AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXX.XXX INC.
SHAMU ACQUISITION, INC.
AND
XXXXXXX.XXX INC.
DATED AS OF JANUARY 20, 2000
CONTENTS
ARTICLE I -THE MERGER.....................................................................................1
1.1 The Merger..............................................................................1
1.2 The Closing.............................................................................2
1.3 Effective Date and Time.................................................................2
1.4 Articles of Incorporation of the Surviving Corporation..................................2
1.5 Bylaws of the Surviving Corporation.....................................................2
1.6 Directors and Officers..................................................................3
1.7 Conversion of Shares....................................................................3
1.7.1 Exchange Ratio...............................................................3
1.7.2 Exchange of Certificates.....................................................6
1.7.3 No Fractional Shares.........................................................7
1.7.4 No Further Transfers.........................................................7
1.8 Amendment to Provide for Alternative Merger Structures..................................7
1.9 Option Grants...........................................................................8
ARTICLE II -REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................8
2.1 Organization............................................................................9
2.2 Enforceability..........................................................................9
2.3 Capitalization..........................................................................9
2.4 Subsidiaries and Affiliates.............................................................11
2.5 No Approvals; No Conflicts..............................................................11
2.6 SEC Documents; Financial Statements.....................................................12
2.7 Absence of Certain Changes or Events....................................................14
2.8 Taxes...................................................................................15
2.9 Property................................................................................18
2.10 Contracts...............................................................................19
2.10.1 Material Contracts...........................................................19
2.10.2 Required Consents............................................................20
2.11 Claims and Legal Proceedings............................................................21
2.12 Labor and Employment Matters............................................................21
2.13 Employee Benefit Plans..................................................................22
2.13.1 Employee Benefit Plan Listing................................................22
2.13.2 Documents Provided...........................................................22
2.13.3 Compliance...................................................................23
2.13.4 Qualification................................................................24
2.13.5 Contributions and Premium Payments...........................................24
2.13.6 Related Employers............................................................24
2.13.7 Certain Pension Plans........................................................24
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2.13.8 Post-Termination Benefits....................................................24
2.13.9 Parachute Payments...........................................................25
2.13.10 Suits, Claims and Investigations.............................................25
2.13.11 Payments Resulting from Transactions.........................................25
2.13.12 Definitions..................................................................25
2.14 Intellectual Property...................................................................26
2.14.1 General......................................................................26
2.14.2 Company Technology...........................................................27
2.14.3 Third Party Technology.......................................................27
2.14.4 Trademarks...................................................................28
2.14.5 Intellectual Property Rights.................................................28
2.14.6 Maintenance of Rights........................................................28
2.14.7 Third Party Claims...........................................................29
2.14.8 Infringement by the Company..................................................29
2.14.9 Confidentiality..............................................................29
2.14.10 Warranty Against Defects.....................................................30
2.14.11 Domain Names.................................................................30
2.14.12 Year 2000....................................................................30
2.14.13 Participating Developers.....................................................31
2.15 Corporate Books and Records.............................................................31
2.16 Licenses, Permits, Authorizations, etc..................................................32
2.17 Compliance With Laws....................................................................32
2.18 Insurance...............................................................................32
2.19 Brokers or Finders......................................................................33
2.20 Absence of Questionable Payments........................................................33
2.21 Bank Accounts...........................................................................33
2.22 Customers and Suppliers.................................................................34
2.23 Accounts Receivable.....................................................................34
2.24 Creditors' List.........................................................................34
2.25 Insider Interests.......................................................................34
2.26 Compliance With Environmental Laws......................................................35
2.27 Information Supplied by the Company.....................................................35
2.28 Full Disclosure.........................................................................36
2.29 Xxxx-Xxxxx-Xxxxxx.......................................................................36
3.1 Organization............................................................................37
3.2 Enforceability..........................................................................37
3.3 Securities..............................................................................37
3.4 No Approvals or Notices Required; No Conflicts With Instruments.........................37
3.5 Information Supplied by XxxxXxx.xxx or Merger Sub.......................................38
3.6 Full Disclosure.........................................................................38
3.7 Capitalization..........................................................................39
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3.8 SEC Documents; Financial Statements.....................................................39
3.9 Compliance With Laws....................................................................40
3.10 Tax Matters.............................................................................40
ARTICLE IV -CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXXX.XXX AND MERGER SUB.............................41
4.1 Accuracy of Representations and Warranties..............................................41
4.2 Performance of Agreements...............................................................41
4.3 Opinion of Counsel for the Company......................................................42
4.4 Compliance Certificate..................................................................42
4.5 Material Adverse Change.................................................................42
4.6 Approvals and Consents..................................................................42
4.7 Proceedings and Documents; Secretary's Certificate......................................42
4.8 Non-U.S. Real Property Holding Corporation Affidavit....................................43
4.9 Compliance With Laws....................................................................43
4.10 Legal Proceedings.......................................................................43
4.11 Noncompetition Arrangements.............................................................43
4.12 Termination of Certain Agreements.......................................................43
4.13 Exercise or Termination of Stock Purchase Rights; Conversion of Convertible Securities..44
4.14 Company Option Plan.....................................................................44
4.15 Consents to Merger......................................................................44
4.16 Resignations............................................................................44
4.17 Tax Clearance Certificates..............................................................45
4.18 Releases of Liens.......................................................................45
4.19 Stockholder Approval....................................................................45
4.20 Affiliate Letters.......................................................................45
4.21 Voting Agreements.......................................................................45
4.22 S-4.....................................................................................45
4.23 Agreements With Certain Stockholders of the Company.....................................45
4.24 Employment and Consulting Agreements....................................................46
4.25 Lock-Up Agreements......................................................................46
4.26 Tax Opinion.............................................................................46
4.27 No Dissenters Rights....................................................................46
4.28 Board Actions...........................................................................46
ARTICLE V -CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.............................................47
5.1 Accuracy of Representations and Warranties..............................................47
5.2 Performance of Agreements...............................................................47
5.3 Compliance Certificate..................................................................47
5.4 Legal Proceedings.......................................................................47
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5.5 Material Adverse Change.................................................................48
5.6 Approvals and Consents..................................................................48
5.7 Compliance With Laws....................................................................48
5.8 Opinion of Counsel......................................................................48
5.9 S-4.....................................................................................48
5.10 Tax Opinion.............................................................................48
ARTICLE VI -COVENANTS.....................................................................................49
6.1 Conduct of Business by the Company Pending the Merger...................................49
6.2 Access to Information; Confidentiality..................................................51
6.3 No Alternative Transactions.............................................................51
6.4 Notification of Certain Matters.........................................................52
6.5 Further Action; Commercially Reasonable Efforts.........................................53
6.6 Publicity...............................................................................53
6.7 Bring-Down Capitalization Schedule......................................................54
6.8 Execution of All Operative Documents....................................................54
6.9 Stockholder Approval....................................................................54
6.10 Preparation of S-4......................................................................54
6.11 XxxxXxx.xxx Common Stock................................................................55
6.12 Retirement of Indebtedness..............................................................55
ARTICLE VII -TERMINATION, AMENDMENT AND WAIVER............................................................55
7.1 Termination.............................................................................55
7.2 Effect of Termination...................................................................56
ARTICLE VIII -GENERAL.....................................................................................56
8.1 Survival................................................................................56
8.2 Tax Matters - Reorganization Treatment..................................................57
8.3 Expenses................................................................................57
8.4 Notices.................................................................................57
8.5 Severability............................................................................58
8.6 Entire Agreement........................................................................59
8.7 Assignment..............................................................................59
8.8 Parties in Interest.....................................................................59
8.9 Governing Law; Venue....................................................................59
8.10 Headings................................................................................59
8.11 Counterparts............................................................................60
8.12 Waiver of Jury Trial....................................................................60
8.13 Amendment...............................................................................60
8.14 Waiver..................................................................................60
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EXHIBITS
2 -- Company Disclosure Memorandum
4.3 -- Form of Opinion of Counsel for the Company
4.8 -- FIRPTA Affidavit
4.11 -- Form of Confidentiality, Invention Assignment and Non-Raiding Agreement
4.20 -- Form of Affiliate Letter
4.21 -- Form of Voting Agreement
4.24A -- Form of Employment Agreement
4.24B -- Form of Consulting Agreement
4.25A -- Form of Lock-Up Agreement between XxxxXxx.xxx and White
4.25B -- Form of Lock-Up Agreement between XxxxXxx.xxx and New Horizons, LP
5.8 -- Form of Opinion of Xxxxxxx Coie
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger ("AGREEMENT") dated as of January 20,
2000, by and among XxxxXxx.xxx Inc., a Washington corporation
("XxxxXxx.xxx"), Shamu Acquisition, Inc., a Washington corporation and wholly
owned subsidiary of XxxxXxx.xxx ("MERGER SUB") and Xxxxxxx.xxx Inc., a Nevada
corporation (the "COMPANY").
RECITALS
A. The Company XxxxXxx.xxx and Merger Sub believe it advisable and in
their respective best interests to effect a merger of the Company and Merger Sub
pursuant to this Agreement (the "MERGER").
B. The Board of Directors of the Company have approved this Agreement
and the Merger as required by applicable law.
C. The Boards of Directors of XxxxXxx.xxx and Merger Sub have approved
this Agreement and the Merger as required by applicable law.
D. It is intended that the Merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"CODE").
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof, (a) at the
Effective Time (as defined in Section 1.3) the separate existence of the Company
shall cease and the Company shall be merged with and into Merger Sub (Merger Sub
as the surviving corporation after the Merger is sometimes referred to herein as
the "SURVIVING CORPORATION") and (b) from and after the Effective Time, the
Merger shall have all the effects of a merger under the laws of the state of
Washington and the state of Nevada and other applicable law.
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1.2 THE CLOSING
Subject to the terms and conditions of this Agreement, the closing of
the Merger (the "CLOSING") shall take place on the earliest practicable business
day (the "CLOSING DATE") after the satisfaction or waiver of the conditions set
forth in Articles IV and V at 10 a.m. local time at the offices of Xxxxxxx Coie
LLP, 1201 Third Avenue, 48th Floor, Seattle, Washington, or such other date,
time or location as XxxxXxx.xxx and the Company shall agree.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and subject to the terms and conditions hereof,
articles of merger and a certificate of merger (the "ARTICLES OF MERGER"),
complying with the applicable provisions of the Washington Business Corporation
Act ("WASHINGTON LAW") and the Nevada General Corporation Law ("NEVADA LAW") and
in such form and executed in such manner as required by Washington Law and
Nevada Law, shall be delivered for filing with the Secretary of State of the
state of Washington (the "WASHINGTON SECRETARY") and the Secretary of State of
the state of Nevada (the "NEVADA SECRETARY"). The Merger shall become effective
on the date (the "EFFECTIVE DATE") and at the time (the "EFFECTIVE TIME") of
filing of the Articles of Merger or at such other time as may be specified in
the Articles of Merger as filed. If the Washington Secretary or the Nevada
Secretary requires any changes in the Articles of Merger as a condition to
filing or issuing its certificate to the effect that the Merger is effective,
XxxxXxx.xxx, Merger Sub and the Company will execute any necessary revisions
incorporating such changes, provided such changes are not inconsistent with and
do not result in any material change in the terms of this Agreement.
1.4 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Articles of Incorporation of Merger Sub
shall be the Articles of Incorporation of the Surviving Corporation; provided,
however, that Article I thereof shall be amended to read as follows: "The name
of this corporation is Xxxxxxx.xxx Inc." Thereafter, the Articles of
Incorporation of the Surviving Corporation may be amended in accordance with
their terms and as provided by law.
1.5 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall become the Bylaws of the Surviving
Corporation. Thereafter, the Bylaws may be amended or repealed in accordance
with their terms and the Articles of Incorporation of the Surviving Corporation
and as provided by law.
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1.6 DIRECTORS AND OFFICERS
At the Effective Time, the directors and officers of the Company shall
resign and the directors of Merger Sub shall continue in office as the directors
of the Surviving Corporation and the officers of Merger Sub shall continue in
office as the officers of the Surviving Corporation, and such directors and
officers shall hold office in accordance with and subject to the Articles of
Incorporation and Bylaws of the Surviving Corporation.
1.7 CONVERSION OF SHARES
1.7.1 EXCHANGE RATIO
As of the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(a) All shares of any class of capital stock of the
Company held by the Company as treasury shares shall be canceled.
(b) Each issued and outstanding share of common stock,
par value $.001 per share, of the Company (the "COMPANY COMMON STOCK") that is
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive from XxxxXxx.xxx a number of shares of
XxxxXxx.xxx common stock, par value $.001 per share (the "XxxxXxx.xxx COMMON
STOCK"), determined by dividing (a) the XxxxXxx.xxx Base Shares (as defined
below) by (b) the Fully Diluted Common Stock Number (as defined below). The
quotient derived in Section 1.7.1(b) shall be rounded to three decimal points
and shall be referred to herein as the "EXCHANGE RATIO." The "XxxxXxx.xxx BASE
SHARES" shall mean the total number of shares of XxxxXxx.xxx Common Stock to be
issued in the Merger, which shall be equal to the number of shares determined by
dividing (a) $44,900,000 by (b) $17.31 (the "BASE PRICE"). The "FULLY DILUTED
COMMON STOCK NUMBER" shall mean the total number of shares of Company Common
Stock outstanding immediately prior to the Effective Time on a fully diluted
basis, as set forth on SCHEDULE 2.3 to the Company Disclosure Memorandum, which
calculation assumes (x) the exercise on a cash or cashless basis, as the case
may be, of all outstanding rights, warrants or options, vested or unvested, to
acquire Company Common Stock, regardless of restrictions on exercise or
conversion and (y) the conversion of all outstanding securities and notes
convertible at any time into Company Common Stock (such rights, warrants, notes,
options and convertible securities referenced in clauses (x) and (y) being
referred to herein as "STOCK PURCHASE RIGHTS"); provided, however, that the term
"Fully Diluted Common Stock Number" shall not include (i) the convertible note
referenced in that certain letter
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agreement dated December 9, 1999 between Momentous Inc. Pension and Trust
("MOMENTOUS") and the Company (the "MOMENTOUS NOTE"), (ii) that certain
Convertible Promissory Note in favor of Alpine Capital LLC ("ALPINE CAPITAL")
dated August 27, 1999 (the "ALPINE CAPITAL NOTE"), (iii) that certain
Convertible Promissory Note, dated December 22, 1999 (the "XxxxXxx.xxx Note"),
and any (iv) options granted pursuant to that stock option agreement dated July
26, 1999, between Astra Ventures LLC ("ASTRA Ventures") and the Company that are
unexercised as of the Effective Time, provided that such options terminate as of
the Effective Time by their terms or by later agreement of Astra Ventures. The
shares of XxxxXxx.xxx Common Stock so issued shall be referred to herein as the
"CLOSING SHARES." The number of shares of XxxxXxx.xxx Common Stock to be issued
at the Closing to each stockholder under this Section 1.7.1(b) shall be
calculated by aggregating all shares of Company Common Stock held by each such
stockholder, so that such number of shares of XxxxXxx.xxx Common Stock to be
issued shall be equal to the number of shares of Company Common Stock held by
such stockholder multiplied by the Exchange Ratio, with fractional shares
rounded up to the nearest whole number pursuant to Section 1.7.3 hereof.
(c) The aggregate number of Closing Shares shall be
subject to adjustment as follows:
(i) In the event that any Company Liability (as
defined below) exists as of the date that is immediately prior to the Closing
Date, the aggregate number of Closing Shares shall be reduced by that number of
shares of XxxxXxx.xxx Common Stock determined by dividing the dollar amount of
the Company Liability by the Base Price. "COMPANY LIABILITY" shall mean all
liabilities, debts or obligations, contingent or otherwise, existing as of the
Closing Date immediately prior to the Effective Time, the value of which shall
not exceed the value of the XxxxXxx.xxx Base Shares (as measured by multiplying
the Base Price by the number of XxxxXxx.xxx Base Shares), including without
limitation, all outstanding liability to (1) Astra Ventures, (2) employees of
the Company based on change of control provisions in such employees' respective
employment agreements, (3) Alpine Capital, (4) Xxx Xxxxx, as an earn-out under a
Share Purchase Agreement among Xxx Xxxxx, International Barter Corp. and Barter
Business Exchange Inc., dated February 28, 1999 and promissory note dated March
2, 1999 (the "BBE PURCHASE AGREEMENT AND NOTE"), (5) Momentous and (6) various
lessors, lenders and vendors created in connection with the execution of
miscellaneous leases and other agreements; provided, however, that Company
Liability shall not include, in each case existing at the Closing, (x) any
outstanding indebtedness and accrued interest payable to XxxxXxx.xxx pursuant to
the XxxxXxx.xxx Note, (y) any payables or accrued expenses incurred in the
ordinary course of business (provided such payables and accrued expenses do not
exceed in the
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aggregate $225,000) and (z) any non-cash or barter trade dollar liabilities. Any
outstanding liability referenced in (1) through (6) above shall be deemed a
Company Liability in the event such liability is retired or paid off prior to
the Effective Time. The dollar amount of Company Liability shall be reduced by
any amounts received by the Company from option holders or warrant holders as a
result of the cash exercise of stock options or warrants between the date hereof
and the Effective Date. The Company shall cause to be prepared and delivered to
XxxxXxx.xxx, on the date that is two days immediately prior to the Closing Date,
a schedule, certified by the Company's Chief Financial Officer and in form and
substance satisfactory to XxxxXxx.xxx, as to the dollar amount of the Company
Liability, which schedule shall include a break down of the dollar amounts of
each liability, debt and obligation comprising the Company Liability.
(ii) In the event XxxxXxx.xxx reasonably determines
between the date hereof and March 1, 2000 as a result of its financial due
diligence investigation and tax assessment of the Company that the Company and
its subsidiaries, taken as a whole, have liabilities or obligations (whether
absolute, accrued or contingent) that are not (a) accrued or reserved against in
the Company Balance Sheet (as defined in Section 2.6) or reflected in the notes
thereto, (b) disclosed in the financial statements of the Company filed as a
part of the Company SEC Documents (as defined in Section 2.6) or (c) disclosed
in the Company Disclosure Memorandum (as defined in the preamble to Article II)
(an "UNDISCLOSED LIABILITY"), then the aggregate number of Closing Shares shall
be reduced by that number of shares of XxxxXxx.xxx Common Stock determined by
dividing the aggregate dollar amount of such Undisclosed Liabilities (up to
$1,000,000) by the Base Price. In the event that XxxxXxx.xxx's accountants and
the Company's accountants disagree as to whether a liability or obligation is an
Undisclosed Liability (a "DISPUTED LIABILITY"), then XxxxXxx.xxx and the Company
shall cause such accountants to promptly choose an independent financial expert
mutually agreeable to the Company's accountants and XxxxXxx.xxx's accountants,
and such independent financial expert shall determine whether the Disputed
Liability is an Undisclosed Liability. The fees of such independent financial
expert shall be paid by XxxxXxx.xxx, provided, however, that if such independent
financial expert determines that the Disputed Liability is an Undisclosed
Liability, the amount of such fees shall reduce the number of Closing Shares by
treating such amount as if it were an Undisclosed Liability. Undisclosed
payables and expenses incurred in the ordinary course of business shall not be
deemed Undisclosed Liabilities, provided that such payables and expenses do not
exceed $225,000.
(d) Holders of shares of Company Common Stock who have
complied with all the requirements for perfecting dissenters' rights, as
required under
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Nevada Law, shall be entitled to their rights under Nevada Law with respect to
such shares (the "DISSENTING Shares"). Notwithstanding the foregoing, if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) the right to dissent, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent the right to receive the shares of
XxxxXxx.xxx Common Stock to which such holder is then entitled under this
Agreement and Nevada Law, without interest thereon and upon surrender of the
certificate representing such shares. Notwithstanding any provision of this
Agreement to the contrary, any Dissenting Shares held by a Shareholder who has
perfected dissenters' rights for such shares in accordance with Nevada Law shall
not be converted into ShopNow Common Stock pursuant to this Section 1.7.1.
1.7.2 EXCHANGE OF CERTIFICATES
(a) As soon as practicable after the Effective Time,
XxxxXxx.xxx shall cause Continental Stock Transfer & Trust (the "EXCHANGE
AGENT") to mail to each holder of record of Company Common Stock as of the
Effective Time (i) a letter of transmittal (which shall be in customary form and
specify that delivery shall be effected, and risk of loss and title to the
certificates of Company Common Stock shall pass, only upon delivery of such
certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of such certificates in exchange for certificates representing
XxxxXxx.xxx Common Stock. Upon surrender of a certificate of Company Common
Stock for cancellation to the Exchange Agent, together with a duly executed
letter of transmittal and such other documents as the Exchange Agent shall
require, the holder of such certificate shall be entitled to receive in exchange
therefor the number of whole shares of XxxxXxx.xxx Common Stock to which the
holder of Company Common Stock is entitled pursuant to Section 1.7.1 hereof. The
certificate so surrendered shall forthwith be canceled. Notwithstanding any
other provision of this Agreement, until holders of certificates of Company
Common Stock have surrendered them for exchange as provided herein, (i) no
dividends or other distributions shall be paid with respect to any shares
represented by such certificates, and (ii) without regard to when such
certificates are surrendered for exchange as provided herein, no interest shall
be paid on any dividends or other distributions. Upon surrender of a certificate
of Company Common Stock, there shall be paid to the holder of such certificate
the amount of any dividends or other distributions which theretofore became
payable, but which were not paid by reason of the foregoing, with respect to the
number of whole shares of XxxxXxx.xxx Common Stock represented by the
certificate or certificates issued upon such surrender. If any certificate for
XxxxXxx.xxx Common Stock is to be issued in a name other than in which the
certificate of Company Common Stock surrendered in exchange therefore is
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registered, it shall be a condition of such exchange that the person requesting
such exchange pay any transfer or other taxes required by reason of the issuance
of certificates for such shares of XxxxXxx.xxx Common Stock in a name other than
that of the registered holder of the certificate surrendered, or establish to
the satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. In connection with its undertakings pursuant to this Section
1.7.2, the Exchange Agent shall be entitled to withhold any income taxes as
required by the Code.
(b) The shares of XxxxXxx.xxx Common Stock that each
stockholder shall be entitled to receive pursuant to the Merger shall be deemed
to have been issued at the Effective Time, and no interest shall accrue on any
of the Closing Shares.
1.7.3 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of XxxxXxx.xxx
Common Stock shall be issued by virtue of the Merger. The aggregate number of
shares of XxxxXxx.xxx Common Stock a stockholder is entitled to receive pursuant
to Section 1.7.1(b) shall be rounded to the nearest whole number of shares, with
.5 being rounded up.
1.7.4 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Common Stock on the stock transfer books of the Surviving Corporation.
Any XxxxXxx.xxx Common Stock made available to the Exchange Agent and not
exchanged for certificates of Company Common Stock within one year after the
Effective Time and any dividends and distributions held by the Exchange Agent
for payment or delivery to the holders of unsurrendered certificates
representing Company Common Stock and unclaimed at the end of such one year
period shall be redelivered or repaid by the Exchange Agent to XxxxXxx.xxx,
after which time any holder of certificates of Company Common Stock who has not
theretofore delivered or surrendered such certificates to the Exchange Agent,
subject to applicable law, shall look as a general creditor only to XxxxXxx.xxx
for payment of the XxxxXxx.xxx Common Stock and any such dividends or
distributions. Notwithstanding any provision of this Agreement, none of
XxxxXxx.xxx, the Exchange Agent, the Surviving Corporation or any other party
hereto shall be liable to any holder of Company Common Stock for any XxxxXxx.xxx
Common Stock or dividends or distributions delivered to a public official
pursuant to applicable abandoned property, escheat or similar law.
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1.8 AMENDMENT TO PROVIDE FOR ALTERNATIVE MERGER STRUCTURES
If at any time prior to the Closing Date, XxxxXxx.xxx elects to have
the Company be the Surviving Corporation or elects to have the Company merge
directly into XxxxXxx.xxx or to have a different subsidiary of XxxxXxx.xxx merge
with the Company in a forward or reverse triangular merger, the parties shall
promptly enter into an amendment to this Agreement to so provide, so long as
such action does not result in a breach of a representation or warranty set
forth in Article II, or the inability to satisfy any of the conditions set forth
in Articles IV and V hereof.
1.9 OPTION GRANTS
No later than thirty days after the Effective Time, XxxxXxx.xxx will
act to grant nonqualified stock options (the "NEW OPTIONS") under its Amended
and Restated 1999 Non-Officer Stock Option Plan, or such other plan having
substantially similar terms as XxxxXxx.xxx shall determine in its sole
discretion, to acquire an aggregate of 600,000 shares of XxxxXxx.xxx Common
Stock in the numbers specified and to the members of the management of the
Company immediately prior to the Effective Time (the "MANAGEMENT MEMBERS") and
to employees of the Company immediately prior to the Effective Time (the
"RETAINED EMPLOYEES"), who have been offered and accepted employment with
XxxxXxx.xxx or the Surviving Corporation and commence employment with
XxxxXxx.xxx or the Surviving Corporation after the Effective Time (with the
allocation of such grants among such Management Members and Retained Employees
to be mutually acceptable to XxxxXxx.xxx and Liad Meidar and Xxxxxx Xxxxx,
except that 250,000 of such New Options shall be allocated to Liad Meidar). Such
New Options shall have an exercise price of $15.58 per share. One-third of the
New Options shall be vested upon the one-year anniversary of the Closing Date,
and the remaining balance of the New Options shall vest on a quarterly basis
over a period of two years following the one-year anniversary of the Closing
Date.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is otherwise set forth with appropriate Section references in
the Company Disclosure Memorandum attached as EXHIBIT 2 (the "COMPANY DISCLOSURE
MEMORANDUM"), each of which exceptions shall specifically identify or
cross-reference the provision of this Article II to which such exception
relates, and in order to induce XxxxXxx.xxx and Merger Sub to enter into and
perform this Agreement and the other agreements and documents attached hereto as
exhibits that are required to be completed and/or executed pursuant to this
Agreement (collectively, the "OPERATIVE DOCUMENTS"), the Company represents and
warrants to XxxxXxx.xxx and Merger Sub
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as of the date of this Agreement and as of the Closing Date as follows in this
Article II. For the purposes of Sections 2.7 through 2.29 of this Article II,
the term "Company" shall refer to the Company and all of its subsidiaries.
2.1 ORGANIZATION
The Company is a corporation duly organized and validly existing under
the laws of the state of Nevada. The Company's subsidiaries are duly organized
and validly existing under the laws of the jurisdictions in which they are
organized. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the
Operative Documents delivered by the Company or to which the Company is a party,
and to consummate, subject to the approval of the Merger by the stockholders of
the Company, the transactions contemplated hereby and thereby. The Company and
its subsidiaries are duly qualified and licensed as a foreign corporations to do
business and are in good standing in each jurisdiction in which the character of
the properties occupied, owned or held under lease or the nature of the business
conducted by the Company and its subsidiaries makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on the financial condition, property,
business or results of operations of the Company and its subsidiaries, taken as
a whole.
2.2 ENFORCEABILITY
All corporate action on the part of the Company and its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the Operative Documents delivered by the
Company or to which the Company is a party, the consummation of the Merger, and
the performance of all the Company's obligations under this Agreement and the
Operative Documents delivered by the Company or to which the Company is a party,
has been taken, subject to the approval of the Merger by the stockholders of the
Company. This Agreement and each of the Operative Documents to which the Company
is a party, has been duly executed and delivered by the Company and this
Agreement is, and each of the Operative Documents delivered by the Company or to
which the Company is a party is, a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms.
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2.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Company Common Stock, par value $.001 per share and 10,000,000 shares
of Preferred Stock, none of which shares of Preferred Stock are issued and
outstanding.
(b) The issued and outstanding capital stock of the Company consists
solely of 6,077,253 shares of Company Common Stock (collectively, the
"OUTSTANDING SHARES"). The Outstanding Shares are, and immediately prior to the
Closing will be, duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable federal and state
securities laws. True and correct copies of the stock records of the Company
showing all issuances of capital stock of the Company since inception have been
delivered to XxxxXxx.xxx or its counsel.
(c) As of the date of this Agreement and as of the Closing Date, and
except as contemplated by this Agreement, there are no outstanding rights of
first refusal or offer, preemptive rights, Stock Purchase Rights or other
agreements, either directly or indirectly, for the purchase or acquisition from
the Company or any stockholder of any shares of Company Common Stock or any
securities convertible into or exchangeable for shares of Company Common Stock
other than (i) options to purchase up to (A) 679,000 shares of Company Common
Stock that have been granted under the Company's 1998 Stock Option Plan (the
"COMPANY OPTION PLAN"), (B) 630,000 shares of Company Common Stock that have
been granted pursuant to a stock option agreement dated July 26, 1999, between
Astra Ventures and the Company, (C) 40,000 shares of Company Common Stock that
have been granted pursuant to a stock option agreement between Xxxxx Xxxxxxxx
and the Company, (ii) 1,333,333 shares of Company Common Stock issuable upon
conversion of that certain Convertible Promissory Note dated August 27, 1999 in
favor of Alpine Capital LLC (the "ALPINE CAPITAL NOTE"), (iii) 183,333 shares of
Company Common Stock issuable upon exercise of that certain warrant dated August
27, 1999 issued to Alpine Capital LLC (the "ALPINE CAPITAL WARRANT"), (iv)
706,000 shares of Company Common Stock issuable upon exercise of outstanding E
Warrants and (v) shares of Company Common Stock issuable upon conversion of the
Momentous Note. Set forth on SCHEDULE 2.3 to the Company Disclosure Memorandum
is a spreadsheet accurately reflecting the number of options and other Stock
Purchase Rights outstanding, the grant or issue dates, vesting schedules and
exercise or conversion prices thereof and, in each case, the identities of the
holders and an indication of their relationships to the Company (if any exist
other than a security holder). The Company has delivered to XxxxXxx.xxx or its
counsel true and correct copies of the Company Option Plan, all stock option
agreements, board resolutions and exercise documentation relating to options
granted thereunder and granted to Astra Ventures and Xxxxx Xxxxxxxx and all
agreements with
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respect to Stock Purchase Rights. SCHEDULE 2.3 to the Company Disclosure
Memorandum also identifies all options, warrants or other Stock Purchase Rights
that have been offered in connection with any employee or consulting agreement
but that, as of the date hereof, have not been issued or granted.
(d) Except as contemplated by this Agreement, the Company is not a
party or subject to any agreement or understanding and there is no agreement or
understanding between any Persons (as defined in Section 2.5) that affects or
relates to the voting or giving of written consents with respect to any
securities of the Company or the voting by any director of the Company. No
stockholder or any affiliate thereof is indebted to the Company, and the Company
is not indebted to any stockholder or any affiliate thereof. The Company is not
under any contractual or other obligation to register any of its presently
outstanding securities or any of its securities that may hereafter be issued.
(e) All rights of refusal, co-sale rights and registration rights
granted by the Company with respect to the Company Common Stock or Stock
Purchase Rights of the Company are described on SCHEDULE 2.3 to the Company
Disclosure Memorandum.
(f) All options, Stock Purchase Rights and shares of Company Common
Stock have been granted or issued at fair market value, as determined by the
Company's Board of Directors at the date of grant or issuance.
2.4 SUBSIDIARIES AND AFFILIATES
The Company does not own, directly or indirectly, any ownership,
equity, or voting interest in, any corporation, partnership, joint venture or
other entity, and has no agreement or commitment to purchase any such interest.
2.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance of this Agreement and the
Operative Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby will not
(a) constitute a violation (with or without the giving of
notice or lapse of time, or both) of any provision of law or any judgment,
decree, order, regulation or rule of any court or other governmental authority
applicable to the Company;
(b) require any consent, approval or authorization of, or
declaration, filing or registration with, any person, corporation, partnership,
joint venture, association, organization, other entity or governmental or
regulatory authority (a
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"PERSON"), except for (i) approval by the stockholders of the Company, (ii) the
filing of all documents necessary to consummate the Merger with the Washington
Secretary and the Nevada Secretary, (iii) the filing of a premerger notification
report and all other required documents by XxxxXxx.xxx and the Company, and the
expiration of all applicable waiting periods, under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and (iv) any
filings with the Securities and Exchange Commission (the "SEC") including such
reports and information as may be required under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), the Securities Act and the rules and
regulations promulgated by the SEC under the Exchange Act or the Securities Act
and the declaration of the effectiveness of the S-4 (as defined in Section 2.27)
by the SEC;
(c) result in a default under (with or without the giving
of notice or lapse of time, or both), or acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any agreement, lease, note or other restriction, encumbrance, obligation or
liability to which the Company is a party or by which it is bound or to which
its assets are subject;
(d) result in the creation of any liens, mortgages,
pledges, deeds of trust, security interests, charges, encumbrances or other
adverse claims of interest of any kind (each, an "ENCUMBRANCE") upon any assets
of the Company or the Outstanding Shares;
(e) conflict with or result in a breach of or constitute
a default under any provision of the Company's Articles of Incorporation or
Bylaws, or
(f) invalidate or adversely affect any permit, license or
authorization or status used in the conduct of the Company's business.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS
(a) The Company has filed all forms, reports and documents required to
be filed by it with the SEC since June 8, 1998 (the date the Company first
became a reporting Company under the Exchange Act) through the date of this
Agreement (collectively, the "COMPANY SEC DOCUMENTS"). As of their respective
filing dates, the Company SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Company
SEC Documents, and none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were
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made, not misleading. As of their respective filing dates, the financial
statements of the Company included in the Company SEC Documents (the "COMPANY
FINANCIAL STATEMENTS") complied as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and were prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied (except as may be
indicated in the notes thereto) and fairly presented, in all material respects,
the consolidated financial position of the Company and its subsidiaries as at
the dates thereof and the results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring audit adjustments not material in scope or amount). There has been no
change in the Company's accounting policies or the methods of making accounting
estimates or changes in estimates that are material to the Company Financial
Statements, except as described in the notes thereto. The balance sheet of the
Company as of September 30, 1999 is herein referred to as the "COMPANY BALANCE
SHEET".
(b) The Company has delivered to XxxxXxx.xxx copies of the Company's
unaudited consolidated balance sheet as of September 30, 1999, and income
statement and statement of cash flows for the period ended September 30, 1999.
Such financial statements: (i) are in accordance with the books and records of
the Company; (ii) fairly present in all material respects the Company's
financial condition at the date therein indicated and the results of operations
for the period therein indicated and the results of operations for the period
therein specified; and (iii) have been prepared in accordance with GAAP applied
on a consistent basis (except for the absence of any footnotes required by
GAAP).
(c) The Company has heretofore furnished to XxxxXxx.xxx a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
(d) The Company and its subsidiaries, taken as a whole, have no
liabilities or obligations (whether absolute, accrued or contingent) except (i)
liabilities, obligations or contingencies that are accrued or reserved against
in the Company Balance Sheet or reflected in the notes thereto or disclosed in
the financial statements of the Company filed as a part of the Company SEC
Documents, (ii) liabilities, obligations or contingencies that would not have a
material adverse effect on the business, operations, prospects or financial
condition of the Company, or (iii) additional liabilities, obligations or
contingencies reserved against since the date of the Company Balance
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Sheet that (x) have arisen in the ordinary course of business and (y) are
accrued or reserved against on the books and records of the Company and its
subsidiaries.
(e) Except as disclosed in the Company SEC Documents as filed and
amended before the date hereof and as contemplated by this Agreement, since
September 30, 1999, no material adverse change in the business, financial
condition, results of operations or prospects of Company has occurred.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except for transactions specifically contemplated in this Agreement,
since the date of the Company Balance Sheet, neither the Company nor any of its
officers or directors in their representative capacities on behalf of the
Company have:
(a) taken any action or entered into or agreed to enter
into any transaction, agreement or commitment other than in the ordinary course
of business;
(b) forgiven or canceled any indebtedness or waived any
claims or rights of material value (including, without limitation, any
indebtedness owing by any stockholder, officer, director, employee or affiliate
of the Company);
(c) granted any increase in the compensation of
directors, officers, employees or consultants;
(d) suffered any change having a material adverse effect
on the Company's business operations, assets, liabilities (absolute, accrued,
contingent or otherwise), condition (financial or otherwise) or prospects;
(e) borrowed or agreed to borrow any funds, incurred or
become subject to, whether directly or by way of assumption or guarantee or
otherwise, any obligations or liabilities (absolute, accrued, contingent or
otherwise) in excess of $10,000 individually or in excess of $20,000 in the
aggregate, except liabilities and obligations that are incurred in the ordinary
course of business and consistent with past practice, or increased, or
experienced any change in any assumptions underlying or methods of calculating,
any bad debt, contingency or other reserves;
(f) paid, discharged or satisfied any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of claims, liabilities and obligations
reflected or reserved against in the Company Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since the date of
the Company Balance Sheet, or prepaid any
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obligation having a fixed maturity of more than 90 days from the date such
obligation was issued or incurred;
(g) knowingly permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
Encumbrance;
(h) purchased or sold, transferred or otherwise disposed
of any of its material properties or assets (real, personal or mixed, tangible
or intangible);
(i) disposed of or permitted to lapse any rights to the
use of any trademark, trade name, patent or copyright, or disposed of or
disclosed to any Person without obtaining an appropriate confidentiality
agreement from any such Person any trade secret, formula, process or know-how
not theretofore a matter of public knowledge;
(j) made any single capital expenditure or commitment in
excess of $10,000 for additions to property, plant, equipment or intangible
capital assets or otherwise or made aggregate capital expenditures in excess of
$20,000 for additions to property, plant, equipment or intangible capital assets
or otherwise;
(k) made any change in accounting methods or practices or
internal control procedure;
(l) issued any capital stock or other securities, or
declared, paid or set aside for payment any dividend or other distribution in
respect of its capital stock, or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other securities of the
Company, or otherwise permitted the withdrawal by any of the holders of Company
Common Stock of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with past
practice;
(m) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to any of the stockholders or any of the Company's
officers, directors or employees or any affiliate of any of the stockholders of
the Company or of the Company's officers, directors or employees, except
compensation paid to officers and employees at rates not exceeding the rates of
compensation paid during the fiscal year last ended and except for advances for
travel and other business-related expenses; or
(n) agreed, whether in writing or otherwise, to take any
action described in this Section 2.7.
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2.8 TAXES
(a) (i) All Tax Returns (as defined below) required to be filed by or
on behalf of the Company have been timely filed and all such Tax Returns were
(at the time they were filed) and are true, correct and complete in all
respects; (ii) all Taxes (as defined below) of the Company (whether or not
reflected on any Tax Return) have been fully and timely paid; (iii) no waivers
of statutes of limitation have been given or requested with respect to the
Company in connection with any Tax Returns covering the Company with respect to
any Taxes payable by it; (iv) no taxing authority in a jurisdiction where the
Company does not file Tax Returns has made a claim, assertion or threat to the
Company that the Company is or may be subject to taxation by such jurisdiction,
and the Company has never been subject to state taxes (other than payroll taxes
that were fully and timely withheld and paid) in any state other than
Washington; (v) the Company has duly and timely withheld from employee salaries,
wages and other compensation and paid over to the appropriate governmental
authority all amounts required to be so withheld and paid over for all periods
under all applicable laws; (vi) there are no liens with respect to Taxes on any
of the Company's property or assets other than liens for current Taxes not yet
payable; (vii) there are no Tax rulings, requests for rulings, or closing
agreements relating to the Company that could affect the liability for Taxes or
the amount of taxable income of the Company for any period (or portion of a
period) after the date hereof; and (viii) any adjustment of Taxes of the Company
made by the IRS (as defined below) in any examination that is required to be
reported to the appropriate state, local or foreign taxing authorities has been
reported, and any additional Taxes due with respect thereto have been paid.
(b) Neither the Company nor any other Person on behalf of the Company
(i) has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company;
(ii) has executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or has notice that a governmental authority has proposed any such
adjustment or change in accounting method.
(c) There is no outstanding dispute or claim concerning any Tax
liability of the Company, nor to the knowledge of the Company is any such claim
or dispute pending. SCHEDULE 2.8 to the Company Disclosure Memorandum lists all
Tax Returns filed with respect to the Company for taxable periods ended on or
after the Company's
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inception or the inception of any predecessor that have been audited, and
indicates those Tax Returns that currently are the subject of audit. The Company
has delivered to XxxxXxx.xxx correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company since the Company's inception.
(d) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(e) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of a Tax Group (as defined
below) filing a consolidated income Tax Return under Section 1501 of the Code
(or any similar provision of state, local or foreign law) and (ii) does not have
any liability for Taxes of any Person under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law) or by
operation of law or as a transferee or successor by contract or otherwise.
(f) The unpaid Taxes of the Company (i) did not, as of December 31,
1999, exceed the reserve for Tax liability set forth on the face (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) of the Company Balance Sheet and (ii) do not exceed that
reserve as adjusted for the passage of time and operations in the ordinary
course of business through the Closing Date.
(g) The aggregate net income tax losses (including net operating
losses) of the Company have exceeded its taxable income for all periods and
there has been no ownership change, as defined in Section 382(g) of the Code (or
any comparable provision of state or local or foreign law), with respect to the
Company during or after any taxable period in which the Company incurred a net
operating loss. The Company has no liability for unpaid income taxes. (including
any liability for penalties or interest with respect to such taxes). The Company
has never owed income taxes for any tax year (including the portion of the tax
year ending on the date hereof).
(h) All options that the Company has treated as incentive stock options
under Section 421 of the Code meet the requirements of Section 422 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"TAXES" means all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties and other assessments, including, but not
limited to, any income,
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alternative minimum or add-on, estimated, gross income, gross receipts, sales,
use, transfer, transactions, intangibles, ad valorem, value-added, franchise,
registration, title, license, capital, paid-up capital, profits, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, real
property, recording, personal property, federal highway use, commercial rent,
environmental (including, but not limited to, taxes under Section 59A of the
Code) or windfall profit tax, custom, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest, penalties or additions to tax; and "TAX" means any of the foregoing
Taxes.
"TAX GROUP" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"TAX RETURNS" means any return, declaration, report, claim or refund,
information return, statement or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2.9 PROPERTY
(a) The Company owns no real property other than the leasehold
interests described on SCHEDULE 2.9(a) to the Company Disclosure Memorandum (the
"REAL PROPERTY"). The Company has delivered to XxxxXxx.xxx or its counsel true
and complete copies of all written leases, subleases, rental agreements,
contracts of sale, tenancies or licenses relating to the Real Property and
written summaries of the terms of any oral leases, subleases, rental agreements,
contracts of sale, tenancies or licenses to which the Real Property is subject.
(b) SCHEDULE 2.9(b) to the Company Disclosure Memorandum contains a
complete and accurate list of each item of personal property having a value in
excess of $10,000 that is owned, leased, rented or used by the Company (the
"PERSONAL PROPERTY"); provided that such list need not describe the Technology
or the IP Rights (as defined in Sections 2.14.2 and 2.14.5, respectively),
listed on SCHEDULE 2.14 to the Company Disclosure Memorandum. The Company has
delivered to XxxxXxx.xxx true and complete copies of all leases, subleases,
rental agreements, contracts of sale, tenancies or licenses to which the
Personal Property is subject. The gross value of the Company's assets (including
the assets of Cascade Trade Association) at the time of the Company's
reincorporation as a Nevada corporation did not exceed $500,000.
(c) The Real Property and the Personal Property include all the
properties and assets (whether real, personal or mixed, tangible or intangible)
(other than, in the
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case of the Personal Property, property rights with an individual value of less
than $10,000 and the Technology and IP Rights) reflected in the Company Balance
Sheet. The Real Property and the Personal Property include all material property
used in the business of the Company, other than the Technology and IP Rights.
The Company's offices and other structures and its Personal Property are in good
operating condition and repair, normal wear and tear excepted, are adequate for
the uses to which they are being put, and, to the Company's knowledge, comply in
all material respects with applicable safety and other laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real
Property is free and clear of all Encumbrances. To the Company's knowledge, each
lease of any portion of the Real Property is valid, binding and enforceable in
accordance with its terms against the parties thereto and against any other
Person with an interest in such Real Property, the Company has performed in all
material respects all obligations imposed on it thereunder, and neither the
Company nor, to the knowledge of the Company, any other party thereto is in
default thereunder, nor is there any event that with notice or lapse of time, or
both, would constitute a default thereunder by the Company or, to the knowledge
of the Company, by any other party. The Company has not granted any lease,
sublease, tenancy or license of, or entered into any rental agreement or
contract of sale with respect to, any portion of the Real Property.
(e) The Personal Property is free and clear of all Encumbrances, and,
other than leased Personal Property that is so noted on the list supplied
pursuant to Section 2.9(b), the Company owns such Personal Property. To the
Company's knowledge, each lease, license, rental agreement, contract of sale or
other agreement to which the Personal Property is subject is valid, binding and
enforceable in accordance with its terms against the parties thereto, the
Company has performed in all material respects all obligations imposed on it
thereunder, and neither the Company nor, to the knowledge of the Company, any
other party thereto is in default thereunder, nor is there any event that with
notice or lapse of time, or both, would constitute a default by the Company or,
to the knowledge of the Company, any other party thereunder. The Company has not
granted any lease, sublease, tenancy or license of any portion of the Personal
Property, except in the ordinary course of business.
2.10 CONTRACTS
2.10.1 MATERIAL CONTRACTS
As of the date of this Agreement, all of the Company's "material
contracts" as such term is defined under Item 601 of Regulation S-K, have been
filed under the Exchange Act. Except to the extent that such agreements have
expired by their own
-19-
terms, each agreement disclosed by the Company under the Exchange Act is in full
force and effect, except where the failure to be in full force and effect would
not have a material adverse affect on the business condition of the Company.
None of the parties to any of such agreements have terminated, except when such
agreements have expired under their own terms. The Company has provided to
XxxxXxx.xxx lease documents for any real or personal property in which the
amount of payments that the Company is required to make on an annual basis
exceeds $20,000 and that have not been filed as an exhibit to any Company SEC
Documents. Except as set forth on SCHEDULE 2.10.1 to the Company Disclosure
Memorandum and the Company SEC Documents, the Company has no
(a) contracts with directors, officers, stockholders,
employees, agents, consultants, advisors, salespeople, sales representatives,
distributors or dealers that cannot be canceled by the Company within 30 days'
notice without liability, penalty or premium, any agreement or arrangement
providing for the payment of any bonus or commission based on sales or earnings,
or any compensation agreement or arrangement affecting or relating to former
employees of the Company;
(b) employment agreement, whether express or implied, or
any other agreement for services that contains severance or termination pay
liabilities or obligations;
(c) noncompetition agreement or other arrangement that
would prevent the Company from carrying on its business anywhere in the world;
(d) notice that any party to any material contract
intends to cancel, terminate or refuse to renew such contract (if such contract
is renewable) or materially modify such contract;
(e) material dispute with any of its suppliers, material
customers, distributors, OEM resellers, licensors or licensees;
(f) product distribution agreement, development agreement
or license agreement as licensor or licensee (except for standard nonexclusive
software licenses granted to end-user customers in the ordinary course of
business, the form of which has been provided to XxxxXxx.xxx, or standard
licenses purchased by the Company for off-the-shelf software);
(g) joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons;
-20-
(h) instrument evidencing indebtedness for borrowed money
by way of a direct loan, sale of debt securities, purchase money obligation,
conditional sale or guarantee, or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Company Financial Statements; and
(i) agreements or commitments to provide indemnification,
except as provided in the Company's Articles of Incorporation, Bylaws and under
Nevada Law.
2.10.2 REQUIRED CONSENTS
The execution and delivery of this Agreement and the performance of the
obligations of the Company hereunder will not constitute a default under any
material contracts or agreements to which the Company is currently a party or by
which the Company currently is bound and do not require the consent or waiver of
any other party to any such contract or agreement, except for those consents
and/or waivers listed on SCHEDULE 2.10.2 to the Company Disclosure Memorandum,
all of which will be obtained on or prior to the Closing.
2.11 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth on SCHEDULE 2.11 and SCHEDULE 2.14 to the Company
Disclosure Memorandum, there are no claims, actions, suits, arbitrations,
mediations, investigations or proceedings pending or, to the knowledge of the
Company, threatened against the Company before or by any court or governmental
or nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person. To the knowledge of the Company, except as
set forth on SCHEDULE 2.11 and SCHEDULE 2.14 to the Company Disclosure
Memorandum, there is no valid basis for any claim, action, suit, arbitration,
proceeding or investigation before or by any Person. There are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the Company is a
party. SCHEDULE 2.11 to the Company Disclosure Memorandum sets forth a
description of any material disputes that have been settled or resolved by
litigation or arbitration since the Company's inception.
2.12 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or
disciplinary actions pending or, to the knowledge of the Company, threatened
against or involving the Company or any of its present or former employees. The
Company has complied in all material respects with all provisions of law
relating to employment and employment practices, terms and conditions of
employment, wages and hours. The Company is not engaged in any unfair labor
practice and has no liability for any arrears of wages or Taxes or penalties for
failure to comply with any such provisions of law.
-21-
There is no labor strike, dispute, slowdown or stoppage pending or, to the
knowledge of the Company, threatened against or affecting the Company, and the
Company has not experienced any work stoppage or other labor difficulty since
its incorporation. No collective bargaining agreement is binding on the Company.
The Company has no knowledge of any organizational efforts presently being made
or threatened by or on behalf of any labor union with respect to employees of
the Company. Each employee, officer and consultant of the Company has executed a
nondisclosure agreement in the form provided to XxxxXxx.xxx. To the knowledge of
the Company, no employee (or person performing similar functions) of the Company
is in violation of any such agreement or any employment agreement,
noncompetition agreement, patent disclosure agreement, invention assignment
agreement, proprietary information agreement or other contract or agreement
relating to the relationship of such employee with the Company or any other
party.
SCHEDULE 2.12 to the Company Disclosure Memorandum lists (a) the names
and current compensation amounts of all directors and officers of the Company;
(b) the wage rates for non-salaried and non-officer salaried employees of the
Company by classification, and all union contracts (if any); (c) all group
insurance programs in effect for employees of the Company; and (d) the names and
current compensation packages of all independent contractors and consultants of
the Company. The Company is not in default with respect to any of its
obligations referred to in clause (b) above and has no, and will not incur any,
obligation or liability for severance or back pay owed through or by virtue of
the Merger. Except as disclosed on SCHEDULE 2.12 to the Company Disclosure
Memorandum, all employees of the Company are employed on an "at will" basis, and
are eligible to work and are lawfully employed in the United States.
2.13 EMPLOYEE BENEFIT PLANS
2.13.1 EMPLOYEE BENEFIT PLAN LISTING
SCHEDULE 2.13.1 to the Company Disclosure Memorandum contains a
complete and accurate list of all Employee Benefit Plans (as defined below). The
Company does not have any agreement, arrangement, commitment or obligation to
create, enter into or contribute to any additional Employee Benefit Plan or to
modify any existing Employee Benefit Plan. There has been no amendment,
interpretation or other announcement or communication (written or oral) by the
Company (or any other Person) relating to, or change in participation or
coverage under, any Employee Benefit Plan that, either alone or together with
other such occurrences or events, could materially increase the expense of
maintaining the Employee Benefit Plans above the level of expense incurred with
respect thereto for the most recent fiscal
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year included in the Company Financial Statements. The terms of each Employee
Benefit Plan permit the Company to amend or terminate such Employee Benefit Plan
at any time and for any reason without penalty or material expense.
2.13.2 DOCUMENTS PROVIDED
The Company has delivered to XxxxXxx.xxx true, correct and complete
copies (or, in the case of unwritten Employee Benefit Plans, descriptions) of
all Employee Benefit Plans (and all amendments thereto), along with, to the
extent applicable to the particular Employee Benefit Plan, copies of the
following: (a) the last three annual reports (Form 5500 series) filed with
respect to such Employee Benefit Plan; (b) all summary plan descriptions,
summaries of material modifications and material employee manuals and
communications filed or distributed with respect to such Employee Benefit Plan
during the last three years; (c) all contracts and agreements (and any
amendments thereto) relating to such Employee Benefit Plan, including, without
limitation, all trust agreements, investment management agreements, annuity
contracts, insurance contracts, bonds, indemnification agreements and service
provider agreements; (d) all written communications relating to the amendment,
creation or termination of such Employee Benefit Plan, or an increase or
decrease in benefits, acceleration of payments or vesting or other events that
could result in liability to the Company sent or received during the last three
years; (e) all correspondence to or from any governmental entity or agency
relating to such Employee Benefit Plan sent or received during the last three
years; (f) all COBRA (as defined below) and HIPAA (as defined below) forms and
notices currently in use; and (g) all coverage and nondiscrimination tests
performed with respect to such Employee Benefit Plan for the last three years.
2.13.3 COMPLIANCE
With respect to each Employee Benefit Plan: (a) such Employee Benefit
Plan is, and at all times since inception has been, maintained, administered,
operated and funded in all respects in accordance with its terms and in material
compliance with all applicable requirements of all applicable laws, statutes,
orders, rules and regulations, including, without limitation, ERISA (as defined
below), COBRA, HIPAA and the Code; (b) the Company, each fiduciary of such
Employee Benefit Plan and all other Persons have, at all times, properly
performed all obligations in all material respects, whether arising by operation
of law or by contract, required to be performed by any of them in connection
with such Employee Benefit Plan; (c) all reports, Tax Returns, information
returns and other information and returns relating to such Employee Benefit Plan
required to be filed with any governmental entity or agency have been accurately
completed and timely and properly filed; (d) all notices, statements, reports
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and other disclosure required to be given or made to participants in such
Employee Benefit Plan or their beneficiaries have been accurately completed and
timely and properly disclosed or provided; (e) neither the Company nor any
fiduciary of such Employee Benefit Plan has engaged in any transaction or acted
or failed to act in a manner that violates the fiduciary requirements of ERISA
or any other applicable law; (f) no transaction or event has occurred or is
threatened or about to occur (including, without limitation, any of the
transactions contemplated in or by this Agreement or any of the other Operative
Documents) that constitutes or could constitute a "prohibited transaction," as
defined in Section 4975 of the Code or Section 406 or 407 of ERISA; and (g) the
Company has not incurred, and there exists no condition or set of circumstances
in connection with which the Company, XxxxXxx.xxx, Merger Sub or any of their
affiliates could incur, directly or indirectly, any material liability or
expense (except for routine contributions and benefit payments) under ERISA, the
Code or any other applicable law, statute, order, rule or regulation with
respect to such Employee Benefit Plan or pursuant to any indemnification or
similar agreement related to such Employee Benefit Plan.
2.13.4 QUALIFICATION
No Employee Benefit Plan is intended to be qualified under Section
401(a)
2.13.5 CONTRIBUTIONS AND PREMIUM PAYMENTS
All contributions, premiums and other payments due or required to be
paid to (or with respect to) each Employee Benefit Plan have been timely paid,
or, if not yet due, have been fully reserved for, and specifically identified
in, the Closing Balance Sheet.
2.13.6 RELATED EMPLOYERS
The Company is not, and has never been, a member of (a) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (b) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (c) an affiliated service group, within the meaning
of Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
2.13.7 CERTAIN PENSION PLANS
The Company does not maintain or contribute to, and has never
maintained or contributed to (or been obligated to contribute to), any
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA or
414(f) of the Code, any multiple
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employer plan within the meaning of Section 4063 or 4064 of ERISA or Section
413(c) of the Code or any employee benefit plan, fund, program, contract or
arrangement that is subject to Section 412 of the Code, Section 302 of ERISA or
Title IV of ERISA.
2.13.8 POST-TERMINATION BENEFITS
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) post-employment or
post-termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of the Company, other than (a)
continuation coverage mandated by Sections 601 through 608 of ERISA and Section
4980B(f) of the Code, and (b) deferred compensation that is accrued as a current
liability on the Closing Balance Sheet.
2.13.9 PARACHUTE PAYMENTS
The Company has not made any payments, is not obligated to make any
payments and is not a party to any agreement that could obligate it to make any
payments that would not be deductible under Section 280G of the Code (or any
similar provision of state, local or foreign law).
2.13.10 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of the Company, threatened with respect
to (or against the assets of) any Employee Benefit Plan, nor, to the knowledge
of the Company, is there a basis for any such action, suit or claim. No Employee
Benefit Plan is currently under investigation, audit or review, directly or
indirectly, by the IRS, the DOL (as defined below) or any other governmental
entity or agency, and, to the knowledge of the Company, no such action is
contemplated or under consideration by the IRS, the DOL or any other
governmental entity or agency.
2.13.11 PAYMENTS RESULTING FROM TRANSACTIONS
Except as set forth on Schedule 2.13.11 to the Company Disclosure
Memorandum, either the execution and delivery of this Agreement or the other
Operative Documents nor the consummation of the transactions contemplated in (or
by) this Agreement or the other Operative Documents (either alone or together
with any other transaction or event) will (a) entitle any individual to
severance pay, unemployment compensation or any other payment from the Company,
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XxxxXxx.xxx, Merger Sub, any of their affiliates or any Employee Benefit Plan,
(b) increase the amount of compensation due to any individual, (c) result in any
benefit or right becoming established or increased, or accelerate the time of
payment or vesting of any benefit, under any Employee Benefit Plan, or (d)
require the Company, XxxxXxx.xxx, Merger Sub or any of their affiliates to
transfer or set aside any assets to fund or otherwise provide for any benefits
for any individual.
2.13.12 DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(a) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
(b) "DOL" means the United States Department of Labor.
(c) "EMPLOYEE BENEFIT PLAN" means any retirement, pension, profit
sharing, deferred compensation, stock bonus, savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, stock appreciation
rights, fringe benefit or other employee benefit plan, fund, policy, program,
contract, arrangement or payroll practice (including, without limitation, any
"employee benefit plan," as defined in Section 3(3) of ERISA) or any employment,
consulting or personal services contract, whether written or oral, qualified or
nonqualified, or funded or unfunded, (i) sponsored, maintained or contributed to
by the Company or to which the Company is a party, (ii) covering or benefiting
any current or former officer, employee, agent, director or independent
contractor of the Company (or any dependent or beneficiary of any such
individual), or (iii) with respect to which the Company has (or could have) any
obligation or liability.
(d) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(e) "HIPAA" means the Health Insurance Portability and Accountability
Act of 1997, as amended.
(f) "IRS" means the United States Internal Revenue Service.
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2.14 INTELLECTUAL PROPERTY
2.14.1 GENERAL
The Company owns or is licensed and has all rights that are required to
conduct its business as now conducted and as proposed to be conducted in and to
the following: (a) all products, tools, computer programs, specifications,
source code, object code, graphics, devices, techniques, algorithms, methods,
processes, procedures, packaging, trade dress, formulae, drawings, designs,
improvements, discoveries, concepts, user interfaces, development and other
tools, content, inventions (whether or not patentable or copyrightable and
whether or not reduced to practice), designs, logos, themes, know-how, concepts
and other technology that are now, or during the two years prior to the date of
this Agreement have been, or currently are proposed to be, developed, produced,
used, marketed or sold by the Company (collectively, the "TECHNOLOGY-RELATED
ASSETS"); and (b) all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade names,
trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights and domestic and foreign letters patent,
and the registrations, applications, renewals, extensions and continuations (in
whole or in part) thereof, all goodwill associated therewith and all rights and
causes of action for infringement, misappropriation, misuse, dilution or unfair
trade practices associated therewith.
2.14.2 COMPANY TECHNOLOGY
SCHEDULE 2.14.2 to the Company Disclosure Memorandum sets forth a list
of all products and tools developed, produced, used, marketed or sold by the
Company during the two years prior to the date of this Agreement, together with
all prior versions, predecessors or precursors to such products or tools
(collectively, the "PRODUCTS"). Except for the Third Party Technologies (as
defined in Section 2.14.3 hereof), the Company owns all right, title and
interest in and to the following (collectively, the "TECHNOLOGY"), free and
clear of all Encumbrances: (a) the Products, together with any and all codes,
techniques, software tools, formats, designs, user interfaces, content related
thereto; (b) any and all updates, enhancements, corrections, modifications,
improvements and new releases related to the items set forth in clause (a)
above; (c) any and all technology and work in progress related to the items set
forth in clauses (a) and (b) above; and (d) all inventions, discoveries,
processes, designs, trade secrets, know-how and other confidential or
proprietary information related to the items set forth in clauses (a), (b), and
(c) above. The Technology, excluding the Third Party Technologies (as defined
below), is sometimes referred to herein as the "COMPANY TECHNOLOGY."
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2.14.3 THIRD PARTY TECHNOLOGY
SCHEDULE 2.14.3 to the Company Disclosure Memorandum sets forth a list
of all Technology used in the Company's business for which the Company does not
own all right, title and interest (collectively, the "THIRD PARTY
TECHNOLOGIES"), and all license agreements or other contracts pursuant to which
the Company has the right to use (in the manner used by the Company, or intended
or necessary for use with the Company Technology) the Third Party Technologies
(the "THIRD PARTY LICENSES"), indicating, with respect to each of the Third
Party Technologies listed therein, the owner thereof and the Third Party License
applicable thereto. The Company has the lawful right to use (free of any
material restriction) (a) all Third Party Technology that is incorporated in or
used in the development or production of the Company Technology and (b) all
other Third Party Technology necessary for the conduct of the Company's business
as now conducted and as proposed to be conducted. To the Company's knowledge,
all Third Party Licenses are valid, binding and in full force and effect; the
Company and, to the knowledge of the Company, each other party thereto has
performed in all material respects his, her or its obligations thereunder; and
neither the Company nor, to the knowledge of the Company, any other party
thereto is in material default thereunder, nor to knowledge of the Company has
there occurred any event or circumstance that with notice or lapse of time or
both would constitute a default or event of default on the part of the Company
or, to the knowledge of the Company, any other party thereto or give to any
other party thereto the right to terminate or modify any Third Party License.
The Company has not received notice that any party to any Third Party License
intends to cancel, terminate or refuse to renew such Third Party License or to
exercise or decline to exercise any option or right thereunder.
2.14.4 TRADEMARKS
SCHEDULE 2.14.4 to the Company Disclosure Memorandum sets forth a list
of all trademarks, trade names, brand names, service marks, logos or other
identifiers for the Products or otherwise used by the Company in its business
(the "MARKS"). The Company has full legal and beneficial ownership, free and
clear of any Encumbrances, of all rights conferred by use of the Marks in
connection with the Products or otherwise in the Company's business and, as to
those Marks that have been registered in the United States Patent and Trademark
Office, by federal registration of the Marks.
2.14.5 INTELLECTUAL PROPERTY RIGHTS
SCHEDULE 2.14.5 to the Company Disclosure Memorandum sets forth all
patents, patent applications, copyright registrations (and applications
therefor) and trademark registrations (and applications therefor) (collectively,
the "IP REGISTRATIONS") associated
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with the Company Technology and the Marks. The Company owns all right, title and
interest, free and clear of any Encumbrances, in and to the IP Registrations,
together with any other rights in or to any copyrights (registered or
unregistered), rights in the Marks (registered or unregistered), trade secret
rights and other intellectual property rights (including, without limitation,
rights of enforcement) contained or embodied in the Company Technology and the
Marks (collectively, the "IP RIGHTS").
2.14.6 MAINTENANCE OF RIGHTS
Except as set forth on SCHEDULE 2.14.6 to the Company Disclosure
Memorandum, the Company has not conducted its business, and has not used or
enforced (or, to the knowledge of the Company, failed to use or enforce) the IP
Rights, in a manner that would result in the abandonment, cancellation or
unenforceability of any item of the IP Rights or the IP Registrations, and the
Company has not taken (or, to the knowledge of the Company, failed to take) any
action that would result in the forfeiture or relinquishment of any IP Rights or
IP Registrations. Except as set forth in SCHEDULE 2.14.6 to the Company
Disclosure Memorandum, the Company has not granted to any third party any rights
or permissions to use any of the Technology or the IP Rights. To the knowledge
of the Company, except pursuant to reasonably prudent safeguards, (a) no third
party has received any confidential information relating to the Technology or
the IP Rights and (b) the Company is not under any contractual or other
obligation to disclose to any third party any Company Technology.
2.14.7 THIRD PARTY CLAIMS
Except as set forth on SCHEDULE 2.14.7 to the Company Disclosure
Memorandum, (a) the Company has not received any notice or claim (whether
written, oral or otherwise) challenging the Company's ownership or rights in the
Company Technology or the IP Rights or claiming that any other person or entity
has any legal or beneficial ownership with respect thereto; (b) all the IP
Rights are legally valid and enforceable without any material qualification,
limitation or restriction on their use, and the Company has not received any
notice or claim (whether written, oral or otherwise) challenging the validity or
enforceability of any of the IP Rights; and (c) to the knowledge of the Company,
no other person or entity is infringing or misappropriating any part of the IP
Rights or otherwise making any unauthorized use of the Company Technology.
2.14.8 INFRINGEMENT BY THE COMPANY
Except as set forth on SCHEDULE 2.14.8 to the Company Disclosure
Memorandum, (a) the use of any of the Technology in the Company's business as
now
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conducted and as currently planned to be conducted does not and will not
infringe, violate or interfere with or constitute an appropriation of any right,
title or interest (including, without limitation, any patent, copyright or trade
secret right) held by any other person or entity, and there have been no claims
made with respect thereto; (b) the use of any of the Marks and other IP Rights
in the Company's business will not infringe, violate or interfere with or
constitute an appropriation of any right, title or interest (including, without
limitation, any patent, copyright, trademark or trade secret right) held by any
other person or entity, and there have been no claims made with respect thereto;
and (c) the Company has not received any notice or claim (whether written, oral
or otherwise) regarding any infringement, misappropriation, misuse, abuse or
other interference with any third party intellectual property or proprietary
rights (including, without limitation, infringement of any patent, copyright,
trademark or trade secret right of any third party) by the Company, the
Technology or the Marks or other IP Rights, or claiming that any other entity
has any claim of infringement with respect thereto.
2.14.9 CONFIDENTIALITY
Except as set forth on SCHEDULE 2.14.9 to the Company Disclosure
Memorandum, (a) the Company has not disclosed any source code regarding the
Technology to any person or entity other than an employee or consultant of the
Company who is under a written nondisclosure agreement; (b) the Company has at
all times maintained and diligently enforced commercially reasonable procedures
to protect all confidential information relating to the Technology; (c) neither
the Company nor any escrow agent is under any contractual or other obligation to
disclose the source code or any other proprietary information included in or
relating to the Technology; and (d) the Company has not deposited any source
code relating to the Technology into any source code escrows or similar
arrangements. If, as disclosed on SCHEDULE 2.14.9 to the Company Disclosure
Memorandum, the Company has deposited any source code to the Technology into
source code escrows or similar arrangements, no event has occurred that has or
could reasonably form the basis for a release of such source code from such
escrows or arrangements.
2.14.10 WARRANTY AGAINST DEFECTS
Except as set forth in SCHEDULE 2.14.10 to the Company Disclosure
Memorandum, the Technology is free from known material defects and substantially
conforms to the applicable specifications, documentation and samples of such
Technology.
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2.14.11 DOMAIN NAMES
SCHEDULE 2.14.11 to the Company Disclosure Memorandum sets forth a list
of all Internet domain names used by the Company in its business (collectively,
the "DOMAIN NAMES"). The Company has, and at the Effective Time the Surviving
Corporation will have, a valid registration and all material rights (free of any
material restriction) in and to the Domain Names, including, without limitation,
all rights necessary to continue to conduct the Company's business as it is
currently conducted and proposed to be conducted following the Effective Time.
2.14.12 YEAR 2000
Each hardware, software and firmware product used by the Company in its
business (collectively, the "SOFTWARE") accurately processes date data
(including, but not limited to, calculating, comparing and sequencing) from,
into and between the twentieth and twenty-first centuries, including, without
limitation, leap year calculations, without a material decrease in the
functionality of the Software. The Software is designed to be used prior to,
during and after the calendar year 2000 A.D. and will operate during each such
time period without material error relating to date data, specifically including
any error relating to, or the product of, date data that represents or
references different centuries or more than one century. Without limiting the
generality of the foregoing, the Software (a) will not abnormally end or provide
invalid or incorrect results as a result of date data, specifically including
date data that represents or references different centuries or more than one
century; (b) has been designed to ensure material year 2000 compatibility,
including, but not limited to, date data century recognition, calculations that
accommodate same century and multi-century formulas and date values, and date
data interface values that reflect the century; and (c) includes "YEAR 2000
CAPABILITIES," meaning that the Software (i) will manage and manipulate data
involving dates, including single century formulas and multicentury formulas,
and will not cause an abnormally ending scenario within the application or
generate incorrect values or invalid results involving such dates; (ii) provides
that all date-related user interface functionalities and data fields include the
indication of century; and (iii) provides that all date-related data interface
functionalities include the indication of century.
2.14.13 PARTICIPATING DEVELOPERS
SCHEDULE 2.14.13 to the Company Disclosure Memorandum contains a
complete list of all Participating Developers (as defined below), specifying for
each relationship between the Participating Developer and the Company (e.g.,
employee, contractor, etc.), all dates during which the relationship was in
effect and a list of any documents
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or other items relating to such relationship. The Company has furnished to
XxxxXxx.xxx or its counsel full and complete copies of such documents and other
items identified in SCHEDULE 2.14.13. "PARTICIPATING DEVELOPER" means any person
or entity that has, at any time and in any way, participated or contributed to
the Development of any IP Rights or any of the Company Technology. "DEVELOPMENT"
means create, author, design, engineer, invent, modify, discover, reduce to
practice or develop. Each Participating Developer has signed a nondisclosure
agreement in the form provided to XxxxXxx.xxx, and such agreement transfers to
the named transferee any and all right, title and interest which the named
Participating Developer may have or acquire in and to the IP Rights and the
Technology.
2.15 CORPORATE BOOKS AND RECORDS
The Company has furnished to XxxxXxx.xxx or its representatives for
their examination true and complete copies of (a) the Articles of Incorporation
and Bylaws of the Company as currently in effect, including all amendments
thereto, (b) the minute books of the Company, and (c) the stock transfer books
of the Company. Such minutes reflect all meetings of the Company's stockholders,
Board of Directors and any committees thereof since the Company's inception, and
such minutes accurately reflect in all material respects the events of and
actions taken at such meetings. Such stock transfer books accurately reflect all
issuances and transfers of shares of capital stock of the Company since its
inception.
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified on SCHEDULE 2.16 to the Company Disclosure
Memorandum, the Company has received all currently required material
governmental approvals, authorizations, consents, licenses, orders,
registrations and permits of all agencies, whether federal, state, local or
foreign (the "PERMITS"). The Company is in compliance in all material respects
with the terms of all Permits, and all the Permits are valid and in full force
and effect, and no proceeding is pending, or to the knowledge of the Company,
threatened, the object of which is to revoke, limit or otherwise affect any of
the Permits. The Company has not received any notifications of any asserted
present failure by it to have obtained any Permit, or any past and unremedied
failure to obtain such items.
2.17 COMPLIANCE WITH LAWS
Except as described on SCHEDULE 2.17 to the Company Disclosure
Memorandum, the business and operations of the Company have been conducted in
compliance in all material respects with all federal, state, local and foreign
laws, rules,
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regulations, ordinances, decrees and orders applicable to it, to its employees
or to the Real Property and the Personal Property, including, without
limitation, all such laws, rules, regulations, ordinances, decrees and orders
relating to intellectual property protection, antitrust matters, consumer
protection, currency exchange, environmental protection, equal employment
opportunity, health and occupational safety, pension and employee benefit
matters, securities and investor protection matters, labor and employment
matters and trading-with-the-enemy matters, except where the failure to so
conduct its business and operations would not be reasonably likely to have a
material adverse effect on the business or financial condition of the Company
and its subsidiaries, taken as a whole. The Company has not received any
notification of any asserted present or past unremedied failure by the Company
to comply with any of such laws, rules, regulations, ordinances, decrees or
orders.
2.18 INSURANCE
The Company Disclosure Memorandum sets forth a true and correct list of
all insurance policies maintained by the Company and includes the policy number,
amount of coverage and contact information for each such policy. The Company
maintains commercially reasonable levels of (a) insurance on its property
(including leased premises) that insures against loss or damage by fire or other
casualty and (b) insurance against liabilities, claims and risks of a nature and
in such amounts as are normal and customary in the Company's industry for
companies of similar size and financial condition. All insurance policies of the
Company are in full force and effect, all premiums with respect thereto covering
all periods up to and including the date this representation is made have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy or binder. Such policies or binders are sufficient
for compliance with all requirements of law currently applicable to the Company
and of all agreements to which the Company is a party, will remain in full force
and effect through the respective expiration dates of such policies or binders
without the payment of additional premiums, and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Company has not been refused any insurance with respect to its
assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance.
2.19 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Merger, this Agreement or any transaction
contemplated hereby.
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2.20 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor, to the Company's knowledge, any director,
officer, agent, employee or other Person acting on behalf of the Company has
used any Company funds for improper or unlawful contributions, payments, gifts
or entertainment, or made any improper or unlawful expenditures relating to
political activity to domestic or foreign government officials or others. The
Company has reasonable financial controls to prevent such improper or unlawful
contributions, payments, gifts, entertainment or expenditures. Neither the
Company nor, to the Company's knowledge, any current director, officer, agent,
employee or other Person acting on behalf of the Company has accepted or
received any improper or unlawful contributions, payments, gifts or
expenditures. The Company has at all times complied, and is in compliance, in
all respects with the Foreign Corrupt Practices Act and all foreign laws and
regulations relating to prevention of corrupt practices and similar matters.
2.21 BANK ACCOUNTS
SCHEDULE 2.21 to the Company Disclosure Memorandum sets forth the names
and locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains safe deposit boxes
or accounts of any nature and the names of all Persons authorized to draw
thereon, make withdrawals therefrom or have access to such safe deposit boxes or
accounts.
2.22 CUSTOMERS AND SUPPLIERS
SCHEDULE 2.22 to the Company Disclosure Memorandum sets forth (a) a
complete and accurate list of the customers of the Company accounting for 5% or
more of the Company's revenues during the fiscal year last ended and the period
ended December 31, 1999, showing the approximate total revenues from each such
customer during the fiscal year last ended and the period ended December 31,
1999 and (b) a complete and accurate list of the suppliers of the Company from
whom the Company has purchased 5% or more of the goods or services purchased by
the Company in the fiscal year last ended and the period ended December 31,
1999. The Company has not received any notice from its customers or suppliers
that would cause it, in its reasonable judgment, to expect any material
modification to its relationship with any customer or supplier named on such
SCHEDULE 2.22 to the Company Disclosure Memorandum.
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2.23 ACCOUNTS RECEIVABLE
All accounts receivable of the Company reflected in the Company Balance
Sheet ("ACCOUNTS"), or existing at the Effective Time, represent sales actually
made in the ordinary course of business and were recorded in the Company's books
consistent with the presentation applied in the Company Financial Statements for
the year ended March 31, 1999. Except as described on SCHEDULE 2.23 to the
Company Disclosure Memorandum, the bad debt reserves and sales return allowances
reflected in the Company Balance Sheet are adequate. Set forth on SCHEDULE 2.23
to the Company Disclosure Memorandum are a full and complete list and aging
study of all Accounts. To the knowledge of the Company, all Accounts existing
and remaining unpaid at the Effective Time will be collectible by the Surviving
Corporation in the ordinary course of business, consistent with past practice.
2.24 CREDITORS' LIST
SCHEDULE 2.24 to the Company Disclosure Memorandum sets forth a full,
complete and accurate list of all creditors of Company, with the amount payable
to each such creditor as of the date hereof.
2.25 INSIDER INTERESTS
Except as set forth on SCHEDULE 2.25 to the Company Disclosure
Memorandum, no stockholder or officer or director of the Company has any
interest (other than as a stockholder of the Company) (a) in any Real Property,
Personal Property, Technology or IP Rights used in or directly pertaining to the
business of the Company, including, without limitation, inventions, patents,
trademarks or trade names, or (b) in any agreement, contract, arrangement or
obligation relating to the Company, its present or prospective business or its
operations. Except as set forth on SCHEDULE 2.25 to the Company Disclosure
Memorandum or as contemplated by this Agreement, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, stockholders, affiliates or any affiliate thereof. The
Company and its officers and directors have no interest, either directly or
indirectly, in any entity, including, without limitation, any corporation,
partnership, joint venture, proprietorship, firm, licensee, business or
association (whether as an employee, officer, director, stockholder, agent,
independent contractor, security holder, creditor, consultant or otherwise),
other than ownership of capital stock comprising less than 1% of any publicly
held company, that presently (i) provides any services, produces and/or sells
any products or product lines, or engages in any activity that is the same,
similar to or competitive with any activity or business in which the Company is
now engaged or proposes to engage; (ii) is a supplier, customer or creditor; or
(iii) has any
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direct or indirect interest in any asset or property (real or personal, tangible
or intangible) of the Company or any property (real or personal, tangible or
intangible) that is necessary or desirable for the present or currently
anticipated future conduct of the Company's business.
2.26 COMPLIANCE WITH ENVIRONMENTAL LAWS
Neither the Company nor, to the knowledge of the Company, any other
Person (including, without limitation, any previous owner, lessee or sublessee)
has treated, stored or disposed of any material amounts of petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on the Real
Property, or any real property previously owned, leased, subleased or used by
the Company in the operation of its business, in violation of any applicable
foreign, federal, state or local statutes, regulations or ordinances, or common
law, in each case as in existence at or prior to the Closing. To the knowledge
of the Company, there have been no releases of any material amounts of
petroleum, petroleum products, hazardous waste, hazardous substances, pollutants
or contaminants on, at or from any assets or properties, including, without
limitation, the Real Property, owned, leased, subleased or used by the Company
in the operation of its business during the time such assets or properties were
owned, leased, subleased or used by the Company (or, to the knowledge of the
Company, prior to such time), including, without limitation, any releases of any
material amounts of petroleum, petroleum products, hazardous waste, hazardous
substances, pollutants or contaminants in violation of any law.
2.27 INFORMATION SUPPLIED BY THE COMPANY
None of the information supplied or to be supplied by the Company or
its subsidiaries, auditors, attorneys, financial advisors or other consultants
or advisors for inclusion in (i) the registration statement on Form S-4, and any
amendment thereto, to be filed under the Securities Act with the SEC by
XxxxXxx.xxx in connection with the issuance of the XxxxXxx.xxx Common Stock in
or as a result of the Merger (the "S-4"), or (ii) the proxy statement and any
amendment or supplement thereto to be distributed in connection with Company's
meetings of stockholders to vote upon this Agreement and the transactions
contemplated hereby (the "PROXY STATEMENT" and, together with the prospectus
included in the S-4, the "PROXY STATEMENT/PROSPECTUS") will, in the case of the
Proxy Statement and any amendment or supplement thereto, at the time of the
mailing of the Proxy Statement and any amendment or supplement thereto, and at
the time of the meeting of stockholders of the Company to vote upon this
Agreement and the transactions contemplated hereby, or, in the case of the S-4,
as amended or supplemented, at the time it becomes effective and at the time of
any post-effective amendment thereto and at the time of the meeting of
stockholders of the
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Company, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading or
necessary to correct any statement in any earlier filing with the SEC of such
Proxy Statement/Prospectus or any amendment or supplement thereto or any earlier
communication (including the Proxy Statement/Prospectus) to stockholders of the
Company with respect to the transactions contemplated by this Agreement.
2.28 FULL DISCLOSURE
Neither this Agreement or the Operative Documents (including, but not
limited to, the Company Financial Statements and all information in the Company
Disclosure Memorandum and the other Exhibits hereto) contains any untrue
statement by the Company of a material fact or omits to state a material fact
necessary in order to make the statements so made or information so delivered
not misleading.
2.29 XXXX-XXXXX-XXXXXX
The Company is its own ultimate parent entity as defined under the
rules and regulations promulgated under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "XXXX-XXXXX-XXXXXX ACT"). The Company
is not a $10 million person as defined thereunder. The Company is not "engaged
in manufacturing" for purposes of the Xxxx-Xxxxx-Xxxxxx Act.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
XXXXXXX.XXX AND MERGER SUB
In order to induce the Company to enter into and perform this Agreement
and the Operative Documents, XxxxXxx.xxx and Merger Sub jointly and severally
represent and warrant to the Company as follows in this Article III:
3.1 ORGANIZATION
XxxxXxx.xxx is a corporation duly organized and validly existing under
the laws of the state of Washington. Merger Sub is a corporation duly organized
and validly existing under the laws of the state of Washington. Each of
XxxxXxx.xxx and Merger Sub has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the
Operative Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. All the issued and outstanding shares of
capital stock of Merger Sub are held of record and beneficially by XxxxXxx.xxx.
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3.2 ENFORCEABILITY
All corporate action on the part of XxxxXxx.xxx and Merger Sub and
their respective officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Operative Documents, the consummation of the Merger and the performance of all
their respective obligations under this Agreement and the Operative Documents
has been taken or will be taken prior to the Effective Time. This Agreement and
each of the Operative Documents has been duly executed and delivered by each of
XxxxXxx.xxx and Merger Sub, as applicable, and this Agreement and each of the
Operative Documents is a legal, valid and binding obligation of each of
XxxxXxx.xxx and Merger Sub, as applicable, enforceable against each of them in
accordance with its terms.
3.3 SECURITIES
The Closing Shares to be issued pursuant to this Agreement have been,
or will be prior to the Effective Time, duly authorized for issuance, and such
Closing Shares, when issued and delivered pursuant to this Agreement, shall be
validly issued, fully paid and nonassessable.
3.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the
Operative Documents by Merger Sub and XxxxXxx.xxx, as applicable, and the
consummation by them of the transactions contemplated hereby and thereby will
not
(a) constitute a violation (with or without the giving of notice or
lapse of time, or both) of any provision of law or any judgment, decree, order,
regulation or rule of any court or other governmental authority applicable to
XxxxXxx.xxx or Merger Sub;
(b) require any consent, approval or authorization of, or declaration,
filing or registration with, any Person, except (i) compliance with applicable
securities laws; (ii) the filing of all documents necessary to consummate the
Merger with the Washington Secretary and the Nevada Secretary; (iii) the filing
of a premerger notification report and all other required documents by
XxxxXxx.xxx and the Company, and the expiration of all applicable waiting
periods, under the HSR Act; and (iv) any filings with the SEC including such
reports and information as may be required under the Exchange Act, the
Securities Act and the rules and regulations promulgated by the SEC under the
Exchange Act or the Securities Act and the declaration of the effectiveness of
the S-4 by the SEC; or
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(c) conflict with or result in a breach of or constitute a default
under any provision of the Articles of Incorporation or Bylaws of XxxxXxx.xxx or
Merger Sub.
3.5 INFORMATION SUPPLIED BY XXXXXXX.XXX OR MERGER SUB
None of the information supplied or to be supplied by XxxxXxx.xxx or
its subsidiaries, auditors, attorneys, financial advisors, other consultants or
advisors or Merger Sub for inclusion in the S-4 or the Proxy
Statement/Prospectus, will, in the case of the Proxy Statement and any amendment
or supplement thereto, at the time of the mailing of the Proxy Statement and any
amendment or supplement thereto, and at the time of any meeting of stockholders
of the Company to vote upon this Agreement and the transactions contemplated
hereby, or in the case of the S-4, as amended or supplemented, at the time it
becomes effective and at the time of any post-effective amendment thereto and at
the time of the meeting of stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading or necessary to correct any
statement in any earlier filing with the SEC of such Proxy Statement/Prospectus
or any amendment or supplement thereto or any earlier communication (including
the Proxy Statement/Prospectus) to stockholders of the Company with respect to
the transactions contemplated by this Agreement.
3.6 FULL DISCLOSURE
Neither this Agreement or the Operative Documents contains any untrue
statement by XxxxXxx.xxx or Merger Sub of a material fact or omits to state a
material fact necessary in order to make the statements so made or information
so delivered not misleading.
3.7 CAPITALIZATION
(a) The authorized capital stock of XxxxXxx.xxx consists of 200,000,000
shares of XxxxXxx.xxx Common Stock, par value $.001 per share, 42,923,035 of
which are issued and outstanding as of December 31, 1999, and 5,000,000 shares
of Preferred Stock, $.001 par value per shares, none of which are issued and
outstanding as of_December 31, 1999. As of December 31, 1999, there are
7,586,112 shares of XxxxXxx.xxx Common Stock reserved for issuance upon the
exercise of outstanding stock options under the XxxxXxx.xxx 1999 Non-Officer
Stock Option Plan and 1996 Combined Incentive and Nonqualified Stock Option
Plan. The Shares of XxxxXxx.xxx Common Stock to be issued pursuant to the Merger
in accordance with Section 1.7.1 and the shares of XxxxXxx.xxx Common Stock
which will be issued
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upon exercise of the options granted in accordance with Section 1.9 have been
duly and validly authorized, have been reserved for issuance and upon issuance
in accordance with the terms hereof or thereof, will be duly authorized, validly
issued, fully paid and nonassessable.
3.8 SEC DOCUMENTS; FINANCIAL STATEMENTS
(a) XxxxXxx.xxx has filed all forms, reports and documents required to
be filed by it with the SEC since September 28, 1999 through the date of this
Agreement (collectively, the "XXXXXXX.XXX SEC DOCUMENTS"). As of their
respective filing dates, the XxxxXxx.xxx SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such XxxxXxx.xxx SEC Documents, and none of the XxxxXxx.xxx SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective filing dates, the financial statements of
XxxxXxx.xxx included in the XxxxXxx.xxx SEC Documents (the "XxxxXxx.xxx
FINANCIAL STATEMENTS") complied as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and were prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto) and
fairly presented, in all material respects, the consolidated financial position
of XxxxXxx.xxx and its subsidiaries as at the dates thereof and the results of
their operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal, recurring audit adjustments not material in
scope or amount). There has been no change in XxxxXxx.xxx's accounting policies
or the methods of making accounting estimates or changes in estimates that are
material to the XxxxXxx.xxx Financial Statements, except as described in the
notes thereto.
(b) Except as disclosed in the XxxxXxx.xxx SEC Documents as filed and
amended before the date hereof and as contemplated by this Agreement, since
September 30, 1999, no material adverse change in the business, financial
condition, results of operations or prospects of XxxxXxx.xxx has occurred.
Changes in the trading prices of XxxxXxx.xxx Common Stock or a public offering
of XxxxXxx.xxx Common Stock shall not be deemed material adverse changes under
this Agreement.
3.9 COMPLIANCE WITH LAWS
The business and operations of XxxxXxx.xxx have been conducted in
compliance in all material respects with all federal, state, local and foreign
laws, rules,
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regulations, ordinances, decrees and orders applicable to it, to its employees
or to its property, including, without limitation, all such laws, rules,
regulations, ordinances, decrees and orders relating to intellectual property
protection, antitrust matters, consumer protection, currency exchange,
environmental protection, equal employment opportunity, health and occupational
safety, pension and employee benefit matters, securities and investor protection
matters, labor and employment matters and trading-with-the-enemy matters, except
where the failure to so conduct its business and operations would not be
reasonably likely to have a material adverse effect on the business or financial
condition of XxxxXxx.xxx and its subsidiaries, taken as a whole. XxxxXxx.xxx has
not received any notification of any asserted present or past unremedied failure
by XxxxXxx.xxx to comply with any of such laws, rules, regulations, ordinances,
decrees or orders.
3.10 TAX MATTERS
Solely for tax purposes, ShopNow represents the following:
(a) It has no present plan or intention to cause Merger Sub to issue,
after the Merger, additional shares of Merger Sub stock (or rights to acquire
shares of Merger Sub stock) or take any other action that would result in
XxxxXxx.xxx losing control of Merger Sub, as defined in Section 368(c) of the
Code.
(b) XxxxXxx.xxx has no present plan or intention to directly or
indirectly (including through a party related to XxxxXxx.xxx within the meaning
of Treasury Regulation 1.368-1(e)(3)) reacquire any of its stock issued pursuant
to the Merger such that the Merger would fail the "continuity of proprietary
interest" requirement set forth in Treasury Regulation Section 1.368-1(e).
(c) It has no present plan or intention to: (i) cause Merger Sub to
sell, transfer or otherwise dispose of any of its assets or of any of the assets
acquired from the Company except for dispositions made in the ordinary course of
business or for the payment of expenses incurred by the Company in connection
with the Merger; (ii) liquidate Merger Sub; (iii) merge Merger Sub with or into
another corporation including ShopNow or any of its affiliates; or (iv) to sell,
distribute or otherwise dispose of the stock of Merger Sub, other than as would
be allowed by Section 368(a)(2)(C) of the Code or the corresponding Treasury
Regulations.
(d) It is ShopNow's present plan or intention to cause Merger Sub to
continue the Company's historic business or use a significant portion of the
Company's historic business assets in a business within the meaning of Treasury
Regulation 1.368-1(d).
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ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS
OF XXXXXXX.XXX AND MERGER SUB
The obligations of XxxxXxx.xxx and Merger Sub to perform and observe
the covenants, agreements and conditions hereof to be performed and observed by
them at or before the Closing shall be subject to the satisfaction of the
following conditions, which may be expressly waived only in writing signed by
XxxxXxx.xxx and Merger Sub:
4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained herein
(including applicable Exhibits or Schedules to the Company Disclosure
Memorandum) and in the Operative Documents shall have been true and correct in
all material respects when made and, except (a) for changes contemplated by this
Agreement and the Operative Documents, (b) for representations and warranties
qualified by materiality which shall be correct in all respects and (c) to the
extent that such representations and warranties speak as of an earlier date,
shall be true and correct in all material respects as of the Closing Date, as
though made on that date.
4.2 PERFORMANCE OF AGREEMENTS
The Company shall have performed in all material respects all
obligations and agreements and complied with all covenants contained in this
Agreement or any Operative Document to be performed and complied with by it at
or prior to the Closing.
4.3 OPINION OF COUNSEL FOR THE COMPANY
XxxxXxx.xxx shall have received the opinion letter of Xxxxxx & Xxxxxxx
LLP, counsel for the Company, dated the Closing Date in the form attached hereto
as EXHIBIT 4.3.
4.4 COMPLIANCE CERTIFICATE
XxxxXxx.xxx shall have received a certificate of the President and the
Chief Financial Officer of the Company, dated the Closing Date, in form and
substance reasonably satisfactory to XxxxXxx.xxx, (a) certifying that the
conditions to the obligations of XxxxXxx.xxx and Merger Sub in Sections 4.1,
4.2, 4.5, 4.6, 4.12, and 4.13 have been fulfilled, and (b) verifying the
accuracy of the information contained in the Option Consideration Spreadsheet
(as defined below).
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4.5 MATERIAL ADVERSE CHANGE
Since the date of the Company Balance Sheet and through the Closing,
there shall not have occurred any change that is or is reasonably likely to be
materially adverse to the Company's business, financial condition, operations,
properties or prospects. Changes in the trading prices of the Company Common
Stock shall not be deemed a material adverse change.
4.6 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby,
including, if applicable, approvals or notices required by the Xxxx-Xxxxx-Xxxxxx
Act, or for the continued operation of the Company, shall have been obtained,
and all waiting periods specified by law shall have passed. All other consents,
approvals and notices referred to in this Agreement shall have been obtained or
delivered.
4.7 PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE
XxxxXxx.xxx shall have received a certificate of the Secretary of the
Company, in form and substance reasonably satisfactory to XxxxXxx.xxx, as to the
authenticity and effectiveness of the actions of the Board of Directors of the
Company and the stockholders authorizing the Merger and the transactions
contemplated by this Agreement and the Operative Documents. Copies of (a) the
Company's Articles of Incorporation, certified by the Nevada Secretary, (b) the
Company's Bylaws, certified by the Secretary of the Company, and (c) the
resolutions of the Board of Directors of the Company and the stockholders
relating to the transactions contemplated by this Agreement and the Operative
Documents shall be attached to such certificate.
4.8 NON-U.S. REAL PROPERTY HOLDING CORPORATION AFFIDAVIT
XxxxXxx.xxx shall have received from the Company, pursuant to Section
1445 of the Code, a Foreign Investment in Real Property Tax Act Affidavit in the
form attached hereto as EXHIBIT 4.8.
4.9 COMPLIANCE WITH LAWS
The effectiveness of the Merger and the performance by XxxxXxx.xxx,
Merger Sub, and the Company of their respective obligations pursuant to this
Agreement and the Operative Documents shall be legally permitted by all laws and
regulations to
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which XxxxXxx.xxx, Merger Sub, the Company and the stockholders of the Company
are subject.
4.10 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened that would enjoin, restrain, condition
or prevent consummation of this Agreement or any Operative Document.
4.11 NONCOMPETITION ARRANGEMENTS
Each of the Management Members and Retained Employees who has been
offered and has accepted employment with XxxxXxx.xxx shall have executed the
XxxxXxx.xxx standard form of Intellectual Property Agreement (Confidentiality,
Invention Assignment, Non-raiding and Noncompetition) in the form attached
hereto as EXHIBIT 4.11 and each such agreement shall be in full force and effect
on the Closing Date.
4.12 TERMINATION OF CERTAIN AGREEMENTS
Any and all rights of refusal, co-sale rights and registration rights
for the benefit of the holders of Company Common Stock, or Stock Purchase Rights
set forth in the Company Disclosure Memorandum, shall have terminated. The
Company shall also terminate the following agreements: (i) the BBE Purchase
Agreement and Note, (ii) the Share Pledge Agreement Among International Barter
Corp., Xxx Xxxxx and Barter Business Exchange Inc., dated Xxxxx 0, 0000, (xxx)
all employment agreements with current Ubarter employees (including, without
limitation, those employment agreements with Xxxxxx Xxxxx, Xxx Xxxxxxxxx, Xxxx
Xxxxx, Xxxx Xxxxxxxxx, Xxxxx Xxxxxxxx, Xxxxxx Xxxxxx, Xxxx Xxxxxx, Xxx Xxxxx,
Xxxxxxxx Xxxxx and Xxxxxxx Xxxxxx and Xxxxxxx Xxxx), (iii) the Alpine Capital
Note and Alpine Capital Warrant (as to registration rights) (iv) the Share
Purchase Agreement, dated May 12, 1999, among Xxxx Xxxxxx, Xxxxx Xxxxxx, the
Company and Barter Business Exchange (Windsor), Inc. (as to registration rights)
and (v) all agreements with Astra Ventures and Momentous. In addition, the
Company shall withdraw its Registration Statement on Form SB-2, as amended.
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4.13 EXERCISE OR TERMINATION OF STOCK PURCHASE RIGHTS; CONVERSION OF
CONVERTIBLE SECURITIES
Any and all Stock Purchase Rights (including all options to purchase
shares of the Company's Common Stock) and any and all securities and notes
convertible at any time into Company Common Stock, vested and unvested, and
regardless of restrictions on exercise or conversion, shall have been exercised
or converted (for cash or on a cashless basis) for shares of Company Common
Stock, or shall have been terminated, as the case may be, immediately prior to
the Effective Time.
4.14 COMPANY OPTION PLAN
The Company shall accelerate the vesting of all options issued and
outstanding under the Company Option Plan and shall make such amendments to the
Company Option Plan as are reasonably requested by XxxxXxx.xxx. The Company
shall make all tax withholdings with respect to the exercise of options
following such acceleration as required by law and prior to the Effective Time.
4.15 CONSENTS TO MERGER
SCHEDULE 2.10.2 to the Company Disclosure Memorandum lists certain
agreements, leases, notes or other documents identified in the schedules to the
Company Disclosure Memorandum that, by their terms require consent or waiver to
consummate the Merger. Unless otherwise set forth in SCHEDULE 2.10.2 to the
Company Disclosure Memorandum, the Company shall have received and shall have
delivered to XxxxXxx.xxx or its counsel written consents to the Merger or
waivers, as applicable, from each of the parties (other than the Company) to
such agreements, leases, notes or other documents, which consents or waivers, as
the case may be, shall be reasonably satisfactory in all respects to
XxxxXxx.xxx.
4.16 RESIGNATIONS
XxxxXxx.xxx and Merger Sub shall have received copies of the
resignations, effective as of the Effective Time, of all the directors and
officers of the Company.
4.17 TAX CLEARANCE CERTIFICATES
The Company shall provide to XxxxXxx.xxx tax clearance certificates
from those states, including but not limited to Nevada, in which the Company is
engaged in business.
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4.18 RELEASES OF LIENS
Prior to the Effective Time, except as agreed to in writing by
XxxxXxx.xxx, the Company shall obtain the release of any and all Encumbrances
with respect to any of the Company's assets except for such Encumbrances that
are incurred in the ordinary course of the Company's business and are not
material.
4.19 STOCKHOLDER APPROVAL
This Agreement and the Merger shall have been approved by the Company's
stockholders as required by the Company's Articles of Incorporation and
applicable law.
4.20 AFFILIATE LETTERS
The Company shall have delivered or caused to be delivered to
XxxxXxx.xxx an Affiliate Letter substantially in the form of EXHIBIT 4.20 from
each of those Persons who were, on the date on which the requisite number of
consents or votes has been obtained to approve the Merger, "affiliates" of the
Company within the meaning of Rule 145 of the rules and regulations promulgated
under the Securities Act.
4.21 VOTING AGREEMENTS
Xxxxxx Xxxxx and New Horizons, LP (the "KEY STOCKHOLDERS") shall have
executed, concurrently with the execution of this Agreement, and have fulfilled
the terms of, voting agreements in the form of EXHIBIT 4.21.
4.22 S-4
The S-4 shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a stop order and the
Proxy Statement shall not be at the Effective Time subject to any proceedings
commenced or threatened by the SEC.
4.23 AGREEMENTS WITH CERTAIN STOCKHOLDERS OF THE COMPANY
XxxxXxx.xxx and Astra Ventures shall have entered into an agreement
wherein at the Closing, in exchange for the termination of all obligations of
the Company to or agreements with Astra Ventures, XxxxXxx.xxx shall pay to Astra
Ventures $675,000 in cash and that number of shares of XxxxXxx.xxx Common Stock
determined by dividing $675,000 by $17.31. XxxxXxx.xxx and Momentous shall have
entered into an agreement wherein at the Closing XxxxXxx.xxx shall issue to
Momentous a warrant to purchase 20,000 shares of XxxxXxx.xxx Common Stock
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in exchange for the cancellation and retirement of all indebtedness under the
Momentous Note. Such warrant shall have a one-year term and an exercise price
equal to the closing sales price of XxxxXxx.xxx Common Stock as reported on the
Nasdaq National Market on the trading day immediately preceding the Effective
Time.
4.24 EMPLOYMENT AND CONSULTING AGREEMENTS
XxxxXxx.xxx and Liad Meidar shall have entered into an Employment
Agreement in substantially the form attached hereto as EXHIBIT 4.24A.
XxxxXxx.xxx and Xxxxxx Xxxxx shall have entered into a Consulting Agreement
substantially in the form attached hereto as EXHIBIT 4.24B.
4.25 LOCK-UP AGREEMENTS
XxxxXxx.xxx shall have entered into Lock-Up Agreements in substantially
the form attached hereto as EXHIBIT 4.25A with Xxxxxx Xxxxx and Liad Meidar.
XxxxXxx.xxx and New Horizons LP shall have entered into the Lock-Up Agreement in
substantially the form attached hereto as EXHIBIT 4.25B.
4.26 TAX OPINION
XxxxXxx.xxx shall have received an opinion from Xxxxxxx Coie LLP to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Xxxxxxx Coie LLP shall be
entitled to rely upon customary representation letters signed by the Company,
XxxxXxx.xxx and Merger Sub.
4.27 NO DISSENTERS RIGHTS
Holders of not more than 5% of the outstanding shares of Company Common
Stock shall have delivered before the Effective Time timely written notice of
such holders' intent to demand payment as dissenting shareholders for such
shares in accordance with Nevada Law.
4.28 BOARD ACTIONS
The Company shall provide XxxxXxx.xxx or its counsel with evidence
reasonably satisfactory to XxxxXxx.xxx or its counsel that all corporate actions
reflected in the minutes of the Company and all stock issuances and options
grants have been duly authorized by the board of directors of the Company.
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ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by it at or before
the Closing shall be subject to the satisfaction of the following conditions,
which may be expressly waived only in writing signed by the Company.
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of XxxxXxx.xxx and Merger Sub
contained herein and in the Operative Documents shall have been true and correct
in all material respects when made and, except (a) for changes contemplated by
this Agreement and the Operative Documents and (b) to the extent that such
representations and warranties speak as of an earlier date, shall be true and
correct as of the Closing Date as though made on that date.
5.2 PERFORMANCE OF AGREEMENTS
XxxxXxx.xxx and Merger Sub shall have performed in all material
respects all obligations and agreements and complied with all covenants
contained in this Agreement or any Operative Document to be performed and
complied with by them at or prior to the Closing.
5.3 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of an officer of
XxxxXxx.xxx, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, certifying that the conditions to the obligations
of the Company in Sections 5.1, 5.2, 5.5 and 5.6 have been fulfilled.
5.4 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any Operative Document, and no litigation, investigation or administrative
proceeding shall be pending or threatened which would enjoin, restrain,
condition or prevent consummation of this Agreement or any Operative Document.
5.5 MATERIAL ADVERSE CHANGE
Since the date of this Agreement and through the Closing, there shall
not have occurred any material change in the business, financial condition,
operations,
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properties or prospects of XxxxXxx.xxx. Changes in the trading prices of
XxxxXxx.xxx Common Stock or a public offering of XxxxXxx.xxx Common Stock shall
not be deemed material adverse changes under this Agreement.
5.6 APPROVALS AND CONSENTS
All transfers of permits or licenses and all approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary on the part of XxxxXxx.xxx and Merger Sub for the
consummation of the transactions contemplated hereby, shall have been obtained,
and all waiting periods specified by law shall have passed. All other consents,
approvals and notices on the part of XxxxXxx.xxx and Merger Sub referred to in
this Agreement shall have been obtained or delivered.
5.7 COMPLIANCE WITH LAWS
The effectiveness of the Merger and the performance by XxxxXxx.xxx,
Merger Sub and the Company of the obligations hereunder and under the Operative
Documents shall be legally permitted by all laws and regulations to which
XxxxXxx.xxx, Merger Sub and the Company are subject.
5.8 OPINION OF COUNSEL
The Company shall have received the opinion letter of Xxxxxxx Coie LLP,
counsel for XxxxXxx.xxx and Merger Sub, dated the Closing Date, in the form of
EXHIBIT 5.8.
5.9 S-4
The S-4 shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a stop order and the
Proxy Statement shall not be at the Effective Time subject to any proceedings
commenced or threatened by the SEC.
5.10 TAX OPINION
The Company shall have received an opinion from Xxxxxx & Whitney LLP to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code. In rendering such opinion, Xxxxxx & Xxxxxxx LLP
shall be entitled to rely upon customary representation letters signed by the
Company, XxxxXxx.xxx and Merger Sub.
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ARTICLE VI - COVENANTS
Between the date of this Agreement and the Effective Time, the parties
covenant and agree as set forth in this Article VI.
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER
Unless XxxxXxx.xxx shall otherwise agree in writing, the Company
covenants and agrees to conduct the Company's business between the date of this
Agreement and the Effective Time in and only in, and the Company shall not take
any action except in, the ordinary course of business and in a manner consistent
with past practice and in accordance with applicable law; and the Company shall
use its reasonable best efforts to preserve intact the business organization of
the Company, to keep available the services of the current officers, employees
and consultants of the Company and to preserve the current relationships of the
Company with, and the goodwill of, customers, suppliers and other Persons with
which the Company has significant business relations. By way of amplification
and not limitation, except as otherwise contemplated by this Agreement, the
Company shall not, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose to do, any of the following without the
prior written consent of XxxxXxx.xxx:
(a) amend or otherwise change the Company's Articles of Incorporation
or Bylaws;
(b) except for the issuance of shares of Company Common Stock upon the
exercise or conversion of currently outstanding Stock Purchase Rights, issue,
sell, contract to issue or sell, pledge, dispose of, grant, encumber or
authorize the issuance, sale, pledge, disposition, grant or Encumbrance of (i)
any shares of capital stock of any class of the Company, (ii) any assets of the
Company, except in the ordinary course of business and in a manner consistent
with past practice or (iii) any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest)
of the Company;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock or other securities, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities;
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(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person, or make any loans or
advances, except in the ordinary course of business and consistent with past
practice; (iii) enter into any contract or agreement other than in the ordinary
course of business, consistent with past practice; (iv) authorize any single
capital expenditure which is in excess of $50,000 or capital expenditures which
are, in the aggregate, in excess of $200,000 for the Company taken as a whole;
(v) enter into any agreement in which the obligation of the Company exceeds
$50,000 or which shall not terminate or be subject to termination for
convenience within 30 days following execution; (vi) license any Technology or
IP Rights; or (vii) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this subsection (e);
(f) enter into or amend any employment, consulting or agency agreement,
or increase the compensation payable or to become payable to its officers,
employees, agents or consultants, or grant any severance or termination pay to,
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company, or establish, adopt, enter into or amend any
Employee Benefit Plan, collective bargaining, bonus, profit-sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, benefit or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
officer or employee;
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting methods, policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable);
(h) make any Tax election or settle or compromise any Tax liability;
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice;
(j) take any action that would or is reasonably likely to result in any
of the representations or warranties of the Company set forth in this Agreement
being untrue in any material respect, or in any covenant of the Company set
forth in this Agreement
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being breached, or in any of the conditions to the Merger specified in Article
IV not being satisfied; or
(k) agree to do any of the foregoing.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY
From the date hereof to the Effective Time, the Company shall, and
shall cause the officers, directors, employees and agents of the Company to,
afford the officers, employees and agents of XxxxXxx.xxx access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of the Company and shall furnish
XxxxXxx.xxx with all financial, operating and other data and information as
XxxxXxx.xxx , through its officers, employees or agents, may reasonably request.
From the date hereof until the Effective Time, the Company shall provide
XxxxXxx.xxx with monthly and other financial statements of the Company as they
become available internally at the Company, all of which financial statements
shall fairly present the financial position and results of operations of the
Company as of the dates and for the periods therein specified. No investigation
pursuant to this Section 6.2 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations of the parties
hereto. The parties shall continue to comply with and to perform their
respective obligations under the Mutual Nondisclosure Agreement between
XxxxXxx.xxx and the Company entered into as of December 17, 1999.
6.3 NO ALTERNATIVE TRANSACTIONS
(a) Unless this Agreement shall have been terminated in accordance with
its terms, the Company shall not, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any Person relating to any acquisition or purchase of
all or (other than in the ordinary course of business) any material portion of
the assets of, or any equity interest in, the Company or any business
combination with the Company (an "ALTERNATIVE TRANSACTION"), or participate in
any negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate or negotiate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing. The Company shall notify XxxxXxx.xxx
promptly if any such proposal or offer, or any inquiry or contact with any
Person with respect thereto, is made and shall, in any such notice to
XxxxXxx.xxx, indicate in reasonable detail the identity of the Person making
such proposal, offer, inquiry or contact and the terms and conditions of such
proposal, offer, inquiry or contact. The Company agrees not to release any third
party from, or waive any
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provision of, any confidentiality or standstill (e.g., agreement not to invest
in or seek change of control of the Company) agreement to which the Company is a
party. Notwithstanding the foregoing, in the event the Company receives a bona
fide offer or proposal from any third party regarding an Alternative Transaction
(an "OFFER") the Company may accept such Offer (after complying with Section
6.3(b) below) if the board of directors of the Company reasonably determines
after due consideration of the factual basis and the advice of counsel
experienced in such matters that such action is required by law; provided,
however, that any such action by the Company shall be deemed a breach of this
Section 6.3 for purposes of determining whether the Company must pay the
Termination Fee described in Section 7.2.
(b) In the event the Company receives an Offer as described in the last
sentence of Section 6.3(a), then the Company shall, prior to accepting such
Offer or entering into any definitive agreement with respect to the Offer,
notify XxxxXxx.xxx in writing of: (a) all of the terms and conditions of such
Offer (which notice shall include a copy of any term sheets and proposed
definitive agreements reflecting such terms and conditions and include the
identity of the third party or parties making the Offer); (b) the Company's
intention of accepting the Offer on such terms and conditions; and (c) the
Company's agreement to enter into a proposed Alternative Transaction with
XxxxXxx.xxx on terms and conditions substantially similar to those set forth in
the Offer (a "Notice of Offer"). XxxxXxx.xxx will have 10 days from the receipt
of such Notice of Offer (the "Exclusivity Period") to deliver written notice to
the Company of XxxxXxx.xxx's acceptance of the Company's offer to enter into an
agreement with the Company providing for a Alternative Transaction on terms and
conditions substantially similar to those set forth in the Notice of Offer (a
"Notice of Acceptance"); provided, however, that to the extent that the
consideration being offered to the Company in the Offer consists of property
other than cash or securities, then XxxxXxx.xxx's acceptance shall, in lieu of
such noncash property or securities, provide for the payment of other
consideration to the Company of substantially equivalent fair market value. The
Company agrees that it will not accept any Offer, enter into any definitive
agreement providing for, or otherwise consummate any Alternative Transaction
with any third party other than XxxxXxx.xxx until the expiration of the
Exclusivity Period. If XxxxXxx.xxx delivers a Notice of Acceptance to the
Company prior to the expiration of the Exclusivity Period, then XxxxXxx.xxx and
the Company shall, within 20 days following receipt of the Notice of Acceptance,
enter into an agreement, on final terms and conditions to be negotiated in good
faith between them, providing for a Alternative Transaction on the terms and
conditions provided for in the Notice of Offer and Notice of Acceptance.
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6.4 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the other parties of (a) the
occurrence or nonoccurrence of any event that would be reasonably likely to
cause any representation or warranty made by such party contained in this
Agreement to be untrue or inaccurate in any material respect and (b) any
material failure by such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 6.4 shall not
limit or otherwise affect the remedies available to the parties hereunder.
6.5 FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, including,
without limitation, using commercially reasonable efforts to obtain all waivers,
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company as
are necessary for the consummation of the transactions contemplated hereby and
to fulfill the conditions to the Merger. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or the Operative Documents, each party to this Agreement shall
use commercially reasonable efforts to promptly take all such action. After the
Closing, each party hereto, at the request of and without any further cost or
expense to the other parties, shall take any further actions reasonably
necessary or desirable to carry out the purposes of this Agreement or any
Operative Document, to vest in the Surviving Corporation full title to all
properties, assets and rights of the Company and to effect the issuance of the
Closing Shares pursuant to the terms and conditions hereof.
6.6 PUBLICITY
No party hereto shall issue any press release or otherwise make any
statements to any third party with respect to this Agreement or the transactions
contemplated hereby other than the issuance by XxxxXxx.xxx of a press release
announcing this Agreement and the transactions contemplated hereby or as
required by law. Any party who is required by law to make any such disclosure
must provide notice in advance of the disclosure to all other parties. Such
notice shall contain (a) the contents of the proposed disclosure; (b) the
reasons that the party contemplating disclosure believes
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that disclosure is required by law; and (c) the proposed time and place of such
disclosure.
6.7 BRING-DOWN CAPITALIZATION SCHEDULE
No later than three days prior to the Closing, the Company shall
deliver to XxxxXxx.xxx an updated version of SCHEDULE 2.3 to the Company
Disclosure Memorandum (Capitalization). The updated SCHEDULE 2.3 shall be deemed
an amendment to SCHEDULE 2.3 attached hereto.
6.8 EXECUTION OF ALL OPERATIVE DOCUMENTS
Each party shall execute at or prior to the Closing each Operative
Document to which he, she or it is a party.
6.9 STOCKHOLDER APPROVAL
The Company will call a special Stockholders Meeting as soon as
practicable but in no event later than 30 days after the Form S-4 is declared
effective by the SEC to submit this Agreement, the Merger and related matters
for the consideration and approval of the Company's Stockholders ("COMPANY
STOCKHOLDERS MEETING"). Such approval will be recommended by the Company's Board
of Directors, subject to the fiduciary obligations of its directors. Such
meeting will be called, held and conducted, and any proxies will be solicited,
in compliance with applicable law.
6.10 PREPARATION OF S-4
The Company will as promptly as practicable provide to XxxxXxx.xxx and
its counsel for inclusion within the Proxy Statement/Prospectus and the S-4 in a
form reasonably satisfactory to XxxxXxx.xxx and its counsel, such information
concerning the Company, its operations, capitalization, technology, share
ownership and other information as XxxxXxx.xxx or its counsel may reasonably
request. By February 15, 2000, or as soon as practicable thereafter, XxxxXxx.xxx
and the Company shall prepare and file with the SEC the Proxy Statement and any
other documents required by the Exchange Act in connection with the Merger, and
XxxxXxx.xxx shall prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a part of the prospectus. Each of XxxxXxx.xxx and
the Company shall use its commercially reasonable best efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing. Prior to the effective date of the S-4, XxxxXxx.xxx shall also take
any action required to be taken under any applicable federal or state securities
or blue sky laws in connection with the issuance of the XxxxXxx.xxx Common Stock
in the Merger. The Company agrees that the Proxy
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Statement/Prospectus will comply as to form in all material respects with the
provisions of all applicable laws, including the provisions of the Exchange Act
and the rules and regulations of the SEC thereunder, except that no
representation is made by the Company with respect to information supplied by
XxxxXxx.xxx specifically for inclusion therein. XxxxXxx.xxx agrees that the S-4
and the Proxy Statement/Prospectus will comply as to form in all material
respects with the provisions of all applicable laws including the provisions of
the Securities Act and the Exchange Act and the rules and regulations of the SEC
thereunder, except that no representation is made by XxxxXxx.xxx with respect to
information supplied by the Company specifically for inclusion therein.
6.11 XXXXXXX.XXX COMMON STOCK
XxxxXxx.xxx agrees to authorize for listing on the Nasdaq National
Market the shares of XxxxXxx.xxx Common Stock comprising the Closing Shares by
filing with the Nasdaq National Market a Notification of Listing of Additional
Shares (or such other form as may be required by the Nasdaq National Market) as
soon as reasonably practicable after the Closing or otherwise in accordance with
the rules and regulations of the Nasdaq National Market.
6.12 RETIREMENT OF INDEBTEDNESS
Immediately prior to the Effective Time, XxxxXxx.xxx agrees to pay off
all outstanding indebtedness of the Company under the Alpine Capital Note.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding approval of this Agreement by
the stockholders):
(a) by mutual written consent of the Company and XxxxXxx.xxx;
(b) by either the Company or XxxxXxx.xxx, if the Merger has not been
consummated by June 22, 2000; provided, however, that the right to terminate
this Agreement under this subsection (b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date;
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(c) by either the Company or XxxxXxx.xxx, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining XxxxXxx.xxx, Merger Sub or the Company
from consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and non-appealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this subsection (c) shall have
used all reasonable efforts to remove such judgment, injunction, order or
decree;
(d) by the Company, in the event of a material breach by XxxxXxx.xxx or
Merger Sub of any representation, warranty or agreement contained herein that
has not been cured or is not curable by June 22, 2000; or
(e) by XxxxXxx.xxx, in the event of a material breach by the Company of
any representation, warranty or agreement contained herein that has not been
cured or is not curable by June 22, 2000.
(f) by either XxxxXxx.xxx or the Company upon written notice to the
other party, in the event that the Undisclosed Liability as determined in
accordance with Section 1.7.1(c)(ii) exceeds $1,000,000 and the parties are
unable to agree within 15 days after the date such Undisclosed Liability is
determined to any adjustment to the Closing Shares.
7.2 EFFECT OF TERMINATION
(a) Except as specifically provided in this Section 7.2, in the event
of the termination of this Agreement pursuant to Section 7.1 hereof, there shall
be no further obligation on the part of any party hereto, except that nothing
herein shall relieve any party from liability for any willful breach hereof.
(b) If XxxxXxx.xxx shall terminate this Agreement pursuant to (i)
Section 7.1(b) by reason of the Company's failure or inability to satisfy the
conditions to the Merger or (ii) Section 7.1(e) by reason of the Company's
breach of the covenants contained in Sections 6.1, 6.3 or 6.6 (a "BREAKUP
TERMINATION"), and the Company consummates an Alternative Transaction on or
before the one-year anniversary of such termination, the Company shall: (i) pay
to XxxxXxx.xxx upon the closing of the Alternative Transaction a termination fee
(the "TERMINATION FEE"), equal to 20% of the aggregate value of cash and
non-cash consideration (including the assumption of any liabilities of the
Company) received and to be received by the Company and/or its stockholders in
respect of such Alternative Transaction in excess of $45 million.
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ARTICLE VIII - GENERAL
8.1 SURVIVAL
All representations and warranties contained in this Agreement or in
the Operative Documents or in any certificate delivered pursuant hereto or
thereto shall terminate upon the Effective Time. The covenants and agreements
contained in this Agreement shall survive and continue until all obligations
with respect thereto shall have been performed or satisfied or shall have been
terminated in accordance with their terms.
8.2 TAX MATTERS - REORGANIZATION TREATMENT
Solely for tax purposes and except as otherwise required by law,
XxxxXxx.xxx shall, and shall cause Merger Sub and the Company to: (a) report the
Merger as a reorganization under Section 368(a)(1) of the Code on all applicable
U.S. federal, state and local Tax Returns (as defined in Section 2.8) and (b)
keep records and file in connection with their respective U.S. federal and state
Tax Returns all such information as may be required by Treasury Regulation
Section 1.368-3.
8.3 EXPENSES
If the transactions contemplated by this Agreement are not consummated,
each party shall pay its own fees and expenses incident to the negotiation,
preparation and execution of this Agreement and the Operative Documents
(including legal and accounting fees and expenses); provided, however, that the
attorneys' fees and expenses of the prevailing party in any action brought
hereunder shall be paid by the other party to such action. If the transactions
contemplated by this Agreement are consummated, XxxxXxx.xxx will pay the
reasonable fees and expenses of the Company and the Key Stockholders incident to
the negotiation, preparation and execution of this Agreement and the Operative
Documents (other than the costs and expenses of the attorneys, accountants and
other representatives of the Key Stockholders in excess of $10,000, which excess
expenses shall remain the responsibility of the Key Stockholders). The
stockholders of the Company shall pay any and all brokerage or finders' fees or
agents' commissions or any similar charges incurred in connection with the
Merger and set forth on Schedule 2.19 to the Company Disclosure Memorandum.
8.4 NOTICES
Any notice, request or demand desired or required to be given hereunder
shall be in writing given by personal delivery, confirmed facsimile transmission
or overnight
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courier service, in each case addressed as respectively set forth below or to
such other address as any party shall have previously designated by such a
notice. The effective date of any notice, request or demand shall be the date of
personal delivery, the date on which successful facsimile transmission is
confirmed or the date actually delivered by a reputable overnight courier
service, as the case may be, in each case properly addressed as provided herein
and with all charges prepaid.
TO XXXXXXX.XXX OR MERGER SUB:
XxxxXxx.xxx Inc.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000 Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx
with a copy to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxxx
TO THE COMPANY:
Xxxxxxx.xxx Inc.
0000 0xx Xxxxxx Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000)000-0000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxx & Xxxxxxx LLP
U.S. Bank Building Center
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxx
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8.5 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and 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 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 a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
8.6 ENTIRE AGREEMENT
This Agreement, the Operative Documents, that certain Non-Disclosure
Agreement dated on or about December 17, 1999, and the XxxxXxx.xxx Note,
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof and thereof (including, without limitation, the Letter of
Intent, dated December 20, 1999, between XxxxXxx.xxx, the Company, and the Key
Stockholders).
8.7 ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise;
provided, however, that Merger Sub's rights and obligations may be assigned to
and assumed by XxxxXxx.xxx or any other corporation wholly owned (directly or
through intermediate wholly owned subsidiaries) by XxxxXxx.xxx.
8.8 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their respective successors, heirs, legal representatives
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
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8.9 GOVERNING LAW; VENUE
This Agreement shall be governed by, and construed in accordance with,
the laws of the state of Washington applicable to contracts executed in and to
be performed in that state. The parties irrevocably consent to the jurisdiction
and venue of the state and federal courts located in King County, Washington in
connection with any action relating to this Agreement (except to the extent
provisions of Nevada Law apply to the Merger).
8.10 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.11 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
8.12 WAIVER OF JURY TRIAL
Each of XxxxXxx.xxx, the Company and Merger Sub hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement, the transactions contemplated hereby or the actions of such
parties in the negotiation, administration, performance and enforcement hereof.
8.13 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by XxxxXxx.xxx, Merger Sub and the Company.
8.14 WAIVER
At any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any obligation or other act of any other
party hereto, (b) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any agreement
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or condition contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement and Plan of Merger as of the date and year first above written.
XXXXXXX.XXX INC.
/s/ Xxxx Xxxxxx
-------------------------------------------
Name
---------------------------------------
Its
----------------------------------------
SHAMU ACQUISITION, INC.
/s/ Xxxx Xxxxxx
-------------------------------------------
Name
---------------------------------------
Its
----------------------------------------
XXXXXXX.XXX INC.
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
Name
---------------------------------------
Its CEO
----------------------------------------
