EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
dated as of November 19, 1999
by and between
▇▇▇▇▇▇▇▇.▇▇▇, INC.,
and
▇▇▇▇▇.▇▇▇, INC.
TABLE OF CONTENTS
Page
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SECTION ONE................................................................. 1
1. The Merger........................................................ 1
1.1 The Merger.................................................... 1
1.2 Closing....................................................... 2
1.3 Effect of the Merger.......................................... 2
1.4 Certificate of Incorporation; Bylaws.......................... 2
1.5 Directors and Officers........................................ 3
1.6 Effect on Capital Stock....................................... 3
1.7 Surrender of Certificates..................................... 6
1.8 No Further Ownership Rights in Alive Common Stock............. 7
1.9 Tax and Accounting Consequences............................... 7
1.10 Taking of Necessary Action; Further Action.................... 8
1.11 Withholding................................................... 8
1.12 Lost, Stolen or Destroyed Certificates........................ 8
1.13 Closing of Transfer Books..................................... 8
SECTION TWO................................................................. 8
2. Representations and Warranties of Alive........................... 8
2.1 Organization Standing and Power; Subsidiaries................. 9
2.2 Articles of Incorporation and Bylaws.......................... 10
2.3 Capital Structure............................................. 10
2.4 Authority..................................................... 11
2.5 No Conflicts; Required Filings and Consents................... 12
2.6 Financial Statements.......................................... 12
2.7 Absence of Undisclosed Liabilities............................ 12
2.8 Absence of Certain Changes.................................... 13
2.9 Litigation.................................................... 14
2.10 Restrictions on Business Activities........................... 15
2.11 Permits....................................................... 15
2.12 Title to Property............................................. 15
2.13 Intellectual Property......................................... 16
2.14 Compliance with Environmental Requirements.................... 18
2.15 Taxes......................................................... 18
2.16 Employee Benefit Plans........................................ 20
2.17 Certain Agreements Affected by the Merger..................... 23
2.18 Employee Matters.............................................. 23
2.19 Material Contracts............................................ 24
2.20 Interested Party Transactions................................. 25
2.21 Insurance..................................................... 26
2.22 Compliance With Laws.......................................... 26
2.23 Minute Books.................................................. 26
2.24 Complete Copies of Materials.................................. 26
2.25 Bank Accounts................................................. 26
2.26 Brokers' and Finders' Fees.................................... 26
2.27 Information Statement......................................... 26
2.28 Voting Agreement.............................................. 27
2.29 Vote Required................................................. 27
2.30 Board Approval................................................ 27
2.31 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act..................... 27
2.32 Accounting and Tax Matters.................................... 27
2.33 Third Party Consents.......................................... 27
2.34 Year 2000..................................................... 27
2.35 Representations Complete...................................... 28
SECTION THREE............................................................... 28
3. Representations and Warranties of ▇▇▇▇▇▇▇▇.▇▇▇................ 28
3.1 Organization, Good Standing and Qualification................. 28
3.2 Capitalization................................................ 28
3.3 Subsidiaries.................................................. 29
3.4 Authority..................................................... 29
3.5 Valid Issuance of Securities.................................. 30
3.6 No Conflict; Required Filings and Consents.................... 30
3.7 Litigation.................................................... 30
3.8 Intellectual Property......................................... 31
3.9 Compliance with Contracts and Other Instruments............... 31
3.10 Agreements; Action............................................ 32
3.11 Representations Complete...................................... 32
3.12 No Conflict of Interest....................................... 33
3.13 Title to Property and Assets.................................. 33
3.14 Financial Statements.......................................... 33
3.15 Changes....................................................... 34
3.16 Employee Benefit Plans........................................ 35
3.17 Tax Returns and Payments...................................... 35
3.18 Insurance..................................................... 35
3.19 Labor Agreements and Actions.................................. 35
3.20 Confidential Information and Invention Assignment Agreements.. 35
3.21 Permits....................................................... 35
3.22 Corporate Documents........................................... 35
3.23 Liabilities................................................... 36
3.24 Accounting and Tax Matters.................................... 36
3.25 Year 2000..................................................... 36
3.26 Information Statement......................................... 36
3.27 Third Party Consents.......................................... 36
3.28 Certain Agreements Affected by the Merger..................... 36
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SECTION FOUR ............................................................... 37
4. Conduct Prior to the Effective Time.............................. 37
4.1 Conduct of Business of Alive and ▇▇▇▇▇▇▇▇.▇▇▇................. 37
4.2 Conduct of Business of Alive.................................. 38
SECTION FIVE................................................................ 40
5. Additional Agreements............................................ 40
5.1 Best Efforts and Further Assurances........................... 40
5.2 Consents; Cooperation......................................... 40
5.3 Access to Information......................................... 42
5.4 Confidentiality............................................... 42
5.5 Public Disclosure............................................. 42
5.6 FIRPTA........................................................ 42
5.7 State Statutes................................................ 42
5.8 Escrow Agreement.............................................. 43
5.9 Blue Sky Laws................................................. 43
5.10 Stockholder Approval.......................................... 43
5.11 Special Meeting of Stockholders............................... 44
5.12 Voting Agreement.............................................. 44
5.13 Maintenance of Alive Indemnification Obligations.............. 44
SECTION SIX................................................................. 45
6. Conditions to the Merger......................................... 45
6.1 Conditions to Obligations of Each Party to Effect the Merger.. 45
6.2 Additional Conditions to Obligations of Alive................. 46
6.3 Additional Conditions to the Obligations of ▇▇▇▇▇▇▇▇.▇▇▇...... 47
SECTION SEVEN............................................................... 49
7. Termination, Amendment and Waiver................................ 49
7.1 Termination................................................... 49
7.2 Effect of Termination......................................... 50
7.3 Expenses...................................................... 50
7.4 Amendment..................................................... 50
7.5 Extension; Waiver............................................. 51
SECTION EIGHT............................................................... 51
8. Escrow and Indemnification....................................... 51
8.1 Survival of Representations and Warranties.................... 51
8.2 Escrow Fund................................................... 51
8.3 Indemnification............................................... 51
8.4 Damages Threshold............................................. 52
8.5 Escrow Period................................................. 52
8.6 Distributions; Voting......................................... 53
8.7 Method of Asserting Claims.................................... 53
8.8 Representative of the Stockholders; Power of Attorney......... 53
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8.9 Adjustment to Escrow.......................................... 54
8.10 Indemnity by ▇▇▇▇▇▇▇▇.▇▇▇..................................... 54
SECTION NINE................................................................ 56
9. General Provisions................................................. 56
9.1 Survival of Warranties........................................ 56
9.2 Notices....................................................... 56
9.3 Interpretation................................................ 57
9.4 Counterparts.................................................. 57
9.5 Entire Agreement; Nonassignability; Parties in Interest....... 57
9.6 Severability.................................................. 58
9.7 Remedies Cumulative........................................... 58
9.8 Governing Law................................................. 58
9.9 Rules of Construction......................................... 58
9.10 Amendments and Waivers........................................ 58
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AGREEMENT AND PLAN OF REORGANIZATION
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This Agreement and Plan of Reorganization (the "Agreement") is made and
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entered into as of November 19, 1999, by and among ▇▇▇▇▇▇▇▇.▇▇▇, Inc., a
Delaware corporation ("▇▇▇▇▇▇▇▇.▇▇▇") and ▇▇▇▇▇.▇▇▇, Inc., a Washington
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corporation ("Alive").
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RECITALS
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A. The Boards of Directors of Alive and ▇▇▇▇▇▇▇▇.▇▇▇ believe it is in the
best interests of their respective companies and the stockholders of their
respective companies that Alive and ▇▇▇▇▇▇▇▇.▇▇▇ combine into a single company
through the merger of Alive with and into ▇▇▇▇▇▇▇▇.▇▇▇ (the "Merger") and, in
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furtherance thereof, each have unanimously approved the Merger and have approved
and adopted this Agreement as a plan of reorganization. Pursuant to the Merger,
among other things, the outstanding shares of capital stock of Alive shall be
converted into shares of the Common Stock of ▇▇▇▇▇▇▇▇.▇▇▇, par value $0.001 per
share (the "▇▇▇▇▇▇▇▇.▇▇▇ Common Stock"), at the rates set forth herein.
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B. Alive and ▇▇▇▇▇▇▇▇.▇▇▇ desire to make certain representations and
warranties and other agreements in connection with the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to ▇▇▇▇▇▇▇▇.▇▇▇'s willingness to enter into this Agreement,
certain shareholders of Alive have entered into Voting Agreements substantially
in the form attached hereto as Exhibit C.
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D. 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"), and that the Merger will be treated as a
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"reorganization" within the meaning of Section 368(a) of the Code.
AGREEMENT
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The parties hereby agree as follows:
SECTION ONE
1. The Merger.
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1.1 The Merger.
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(a) Subject to and upon the terms and conditions of this
Agreement, an Agreement and Plan of Merger and Articles of Merger in such
mutually acceptable form as is required by the relevant provisions of the
Washington Business Corporations Act (the "WBCA") in substantially the
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forms attached hereto as Exhibit A-1 and Exhibit A-2 (collectively, the
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"Articles of Merger") shall be duly prepared, executed and acknowledged by
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▇▇▇▇▇▇▇▇.▇▇▇ and
Alive, and thereafter delivered to the Secretary of State of the State of
Washington for filing on the Closing or before the Closing Date (as defined
below).
(b) Subject to and upon the terms and conditions of this Agreement, a
Certificate of Merger in such mutually acceptable form as is required by the
relevant provisions of the Delaware General Corporations Law (the "Delaware
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Law") in substantially the form attached hereto as Exhibit B (the "Certificate
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of Merger" and together with the Articles of Merger, the "Merger Documents")
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shall be duly prepared, executed and acknowledged by ▇▇▇▇▇▇▇▇.▇▇▇ and Alive, and
thereafter delivered to the Secretary of State of the State of Delaware for
filing on the Closing or before the Closing Date (as defined below).
(c) The Merger shall become effective upon the due and valid filing
of the Articles of Merger with the Secretary of State of the State of Washington
and the Certificate of Merger with the Secretary of State of the State of
Delaware or at such date and time thereafter as is provided in Section 1.2 (the
"Effective Time").
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1.2 Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place as soon as practicable, (and in no
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event later than 5 business days after the satisfaction or waiver of each of the
conditions set forth in Section 4 below or at such other time as the parties
agree (the "Closing Date"). The Closing shall take place at the offices of
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Venture Law Group, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇, or at such other location
as the parties agree.
1.3 Effect of the Merger.
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(a) At the Effective Time, Alive shall be merged with and into
▇▇▇▇▇▇▇▇.▇▇▇, the separate corporate existence of Alive shall cease and
▇▇▇▇▇▇▇▇.▇▇▇ shall continue as the surviving corporation of the Merger.
(b) At the Effective Time, the effect of the Merger shall be as
provided in this Agreement, the Merger Documents and the applicable provisions
of the WBCA and Delaware Law. Without limiting the generality of the foregoing,
at and after the Effective Time, ▇▇▇▇▇▇▇▇.▇▇▇ shall possess all the rights,
privileges, powers and franchises, and be subject to all the restrictions,
disabilities and duties of Alive.
1.4 Certificate of Incorporation; Bylaws.
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(a) Unless otherwise determined by ▇▇▇▇▇▇▇▇.▇▇▇ and Alive prior to the
Effective Time, the Certificate of Incorporation of ▇▇▇▇▇▇▇▇.▇▇▇ as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of ▇▇▇▇▇▇▇▇.▇▇▇ following the Merger.
(b) Unless otherwise determined by ▇▇▇▇▇▇▇▇.▇▇▇ and Alive prior to the
Effective Time, the Bylaws of ▇▇▇▇▇▇▇▇.▇▇▇ as in effect immediately prior to the
Effective Time shall be the Bylaws of ▇▇▇▇▇▇▇▇.▇▇▇ following the Merger.
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1.5 Directors and Officers. At the Effective Time, the directors
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of ▇▇▇▇▇▇▇▇.▇▇▇ immediately prior to the Effective Time shall be the directors
of ▇▇▇▇▇▇▇▇.▇▇▇ following the Merger, and the officers of ▇▇▇▇▇▇▇▇.▇▇▇
immediately prior to the Effective Time, shall be the officers of ▇▇▇▇▇▇▇▇.▇▇▇
following the Merger, in each case until their respective successors are duly
elected or appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and without
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any action on the part of ▇▇▇▇▇▇▇▇.▇▇▇ or Alive or any of their respective
stockholders, the following shall occur at the Effective Time:
(a) Conversion of Alive Common Stock. Each share of Common Stock of
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Alive, par value $0.01 per share (including shares of Alive Common Stock issued
upon conversion of the Series A Convertible Preferred Stock of Alive and the
Series B Convertible Preferred Stock of Alive or any other convertible security)
(collectively, the "Alive Common Stock"), that is issued and outstanding
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immediately prior to the Effective Time (other than shares to be cancelled
pursuant to Section 1.6(b) and shares, if any, held by persons who have not
voted such shares for approval of the Merger, or have not delivered a written
consent thereto, and with respect to which such persons shall become entitled to
exercise dissenters' rights in accordance with 23B.13 of the WBCA ("Dissenting
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Shares")) will, by virtue of the Merger and as of the Effective Time, shall be
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converted into and exchanged for such fraction of a fully paid and nonassessable
share of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock as is equal to the Exchange Ratio (as defined
below) (such shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock being received as a result of
such conversion and exchange, together with all options to purchase ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock pursuant to Section 1.6(c), shall be referred to as the "Merger
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Consideration"). All shares of Alive Common Stock, when so converted, shall no
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longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Alive Common Stock shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration therefor upon the surrender of
such certificate in accordance with Section 1.7, without interest.
For purposes of this Agreement, the "Exchange Ratio" will be a
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fraction, the numerator of which is two million six hundred thousand (2,600,000)
and the denominator of which is the sum of all outstanding shares of Alive
Common Stock plus all outstanding warrants, options or other rights to acquire
Alive Common Stock as of the Effective Time.
(b) Cancellation of Alive Common Stock Owned by ▇▇▇▇▇▇▇▇.▇▇▇ or Alive.
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At the Effective Time, all shares of Alive Common Stock that are owned by Alive
as treasury stock, each share of Alive Common Stock owned by ▇▇▇▇▇▇▇▇.▇▇▇ or
Alive immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(c) Alive Stock Options. At the Effective Time, each stock option
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that is then outstanding under the Alive 1998 Stock Incentive Compensation Plan
(the "Alive Option Plan"), whether vested or unvested (an "Alive Option"), shall
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be assumed by ▇▇▇▇▇▇▇▇.▇▇▇ in accordance with the terms (as in effect as of the
date of this Agreement) of the
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Alive Option Plan and the stock option agreement by which such Alive Option is
evidenced. All rights with respect to Alive Common Stock under outstanding Alive
Options shall thereupon be converted into rights with respect to ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock. Accordingly, from and after the Effective Time, (a) each Alive
Option assumed by ▇▇▇▇▇▇▇▇.▇▇▇ may be exercised solely for shares of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock, (b) the number of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock
subject to each such assumed Alive Option shall be equal to the number of shares
of Alive Common Stock that were subject to such Alive Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounded down to the
nearest whole number of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock (collectively, the
"Option Shares"), (c) the per share exercise price for the ▇▇▇▇▇▇▇▇.▇▇▇ Common
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Stock issuable upon exercise of each such assumed Alive Option shall be
determined by dividing the exercise price per share of Alive Common Stock
subject to such Alive Option, as in effect immediately prior to the Effective
Time, by the Exchange Ratio, and rounding the resulting exercise price up to the
nearest whole cent, and (d) all restrictions on the exercise of each such
assumed Alive Option shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of such Alive Option shall
otherwise remain unchanged; provided, however, that each such assumed Alive
Option shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by ▇▇▇▇▇▇▇▇.▇▇▇ after the
Effective Time. Alive and ▇▇▇▇▇▇▇▇.▇▇▇ shall take all action that may be
necessary (under the Alive Option Plan and otherwise) to effectuate the
provisions of this Section 1.6(c). It is the intention of the parties that the
Alive Options assumed by ▇▇▇▇▇▇▇▇.▇▇▇ qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent such
Alive Options qualified as incentive stock options prior to the Effective Time,
and this Section 1.6(c) shall be interpreted consistent with such intent.
Following the Closing, ▇▇▇▇▇▇▇▇.▇▇▇ will send to each holder of an assumed Alive
Option a written notice setting forth (i) the number of shares of ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock subject to such assumed Alive Option, and (ii) the exercise price
per share of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock issuable upon exercise of such assumed
Alive Option.
(d) Adjustments; Maximum Issuance. The Exchange Ratio shall be
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adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock or Alive Common Stock), reorganization,
recapitalization or other like change with respect to ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock
or Alive Common Stock occurring after the date of this Agreement and prior to
the Effective Time. The maximum number of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to
be issued (including ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to be reserved for issuance upon
exercise of Alive Options) in exchange for the acquisition by ▇▇▇▇▇▇▇▇.▇▇▇ of
all outstanding Alive Common Stock and all unexpired and unexercised options and
warrants to acquire Alive Common Stock shall be 2,600,000 shares (as adjusted
for stock splits, recapitalizations and the like) of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock,
such number of shares to be reduced by the number of shares of ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock with respect to Dissenting Shares, if any, in accordance with
Section 1.6(a) above. No other adjustment shall be made in the number of shares
of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock issued in the Merger as a result of (i) any
increase or decrease in the price of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock or Preferred
Stock prior to the Effective Time, or (ii) any cash proceeds received by Alive
from the date of this Agreement to
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the Closing Date pursuant to the exercise of currently outstanding options or
warrants to acquire Alive Common Stock.
(f) Dissenters' Rights.
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(i) Notwithstanding anything to the contrary contained in this
Agreement, any Dissenting Shares shall not be converted into or represent the
right to receive ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in accordance with Section 1.6, and
the holder or holders of such shares shall be entitled only to such rights as
may be granted to such holder or holders in Chapter 23B.13 of the WBCA;
provided, however, that if the status of any such holder as a "dissenter" shall
not be perfected, or if such holder shall lose his, her or its status as a
"dissenter," then, as of the later of the Effective Time or the time of the
failure to perfect such status or the loss of such status, such shares shall
automatically be converted into and shall represent only the right to receive
(upon the surrender of the certificate or certificates representing such shares)
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in accordance with this Section 1.6.
(ii) Alive shall give ▇▇▇▇▇▇▇▇.▇▇▇ (i) prompt notice of any
written demand received by Alive prior to the Effective Time to require Alive to
purchase shares of capital stock of Alive pursuant to Chapter 23B.13 of the WBCA
and of any other demand, notice or instrument delivered to Alive prior to the
Effective Time pursuant to the WBCA, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to any such demand, notice or
instrument; provided, however, that any participation by ▇▇▇▇▇▇▇▇.▇▇▇ shall not
prevent Alive from satisfying its obligations to holders of Dissenting Shares
under the WBCA. Subject to the foregoing, Alive shall not make any payment
(unless such payment is pursuant to a court order in which event Alive shall
give ▇▇▇▇▇▇▇▇.▇▇▇ notice of any such court order or request therefor as soon as
practicable) or settlement offer prior to the Effective Time with respect to any
such demand unless ▇▇▇▇▇▇▇▇.▇▇▇ shall have consented in writing to such payment
or settlement offer.
(g) Fractional Shares. No fraction of a share of ▇▇▇▇▇▇▇▇.▇▇▇
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Common Stock will be issued, but in lieu thereof each holder of shares of Alive
Common Stock who would otherwise be entitled to a fraction of a share of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock (after aggregating all fractional shares of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to be received by such holder) shall receive from
▇▇▇▇▇▇▇▇.▇▇▇ an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the fair market value of a
share of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock immediately prior to the Effective Time, as
determined in good faith by ▇▇▇▇▇▇▇▇.▇▇▇'s Board of Directors.
(h) Restricted Shares. Shares of Alive Common Stock which are
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subject to repurchase by Alive in the event the holder thereof ceases to be
employed by Alive ("Alive Restricted Shares") shall be converted into
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▇▇▇▇▇▇▇▇.▇▇▇ Common Stock on the same basis as provided in subsection (a) above
and shall be registered in such holder's name, but shall be held by ▇▇▇▇▇▇▇▇.▇▇▇
pursuant to the existing agreements in effect on the date of this Agreement.
Holders of the Alive Restricted Shares are identified on Schedule 1.6(h)
together with the vesting schedules associated with such shares.
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1.7 Surrender of Certificates.
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(a) ▇▇▇▇▇▇▇▇.▇▇▇ to Provide Common Stock and Cash. Promptly after
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the Effective Time, ▇▇▇▇▇▇▇▇.▇▇▇ shall make available for exchange in accordance
with this Section 1, through such reasonable procedures as ▇▇▇▇▇▇▇▇.▇▇▇ may
adopt, (i) the shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock issuable pursuant to Section
1.6(a) less the number of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to be deposited
into the Escrow Fund (as defined in Section 8) pursuant to the requirements of
Section 8 and (ii) cash in an amount sufficient to permit payment of cash in
lieu of fractional shares pursuant to Section 1.6(g).
(b) Exchange Procedures. Promptly after the Effective Time,
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▇▇▇▇▇▇▇▇.▇▇▇ shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
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Time represented outstanding shares of Alive Common Stock, whose shares were
converted into the right to receive shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock (and
cash in lieu of fractional shares) pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon receipt of the
Certificates by ▇▇▇▇▇▇▇▇.▇▇▇, and shall be in such form and have such other
provisions as is customary and as ▇▇▇▇▇▇▇▇.▇▇▇ may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock (and cash in
lieu of fractional shares). Upon surrender of a Certificate for cancellation to
▇▇▇▇▇▇▇▇.▇▇▇ or to such other agent or agents as may be appointed by
▇▇▇▇▇▇▇▇.▇▇▇, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock (less the
number of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to be deposited in the Escrow Fund
on such holder's behalf pursuant to Section 8 below) and payment in lieu of
fractional shares which such holder has the right to receive pursuant to Section
1.6, and the Certificate so surrendered shall forthwith be cancelled. Until so
surrendered, each Certificate will be deemed from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock into which
such shares of Alive 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. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Section 8 below,
▇▇▇▇▇▇▇▇.▇▇▇ shall cause to be distributed to the Escrow Agent (as defined in
Section 8 below) a certificate or certificates representing 260,000 shares of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock which shall be registered in the name of the Escrow
Agent as nominee for the holders of Certificates cancelled pursuant to this
Section 1.7. Such shares shall be beneficially owned by such holders and shall
be held in escrow and shall be available to compensate ▇▇▇▇▇▇▇▇.▇▇▇ for certain
damages as provided in Section 8 below. To the extent not used for such
purposes, such shares shall be released, all as provided in Section 8 below.
(c) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, neither ▇▇▇▇▇▇▇▇.▇▇▇ nor Alive shall be liable to any person for
any amount
-6-
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(d) Dissenting Shares. The provisions of this Section 1.7 shall also
-----------------
apply to Dissenting Shares that lose their status as such, except that the
obligations of ▇▇▇▇▇▇▇▇.▇▇▇ under this Section 1.7 shall commence on the date of
loss of such status and the holder of such shares shall be entitled to receive
in exchange for such shares the number of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to
which such holder is entitled pursuant to Section 1.6 hereof and the amount of
cash payable to such holder pursuant to Section 1.6(h), if any.
(e) Distributions With Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions with respect to ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the Certificates
representing whole shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of any
such dividends or other distributions with a record date after the Effective
Time payable (but for the provisions of this Section 1.7(e)) with respect to
such shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock.
(f) Transfers of Ownership. If any certificate for shares of
----------------------
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of such issuance that the certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to ▇▇▇▇▇▇▇▇.▇▇▇ or any agent designated
by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in any name other than that
of the registered holder of the certificate surrendered, or established to the
reasonable satisfaction of ▇▇▇▇▇▇▇▇.▇▇▇ or any agent designated by it that such
tax has been paid or is not payable.
1.8 No Further Ownership Rights in Alive Common Stock. All shares of
-------------------------------------------------
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock issued upon the surrender for exchange of shares of
Alive Common Stock in accordance with the terms hereof (including any cash paid
in lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Alive Common Stock, and
there shall be no further registration of transfers on the records of Alive or
▇▇▇▇▇▇▇▇.▇▇▇ of shares of Alive Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to ▇▇▇▇▇▇▇▇.▇▇▇ for any reason, they shall be cancelled and exchanged
as provided in this Section 1.
1.9 Tax and Accounting Consequences. It is intended by the parties
-------------------------------
that the Merger shall constitute a "reorganization" and that this Agreement be
treated as a plan of reorganization within the meaning of Section 368 of the
Code and be accounted for as a purchase.
-7-
1.10 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 ▇▇▇▇▇▇▇▇.▇▇▇ with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of Alive, the officers and directors of Alive are fully authorized in
the name of their corporation or otherwise to take, and will take, all such
lawful and necessary action, so long as such action is not inconsistent with
this Agreement.
1.11 Withholding. ▇▇▇▇▇▇▇▇.▇▇▇ shall be entitled to deduct and
-----------
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Alive Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code or
any provision of applicable state, local or foreign tax laws. To the extent that
amounts are so withheld by ▇▇▇▇▇▇▇▇.▇▇▇ such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to such holder in respect
of which such deduction and withholding was made by ▇▇▇▇▇▇▇▇.▇▇▇.
1.12 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, ▇▇▇▇▇▇▇▇.▇▇▇ shall issue
in exchange for such lost, stolen or destroyed Certificates, upon the making of
an affidavit of that fact by the holder thereof, such shares of ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock (and cash in lieu of fractional shares) as may be required pursuant
to Section 1.6; provided, however, that ▇▇▇▇▇▇▇▇.▇▇▇ may, in its discretion and
as a condition precedent to such issuance, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as ▇▇▇▇▇▇▇▇.▇▇▇
may reasonably direct as indemnity against any claim that may be made against
▇▇▇▇▇▇▇▇.▇▇▇ with respect to the Certificates alleged to have been lost, stolen
or destroyed.
1.13 Closing of Transfer Books. At the Effective Time, the stock
-------------------------
transfer books of Alive shall be closed and no transfer of Alive Common Stock or
Alive Preferred Stock, if any, shall thereafter be made. Certificates presented
to ▇▇▇▇▇▇▇▇.▇▇▇ after the Effective Time shall be cancelled and exchanged for
shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in accordance with Section 1.6, subject to
Section 8 and to applicable law in the case of Dissenting Shares.
SECTION TWO
2. Representations and Warranties of Alive.
---------------------------------------
In this Agreement, any reference to a "Material Adverse Effect" with
-----------------------
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects of such entity and its subsidiaries, taken as
a whole, or to prevent or materially delay consummation of the Merger or
otherwise to prevent such entity and its subsidiaries from performing their
obligations under this Agreement; provided, however that the following shall not
be taken into account in determining a "Material Adverse Effect": (a) any
adverse change, event or effect that is directly attributable to conditions
affecting the United States economy generally unless such conditions adversely
affect such party in a materially
-8-
disproportionate manner, and (b) any adverse change, event or effect that is
directly attributable to conditions affecting such party's industry generally,
unless such conditions adversely affect such party in a materially
disproportionate manner.
In this Agreement, any reference to a party's "knowledge" means the
---------
actual knowledge of such party's officers or directors provided that such
persons shall have made inquiry of those employees of such party whom such
officers or directors reasonably believe to have actual knowledge of the matters
in question.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Alive to ▇▇▇▇▇▇▇▇.▇▇▇ prior to the execution and
delivery of this Agreement and specifically referring to a particular
representation or warranty (or subsection thereof) in this Agreement (the "Alive
-----
Disclosure Schedule"), Alive represents and warrants to ▇▇▇▇▇▇▇▇.▇▇▇ as follows:
-------------------
2.1 Organization; Subsidiaries.
---------------------------
(a) Alive is a corporation duly organized, validly existing and in
good standing under the laws of the state of Washington. Alive has the requisite
corporate power and authority and all necessary government approvals to own,
lease and operate its properties and to carry on its business as now being
conducted and as proposed to be conducted, except where the failure to have such
power, authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on Alive. Alive is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on Alive. The Alive Disclosure Schedule contains a true
and complete list of all states in which Alive is duly qualified or licensed to
transact business as a foreign corporation. The Alive Disclosure Schedule
contains a true and complete listing of the locations of all sales offices,
development facilities, and any other offices or facilities of Alive and a true
and complete list of all states in which Alive maintains any employees.
(b) Alive has no Subsidiaries (as defined below). Alive does not own
or control (directly or indirectly) any capital stock, bonds or other securities
of, and does not have any proprietary interest in, any other corporation,
general or limited partnership, limited liability company, joint venture, firm,
association or business organization, entity or enterprise, and Alive does not
control (directly or indirectly) the management or policies of any other
corporation, partnership, limited liability company, joint venture, firm,
association or business organization, entity or enterprise. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
----------
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership), or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a
-9-
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization or a majority of the profit
interests in such other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
2.2 Articles of Incorporation. Alive has delivered a true and correct
-------------------------
copy of the Articles of Incorporation and Bylaws or other charter documents of
Alive, as amended to date, to ▇▇▇▇▇▇▇▇.▇▇▇. Alive is not in violation of any of
the provisions of its Articles of Incorporation or Bylaws.
2.3 Capital Structure.
-----------------
(a) The authorized capital stock of Alive consists of 20,000,000
shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of
Preferred Stock, par value $0.01 per share, 902,886 of which are designated
Series A Preferred Stock and 1,867,233 of which are designated Series B
Preferred Stock. As of the date of this Agreement, there were issued and
outstanding 2,322,752 shares of Alive Common Stock, 902,886 shares of Series A
Preferred Stock (the "Alive Series A Preferred") and 1,867,233 shares of Series
------------------------
B Preferred Stock (the "Alive Series B Preferred" and together with the Alive
------------------------
Series A Preferred and Alive Common Stock, the "Alive Capital Stock"). The
-------------------
issued and outstanding shares of Alive Capital Stock are held of record by the
shareholders of Alive as set forth and identified in the shareholder list
attached as Schedule 2.3(a) to the Alive Disclosure Schedule. All outstanding
shares of Alive Capital Stock are duly authorized, validly issued, fully paid
and non-assessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Articles of Incorporation or Bylaws of Alive or any agreement to which Alive
is a party or by which it is bound. All outstanding shares of Alive Capital
Stock were issued in compliance with all applicable federal and state securities
laws. Of the issued and outstanding shares of Alive Capital Stock, 820,034
shares will be subject, as of the Effective Date (after giving effect to the
Merger), to Alive's right of repurchase at a weighted average repurchase price
of $0.18 per share.
(b) There are no other outstanding shares of capital stock or
voting securities and no outstanding commitments to issue any shares of capital
stock or voting securities after September 30, 1999 other than pursuant to the
exercise of options outstanding as of such date under the Alive Stock Option
Plan and pursuant to a warrant to purchase 7,500 shares of Common Stock (the
Landlord Warrant"). As of the date of this Agreement, Alive has reserved (i)
----------------
sufficient shares of Common Stock for issuance upon conversion of the Alive
Series A Preferred and the Alive Series B Preferred, and (ii) 1,498,350 shares
of Common Stock for issuance to employees and consultants pursuant to the Alive
Stock Option Plan, of which 569,454 shares have been issued pursuant to option
exercises or direct stock purchases, 185,400 shares are subject to outstanding,
unexercised options. As of the Effective Time (after giving effect to the
Merger), 190,625 shares under the Alive Stock Option Plan will be fully vested
and 564,229 shares will be subject to vesting as set forth on Schedule 2.3(b)
hereto (including any such shares subject to Alive's right of repurchase due to
early exercise of options). Since
-10-
October 31, 1999, Alive has not issued or granted additional options under the
Alive Stock Option Plan. Alive is not in active discussion, formal or informal,
with any person or entity regarding the issuance of any form of additional Alive
equity that has not been issued or committed to prior to the date of this
Agreement. Schedule 2.3(b) of the Alive Disclosure Schedule sets forth the
number of outstanding Alive Options and all other rights to acquire shares of
Alive Common Stock pursuant to the Alive Stock Option Plan and the applicable
exercise prices. Except (i) for the rights created pursuant to this Agreement,
(ii) for Alive's right to repurchase any unvested shares under the Alive Stock
Option Plan, (iii) for such rights as to which waivers have been or will be
obtained as set forth on Schedule 2.3(b) hereto, (iv) the acceleration
provisions of the Alive Stock Option Plan and related option agreements, and (v)
as set forth in this Section 2.3, there are no options, warrants, calls, rights,
commitments, agreements or arrangements of any character to which Alive is a
party or by which Alive is bound relating to the issued or unissued capital
stock of Alive or obligating Alive to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of Alive or obligating Alive to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
Alive's capital stock (i) between or among Alive and any of its stockholders and
(ii) to the knowledge of Alive, between or among any of Alive's stockholders,
except for the stockholders delivering Irrevocable Proxies (as defined below).
The terms of the Alive Stock Option Plan permit the assumption or substitution
of options to purchase ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock as provided in this Agreement,
without the consent or approval of the holders of such securities, the Alive
stockholders, or otherwise. True and complete copies of all agreements and
instruments relating to or issued under the Alive Stock Option Plan have been
made available to ▇▇▇▇▇▇▇▇.▇▇▇ and such agreements and instruments have not been
amended, modified or supplemented, and there are no agreements to amend, modify
or supplement such agreements or instruments in any case from the form made
available to ▇▇▇▇▇▇▇▇.▇▇▇. Except as set forth on Schedule 2.3(b) to the Alive
Disclosure Schedule, there are no agreements or arrangements pursuant to which
Alive is required to register shares of its capital stock under the Securities
Act of 1933, as amended.
(c) To Alive's knowledge, all applicable elections with respect
to issued capital stock of Alive under Section 83(b) of the Code have been duly
made and timely filed.
2.4 Authority. Alive has all requisite corporate power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. 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 Alive, subject only to the
approval of the Merger by Alive's stockholders as contemplated by Section
6.1(a). Alive's Board of Directors has unanimously approved the Merger and this
Agreement. This Agreement has been duly executed and delivered by Alive and
assuming due authorization, execution and delivery by ▇▇▇▇▇▇▇▇.▇▇▇, constitutes
the valid and binding obligation of Alive enforceable against Alive in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the
-11-
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
2.5 No Conflicts; Required Filings and Consents.
-------------------------------------------
(a) The execution and delivery of this Agreement by Alive
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under or
result in the creation of any lien upon the assets of Alive under (i) any
provision of the Articles of Incorporation or Bylaws of Alive or any of its
subsidiaries, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Alive or any of their properties or assets.
(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 ("Governmental
------------
Entity") is required by or with respect to Alive in connection with the
------
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Merger Documents, together
with the required officers' certificates, as provided in Section 1.2, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act of 1933, as amended (the "Securities
------------ ----------
Act"), applicable state securities 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 have a Material Adverse
Effect on Alive and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
2.6 Financial Statements. Section 2.6 of the Alive Disclosure
--------------------
Schedule includes a true, correct and complete copy of Alive's unaudited
financial statement for the fiscal year ended December 31, 1998, and its
unaudited financial statements (balance sheet, statement of operations and
statement of cash flows) on a consolidated basis as at, and for the nine-month
period ended September 30, 1999 (collectively, the "Alive Financial
---------------
Statements"). The Alive Financial Statements have been prepared in accordance
----------
with generally accepted accounting principles (except that the unaudited
financial statements do not have notes thereto) applied on a consistent basis
throughout the periods indicated. The Alive Financial Statements accurately set
forth and describe the financial condition and operating results of Alive and
its consolidated Subsidiaries as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. Alive maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
2.7 Absence of Undisclosed Liabilities. Alive does not have any
----------------------------------
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended September
-12-
30, 1999 (the "Alive Balance Sheet"), (ii) those incurred in the ordinary course
-------------------
of business and not required to be set forth in the Alive Balance Sheet under
generally accepted accounting principles, (iii) those incurred in the ordinary
course of business since the date of the Alive Balance Sheet and consistent with
past practice, and (iv) those incurred in connection with the execution of this
Agreement.
2.8 Absence of Certain Changes. Except as set forth in Section
--------------------------
2.8 of the Alive Disclosure Schedule, since September 30, 1999 ( the "Alive
-----
Balance Sheet Date") there has not been, occurred or arisen any:
------------------
(a) transaction by Alive except in the ordinary course of
business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation
or Bylaws of Alive;
(c) capital expenditure or commitment by Alive, in excess of
$15,000 in any individual transaction or series of related transactions, or in
the aggregate exceeding $30,000;
(d) destruction of, damage to, or loss of any assets
(including, without limitation, intangible assets), business or customer of
Alive (whether or not covered by insurance) which would constitute a Material
Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates, any change in policies
in making or reversing accruals, any change in respect of Taxes, as defined in
Section 2.15, including elections with respect thereto, or any change in
capitalization of software development costs) by Alive or any revaluation by
Alive of any of its assets;
(g) declaration, setting aside, or payment of a dividend or
other distribution in respect to the capital stock of Alive, or any direct or
indirect redemption, purchase or other acquisition by Alive of any of its
capital stock, except repurchases of Alive Common Stock from terminated Alive
employees at the original per share purchase price of such shares pursuant to
the terms of the Alive Option Plan and applicable option agreements;
(h) increase in the salary or other compensation payable or
to become payable by Alive to any officers, directors, employees or advisors of
Alive, except in the ordinary course of business consistent with past practice,
or the declaration, payment, or commitment or obligation of any kind for the
payment by Alive of a bonus or other additional salary or compensation to any
such person except as otherwise contemplated by this Agreement, or other than as
set forth in Section 2.16 below, the establishment of any bonus, insurance,
deferred compensation, pension, retirement, profit sharing, stock option
(including without
-13-
limitation, stock appreciation rights and performance awards), stock purchase or
other employee benefit plan;
(i) sale, lease, license of other disposition of any of the
assets or properties of Alive, except in the ordinary course of business and not
in excess of $15,000 in the aggregate;
(j) termination or material amendment of any material
contract, agreement or license (including any distribution agreement) to which
Alive is a party or by which it is bound;
(k) loan by Alive to any person or entity, or guaranty by
Alive of any loan;
(l) waiver or release of any right or claim of Alive,
including any write-off or other compromise of any account receivable of Alive,
in excess of $15,000 in the aggregate;
(m) the commencement or notice or threat of commencement of
any lawsuit or proceeding against or, to Alive's knowledge, investigation of
Alive or its respective affairs;
(n) notice of any claim of ownership by a third party of
Alive's Intellectual Property (as defined in Section 2.13 below) or of
infringement by Alive of any third party's Intellectual Property rights;
(o) issuance or sale by Alive of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable therefor,
or of any other of its securities, except for the exercise of options pursuant
to the Alive Stock Option Plan;
(p) change in pricing or royalties set or charged by Alive
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Intellectual Property to Alive;
(q) event or condition of any character that has or could
reasonably be expected to have a Material Adverse Effect on Alive; or
(r) agreement by Alive or any officer or employee of Alive
on behalf of Alive to do any of the things described in the preceding clauses
(a) through (q) (other than negotiations with ▇▇▇▇▇▇▇▇.▇▇▇ and its
representatives regarding the transactions contemplated by this Agreement).
2.9 Litigation. There is no private or governmental action,
----------
suit, proceeding, claim, arbitration or investigation (collectively, a "Suit")
----
pending or, to Alive's knowledge, currently threatened against Alive that
questions the validity or enforceability of the Agreement or the right of Alive
to enter into it, or to consummate the transactions contemplated hereby or
-14-
thereby, or that might result, either individually or in the aggregate, in any
Material Adverse Effect on Alive, or any change in the current equity ownership
of Alive, nor is Alive aware that there is any basis for the foregoing. For the
purposes of this Section 2.9, "Suit" shall include but not be limited to any
----
action, suit, proceeding, claim, arbitration or investigation pending or, to
Alive's knowledge, currently threatened against Alive involving the prior
employment of any of Alive's current employees, such employees use in connection
with Alive's business of any information or techniques proprietary to any of
such employees' former employers, such employees' obligations under any
agreements with prior employers, or negotiations by Alive with potential
investors in Alive or its proposed business. Neither Alive nor any of its
subsidiaries is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding, claim, arbitration or
investigation by Alive or any of its subsidiaries currently pending or which
Alive or any of its subsidiaries intends to initiate.
2.10 Restrictions on Business Activities. There is no agreement,
-----------------------------------
judgment, injunction, order or decree binding upon Alive which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current or currently proposed future business practice of Alive, any
acquisition of property by Alive or the overall conduct of business by Alive as
currently conducted or as proposed to be conducted by Alive. Alive has not
entered into any agreement under which Alive is restricted from selling,
licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.11 Permits. Alive is in possession of all franchises, grants,
-------
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders necessary for Alive, to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "Alive Authorizations") and no suspension or cancellation of any Alive
--------------------
Authorization is pending or, to Alive's knowledge, threatened, except where the
failure to have, or the suspension or cancellation of, any Alive Authorization
would not have a Material Adverse Effect on Alive. Alive is not in conflict
with, or in default or violation of, (i) any laws applicable to Alive or by
which any property or asset of Alive is bound or affected, (ii) any Alive
Authorization, or (iii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Alive is a party or by which Alive or any property or asset of Alive is
bound or affected, except for any such conflict, default or violation that would
not have a Material Adverse Effect on Alive.
2.12 Title to Property.
-----------------
(a) Alive has good and marketable title to all of its
properties and assets, real and personal, reflected in the Alive Balance Sheet
or acquired after the Alive Balance Sheet Date (except properties and assets
sold or otherwise disposed of since the Alive Balance Sheet Date in the ordinary
course of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges, charges
or encumbrances of any kind or character, except, in each case, for (i) liens
for current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not
-15-
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties, and (iii) liens securing debt which is reflected on
the Alive Balance Sheet. The plants, property and equipment of Alive that are
used in the operations of its business are in good operating condition and
repair, subject to normal wear and tear. All properties used in the operations
of Alive are reflected in the Alive Balance Sheet to the extent generally
accepted accounting principles require the same to be reflected and to the
extent acquired prior to the Alive Balance Sheet Date. Schedule 2.12(a) of the
Alive Disclosure Schedule sets forth a true, correct and complete list of all
real property owned or leased by Alive, the name of the lessor, the date of the
lease and each amendment thereto and the aggregate annual rental and other fees
payable under such lease. Such leases are in good standing, are valid and
effective in accordance with their respective terms, and there is not under any
such leases any existing default or event of default (or event which with notice
or lapse of time, or both, would constitute a default).
(b) Schedule 2.12(b) of the Alive Disclosure Schedule also
sets forth a true, correct and complete list of all equipment (the "Equipment")
---------
owned or leased by Alive, and such Equipment is, taken as a whole, (i) adequate
for the conduct of Alive's business, consistent with its past practice, and (ii)
in good operating condition (except for ordinary wear and tear).
2.13 Intellectual Property.
---------------------
(a) Alive owns, or is licensed or otherwise possess legally
enforceable rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, copyrights, and any
applications for any of the foregoing, maskworks, net lists, schematics,
industrial models, inventions, technology, know-how, trade secrets, inventory,
ideas, algorithms, processes, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") that are used or proposed to
---------------------
be used in the business of Alive as currently conducted or as proposed to be
conducted by Alive.
(b) Section 2.13 of the Alive Disclosure Schedule lists (i)
all patents and patent applications and all registered and unregistered
trademarks, trade names and service marks, registered and unregistered
copyrights, and maskworks, included in the Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements as to which
Alive is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which Alive is a party and pursuant to which Alive is authorized to use
any third party patents, trademarks or copyrights, including software ("Third
-----
Party Intellectual Property Rights") which are incorporated in, are, or form a
----------------------------------
part of any product offered by Alive. Alive is not in violation of any license,
sublicense or agreement described in Section 2.13 of the Alive Disclosure
Schedule, except for such violations as will not have a Material Adverse Effect
on Alive. The execution and delivery of this Agreement by Alive and the
consummation of the transactions contemplated hereby, will neither cause Alive
to be in violation or default under any such license, sublicense or agreement,
nor entitle any other party
-16-
to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement. Except as set forth in Section 2.13 of the
Alive Disclosure Schedule, Alive is the sole and exclusive owner or licensee of,
with all right, title and interest in and to (free and clear of any liens), the
Intellectual Property, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which Intellectual Property is being
used.
(c) To Alive's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Alive, any trade secret material to Alive or any Intellectual Property right
of any third party to the extent licensed by or through Alive, by any third
party, including any employee or former employee of Alive. Except as set forth
on Schedule 2.13(c) of the Alive Disclosure Schedule, Alive has not entered into
any agreement to indemnify any other person against any charge of infringement
of any Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business.
(d) Alive is not nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, registered service
marks and copyrights held by Alive are valid and existing and, to Alive's
knowledge, there is no assertion or claim (or basis therefor) challenging the
validity of any Intellectual Property of Alive. Alive has not been sued in any
suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party. Neither the conduct of the
business of Alive as currently conducted or contemplated nor the manufacture,
sale, licensing or use of any of the products of Alive as now manufactured, sold
or licensed or used, nor the use in any way of the Intellectual Property in the
manufacture, use, sale or licensing by Alive of any products currently proposed,
infringes on or will infringe or conflict with, in any way, any license,
trademark, trademark right, trade name, trade name right, patent, patent right,
industrial model, invention, service ▇▇▇▇ or copyright of any third party. Alive
has not brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual Property
against any third party. There are no pending, or to Alive's knowledge,
threatened interference, re-examinations, oppositions or nullities involving any
patents, patent rights or applications therefor of Alive, except such as may
have been commenced by Alive. There is no breach or violation of or, to Alive's
knowledge, threatened or actual loss of rights under any license agreement to
which Alive is a party.
(f) Alive has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Alive does not
already own by operation of law.
-17-
(g) Alive has taken all necessary and appropriate steps that
are commercially reasonable to protect and preserve the confidentiality of all
Intellectual Property not otherwise protected by patents, patent applications or
copyright ("Confidential Information"). Alive has a policy requiring each
------------------------
employee, consultant and independent contractor to execute proprietary
information and confidentiality agreements substantially in Alive's standard
forms and all current and former employees, consultants and independent
contractors of Alive have executed such an agreement. All use, disclosure or
appropriation of Confidential Information owned by Alive by or to a third party
has been pursuant to the terms of a written agreement between Alive and such
third party. All use, disclosure or appropriation of Confidential Information
not owned by Alive has been pursuant to the terms of a written agreement between
Alive and the owner of such Confidential Information, or is otherwise lawful.
(h) The Alive Disclosure Schedule lists all currently
effective written or oral and all past written consulting, independent
contractor and/or employment agreements and other material agreements concluded
with individual employees, independent contractors or consultants to which Alive
is a party. True and correct copies of all such written agreements have been
provided to ▇▇▇▇▇▇▇▇.▇▇▇ or its representatives.
2.14 Compliance with Environmental Requirements. Alive is in
------------------------------------------
compliance in all material respects with all terms and conditions of all
permits, licenses and authorizations which are required under federal, state and
local laws applicable to Alive and relating to pollution or protection of the
environment, including laws or provisions relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials, substances, or wastes into air, surface water, groundwater, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials, substances, or wastes or which are intended to
assure the safety of employees, workers or other persons, except where the
failure to obtain such authorizations or comply with such requirements could not
be reasonably expected to have a Material Adverse Effect on Alive. There are no
conditions, circumstances, activities, practices, incidents, or actions known to
Alive which could reasonably be expected to form the basis of any claim, action,
suit, proceeding, hearing, or investigation of, by, against or relating to
Alive, based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic substance, material or waste.
2.15 Taxes.
-----
(a) For purposes of this Section 2.15 and other provisions
of this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
-----
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without
-18-
limiting the generality of the foregoing, all income or profits taxes (including
but not limited to, federal, state and foreign income taxes), payroll and
employee withholding taxes, unemployment insurance contributions, social
security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise
taxes, gross receipts taxes, withholding taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, transfer taxes, workers' compensation, Pension Benefit Guaranty
Corporation premiums and other governmental charges, and other obligations of
the same or of a similar nature to any of the foregoing, which are required to
be paid, withheld or collected, (B) any liability for the payment of amounts
referred to in (A) as a result of being a member of any affiliated,
consolidated, combined or unitary group, or (C) any liability for amounts
referred to in (A) or (B) as a result of any obligations to indemnify another
person.
(ii) The term "Returns" shall mean all reports, estimates,
-------
declarations of estimated tax, information statements and returns required to be
filed in connection with any Taxes, including information returns with respect
to backup withholding and other payments to third parties.
(b) All material Returns required to be filed by or on behalf of
Alive have been duly filed on a timely basis (taking into account all properly
requested extensions of due dates) and such Returns are true, complete and
correct. All Taxes shown to be payable on such Returns or on subsequent
assessments with respect thereto, and all payments of estimated Taxes required
to be made by or on behalf of Alive under Section 6655 of the Code or comparable
provisions of state, territorial, local or foreign law, have been paid in full
on a timely basis, and no other Taxes are payable by Alive with respect to items
or periods covered by such Returns (whether or not shown on or reportable on
such Returns). Alive has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There is no claim for Taxes that
is a lien on any of the assets of Alive with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that Alive is contesting in good
faith through appropriate proceedings which are reflected as a reserve on the
Alive Financial Statements. Alive has not been at any time a member of an
affiliated group of corporations filing consolidated, combined or unitary income
or franchise tax returns for a period for which the statute of limitations for
any Tax potentially applicable as a result of such membership has not expired.
(c) The amount of Alive's liabilities for unpaid Taxes for all
periods through the date of the Alive Financial Statements do not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
reflected on the Alive Financial Statements, and the Alive Financial Statements
adequately accrue in accordance with generally accepted accounting principles
("GAAP") all liabilities for Taxes of Alive payable after the date of the Alive
----
Financial Statements attributable to transactions and events occurring prior to
such date. No material liability for Taxes or amount of taxable income of Alive
has been incurred (or prior to Closing will be incurred) since such date other
than in the ordinary course of business.
-19-
(d) ▇▇▇▇▇▇▇▇.▇▇▇ has been furnished by Alive true and
complete copies of (i) relevant portions of income tax audit reports, statements
of deficiencies, closing or other agreements received by or on behalf of Alive
relating to Taxes, and (ii) all federal, state and foreign income or franchise
tax returns and state sales and use tax Returns for or including Alive for all
periods since Alive's inception.
(e) No audit of the Returns of Alive by a government or
taxing authority is in process, or, to Alive's knowledge, threatened (either in
writing or orally, formally or informally) or, to Alive's knowledge, pending
(either in writing or orally, formally or informally). No deficiencies exist or
have been asserted (either in writing or orally, formally or informally) or are
expected to be asserted with respect to Taxes of Alive, and Alive has not
received notice (either in writing or orally, formally or informally) nor does
it expect to receive notice that it has not filed a Return or paid Taxes
required to be filed or paid. Alive is not a party to any action or proceeding
for assessment or collection of Taxes, nor has such event been asserted or
threatened (either in writing or orally, formally or informally) against Alive,
or any of its respective assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of Alive. Alive has
disclosed on its federal and state income and franchise tax returns all
positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.
(f) Alive is not (nor has it ever been) party to any tax
sharing agreement.
(g) Alive is not, nor has it 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.
Alive is not a "consenting corporation" under Section 341(f) of the Code. Alive
has not entered into any agreements where any payment thereunder would result in
a nondeductible expense to Alive pursuant to Section 280G of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of the
Code. Alive has not agreed to, nor is it required to make, other than by reason
of the Merger, any adjustment under Code Section 481(a) by reason of, a change
in accounting method, and Alive will not otherwise have any income reportable
for a period ending after the Closing Date attributable to a transaction or
other event (e.g., an installment sale) occurring prior to the Closing Date with
respect to which Alive received the economic benefit prior to the Closing Date.
Alive is not, nor has it been, a "reporting corporation" subject to the
information reporting and record maintenance requirements of Section 6038A and
the regulations thereunder.
(h) The Alive Disclosure Schedule contains accurate and
complete information regarding Alive's net operating losses for federal and each
state tax purposes. Alive has no net operating losses and credit carryovers or
other tax attributes currently subject to limitation under Sections 382, 383 or
384 of the Code.
2.16 Employee Benefit Plans.
----------------------
(a) Schedule 2.16 lists, with respect to Alive, and any
trade or business (whether or not incorporated) which is treated as a single
employer with Alive (an "ERISA
-----
-20-
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
----------
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each loan
-----
to a non-officer employee in excess of $10,000, loans to officers and directors
and any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code Section 125) or
dependent care (Code Section 129), life insurance or accident insurance plans,
programs or arrangements, (iii) all contracts and agreements relating to
employment that provide for annual compensation in excess of $50,000 and all
severance agreements, with any of the directors, officers or employees of Alive,
(iv) all bonus, pension, profit sharing, savings, deferred compensation or
incentive plans, programs or arrangements, (v) other fringe or employee benefit
plans, programs or arrangements that apply to senior management of Alive and
that do not generally apply to all employees, and (vi) any current or former
employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of Alive remain for the benefit
of, or relating to, any present or former employee, consultant or director of
Alive (together, the "Alive Employee Plans").
--------------------
(b) Alive has furnished to ▇▇▇▇▇▇▇▇.▇▇▇ a copy of each of the
Alive Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Alive Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Alive
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. Alive has also furnished ▇▇▇▇▇▇▇▇.▇▇▇ with the most
recent Internal Revenue Service determination letter issued with respect to each
such Alive Employee Plan, and nothing has occurred since the issuance of each
such letter which could reasonably be expected to cause the loss of the tax-
qualified status of any Alive Employee Plan subject to Code Section 401(a).
(c) Except as required by applicable law or set forth in
Schedule 2.16(c) of the Alive Disclosure Schedule, (i) none of the Alive
Employee Plans promises or provides retiree medical or other retiree welfare or
life insurance benefits to any person; (ii) there has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA and Section 4975
of the Code, with respect to any Alive Employee Plan, which could reasonably be
expected to have, in the aggregate, a Material Adverse Effect; (iii) each Alive
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have, in the
aggregate, a Material Adverse Effect, and Alive and each ERISA Affiliate have
performed all material obligations required to be performed by them under,
-21-
are not in any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to, any of the
Alive Employee Plans; (iv) neither Alive nor any ERISA Affiliate is subject to
any material liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA with respect to any of the Alive Employee Plans; (v) all
material contributions required to be made by Alive or any ERISA Affiliate to
any Alive Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Alive Employee Plan
for the current plan years; (vi) with respect to each Alive Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Alive Employee Plan
is covered by, and neither Alive nor any ERISA Affiliate has incurred or expects
to incur any direct or indirect liability under, arising out of or by operation
of Title IV of ERISA in connection with the termination of, or an employee's
withdrawal from, any Alive Employee Plan or other retirement plan or
arrangement, and no fact or event exists that could give rise to any such
liability, or under Section 412 of the Code; (viii) Alive and the Subsidiaries
have not incurred any liability under, and have complied in all respects with,
the Worker Adjustment Retraining Notification Act, (the "WARN Act") and no fact
--------
or event exists that could give rise to liability under such act; and (ix) no
compensation paid or payable to any employee of Alive has been, or will be, non-
deductible by reason of application of Section 162(m) of the Code. With respect
to each Alive Employee Plan subject to ERISA as either an employee pension plan
within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, Alive has prepared in good faith
and timely filed all requisite governmental reports (which were true and correct
as of the date filed) and has properly and timely filed and distributed or
posted all material notices and reports to employees required to be filed,
distributed or posted with respect to each such Alive Employee Plan. No suit,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of Alive is threatened, against or with respect to any such Alive
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither Alive nor any ERISA Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Alive Employee Plan, Alive has complied
with (i) the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
-----
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect.
(e) Except for the acceleration of vesting of Alive Options
under the Alive Option Plan and related agreements, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or other service provider of Alive or any Subsidiary to
severance benefits or any other payment (including, without limitation,
unemployment compensation, golden parachute or bonus), except as expressly
-22-
provided in this Agreement, or (ii) accelerate the time of payment or vesting of
any such benefits, or increase the amount of compensation due any such employee
or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Alive or any Subsidiary relating to, or
change in participation or coverage under, any Alive Employee Plan which would
materially increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan for the most recent fiscal year
included in the Alive Financial Statements.
2.17 Certain Agreements Affected by the Merger. Except for the
-----------------------------------------
acceleration of vesting of Alive Options under the Alive Option Plan and related
agreements, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or employee
of Alive or any of its Subsidiaries, (ii) materially increase any benefits
otherwise payable by Alive, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.18 Employee Matters.
----------------
(a) Alive is in compliance in all material respects with all
currently applicable federal, state, local and foreign laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and is not engaged in any unfair labor practice. There are no pending
claims against Alive under any workers compensation plan or policy or for long
term disability. There is and has not been any claim against Alive or its
officers or employees, or to Alive's knowledge, threatened against Alive or its
officers or employees, based on actual or alleged race, age, sex, disability or
other harassment or discrimination, or similar tortious conduct, or based on
actual or alleged breach of contract with respect to any person's employment by
Alive, nor, to the knowledge of Alive, is there any basis for any such claim.
Alive does not have any material obligations under COBRA with respect to any
former employees or qualifying beneficiaries thereunder. There are no
controversies pending or, to the knowledge of Alive, threatened, between Alive
and any of its employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on Alive. Alive is not a party to any
collective bargaining agreement or other labor unions contract and Alive does
not know of any activities or proceedings of any labor union or other group to
organize any such employees.
(b) To the knowledge of Alive, all independent contractors have
been properly classified as independent contractors for the purposes of federal
and applicable state tax laws, laws applicable to employee benefits and other
applicable law. All salaries and wages paid by Alive are in compliance in all
material respects with applicable federal, state and local laws.
(c) The Alive Disclosure Schedule lists all persons presently
employed by Alive, setting forth for each person his or her position, salary or
rate of pay (including
-23-
bonuses), and if any such employee is currently on leave, sets forth the reason
for the leave, the date the leave commenced and the date the employee is
expected to return to active work.
2.19 Material Contracts.
------------------
(a) Subsections (i) through (viii) of Schedule 2.19(a) of the
Alive Disclosure Schedule contain a list of all contracts and agreements to
which Alive is a party and that are material to the business, results of
operations, or condition (financial or otherwise), of Alive taken as a whole
(such contracts, agreements and arrangements as are required to be set forth in
Schedule 2.19(a) of the Alive Disclosure Schedule being referred to herein
collectively as the "Material Contracts"). Material Contracts shall include,
------------------
without limitation, the following and shall be categorized in the Alive
Disclosure Schedule as follows:
(i) each contract and agreement (other than routine
purchase orders and pricing quotes in the ordinary course of business covering a
period of less than 1 year) for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to Alive under the terms of which Alive: (A) paid or otherwise gave
consideration of more than $10,000 in the aggregate during the calendar year
ended December 31, 1999, (B) is likely to pay or otherwise give consideration of
more than $10,000 in the aggregate over the remaining term of such contract, or
(C) cannot be cancelled by Alive without penalty or further payment of less than
$10,000;
(ii) each customer contract and agreement (other than
routine purchase orders, pricing quotes with open acceptance and other tender
bids, in each case, entered into in the ordinary course of business and covering
a period of less than one year and other than its form end-user licenses, a copy
of which has been provided to ▇▇▇▇▇▇▇▇.▇▇▇ or its representatives) to which
Alive is a party which (A) involved payments by or to Alive of more than $10,000
in the aggregate during the calendar year ended December 31, 1999, (B) is likely
to involve payments by or to Alive of more than $10,000 in the aggregate over
the remaining term of the contract, or (C) cannot be cancelled by Alive without
penalty or further payment of less than $10,000;
(iii) (A) all distributor, manufacturer's representative,
broker, franchise, agency and dealer contracts and agreements to which Alive is
a party (specifying on a matrix, in the case of distributor agreements, the name
of the distributor, product, territory, termination date and exclusivity
provisions) and (B) all sales promotion, market research, marketing and
advertising contracts and agreements to which Alive is a party which: (1)
involved payments by or to Alive of more than $10,000 in the aggregate during
the calendar year ended December 31, 1999, (2) are likely to involve payments by
or to Alive of more than $10,000 in the aggregate over the remaining term of the
contract;
(iv) all management contracts with independent contractors
or consultants (or similar arrangements) to which Alive is a party and which (A)
involved payments by or to Alive or more than $10,000 in the aggregate during
the calendar year ended December 31, 1999, (B) are likely to involve payments by
or to Alive of more than $10,000 in the aggregate over the remaining term of the
contract;
-24-
(v) all contracts and agreements (excluding routine
checking account overdraft agreements involving ▇▇▇▇▇ cash amounts) under which
Alive has created, incurred, assumed or guaranteed (or may create, incur, assume
or guarantee) indebtedness for borrowed money or under which Alive has imposed
(or may impose) a security interest or lien on any of its assets, whether
tangible or intangible, to secure indebtedness;
(vi) all contracts and agreements that limit the ability
of Alive or, after the Effective Time, ▇▇▇▇▇▇▇▇.▇▇▇ or any of its affiliates, to
compete in any line of business or with any person or in any geographic area or
during any period of time, or to solicit any customer or client;
(vii) all contracts and agreements to which Alive is a
party under which it has agreed to supply products to a customer at specified
prices, whether directly or through a specific distributor, manufacturer's
representative or dealer; and
(viii) all other contracts or agreements (A) which if not
already covered above are, in the judgment of Alive, material to Alive or the
conduct of its businesses, (B) the absence of which would have a Material
Adverse Effect on Alive, or (C) which are believed by Alive to be of unique
value even though not material to the business of Alive.
(b) Except as would not reasonably likely have a Material
Adverse Effect on Alive, each Material Contract is a legal, valid and binding
agreement in full force and effect and enforceable by Alive in accordance with
their terms, and Alive is not in default under any Material Contract nor has any
Alive Material Contract been cancelled by the other party; Alive is not in
receipt of any claim of default under any such agreement; and Alive does not
anticipate any termination or change to, or receipt of a proposal with respect
to, any such agreement as a result of the Merger or otherwise. Alive has
furnished ▇▇▇▇▇▇▇▇.▇▇▇ with true and complete copies of all such agreements
together with all amendments, waivers or other changes thereto.
(c) No Material Contract contains any liquidated damages,
penalty or similar provision. To the knowledge of Alive, no party to any such
Material Contract intends to cancel, withdraw, modify or amend such contract,
agreement or arrangement. Alive is not in default under or in breach or
violation of, nor, to Alive's knowledge, is there any valid basis for any claim
of default by Alive under, or breach or violation by Alive of, any material
provision of any Material Contract. To Alive's knowledge, no other party is in
default under or in breach or violation of, nor is there any valid basis for any
claim of default by any other party under or any breach or violation by any
other party of, any Material Contract. Except as specifically indicated on the
Alive Disclosure Schedule, none of the Material Contracts provides for
indemnification by Alive of any third party. No claims have been made or, to the
knowledge of Alive, threatened that would require indemnification by Alive, and
Alive has not paid any amounts to indemnify any third party as a result of
indemnification requirements of any kind.
2.20 Interested Party Transactions. Alive is not indebted to any
-----------------------------
director, officer, employee or shareholder of Alive or ▇▇▇▇▇▇▇▇.▇▇▇ (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted
-25-
to Alive. Schedule 2.20 of the Alive Disclosure Schedule lists all agreements
and arrangements currently in effect, and currently proposed agreements and
arrangements, by or between Alive, on the one hand, with or for the benefit of
any current or former shareholder, director or officer of Alive, on the other
hand. Schedule 2.20 of the Alive Disclosure Schedule lists all payments of any
kind since November 1, 1998, from Alive, to or for the benefit of any current or
former shareholder, officer, director or other affiliate of Alive other than
payments to the individuals and consistent with the levels disclosed in Schedule
2.18(c). All debts of any of Alive's shareholders, officers, directors or their
respective Affiliates owed or owing to Alive are reflected in the Alive
Financial Statements.
2.21 Insurance. Alive has policies of insurance and bonds of the
---------
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Alive. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Alive is
otherwise in compliance with the terms of such policies and bonds. Alive has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.22 Compliance With Laws. Alive has complied with, is not in
--------------------
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not reasonably be expected to
have a Material Adverse Effect on Alive.
2.23 Minute Books. The minute books of Alive made available to
------------
▇▇▇▇▇▇▇▇.▇▇▇ contain a complete summary of all meetings of directors and
stockholders or actions by written consent since the time of incorporation of
Alive through the date of this Agreement, and reflect all transactions referred
to in such minutes accurately in all material respects.
2.24 Complete Copies of Materials. Alive has delivered or made
----------------------------
available true and copies of each document which has been requested by
▇▇▇▇▇▇▇▇.▇▇▇ or its counsel in connection with their legal and accounting review
of Alive.
2.25 Bank Accounts. The Alive Disclosure Schedule sets forth the
-------------
names and locations of all banks, trust companies, savings and loan
associations, and other financial institutions at which Alive maintains accounts
of any nature and the names of all persons authorized to draw thereon or make
withdrawals therefrom.
2.26 Brokers' and Finders' Fees. Alive has not incurred, nor
--------------------------
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
2.27 Information Statement. None of the information (including
---------------------
financial data) relating to Alive supplied by Alive to ▇▇▇▇▇▇▇▇.▇▇▇ to be
included in the Information
-26-
Statement (as defined in Section 5.14(a)) at the time the Information Statement
is mailed to holders of Alive Common Stock in connection with the solicitation
of written consents with respect to the Merger and the other transactions
contemplated hereby, and at all times subsequent to such dates up to and
including the date of the Effective Time, will contain any statement which, at
the time and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event or
information should be discovered by Alive which should be set forth in a
supplement to the Information Statement, Alive shall promptly inform
▇▇▇▇▇▇▇▇.▇▇▇.
2.28 Voting Agreement. Each shareholder holding at least 5% of
----------------
the outstanding Alive Capital Stock has agreed in writing to vote for approval
of the Merger pursuant to Voting Agreements attached hereto as Exhibit C
---------
("Voting Agreements").
-------------------
2.29 Vote Required. The affirmative vote of the holders of (i) two-
-------------
thirds of the Alive Common Stock, the Alive Series A and the Alive Series B
voting together as a class, (ii) a majority of the Alive Series A voting
separately as a class and (iii) a majority of the Alive Series B voting
separately as a class, outstanding on the record date set by Alive for voting on
the Merger are the only votes of the holders of any of Alive's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
2.30 Board Approval. The Board of Directors of Alive has
--------------
unanimously (i) approved this Agreement and the Merger in accordance with the
provisions of the WBCA, (ii) determined that the Merger is in the best interests
of the stockholders of Alive and is on terms that are fair to such stockholders
and (iii) recommended that the stockholders of Alive approve this Agreement and
the Merger.
2.31 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Neither Alive's
-----------------------------------------
total assets or annual net sales exceed $10,000,000 within the meaning of, and
calculated in accordance with, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, Section 7A(a)(3) of the ▇▇▇▇▇▇▇ Act, 15 U.S.C. (S) 18A, and
the regulations promulgated thereunder.
2.32 Tax Matters. Neither Alive nor, to the knowledge of Alive,
-----------
any of its officers, directors, shareholders or agents is aware of any
agreement, plan or other circumstance that would prevent the Merger from
constituting a "reorganization" within the meaning of Section 368(a) of the
Code.
2.33 Third Party Consents. Except as set forth in Schedule 2.33 of
--------------------
the Alive Disclosure Schedule, no consent or approval is needed from any third
party in order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.34 Year 2000. Alive's products are designed to be used prior to,
---------
during and after calendar year 2000 A.D., and all of Alive's products which are
material to Alive's business will record, store, process and calculate any
information dependent on or relating to such dates in the same manner and with
the same functionality, data integrity and performance as the products
-27-
record, store, process and calculate and present calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to such
dates (collectively, "Year 2000 Compliant"). To Alive's knowledge after
-------------------
reasonable investigation, all of Alive' internal computer systems, including,
without limitation, its accounting systems, are Year 2000 Compliant.
2.35 Representations Complete. None of the representations or
------------------------
warranties made by Alive herein or in any Schedule hereto, including the Alive
Disclosure Schedule, or certificate furnished by Alive pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
SECTION THREE
3. Representations and Warranties of ▇▇▇▇▇▇▇▇.▇▇▇.
----------------------------------------------
Except as disclosed in a document dated as of the date of this
Agreement and delivered by ▇▇▇▇▇▇▇▇.▇▇▇ to Alive prior to the execution and
delivery of this Agreement and specifically referring to a particular
representation or warranty in this Agreement (the "▇▇▇▇▇▇▇▇.▇▇▇ Disclosure
-----------------------
Schedule"), ▇▇▇▇▇▇▇▇.▇▇▇ hereby represents and warrants to Alive as follows:
--------
3.1 Organization, Good Standing and Qualification. ▇▇▇▇▇▇▇▇.▇▇▇ is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware. ▇▇▇▇▇▇▇▇.▇▇▇ has the requisite corporate power and
authority and all necessary government approvals to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted, except where the failure to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect on ▇▇▇▇▇▇▇▇.▇▇▇. ▇▇▇▇▇▇▇▇.▇▇▇ is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on ▇▇▇▇▇▇▇▇.▇▇▇. ▇▇▇▇▇▇▇▇.▇▇▇ has delivered a true and
correct copy of the Certificate of Incorporation and Bylaws of ▇▇▇▇▇▇▇▇.▇▇▇, as
amended to date, to Alive. ▇▇▇▇▇▇▇▇.▇▇▇ is not in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
3.2 Capitalization. The authorized capital of ▇▇▇▇▇▇▇▇.▇▇▇ consists,
--------------
or will consist, immediately prior to the Closing, of:
(a) 35,000,000 shares of Preferred Stock: of which 5,000,000
shares have been designated Series A Preferred Stock, 4,983,787 shares of which
are issued and outstanding immediately prior to the Closing; of which 4,000,000
shares have been designated Series B Preferred Stock, 3,259,194 shares of which
are issued and outstanding immediately
-28-
prior to the Closing; of which 4,000,000 shares have been designated Series B-1
Preferred Stock, none of which are issued and outstanding immediately prior to
the Closing; of which 6,000,000 shares have been designated Series C Preferred
Stock, 5,309,266 shares of which are issued and outstanding immediately prior to
Closing; and of which 6,000,000 shares have been designated Series C-1 Preferred
Stock, none of which are issued and outstanding immediately prior to Closing.
The rights, privileges and preferences of the Preferred Stock are as stated in
the Restated Certificate. All of the outstanding shares of Preferred Stock have
been duly authorized, validly issued, fully paid and are nonassessable, have
been issued in compliance with all applicable federal and state securities laws
and are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or bylaws of ▇▇▇▇▇▇▇▇.▇▇▇ or any
agreement to which ▇▇▇▇▇▇▇▇.▇▇▇ is a party or by which it is bound.
(b) 100,000,000 shares of Common Stock, 6,138,437 shares of
which are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Common Stock have been duly authorized, validly issued,
fully paid and are nonassessable and have been issued in compliance with all
applicable federal and state securities laws. The shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common
Stock to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid, and non-assessable, have been issued in compliance with all
applicable and state securities laws and are not subject to preemptive rights or
rights of first refusal created by statute, the Certificate of Incorporation or
bylaws of ▇▇▇▇▇▇▇▇.▇▇▇ or any agreement to which ▇▇▇▇▇▇▇▇.▇▇▇ is a party or by
which it is bound.
(c) ▇▇▇▇▇▇▇▇.▇▇▇ has reserved 4,660,000 shares of Common Stock
for issuance to officers, directors, employees and consultants of ▇▇▇▇▇▇▇▇.▇▇▇
pursuant to its 1998 Stock Option Plan duly adopted by the Board of Directors
and approved by ▇▇▇▇▇▇▇▇.▇▇▇ stockholders (the "Stock Plan"). Of such reserved
----------
shares of Common Stock, options to purchase 3,833,900 shares have been granted
and are currently outstanding, 764,187 shares of Common Stock have been issued
upon exercise of options granted thereunder and 61,913 shares of Common Stock
remain available for issuance to officers, directors, employees and consultants
pursuant to the Stock Plan.
(d) Except for (i) outstanding options issued pursuant to the
Stock Plan and (ii) outstanding warrants to purchase 41,053 shares of Series C
Preferred Stock, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal or similar rights)
or agreements, orally or in writing, for the purchase or acquisition from
▇▇▇▇▇▇▇▇.▇▇▇ of any shares of its capital stock. As of the date of this
Agreement, ▇▇▇▇▇▇▇▇.▇▇▇ has reserved sufficient shares of Common Stock for
issuance upon conversion of the Series A Series B and Series C Preferred Stock.
3.3 Subsidiaries. ▇▇▇▇▇▇▇▇.▇▇▇ does not have any Subsidiaries.
------------
3.4 Authority. ▇▇▇▇▇▇▇▇.▇▇▇ has all requisite corporate power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. 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
-29-
▇▇▇▇▇▇▇▇.▇▇▇ (other than, with respect to the Merger, the filing and recordation
of appropriate merger documents as required by the WBCA). This Agreement has
been duly executed and delivered by ▇▇▇▇▇▇▇▇.▇▇▇ and constitutes the valid and
binding obligations of ▇▇▇▇▇▇▇▇.▇▇▇ enforceable against ▇▇▇▇▇▇▇▇.▇▇▇ in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3.5 Valid Issuance of Securities. The ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock that
----------------------------
is being issued to the holders of Alive Common Stock hereunder, when issued,
sold and delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and free of restrictions on transfer other than restrictions on transfer under
this Agreement and applicable state and federal securities laws. Based in part
upon the representations of the Alive Shareholders in the Investment
Representation Agreement and subject to the provisions of Section 3.6 below, the
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock will be issued in compliance with all applicable
federal and state securities laws.
3.6 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of ▇▇▇▇▇▇▇▇.▇▇▇, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to ▇▇▇▇▇▇▇▇.▇▇▇ or its properties or
assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to ▇▇▇▇▇▇▇▇.▇▇▇ in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Merger Documents, together with the required
officers' certificates, as provided in Section 1.2, (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the Exchange Act, the Securities Act, applicable state
securities 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 have a Material Adverse Effect on ▇▇▇▇▇▇▇▇.▇▇▇
and would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
3.7 Litigation. There is no Suit pending or, to ▇▇▇▇▇▇▇▇.▇▇▇'s
----------
knowledge, currently threatened against ▇▇▇▇▇▇▇▇.▇▇▇ or any of its subsidiaries
that questions the validity or enforceability of the Agreement or the right of
▇▇▇▇▇▇▇▇.▇▇▇ to enter into it, or to consummate the transactions contemplated
hereby or thereby, or that might result, either individually or in the
-30-
aggregate, in any Material Adverse Effect on ▇▇▇▇▇▇▇▇.▇▇▇ or any of its
subsidiaries, or any change in the current equity ownership of ▇▇▇▇▇▇▇▇.▇▇▇ or
any of its subsidiaries, nor is ▇▇▇▇▇▇▇▇.▇▇▇ aware that there is any basis for
the foregoing. For the purposes of this Section 3.7, "Suit" shall include but
----
not be limited to any action, suit, proceeding or investigation pending or, to
▇▇▇▇▇▇▇▇.▇▇▇'s knowledge, currently threatened against ▇▇▇▇▇▇▇▇.▇▇▇ or any of
its subsidiaries involving the prior employment of any of ▇▇▇▇▇▇▇▇.▇▇▇'s current
employees, such employees use in connection with ▇▇▇▇▇▇▇▇.▇▇▇'s business of any
information or techniques proprietary to any of such employees' former
employers, such employees' obligations under any agreements with prior
employers, or negotiations by ▇▇▇▇▇▇▇▇.▇▇▇ with potential investors in
▇▇▇▇▇▇▇▇.▇▇▇ or its proposed business. Neither ▇▇▇▇▇▇▇▇.▇▇▇ nor any of its
subsidiaries is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by
▇▇▇▇▇▇▇▇.▇▇▇ or any of its subsidiaries currently pending or which ▇▇▇▇▇▇▇▇.▇▇▇
or any of its subsidiaries intends to initiate.
3.8 Intellectual Property. To its knowledge, ▇▇▇▇▇▇▇▇.▇▇▇ owns or
---------------------
possesses sufficient legal rights to use all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes necessary for its business as presently conducted and as
proposed to be conducted without any conflict with, or infringement of, the
rights of others. ▇▇▇▇▇▇▇▇.▇▇▇ has not received any communications alleging that
▇▇▇▇▇▇▇▇.▇▇▇ has violated or, by conducting its business, would violate any of
the patents, trademarks, service marks, tradenames, copyrights, trade secrets or
other proprietary rights or processes of any other person or entity. To
▇▇▇▇▇▇▇▇.▇▇▇'s knowledge, there is no unauthorized use, disclosure, infringement
or misappropriation of any intellectual property rights of ▇▇▇▇▇▇▇▇.▇▇▇.
▇▇▇▇▇▇▇▇.▇▇▇ is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interest of ▇▇▇▇▇▇▇▇.▇▇▇ or that would conflict with
▇▇▇▇▇▇▇▇.▇▇▇'s business. Neither the execution or delivery of the Agreements,
nor the carrying on of ▇▇▇▇▇▇▇▇.▇▇▇'s business by the employees of ▇▇▇▇▇▇▇▇.▇▇▇,
nor the conduct of ▇▇▇▇▇▇▇▇.▇▇▇'s business as proposed, will, to ▇▇▇▇▇▇▇▇.▇▇▇'s
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. ▇▇▇▇▇▇▇▇.▇▇▇ does not
believe it is or will be necessary to use any inventions of any of its employees
(or persons it currently intends to hire) made prior to their employment by
▇▇▇▇▇▇▇▇.▇▇▇.
3.9 Compliance with Contracts and Other Instruments.
-----------------------------------------------
(a) ▇▇▇▇▇▇▇▇.▇▇▇ is not in violation, breach or default of any
provisions of its Restated Certificate or Bylaws or of any instrument, judgment,
order, writ, decree, agreement, note, mortgage, contract or other instrument to
which it is a party or by which it is bound or, to its knowledge, of any
provision of federal or state statute, rule or regulation applicable to
▇▇▇▇▇▇▇▇.▇▇▇. The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated hereby or thereby will not
-31-
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree, agreement, note,
mortgage, contract or other instrument or document or an event which results in
the creation of any lien, charge or encumbrance upon any assets of ▇▇▇▇▇▇▇▇.▇▇▇.
(b) To its knowledge, ▇▇▇▇▇▇▇▇.▇▇▇ has avoided every condition,
and has not performed any act, the occurrence of which would result in
▇▇▇▇▇▇▇▇.▇▇▇'s loss of any right granted under any license, distribution
agreement or other agreement.
3.10 Agreements; Action.
------------------
(a) There are no agreements, understandings or proposed
transactions between ▇▇▇▇▇▇▇▇.▇▇▇ and any of its officers, directors,
affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by this
Agreement, there are no agreements, understandings, instruments, contracts or
proposed transactions to which ▇▇▇▇▇▇▇▇.▇▇▇ is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to,
▇▇▇▇▇▇▇▇.▇▇▇ in excess of, $50,000, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from ▇▇▇▇▇▇▇▇.▇▇▇ or any of its
affiliates, or (iii) the grant of rights to manufacture, produce, assemble,
license, market, or sell its products to any other person or affect
▇▇▇▇▇▇▇▇.▇▇▇'s exclusive right to develop, manufacture, assemble, distribute,
market or sell its products.
(c) Neither ▇▇▇▇▇▇▇▇.▇▇▇ nor any of its subsidiaries has (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $50,000 or in excess of $200,000 in the aggregate, (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(d) ▇▇▇▇▇▇▇▇.▇▇▇ has not engaged in the past one (1) year in any
discussion (i) with any representative of any corporation, corporations,
partnership, association or other business entity or any individual
(collectively, "Person") regarding the merger of ▇▇▇▇▇▇▇▇.▇▇▇ with or into any
------
such Person, (ii) with any representative of any Person regarding the sale,
conveyance or disposition of all or substantially all of the assets of
▇▇▇▇▇▇▇▇.▇▇▇ or a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of ▇▇▇▇▇▇▇▇.▇▇▇ would be disposed
of, or (iii) regarding any other form of liquidation, sale, dissolution or
winding up of ▇▇▇▇▇▇▇▇.▇▇▇.
3.11 Representations Complete. None of the representations or
------------------------
warranties made by ▇▇▇▇▇▇▇▇.▇▇▇ herein or in any Schedule hereto, including the
▇▇▇▇▇▇▇▇.▇▇▇ Disclosure Schedule, or certificate furnished by ▇▇▇▇▇▇▇▇.▇▇▇
pursuant to this Agreement, when all such documents are read together in their
entirety, contains or will contain at the Effective Time any untrue statement of
a material fact, or omits or will omit at the Effective Time to state any
-32-
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
3.12 No Conflict of Interest. ▇▇▇▇▇▇▇▇.▇▇▇ is not indebted, directly
-----------------------
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To ▇▇▇▇▇▇▇▇.▇▇▇'s knowledge, none of
▇▇▇▇▇▇▇▇.▇▇▇'s officers or directors, or any members of their immediate
families, are, directly or indirectly, indebted to ▇▇▇▇▇▇▇▇.▇▇▇ (other than in
connection with purchases of ▇▇▇▇▇▇▇▇.▇▇▇'s stock) or have any direct or
indirect ownership interest in any Person with which ▇▇▇▇▇▇▇▇.▇▇▇ is affiliated
or with which ▇▇▇▇▇▇▇▇.▇▇▇ has a business relationship, or any Person which
competes with ▇▇▇▇▇▇▇▇.▇▇▇ except that officers, directors and/or stockholders
of ▇▇▇▇▇▇▇▇.▇▇▇ may own stock in (but not exceeding two percent of the
outstanding capital stock of) any publicly traded companies that may compete
with ▇▇▇▇▇▇▇▇.▇▇▇. To ▇▇▇▇▇▇▇▇.▇▇▇'s knowledge, none of ▇▇▇▇▇▇▇▇.▇▇▇'s officers
or directors or any members of their immediate families are, directly or
indirectly, interested in any material contract with ▇▇▇▇▇▇▇▇.▇▇▇. ▇▇▇▇▇▇▇▇.▇▇▇
is not a guarantor or indemnitor of any indebtedness of any other Person. The
▇▇▇▇▇▇▇▇.▇▇▇ Disclosure Schedule lists all material transactions with
▇▇▇▇▇▇▇▇.▇▇▇'s affiliates.
3.13 Title to Property and Assets. ▇▇▇▇▇▇▇▇.▇▇▇ owns its property
----------------------------
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair ▇▇▇▇▇▇▇▇.▇▇▇'s ownership or use of such
property or assets. With respect to the property and assets it leases,
▇▇▇▇▇▇▇▇.▇▇▇ is in compliance with such leases and, to its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances.
3.14 Financial Statements. ▇▇▇▇▇▇▇▇.▇▇▇ has made available to Alive
--------------------
its audited financial statements (including balance sheet, income statement and
statement of cash flows) as of December 31, 1998 and for the fiscal year ended
December 31, 1998 and its unaudited financial statements (including balance
sheet, income statement and statement of cash flows) as of September 30, 1999
and for the nine-month period ended September 30, 1999 (collectively, the
"▇▇▇▇▇▇▇▇.▇▇▇ Financial Statements"). The ▇▇▇▇▇▇▇▇.▇▇▇ Financial Statements have
---------------------------------
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except that the
unaudited ▇▇▇▇▇▇▇▇.▇▇▇ Financial Statements may not contain all footnotes
required by generally accepted accounting principles. The ▇▇▇▇▇▇▇▇.▇▇▇ Financial
Statements fairly present the financial condition and operating results of
▇▇▇▇▇▇▇▇.▇▇▇ as of the dates, and for the periods, indicated therein, subject to
normal year-end audit adjustments. Except as set forth in the ▇▇▇▇▇▇▇▇.▇▇▇
Financial Statements, ▇▇▇▇▇▇▇▇.▇▇▇ has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to September 30, 1999 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the ▇▇▇▇▇▇▇▇.▇▇▇
Financial Statements, which, in both cases, individually or in the aggregate are
not material to the financial condition or operating results of ▇▇▇▇▇▇▇▇.▇▇▇.
-33-
3.15 Changes. Since September 30, 1999, there has not been, occurred
-------
or arisen:
(a) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of ▇▇▇▇▇▇▇▇.▇▇▇;
(b) any waiver or compromise by ▇▇▇▇▇▇▇▇.▇▇▇ of a valuable right
or of a material debt owed to it;
(c) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by ▇▇▇▇▇▇▇▇.▇▇▇, except in the ordinary
course of business and that is not material to the business, properties,
prospects or financial condition of ▇▇▇▇▇▇▇▇.▇▇▇;
(d) any material change to a material contract or agreement by
which ▇▇▇▇▇▇▇▇.▇▇▇ or any of its assets is bound or subject;
(e) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(g) any resignation or termination of employment of any officer
or key employee of ▇▇▇▇▇▇▇▇.▇▇▇; and ▇▇▇▇▇▇▇▇.▇▇▇ is not aware of any impending
resignation or termination of employment of any such officer or key employee;
(h) any mortgage, pledge, transfer or grant of a security
interest in, or lien, created by ▇▇▇▇▇▇▇▇.▇▇▇, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable;
(i) any loans or guarantees made by ▇▇▇▇▇▇▇▇.▇▇▇ to or for the
benefit of its employees, officers, stockholders or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
(j) any declaration, setting aside or payment or other
distribution in respect to any of ▇▇▇▇▇▇▇▇.▇▇▇'s capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by
▇▇▇▇▇▇▇▇.▇▇▇;
(k) to ▇▇▇▇▇▇▇▇.▇▇▇'s knowledge, any other event or condition of
any character that might materially and adversely affect the business,
properties, prospects or financial condition of ▇▇▇▇▇▇▇▇.▇▇▇; or
(l) any arrangement or commitment by ▇▇▇▇▇▇▇▇.▇▇▇ to do any of
the things described in this Section 3.15.
-34-
3.16 Employee Benefit Plans. ▇▇▇▇▇▇▇▇.▇▇▇ does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.17 Tax Returns and Payments. ▇▇▇▇▇▇▇▇.▇▇▇ has filed all Returns as
------------------------
required by law which are true and correct in all material respects.
▇▇▇▇▇▇▇▇.▇▇▇ has paid all Taxes due. ▇▇▇▇▇▇▇▇.▇▇▇ has no notice of any proposed
tax deficiency which may be asserted which would materially and adversely affect
the business, properties, prospects or financial condition of ▇▇▇▇▇▇▇▇.▇▇▇.
▇▇▇▇▇▇▇▇.▇▇▇ has not taken or agreed to take any action, and does not know of
any circumstance that would prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
3.18 Insurance. ▇▇▇▇▇▇▇▇.▇▇▇ has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
3.19 Labor Agreements and Actions. ▇▇▇▇▇▇▇▇.▇▇▇ is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of
▇▇▇▇▇▇▇▇.▇▇▇, has sought to represent any of the employees, representatives or
agents of ▇▇▇▇▇▇▇▇.▇▇▇. There is no strike or other labor dispute involving
▇▇▇▇▇▇▇▇.▇▇▇ pending, or to the knowledge of ▇▇▇▇▇▇▇▇.▇▇▇ threatened, which
could have a material adverse effect on the assets, properties, financial
condition, operating results, or business of ▇▇▇▇▇▇▇▇.▇▇▇, nor is ▇▇▇▇▇▇▇▇.▇▇▇
aware of any labor organization activity involving its employees. The employment
of each officer and employee of ▇▇▇▇▇▇▇▇.▇▇▇ is terminable at the will of
▇▇▇▇▇▇▇▇.▇▇▇. To its knowledge, ▇▇▇▇▇▇▇▇.▇▇▇ has complied in all material
respects with all applicable state and federal equal employment opportunity laws
and with other laws related to employment.
3.20 Confidential Information and Invention Assignment Agreements.
------------------------------------------------------------
Each employee, consultant and officer of ▇▇▇▇▇▇▇▇.▇▇▇ has executed an agreement
with ▇▇▇▇▇▇▇▇.▇▇▇ regarding confidentiality and proprietary information
substantially in the form or forms made available to the counsel for Alive.
▇▇▇▇▇▇▇▇.▇▇▇ is not aware that any of its employees or consultants is in
violation thereof, and ▇▇▇▇▇▇▇▇.▇▇▇ will use its best efforts to prevent any
such violation.
3.21 Permits. ▇▇▇▇▇▇▇▇.▇▇▇ and each of its subsidiaries has all
-------
franchises, permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could materially and adversely affect
the business, properties, prospects, or financial condition of ▇▇▇▇▇▇▇▇.▇▇▇ and
it believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as presently planned to be conducted.
▇▇▇▇▇▇▇▇.▇▇▇ is not in default in any material respect under any of such
franchises, permits, licenses or other similar authority.
3.22 Corporate Documents. The Restated Certificate and Bylaws of
-------------------
▇▇▇▇▇▇▇▇.▇▇▇ are in the form delivered to counsel for Alive. The copy of the
minute books of ▇▇▇▇▇▇▇▇.▇▇▇ made available to Alive's counsel contains minutes
of all meetings of directors
-35-
and stockholders and all actions by written consent without a meeting by the
directors and stockholders since the date of incorporation and reflects all
actions by the directors (and any committee of directors) and stockholders with
respect to all transactions referred to in such minutes accurately in all
material respects.
3.23 Liabilities. Except for those liabilities set forth on
-----------
Schedule 3.23 to the ▇▇▇▇▇▇▇▇.▇▇▇ Disclosure Schedule and except as otherwise
disclosed hereunder, ▇▇▇▇▇▇▇▇.▇▇▇ has no debts, commitments, obligations and
other liabilities of any nature whatsoever individually in excess of $25,000 and
in the aggregate in excess of $50,000.
3.24 Tax Matters. Neither ▇▇▇▇▇▇▇▇.▇▇▇ nor any of its Subsidiaries
-----------
nor, to the knowledge of ▇▇▇▇▇▇▇▇.▇▇▇, any of their respective affiliates or
agents is aware of any agreement, plan or other circumstance that would prevent
the Merger from constituting a "reorganization" within the meaning of Section
368(a) of the Code.
3.25 Year 2000. ▇▇▇▇▇▇▇▇.▇▇▇'s products are designed to be used
---------
prior to, during and after calendar year 2000 A.D., and all of ▇▇▇▇▇▇▇▇.▇▇▇'s
products which are material to ▇▇▇▇▇▇▇▇.▇▇▇'s business will record, store,
process and calculate any information dependent on or relating to such dates in
the same manner and with the same functionality, data integrity and performance
as the products record, store, process and calculate and present calendar dates
on or before December 31, 1999, or calculate any information dependent on or
relating to such dates (collectively, "Year 2000 Compliant"). To the knowledge
-------------------
of ▇▇▇▇▇▇▇▇.▇▇▇, all of ▇▇▇▇▇▇▇▇.▇▇▇'s internal computer systems, including,
without limitation, its accounting systems, are Year 2000 Compliant.
3.26 Information Statement. None of the information (including
---------------------
financial data) relating to ▇▇▇▇▇▇▇▇.▇▇▇ supplied by ▇▇▇▇▇▇▇▇.▇▇▇ to be included
in the Information Statement (as defined below) at the time the Information
Statement is mailed to stockholders of Alive in connection with the solicitation
of written consents with respect to the Merger and the other transactions
contemplated hereby, and at all times subsequent to such dates up to and
including the Effective Time, will contain any statement which, at the time and
in light of the circumstances under which it is made, is false or misleading
with respect to any material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading. If at any time prior to the Effective Time any event or information
should be discovered by ▇▇▇▇▇▇▇▇.▇▇▇ which should be set forth in a supplement
to the Information Statement, ▇▇▇▇▇▇▇▇.▇▇▇ shall promptly inform Alive.
3.27 Third Party Consents. Except as set forth in Schedule 3.27 of
--------------------
the ▇▇▇▇▇▇▇▇.▇▇▇ Disclosure Schedule, no consent or approval is needed from any
third party in order to effect the Merger, this Agreement or any of the
transactions contemplated hereby.
3.28 Certain Agreements Affected by the Merger. Neither the
-----------------------------------------
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of ▇▇▇▇▇▇▇▇.▇▇▇ or
any of its Subsidiaries, (ii) materially increase any benefits otherwise payable
-36-
by ▇▇▇▇▇▇▇▇.▇▇▇, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
SECTION FOUR
4. Conduct Prior to the Effective Time.
-----------------------------------
4.1 Conduct of Business of Alive and ▇▇▇▇▇▇▇▇.▇▇▇. During the
---------------------------------------------
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of Alive and
▇▇▇▇▇▇▇▇.▇▇▇ agrees (except to the extent expressly contemplated by this
Agreement or as consented to in writing by the other party), to carry on its
and, if applicable, its subsidiaries', business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to
pay, and, if applicable, to cause its subsidiaries to pay, debts and Taxes when
due subject (i) to good faith disputes over such debts or Taxes and (ii) in the
case of Taxes of Alive, to ▇▇▇▇▇▇▇▇.▇▇▇'s consent to the filing of material Tax
Returns if applicable (which consent shall not unreasonably be withheld), to pay
or perform other obligations when due, and to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Each of Alive and ▇▇▇▇▇▇▇▇.▇▇▇ agrees to promptly notify the
other of any event or occurrence not in the ordinary course of its business, and
of any event which could reasonably be likely to have a Material Adverse Effect.
Without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement, neither Alive nor ▇▇▇▇▇▇▇▇.▇▇▇ shall do, cause
or permit any of the following, or allow, cause or permit any of its
subsidiaries, if applicable, to do, cause or permit any of the following,
without the prior written consent of the other:
(a) Charter Documents. Cause or permit any amendments to its
-----------------
Certificate of Incorporation or Articles of Incorporation, as the case may be,
or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
-----------------------------------
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Except as required by the Alive
-----------------------
Option Plan, accelerate, amend or change the period of exercisability or vesting
of options or other rights granted under its stock plans or authorize cash
payments in exchange for any options or other rights granted under any of such
plans.
-37-
(d) Other. Take, or agree in writing or otherwise to take,
-----
any of the actions described in Sections 4.1(a) through (c) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
4.2 Conduct of Business of Alive. During the period from the date of
----------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Alive shall not do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of ▇▇▇▇▇▇▇▇.▇▇▇:
(a) Material Contracts. Enter into any material contract or
------------------
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
(b) Issuance of Securities. Issue, deliver or sell or
----------------------
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities; other than (i) the issuance of shares of its Common
Stock pursuant to the exercise of stock options, warrants or other rights
therefor outstanding as of the date of this Agreement; (ii) the issuance of
convertible debt or equity securities, provided that no additional shares of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock shall be issued in the Merger in exchange for any such
convertible debt or equity security, and provided further that any such debt
securities issued have either been repaid or converted to Alive Common Stock
prior to the Effective Time; or (iii) repurchases of shares from former
employees, directors and consultants in accordance with Section 4.1(b) above.
(c) Intellectual Property. Transfer to any person or entity any
---------------------
rights to its Intellectual Property other than licenses granted in the ordinary
course of business;
(d) Exclusive Rights. Enter into or amend any agreements
----------------
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(e) Dispositions. Sell, lease, license or otherwise dispose
------------
of or encumber any of its properties or assets which are material, individually
or in the aggregate, to its and, if applicable, its Subsidiaries', business,
taken as a whole, except in the ordinary course of business consistent with past
practice;
(f) Indebtedness. Incur any indebtedness for borrowed money or
------------
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others in an amount in excess of $15,000 or
outside the normal course of business;
(g) Leases. Enter into any operating lease;
------
-38-
(h) Payment of Obligations. Pay, discharge or satisfy in an
----------------------
amount in excess of $15,000 in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) arising
other than in the ordinary course of business, other than the payment, discharge
or satisfaction of liabilities reflected or reserved against in the Alive
Financial Statements;
(i) Capital Expenditures. Make any capital expenditures,
--------------------
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(j) Insurance. Materially reduce the amount of any material
---------
insurance coverage provided by existing insurance policies;
(k) Termination or Waiver. Terminate or waive any right of
---------------------
substantial value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay Increases. Adopt
------------------------------------------------
or amend any employee benefit or stock purchase or option plan, or hire any new
director level or officer level employee (except that it may hire a replacement
for any current director level or officer level employee if it first provides
▇▇▇▇▇▇▇▇.▇▇▇ advance notice regarding such hiring decision), pay any special
bonus or special remuneration to any employee or director, or increase the
salaries or wage rates of its employees, other than increases committed to prior
to the date of this Agreement as set forth on Schedule 2.8(h) to the Alive
Disclosure Schedule;
(m) Severance Arrangement. Grant any severance or termination
---------------------
pay (i) director or officer or (ii) to any other employee except (A) payments
made pursuant to standard written agreements outstanding on the date of this
Agreement or (B) grants which are made in the ordinary course of business in
accordance with its standard past practice;
(n) Lawsuits. Commence a lawsuit other than (i) for the routine
--------
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with ▇▇▇▇▇▇▇▇.▇▇▇ prior to the
filing of such a suit, or (iii) for a breach of this Agreement;
(o) Acquisitions. Acquire or agree to acquire by merging or
------------
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its business, taken as a whole;
(p) Taxes. Other than in the ordinary course of business,
-----
make or change any material election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any
-39-
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Notices. Alive shall give all notices and other
-------
information to the employees of Alive, any collective bargaining unit
representing any group of employees of Alive, and any applicable government
authority under the WARN Act, the National Labor Relations Act, the Internal
Revenue Code, COBRA, and other applicable law required to be given in connection
with the transactions provided for in this Agreement, except where the right to
receive such notice of information has been waived;
(r) Revaluation. Revalue any of its assets, including without
-----------
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(s) Other. Take or agree in writing or otherwise to take, any
-----
of the actions described in Sections 4.2(a) through (r) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
SECTION FIVE
5. Additional Agreements.
---------------------
5.1 Best Efforts and Further Assurances. Each of the parties to
-----------------------------------
this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
5.2 Consents; Cooperation.
---------------------
(a) Each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall use its reasonable best
efforts to promptly (i) obtain from any Governmental Entity any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by ▇▇▇▇▇▇▇▇.▇▇▇ or Alive or, if applicable, any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereunder,
and (ii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under the
Securities Act and the Exchange Act and any other applicable federal, state or
foreign securities laws.
(b) Each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the
Federal Trade Commission Act, as amended, and any other
-40-
Federal, state or foreign statutes, rules, regulations, orders or decrees that
are designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade (collectively, "Antitrust Laws").
--------------
(c) From the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement, each party shall promptly
notify the other party in writing of any pending or, to the knowledge of such
party, threatened action, proceeding or investigation by any Governmental Entity
or any other person (i) challenging or seeking material damages in connection
with this Agreement or the transactions contemplated hereunder or (ii) seeking
to restrain or prohibit the consummation of the Merger or the transactions
contemplated hereunder or otherwise limit the right of ▇▇▇▇▇▇▇▇.▇▇▇ or its
subsidiaries to own or operate all or any portion of the businesses or assets of
Alive.
(d) Each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall give or cause to be
given any required notices to third parties, and use its reasonable best efforts
to obtain all consents, waivers and approvals from third parties (i) necessary,
proper or advisable to consummate the transactions contemplated hereunder, (ii)
disclosed or required to be disclosed in the Alive Disclosure Schedule or the
▇▇▇▇▇▇▇▇.▇▇▇ Disclosure Schedule, or (iii) required to prevent a Material
Adverse Effect on Alive or ▇▇▇▇▇▇▇▇.▇▇▇ from occurring prior or after the
Effective Time. In the event that ▇▇▇▇▇▇▇▇.▇▇▇ or Alive shall fail to obtain any
third party consent, waiver or approval described in this Section 5.2(d), it
shall use its reasonable best efforts, and shall take any such actions
reasonably requested by the other party, to minimize any adverse effect upon
▇▇▇▇▇▇▇▇.▇▇▇ and Alive, their respective subsidiaries, if any, and their
respective businesses resulting (or which could reasonably be expected to result
after the Effective Time) from the failure to obtain such consent, waiver or
approval.
(e) Each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive will take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on them with respect to the consummation of the transactions
contemplated by this Agreement and will promptly cooperate with and furnish
information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
(f) Each of Alive and ▇▇▇▇▇▇▇▇.▇▇▇ and their respective
Subsidiaries, if any, will use its reasonable best efforts to cause the Merger
to qualify as, and will not (either before or after consummation of the Merger)
take any actions or fail to take any actions that might reasonably be expected
to prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
-41-
5.3 Access to Information.
---------------------
(a) Alive shall afford ▇▇▇▇▇▇▇▇.▇▇▇ and its accountants, counsel
and other representatives, reasonable access during normal business hours during
the period prior to the Effective Time to (i) all of Alive's properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of Alive as ▇▇▇▇▇▇▇▇.▇▇▇ may reasonably
request. Alive agrees to provide to ▇▇▇▇▇▇▇▇.▇▇▇ and its accountants, counsel
and other representatives copies of internal financial statements promptly upon
request. ▇▇▇▇▇▇▇▇.▇▇▇ shall afford Alive and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of ▇▇▇▇▇▇▇▇.▇▇▇'s properties,
books, contracts, commitments and records, and (ii) all other information
concerning the business, properties and personnel of ▇▇▇▇▇▇▇▇.▇▇▇ as Alive may
reasonably request. ▇▇▇▇▇▇▇▇.▇▇▇ agrees to provide to Alive and its accountants,
counsel and other representatives copies of internal financial statements
promptly upon request.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall confer on
a regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that ▇▇▇▇▇▇▇▇.▇▇▇ and
---------------
Alive have previously executed a non-disclosure agreement (the "Confidentiality
---------------
Agreement"), which Confidentiality Agreement shall continue in full force and
---------
effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this
-----------------
Agreement, ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall consult with each other before issuing
any press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law.
5.6 FIRPTA. Alive shall, prior to the Closing Date, provide
------
▇▇▇▇▇▇▇▇.▇▇▇ with a statement that the shares of Alive Common Stock do not
constitute a "United States real property interest" within the meaning of
Section 897(c) of the Code as described in Treasury Regulation Section 1.1445-
2(c)(3).
5.7 State Statutes. If any state takeover law shall become
--------------
applicable to the transactions contemplated by this Agreement, ▇▇▇▇▇▇▇▇.▇▇▇ and
its Board of Directors or Alive and its Board of Directors, as the case may be,
shall use their reasonable best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated by this
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Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effects of such
state takeover law on the transactions contemplated by this Agreement.
5.8 Escrow Agreement. On or before the Effective Time, the Escrow
----------------
Agent and the Stockholders' Representative (as defined in Section 8 below) will
execute the Escrow Agreement contemplated by Section 8 in the form attached
hereto as Exhibit D ("Escrow Agreement").
--------- ----------------
5.9 Blue Sky Laws. ▇▇▇▇▇▇▇▇.▇▇▇ shall take such steps as may be
-------------
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in
connection with the Merger. Alive shall use its best efforts to assist
▇▇▇▇▇▇▇▇.▇▇▇ as may be necessary to comply with the securities and blue sky laws
of all jurisdictions which are applicable in connection with the issuance of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in connection with the Merger.
5.10 Stockholder Approval.
--------------------
(a) Information Statement. As soon as practicable after the
---------------------
execution of this Agreement, Alive shall prepare, with the cooperation of
▇▇▇▇▇▇▇▇.▇▇▇, an Information Statement (the "Information Statement") for the
---------------------
stockholders of Alive to approve this Agreement, the Agreement and Plan of
Merger and the transactions contemplated hereby and thereby. The Information
Statement shall constitute a disclosure document for the offer and issuance of
the shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to be received by the holders of the
capital stock of Alive in the Merger.
(b) ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall each use its best efforts to
cause the Information Statement to comply with applicable federal and state
securities laws requirements. Each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Information
Statement, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Information Statement. The information supplied by each of
▇▇▇▇▇▇▇▇.▇▇▇ and Alive for inclusion in the Information Statement shall not, at
(i) the time the Information Statement is first mailed to the holders of capital
stock of Alive, (ii) the time of the Special Meeting (as defined below), and
(iii) the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. Alive will promptly advise
▇▇▇▇▇▇▇▇.▇▇▇, and ▇▇▇▇▇▇▇▇.▇▇▇ will promptly advise Alive, in writing if at any
time prior to the Effective Time either Alive or ▇▇▇▇▇▇▇▇.▇▇▇ shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Information Statement in order to make the statements contained
or incorporated by reference therein not misleading or to comply with applicable
law.
(c) Subject to Section 5.12 below, the Information Statement
shall contain the unanimous recommendation of the Board of Directors of Alive
that the Alive
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stockholders approve the Merger and this Agreement and the conclusion of the
Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the stockholders of Alive. Anything to the contrary contained
herein notwithstanding, Alive shall not include in the Information Statement any
information with respect to ▇▇▇▇▇▇▇▇.▇▇▇ or its affiliates or associates, the
form and content of which information shall not have been approved by
▇▇▇▇▇▇▇▇.▇▇▇ prior to such inclusion.
(d) The Information Statement shall include as an attachment an
Investor Representation Statement, in substantially the form attached hereto as
Exhibit E (an "Investor Representation Statement"), to be completed by each
--------- ---------------------------------
shareholder of Alive and delivered to ▇▇▇▇▇▇▇▇.▇▇▇ for purposes of confirming
the availability of an exemption from registration under the Securities Act for
the issuance by ▇▇▇▇▇▇▇▇.▇▇▇ of shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock in the
Merger.
5.11 Special Meeting of Stockholders. As promptly as practicable
-------------------------------
after the date hereof, Alive shall take all action necessary in accordance with
the WBCA and its Articles of Incorporation and Bylaws to solicit and obtain the
written consent of the Alive stockholders for the purposes of approving the
adoption of this Agreement and the transactions contemplated hereby and thereby.
Alive shall consult with ▇▇▇▇▇▇▇▇.▇▇▇ regarding the date of the consent
solicitation. Alive shall use its best efforts to solicit from the stockholders
of Alive the required consents for approval of the Merger and shall take all
other action necessary or advisable to secure the consent of stockholders
required under the WBCA and its Articles of Incorporation and Bylaws to effect
the Merger.
5.12 Voting Agreement. Alive shall use its best efforts to cause
----------------
each holder of more than 5% of the shares of Alive Common Stock issued and
outstanding to execute and deliver to ▇▇▇▇▇▇▇▇.▇▇▇ a Voting Agreement
substantially in the form of Exhibit C attached hereto concurrently with the
---------
execution of this Agreement.
5.13 Maintenance of Alive Indemnification Obligations.
------------------------------------------------
(a) Subject to and following the Effective Time, ▇▇▇▇▇▇▇▇.▇▇▇
shall indemnify and hold harmless the Indemnified Alive Parties (as defined
below) to the extent provided in the Bylaws or Articles of Incorporation of
Alive, in each case as in effect as of the date of this Agreement. ▇▇▇▇▇▇▇▇.▇▇▇
shall keep in effect such provisions, which shall not be amended except as
required by applicable law or to make changes permitted by the WBCA that would
enlarge the rights to indemnification available to the Indemnified Alive Parties
and changes to provide for exculpation of director and officer liability to the
fullest extent permitted by the WBCA. For purposes of this Section 5.12,
"Indemnified Alive Parties" shall mean the individuals who were officers,
-------------------------
directors, employees and agents of Alive on or prior to the Effective Time.
(b) Subject to and following the Effective Time, ▇▇▇▇▇▇▇▇.▇▇▇
shall be obligated to pay the reasonable expenses, including reasonable
attorney's fees, that may be incurred by any Indemnified Alive Party in
enforcing the rights provided in this Section 5.12 and shall make any advances
of such expenses to the Indemnified Alive Party that would be available
-44-
under the Bylaws or Articles of Incorporation of Alive (in each case as in
effect as of the date of this Agreement) with regard to the advancement of
indemnifiable expenses, subject to the undertaking of such party to repay such
advances in the event that it is ultimately determined that such party is not
entitled to indemnification.
(c) The provisions of this Section 5.12 shall be in addition to
any other rights available to the Indemnified Alive Parties, shall survive the
Effective Time of the Merger, and are expressly intended for the benefit of the
Indemnified Alive Parties.
SECTION SIX
6. 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 consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction on or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall
--------------------
have been duly approved and adopted by the affirmative vote of the holders of
(i) a two-thirds of the Alive Common Stock, the Alive Series A and the Alive
Series B voting together as a class, (ii) majority of the Alive Series A voting
separately as a class and (iii) a majority of the Alive Series B voting
separately as a class, outstanding on the record date set by Alive for voting on
the Merger.
(b) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted. In
addition, no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting ▇▇▇▇▇▇▇▇.▇▇▇'s conduct or
operation of the business of Alive and its subsidiaries, following the Merger
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(c) Governmental Approval. ▇▇▇▇▇▇▇▇.▇▇▇ and Alive and, as
---------------------
applicable, their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several transactions
contemplated hereby, including, without
-45-
limitation, such approvals, waivers and consents as may be required under the
Securities Act and under any state securities laws.
(d) Tax Opinion. ▇▇▇▇▇▇▇▇.▇▇▇ and Alive shall have received a
-----------
written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & with respect to federal income tax
laws, substantially in the form of Exhibit H hereto and based upon
---------
representations of Alive and ▇▇▇▇▇▇▇▇.▇▇▇ substantially in the form of
Exhibit I-1 and Exhibit I-2 hereto.
----------- -----------
(e) Escrow Agreement. ▇▇▇▇▇▇▇▇.▇▇▇, Alive, Escrow Agent and the
----------------
Stockholders' Representative (as defined in Section 8 below) shall have entered
into an Escrow Agreement substantially in the form attached hereto as Exhibit D.
---------
(f) Amended and Restated Investors' Rights Agreement. At
------------------------------------------------
least the requisite majority of holders of Alive Common Stock party to the Alive
Amended and Restated Investors Rights Agreement dated March 17, 1999 shall have
terminated such agreement and entered into an Investors' Rights Agreement by and
among ▇▇▇▇▇▇▇▇.▇▇▇, certain shareholders of ▇▇▇▇▇▇▇▇.▇▇▇ and such Alive
stockholders in substantially the form of ▇▇▇▇▇▇▇▇.▇▇▇'s Amended and Restated
Investors' Rights Agreement dated as of August 9, 1999 (as amended to add such
Alive stockholders and as amended as necessary in connection with any equity
financings of ▇▇▇▇▇▇▇▇.▇▇▇ after the date hereof and prior to the Effective
Time).
6.2 Additional Conditions to Obligations of Alive. The obligations
---------------------------------------------
of Alive to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Alive:
(a) Representations, Warranties and Covenants (i) Each of the
-----------------------------------------
representations and warranties of ▇▇▇▇▇▇▇▇.▇▇▇ in this Agreement that is
expressly qualified by a reference to materiality shall be true in all respects
as so qualified, and each of the representations and warranties of ▇▇▇▇▇▇▇▇.▇▇▇
in this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Effective Time as though such representation
or warranty had been made on and as of such time (except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), and (ii) ▇▇▇▇▇▇▇▇.▇▇▇ shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Effective Time.
(b) Certificates of ▇▇▇▇▇▇▇▇.▇▇▇.
----------------------------
(i) Compliance Certificate of ▇▇▇▇▇▇▇▇.▇▇▇. Alive
--------------------------------------
shall have been provided with a certificate executed on behalf of ▇▇▇▇▇▇▇▇.▇▇▇
by its President or its Chief Financial Officer to the effect that, as of the
Effective Time, each of the conditions set forth in Section 6.2(a) and (e) above
has been satisfied with respect to ▇▇▇▇▇▇▇▇.▇▇▇.
-46-
(ii) Certificate of Secretary of ▇▇▇▇▇▇▇▇.▇▇▇. Alive
----------------------------------------
shall have been provided with a certificate executed by the Secretary or
Assistant Secretary of ▇▇▇▇▇▇▇▇.▇▇▇ certifying:
(A) Resolutions duly adopted by the Board of
Directors of ▇▇▇▇▇▇▇▇.▇▇▇ authorizing the execution of this Agreement and the
execution, performance and delivery of all agreements, documents and
transactions contemplated hereby; and
(B) the incumbency of the officers of ▇▇▇▇▇▇▇▇.▇▇▇
executing this Agreement and all agreements and documents contemplated hereby.
(c) Legal Opinion. Alive shall have received a legal opinion
-------------
from Venture Law Group, ▇▇▇▇▇▇▇▇.▇▇▇'s legal counsel, substantially in the form
of Exhibit F hereto.
---------
(d) No Material Adverse Changes. There shall not have
---------------------------
occurred any event, change or effect that has a Material Adverse Effect on
▇▇▇▇▇▇▇▇.▇▇▇, taken as a whole.
(e) Good Standing. Alive shall have received a certificate or
-------------
certificates of the Secretary of State of the State of Delaware and any
applicable franchise tax authority of such state, certifying as of a date no
more than 3 business days prior to the Effective Time that ▇▇▇▇▇▇▇▇.▇▇▇ has
filed all required reports, paid all required fees and taxes and is, as of such
date, in good standing and authorized to transact business as a domestic
corporation.
6.3 Additional Conditions to the Obligations of ▇▇▇▇▇▇▇▇.▇▇▇. The
--------------------------------------------------------
obligations of ▇▇▇▇▇▇▇▇.▇▇▇ to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by ▇▇▇▇▇▇▇▇.▇▇▇:
(a) Representations, Warranties and Covenants. (i) Each of the
-----------------------------------------
representations and warranties of Alive in this Agreement that is expressly
qualified by a reference to materiality shall be true in all respects as so
qualified, and each of the representations and warranties of Alive in this
Agreement that is not so qualified shall be true and correct in all material
respects, on and as of the Effective Time as though such representation or
warranty had been made on and as of such time (except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date), and (ii) Alive shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Effective Time.
(b) No Material Adverse Changes. There shall not have occurred
---------------------------
any event, change or effect that has a Material Adverse Effect on Alive, taken
as a whole.
(c) Certificates of Alive.
---------------------
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(i) Compliance Certificate of Alive. ▇▇▇▇▇▇▇▇.▇▇▇ shall
-------------------------------
have been provided with a certificate executed on behalf of Alive by its
President or its Chief Financial Officer to the effect that, as of the Effective
Time, each of the conditions set forth in Section 6.3(a) and (b) above has been
satisfied.
(ii) Certificate of Secretary of Alive. ▇▇▇▇▇▇▇▇.▇▇▇
---------------------------------
shall have been provided with a certificate executed by the Secretary of Alive
certifying:
(A) Resolutions duly adopted by the Board of
Directors and the stockholders of Alive authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby;
(B) The Articles of Incorporation and Bylaws of
Alive, as in effect immediately prior to the Effective Time, including all
amendments thereto; and
(C) the incumbency of the officers of Alive executing
this Agreement and all agreements and documents contemplated hereby.
(d) Third Party Consents. ▇▇▇▇▇▇▇▇.▇▇▇ shall have been
--------------------
furnished with evidence satisfactory to it that Alive has obtained those
consents, waivers, approvals or authorizations of those Governmental Entities
and third parties whose consent or approval are required in connection with the
Merger as set forth in Sections 5.2(a) and (e).
(e) Legal Opinion. ▇▇▇▇▇▇▇▇.▇▇▇ shall have received a legal
-------------
opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇, Alive's legal counsel, in
substantially the form of Exhibit G.
---------
(f) Employee Agreements. Each employee of Alive as of the
-------------------
Effective Time who shall be hired by ▇▇▇▇▇▇▇▇.▇▇▇ shall have signed
▇▇▇▇▇▇▇▇.▇▇▇'s standard form Proprietary Information and Inventions Assignment
Agreement.
(g) FIRPTA Statement. Alive shall, prior to the Closing Date,
----------------
provide ▇▇▇▇▇▇▇▇.▇▇▇ with a statement as described in Section 5.6.
(h) Investor Representation Agreements. ▇▇▇▇▇▇▇▇.▇▇▇ shall have
----------------------------------
received from a sufficient number of holders of Alive Capital Stock an Investor
Representation Agreements in substantially the form attached hereto as Exhibit D
---------
sufficient to establish the availability of the Rule 506 safe harbor exemption
under Regulation D of the Securities Act with respect to the transactions
contemplated in this Agreement.
(i) Resignation of Directors and Officers. ▇▇▇▇▇▇▇▇.▇▇▇ shall
-------------------------------------
have received letters of resignation from each of the directors and officers of
Alive in office immediately prior to the Effective Time, which resignations in
each case shall be effective as of the Effective Time.
-48-
(j) Conversion of Preferred Stock. All of Alive's outstanding
-----------------------------
Preferred Stock shall have been converted into Alive Common Stock in accordance
with the Articles of Incorporation of Alive.
(k) Qualification Under Regulation D. Each unaccredited Alive
--------------------------------
stockholder (other than an Alive stockholder who has indicated such stockholder
will exercise dissenter's rights) shall have acknowledged and agreed in writing
that such stockholder has been represented by a Purchaser Representative in
considering the purchase of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock pursuant to this
Agreement. Either (i) counsel to ▇▇▇▇▇▇▇▇.▇▇▇ shall be satisfied in its
reasonable discretion that the requirements of the Rule 506 safe harbor
exemption under Regulation D of the Securities Act have been satisfied with
respect to the purchase of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock to be made pursuant to this
Agreement or (ii) counsel to ▇▇▇▇▇▇▇▇.▇▇▇ shall otherwise be satisfied that the
purchase of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock pursuant to this Agreement is otherwise
exempt from the registration requirements of the Securities Act.
(l) Maximum Percentage of Alive Stockholders Exercising
---------------------------------------------------
Dissenters' Rights. Holders of less than two and one half percent (2.5%) of
------------------
Alive Common Stock issued and outstanding as of the Closing Date shall have
exercised their dissenters' rights with respect to the Merger.
(m) Good Standing. ▇▇▇▇▇▇▇▇.▇▇▇ shall have received a
-------------
certificate or certificates of the Secretary of State of the State of Washington
and any applicable franchise tax authority of such state, certifying as of a
date no more than 5 business days prior to the Effective Time that Alive has
filed all required reports, paid all required fees and taxes and is, as of such
date, in good standing and authorized to transact business as a domestic
corporation.
(n) Cancellation of Acceleration. All Director level and higher
----------------------------
employees of Alive shall have entered into an agreement by and among such
individual, Alive and ▇▇▇▇▇▇▇▇.▇▇▇ that any accelerated vesting resulting from
the Merger pursuant to such individual's stock option agreements with Alive
shall be cancelled and of no force and effect.
(o) Warrant Assumption Agreement. ▇▇▇▇▇▇▇▇.▇▇▇ and the holder
----------------------------
of the Landlord Warrant shall have entered into a Warrant Assumption Agreement
in a form reasonably acceptable to ▇▇▇▇▇▇▇▇.▇▇▇.
SECTION SEVEN
7. Termination, Amendment and Waiver.
---------------------------------
7.1 Termination. At any time prior to the Effective Time, whether
-----------
before or after approval of the matters presented in connection with the Merger
by the stockholders of Alive, this Agreement may be terminated and the Merger
may be abandoned:
(a) by mutual consent duly authorized by the Boards of Directors
of each of ▇▇▇▇▇▇▇▇.▇▇▇ and Alive;
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(b) by either ▇▇▇▇▇▇▇▇.▇▇▇ or Alive, if, without fault of the
terminating party,
(i) the Effective Time shall not have occurred on or
before December 20, 1999 (or such later date as may be agreed upon in writing by
the parties);
(ii) there shall be any applicable federal or state law
that makes consummation of the Merger illegal or otherwise prohibited or if any
court of competent jurisdiction or Governmental Entity shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
(iii) the required approval of the stockholders of Alive
shall not have been obtained by reason of the failure to obtain the required
consent of the stockholders of Alive;
(c) by ▇▇▇▇▇▇▇▇.▇▇▇, if Alive shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten calendar days of receipt by Alive of written notice
of such breach, provided that ▇▇▇▇▇▇▇▇.▇▇▇ is not in material breach of any of
its representations, warranties or obligations hereunder, and provided further,
that no cure period shall be required for a breach which by its nature cannot be
cured; or
(d) by Alive, if ▇▇▇▇▇▇▇▇.▇▇▇ shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten calendar days following receipt by ▇▇▇▇▇▇▇▇.▇▇▇ of
written notice of such breach, provided that Alive is not in material breach of
any of its representations, warranties or obligations hereunder, and provided
further, that no cure period shall be required for a breach which by its nature
cannot be cured.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of ▇▇▇▇▇▇▇▇.▇▇▇ or
Alive or their respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties or covenants set forth in this
Agreement; provided that, the provisions of Section 5.4 (Confidentiality),
Section 7.3 (Expenses and Termination Fees) and this Section 7.2 shall remain in
full force and effect and survive any termination of this Agreement.
7.3 Expenses. Whether or not the Merger is consummated, all costs
--------
and expenses incurred in connection with this Agreement and the transactions
contemplated herein including, without limitation, filing fees and the fees and
expenses of advisors, accountants and legal counsel, shall be paid by the party
incurring such expense.
7.4 Amendment. The boards of directors of the parties may cause
---------
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf
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of each of the parties; provided that an amendment made subsequent to adoption
of the Agreement by the stockholders of Alive shall not (i) alter or change the
amount or kind of consideration to be received on conversion of the Alive Common
Stock, (ii) alter or change any term of the Certificate of Incorporation of
▇▇▇▇▇▇▇▇.▇▇▇ to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
adversely affect the stockholders of Alive.
7.5 Extension; Waiver. At any time prior to the Effective Time any
-----------------
party 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, (ii)
waive any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
SECTION EIGHT
8. Escrow and Indemnification.
--------------------------
8.1 Survival of Representations and warranties. All covenants to
----------------------------------------------
be performed prior to the Effective Time, and all representations in this
Agreement or in any instrument delivered pursuant to this Warranties Agreement
shall survive the consummation of the Merger and continue until the first
anniversary of the Closing Date (the "Escrow Termination Date"); provided that
-----------------------
if any claims for indemnification under this Section 8 have been asserted with
respect to any such representations and warranties prior to the Escrow
Termination Date, the representations and warranties on which any such claims
are based shall continue in effect until final resolution of such claims. All
covenants to be performed after the Effective Time shall continue indefinitely.
8.2 Escrow Fund. As soon as practicable after the Effective Time,
-----------
260,000 shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock that the Alive stockholders are
entitled to receive in the Merger in exchange for the Alive Common Stock
(together with the New Shares (as defined below), the "Escrow Shares") shall,
-------------
without any act of any stockholder of Alive, be deposited with, the ▇▇▇▇▇▇ Trust
Company of California (or other institution acceptable to the Shareholders'
Representative and ▇▇▇▇▇▇▇▇.▇▇▇) as escrow agent (the "Escrow Agent"), such
------------
deposit to constitute the escrow fund (the "Escrow Fund") and to be governed by
-----------
the terms set forth herein and in the Escrow Agreement attached hereto as
Exhibit D (the "Escrow Agreement"). In the event that any Damages (as defined
--------- ----------------
below) arise, the Escrow Fund shall be available to compensate the Indemnified
Persons (defined below) pursuant to the indemnification obligations of Alive
pursuant to Section 8.3 and in accordance with the Escrow Agreement.
8.3 Indemnification.
---------------
(a) Indemnified Damages. Subject to the limitations set forth in
-------------------
this Section 8, from and after the Effective Time, Alive shall protect,
indemnify and hold harmless ▇▇▇▇▇▇▇▇.▇▇▇ and its affiliates, officers,
directors, employees, representatives and agents
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(▇▇▇▇▇▇▇▇.▇▇▇ and each of the foregoing persons or entities is hereinafter
referred to individually as an "Indemnified Person" and collectively as
------------------
"Indemnified Persons") out of the Escrow Fund from and against any and all
-------------------
losses, costs, damages, liabilities, fees (including without limitation
reasonable attorneys' fees) and expenses (collectively, the "Damages"), that any
-------
of the Indemnified Persons incurs or reasonably anticipates incurring by reason
of or in connection with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of Alive contained in this
Agreement, including any exhibits or schedules attached hereto which becomes
known to ▇▇▇▇▇▇▇▇.▇▇▇ during the Escrow Period (as defined below) and for which
written notice is duly given in accordance with Section 8.7 below during the
Escrow Period. Damages in each case shall be net of the amount of any insurance
proceeds and indemnity and contribution actually recovered by ▇▇▇▇▇▇▇▇.▇▇▇.
(b) Exclusive Contractual Remedy and Limitations.
--------------------------------------------
▇▇▇▇▇▇▇▇.▇▇▇ and Alive each acknowledge that Damages, if any, would relate to
unresolved contingencies existing at the Effective Time, which if resolved at
the Effective Time would have led to a reduction in the total consideration
▇▇▇▇▇▇▇▇.▇▇▇ would have agreed to pay in connection with the Merger. Resort to
the Escrow Fund shall be the exclusive contractual remedy of ▇▇▇▇▇▇▇▇.▇▇▇ for
any and all Damages if the Merger closes. The maximum liability of any former
holder of the Alive Common Stock for any breach of a representation, warranty or
covenant of Alive shall be limited to the Escrow Shares in which such holder has
an interest that are held pursuant to the Escrow Agreement; provided, however,
that nothing herein shall limit the liability: (i) of Alive for any breach of
representation, warranty or covenant if the Merger does not close, (ii) of Alive
or any officer, director, stockholder, or optionholder of Alive for such
person's or entity's fraud or intentional misrepresentation or (iii) of Alive or
any officer, director, stockholder, or optionholder for such person's or
entity's violations of applicable state or federal securities laws.
8.4 Damages Threshold. Notwithstanding the foregoing,
-----------------
▇▇▇▇▇▇▇▇.▇▇▇ may not receive any amount of the Escrow Shares from the Escrow
Fund unless and until a certificate signed by an officer of ▇▇▇▇▇▇▇▇.▇▇▇ (an
"Officer's Certificate") identifying Damages in the aggregate amount in excess
---------------------
of $100,000 has been delivered to the Escrow Agent and such amount is determined
pursuant to this Section 8 to be payable, in which case ▇▇▇▇▇▇▇▇.▇▇▇ shall
receive Escrow Shares equal in value to the full amount of such Damages without
deduction. In determining the amount of any Damages attributable to a breach,
any materiality standard contained in a representation, warranty or covenant of
▇▇▇▇▇▇▇▇.▇▇▇ shall be disregarded.
8.5 Escrow Period. Subject to the following requirements,
-------------
the Escrow Fund shall remain in existence until the Escrow Termination Date (the
"Escrow Period"). Upon the expiration of the Escrow Period, the Escrow Fund
-------------
shall terminate with respect to all Escrow Shares; provided, however, that the
-------- -------
number of Escrow Shares, which, in the reasonable judgment of ▇▇▇▇▇▇▇▇.▇▇▇,
subject to the objection of the Stockholders' Representative (as defined in
Section 8.8 below) and the subsequent arbitration of the claim in the manner
provided in the Escrow Agreement, are necessary to satisfy any unsatisfied
claims specified in any Officer's Certificate delivered to the Escrow Agent
prior to the expiration of such Escrow Period with
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respect to facts and circumstances existing on or prior to the Escrow
Termination Date shall remain in the Escrow Fund (and the Escrow Fund shall
remain in existence) until such claims have been resolved. Within ten (10) days
of the Escrow Termination Date, the Escrow Agent shall promptly deliver to the
former shareholders of Alive all Escrow Shares in excess of those necessary to
satisfy any such pending unsatisfied claims. As soon as all such claims have
been resolved, the Escrow Agent shall deliver to the stockholders of Alive all
Escrow Shares and other property remaining in the Escrow Fund and not required
to satisfy such claims. Deliveries of Escrow Shares to the stockholders of Alive
pursuant to this Section 8.5 and the Escrow Agreement shall be made in
proportion to their respective original contributions to the Escrow Fund.
8.6 Distributions. Any shares of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock
-------------
or other equity securities issued or distributed by ▇▇▇▇▇▇▇▇.▇▇▇ (including
shares issued upon a stock split) ("New Shares") in respect of the Escrow Shares
----------
that have not been released from the Escrow Fund shall be added to the Escrow
Fund and become a part thereof. When and if cash dividends on Escrow Shares in
the Escrow Fund shall be declared and paid, they shall be paid to the beneficial
owners of the Escrow Shares as soon as practicable following their receipt by
the Escrow Agent. Such dividends will not become part of the Escrow Fund and
will not be available to satisfy Damages. The Alive stockholders will be treated
as the beneficial owners of the Escrow Sha res and as such will pay any taxes on
such dividends.
8.7 Method of Asserting Claims. All claims for
--------------------------
indemnification by the ▇▇▇▇▇▇▇▇.▇▇▇ or any other Indemnified Person pursuant to
this Section 8 shall be made in accordance with the provisions of the Escrow
Agreement.
8.8 Representative of the Stockholders; Power of Attorney.
-----------------------------------------------------
(a) In the event that the Merger is approved by the
requisite number of Alive stockholders, effective upon such vote and pursuant to
the Letters of Transmittal submitted by each stockholder of Alive, and without
further act of any stockholder, ▇▇▇▇ ▇▇▇▇▇▇ shall be appointed as agent and
attorney-in-fact (the "Stockholders' Representative") for each stockholder of
----------------------------
Alive (except such stockholders, if any, as shall have perfected their
dissenters' rights under Chapter 23B of the WBCA), for and on behalf of
stockholders of Alive, to give and receive notices and communications on behalf
of Alive stockholders, to enter into and perform the Escrow Agreement, to
authorize delivery to ▇▇▇▇▇▇▇▇.▇▇▇ of Escrow Shares or other property from the
Escrow Fund in satisfaction of claims by ▇▇▇▇▇▇▇▇.▇▇▇ or any other Indemnified
Person pursuant to this Section 8, 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
Stockholders' Representative for the accomplishment of the foregoing. The
Stockholders' Representative shall act by vote or written action or consent of a
majority of the members of the Committee.
(b) The Shareholders' Representative shall not be liable
for any act done or omitted hereunder as Shareholders' Representative while
acting in good faith and in the exercise
-53-
of reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith. Shareholders of Alive
shall severally indemnify the Shareholders' Representative and hold him harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Shareholders' Representative and arising out of or in
connection with the acceptance or administration of his duties hereunder. No
bond shall be required of the Shareholders' Representative, and the
Shareholders' Representative shall receive no compensation for his or her
services.
(c) The Shareholders' Representative shall be given
reasonable access by ▇▇▇▇▇▇▇▇.▇▇▇ to information about Alive and the reasonable
assistance of Alive's officers and employees for purposes of performing its
duties and exercising its rights hereunder, provided that the Shareholders'
Representative shall treat confidentially and not disclose any nonpublic
information from or about Alive to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).
8.9 Adjustment to Escrow. In the event that ▇▇▇▇▇▇▇▇.▇▇▇
--------------------
pays out any amounts to holders of Dissenting Shares with respect to such
shares, the Escrow Shares shall be automatically reduced by the number of Escrow
Shares allocable to such Dissenting Shares. Upon certification by ▇▇▇▇▇▇▇▇.▇▇▇
to the Escrow Agent of such event, the Escrow Shares and any New Shares with
respect thereto allocable to such Dissenting Shares shall be promptly returned
to ▇▇▇▇▇▇▇▇.▇▇▇; provided, that ▇▇▇▇▇▇▇▇.▇▇▇ has notified the Shareholders'
Representative in writing no later than fifteen (15) days prior to the release
of any such shares.
8.10 Indemnity by ▇▇▇▇▇▇▇▇.▇▇▇. Subsequent to the
-------------------------
Effective Time, ▇▇▇▇▇▇▇▇.▇▇▇ agrees to indemnify and hold harmless the holders
of the Alive Common Stock outstanding immediately prior to the Effective Time
(the "Alive Indemnitees") from and against any and all Damages which any of the
-----------------
Alive Indemnitees incur or reasonably anticipate incurring by reason of or in
connection with any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of ▇▇▇▇▇▇▇▇.▇▇▇ contained
herein including any exhibits and schedules attached hereto or in any
certificate delivered pursuant hereto, which breach becomes known to the Alive
Indemnitees and is asserted in writing to ▇▇▇▇▇▇▇▇.▇▇▇ on or before the Escrow
Termination Date (the date of any such written assertion being an "Alive Claim
-----------
Date"), at which date this indemnification provision shall terminate, provided
----
however that no such compensation shall be payable to the Alive Indemnitees
unless and until the amount of all Damages to Alive Indemnitees exceeds One
Hundred Thousand Dollars ($100,000) in the aggregate, whereupon compensation
shall be payable for all such Damages without any deduction; provided, however,
in no event shall ▇▇▇▇▇▇▇▇.▇▇▇'s maximum liability for all Damages hereunder
exceed Encoding Indemnification Limit (as defined below). The indemnification
set forth in this Section 8.10 shall be the exclusive contractual remedy of the
Alive Indemnitees for any and all Damages if the Merger closes; provided,
however, that nothing herein shall limit the liability of ▇▇▇▇▇▇▇▇.▇▇▇ for
Damages: (i) of ▇▇▇▇▇▇▇▇.▇▇▇ for any breach of representation, warranty or
covenant if the Merger does not close, (ii) of ▇▇▇▇▇▇▇▇.▇▇▇ or any officer,
director, stockholder, or optionholder of ▇▇▇▇▇▇▇▇.▇▇▇ for such person's or
entity's fraud or intentional misrepresentation or (iii) of ▇▇▇▇▇▇▇▇.▇▇▇ for
violations of applicable state
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or federal securities laws. In determining the amount of any Damages
attributable to a breach, any materiality standard contained in a
representation, warranty or covenant of ▇▇▇▇▇▇▇▇.▇▇▇ shall be disregarded.
For purposes of this Section 8.10, the Encoding Indemnification Limit
shall be the amount equal to (i) 260,000 multiplied by the value of ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock (as determined below) on the applicable Alive Claim Date minus (ii)
the amounts of all Damages previously paid to Alive Indemnitees pursuant to this
Section 8.10; provided, however, in no event shall the Encoding Indemnification
Limit exceed $5,200,000. For purposes of this Section 8.10, the value of
▇▇▇▇▇▇▇▇.▇▇▇ Common Stock shall be determined as follows:
(A) if ▇▇▇▇▇▇▇▇.▇▇▇'s Common Stock is not traded on a
securities exchange or the Nasdaq Stock Market, the value of ▇▇▇▇▇▇▇▇.▇▇▇ Common
Stock shall be determined in good faith jointly by the Board of Directors of
▇▇▇▇▇▇▇▇.▇▇▇ and the Stockholders' Representative; provided that if the Board of
Directors of ▇▇▇▇▇▇▇▇.▇▇▇ and the Stockholders' Representative cannot agree on
such value within 15 days of the Alive Claim Date, then such shares shall be
valued at the "Appraised Fair Market Value" (as defined below). For purposes of
---------------------------
this Agreement, "Fair Market Value" means the price that an unrelated third
-----------------
party would pay if it were to acquire all outstanding shares of ▇▇▇▇▇▇▇▇.▇▇▇
Common Stock (on an as-converted basis) in an arm's-length transaction, assuming
that such shares were being sold in a manner designed to attract all possible
participants and without taking into consideration a control premium or minority
discount. The "Appraised Fair Market Value" shall be determined in accordance
---------------------------
with the following procedures: ▇▇▇▇▇▇▇▇.▇▇▇ and the Stockholder's Representative
shall jointly select an investment banking firm of recognized national standing
(the "Appraiser"), which shall appraise the Fair Market Value and deliver its
---------
appraisal to ▇▇▇▇▇▇▇▇.▇▇▇ and the Stockholder's Representative, within 30 days
of its engagement. If either party shall disagree with the Fair Market Value
determined by such appraiser, then such party shall have the right to appoint an
additional investment banking firm of recognized national standing (the "Second
------
Appraiser"). If such party does not engage a Second Appraiser within 30 days of
---------
the First Appraiser's delivery of its appraisal, the First Appraiser's appraisal
shall be the Appraised Fair Market Value. If a party engages a Second Appraiser,
the Second Appraiser will appraise the Fair Market Value, and deliver its
appraisal to ▇▇▇▇▇▇▇▇.▇▇▇ and the Stockholders' Representative, within 30 days
of its engagement. If such difference between the two appraisals is less than
20% of the lower appraised value, then the Appraised Fair Market Value shall be
the average of the two appraisals. If the difference is greater than or equal to
20% of the lower appraised value, unless ▇▇▇▇▇▇▇▇.▇▇▇ and the Stockholders'
Representative agree otherwise, the two appraisers shall engage a third
independent investment banking firm of recognized national standing (the "Third
-----
Appraiser"), which shall appraise the Fair Market Value within 30 days of its
---------
engagement. The Appraised Fair Market Value shall be the average of the two
appraised values which are closest in absolute dollars. All appraisals of Fair
Market Value shall be as of the Alive Claim Date. The expenses of the First
Appraiser shall be borne jointly by ▇▇▇▇▇▇▇▇.▇▇▇, on the one hand, and the
holders of the Escrow Shares in accordance with their proportionate interest
therein (as determined in the Escrow Agreement), on the other hand; the expenses
of the Second Appraiser, if any, shall be borne by the party requesting such
Second Appraiser; and the expenses of the Third Appraiser, if any, shall be
borne equally by
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▇▇▇▇▇▇▇▇.▇▇▇ on the one hand and the holders of the Escrow Shares in accordance
with their proportionate interest therein on the other hand.
(B) if ▇▇▇▇▇▇▇▇.▇▇▇'s Common Stock is traded on a securities
exchange or The Nasdaq Stock Market, the value of ▇▇▇▇▇▇▇▇.▇▇▇ Common Stock
shall be deemed to be the average of the closing prices over a fifteen (15)
trading day period beginning on the Alive Claim Date.
SECTION NINE
9. General Provisions.
------------------
9.1 Survival of Warranties. The representations, warranties and
----------------------
agreements set forth in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time of the Merger until the first
anniversary of the Closing Date.
9.2 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
72 hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice,
(a) if to ▇▇▇▇▇▇▇▇.▇▇▇, to:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
Times Square Building
▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Venture Law Group
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) if to Alive, to:
▇▇▇▇▇.▇▇▇, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.3 Interpretation. When a reference is made in this Agreement to
--------------
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to 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 phrase "made available" in this Agreement shall
------------------ --------------
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
---
date of this Agreement," "the date hereof," and terms of similar import, unless
---------------------- ---------------
the context otherwise requires, shall be deemed to refer to November 19, 1999.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.5 Entire Agreement; Nonassignability; Parties in Interest. This
-------------------------------------------------------
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Alive Disclosure Schedule and the ▇▇▇▇▇▇▇▇.▇▇▇
Disclosure Schedule (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, except for the Confidentiality Agreement, which shall
continue in full force and effect, and shall survive any termination of this
Agreement or the Closing, in accordance with its terms; (b) are not intended to
confer upon any other person any rights or remedies hereunder (other than the
Alive Indemnitees); and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
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9.6 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
9.7 Remedies Cumulative. Except as otherwise provided herein, any
-------------------
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.8 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law. Each of the
parties to this Agreement consents to the exclusive jurisdiction and venue of
the state and federal courts sitting in King County, Washington.
9.9 Rules of Construction. The parties hereto agree that they have
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been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
9.10 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 9.10 shall be binding upon the parties and their
respective successors and assigns.
[Signature page follows]
-58-
Alive and ▇▇▇▇▇▇▇▇.▇▇▇ have executed this Agreement as of the date first
written above.
ALIVE
▇▇▇▇▇.▇▇▇, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇
_____________________________________________
▇▇▇▇▇ ▇▇▇▇, President
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇.▇▇▇, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer and
Minister of Order and Reason
Times Square Building
▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
[Note: Schedules were omitted in compliance with Rule 601(b)(2).]