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
10.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties without the prior written
consent of the other parties, except that Merger Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to any wholly owned Subsidiary of Parent, but no such assignment shall
relieve Merger Sub of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
10.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
96
**REMAINDER OF PAGE INTENTIONALLY LEFT BLANK**
97
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
all as of the date first written above.
NEXTWAVE WIRELESS INC.
By:
----------------------------------------
Name:
Title:
IPW, LLC
By:
----------------------------------------
Name:
Title:
IPWIRELESS, INC.
By:
----------------------------------------
Name:
Title:
X. Xxxxxx Xxxxxxxx
--------------------------------------------
X. Xxxxxx Xxxxxxxx
Stockholder Representative
TABLE OF CONTENTS
PAGE
Article I DEFINITIONS...........................................................................1
1.1 Certain Definitions...................................................................1
Article II THE MERGER...........................................................................21
2.1 The Merger...........................................................................21
2.2 Closing..............................................................................21
2.3 Effective Time.......................................................................21
2.4 Effects of the Merger................................................................22
2.5 Certificate of Incorporation and By-laws.............................................22
2.6 Directors............................................................................22
2.7 Officers.............................................................................22
Article III EFFECT OF THE MERGER ON THE SECURITIES OF THE COMPANY AND MERGER SUB.................22
3.1 Effect on Capital Stock..............................................................22
3.2 Allocations Spreadsheet..............................................................28
3.3 Additional Consideration Spreadsheet.................................................28
3.4 Earnout Consideration Spreadsheets...................................................29
3.5 Exchange of Certificates.............................................................29
3.6 Appraisal Rights.....................................................................32
3.7 Working Capital Adjustment...........................................................33
Article IV TERMINATION, AMENDMENT AND WAIVER....................................................37
4.1 Termination of Agreement.............................................................37
4.2 Effect of Termination................................................................38
Article V REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................38
5.1 Organization and Good Standing.......................................................38
5.2 Authorization of Agreement...........................................................39
5.3 Conflicts; Consents of Third Parties.................................................40
5.4 Capitalization.......................................................................41
5.5 Subsidiaries.........................................................................42
5.6 Corporate Records....................................................................43
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5.7 Financial Statements.................................................................43
5.8 No Undisclosed Liabilities...........................................................43
5.9 Absence of Certain Developments......................................................44
5.10 Taxes................................................................................45
5.11 Property and Assets..................................................................51
5.12 Technology and Intellectual Property.................................................51
5.13 Insurance............................................................................56
5.14 Material Contracts and Obligations...................................................56
5.15 Compliance...........................................................................57
5.16 Employee Benefits....................................................................57
5.17 Labor and Employment Matters.........................................................60
5.18 Litigation...........................................................................61
5.19 Related Party Transactions...........................................................61
5.20 Banks................................................................................62
5.21 State Take Over Statutes.............................................................62
5.22 Financial Advisors...................................................................62
5.23 Environmental Matters................................................................62
5.24 Receivables..........................................................................62
5.25 Outstanding Obligations..............................................................63
5.26 UTStarcom Agreement..................................................................63
5.27 No Other Representations, Etc........................................................63
Article VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................63
6.1 Organization and Good Standing.......................................................64
6.2 Authorization of Agreement...........................................................64
6.3 Conflicts; Consents of Third Parties.................................................64
6.4 Compliance with Laws.................................................................65
6.5 Charter Documents; Capitalization....................................................65
6.6 Merger Sub...........................................................................66
6.7 Financial Statements.................................................................66
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6.8 Litigation...........................................................................67
6.9 Financial Advisors...................................................................67
6.10 SEC Filings..........................................................................67
6.11 S-3 Eligibility......................................................................67
6.12 Absence of Certain Changes or Events.................................................67
6.13 No Other Representations, Etc........................................................68
Article VII COVENANTS............................................................................68
7.1 Access to Information................................................................68
7.2 Conduct of the Business Pending the Closing..........................................69
7.3 Notice of Changes....................................................................72
7.4 Fees and Expenses....................................................................72
7.5 Commercially Reasonable Efforts; Regulatory Approvals................................73
7.6 Transaction Related Litigation.......................................................73
7.7 No Solicitation by the Company; Etc..................................................73
7.8 Indemnification; Insurance...........................................................74
7.9 Confidentiality......................................................................76
7.10 Publicity............................................................................76
7.11 Employee Matters.....................................................................76
7.12 Employee Agreements..................................................................77
7.13 Options..............................................................................77
7.14 Board of Directors...................................................................77
7.15 Tax Matters..........................................................................78
7.16 Reservation and Listing of Parent Common Stock.......................................79
7.17 Information Statement................................................................79
7.18 Registration Statement...............................................................79
7.19 Operation of the Surviving Corporation...............................................79
7.20 280G Shareholder Vote................................................................80
Article VIII CONDITIONS TO CLOSING................................................................80
8.1 Conditions Precedent to Obligations of Parent and Merger Sub.........................80
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(CONTINUED)
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8.2 Conditions Precedent to the Obligations of the Company...............................82
Article IX INDEMNIFICATION......................................................................83
9.1 Survival of Representations and Warranties...........................................83
9.2 Indemnification......................................................................84
9.3 Escrow Arrangements..................................................................85
9.4 Exclusive Remedy.....................................................................90
9.5 Tax Losses...........................................................................90
9.6 Tax Treatment of Indemnity Payments..................................................90
Article X MISCELLANEOUS........................................................................91
10.1 Stockholder Representative...........................................................91
10.2 Specific Performance.................................................................94
10.3 Submission to Jurisdiction; Consent to Service of Process............................94
10.4 Governing Law........................................................................94
10.5 Entire Agreement; No Third-Party Beneficiaries.......................................94
10.6 Amendment and Waivers................................................................94
10.7 Notices..............................................................................95
10.8 Severability.........................................................................96
10.9 Assignment...........................................................................96
10.10 Counterparts.........................................................................96
Exhibits
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Amended and Restated Certificate of Incorporation
Exhibit C - Form of Letter of Transmittal
Exhibit D - Form of IPWireless Stock Bonus Plan
Exhibit E - Form of Release Agreement
Exhibit F - Form of Non-Competition Agreement
Exhibit G - Form of Registration Rights Agreement
Exhibit H - Projected Working Capital
iv
SCHEDULES
Schedule Section Description
---------------- -----------
Section 1.1 Key Employees
Section 5.3(b) Company Conflicts; Consents of Third Parties
Section 5.4(a) Capitalization
Section 5.5 Subsidiaries
Section 5.9(d) Absence of Certain Developments
Section 5.10(c) Taxes
Section 5.10(cc) United Kingdom Corporate Tax
Section 5.11 Company property or Assets
Section 5.12(a) Company Intellectual Property
Section 5.12(b) Company Intellectual Property Agreements
Section 5.12(d) Company Intellectual Property Payments
Section 5.12(f) Company Intellectual Property Licenses
Section 5.12(g) Company Intellectual Property Indemnification Obligations
Section 5.13 Insurance
Section 5.14 Material Contracts
Section 5.16(a) Employee Benefit Plans
Section 5.16(d) Post-Employment Benefits
Section 5.16(e) Employee Benefit Payments
Section 5.16(f)(i) Employee Benefit Payment Acceleration
Section 5.16(f)(ii) Excess Parachute Payments
Section 5.16(g) Foreign Plan
Section 5.17(f)(i) Employee List
Section 5.17(f)(ii) Consulting Agreements
Section 5.18 Litigation
Section 5.20 Banks
Section 5.22 Financial Advisors
Section 5.23 Environmental Matters
Section 5.24 Receivables
Section 6.3(b) Parent Conflicts; Consents of Third Parties
Section 6.10 Parent SEC Filings
Section 7.1 Access to Information
Section 8.1(e) Employee List
v
