EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
▇▇▇▇▇▇▇▇.▇▇▇, INC.,
PETJUNGLE, INC.
AND THE STOCKHOLDER NAMED HEREIN
Dated as of May 12, 1999
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER............................................................. 1
1.1 The Merger........................................................... 1
1.2 Effective Time; Closing.............................................. 2
1.3 Effect of the Merger................................................. 2
1.4 Certificate of Incorporation; Bylaws................................. 2
1.5 Directors and Officers............................................... 2
1.6 Effect on Capital Stock.............................................. 2
1.7 Surrender of Certificates............................................ 3
1.8 No Further Ownership Rights in Target Common Stock................... 4
1.9 Dissenting Shares.................................................... 4
1.10 Tax Consequences..................................................... 4
1.11 Taking of Necessary Action; Further Action........................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET............................. 5
2.1 Organization of Target............................................... 5
2.2 Target Capital Structure............................................. 5
2.3 Obligations With Respect to Capital Stock............................ 6
2.4 Authority............................................................ 6
2.5 Compliance; Permits; Restrictions.................................... 7
2.6 Litigation........................................................... 7
2.7 Board Approval....................................................... 8
2.8 Section 203 of the Delaware General Corporation Law Not Applicable... 8
2.9 Sophistication of Target Stockholders................................ 8
2.10 Financial Statements................................................. 8
2.11 Material Contracts and Commitments................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT............................. 8
3.1 Organization of Parent............................................... 9
3.2 Parent Capital Structure............................................. 9
3.3 Obligations With Respect to Capital Stock............................ 9
3.4 Authority............................................................ 10
3.5 Compliance; Permits; Restrictions.................................... 11
3.6 Litigation........................................................... 11
3.7 Valid Issuance....................................................... 11
3.8 Board Approval....................................................... 11
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................... 11
4.1 Conduct of Business by Target........................................ 11
4.2 Conduct of Business by Parent........................................ 12
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TABLE OF CONTENTS
(continued)
Page
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4.3 Reasonable Efforts; Notification..................................... 12
4.4 Third Party Consents................................................. 13
ARTICLE V........................................................................ 13
5.1 Indemnification by Stockholder....................................... 13
5.2 Escrow Arrangements.................................................. 13
5.3 Maximum Payments; Remedy............................................. 18
ARTICLE VI CONDITIONS TO THE MERGER.............................................. 18
6.1 Conditions to Obligations of Each Party to Effect the Merger......... 18
6.2 Additional Conditions to Obligations of Target....................... 18
6.3 Additional Conditions to the Obligations of Parent................... 19
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................... 19
7.1 Termination.......................................................... 19
7.2 Notice of Termination; Effect of Termination......................... 20
7.3 Fees and Expenses.................................................... 20
7.4 Amendment............................................................ 20
7.5 Extension; Waiver.................................................... 20
ARTICLE VIII GENERAL PROVISIONS.................................................. 21
8.1 Non-Survival of Representations and Warranties....................... 21
8.2 Notices.............................................................. 21
8.3 Interpretation; Knowledge............................................ 22
8.4 Counterparts......................................................... 22
8.5 Entire Agreement; Third Party Beneficiaries.......................... 23
8.6 Severability......................................................... 23
8.7 Other Remedies; Specific Performance................................. 23
8.8 Governing Law........................................................ 23
8.9 Rules of Construction................................................ 23
8.10 Assignment........................................................... 23
8.11 Waiver of Jury Trial; Waiver of Conflicts............................ 24
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
May 12, 1999, among ▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation ("Parent"),
PetJungle, Inc., a Delaware corporation ("Target") and idealab! Holdings, L.L.C.
(the "Stockholder").
RECITALS
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A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("Delaware Law"), Parent
and Target intend to enter into a business combination transaction.
B. The Boards of Directors of Target and Parent (i) have determined that
the Merger (as defined in Section 1.1) is consistent with and in furtherance of
their respective long-term business strategies and fair to, advisable for and in
the best interests of, their respective stockholders, (ii) have approved this
Agreement, the Merger and the other transactions contemplated by this Agreement
and (iii) have, in the case of Target, subject to the provisions of this
Agreement, determined to recommend that the stockholders of Target adopt and
approve this Agreement and approve the Merger and, in the case of Parent,
subject to the provisions of this Agreement, determined to recommend that the
stockholders of Parent approve the issuance of shares of Parent Common Stock (as
defined in Section 1.6(a)) pursuant to the Merger.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Target shall be merged with and into
Parent (the "Merger"), the separate corporate existence of Target shall cease
and Parent shall continue as the surviving corporation. Parent as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
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1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
-----------------------
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing (or such later time as may be agreed in
writing by Target and Parent and specified in the Certificate of Merger) being
the "Effective Time") as soon as practicable on or after the Closing Date (as
herein defined). The closing of the Merger (the "Closing") shall take place at
the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, or
virtually, at a time and date to be specified by the parties, which shall be no
later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of Target shall vest in the Surviving Corporation, and all debts, liabilities
and duties of Target shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) At the Effective Time, the Certificate of Incorporation of
Parent, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation.
(b) The Bylaws of the Parent, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The directors of Parent immediately prior to
----------------------
the Effective Time shall be the directors of the Surviving Corporation until
their respective successors are duly elected or appointed and qualified
(together with such additional directors as may be elected by the Target
effective as of or after the Effective Time). The officers of the Surviving
Corporation shall be the officers of the Parent immediately prior to the
Effective Time until their respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
-----------------------
Merger and without any action on the part of Target, Target or the holders of
any of the following securities:
(a) Conversion of Target Common Stock. Each share of Common Stock,
---------------------------------
$0.001 par value per share, of Target (the "Target Common Stock") issued and
outstanding immediately prior to the Effective Time, other than (i) Dissenting
Shares (as defined in Section 1.9 below) or (ii) any shares of Target Common
Stock to be canceled pursuant to Section 1.6(b), will be canceled and
extinguished and automatically converted (subject to Section 1.6(e)) into the
right to receive 0.027259 (the "Exchange Ratio") shares of Common Stock of
Parent (the "Parent Common Stock").
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(b) Cancellation of Parent-Owned Stock. Each share of Target Common
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Stock held by Target, Parent or any direct or indirect wholly owned subsidiary
of Target or of Parent immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective
--------------------------------------------
Time, there are no outstanding options to purchase Target Common Stock under
Target's 1999 Stock Option Plan.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Target Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Target Common Stock occurring on or after the date hereof and
prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Parent Common Stock
-----------------
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Target Common Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock that otherwise would be received by such holder) shall receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of such fraction multiplied by the fair market value of one share of
Parent Common Stock, as determined by the Board of Directors of Parent.
1.7 Surrender of Certificates.
-------------------------
(a) Exchange Procedures. Following the Effective Time, the
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certificates formerly representing shares of Target Common Stock (the
"Certificates") will not be automatically canceled, and each Certificate will
represent a number of shares of Parent Common Stock equal to the number of
shares of Target Common Stock represented by such Certificate multiplied by the
Exchange Ratio. Unless surrendered as provided below, outstanding Certificates
will be deemed from and after the Effective Time, for all corporate purposes, to
evidence only the ownership of the number of full shares of Parent Common Stock
into which such shares of Target Common Stock shall have been so converted and
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6(f). If so requested by a former holder of
Target Common Stock, upon exchange and against delivery of a Certificate or
Certificates, Parent shall provide to such holder a certificate or certificates
representing shares of Parent Common Stock issued to such holder in the Merger
pursuant to Section 1.6 hereof (or in the case of a lost, stolen or destroyed
Certificate, upon delivery of an affidavit of that fact (and bond, if required
by Parent).
(b) Transfers of Ownership. If certificates representing shares of
----------------------
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other
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than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(c) No Liability. Notwithstanding anything to the contrary in this
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Section 1.7, neither Parent, the Surviving Corporation nor any party hereto
shall be liable to a holder of shares of Parent Common Stock or Target Common
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Target Common Stock. All shares of
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Parent Common Stock represented by the Certificates or issued upon surrender of
the Certificates in accordance with the terms hereof (including any cash paid in
respect thereof pursuant to Section 1.6(e)) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Target Common
Stock.
1.9 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Target Common Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with Delaware Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("Dissenting Shares") shall not be exchanged for
or represent a right to receive Parent Common Stock pursuant to Section 1.6, but
the holder thereof shall only be entitled to such rights as are granted by
Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of shares of Target Common Stock who demands appraisal of such shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
exchanged for only Parent Common Stock and cash in lieu of fractional shares as
provided in Section 1.6, without interest thereon.
(c) Target shall give Parent (i) prompt notice of any written demands
for appraisal of any shares of Target Common Stock, withdrawals of such demands,
and any other instruments served pursuant to Delaware Law and received by Target
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under Delaware Law. Target shall not, except
with the prior written consent of Parent, voluntarily make any payment with
respect to any demands for appraisal of Target Common Stock or offer to settle
or settle any such demands.
1.10 Tax Consequences. It is intended by the parties hereto that the Merger
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shall constitute a reorganization within the meaning of Section 368 of the Code,
and each of the parties hereto will use its commercially reasonable efforts to
cause the Merger to be treated as such a reorganization.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges,
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powers and franchises of Target, the officers and directors of Target will take
all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Parent, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by Target to
Parent dated as of the date hereof and certified by a duly authorized officer of
Target (the "Target Schedules"), as follows:
2.1 Organization of Target.
----------------------
(a) Target (i) is a corporation duly organized, validly existing and
in good standing under the laws of Delaware; (ii) has the corporate or other
power and authority to own, lease and operate its assets and property and to
carry on its business as now being conducted; and (iii), except as would not be
material to Target, is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary.
(b) Target has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of Target, each as
amended to date, and each such instrument is in full force and effect. Neither
Target nor any of its material subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent governing
instruments.
2.2 Target Capital Structure. The authorized capital stock of Target
------------------------
consists of 50,000,000 shares of Common Stock, $0.001 par value per share, of
which there were 24,126,600 shares issued and outstanding as of the date hereof
(excluding shares held in treasury of which there are none), and 25,000,000
shares of Preferred Stock, $0.001 par value per share, of which no shares are
issued or outstanding as of the date hereof. All outstanding shares of Target
Common Stock are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Target or any agreement or document to which Target
is a party or by which it is bound. As of the date hereof, the Target had
reserved an aggregate of 3,000,000 shares of Target Common Stock for issuance
pursuant to the Target's 1999 Stock Option Plan. As of the date hereof, there
were no options outstanding to purchase shares of Target Common Stock pursuant
to the Target's 1999 Stock Option Plan. All shares of Target Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and nonassessable. A list of all holders
of Target Common Stock or rights to acquire Target Common Stock, together with
their holdings, is set forth in the Target Schedules. The Target Schedules also
list each person who holds options to acquire shares of Target Common Stock of
which the exercisability will be accelerated in any way by the transactions
contemplated by this Agreement as well as the number of shares subject to such
options and the extent of such acceleration.
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2.3 Obligations With Respect to Capital Stock. Except as set forth in
-----------------------------------------
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Target, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.2, there are no options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Target is a party or by which it is bound obligating Target to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Target or obligating Target to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. Stockholders of Target will be entitled to dissenters rights under
applicable state law in connection with the Merger.
2.4 Authority.
---------
(a) Target has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
subject only to the approval of the Merger and the approval and adoption of this
Agreement by the stockholders of Target. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Target, subject
only to the approval and adoption of this Agreement and the approval of the
Merger by Target's stockholders and the filing of the Certificate of Merger
pursuant to Delaware Law. A vote of the holders of a majority of the outstanding
shares of the Target Common Stock is sufficient for Target's stockholders to
approve and adopt this Agreement and approve the Merger. This Agreement has been
duly executed and delivered by Target and, assuming the due authorization,
execution and delivery by Parent, constitutes a valid and binding obligation of
Target, enforceable against Target in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by Target do
not, and the performance of this Agreement by Target will not, (i) conflict with
or violate the Certificate of Incorporation or Bylaws of Target, (ii) subject to
obtaining the approval and adoption of this Agreement and the approval of the
Merger by Target's stockholders and compliance with the requirements set forth
in Section 2.4(b) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Target, or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or materially
impair Target's material rights or alter the material rights or material
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or encumbrance on any of the material properties or
assets of Target pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Target is a party or by which Target is bound. The Target
Schedules list all consents, waivers and approvals under any of Target's
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby, which,
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if individually or in the aggregate not obtained, would result in a material
loss of benefits to Target or Parent as a result of the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required to be obtained or made by Target in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related)
laws, and the securities or antitrust laws of any foreign country, and (iv) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not be material to Target or have a material adverse
effect on the ability of Target to consummate the Merger.
2.5 Compliance; Permits; Restrictions.
---------------------------------
(a) The Target is not, in any material respect, in conflict with, or
in default or in violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Target or by which Target is bound or affected by, or (ii)
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Target is
a party or by which Target is bound, except for conflicts, violations and
defaults that (individually or in the aggregate) would not cause Target to lose
any material benefit or incur any material liability. No investigation or review
by any Governmental Entity is pending or, to Target's knowledge, has been
threatened in a writing delivered to Target against Target, nor, to Target's
knowledge, has any Governmental Entity indicated an intention to conduct an
investigation of Target. There is no material agreement, judgment, injunction,
order or decree binding upon Target which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
Target, any acquisition of material property by Target or the conduct of
business by Target as currently conducted.
(b) Target holds, to the extent legally required, all permits,
licenses, variances, exemptions, orders and approvals from governmental
authorities that are material to and required for the operation of the business
of Target as currently conducted (collectively, the "Target Permits"). Target is
in compliance in all material respects with the terms of the Target Permits,
except where the failure to obtain any Target Permits or to be in compliance
with the terms of the Target Permits would not be material to Target.
2.6 Litigation. There is no action, suit, proceeding, claim, arbitration
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or investigation pending, and to Target's knowledge, no person has threatened in
a writing delivered to Target to commence any action, suit, proceeding, claim,
arbitration or investigation against Target which would be likely to be material
to Target. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Target the legal right of Target to design, manufacture,
offer or sell any of its products in the present manner or style thereof.
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2.7 Board Approval. The Board of Directors of Target has, as of the date
--------------
of this Agreement, determined (i) that the Merger is fair to, advisable for, and
in the best interests of Target and its stockholders, and, (ii) subject to the
terms and conditions set forth in this Agreement, to recommend that the
stockholders of Target approve and adopt this Agreement and approve the Merger.
2.8 Section 203 of the Delaware General Corporation Law Not Applicable.
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The Board of Directors of Target has taken all actions so that the restrictions
contained in Section 203 of the Delaware General Corporation Law applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or the other transactions contemplated by this Agreement.
2.9 Sophistication of Target Stockholders. Each stockholder of the Target
-------------------------------------
is able to fend for himself or itself, can bear the economic risk of his or its
investment and has such knowledge and experience in financial or business
matters that he or it is capable of evaluating the merits of acquiring shares of
Parent Common Stock in the Merger. Parent shall be entitled to rely on this
representation of Target for purposes of compliance with federal and state
securities laws.
2.10 Financial Statements. The financial statements of the Target, as
--------------------
delivered to the Parent, or its counsel, have been prepared in good faith in
accordance with the books and records of the Target and fairly present the
financial position of the Target as of such dates and the financial results of
the Target for such periods.
2.11 Material Contracts and Commitments. Set forth in the Target Schedules
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is a list of all agreements, contracts, arrangements, understanding,
indebtedness, liabilities and other obligations to which the Target is a party
by which the Target is bound that are material to the conduct and operations of
its business and properties or that provide for payments to or by the Target in
excess of $5,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Target, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by Parent to
Target dated as of the date hereof and certified by a duly authorized officer of
Parent (the "Parent Schedules"), as follows:
3.1 Organization of Parent.
----------------------
(a) Parent (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware; (ii) has the corporate
or other power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted; and (iii) except as would
not be material to Parent, is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary.
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(b) Parent has delivered or made available to Target a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent, as
amended to date, and each such instrument is in full force and effect. Parent is
not in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent governing instruments.
3.2 Parent Capital Structure. The authorized capital stock of Parent
------------------------
consists of 50,000,000 shares of Common Stock, of which there are 7,200,000
shares issued and outstanding as of the date hereof; 3,300,000 shares of Series
A Preferred Stock, of which 3,000,000 are issued and outstanding as of the date
hereof; 1,800,000 shares of Series B Preferred Stock, of which all are issued
and outstanding as of the date hereof and 2,805,770 shares of Series C Preferred
Stock, 2,400,000 shares of which are issued and outstanding as of the date
hereof. As of the date hereof, there are warrants to issue 300,000 shares of
Series A Preferred Stock and warrants to issue 405,668 Shares of Series C
Preferred Stock. All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
Parent or any agreement or document to which Parent is a party or by which it is
bound. As of the date hereof, Parent had reserved an aggregate of 1,191,469
shares of Parent Common Stock for issuance pursuant to Parent's 1999 Stock Plan.
As of the date hereof, there were no options outstanding to purchase shares of
Parent Common Stock pursuant to such plan. All shares of Parent Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
pursuant to which they are issuable, would be duly authorized, validly issued,
fully paid and nonassessable. A list of all holders of Parent Common Stock or
rights to acquire Parent Common Stock, together with their holdings, is set
forth in the Parent Schedules.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
-----------------------------------------
Section 3.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Parent, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Parent is a party or by which it is bound obligating Parent to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Target or obligating Target to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement.
3.4 Authority.
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(a) Parent has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
subject only to the approval of the issuance of Parent Common Stock pursuant to
the Merger by Parent's stockholders. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent, subject
only to the approval of the issuance of Parent Common Stock pursuant to the
Merger by Parent's stockholders and the filing of the
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Certificate of Merger pursuant to Delaware Law. Approval by the stockholders of
Parent of the issuance of Parent Common Stock pursuant to the Merger may be
obtained by the vote of a majority of the total votes cast regarding such
proposal at a duly called and noticed meeting of Parent's stockholders at which
a quorum is present. This Agreement has been duly executed and delivered by
Parent and, assuming the due authorization, execution and delivery by Target,
constitutes the valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by Parent does not, and the performance
of this Agreement by Parent will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of Parent, (ii) subject to compliance
with the requirements set forth in Section 3.4(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or (iii) result in any material breach of or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or materially impair Parent's material rights or alter
the material rights or material obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a material lien or encumbrance on any of the material
properties or assets of Parent pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent is a party or by which Parent or any of
its respective properties are bound. The Parent Schedules list all consents,
waivers and approvals under any of Parent's agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, which, if individually or in the aggregate not
obtained, would result in a material loss of benefits to Parent as a result of
the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by Parent in connection with the execution and delivery of this Agreement
or the consummation of the Merger, except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal, foreign and state
securities (or related) laws and the securities laws of any foreign country, and
(iii) such other consents, authorizations, filings, approvals and registrations
which if not obtained or made would not be material to Parent or have a material
adverse effect on the ability of Parent or consummate the Merger.
3.5 Compliance; Permits; Restrictions.
---------------------------------
(a) Parent is not, in any material respect, in conflict with, or in
default or in violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Parent or by which Parent is bound or affected, or (ii) any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent is a party
or by which Parent is bound, except for conflicts, violations and defaults that
(individually or in the aggregate) would not cause Parent to lose any material
benefit or incur any material liability. No investigation or review by any
Governmental Entity is pending or, to Parent's knowledge, has been threatened in
a writing delivered to Parent against Parent, nor, to Parent's knowledge, has
any Governmental Entity indicated an intention to conduct an investigation of
Parent. There is no material agreement, judgment, injunction, order or
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decree binding upon Parent which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Parent,
any acquisition of material property by Parent or the conduct of business by
Parent as currently conducted.
(b) Parent holds, to the extent legally required, all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to and required for the operation of the business of Parent as
currently conducted (collectively, the "Parent Permits"). Parent is in
compliance in all material respects with the terms of the Parent Permits, except
where the failure to be in compliance with the terms of the Parent Permits would
not be material to Parent.
3.6 Litigation. There is no action, suit, proceeding, claim, arbitration
----------
or investigation pending, and to Parent's knowledge, no person has threatened in
a writing delivered to Parent to commence any action, suit, proceeding, claim,
arbitration or investigation against Parent which would be likely to be material
to Parent. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Parent the legal right of Parent to design, manufacture,
offer or sell any of its products in the present manner or style thereof.
3.7 Valid Issuance. The Parent Common Stock to be issued in the Merger,
--------------
when issued in accordance with the provisions of this Agreement will be validly
issued, fully paid and nonassessable;
3.8 Board Approval. The Board of Directors of Parent has, as of the date
--------------
of this Agreement, determined (i) that the Merger is fair to, advisable for and
in the best interests of Parent and its stockholders, and, (ii) subject to the
terms and conditions set forth in this Agreement, to recommend that the
stockholders of Parent approve the issuance of shares of Parent Common Stock
pursuant to the Merger.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Target. During the period from the date of this
-----------------------------
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Target shall, except to the extent
that Parent shall otherwise consent in writing, carry on its business, in all
material respects, in the usual, regular and ordinary course, in substantially
the same manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations, pay its debts and taxes when
due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, Target will promptly notify Parent of any material event
involving its business or operations. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Target shall not issue, deliver,
sell, pledge or otherwise encumber any shares of capital stock or any securities
convertible into capital stock, or
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subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible in to capital stock, or enter into
agreements or commitments of any character obligating it to do any of the
foregoing, other than the issuance, delivery and/or sale of shares of Target
Common Stock pursuant to the exercise of options therefor outstanding as of the
date of this Agreement.
4.2 Conduct of Business by Parent. During the period from the date of this
-----------------------------
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Parent shall, except to the extent
that Target shall otherwise consent in writing, carry on its business, in all
material respects, in the usual, regular and ordinary course, in substantially
the same manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations, pay its debts and taxes when
due subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, Parent will promptly notify Target of any material event
involving its business or operation.
4.3 Reasonable Efforts; Notification. Upon the terms and subject to the
--------------------------------
conditions set forth in this Agreement, each of the parties agrees to use
reasonable efforts to take, or cause to be taken, such actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
such things as are necessary, proper or advisable to consummate and make
effective, as expeditiously as reasonably practicable, the Merger and the other
transactions contemplated by this Agreement, including using reasonable efforts
to accomplish the following: (i) the taking of such reasonable acts as are
necessary to cause the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
the taking of such reasonable steps as may be necessary to avoid any suit,
claim, action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iv) the defending of any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Target and its Board of Directors shall, if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Merger, this Agreement or any of the transactions contemplated by this
Agreement, use reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated hereby.
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4.4 Third Party Consents. As soon as reasonably practicable following the
--------------------
date hereof, Parent and Target will each use its commercially reasonable efforts
to obtain any material consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by Stockholder. Stockholder agrees to indemnify and
------------------------------
hold Parent and its officers, directors and affiliates harmless against all
liabilities, costs and expenses (hereinafter individually a "Loss" and
collectively "Losses") incurred by Parent, its officers, directors, or
affiliates, as a result of (i) any inaccuracy or breach of a representation or
warranty of Target contained in Article II herein and (ii) any failure by Target
to perform or comply with any covenant contained herein. Upon receipt by
Securityholder Agent at any time on or before the last day of the Escrow Period
(as defined below) of a certificate signed by the Parent (as defined in Section
5.2(g)) (A) stating that Parent has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid or properly accrued, or the basis for
such anticipated liability, and the nature of the misrepresentations, breach of
warranty or covenant to which such items is related, Stockholder shall deliver
to the Parent shares of Parent Common Stock in an amount equal to such losses;
provided that, (i) Stockholder shall have thirty (30) days to object in a
written statement to the claim made in the certificate, in which event the
parties shall resolve the conflict pursuant to Section 5.2(f) hereof and (ii)
Shareholder's liability under this Article V shall not exceed the Escrow Amount.
5.2 Escrow Arrangements.
-------------------
(a) Escrow Fund. As security for the indemnity provided for in
-----------
Article V hereof and by virtue of this Agreement, the Stockholder will be deemed
to have received and deposited with the Escrow Agent (as defined below) 269,146
shares of Parent Common Stock (the "Escrow Amount") without any act of the
Shareholder. As soon as practicable after the Effective Time, the Escrow Amount,
without any act of Shareholder, will be deposited with the Assistant Secretary
of Parent as Escrow Agent (the "Escrow Agent"), such deposit to constitute an
escrow fund (the "Escrow Fund") to be governed by the terms set forth herein.
Parent may not receive any shares from the Escrow Fund unless and until
Officer's Certificates (as defined in paragraph (d)(i) below) identifying
Losses, in excess of $10,000 (the "Threshold Amount") have been delivered to the
Escrow Agent as provided in paragraph (d) below, in which case Parent shall be
entitled to recover all Losses in excess of the Threshold Amount.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
--------------------------------------------------------------
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
P.S.T., on the date that is ninety (90) days after the Effective Time (the
"Escrow Period"); provided that the Escrow Period shall not terminate with
respect to such remaining
-13-
portion of the Escrow Fund (or some portion thereof) that in the reasonable
judgment of Parent, subject to the objection of the Securityholder Agent (as
defined below) and the subsequent arbitration of the matter in the manner
provided in Section 5.2(f) hereof, is necessary to satisfy any then pending
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to the termination of the Escrow Period. At the termination
of the Escrow Period, the Escrow Agent shall deliver to the Stockholder the
portion of the Escrow Fund not required to satisfy such claims. Shares released
from the Escrow Fund to satisfy Losses shall be valued solely for the purpose of
this Agreement at $1.67 per share. As soon as all outstanding claims have been
resolved, the Escrow Agent shall deliver to the Stockholder any remaining
portion of the Escrow Fund not used to satisfy such claims. Deliveries of Escrow
Amounts to the Stockholder pursuant to this Section 5.2(b) shall be made in
proportion to their respective original contributions to the Escrow Fund.
(c) Protection of Escrow Fund.
-------------------------
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period and until such later time as all deliveries of the Escrow
Amount out of the Escrow Fund have been made, shall treat such fund as a trust
fund in accordance with the terms of this Agreement and not as the property of
Parent and shall hold and dispose of the Escrow Fund only in accordance with the
terms hereof.
(ii) The Stockholder shall have voting rights and the right to
distributions of cash dividends with respect to the shares of Parent Common
Stock contributed to the Escrow Fund by the Stockholder (and on any voting
securities added to the Escrow Fund in respect of such shares of Parent Common
Stock). As the record holder of such shares, the Escrow Agent shall vote such
shares in accordance with the instructions of the Stockholder having the
beneficial interest therein and shall promptly deliver copies of all proxy
solicitation materials to such Shareholders. Parent shall show the Parent Common
Stock contributed to the Escrow Fund as issued and outstanding on its balance
sheet.
(d) Claims Upon Escrow Fund. Upon receipt by the Escrow Agent at any time
-----------------------
on or before the last day of the Escrow Period of a certificate signed by any
officer of Parent (an "Officer's Certificate"): (A) stating that Parent has paid
or properly accrued Losses, and (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each such
item was paid or properly accrued, and the nature of the misrepresentations,
breach of warranty or covenant to which such items is related, the Escrow Agent
shall, subject to the provisions of Section 5.2(e), deliver to Parent out of the
Escrow Fund as promptly as practicable, shares of Parent Common Stock held in
the Escrow Fund in an amount equal to such Losses.
(e) Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amounts pursuant to Section 5.2(d) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent Common Stock from
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the Escrow Fund in accordance with Section 5.2(d) hereof, provided that no such
payment or delivery may be made if the Securityholder Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the expiration
of such thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Securityholder Agent shall so object in writing to any
claim or claims made in any Officer's Certificate, the Securityholder Agent and
Parent shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the Securityholder Agent and
Parent should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and distribute
shares of Parent Common Stock from the Escrow Fund in accordance with the terms
thereof.
(ii) If no such agreement can be reached after good faith negotiation,
either Parent or the Securityholder Agent may demand arbitration of the matter
unless the amount of the damage or loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced until such amount
is ascertained or both parties agree to arbitration; and in either such event
the matter shall be settled by arbitration conducted by one arbitrator mutually
agreeable to Parent and the Securityholder Agent. In the event that within
forty-five (45) days after submission of any dispute to arbitration, Parent and
the Securityholder Agent cannot mutually agree on one arbitrator, Parent and the
Securityholder Agent shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator. The arbitrator or arbitrators, as
the case may be, shall set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator or majority of the
three arbitrators, as the case may be, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrator or a
majority of the three arbitrators, as the case may be, shall rule upon motions
to compel or limit discovery and shall have the authority to impose sanctions,
including attorneys' fees and costs, to the extent as a court of competent law
or equity, should the arbitrator or a majority of the three arbitrators, as the
case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator or a majority of the three
arbitrators, as the case may be, as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in Section 5.2(e) hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Santa ▇▇▇▇▇ County, California under the rules then in effect of the American
Arbitration Association. The arbitrator(s) shall determine how all expenses
relating to the arbitration shall be paid, including without limitation, the
respective expenses
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of each party, the fees of each arbitrator and the administrative fee of the
American Arbitration Association.
(g) Securityholder Agent of the Shareholder; Power of Attorney.
----------------------------------------------------------
(i) In the event that the Merger is approved, effective upon such vote,
and without further act of Shareholder, ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be appointed as
agent and attorney-in-fact (the "Securityholder Agent") for Shareholder, for and
on behalf of the Shareholder, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock from the Escrow
Fund in satisfaction of claims by Parent, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the Stockholder from time to time upon not less than thirty (30) days
prior written notice to Parent. No bond shall be required of the Securityholder
Agent, and the Securityholder Agent shall not receive compensation for his
services. Notices or communications to or from the Securityholder Agent shall
constitute notice to or from the Shareholder.
(ii) The Securityholder Agent shall not be liable for any act done or
omitted hereunder as Securityholder Agent while acting in good faith and in the
exercise of reasonable judgment. The Stockholder on whose behalf the Escrow
Amount was contributed to the Escrow Fund shall severally indemnify the
Securityholder Agent and hold the Securityholder Agent harmless against any
loss, liability or expense incurred without negligence or bad faith on the part
of the Securityholder Agent and arising out of or in connection with the
acceptance or administration of the Securityholder Agent's duties hereunder,
including the reasonable fees and expenses of any legal counsel retained by the
Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent or
-----------------------------------
instruction of the Securityholder Agent shall constitute a decision of the
Stockholder for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
the Shareholder, and the Escrow Agent and Parent may rely upon any such
decision, act, consent or instruction of the Securityholder Agent as being the
decision, act, consent or instruction of each and every Shareholder. The Escrow
Agent and Parent are hereby relieved from any liability to any person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Securityholder Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a third-party
------------------
claim which Parent reasonably believes may result in a demand against the Escrow
Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent shall be entitled on behalf of the Stockholder at its
expense, to participate in any defense of such claim. Parent shall have the
right in its sole discretion to conduct the defense of and settle any such
claim; provided, however, that except with the prior written consent of the
Securityholder Agent, no settlement of any such claim with third-party claimants
shall be determinative of the amount of any claim against the Escrow Fund. In
the event that
-16-
the Securityholder Agent has consented in writing to any such settlement, the
Securityholder Agent shall have no power or authority to object under any
provision of this Article V to the amount of any claim by Parent against the
Escrow Fund consistent with such settlement.
(j) Escrow Agent's Duties.
---------------------
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Parent and the
Securityholder Agent, and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed to be genuine and
to have been signed or presented by the proper party or parties.
(ii) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder provided that the Escrow Agent acted in good
faith and in the exercise of reasonable judgment.
(iii) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
(iv) In performing any duties under the Agreement, the Escrow Agent
shall not be liable to any party for damages, losses, or expenses, except for
negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for (A) any act or failure to act made
or omitted in good faith, or (B) any action taken or omitted in reliance upon
any instrument, including any written statement of affidavit provided for in
this Agreement that the Escrow Agent shall in good faith believe to be genuine,
nor will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with the legal counsel in connection with
Escrow Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by him in good faith in accordance with the
advice of counsel.
5.3 Maximum Payments; Remedy. If the Merger closes, the Escrow Fund shall
------------------------
be the sole and exclusive remedy of Parent for breaches of the representations
and warranties or breaches of covenants of Target contained in this Agreement;
provided, however, that nothing contained herein shall prevent the Parent from
seeking equitable remedies.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
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(a) Target Stockholder Approval. This Agreement shall have been
---------------------------
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of Target.
(b) Parent Stockholder Approval. The issuance of shares of Parent
---------------------------
Common Stock pursuant to the Merger shall have been duly approved by the
requisite vote under applicable law by the stockholders of Parent.
(c) No Order. No Governmental Entity shall have enacted, issued,
--------
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
6.2 Additional Conditions to Obligations of Target. The obligation of
----------------------------------------------
Target to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Target:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent contained in this Agreement (i) shall have been true and
correct in all material respects as of the date of this Agreement and (ii) shall
be true and correct in all material respects on and as of the Closing Date
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct in all material respects as of such
particular date), with the same force and effect as if made on and as of the
Closing Date.
(b) Agreements and Covenants. Parent shall have performed or complied
------------------------
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Parent shall have occurred since the date of this Agreement or be reasonably
likely to occur.
6.3 Additional Conditions to the Obligations of Parent. The obligations of
--------------------------------------------------
Parent to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Target contained in this Agreement (i) shall have been true and
correct in all material respects as of the date of this Agreement and (ii) shall
be true and correct in all material respects on and as of the Closing Date
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct as of such particular date), with
the same force and effect as if made on and as of the Closing Date.
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(b) Agreements and Covenants. Target shall have performed or complied
------------------------
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Target shall have occurred since the date of this Agreement or be reasonably
likely to occur.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time, whether before or after the requisite approvals of the
stockholders of Target or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Target;
(b) by either Target or Parent if the Merger shall not have been
consummated by May 31, 1999 for any reason; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
(c) by either Target or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Target or Parent if the required approvals of the
stockholders of Target contemplated by this Agreement shall not have been
obtained (provided that the right to terminate this Agreement under this Section
--------
7.1(d) shall not be available to Target where the failure to obtain Target
stockholder approval shall have been caused by the action or failure to act of
Target and such action or failure to act constitutes a breach by Target of this
Agreement);
(e) by either Target or Parent if the required approval of the
stockholders of Parent contemplated by this Agreement shall not have been
obtained (provided that the right to terminate this Agreement under this Section
--------
7.1(e) shall not be available to Parent where the failure to obtain Parent
stockholder approval shall have been caused by the action or failure to act of
Parent and such action or failure to act constitutes a material breach by Parent
of this Agreement);
(f) by Target, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.1(a) or Section 6.1(b)
would
-19-
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue.
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of Target set forth in this Agreement, or if
any representation or warranty of Target shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue.
7.2 Notice of Termination; Effect of Termination. Any termination of this
--------------------------------------------
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement.
7.3 Fees and Expenses. All fees and expenses incurred in connection with
-----------------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Merger is consummated.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
---------
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent and Target.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
-----------------
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
----------------------------------------------
and warranties of Target and Parent contained in this Agreement shall terminate
six (6) months after the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt
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confirmed) to the parties at the following addresses or telecopy numbers (or at
such other address or telecopy numbers for a party as shall be specified by like
notice):
(a) if to Parent, to:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Target, to:
PetJungle, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Securityholder Agent to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to Escrow Agent
Assistant Secretary, ▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation; Knowledge.
-------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(b) For purposes of this Agreement the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any of
the executive officers, of such party, has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event or effect
that is materially adverse to the business or financial condition of such entity
taken as a whole, except for those changes, events and effects that (i) are
directly and primarily caused by conditions affecting the United States economy
as a whole or affecting the industry in which such entity competes as a whole,
which conditions do not affect such entity in a disproportionate manner, or (ii)
are directly and primarily related to or result from announcement or pendency of
the Merger.
8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
-------------------------------------------
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Target Schedules and the
Parent Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) are not intended to confer upon any other person
any rights or remedies hereunder.
8.6 Severability. In the event that any provision of this Agreement or the
------------
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision
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to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
------------------------------------
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Each of the parties hereto irrevocably consents to the jurisdiction of any state
or federal court within the Northern District of California, in connection with
any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of California, as is appropriate, for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
----------
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Waiver of Jury Trial; Waiver of Conflicts. Each of Parent, Target and
-----------------------------------------
Stockholder hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this agreement or the actions of Parent, Target or
Stockholder in the negotiation, administration, performance and enforcement
hereof. Each of Parent, Target and Stockholder hereby acknowledges that ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ is counsel to Parent with respect to this agreement
and the transactions contemplated hereby, and irrevocably waives any conflict of
interest in connection with such representation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
▇▇▇▇▇▇▇▇.▇▇▇, INC.
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇, President
PETJUNGLE, INC.
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇, President
IDEALAB! HOLDINGS, L.L.C.
/s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇▇▇▇▇, President
SECURITYHOLDER AGENT
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
ESCROW AGENT
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary of
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
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