EXHIBIT 2.1
AS OF DECEMBER 6, 1999
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.,
IC ACQUISITION I CORPORATION
AND
▇▇▇▇▇▇▇.▇▇▇ INC
AS OF DECEMBER 6, 1999
TABLE OF CONTENTS
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1. Certain Definitions..........................................................................................2
2. The Merger...................................................................................................9
2.1 Merger; Effective Time..............................................................................9
2.2 Merger Closing......................................................................................9
2.3 Effect of the Merger................................................................................9
3. Effect of Merger on the Capital Stock of Sub and the Company; Exchange of Certificates; Additional
Payments....................................................................................................10
3.1 Conversion of Stock................................................................................10
3.2 Company Options and Warrants.......................................................................10
3.3 Conversion of Shares...............................................................................10
3.4 Adjustments to Surviving Corporation Common Stock and Parent Share Consideration...................11
3.5 Fractional Shares..................................................................................11
3.6 Exchange of Certificates...........................................................................12
3.7 Taking of Necessary Action; Further Action.........................................................14
3.8 Escrow Account.....................................................................................14
3.9 Dissenters' Rights.................................................................................14
3.10 Dissenting Shares After Payment of Fair Value......................................................15
3.11 Tax and Accounting Consequences....................................................................15
4. Securities Act Compliance...................................................................................15
5. Contribution and License of Wireless Assets.................................................................16
6. Representations and Warranties of the Company...............................................................16
6.1 Organization, Qualification, and Corporate Power...................................................16
6.2 Authorization......................................................................................16
6.3 Capitalization.....................................................................................17
6.4 Noncontravention...................................................................................18
6.5 Fees...............................................................................................18
6.6 Financial Statements...............................................................................18
6.7 Subsidiaries.......................................................................................19
6.8 Title to Assets....................................................................................19
6.9 Events Subsequent to Most Recent Fiscal Period End.................................................19
6.10 Undisclosed Liabilities............................................................................21
6.11 Legal Compliance...................................................................................21
6.12 Tax Matters........................................................................................22
6.13 Real Properties....................................................................................24
6.14 Intellectual Property..............................................................................24
6.15 Tangible Assets....................................................................................29
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TABLE OF CONTENTS
(CONTINUED)
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6.16 Contracts..........................................................................................29
6.17 Notes and Accounts Receivable......................................................................32
6.18 Power of Attorney..................................................................................32
6.19 Insurance..........................................................................................32
6.20 Litigation.........................................................................................32
6.21 Restrictions on Business Activities................................................................32
6.22 Product Warranty...................................................................................33
6.23 Employees..........................................................................................33
6.24 Employee Matters and Benefits......................................................................33
6.25 Guaranties.........................................................................................38
6.26 Environment, Health, and Safety....................................................................38
6.27 Certain Business Relationships With the Company....................................................39
6.28 No Adverse Developments............................................................................40
6.29 Full Disclosure....................................................................................40
7. Representations and Warranties of the Parent Entities.......................................................40
7.1 Organization, Qualification, and Corporate Power...................................................40
7.2 Authorization......................................................................................40
7.3 Capitalization.....................................................................................41
7.4 Noncontravention as to the Merger..................................................................41
7.5 SEC Filings........................................................................................41
7.6 Brokers' Fees......................................................................................42
7.7 Noncontravention as to the Parent Wireless Assets..................................................42
7.8 Title to Assets....................................................................................42
7.9 Undisclosed Liabilities............................................................................43
7.10 Contracts..........................................................................................43
7.11 Litigation.........................................................................................43
7.12 Restrictions on Business Activities................................................................43
7.13 Employees..........................................................................................43
7.14 No Adverse Developments............................................................................44
7.15 Full Disclosure....................................................................................44
8. Pre-Closing Covenants.......................................................................................44
8.1 General............................................................................................44
8.2 Notices and Consents...............................................................................44
8.3 Operation of Business of the Company...............................................................44
8.4 Operation of Wireless Business of Parent...........................................................47
8.5 Access to Information..............................................................................48
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TABLE OF CONTENTS
(CONTINUED)
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8.6 Notice of Developments.............................................................................48
8.7 Registration; Fairness Hearing; Company Stockholder Approval.......................................49
8.8 No Solicitation....................................................................................51
8.9 Regulatory Filings.................................................................................51
8.10 NMS Listing........................................................................................52
8.11 Tax-Free Reorganization............................................................................52
8.12 Parent SEC Reports.................................................................................52
8.13 Pre-Closing Bridge Loan............................................................................52
8.14 Company Registration Rights Agreement; Tax-Sharing Agreement. 52
8.15 Obligation to Update Disclosure Schedules..........................................................53
9. Post-Closing Covenants......................................................................................53
9.1 General............................................................................................53
9.2 Litigation Support.................................................................................53
9.3 Confidentiality....................................................................................53
9.4 FIRPTA Compliance..................................................................................54
9.5 Tax Free Reorganization............................................................................54
9.6 Board of Directors.................................................................................54
9.7 Surviving Corporation Incentive Stock Plan.........................................................54
9.8 Initial Public Offering of Surviving Corporation...................................................54
9.9 Bridge Loan Facility...............................................................................55
9.10 Indemnification Continuation.......................................................................55
9.11 Treatment of Employees.............................................................................56
9.12 Existing Bridge Loans..............................................................................56
10. Conditions to Obligations to Closing........................................................................56
10.1 Conditions to the Obligations of Parent and Sub....................................................56
10.2 Conditions to the Company's Obligations............................................................59
11. Survival of Representations, Warranties and Covenants; Indemnity; Escrow....................................60
11.1 Survival of Representations and Warranties.........................................................60
11.2 Escrow Arrangements................................................................................61
11.3 Exclusive Remedy...................................................................................69
11.4 Parent Indemnification for Certain Losses..........................................................69
12. Termination.................................................................................................70
12.1 Termination of the Agreement.......................................................................70
12.2 Effect of Termination..............................................................................72
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TABLE OF CONTENTS
(CONTINUED)
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12.3 Termination Fees and other Events..................................................................73
13. Miscellaneous...............................................................................................75
13.1 Press Releases and Public Announcements............................................................75
13.2 No Third-Party Beneficiaries.......................................................................75
13.3 Entire Agreement and Modification..................................................................76
13.4 Succession and Assignment..........................................................................76
13.5 Counterparts.......................................................................................76
13.6 Headings...........................................................................................76
13.7 Notices............................................................................................76
13.8 Governing Law......................................................................................77
13.9 Forum Selection; Consent to Jurisdiction...........................................................77
13.10 Waivers............................................................................................78
13.11 Severability.......................................................................................78
13.12 Expenses...........................................................................................78
13.13 Construction.......................................................................................78
13.14 Company Disclosure Letter..........................................................................79
13.15 Attorneys' Fees....................................................................................79
13.16 Further Assurances.................................................................................79
13.17 Time of Essence....................................................................................79
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EXHIBITS
Exhibit A Form of Contribution Agreement
Exhibit B-1 Form of Amended and Restated Certificate of Incorporation of
the Surviving Corporation
Exhibit B-2 Form of Amended and Restated Bylaws of the Surviving
Corporation
Exhibit C Certificate of Merger
Exhibit D Form of Voting Agreement
Exhibit E Form of Non-Competition Agreement
Exhibit F [Intentionally omitted]
Exhibit G [Intentionally omitted]
Exhibit H Form of Stockholder Certificate
Exhibit I [Intentionally omitted]
Exhibit J [Intentionally omitted]
Exhibit K [Intentionally omitted]
Exhibit L Form of Release
Exhibit M [Intentionally omitted]
Exhibit N-1 Form of Secured Convertible Promissory Note
Exhibit N-2 Form of Security Agreement
Exhibit O Form of Amended and Restated Stockholders Agreement
Exhibit P Form of Technology License and Content Access Agreement
Exhibit Q Form of Joint Marketing and Referral Agreement
Exhibit R Form of Support Services Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered
into as of December 6, 1999, by and among ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware
corporation ("Parent"), IC Acquisition I Corporation, a Delaware corporation and
wholly-owned subsidiary of Parent ("Sub"),and ▇▇▇▇▇▇▇.▇▇▇ inc, a Delaware
corporation (the "Company"). Parent, the Company, and Sub are sometimes referred
to herein individually as a "PARTY" and collectively as the "Parties." Parent
and Sub are sometimes collectively referred to herein as the "Parent Entities."
RECITALS
A. Parent, Sub and the Company intend to effect the Merger (as defined
herein) of Sub with and into the Company in accordance with this Agreement and
Delaware Law (as defined herein). Upon consummation of the Merger, Sub will
cease to exist, and the Company will become a subsidiary of Parent in which
Parent shall hold eighty percent (80%) of the Fully Diluted Shares of Surviving
Corporation Common Stock (as defined herein).
B. It is intended that the Contemplated Transactions (as defined in
Section 1) effectuated by the Merger qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and this Agreement is intended to constitute the plan of
reorganization described in Section 368(a) of the Code.
C. The respective boards of directors of Parent, Sub and the Company
have approved this Agreement and approved the Merger.
D. Concurrent with the execution of this Agreement, as a material
inducement to Parent and Sub, certain stockholders of the Company are entering
into voting agreements in the form of Exhibit D hereto (the "Voting
Agreements"), an employee of the Company is entering into a non-competition
agreement in favor of the Company in the form of Exhibit E hereto (the "Non-
Competition Agreement"), and upon the consummation of the Merger and the other
transactions contemplated by this Agreement, the Company and Parent will enter
into (i) the Amended and Restated Stockholders Agreement substantially in the
form attached hereto as Exhibit O (the "Stockholders Agreement"), (ii) a
Technology License and Content Access Agreement substantially in the form
attached hereto as Exhibit P (the "License Agreement"), (iii) the Joint
Marketing and Referral Agreement substantially in the form attached hereto as
Exhibit Q (the "Joint Marketing Agreement") and (iv) the Support Services
Agreement substantially in the form attached hereto as Exhibit R (the "Support
Services Agreement").
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
Parties do hereby agree as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa). Certain other terms are defined
in the text of this Agreement.
"Affiliate" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
"After-acquired Wireless Assets" means any rights in or to any
assets (including Intellectual Property Rights) that Parent acquires or obtains
by license or otherwise between the date of this Agreement and the Closing Date
and which relate to Parent's wireless business or are otherwise of substantially
the same nature as the Parent Wireless Assets and which Parent has the right to
transfer or license.
"Aggregate Breach Amount" means:
(i) with respect to any Breaches by the Company of one or more of
its representations and warranties set forth in Section 6 (individually or in
the aggregate) as of the date hereof, the sum total of the following amounts,
determined separately with respect to each such Breach: the lesser of (1) the
cost (if any) to the Company of curing such Breach in all material respects on
or prior to the Closing Date, or (2) the decline (if any) in the value of the
Company resulting from such Breach; and
(ii) with respect to any Breaches by Parent of one or more of its
representations and warranties set forth in Sections 7.7 through 7.15
(individually or in the aggregate) as of the date hereof, the sum total of the
following amounts, determined separately with respect to each such Breach: the
lesser of (1) the cost (if any) to Parent of curing such Breach in all material
respects on or prior to the Closing Date, or (2) the decline (if any) in the
value of Parent resulting from such Breach.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to attempt to cause such
result to be achieved as expeditiously as reasonably possible; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
"Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is any inaccuracy in or
breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach or failure.
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"Business Condition" means the current business, financial
condition, results of operations and assets of a corporate entity.
"Change of Control of the Company" shall mean:
(a) The merger or consolidation of the Company with or into, or
other corporate reorganization of the Company with, any third party other than
any such transaction or series of related transactions following which the
stockholders of the Company prior to the transaction own, by virtue of their
holdings of shares of the Company prior to the transaction, a majority of the
equity securities of the surviving corporation or its parent (it being
understood that a transfer or issuance of equity securities in any transaction
or series of related transactions representing a majority of the equity
securities of the surviving corporation or its parent to a number of third
parties where no single third party and its parents and subsidiaries holds
beneficial ownership of a majority of such equity securities shall not be a
"Change of Control of the Company"); or
(b) The sale of all or substantially all of the assets of the
Company, other than any such transaction following which the stockholders of the
Company prior to the transaction own a majority of the equity securities of (i)
the entity acquiring the assets of the Company or (ii) such entity's parent.
"Company Affiliate" means each "affiliate" of the Company
immediately prior to the Effective Time, as such term is defined under Rule 144
of the Securities Act. For purposes hereof, each officer of the Company elected
by the Company's board of directors in office at a particular time that Company
Affiliates are required to take actions pursuant to this Agreement; each
director of the Company in office at a particular time that Company Affiliates
are required to take actions pursuant to this Agreement, and each person with
beneficial ownership of more than ten percent (10%) in interest of the issued
and outstanding Company Capital Stock at a particular time that Company
Affiliates are required to take actions pursuant to this Agreement, shall be
deemed to be Company Affiliates.
"Company Capital Stock" means shares of capital stock of the
Company.
"Company Common Stock" means shares of the common stock of the
Company.
"Company Disclosure Letter" means the Company Disclosure Letter
delivered by the Company to Parent concurrently with the execution and delivery
of this Agreement, as it may be updated by the Company pursuant to Section 8.15.
"Company Intellectual Property" means any Technology and
Intellectual Property Rights including the Company Registered Intellectual
Property Rights (as defined below in Section 6.14(a)), that are owned (in whole
or in part) by or exclusively licensed to the Company.
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"Company Option Shares" means the number of shares of Company
Capital Stock (whether vested or unvested) issuable upon the exercise of all
Company Options.
"Company Options" means all options to purchase Company Capital
Stock (whether vested or unvested) issued and outstanding immediately prior to
the Effective Time, including all Company Options granted under the Company
Plans.
"Company Plans" means the Company's 1998 Equity Incentive Plan
and the 1998 Stock Option Incentive Plan.
"Company Preferred Stock" means shares of the preferred stock of the
Company.
"Company Stockholders" means the stockholders of record of the
Company immediately prior to the Effective Time.
"Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including:
(a) the contribution of certain of the Parent Wireless Assets to
Surviving Corporation pursuant to the Contribution Agreement immediately
following the Effective Time and the license of the remaining Parent Wireless
Assets to the Surviving Corporation pursuant to the License Agreement;
(b) the merger of Sub with and into the Company and assumption by
Parent and the Surviving Corporation of Company Options pursuant to the
Certificate of Merger;
(c) the execution and delivery of the Voting Agreements, the Non-
Competition Agreement and all other agreements and instruments executed by any
of the Parties contemporaneously with the execution of this Agreement or in
contemplation of or contemporaneously with the Merger; and
(d) the performance by Parent, the Company, and Sub of their
respective covenants and obligations under this Agreement and all other
agreements which are contemplated by the Parties to be entered into in
connection with the Merger.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; and (d)
any other nonqualified plan providing welfare benefits, including but not
limited to medical, dental, life insurance and disability benefits.
"Employee Pension Benefit Plan" has the meaning set forth in Section
3(2) of ERISA.
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"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA.
"Erisa" means the Employee Retirement Income Security Act of 1974,
as amended.
"Existing Bridge Loans" means (i) the Bridge Loan Agreement dated as
of September 1, 1999 by and among Ericsson Radio Systems AB, Nortel Networks
Corporation, GSM Capital Limited Partnership (and ARGC, LLC), Microcell
Telecommunications, Inc. and ▇▇▇▇▇▇▇.▇▇▇ inc and the warrants and promissory
notes issued pursuant thereto, and (ii) the Bridge Loan Agreement dated as of
November 10, 1999 by and among Ericsson Radio Systems AB, Nortel Networks
Corporation, Microcell Telecommunications Inc., and ▇▇▇▇▇▇▇.▇▇▇ inc and the
convertible promissory notes issued pursuant thereto.
"Existing Stockholders Agreement" means, collectively, (i) the
Stockholders Agreement dated June 30, 1998 by and among Nortel Networks
Corporation, GSM Capital Limited Partnership (and ARGC, LLC), Microcell Capital
Inc., and Omnipoint Communications Services (collectively, the "Stockholders"),
(ii) Amendment No. 1 to the Stockholders Agreement dated June 4, 1999 by and
among the Stockholders and Ericsson Radio Systems AB, and (iii) Amendment No. 2
to the Stockholders' Agreement dated July 30, 1999 by and among the Stockholders
and Ericsson Radio Systems AB.
"Fully Diluted Shares of Company Capital Stock" means the sum of (i)
the number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time, (ii) the number of shares of Company Common Stock
issuable upon conversion of all shares of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time, and (iii) the Company
Option Shares.
"Fully Diluted Shares of Surviving Corporation Common Stock" means
the sum of (i) the number of shares of Surviving Corporation Common Stock issued
and outstanding immediately following the Effective Time following the
conversions set forth in Section 3.3, and (ii) the number of shares of Surviving
Corporation Common Stock (whether vested or unvested) issuable upon the exercise
of all options to purchase Surviving Corporation Common Stock (whether vested or
unvested) issued and outstanding immediately following the Effective Time by
reason of the conversion of Company Options into options to acquire Surviving
Corporation Common Stock and options to acquire Parent Common Stock pursuant to
Section 3.2.
"Governmental Body" means any:
(a) nation, province, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal, foreign, or other
government;
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(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Gross Negligence" consists of an intentional act, or the failure to
perform a duty, with reckless disregard for the consequences of such act or
failure.
"Intellectual Property Rights" any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries including without limitation invention
disclosures ("Patents"); (ii) all trade secrets and other rights in know-how and
confidential or proprietary information; (iii) all copyrights, copyrights
registrations and applications therefor and all other rights corresponding
thereto throughout the world ("Copyrights"); (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all rights in
World Wide Web addresses and domain names and applications and registrations
therefor; (vi) all trade names, logos, common law trademarks and service marks,
trademark and service ▇▇▇▇ registrations and applications therefor and all
goodwill associated therewith throughout the world ("Trademarks"); and (vii) any
similar, corresponding or equivalent rights to any of the foregoing anywhere in
the world.
"Knowledge" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a Person holding the positions held by such individual would
reasonably be expected in the exercise of the normal responsibilities of such
Person to have learned of the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director, officer, partner, executor, or trustee of such Person (or
in any position having the same or greater level of responsibility) has
Knowledge of such fact or other matter. The Company will be deemed to have
Knowledge of a particular fact or matter only if any of the following
individuals has Knowledge of such fact or other matter: ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
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"Major Stockholders" means the following Company Stockholders:
Microcell Capital Inc., a corporation organized under the laws of Canada; Nortel
Networks Corporation, a corporation organized under the laws of Canada; GSM
Capital Limited Partnership, a partnership registered under the laws of
Delaware; ARGC, LLC, a limited liability company registered under the laws of
Delaware; Ericsson Radio Systems AB, a corporation incorporated under the laws
of the Kingdom of Sweden; and ▇▇▇▇▇ ▇▇▇▇▇▇.
"Material Adverse Effect" means a material adverse effect on the
Business Condition of the corporate entity and its subsidiaries, taken as a
whole, or in the case of the Parent Wireless Assets, such assets taken as a
whole; provided that any adverse effects arising from or relating to the
following matters (individually and in the aggregate) shall be excluded in
determining whether such a material adverse effect has occurred: (i) general
economic conditions or conditions (including conditions in financial markets)
generally prevailing in the industry or market segment in which the corporate
entity and its subsidiaries conduct their respective businesses, (ii)
performance by any Party of its obligations under this Agreement; (iii) the
announcement or pendency of the proposed Merger; and (iv) the taking by any
Party of any action (or omission by any Party to take any action) at the request
of or with the permission of another Party to this Agreement.
"Merger Consideration" means the sum of the Parent Share
Consideration and the shares of Surviving Corporation Common Stock received by
Company Stockholders in accordance with SECTION 3.3.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of
ERISA and Section 414(f) of the Code.
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal business operations of such
Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person.
"Parent Common Stock" means shares of common stock of Parent.
"Parent Conversion Ratio" shall equal the quotient obtained by
dividing (A) the Parent Share Consideration, by (B) the Fully Diluted Shares of
Company Capital Stock.
"Parent Disclosure Letter" means the Parent Disclosure Letter
delivered by Parent to the Company concurrently with the execution and delivery
of this Agreement, as it may be updated by Parent pursuant to Section 8.15.
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"Parent Sec Reports" has the meaning set forth in Section 7.5.
"Parent Share Consideration" means two million three hundred ninety
seven thousand seven hundred and sixteen (2,397,716) shares of Parent Common
Stock, subject to Section 3.4.
"Parent Wireless Assets" means (a) the contracts and other assets of
Parent as set forth in, and assigned to the Surviving Corporation under, the
Contribution Agreement, and (b) the rights to technologies, content and services
of Parent made available to Surviving Corporation pursuant to the License
Agreement.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Registered Intellectual Property Rights" means all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including intent-to-
use applications, or other registrations or applications related to Trademarks;
(iii) Copyrights registrations and applications to register Copyrights; and (iv)
any other Technology that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any
Governmental Body at any time.
"Representatives" means, with respect to a Person, that Person's
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors and other representatives.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Sec" means the United States Securities and Exchange Commission.
"Stockholder Agent" means the agent and attorney-in-fact for each of
the Major Stockholders. The Stockholder Agent shall be selected by the Company
prior to the Closing Date with the consent of Parent, such consent not to be
unreasonably withheld.
"Surviving Corporation Common Stock" means shares of common stock of
the Surviving Corporation.
"Surviving Corporation Conversion Ratio" shall equal one-fifth
(0.2).
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"Technology" means any or all of the following: (i) works of
authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (ii)
inventions (whether or not patentable), improvements, and technology; (iii)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (iv) databases, data
compilations and collections and technical data; (v) logos, trade names, trade
dress, trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, methods and processes; and (viii) all instantiations of
the foregoing in any form and embodied in any media.
2. The Merger.
2.1 Merger; Effective Time. Subject to the terms and conditions of
this Agreement and the applicable provisions of the Delaware General Corporation
Law ("Delaware Law"), Sub will be merged with and into the Company (the
"Merger"), the separate existence of Sub shall cease and the Company shall
continue as the Surviving Corporation (as defined herein) in which immediately
after the Effective Time Parent shall hold eighty percent (80%) of the Fully
Diluted Shares of Surviving Corporation Common Stock. In accordance with the
provisions of this Agreement, a Certificate of Merger in substantially the form
attached hereto as Exhibit C (the "Certificate of Merger") shall be filed with
the Delaware Secretary of State in accordance with Delaware Law, and all issued
and outstanding shares of Company Capital Stock shall be converted into a
combination of shares of Parent Common Stock and Surviving Corporation Common
Stock in the manner contemplated by Section 3. The Merger shall become effective
at the time of the acceptance of the Certificate of Merger by the Delaware
Secretary of State (the date of such acceptance being hereinafter referred to as
the "Effective Date" and the time of such acceptance being hereinafter referred
to as the "Effective Time").
2.2 Merger Closing. The closing of the Merger (the "Closing") will
take place as soon as practicable after satisfaction or waiver of the latest to
occur of the conditions set forth in Section 10 (the "Closing Date"), at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2.3 Effect of The Merger. At the Effective Time, (i) the separate
existence of Sub shall cease and Sub shall be merged with and into the Company
(the Company after the Merger is referred to herein as the "Surviving
Corporation"), (ii) the Amended and Restated Certificate of Incorporation
attached hereto as Exhibit B-1 and the Amended and Restated Bylaws attached
hereto as Exhibit B-2 shall be the Certificate of Incorporation and Bylaws,
respectively, of the Surviving Corporation, (iii) the individuals specified in
Section 9.6 shall be the directors of the Surviving Corporation until their
successors shall have been duly appointed or elected and qualified, (iv) the
officers of the Company immediately prior to the Effective Time (as well as any
other officers designated by Parent immediately prior to the Effective Time)
shall be the officers of the Surviving Corporation until their successors have
been duly appointed and qualified, (v) all shares of capital
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stock of Sub shall be canceled, and (vi) the Merger shall, from and after the
Effective Time, have all the effects provided by applicable law.
3. Effect of Merger on the Capital Stock of Sub and the Company;
Exchange of Certificates; Additional Payments.
3.1 Conversion of Stock. As of the Effective Time, each share of
Company Capital Stock that is issued and outstanding immediately prior to the
Effective Time (other than shares, if any, held by Persons exercising
dissenters' rights in accordance with Delaware Law as provided for in Section
3.9) shall, by virtue of the Merger and without any action on the part of
Company Stockholders, be converted into shares of Surviving Corporation Common
Stock and Parent Share Consideration, as provided by Section 3.3.
3.2 Company Options and Warrants. At the Effective Time, each
Company Option will by virtue of the Merger, and without any further action on
the part of any holder thereof, be assumed by the Surviving Corporation and
Parent and converted into options to purchase the following: (a) the number of
shares of Surviving Corporation Common Stock determined by multiplying (i) the
number of shares of Company Capital Stock issuable upon the exercise of such
Company Option immediately prior to the Effective Time, by (ii) the Surviving
Corporation Conversion Ratio; and (b) the number of shares of Parent Common
Stock determined by multiplying (i) the number of shares of Company Capital
Stock issuable upon the exercise of such Company Option immediately prior to the
Effective Time, by (ii) the Parent Conversion Ratio. The exercise price term,
exercisability, vesting schedule, acceleration provisions, vesting commencement
date, status as an "incentive stock option" under Section 422 of the Code, if
applicable, all restrictions on the exercise of each such assumed Company Option
and all other terms and conditions of the Company Options will otherwise be
unchanged. Continuous employment with the Company will be credited to an
optionee of the Company for purposes of determining the number of shares of
Surviving Corporation Common Stock and Parent Common Stock subject to exercise
under an assumed Company Option after the Effective Time. The Parties
acknowledge that the Merger will constitute a "Change of Control" under the
Company Plans. Prior to the Effective Time, the Company shall take all action
necessary so that all outstanding warrants and any other rights to acquire
Company Capital Stock (other than the Company Options) ("Warrants") are either
exercised in full or terminated prior to the Effective Time.
3.3 Conversion of Shares.
(a) Subject to Sections 3.5 and 3.9, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent, Sub,
the Company or any Company Stockholder:
(i) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares, if any, held by
Persons exercising
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dissenters' rights in accordance with Delaware Law as provided for in Section
3.9) shall be converted into the right to receive (1) a number of shares of
Parent Common Stock equal to the Parent Conversion Ratio, and (2) a number of
shares of Surviving Corporation Common Stock equal to the Surviving Corporation
Conversion Ratio;
(ii) each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than shares, if any,
held by Persons exercising dissenters' rights in accordance with Delaware Law as
provided for in Section 3.9) shall be converted into the right to receive (1) a
number of shares of Parent Common Stock equal to the Parent Conversion Ratio,
and (2) a number of shares of Surviving Corporation Common Stock equal to the
Surviving Corporation Conversion Ratio; and
(iii) all of the issued and outstanding shares of the common
stock of Sub outstanding immediately prior to the Effective Time shall be
converted into the number of shares of Surviving Corporation Common Stock equal
to eighty percent (80%) of the Fully Diluted Shares of Surviving Corporation
Common Stock.
(b) If any shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time are subject to a repurchase option, risk
of forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company, then the shares of Parent Common
Stock and Surviving Corporation Common Stock issued upon the conversion of such
shares of Company Common Stock will also be subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Parent Common Stock or Surviving Corporation Common Stock may
accordingly be marked with appropriate legends, provided, HOWEVER, that no
shares of Parent Common Stock shall be subject to the provisions of the
Stockholders Agreement (or any predecessor agreement thereto).
3.4 Adjustments to Surviving Corporation Common Stock and Parent
Share Consideration. The number of shares of Surviving Corporation Common Stock
and Parent Share Consideration issuable hereunder shall be adjusted to reflect
fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Share Consideration), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Capital Stock which is effective after
the date hereof, including without limitation that certain two-for-one stock
split declared by the Board of Directors of Parent on or about November 30,
1999.
3.5 Fractional Shares. No fractional shares of Surviving
Corporation Common Stock and Parent Share Consideration shall be issued in the
Merger. No fraction of a share of Parent Common Stock will be issued, but in
lieu thereof, each holder of shares of Company Capital Stock who would otherwise
be entitled to a fraction of a share of Parent Common Stock (after aggregating
all fractional shares of Parent Common Stock to be received by such holder)
shall be entitled to receive from Parent an amount of cash (rounded to the
nearest whole cent) equal to the product of (i)
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such fraction, and (ii) the average Closing Price of Parent Common Stock as
reported on the Nasdaq National Market for the five (5) trading days ending
three (3) days prior to the Closing Date.
3.6 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall
appoint itself or ChaseMellon Shareholder Services, L.L.C., to act as the
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Surviving Corporation Common Stock and
Parent Common Stock. Promptly after the Effective Date, Parent shall make
available for issuance in accordance with this Section 3, through such
reasonable procedures as Parent may adopt, the shares of Parent Common Stock and
Surviving Corporation Common Stock, issuable pursuant to Section 3.1 in
conversion of outstanding shares of Company Capital Stock, other than the shares
of Parent Common Stock to be held in escrow pursuant to Section 3.8.
(c) Exchange Procedures. Within three (3) business days after
the Effective Date, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock (the "Certificates")
whose shares are being converted into Surviving Corporation Common Stock and
Parent Common Stock, pursuant to Section 3.1 (subject to Section 3.8), (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 delivery of the
Certificates to the Exchange Agent and which shall be in such form and have such
other provisions as Parent may reasonably specify) (the "Letter of
Transmittal"), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the Surviving Corporation
Common Stock and Parent Common Stock (less any shares held in escrow pursuant to
SECTION 3.8 with respect to the Major Stockholders). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal
and (in the case of Company Affiliates) a Stockholder Certificate substantially
in the form of Exhibit H, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor certificates representing the number of
shares of Surviving Corporation Common Stock and Parent Common Stock (less any
shares held in escrow pursuant to Section 3.8 with respect to the Major
Stockholders) to which such holder of Company Capital Stock is entitled pursuant
to Section 3.1. The Certificate so surrendered shall forthwith be canceled. No
interest will accrue or be paid to the holder of any outstanding Company Capital
Stock. From and after the Effective Date, until surrendered as contemplated by
this Section 3.6, each such Certificate shall be deemed for all corporate
purposes to evidence the number of shares of Surviving Corporation Common Stock
and Parent Common Stock, respectively, into which the shares of Company Capital
Stock represented by such Certificate have been converted.
(d) No Further Registration. The certificates representing the
Surviving Corporation Common Stock and Parent Common Stock, delivered upon the
surrender for exchange
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of the Certificates representing shares of Company Capital Stock in accordance
with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such Company Capital Stock. There shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of Company Capital Stock which were outstanding
immediately prior to the Effective Date. If, after the Effective Date,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Section 3.6, provided that
the presenting holder is listed on the Company's stockholder list as a holder of
Company Capital Stock.
(e) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock or Surviving Corporation Common Stock, as the
case may be, with a record date after the Effective Time will be paid to the
holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock or Surviving Corporation Common Stock, as the case may be,
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 shares of Parent Common Stock or Surviving Corporation
Common Stock, as the case may be, issued in exchange therefor, without interest,
at the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such shares of Parent Common Stock or Surviving Corporation Common Stock, as the
case may be.
(f) Transfers of Ownership. If any certificate for shares of
Parent Common Stock or Surviving Corporation Common Stock, as the case may be,
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 the issuance
thereof 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 Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock or Surviving Corporation Common Stock, as the case may be,
in any name other than that of the registered holder of the Certificate
surrendered, or established to the reasonable satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(g) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that
any Certificates evidencing shares of Company Capital Stock shall have been
lost, stolen or destroyed, the Exchange Agent 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 Parent Common Stock and Surviving
Corporation Common Stock as may be required pursuant to SECTION 3.1; PROVIDED,
HOWEVER, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
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(h) NO LIABILITY. Notwithstanding anything to the contrary in
this SECTION 3.6, none of the Exchange Agent, the Surviving Corporation or any
Party hereto shall be liable to a holder of shares of Parent Common Stock or
Surviving Corporation Common Stock, as the case may be, or Company Capital Stock
for any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.7 TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent, Sub and the
Company shall take all such actions as may be necessary or appropriate in order
to effect the Merger as promptly as possible. If, at any time after the
Effective Date, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of the Surviving
Corporation are fully authorized in the name of the Surviving Corporation or
otherwise to take, and shall take, all such action.
3.8 ESCROW ACCOUNT. The Parties agree that two hundred thirty nine
thousand seven hundred seventy two (239,772) shares of Parent Common Stock
issuable in connection with the Merger to the Major Stockholders pursuant to
SECTION 3.3 (the "ESCROW AMOUNT") will, without any act of any Major
Stockholder, be deposited with the Escrow Agent, such deposit to constitute the
Escrow Fund (as defined in SECTION 11.2) to be governed by the terms of SECTION
11. No shares of Parent Common Stock shall be deposited in the Escrow Fund with
respect to Company Stockholders other than the Major Stockholders or with
respect to the Company Options, and no shares of Surviving Corporation Common
Stock or options with respect thereto shall be deposited in the Escrow Fund. The
certificates delivered to Major Stockholders pursuant to SECTION 3.6(C) shall
represent the number of shares of Parent Common Stock otherwise issuable to them
in connection with the Merger, less the shares subject to the Escrow Fund, the
number of shares of Parent Common Stock held in the Escrow Fund to be allocated
among the Major Stockholders in proportion to the respective number of shares of
Company Capital Stock held by each them immediately prior to the Effective Time.
3.9 DISSENTERS' RIGHTS.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has exercised
and perfected appraisal rights for such shares in accordance with Delaware Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("DISSENTING SHARES"), shall not be converted into or represent
a right to receive any Merger Consideration, but the holder thereof shall only
be entitled to such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of Section 3.9(a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) his or her appraisal rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive such
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holder's pro rata interest in the Merger Consideration, without interest
thereon, upon surrender of the Certificate representing such shares.
(c) The Company shall give Parent and Sub (i) prompt notice of
any written demand for appraisal received by the Company pursuant to the
applicable provisions of Delaware Law and (ii) the opportunity to participate in
all negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any such demands or offer to settle or settle any such
demands. In the event that Surviving Corporation makes any payment or payments
in respect of Dissenting Shares (a "Dissenting Share Payment") where the sum of
(i) the aggregate amount of all such Dissenting Share Payments minus the
aggregate amount of Parent Share Consideration that otherwise would have been
distributable in respect of such shares (valued at the closing price of Parent
Common Stock on the Effective Date) and (ii) the aggregate fees and expenses
(including reasonable attorneys' fees and expenses) incurred by Surviving
Corporation in connection with calculating, settling or litigating the amount
of, or making, any such payments ("Dissenting Share Expenses"), exceeds ten
million dollars ($10,000,000) (the amount of such excess shall be referred to
herein as an "Excess Dissenting Share Cost"), Parent shall be entitled to
recover fifty percent (50%) of such Excess Dissenting Share Cost as an
indemnifiable Parent Loss (as defined in Section 11) pursuant to the terms of
Section 11. In the event the amount resulting from (i) the excess, if any, of
the aggregate amount of Parent Share Consideration that otherwise would have
been distributable in respect of the Dissenting Shares (valued at the closing
price of Parent Common Stock on the Effective Date) over the aggregate amount of
all such Dissenting Share Payments, minus (ii) all Dissenting Share Expenses,
exceeds ten million dollars ($10,000,000) (a "Dissenting Share Cost Savings"),
Parent shall distribute to the Major Stockholders (other than holders of
Dissenting Shares) fifty percent (50%) of the Dissenting Share Cost Savings.
Such Dissenting Share Cost Savings shall be made in Parent Common Stock on a pro
rata basis (based on the Major Stockholders' respective shares of Company
Capital Stock immediately prior to the Effective Date) and such shares shall be
valued at the closing price of Parent Common Stock on the Closing Date.
3.10 DISSENTING SHARES AFTER PAYMENT OF FAIR VALUE. Dissenting
Shares, if any, after payments of fair value in respect thereto have been made
to dissenting stockholders of the Company pursuant to Delaware Law, shall be
canceled.
3.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the Parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368(a) of the Code and as a transaction described in Section 351 of
the Code, and (ii) qualify for accounting treatment as a purchase. Each Party
has consulted with its own tax advisors and accountants with respect to the tax
and accounting consequences, respectively, of the Merger.
4. SECURITIES ACT COMPLIANCE. The shares of Surviving Corporation
Common Stock issued in connection with the Merger will be subject to a 180-day
market standoff in the initial public offering of the capital stock of the
Surviving Corporation and a right of first refusal on transfer as
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provided in the Certificate of Incorporation or Bylaws of Surviving Corporation.
The Parent Share Consideration issued in connection with the Merger shall be
issued in a transaction exempt from registration by reason of Section 3(a)(10)
of the Securities Act of 1933, as amended (the "SECURITIES ACT"). In the event
that Parent determines that it cannot rely on a 3(a)(10) Permit (as defined
herein), Parent shall as soon as practicable prepare and file with the SEC an S-
4 (as defined herein) as provided in SECTION 8.7 herein for the purpose of
registering the offer and sale of the Parent Share Consideration on the S-4.
5. CONTRIBUTION AND LICENSE OF WIRELESS ASSETS. The Parent Wireless
Assets and any After-Acquired Wireless Assets shall be contributed and licensed
as follows: (a) immediately following the Effective Time, Parent shall
contribute to Surviving Corporation certain of such Parent Wireless Assets and
After-Acquired Wireless Assets pursuant to a contribution agreement in
substantially the form attached hereto as EXHIBIT A (the "CONTRIBUTION
AGREEMENT"), and (b) immediately following the Effective Time, Parent shall
license to the Surviving Corporation the remainder of such Parent Wireless
Assets and After-Acquired Wireless Assets pursuant to the License Agreement. The
Parties intend that the foregoing contribution constitutes a transaction
described in Section 351(a) of the Code.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Parent and Sub as follows.
6.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each other jurisdiction where
such qualification is required. SECTION 6.1 of the Company Disclosure Letter
lists the jurisdictions in which the Company has any employees or office
locations. The Company has all necessary corporate power and authority, and has
all necessary licenses and permits, to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. Section 6.1 of
the Company Disclosure Letter lists the directors and officers of the Company as
of the date hereof. Except as set forth in SECTION 6.1 of the Company Disclosure
Letter, the Company has not conducted any business under or otherwise used, for
any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the names "▇▇▇▇▇▇▇.▇▇▇ inc", "Saraide Inc., "New
World Solutions Inc." or variations of the foregoing. The copies of the
Company's Certificate of Incorporation, Bylaws, minute books, stock transfer
ledger, stock option ledger and warrant ledger which have been delivered to
Parent are accurate, correct and complete.
6.2 AUTHORIZATION. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and all agreements and
instruments delivered pursuant hereto (the "ANCILLARY AGREEMENTS") to which it
is a party, and, subject to receipt of the requisite approvals of its
stockholders, to consummate the Contemplated Transactions and to perform its
obligations hereunder, and no other proceedings on the part of the Company are
necessary to authorize the
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execution, delivery and performance of this Agreement and the Ancillary
Agreements to which the Company is a party. This Agreement and the Ancillary
Agreements to which the Company is a party and the Contemplated Transactions
have been duly approved by the Company's Board of Directors. This Agreement and
the Ancillary Agreements to which the Company is a party constitute the valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms and conditions, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. Other than (i) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws, (ii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware,
and (iii) any applicable filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), the Company need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or Governmental Body in order to consummate the
transactions contemplated by this Agreement.
6.3 CAPITALIZATION.
(a) CAPITAL STOCK. The entire authorized capital stock of the
Company consists of 43,833,333 shares of Company Common Stock, 2,270,858 of
which are issued and outstanding, and 27,166,667 shares of Company Preferred
Stock, 20,728,145 of which are issued and outstanding. All of the issued and
outstanding shares of Company Capital Stock have been duly authorized, are
validly issued, fully paid and non-assessable and were not issued in violation
of any preemptive rights, rights of first refusal, or any similar rights and are
held of record by the respective stockholders as set forth in SECTION 6.3(A) of
the Company Disclosure Letter. All of the outstanding shares of Company Capital
Stock have been offered, issued and sold by the Company in compliance in all
material respects with applicable federal and state securities laws. All shares
of Company Preferred Stock issued and outstanding are convertible into shares of
Company Common Stock at a one-for-one conversion ratio. The Major Stockholders
beneficially own shares of Company Capital Stock which represent in the
aggregate in excess of eighty five percent (85%) of the outstanding number of
shares of Company Capital Stock.
(b) NO OTHER RIGHTS OR AGREEMENTS. SECTION 6.3(B) of the Company
Disclosure Letter lists all of the holders of options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights and other rights
that require the Company to issue, sell or otherwise cause to become outstanding
additional shares of its capital stock, as well as any other agreements or
commitments of any character to which Company is a party obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, shares of
capital stock or other securities of Company or obligating Company to grant,
extend or enter into any subscription, option, warrant, right or convertible or
exchangeable security, right of first refusal, right to receive notification of
the transactions contemplated hereby or other similar agreement or commitment
with respect to the Company, or obligating the Company to make any payments
pursuant to any stock based or stock related plan or award, in each case other
than any rights in favor of Parent or Sub (the
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"STOCK RIGHTS"), and the number and class of shares of Company Capital Stock
subject to such Stock Rights. Except as set forth in SECTION 6.3(B) of the
Company Disclosure Letter or in the Existing Stockholders Agreement, there are
no other outstanding or authorized Stock Rights. There are no outstanding or
authorized stock appreciation, phantom stock or profit participation rights or
similar rights with respect to the Company. Except as set forth in SECTION
6.3(B) of the Company Disclosure Letter, no terms relating to the vesting or
exercisability of any Stock Rights or restricted shares of Company Capital Stock
will be affected by the execution of the Agreement or the consummation of the
transactions contemplated hereby. Except as set forth in SECTION 6.3(B) of the
Company Disclosure Letter, there are no voting trusts, proxies, or similar
agreements or understandings with respect to the voting of the capital stock of
the Company.
6.4 NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement by the Company nor the consummation by the Company of the
Contemplated Transactions will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any Governmental Body or court to which the Company is subject or
any provision of its Certificate of Incorporation or bylaws, or (B) except as
set forth in SECTION 6.4 of the Company Disclosure Letter, conflict with, result
in a breach of, constitute a default under, result in the acceleration of the
Company's obligations under, create in any third party the right to accelerate,
terminate, modify, or cancel, or require any notice or consent under, any
agreement, contract, lease, license, instrument, franchise, permit, mortgage,
indenture or other arrangement to which the Company is a party or by which it is
bound or to which any of its assets are subject (or result in the imposition of
any Security Interest upon any of its assets).
6.5 FEES. The Company has not retained any broker or finder in
connection with any of the Contemplated Transactions, and the Company has not
incurred or agreed to pay, or taken any other action that would entitle any
Person to receive, any brokerage fee, finder's fee or other similar fee or
commission with respect to any of the Contemplated Transactions.
6.6 FINANCIAL STATEMENTS. SECTION 6.6 of the Company Disclosure
Letter contains the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) audited balance sheets and statements of income and cash flows
as of and for the fiscal year ended December 31, 1998 for the Company; and (ii)
an unaudited balance sheet and statements of income and cash flows (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the 10 months ended October 31, 1999
(the "MOST RECENT FISCAL PERIOD END") for the Company. Except as set forth
therein, the Financial Statements (including the notes thereto) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby and present
fairly the financial condition of the Company as of such dates and the results
of operations of the Company for such periods; PROVIDED, HOWEVER, that the Most
Recent Financial Statements lack footnotes and certain other presentation items
and are subject to normal year end adjustments which will not be material
individually or in the aggregate. The books of account of the Company reflect as
of the dates shown thereon all items of income and expenses, and all assets,
liabilities and accruals of the Company required to be reflected therein.
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6.7 SUBSIDIARIES. Except as set forth in SECTION 6.7 of the Company
Disclosure Letter, the Company does not have, and never has had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
6.8 TITLE TO ASSETS. Except as set forth in SECTION 6.8 of the
Company Disclosure Letter, the Company has good and marketable title to, or a
valid leasehold interest in or other rights to, the material properties and
assets (including, without limitation, all Company Intellectual Property) used
by it or shown on the balance sheet contained within the Most Recent Financial
Statements (the "MOST RECENT BALANCE SHEET") or acquired after the date thereof,
free and clear of all Security Interests, except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Most Recent
Balance Sheet. The Company is not as of the date of this Agreement a party to
any existing contracts, agreements, commitments or arrangements with any person
to transfer any of the assets or properties of the Company (or any interest
therein) to any such person, except for this Agreement and related documents.
6.9 EVENTS SUBSEQUENT TO MOST RECENT FISCAL PERIOD END. Since the
Most Recent Fiscal Period End, there has not been any Material Adverse Effect on
the Company. Without limiting the generality of the foregoing, and except as set
forth in Section 6.9 of the Company Disclosure Letter, since the Most Recent
Fiscal Period End:
(a) the Company has not sold, leased, transferred, or assigned
any assets or properties, tangible or intangible, outside the Ordinary Course of
Business;
(b) the Company has not entered into, assumed or become bound
under or obligated by any agreement, contract, lease or commitment or extended
or modified the terms of any such agreement, contract, lease or commitment which
(i) involves the payment of greater than $10,000 per annum or which extends for
more than one (1) year, (ii) involves any payment or obligation to any Affiliate
of the Company, (iii) involves the sale of any material assets, or (iv) involves
any license of any Company Intellectual Property;
(c) no person (including the Company) has accelerated, termi-
nated, made modifications to, or canceled any agreement, contract, lease, or
license to which the Company is a party or by which it is bound and the Company
has not modified, canceled or waived or settled any debts or claims held by it,
outside the Ordinary Course of Business, or waived or settled any rights or
claims of a substantial value, whether or not in the Ordinary Course of
Business;
(d) none of the assets of the Company, tangible or intangible,
has become subject to any Security Interest;
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(e) the Company has not made any capital expenditures except in
the Ordinary Course of Business and not exceeding $10,000 in the aggregate of
all such capital expenditures;
(f) the Company has not made any capital investment in, or any
loan to, any other Person;
(g) the Company has not created, incurred, assumed, prepaid or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness;
(h) other than in the Ordinary Course of Business, the Company
has not granted any license or sublicense of any rights under or with respect to
any Company Intellectual Property;
(i) there has been no change made or authorized in the Certifi-
cate of Incorporation or bylaws of the Company;
(j) there has not been (i) any change in the Company's
authorized or issued capital stock, (ii) any grant of any stock option or right
to purchase shares of capital stock of the Company, (iii) the issuance of any
security convertible into such capital stock, (iv) the grant of any registration
rights with respect to such capital stock, (v) any purchase, redemption,
retirement, or other acquisition by the Company of any shares of any such
capital stock or (vi) any declaration or payment of any dividend or other
distribution or payment in respect of shares of such capital stock;
(k) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property in excess of $10,000
in the aggregate of all such damage, destruction and losses;
(l) the Company has not suffered any repeated, recurring or
prolonged shortage, cessation or interruption of communications, customer
access, supplies or utility services;
(m) the Company has not made any loan to, or entered into any
other transaction with, or paid any bonuses in excess of an aggregate of $10,000
to, any of its Affiliates, directors, officers, or employees or their
Affiliates.
(n) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(o) the Company has not granted any increase in the base compen-
sation of any of its directors or elected officers, or, except in the Ordinary
Course of Business, any of its employees;
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(p) the Company has not adopted, amended, modified, or termi-
nated any bonus, profit-sharing, incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, or employees
(or taken any such action with respect to any other Employee Benefit Plan except
as may be required by applicable law);
(q) other than in the Ordinary Course of Business, the Company
has not made any other change in employment terms for any of its directors or
elected officers, and the Company has not made any other change in employment
terms for any other employees;
(r) the Company has not suffered any material adverse change or
any threat of any material adverse change in its relations with, or any loss or
threat of loss of, any of its major customers, distributors or partners;
(s) the Company has not suffered any material adverse change or
any threat of any material adverse change in its relations with, or any loss or
threat of loss of, any of it major suppliers;
(t) the Company has not received notice and does not have
Knowledge of any actual or threatened labor trouble or strike involving the
Company's employees;
(u) the Company has not changed any of the accounting principles
followed by it or the method of applying such principles;
(v) the Company has not made a change in any of its banking or
safe deposit arrangements;
(w) the Company has not entered into any transaction other than
in the Ordinary Course of Business; and
(x) the Company has not become obligated to take any of the
actions set forth in the foregoing provisions of this SECTION 6.9.
6.10 UNDISCLOSED LIABILITIES. Except as set forth in SECTION 6.10 of
the Company Disclosure Letter, the Company has no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes), except for that which individually or
in the aggregate (i) is reflected on the Most Recent Balance Sheet or (ii) has
arisen after the Most Recent Fiscal Period End in the Ordinary Course of
Business.
6.11 LEGAL COMPLIANCE. Except as set forth in SECTION 6.11 of the
Company Disclosure Letter, the Company has complied with all material applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of
-▇▇-
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, and foreign Governmental Bodies. To the Knowledge of the
Company, no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, notice or inquiry has been filed or commenced against the Company
by any Governmental Body alleging any failure to so comply. The Company has all
licenses, permits, approvals, registrations, qualifications, certificates and
other governmental authorizations that are necessary for the operations of the
Company as they are presently conducted where the failure to hold any such
license or other item would have a Material Adverse Effect on the Company.
6.12 Tax Matters.
(a) For purposes of this Agreement, (i) "TAX" or, collectively,
"TAXES", means (i) any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts;
(ii) any liability for the payment of any amounts of the type described in
clause (i) as a result of being or ceasing to be a member of an affiliated,
consolidated, combined or unitary group for any period (including, without
limitation, any liability under Treas. Reg. Section 1.1502-6 or any comparable
provision of foreign, state or local law); and (iii) any liability for the
payment of any amounts of the type described in clause (i) or (ii) as a result
of any express or implied obligation to indemnify any other Person or as a
result of any obligations under any agreements or arrangements with any other
Person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Except as set forth in SECTION 6.12(b) of the Company Dis-
closure Letter, the Company has filed all reports and returns with respect to
any Taxes ("TAX RETURNS") that it was required to file. All such Tax Returns
were correct and complete in all respects and have been completed in accordance
with applicable law and were prepared in accordance with the applicable
statutes, rules and regulations. No such Tax Returns are currently the subject
of audit or examination nor has the Company been notified of any request for an
audit or examination. All Taxes owed by the Company (whether or not shown on any
Tax Return) were paid in full when due or are being contested in good faith and
are supported by adequate reserves on the Most Recent Financial Statements. The
Company has provided adequate reserves on its Financial Statements for the
payment of any taxes accrued but not yet due and payable. The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return, and the Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(c) To the Knowledge of the Company, there is no dispute, claim
or proposed adjustment concerning any Tax liability of the Company either (A)
claimed or raised by any authority in writing or (B) based upon personal contact
with any agent of such authority. The Company is not a party to nor has it been
notified that it is the subject of any pending, proposed or
-22-
threatened action, investigation, proceeding, audit, claim or assessment by or
before the IRS or any other Governmental Body and no claim for assessment,
deficiency or collection of Taxes, or proposed assessment, deficiency or
collection from the IRS or any other Governmental Body which has not been
satisfied, nor does the Company have any reason to believe that any such notice
will be received in the future. The IRS has never audited any federal income tax
return of the Company. The Company has not filed any requests for rulings with
the Internal Revenue Service. No power of attorney has been granted by the
Company or any of its Affiliates with respect to any matter relating to Taxes of
the Company. There are no tax liens of any kind upon any property or assets of
the Company, except for inchoate liens for taxes not yet due and payable.
(d) Except as set forth in SECTION 6.12(d) of the Company Dis-
closure Letter, the Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. The Company has not made any payments,
is not obligated to make any payments, and is not a Party to any agreement that
under any circumstances could obligate it to make any payments as a result of
the consummation of the Merger that will not be deductible under Section 280G of
the Code. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The Company
is not a party to any tax allocation or sharing agreement. The Company (A) has
not been a member of any affiliated group within the meaning of Section 1504 of
the Code or any similar group defined under a similar provision of state, local,
or foreign law (an "AFFILIATED GROUP") filing a consolidated federal Income Tax
Return (other than a group the common parent of which was the Company) and
(B) has no liability for the taxes of any Person (other than any of the Company)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise. Except
for requests for determination letters described in SECTION 6.24(d), the Company
has not requested or received a ruling from any taxing authority or signed a
closing agreement with any taxing authority. No claim has ever been made by a
taxing authority in a jurisdiction where the Company does not file Tax returns
that the Company is or may be subject to taxation by such jurisdiction.
(e) The unpaid Taxes of the Company (A) did not, as of the Most
Recent Fiscal Period End, exceed by any amount the reserve for Tax liability
(other than any reserve for deferred taxes established to reflect timing
differences between book and tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (B) will not exceed
that reserve as adjusted for operations and transactions through the Closing
Date in accordance with the past custom and practice of the Company in filing
its Tax Returns.
(f) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two years prior
to the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series" of related transactions (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
-23-
6.13 REAL PROPERTIES.
(a) The Company does not currently own and has never previously
owned any real property.
(b) Section 6.13 of the Company Disclosure Letter lists and
describes briefly all real property leased or subleased to the Company. The
Company has delivered to Parent correct and complete copies of the leases and
subleases (as amended to date) listed in SECTION 6.13 of the Company Disclosure
Letter. With respect to each lease and sublease listed in Section 6.13 of the
Company Disclosure Letter, and except as otherwise provided in SECTION 6.13 of
the Company Disclosure Letter:
(i) the lease or sublease is legal, valid, binding, enforce-
able, and in full force and effect in all respects against the Company and, to
the Company's Knowledge, the other parties thereto;
(ii) neither the Company nor, to the Company's Knowledge,
any other party thereto is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(iii) neither the Company nor, to the Company's Knowledge,
any other party thereto has repudiated any provision thereof;
(iv) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease: and
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
6.14 INTELLECTUAL PROPERTY.
(a) SECTION 6.14-(a) of the Company Disclosure Letter lists all
Registered Intellectual Property Rights owned by, filed in the name of, or
applied for, by the Company (the "COMPANY REGISTERED INTELLECTUAL PROPERTY
RIGHTS"), and to the Company's Knowledge, lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property Rights or Company Intellectual
Property.
(b) Eachitem of Company Registered Intellectual Property Rights
is valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property Rights
have been paid and all necessary documents and certificates in connection with
such Company Registered Intellectual Property Rights have been filed
-24-
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property Rights. Except as set forth on
SECTION 6.14(b) of the Company Disclosure Letter, there are no actions that must
be taken by the Company within one hundred twenty (120) days of the Closing
Date, including the payment of any registration, maintenance or renewal fees or
the filing of any responses to PTO office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting or
preserving or renewing any Registered Intellectual Property Rights. Except as
set forth in SECTION 6.14(b) of the Company Disclosure Letter, in each case in
which the Company has acquired any Technology or Intellectual Property Right
from any Person, the Company or such Subsidiary has obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such
Technology and the associated Intellectual Property Rights (including the right
to seek past and future damages with respect thereto) to the Company. To the
maximum extent provided for by, and in accordance with, applicable laws and
regulations, the Company has recorded each such assignment of a Registered
Intellectual Property Right assigned to the Company with the relevant
Governmental Body, including the PTO, the U.S. Copyright Office, or their
respective equivalents in any relevant foreign jurisdiction, as the case may be.
Except as set forth on SECTION 6.14(b) of the Company Disclosure Letter, the
Company has not claimed a particular status, including "Small Business Status,"
in the application for any Intellectual Property Rights, which claim of status
was not at the time made, or which has since become, inaccurate or false or that
will no longer be true and accurate as a result of the Closing.
(c) The Company has no Knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
Without limiting the foregoing, the Company knows of no information, materials,
facts, or circumstances, including any information or fact that would constitute
prior art, that would render any of the Company Registered Intellectual Property
Rights invalid or unenforceable, or would adversely affect any pending
application for any Company Registered Intellectual Property Right and the
Company has not misrepresented, or failed to disclose, and has no Knowledge of
any misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise adversely affect the validity or enforceability of any Company
Registered Intellectual Property Right.
(d) Except as set forth in SECTION 6.14(d) of the Company Dis-
closure Letter: each item of Company Intellectual Property is free and clear of
any Security Interests except for non-exclusive licenses granted to end-user
customers in the Ordinary Course of Business; and the Company is the exclusive
owner or exclusive licensee of all Company Intellectual Property. Without
limiting the foregoing: (i) the Company is the exclusive owner of all Trademarks
used in connection with the operation or conduct of the business of the Company,
including the sale, licensing, distribution or provision of any products or
services by the Company; (ii) the Company owns exclusively, and has good title
to, all Copyrighted Works that are products of the Company or which the Company
otherwise purports to own; and (iii) to the extent that any Patents would
otherwise be
-25-
infringed by any product or services of the Company, such Patents constitute
Company Intellectual Property.
(e) Except as set forth in SECTION 6.14(d) of the Company Dis-
closure Letter, all Company Intellectual Property will be fully transferable,
alienable or licensable by Surviving Corporation and/or Parent without
restriction and without payment of any kind to any third party.
(f) Except as set forth in SECTION 6.14(f) of the Company Dis-
closure Letter, to the extent that any Company Technology has been developed or
created by a third party for the Company, the Company has a written agreement
with such third party with respect thereto and the Company thereby either
(i) has obtained ownership of, and is the exclusive owner of, or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted and as proposed to be conducted) to all such third party's
Intellectual Property Rights in such Technology by operation of law or by valid
assignment, to the fullest extent it is legally possible to do so.
(g) Except as set forth on SECTION 6.14(g) of the Company Dis-
closure Letter and with exception of "shrink-wrap" or similar widely-available
commercial end-user licenses, all Technology used in or necessary to the conduct
of Company's business as presently conducted or currently contemplated to be
conducted by the Company was written and created solely by either (i) employees
of the Company acting within the scope of their employment or (ii) by third
parties who have validly and irrevocably assigned all of their rights, including
Intellectual Property Rights therein, to the Company, and no third party owns or
has any rights to any of the Company Intellectual Property.
(h) All employees of the Company have entered into a valid and
binding written agreement with the Company sufficient to vest title in the
Company of all Technology, including all accompanying Intellectual Property
Rights, created by such employee in the scope of his or her employment with the
Company.
(i) The Company has taken all steps that are reasonably required
to protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other Person to the Company. Without limiting the
foregoing, the Company has, and enforces, a policy requiring each employee,
consultant and contractor to execute a proprietary information, confidentiality
and assignment agreement, copies of all of which have been delivered to Parent,
and, except as set forth in SECTION 6.14(i) of the Company Disclosure Letter,
all current and former employees, consultants and contractors of the Company
have executed such an agreement.
(j) Except as set forth on SECTION 6.14(j) of the Company Dis-
closure Letter, no Person who has licensed Technology or Intellectual Property
Rights to the Company has ownership rights or license rights to improvements
made by the Company in such Technology or Intellectual Property Rights.
-26-
(k) Except as set forth on SECTION 6.14(k) of the Company Dis-
closure Letter, the Company has not transferred ownership of, or granted any
exclusive license of or right to use, or authorized the retention of any
exclusive rights to use or joint ownership of, any Technology or Intellectual
Property Right that is or was Company Intellectual Property, to any other
Person.
(l) Other than inbound "shrink-wrap" and similar publicly avail-
able commercial binary code end-user licenses and outbound "shrink-wrap"
licenses in the form set forth on SECTION 6.14(l) of the Company Disclosure
Letter, the contracts, licenses and agreements listed in SECTION 6.14(l) of the
Company Disclosure Letter lists all contracts, licenses and agreements to which
the Company is a party with respect to any Technology or Intellectual Property
Rights. The Company is not in breach of nor has the Company failed to perform
under, any of the foregoing contracts, licenses or agreements and, to the
Company's Knowledge, no other party to any such contract, license or agreement
is in breach thereof or has failed to perform thereunder.
(m) SECTION 6.14(m) of the Company Disclosure Letter lists all
material contracts, licenses and agreements between the Company and any other
Person wherein or whereby the Company has agreed to, or assumed, any obligation
or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise
assume or incur any obligation or liability or provide a right of rescission
with respect to the infringement or misappropriation by the Company or such
other Person of the Intellectual Property Rights of any Person other than the
Company.
(n) To the Knowledge of the Company, there are no contracts,
licenses or agreements between the Company and any other Person with respect to
Company Intellectual Property under which there is any dispute regarding the
scope of such agreement, or performance under such agreement, including with
respect to any payments to be made or received by the Company thereunder.
(o) The operation of the business of the Company as it currently
is conducted or is contemplated to be conducted by the Company, including but
not limited to the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company does not and will not and will not when conducted by
Surviving Corporation in substantially the same manner following the Closing,
infringe or misappropriate any Intellectual Property Right of any Person,
violate any right of any Person (including any right to privacy or publicity) or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Company has not received notice from any Person claiming
that such operation or any act, product, technology or service (including
products, technology or services currently under development) of the Company
infringes or misappropriates any Intellectual Property Right of any Person or
constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor does the Company have Knowledge of any basis therefor).
-27-
(p) To the Company's Knowledge, no Person is infringing or mis-
appropriating any Company Intellectual Property Right.
(q) No Company Intellectual Property or service of the Company
is subject to any proceeding or outstanding decree, order, judgment or
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(r) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company, or (iii) conduct
or statement of the Company constitutes obscene material, a defamatory statement
or material, false advertising or otherwise violates in any material respect any
law or regulation.
(s) Except as set forth on SECTION 6.14(s) of the Company Dis-
closure Letter, the Company Intellectual Property constitutes all the Technology
and Intellectual Property Rights used in and/or necessary to the conduct of the
business of the Company as it currently is conducted, and, to the Knowledge of
the Company, as it is currently planned or contemplated to be conducted by the
Company, including, without limitation, the design, development, manufacture,
use, import and sale of products, technology and performance of services
(including products, technology or services currently under development).
(t) Except as set forth on SECTION 6.14(t) of the Company Dis-
closure Letter, neither this Agreement nor the transactions contemplated by this
Agreement, will result in (i) either Parent's or the Surviving Corporation's
granting to any third party any right to or with respect to any Technology or
Intellectual Property Right owned by, or licensed to, either of them, (ii)
either Parent's or the Surviving Corporation's being bound by, or subject to,
any non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) either Parent s or the Surviving Corporation's
being obligated to pay any royalties or other amounts to any third party in
excess of those payable by Parent or Surviving Corporation, respectively, prior
to the Closing.
(u) There are no royalties, fees, honoraria or other payments
payable by the Company to any Person by reason of the ownership, development,
use, license, sale or disposition of the Company Intellectual Property, other
than salaries and sales commissions paid to employees and sales agents in the
Ordinary Course of Business.
(v) Except as set forth in SECTION 6.14(v) of the Company Dis-
closure Letter, all of the Company's products (including products currently
under development): (i) will record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000, and will 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, 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
-28-
COMPLIANT"); and (ii) will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
Except as set forth in SECTION 6.14(v) of the Company Disclosure Letter, all of
the Company's Information Technology (as defined below) is Year 2000 Compliant,
and will not cause an interruption in the ongoing operations of the Company's
business on or after January 1, 2000. For purposes of the foregoing, the term
"INFORMATION TECHNOLOGY" means and include all software, hardware, firmware,
telecommunications systems, network systems, embedded systems and other systems,
components and/or services (other than general utility services including gas,
electric, telephone and postal) that are owned or used by the Company in the
conduct of its business, or purchased by the Company from third party suppliers.
6.15 TANGIBLE ASSETS. The buildings, equipment, and other tangible
assets that the Company owns and leases have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business.
6.16 CONTRACTS. SECTION 6.16 of the Company Disclosure Letter lists
the following agreements, commitments and other arrangements to which the Com-
pany is a party or by which the Company or any of its assets is bound as of the
date of this Agreement:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person that involves aggregate annual
payments of more than $10,000;
(b) any agreement under which the consequences of a default or
termination would have a Material Adverse Effect on the Company;
(c) any agreement (or group of related agreements) for the pur-
chase or sale of commodities, supplies, products, or other personal property, or
for the furnishing or receipt of services, the performance of which will extend
over a period of more than one year or involve consideration in excess of
$10,000;
(d) any agreement for the purchase of supplies, components,
products or services from single source suppliers, custom manufacturers or
subcontractors that involves aggregate annual payments of more than $10,000;
(e) any agreement to form or enter into a partnership or joint
venture;
(f) any agreement (or group of related agreements) under which
the Company has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or any capitalized lease obligation in excess of $10,000 or under
which a Security Interest has been imposed on any of the Company's assets,
tangible or intangible;
-29-
(g) any agreement to which the Company is a party and which con-
tains covenants of the Company not to compete or engage in any line of business,
in any geographic area or with any person or covenants of any other Person not
to compete with the Company or engage in any line of business of the Company;
(h) any agreement with any Company Stockholder or any of such
stockholder's Affiliates (other than the Company) or with any Affiliate of the
Company;
(i) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees;
(j) any collective bargaining agreement;
(k) any agreement for the employment (other than employment
agreements that are terminable at will by the Company without payment of any
penalty or severance benefit) of any individual on a full-time, part-time,
consulting, or other basis;
(l) any executory agreement under which the Company has advanced
or loaned any amount to any of its directors, officers, and employees;
(m) any advertising services, e-commerce or other agreement
involving the promotion of products and services of third parties by the
Company;
(n) any executory agreement pursuant to which the Company is
obligated to provide maintenance, support or training for its services or
products;
(o) any revenue or profit participation agreement which involves
aggregate annual payments of more than $10,000;
(p) any license, agreement or other permission which the Company
or any Affiliate of the Company has granted to any third party with respect to
any of the Intellectual Property used in the Company's business;
(q) any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contains an escalation clause
or that obligates the Company to purchase all or substantially all of its
requirements of a particular product or service from a supplier or to make
periodic minimum purchases of a particular product or service from a supplier,
which is not terminable on not more than 30 days notice (without penalty or
premium);
(r) any agreement of surety, guarantee or indemnification, other
than agreements in the Ordinary Course of Business with respect to obligations
in an aggregate amount not in excess of $10,000;
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(s) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;
(t) any agreement obligating the Company to deliver maintenance
services or future product enhancements or containing a "most favored nation"
pricing clause;
(u) any agreement obligating the Company to provide source code
to any third party for any Company Intellectual Property;
(v) any agreement granting an exclusive license to any Company
Intellectual Property or granting any exclusive distribution rights;
(w) any agreement relating to the acquisition by the Company of
any operating business or the capital stock of any other Person;
(x) any agreement requiring the payment to any Person of a bro-
kerage or sales commission or a finder's or referral fee (other than
arrangements to pay commissions or fees to employees in the Ordinary Course of
Business); and
(y) any other agreement (or group of related agreements) the
performance of which involves annual consideration in excess of $10,000 or which
is expected to continue for more than one (1) year from the date hereof.
The Company has delivered or made available to Parent a correct and complete
copy of each written agreement (as amended to date) listed in SECTION 6.16 of
the Company Disclosure Letter and a written summary setting forth the terms and
conditions of each oral agreement referred to in SECTION 6.16 of the Company
Disclosure Letter. With respect to each such agreement and except as set forth
in SECTION 6.16 of the Company Disclosure Letter: (A) the agreement, with
respect to the Company and, to the Company's Knowledge, all other parties
thereto, is legal, valid, binding, enforceable, and in full force and effect in
all respects; (B) neither the Company nor, to the Company's Knowledge, any other
party is in breach or default, and no event has occurred, which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; (C) no party has repudiated
any provision of the agreement; and (D) the Company does not have any reason to
believe that the service called for thereunder cannot be supplied in accordance
with its terms and without resulting in a material loss to the Company. Section
6.16 of the Company Disclosure Letter lists all necessary consents, waivers and
approvals under any of the Company's or any of its subsidiaries' agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the Contemplated Transactions. Following the Effective Time, the
Company will be permitted to exercise all of the Company's rights under such
agreements to the same extent the Company would have been able to had the Merger
not occurred and without the payment of any additional material amounts or
material consideration other than ongoing fees, royalties or payments which the
Company would otherwise be required to pay.
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6.17 NOTES AND ACCOUNTS RECEIVABLE. Except as set forth in SECTION
6.17 of the Company Disclosure Letter, all notes and accounts receivable of the
Company, are valid receivables subject to no setoffs, defenses or counterclaims,
are current and, to the Company's Knowledge, are collectible subject in each
case only to the reserve for bad debts set forth in the Most Recent Balance
Sheet as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company.
6.18 POWER OF ATTORNEY. Except as set forth in SECTION 6.18 of the
Company Disclosure Letter, there are no outstanding powers of attorney executed
on behalf of the Company.
6.19 INSURANCE. The Company has delivered to Parent copies of each
insurance policy (including policies providing property, casualty, liability,
and workers compensation coverage and bond and surety arrangements) with respect
to which the Company is a party, a named insured, or otherwise the beneficiary
of coverage. With respect to each such insurance policy: (A) the policy is
legal, valid, binding, enforceable, and in full force and effect (and there has
been no notice of cancellation or nonrenewal of the policy received);
(B) neither the Company nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; (C) no party to the policy has repudiated any
provision thereof; and (D) there has been no failure to give any notice or
present any claim under the policy in due and timely fashion. Section 6.19 of
the Company Disclosure Letter describes any self-insurance arrangements
presently maintained by the Company.
6.20 LITIGATION. SECTION 6.20 of the Company Disclosure Letter sets
forth each instance in which the Company (or any of its assets) (i)is subject
(ii)is or has been since its inception a party, or, to the Knowledge of the
Company, is threatened to be made a party, to any action, suit, proceeding,
hearing, arbitration, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. To the Knowledge of the Company, there
are no facts or circumstances which would form the basis of any claim against
the Company.
6.21 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in
SECTION6. 21 of the Company Disclosure Letter, there is no agreement (not to
compete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or which is otherwise binding upon the Company
which has the effect of prohibiting or restricting any business or any
acquisition of property (tangible or intangible) by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its technology (including any Company Intellectual Property)
or products to or providing services to, customers or potential customers or any
class of customers, in any geographic area, or in any segment of the market.
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6.22 PRODUCT WARRANTY. Except as set forth in SECTION 6.22 of the
Company Disclosure Letter, the technologies or products licensed, sold, leased,
and delivered and all services provided by the Company conform in all material
respects with all applicable contractual commitments and all express and implied
warranties, and the Company has no liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due)
for replacement or modification thereof or other damages in connection
therewith, other than in the Ordinary Course of Business in an aggregate amount
not exceeding $10,000.
6.23 EMPLOYEES. Except as set forth in SECTION 6.23 of the Company
Disclosure Letter, no executive, key employee, or significant group of employees
has advised any executive officer of the Company that he, she or they plan to
terminate employment with the Company during the next 12 months. The Company is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strike or grievance, claim of unfair labor practices, or other
collective bargaining dispute. To the Company's Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
6.24 EMPLOYEE MATTERS AND BENEFITS.
(a) DEFINITIONS. With the exception of the definition of
AFFILIATE set forth in SECTION6.24(a)(i) (which definition shall apply only to
this Section6.24), for purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) AFFILIATE shall mean any other Person under common
control with the Company within the meaning of Section414(b), (c), (m) or (o) of
the Code and the regulations issued thereunder;
(ii) COMPANY EMPLOYEE PLAN shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, funded or unfunded, including without
limitation, each employee benefit plan, within the meaning of Section3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any Employee,
or with respect to which the Company or any Affiliate has or would reasonably be
expected to have any liability or obligation;
(iii) COBRA shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) DOL shall mean the Department of Labor;
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(v) EMPLOYEE shall mean any current or former employee,
consultant or director of the Company or any Affiliate;
(vi) EMPLOYEE AGREEMENT shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between the
Company or any Affiliate and any Employee;
(vii) ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) FMLA shall mean the Family Medical Leave Act of
1993, as amended;
(ix) INTERNATIONAL EMPLOYEE PLAN shall mean each Company
Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services primarily outside the United States, but excluding any plan
that is statutorily mandated by the local jurisdictions;
(x) IRS shall mean the Internal Revenue Service;
(xi) MULTIEMPLOYER PLAN shall mean any PENSION PLAN (as
defined below) which is a multiemployer plan, as defined in Section3(37) of
ERISA;
(xii) PBGC shall mean the Pension Benefit Guaranty Corpo-
ration; and
(xiii) PENSION PLAN shall mean each Company Employee Plan
which is an employee pension benefit plan, within the meaning of Section3(2) of
ERISA.
(b) SCHEDULE. SECTION 6.24(b) of the Company Disclosure Letter
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan or Employee Agreement, to modify any
Company Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law), or to enter into any Company Employee Plan
or Employee Agreement.
(c) DOCUMENTS. The Company has provided to Parent: (i)correct
and complete copies of all documents embodying each Company Employee Plan and
each Employee Agreement including (without limitation) all amendments thereto
and all related trust documents; (ii)the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii)the three (3)
most recent annual reports (Form Series5500 and all schedules and financial
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statements attached thereto), if any, required under ERISA or the Code in
connection with each Company Employee Plan; (iv)if the Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee Plan
assets; (v)the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter; (vii)
all material written agreements and contracts relating to each Company Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii)all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plans which would result in any material liability
to the Company, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules; (ix) all correspondence to or from any Governmental Body
relating to any Company Employee Plan; (x) all COBRA forms and related notices;
(xi) all policies pertaining to fiduciary liability insurance covering the
fiduciaries for each Company Employee Plan; (xii) all discrimination tests for
each Company Employee Plan for the most recent plan year; and (xiii) all
registration statements, annual reports (Form 11-K and all attachments thereto)
and prospectuses prepared in connection with each Company Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on SECTION
6.24(d) of the Company Disclosure Letter, (i)the Company has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no Knowledge of any default or violation by
any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code; (ii) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination, opinion, notification or advisory letter
from the IRS with respect to each such Plan 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 remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii)neither the
Company nor any Affiliates, and to the Company's Knowledge no other party in
interest has entered into a prohibited transaction, within the meaning of
Section4975 of the Code or Sections406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Company
Employee Plan; (iv)there are no actions, suits or claims pending, or, to the
Knowledge of the Company, threatened or reasonably anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; (v)each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, Company or any of its
Affiliates (other than
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ordinary administration expenses and other ordinary and customary liabilities);
(vi) there are no audits, inquiries or proceedings pending or, to the Knowledge
of the Company or any Affiliates, threatened by the IRS or DOL with respect to
any Company Employee Plan; and (vii) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) PENSION PLAN. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) MULTIEMPLOYER PLANS. At no time has the Company or any
Affiliate contributed to or been obligated to contribute to any Multiemployer
Plan.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
SECTION 6.24(g) of the Company Disclosure Letter, no Company Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
Person for any reason, except as may be required by COBRA or other applicable
statute, and the Company has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) or any other Person that such Employee(s) or other Person would be
provided with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute or which are paid for
entirely by the employee.
(h) COBRA etc. Neither the Company nor any Affiliate has, prior
to the Effective Time and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Womens Heath and Cancer Rights Act, the requirements of the
Newborns and Mothers Health Protection Act of 1996, or any similar provisions of
state law applicable to its Employees.
(i) EFFECT OF TRANSACTION. Except as set forth on SECTION
6.24(i) of the Company Disclosure Letter, the execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events occurring on or
prior to the Effective Time) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or would reasonably be
expected to result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
(i) Except as set forth on SECTION6. 24(i) of the Company
Disclosure Letter, no payment or benefit which will or may be made by the
Company or its Affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement or
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otherwise will be characterized as a parachute payment, within the meaning of
Section 280G(b)(2) of the Code (but without regard to clause(ii) thereof).
(j) EMPLOYMENT MATTERS. The Company: (i)is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii)has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii)to the Knowledge of the Company is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; and (iv)is not liable for any payment to any trust or other
fund governed by or maintained by or on behalf of any Governmental Body, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending or (to the Knowledge of the Company) threatened claims or actions
against the Company under any workers compensation policy or long-term
disability policy.
(k) LABOR. No work stoppage or labor strike against the Company
is pending, threatened or reasonably anticipated. The Company does not know of
any activities or proceedings of any labor union to organize any Employees.
Except as set forth in Section6.24(k) of the Company Disclosure Letter, there
are no actions, suits, claims, labor disputes or grievances pending, or, to the
Knowledge of the Company, threatened. The Company does not have Knowledge of any
activities or proceedings of any labor union to organize any Employees. There is
no litigation pending, or to the Knowledge of the Company, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, is reasonably expected to result in any
material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. Except as set forth in Section6.24(k) of the
Company Disclosure Letter, the Company is not presently, nor has it been in the
past, a Party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by the Company.
(l) INTERNATIONAL EMPLOYEE PLAN. Except as set forth in Section
6.24(l) of the Company Disclosure Letter, the Company does not maintain,
nor has it ever had the obligation to, maintain, establish, sponsor, participate
in, or contribute to any International Employee Plan.
(m) H-1B VISA. Except as set forth in SECTION 6.24(m) of the
Company Disclosure Letter, each Company employee who is reliant on an H-1B visa
to work in the United States has such visa in good standing.
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(n) RESTRICTED STOCK AGREEMENT. Each officer, director and
employee of the Company who holds Company Capital Stock has executed a
restricted stock agreement in substantially the form attached hereto as set
forth on SCHEDULE 6.24(n)(i) hereto, and such shares of such individuals are
subject to vesting in the amounts set forth on SCHEDULE 6.24(n)(ii) hereto.
6.25 GUARANTIES. Except as set forth in SECTION 6.25 of the Company
Disclosure Letter, the Company is not a guarantor or otherwise responsible for
any liability or obligation (including indebtedness) of any other Person.
6.26 ENVIRONMENT, HEALTH, AND SAFETY.
(a) For purposes of this Agreement, the following terms have the
following meanings:
ENVIRONMENTAL, HEALTH, AND SAFETY LAWS means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, plans, injunctions, judgments, decrees, requirements or
rulings now or hereafter in effect, imposed by any Governmental Body regulating,
relating to, or imposing liability or standards of conduct relating to pollution
or protection of the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), public health
and safety, or employee health and safety, concerning any Hazardous Materials or
Extremely Hazardous Substances, as such terms are defined herein, or otherwise
regulated, under any Environmental, Health and Safety Laws. The term
ENVIRONMENTAL, HEALTH AND SAFETY LAWS shall include, without limitation, the
Clean Water Act (also known as the Federal Water Pollution Control Act), 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section2601 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et
seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986,
Public Law 99-4, 99, 100 Stat. 1613, the Emergency Planning and Community Right
to Know Act, 42 U.S.C. Section 11001 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., and the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq., all as amended, together with any
amendments thereto, regulations promulgated thereunder and all substitutions
thereof.
EXTREMELY HAZARDOUS SUBSTANCE means a substance on the list
described in Section302 (42 U.S.C. Section11002(a)(2)) of the Emergency Planning
and Community Right to Know Act, ▇▇ ▇.▇.▇. ▇▇▇▇▇▇▇▇▇▇▇▇ et seq., as amended.
HAZARDOUS MATERIAL means any material or substance that,
whether by its nature or use, is now or hereafter defined as a pollutant,
dangerous substance, toxic substance, hazardous waste, hazardous material,
hazardous substance or contaminant under any Environmental, Health and Safety
Laws, or which is toxic, explosive, corrosive, flammable, infectious,
radioactive,
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carcinogenic, mutagenic or otherwise hazardous and which is now or hereafter
regulated under any Environmental, Health and Safety Laws, or which is or
contains petroleum, gasoline, diesel fuel or other petroleum hydrocarbon
product.
(b) Each of the Company and its predecessors and Affiliates (A)
has complied with the Environmental, Health, and Safety Laws (and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
directive or notice has been filed or commenced against any of them alleging any
such failure to comply), (B)has obtained and been in substantial compliance with
all of the terms and conditions of all permits, licenses, certificates and other
authorizations which are required under the Environmental, Health, and Safety
Laws, and (C)has complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in the Environmental, Health, and
Safety Laws.
(c) The Company has no liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), and none of the Company and its predecessors and Affiliates has handled or
disposed of any Hazardous Materials or Extremely Hazardous Substances, arranged
for the disposal of any Hazardous Materials or Extremely Hazardous Substances,
exposed any employee or other individual to any Hazardous Materials or Extremely
Hazardous Substances, or owned or operated any property or facility in any
manner that could give rise to any liability, for damage to any site, location,
surface water, groundwater, land surface or subsurface strata, for any illness
of or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(d) No Extremely Hazardous Substances are currently, or have
been, located at, on, in, under or about all properties and equipment used in
the business of the Company and its predecessors and Affiliates.
(e) No Hazardous Materials are currently located at, on, in,
under or about all properties and equipment used in the business of the Company
and its predecessors and Affiliates in a manner which violates any
Environmental, Health and Safety Laws or which requires cleanup or corrective
action of any kind under any Environmental, Health and Safety Laws.
6.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as set
forth in SECTION 6.27 of the Company Disclosure Letter, to the Company's
Knowledge, as of the date of this Agreement neither the stockholders of the
Company nor any director or officer of the Company, nor any member of their
immediate families, nor any Affiliate of any of the foregoing, owns, directly or
indirectly, or has an ownership interest in (a)any business (corporate or
otherwise) which is a party to, or in any property which is the subject of, any
business arrangement or relationship of any kind with the Company, or (b)any
business (corporate or otherwise) which conducts the same business as, or a
business similar to, that conducted by the Company.
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6.28 NO ADVERSE DEVELOPMENTS. There is no development (exclusive of
general economic factors affecting business in general or the Internet or
wireless services sector in particular) or, to the Company's Knowledge,
threatened development affecting the Company (or affecting the Company's
relationships with its customers, suppliers, employees, and with other Persons
that (i)is having or is reasonably likely to have a Material Adverse Effect on
the Company, or (ii)would prevent the Surviving Corporation from conducting its
business following the Closing in the manner in which it was conducted by the
Company prior to the Closing.
6.29 FULL DISCLOSURE. The representations and warranties in this
Section6 (as qualified by the Company Disclosure Letter and including any
document referenced in the Company Disclosure Letter), when taken as a whole, do
not contain any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements herein , in light of the circumstances in
which they were made, not misleading. The Company has delivered to Parent true,
correct and complete copies of all documents, including all amendments,
supplements and modifications thereof or waivers currently in effect thereunder,
described in the Company Disclosure Letter.
7. REPRESENTATIONS AND WARRANTIES OF THE PARENT ENTITIES. The Parent
Entities jointly and severally represent and warrant to the Company (and in
respect of SECTIONS 7.7 to 7.15 provided herein, directly to the Company
Stockholders) as follows.
7.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Parent
Entities are corporations duly organized, validly existing, and in good standing
under the laws of the State of Delaware. The Parent Entities are duly authorized
to conduct business and are in good standing under the laws of each other
jurisdiction where such qualification is required and in which the failure to so
qualify is reasonably likely to have a Material Adverse Effect on the Parent
Entities as a whole or on the Parent Wireless Assets. The Parent Entities have
full corporate power and authority, and have all necessary licenses and permits,
to carry on the businesses in which they are engaged and to own and use the
properties owned and used by them. Parent has not conducted any business
utilizing the Parent Wireless Assets under or otherwise used, for any purpose
relating to the Parent Wireless Assets or in any jurisdiction, any fictitious
name, assumed name, trade name or other name, other than the name ▇▇▇▇▇▇▇▇▇.▇▇▇
or variations of such name.
7.2 AUTHORIZATION. The Parent Entities have full power and autho-
rity to execute and deliver this Agreement and the Ancillary Agreements to which
they are parties, and to consummate the transactions contemplated hereunder and
to perform their obligations hereunder, and no other proceedings on the part of
the Parent Entities are necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which they are
parties. This Agreement and the Ancillary Agreements to which they are parties
and the transactions contemplated hereby and thereby have been approved by each
of the Parent Entities Boards of Directors. The consummation of the Contemplated
Transactions does not require the approval or consent of the stockholders of
Parent. This Agreement and the Ancillary Agreements to which they are parties
constitute the valid and legally binding obligations of the Parent Entities,
enforceable
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against the Parent Entities in accordance with their respective terms and
conditions, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. Other than (i)such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (ii)the filing of the Merger Certificate with the Secretary of
State of the State of Delaware, and (iii)any applicable filings required under
the HSR Act, the Parent Entities do not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement.
7.3 CAPITALIZATION.
(a) Except as set forth in Section 7.3 of the Parent Disclosure
Letter, as of November 30, 1999, the authorized capital stock of Parent
consisted of (i)15,000,000 shares of Preferred Stock, $0.0001 par value, none of
which was issued or outstanding, and (ii)200,000,000 shares of Common Stock,
$0.0001 par value, of which 49,565,672shares were issued and outstanding. The
authorized capital stock of Sub consists of 1,000 shares of Common Stock, 100
shares of which, as of the date hereof, are issued and outstanding and all of
which are held by Parent. All such outstanding shares of the Parent Entities
have been duly authorized, and all such issued and outstanding shares have been
validly issued, are fully paid and nonassessable. Except as set forth in
Section7.3 of the Parent Disclosure Letter or as described in the Parent SEC
Reports, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Parent Entities or obligating the Parent Entities to issue
or sell any shares of capital stock of, or other equity interests in, any of the
Parent Entities.
(b) The shares of Parent Common Stock to be issued pursuant to
SECTION3.1 of this Agreement are duly authorized and reserved for issuance, and
upon issuance thereof in accordance with this Agreement and the Certificate of
Merger will be validly issued, fully paid and nonassessable.
7.4 NONCONTRAVENTION AS TO THE MERGER. Neither the execution and the
delivery of this Agreement nor the consummation of the Merger, will (A)violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Parent or Sub is subject or any provision of their
respective charters or bylaws, or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of,create in any Party
the right to accelerate, terminate, modify, or cancel, or require any notice
under, any agreement, contract, lease, license, instrument, or other arrangement
to which any of the Parent Entities is a party or by which any of them is bound
or to which any of their assets is subject which has been filed as an exhibit to
the Parent SEC Reports.
7.5 SEC FILINGS. Parent has filed all forms, reports and documents
(and amendments thereto) required to be filed with the SEC since December31,
1998 (collectively, the
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PARENT SEC REPORTS), and has heretofore made available to the Company, in the
form filed with the SEC, (i)its Annual Report on Form10-K for the fiscal year
ended December31, 1998, (ii)its Quarterly Report on Form10-Q for the periods
ended March31, 1999, June 30, 1999 and September30, 1999, (iii)the proxy
statement relating to Parents annual meeting of stockholders held on May24,
1999, and (iv) its Current Reports on Form 8-K dated July 15, 1999, August 16,
1999 and October 14, 1999. The Parent SEC Reports (i)were prepared in accordance
with the requirements of the Securities Exchange Act of 1934, as amended, and
(ii)did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements contained in the Parent SEC Reports: (i)
complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (ii) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered (except as may be indicated in the notes to such
financial statements and, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC, and except that unaudited financial statements are subject
to year-end audit adjustments); and (iii) fairly presented the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the consolidated results of operations, stockholders equity and cash
flows of Parent and its subsidiaries for the periods covered thereby.
7.6 BROKERS FEES. Neither Parent nor Sub has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to any of the Contemplated Transactions.
7.7 NONCONTRAVENTION AS TO THE PARENT WIRELESS ASSETS. Except as set
forth on SECTION 7.7 of the Parent Disclosure Letter, neither the execution and
the delivery of the Contribution Agreement by Parent or Sub, nor the
contribution and license of the Parent Wireless Assets by Parent pursuant to the
Contribution Agreement and the License Agreement, respectively, will (A)violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Parent or Sub is subject or any provision of its
Certificate of Incorporation or bylaws, or (B)conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under, any of the Contracts contributed pursuant to the
Contribution Agreement or other arrangement to which or by which any of the
Parent Wireless Assets are bound or to which any of the Parent Wireless Assets
are otherwise subject (or result in the imposition of any Security Interest upon
any such assets) .
7.8 TITLE TO ASSETS. Except as set forth in SECTION 7.8 of the
Parent Disclosure Letter, Parent has good and marketable title to, or a valid
leasehold interest in, the Parent Wireless Assets, free and clear of all
Security Interests whether absolute, contingent or otherwise, except for
properties and assets disposed of in the Ordinary Course of Business since the
date hereof.
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7.9 UNDISCLOSED LIABILITIES. Except as set forth in SECTION 7.9 of
the Parent Disclosure Letter, there is no liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type (whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes) associated with the Parent Wireless Assets,
except for that which individually or in the aggregate (i)is a liability which
is expressly contemplated pursuant to the terms of the contracts included among
the Parent Wireless Assets, as set forth in the Contribution Agreement, or
(ii)will have arisen after the date hereof in the Ordinary Course of Business.
7.10 CONTRACTS. Parent has delivered to the Company a correct and
complete copy of each written agreement (as amended to date) listed in EXHIBIT A
TO THE CONTRIBUTION AGREEMENT. With respect to each such agreement and except as
set forth in Section 7.10 of the Parent Disclosure Letter: (A)the agreement,
with respect to Parent and, to Parent's Knowledge, all other parties thereto, is
legal, valid, binding, enforceable, and in full force and effect in all
respects, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies; (B) neither Parent
nor, to Parents Knowledge, any other party is in material breach or default, and
no event has occurred, which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C)no party has repudiated any provision
of the agreement.
7.11 LITIGATION. SECTION 7.11 of the Parent Disclosure Letter sets
forth each instance in which Parent (with respect to any of the contracts
included in the Parent Wireless Assets) (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii)is or has been
since its inception a party, or, to the Knowledge of Parent, is threatened to be
made a party, to any action, suit, proceeding, hearing, arbitration, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
7.12 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in
SECTION 7.12 of the Parent Disclosure Letter, there is no agreement (not to
compete or otherwise), commitment, judgment, injunction, order or decree to
which Parent is a party or which is otherwise binding upon Parent or any of
contracts included in the Parent Wireless Assets which may have the effect of
prohibiting or restricting the Surviving Corporation in the conduct of its
wireless business after the Effective Date. Without limiting the foregoing,
Parent has not entered into any agreement under which Parent is restricted in
any material respect from selling, licensing or otherwise distributing any of
its technology or products relating to its wireless business to, or providing in
any material respect services relating to its wireless businesses to, customers
or potential customers or any class of customers, in any geographic area, or in
any segment of the market.
7.13 EMPLOYEES. Except as set forth in Section7.13 of the Parent
Disclosure Letter, none of the Key Wireless Employees has advised any executive
officer of Parent on or prior
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the date of this Agreement that he, she or they plan to terminate employment
with Parent during the next 12 months.
7.14 NO ADVERSE DEVELOPMENTS. As related to the Parent Wireless
Assets, there is no development (exclusive of general economic factors affecting
business in general or the Internet or wireless services sector in particular)
or, to Parents Knowledge, threatened development affecting the Parent Wireless
Assets (or affecting Parents relationships with its customers, suppliers,
employees, and with other Persons that is having or is reasonably likely to have
a Material Adverse Effect on the Parent Wireless Assets.
7.15 FULL DISCLOSURE. The representations and warranties in this
Section 7 (as qualified by the Parent Disclosure Letter) including any document
referenced in the Parent Disclosure Letter) do not, when taken as a whole,
contain any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements herein , in light of the circumstances in
which they were made, not misleading. The Parent has delivered to Company true,
correct and complete copies of all documents, including all amendments,
supplements and modifications thereof or waivers currently in effect thereunder,
described in the Parent Disclosure Letter.
8. PRE-CLOSING COVENANTS. With respect to the period between the
execution of this Agreement and the earlier of the termination of this Agreement
and the Effective Time:
8.1 GENERAL. Each of the Parties will use its Best Efforts to take
all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in SECTION
10).
8.2 NOTICES AND CONSENTS. The Company will give any notices to
third parties and will use its Best Efforts to obtain any third party consents
that are required in connection with the matters identified in Section6.4 of the
Company Disclosure Letter or otherwise required in connection with the Merger so
as to preserve in all material respects all material rights of or material
benefits to the Company. Each of the Parties will give any notices to, make any
filings with, and use its Best Efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection with the
matters identified in SECTION 6.4 of the Company Disclosure Letter and SECTION
7.4 of the Parent Disclosure Letter or as otherwise required in connection with
the Merger. Parent will give any notices to third parties and will use its Best
Efforts to obtain any third party consents that are required in connection with
the matters identified in Section 7.4 of the Parent Disclosure Letter.
8.3 OPERATION OF BUSINESS OF THE COMPANY. The Company agrees (except
(a) as expressly contemplated by this Agreement, (b) as may be necessary to
facilitate compliance with any of the Contemplated Transactions, (c) in order to
facilitate compliance with applicable Legal Requirements or the Company's
existing contracts, or (d) to the extent that Parent shall otherwise
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consent in writing, such consent not to be unreasonably withheld or delayed) to
carry on its business in the Ordinary Course of Business, to pay its debts and
Taxes when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, 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 their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent upon obtaining Knowledge of any
material event or occurrence not in the Ordinary Course of Business, and any
Material Adverse Effect on the Company. Except (a) as expressly contemplated by
this Agreement, (b) as may be necessary to facilitate compliance with any of the
Contemplated Transactions, (c) in order to facilitate compliance with applicable
Legal Requirements or the Company's existing contracts, or (d) with the prior
written consent of Parent (which may be evidenced by e-mail communication), such
consent not to be unreasonably withheld or delayed, the Company shall not:
(a) Enter into any commitment, activity or
transaction not in the Ordinary Course of Business;
(b) Transfer to any person or entity any rights to
any Intellectual Property Rights other than in the Ordinary Course of Business;
(c) Enter into or amend any agreements pursuant to
which any other party is granted, marketing, distribution or similar rights of
any type or scope with respect to any products or services of the Company other
than in the Ordinary Course of Business;
(d) Amend or otherwise modify (or agree to do so),
except in the Ordinary Course of Business, or violate the material terms of, any
of the agreements set forth or described in the Schedules attached to the
Company Disclosure Letter;
(e) Commence any litigation;
(f) Declare, set aside 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 capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
its capital stock (or options, warrants or other rights exercisable therefor),
except pursuant to existing agreements contemplating or providing for any such
matters, including the Existing Stockholders Agreement;
(g) Issue, grant, deliver or sell or authorize or
propose the issuance, grant, 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
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commitments of any character obligating it to issue any such shares or other
convertible securities, except for (i) the issuance of shares of Company Capital
Stock upon exercise or conversion of presently outstanding Warrants or the
Existing Bridge Loans or any Company Options, and (ii) the issuance of options
under the Company Plans in the Ordinary Course of Business;
(h) Cause or permit any amendments to its Certificate
of Incorporation or Bylaws;
(i) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities 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
the business of the Company;
(j) Sell, lease, license or otherwise dispose of any
of its properties or assets, except in the Ordinary Course of Business;
(k) Incur any indebtedness for borrowed money in
excess of $1,000,000 or guarantee any such indebtedness or issue or sell any
debt securities of the Company or guarantee any debt securities of others,
except that Company may borrow money, at any time and in any amount, from the
Major Stockholders;
(l) Grant any severance or termination pay to any
director, officer, employee or consultant, except pursuant to the employment
agreements set forth in Section 6.24(b) of the Company Disclosure Letter;
(m) Adopt or materially amend employee benefit plan,
or any material employee program, policy or arrangement, enter into any
employment contract, extend any employment offer, pay or agree to pay any
special bonus or special remuneration to, or increase the wages of, any director
or officer, or enter into any employment contract, extend any employment offer,
pay or agree to pay any special bonus or special remuneration to, or increase
the wages of, any employee except in the Ordinary Course of Business;
(n) 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 and consistent with
past practice;
(o) Pay, discharge or satisfy, in an amount in
excess of $10,000, in any one case, or $25,000, in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction in the Ordinary
Course of Business of liabilities;
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(p) Make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Enter into any strategic alliance, joint
development or joint marketing arrangement or agreement;
(r) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;
(s) Waive or commit to waive any rights with a value
in excess of $25,000, in any one case, or $100,000, in the aggregate;
(t) Cancel, materially amend or renew any insurance
policy other than in the Ordinary Course of Business;
(u) Alter or enter into any commitments to alter,
its interest in any corporation, association, joint venture, partnership or
business entity in which the Company directly or indirectly holds any interest
on the date hereof, except for capital contribution to, or distributions from,
its subsidiaries in the Ordinary Course of Business;
(v) Form any subsidiary or joint venture, except for
wholly-owned subsidiaries in countries in which the Company intends to do
business; or
(w) Take, or agree in writing or otherwise to take,
any of the actions described in Sections8.3(a) through (v) above, or any other
action that would prevent the Company from performing or cause the Company not
to perform its covenants hereunder.
8.4 OPERATION OF WIRELESS BUSINESS OF PARENT. Parent
agrees (except (a) as expressly contemplated by this Agreement, (b) as may be
necessary to facilitate compliance with any of the Contemplated Transactions,
(c) in order to facilitate compliance with applicable Legal Requirements or
Parents existing contracts, or (d) to the extent that the Company shall
otherwise consent in writing, such consent not to be unreasonably withheld or
delayed) to carry on its wireless businesses in the Ordinary Course of Business,
to pay its debts and Taxes relating to its wireless businesses or the Parent
Wireless Assets when due, to pay or perform other obligations relating to its
wireless businesses or the Parent Wireless Assets when due, and to the extent
consistent with such businesses, to use all reasonable efforts consistent with
past practice and policies to preserve intact its present business organization
relating to its wireless businesses, keep available the services of the key
employees listed in Section 8.4 of the Parent Disclosure Letter (the Key
Wireless Employees) and preserve its material relationships with customers,
suppliers, distributors, licensors, licensees, and others having material
business dealings with it, all with the goal of preserving unimpaired in all
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material respects the goodwill and ongoing wireless businesses at the Effective
Time. Parent shall use Best Efforts to cause the Surviving Corporation at and
following the Effective Time to employ each of the Key Wireless Employees.
Parent shall promptly notify the Company upon obtaining Knowledge of any
material event or occurrence not in the Ordinary Course of Business, and any
Material Adverse Effect on Parent or the Parent Wireless Assets. Except (a) as
expressly contemplated by this Agreement, (b) as may be necessary to facilitate
compliance with any of the Contemplated Transactions, (c) in order to facilitate
compliance with applicable Legal Requirements or Parents existing contracts, or
(d) with the prior written consent of the Company, such consent not to be
unreasonably withheld or delayed, Parent shall not:
(a) Enter into any material commitment, activity or
transaction relating to its wireless businesses or the Parent Wireless Assets
not in the Ordinary Course of Business;
(b) Materially amend or otherwise modify (or agree to
do so), except in the Ordinary Course of Business, or violate the material terms
of, any of the agreements set forth or described in Exhibit G;
(c) Commence any litigation relating to its wireless
businesses or the Parent Wireless Assets;
(d) Sell, lease, license or otherwise dispose of any
of it properties or assets relating to its wireless businesses or the Parent
Wireless Assets, except in the Ordinary Course of Business;
(e) Cancel, materially amend or renew any insurance
policy relating to its wireless businesses or the Parent Wireless Assets other
than in the Ordinary Course of Business; or
(f) Take, or agree in writing or otherwise to take,
any of the actions described in Sections 8.4(a) through (e) above, or any other
action that would prevent Parent in any material respect from performing or
cause Parent not to perform its covenants hereunder.
8.5 Access to Information. Each of the Company and Parent
will permit the other Party and its representatives to have access at all
reasonable times, and in a manner so as not to interfere with its normal
business operations, to its business and operations (subject, in the case of
Parent, to compliance with applicable securities laws). Neither such access,
inspection and furnishing of information to any Party and its representatives,
nor any investigation by any Party and its representatives, shall in any way
diminish or otherwise affect such Partys right to rely on any representation or
warranty made by the other Parties hereunder.
8.6 Notice of Developments. Each of the Company and
Parent will give prompt written notice to the other Party promptly upon
obtaining Knowledge of any material development causing a material Breach of any
of its own material representations and warranties in Section 6 or
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Section 7, as the case may be. No disclosure pursuant to this Section8.6,
however, shall be deemed to amend or supplement the Company Disclosure Letter or
the Parent Disclosure Letter, or to prevent or cure any misrepresentation,
Breach of warranty, or Breach of covenant.
8.7 Registration; Fairness Hearing; Company Stockholder
Approval. As promptly as practicable after the execution of this Agreement,
Parent shall determine in consultation with the Company whether it will issue
the Parent Share Consideration by (i) seeking to obtain a permit (a 3(a)(10)
Permit") from the Commissioner of the Department of Corporations of the State of
California (the "California Commissioner") (after a hearing before such
Department) pursuant to Sections 25121 and 25142 of the California Corporate
Securities Law of 1968, as amended (the "CSL"), so that the issuance of the
Parent Share Consideration shall be exempt from registration under
Section3(a)(10) of the Securities Act; or (ii)registering the offer and sale of
such shares pursuant to a Registration Statement on FormS-4 (the S-4) filed with
the SEC and including therein a proxy statement (the Proxy Statement) to be sent
to the Company Stockholders soliciting their consent to the Merger. Upon
determining whether to seek a 3(a)(10) Permit or to file an S-4, Parent shall
notify the Company of its determination and the basis therefor and, as promptly
as practicable, prepare the necessary documentation to satisfy the relevant
securities law requirements of such determination. In any event, Parent
covenants and agrees to either seek a 3(a)(10) Permit or to file an S-4 as
provided above.
(b) In the event Parent relies on a 3(a)(10) Permit,
as promptly as practicable after the execution of this Agreement, Parent shall
prepare and cause to be filed with the California Commissioner a permit
application and related notice of hearing (the Permit Application) under
Sections25121 and 25142 of the CSL and a related information statement or other
disclosure document (the Information Statement), and shall request a hearing
(the Fairness Hearing) on the fairness of the terms and conditions of the Merger
at the Fairness Hearing (with a target completion date of approximately forty-
five (45) days after submission of the Permit Application). Parent and the
Company shall cooperate in the preparation of the Permit Application,
Information Statement and other documents related thereto, which shall be in
form and substance reasonably acceptable to each of them.
(c) In the event that Parent relies on the S-4
registration process, Parent shall prepare and file with the SEC the S-4, in
which the Proxy Statement will be included as a prospectus. The Company shall
provide to Parent and its counsel for inclusion in the Proxy Statement of the
S-4, in form and substance reasonably satisfactory to Parent and its counsel,
such information concerning the Company, its operations, capitalization,
technology, share ownership and other material as Parent or its counsel may
reasonably request. Parent shall use its Best Efforts to respond to any comments
of the SEC, to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing and to cause the Proxy Statement to be
mailed to the Company Stockholders at the earliest practicable time (it being
understood that Parent shall file all amendments to the S-4 and all responses to
SEC comments, and the Company shall use Best Efforts to assist Parent at Parents
request from time to time in this regard). Parent will notify the Company
promptly
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of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the S-4 or, the Proxy
Statement or for additional information and will supply the Company with copies
of all correspondence between Parent or any of its Representatives, on the one
hand, and the SEC, or its staff, on the other hand, with respect to the S-4 or
the Proxy Statement. Whenever any event occurs which should be set forth in an
amendment or supplement to the Proxy Statement and the S-4 Filing, Parent shall
promptly inform the Company of such occurrence and cooperate in filing with the
SEC or its staff.
(d) As promptly as practicable after the execution of
this Agreement and at such time as Parent may request so as not to interfere
with the 3(a)(10) Permit, application process described above or the
Section3(a)(10) exemption or the S-4 registration process, the Company shall
submit this Agreement and the transactions contemplated hereby to the Company
Stockholders for approval and adoption as provided by Delaware Law and its
Certificate of Incorporation and Bylaws. Subject to the fiduciary obligations of
the Board of Directors of the Company, the Company shall use its Best Efforts to
solicit and obtain the consent of the Company Stockholders sufficient to approve
the Merger and this Agreement and to enable the Closing to occur as promptly as
practicable. The materials submitted to the Company Stockholders shall be
subject to review and reasonable approval by Parent and include information
regarding the Company, the terms of the Merger and this Agreement and the
recommendation of the Board of Directors of the Company in favor of the Merger
and this Agreement; provided, however, that such recommendation need not be
included, or may be withdrawn, to the extent that the Board of Directors of the
Company deems it necessary to do so in the exercise of its fiduciary obligations
to the holders of the Company Capital Stock after being so advised by counsel.
(e) Notwithstanding anything to the contrary contained
herein, if (i) the Company determines in good faith that a 3(a)(10) Permit could
not be obtained on a schedule that would allow the Closing to take place before
February 15, 2000, and (ii) the Company notifies Parent within thirty (30) days
after the date of this Agreement that the Company is electing to require that
the Parent Share Consideration be issued in reliance on the exemption from
registration set forth in Rule 506 under the Securities Act (the Private
Placement Exemption), then (unless Parent reasonably determines, after
consultation with the Company, that the Private Placement Exemption is
unavailable under Rule 506 under the Securities Act), Parent shall proceed to
arrange for the issuance of the Parent Share Consideration in reliance on the
Private Placement Exemption (which shall be conditioned on the receipt by Parent
of such certificates and information as Parent reasonably requires in order to
document compliance with the Private Placement Exemption). If the Parent Share
Consideration is to be issued in reliance on the Private Placement Exemption,
then Parent shall register such shares for resale pursuant to a registration
statement on FormS-3 (or, if unavailable, a registration statement on Form S-1).
Parent shall be required to prepare and file such registration statement as soon
as commercially practicable but in no event later than sixty (60) days of the
Closing Date pursuant to the terms of a registration rights agreement which the
Parties shall negotiate in good faith with customary terms and conditions. If,
at any time after making the election referred to in the first sentence of this
Section 8.7(e), the Company or Parent reasonably determines that the Private
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Placement Exemption would not be available, then Parent's obligations under
Section 4 (to proceed with a fairness hearing or with the S-4 shall be
reinstated.
8.8 NO SOLICITATION.
(a) The Company shall instruct its Representatives not to,
directly or indirectly, solicit, initiate or intentionally encourage (including
by way of furnishing non-public information) any proposal which constitutes or
may reasonably be expected to lead to an Acquisition Proposal (as defined below)
in respect of the Company, from any Person, or engage in any discussion or
negotiations relating thereto or enter into any agreement with any Person
providing for or contemplating any Acquisition Proposal.
(b) The Company and its Representatives shall immediately cease
and terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any party or parties conducted heretofore by the
Company or its other Representatives with respect to any Acquisition Proposal.
The Company shall notify Parent in writing of any Acquisition Proposal and any
amendments thereto with respect to the Company or any other transaction, the
consummation of which would reasonably be expected to prevent or materially
interfere with or materially delay the Merger (including the material terms and
conditions of any such Acquisition Proposal and the identity of the Person
making it and any subsequent modifications thereto), promptly, but in any event
within one business day after receipt by the Company.
(c) As used in this SECTION 8.8, "ACQUISITION PROPOSAL" shall
mean:
(i) a bona fide proposal or offer for a merger,
consolidation or other business combination involving an acquisition of the
Company or a substantial portion of the assets of the Company; or
(ii) any proposal to acquire in excess of twenty percent
(20%) in interest of the Company's Capital Stock (other than upon the exercise
of options outstanding on the date hereof).
8.9 REGULATORY FILINGS. As soon as may be reasonably practicable,
Parent and the Company each shall file, if required, with the United States
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "DOJ") Notification and Report Forms relating
to the transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction. Parent and the
Company each shall promptly (a) supply the other with any information which may
be required in order to effectuate such filings and (b) supply any additional
information which reasonably may be required by the FTC, the DOJ or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate.
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8.10 NMS LISTING. Parent shall cause the shares of Parent Common
Stock issuable in connection with the Merger to be listed on the Nasdaq National
Market as of the Effective Time.
8.12 TAX-FREE REORGANIZATION. The Parties shall use their respective
Best Efforts to enable the Contemplated Transactions to qualify as a tax-free
reorganization as defined in Section 368(a) of the Code and as a transaction
described in Section 351 of the Code, including executing prior to the Effective
Time customary representations for transactions described in Sections 351 and/or
Section 368 of the Code.
8.11 PARENT SEC REPORTS. Parent will promptly deliver or make
available (including by notification that an ▇▇▇▇▇ filing has been made) to the
Company copies of any Parent SEC Reports filed by Parent during the period prior
to the Closing, and all such Parent SEC Reports (i) will be prepared in
accordance with the requirements of the Securities Exchange Act of 1934, as
amended, and (ii) will not at the time they are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements contained in such Parent SEC Reports: (i) will comply as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements and, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements are subject to year-
end audit adjustments); and (iii) will fairly present the consolidated financial
position of Parent and its subsidiaries as of the respective dates thereof and
the consolidated results of operations, stockholders equity and cash flows of
Parent and its subsidiaries for the periods covered thereby.
8.13 PRE-CLOSING BRIDGE LOAN. At any time preceding the Effective
Time, upon the Company's demonstration of a bona fide need for additional
operating funds, Parent shall provide the Company with a bridge loan of fifteen
million dollars ($15,000,000), such bridge loan to be made on substantially the
same terms as set forth in the Bridge Loan Agreement (as defined in Section
9.9); provided, that, the principal and interest accrued under such loan shall
become due and payable upon the earlier of (i) one (1) year from the date of
such loan or (ii) the closing of one or more sales by the Company of its debt or
equity securities where the aggregate gross proceeds from such financings exceed
thirty million dollars ($30,000,000).
8.14 COMPANY REGISTRATION RIGHTS AGREEMENT; TAX-SHARING AGREEMENT.
As soon as practicable following the date hereof and prior to the Closing Date,
Parent and the Company shall negotiate in good faith (i) an amendment to the
Registration Rights Agreement of the Company dated as of May 14, 1999, as
amended as of June 4, 1999, for the purpose of adding Parent as a party thereto
to be effective immediately following the Effective Date, pursuant to which
Parent shall have rights junior to the rights of the current holders under such
agreement, and (ii) a tax sharing
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agreement between the Company and Parent to be effective immediately following
the Effective Date with customary terms and conditions.
8.15 OBLIGATION TO UPDATE DISCLOSURE SCHEDULES. Not later than five
(5) days prior to the Closing Date, (a) the Company shall deliver to Parent an
update of the Company Disclosure Letter, which shall speak as of a date not
earlier than five days prior to the date of delivery of such update, and (b)
Parent shall deliver to the Company an update of the Parent Disclosure Letter,
which shall speak as of a date not earlier than five days prior to the date of
delivery of such update. No such update shall be deemed to supplement or amend
the Disclosure Letters for the purpose of (i) determining the accuracy of any
representation or warranty made by any of the Parties in this Agreement as of
the date hereof or as of the Closing, or (ii) determining whether any of the
conditions set forth in Section 10 has been satisfied. No Party which has
delivered an update of its Disclosure Letter under this Section 8.15 shall be
deemed to have breached or failed to comply with its covenant to deliver such
update by reason of any actual or alleged inaccuracies in, or any actual or
alleged omissions from, any such updated Disclosure Letter.
9. POST-CLOSING COVENANTS. With respect to the period following the
Effective Time:
9.1 GENERAL. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 11).
9.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time involving the Company, or (B) arising out of the
operation of the business of the Surviving Corporation following the Effective
Time in the manner in which it is presently conducted and planned to be
conducted, each of the other Parties will cooperate with the Party and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under SECTION 11 below).
9.3 CONFIDENTIALITY. Each of the Parties hereto hereby agrees to
keep such information or Knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential, except to
the extent that such information is or becomes publicly known or available or is
independently acquired or developed. In this regard, the Company and its
employees
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and agents acknowledge that Parent's Common Stock is publicly traded and that
any information obtained during the course of its due diligence could be
considered to be material non-public information within the meaning of federal
and state securities laws. Accordingly, the Company and its employees and
agents, acknowledge and agree not to engage in any transactions in Parent's
Common Stock in violation of applicable ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ laws.
9.4 FIRPTA COMPLIANCE. On the Closing Date, the Company shall
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under U.S. Treasury
Regulation Section 1.1445-2(c)(3).
9.5 TAX FREE REORGANIZATION. The Parties intend to adopt this
Agreement as a tax-free plan of reorganization under Section 368 of the Code.
The Parties acknowledge that the issuance of the Parent Common Stock to the
Company Stockholders and the issuance of Surviving Corporation Common Stock to
Parent is the sole consideration issued in connection with the Contemplated
Transactions, and no other transaction represents, provides for or is intended
to be an adjustment to the consideration paid for the Company Capital Stock or
the Parent Wireless Assets. No consideration that could constitute "other
property" within the meaning of Section 356(b) of the Code is being transferred
by Parent or the Company in connection with the Contemplated Transactions. The
Parties shall not take a position on any tax return inconsistent with this
Section 9.5 unless there has been a final "determination" (within the meaning of
Section 1313(a) of the Code) to the contrary. Except as contemplated in this
Agreement, from and after the Effective Time, neither Parent nor the Surviving
Corporation shall take any action (or fail to take any action) that could
reasonably be expected to cause the Contemplated Transactions not to be treated
as a reorganization within the meaning of Section 368 of the Code or as a
transfer described in Section 351 of the Code.
9.6 BOARD OF DIRECTORS. The members of the Board of Directors of the
Surviving Corporation immediately following the Merger shall be ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ and such other individuals as may be nominated and elected pursuant
to the Stockholders Agreement.
9.7 SURVIVING CORPORATION INCENTIVE STOCK PLAN. Immediately
following the Merger, Surviving Corporation shall have an Incentive Stock Plan
under which the number of shares of Surviving Corporation Common Stock reserved
for issuance shall be 2,600,000 shares of Surviving Corporation Common Stock,
such shares to be in addition to the number of shares of Surviving Corporation
Common Stock reserved for issuance upon exercise of Company Options assumed in
the Merger.
9.8 INITIAL PUBLIC OFFERING OF SURVIVING CORPORATION. Parent shall
use commercially reasonable efforts to cause the Surviving Corporation, at the
earliest practicable time after the Merger, to effect a firm commitment
underwritten public offering pursuant to a registration statement on Form S-1
under the Securities Act; PROVIDED, HOWEVER, that Parent's foregoing obligation
shall be subject to (i) the discretion of the Board of Directors of Surviving
Corporation to exercise its business judgment under Delaware Law for the purpose
of maximizing stockholder value
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for all stockholders of the Surviving Corporation, (ii) underwriting
considerations, including market conditions, and (iii) such other pertinent
factors as Parent and the Board of Directors of Surviving Corporation may
consider significant in the good faith exercise of its business judgment.
9.9 BRIDGE LOAN FACILITY. Immediately following the Effective Time,
Parent shall provide Surviving Corporation with a bridge loan facility in an
amount of fifty million dollars ($50,000,000) subject to periodic drawdown from
time to time in such amounts as shall be needed to fund the working capital and
other cash requirements of the Company, such drawdowns to be evidenced by a
Secured Convertible Promissory Note in substantially the form of Exhibit N-1,
and a Security Agreement in substantially the form of Exhibit N-2.
9.10 INDEMNIFICATION CONTINUATION.
(a) For purposes of this SECTION 9.10, (i) "INDEMNIFIED PERSON"
means any person who is now, or has been at any time between the date of this
Agreement and prior to the Effective Time, an officer or director of the Company
or who was serving at the request of the Company as an officer or director of
another corporation, joint venture or other enterprise, or a general partner of
any partnership, or a trustee of any trust and (ii) "PROCEEDING" means any
claim, action, suit, proceeding or investigation.
(b) From and after the Effective Time, Parent shall cause the
Surviving Corporation to provide indemnification to the same extent and under
similar conditions and procedures as offered to officers and directors of the
Company immediately prior to the Effective Time, to each Indemnified Person in
connection with any Proceeding based directly or indirectly (in whole or in
part) on, or arising directly or indirectly (in whole or in part) out of, the
fact that such Indemnified Person is or was an officer or director of the
Company or is or was serving at the request of the Company as an officer or
director of another corporation, joint venture or other enterprise or general
partner of any partnership or a trustee of any trust, whether pertaining to any
matter arising before or after the Effective Time.
(c) The rights of each Indemnified Person hereunder shall be in
addition to any other rights such Indemnified Person may have under Delaware
Law, the Company's Certificate of Incorporation or Bylaws in effect prior to the
Effective Time, any agreement or otherwise. The provisions of this SECTION 9.10
shall survive the consummation of the Merger for a period of six years and are
expressly intended to benefit and may be relied upon by each of the Indemnified
Persons; PROVIDED, HOWEVER, that in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims.
(d) In the event Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or (ii)
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transfers or conveys all or a substantial portion of its properties or assets to
any person or entity, then, and in each such case, to the extent necessary to
effectuate the purposes of this SECTION 9.10, proper provision shall be made so
that the successors and assigns of Parent and the Surviving Corporation assume
the obligations set forth in this SECTION 9.10.
(e) For a period of six (6) years after the Effective Time,
Parent will cause the Surviving Corporation to maintain in effect, directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy on
terms comparable to those applicable to the current directors and officers of
the Company; PROVIDED, HOWEVER, that in no event will the Surviving Corporation
be required to maintain such a policy in which the aggregate coverage exceeds
five million dollars ($5,000,000) for any and all claims.
9.11 TREATMENT OF EMPLOYEES. Parent hereby covenants that at and
following the Effective Time the employees of the Surviving Corporation will not
be treated less favorably than comparably-situated employees of Parent in regard
to employee benefits and the like taken as a whole.
9.12 EXISTING BRIDGE LOANS. Parent shall cause the Surviving
Corporation to pay off the Existing Bridge Loans in full as soon as practicable
following the Effective Time, and in any event not later than ten (10) days
following the Effective Date.
10. CONDITIONS TO OBLIGATIONS TO CLOSING.
10.1 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to consummate the Merger and enter into the
remainder of the Contemplated Transactions is subject to satisfaction of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
(i) The representations and warranties of the Company set
forth in SECTION 6 shall be true and correct (determined without regard to any
materiality qualifiers, including without limitation, "Material Adverse Effect")
(i) as of the date hereof (unless the Aggregate Breach Amount attributable to
the Breach by the Company of such representations or warranties (individually or
in the aggregate) as of the date hereof shall be less than $15,000,000), and
(ii) as of the Closing Date as though made on and as of the Closing Date (unless
the effect of the Breach by the Company of such representations and warranties
(individually or in the aggregate) as of the Closing Date shall not be a
Material Adverse Effect on the Company), provided that in the cases of both
clauses (i) and (ii), any such representation and warranty made as of a specific
date shall only be true and correct as of such specific date; and
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(ii) The representations and warranties set forth in the
first two sentences of SECTION 6.2 above shall be true and correct on and as of
the Closing Date as though such representations and warranties were made on and
as of the Closing Date.
(b) COVENANTS. The Company shall have performed and complied in
all material respects with all of its covenants hereunder that are required to
be performed or complied with at or prior to the Closing.
(c) CONSENTS. The Company shall have procured all of the third
party consents specified in SECTION 6.4 of the Company Disclosure Letter with
respect to any material Contracts.
(d) NO ACTIONS. No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator with respect to
which there is a reasonable likelihood of an unfavorable injunction, judgment,
order, decree, ruling, or charge that would (A) prevent consummation of any of
the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect materially the right of Parent to own Surviving
Corporation Common Stock following the Effective Time, or (D) affect materially
the right of Surviving Corporation to own the Company's assets (including
without limitation its Intellectual Property) and to operate the Company's
businesses (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect) and no law, statute, ordinance, rule, regulation or order
shall have been enacted, enforced or entered since the date of this Agreement
which has caused, or would reasonably be expected to cause, any of the effects
under clause (A), (B), (C), or (D) of this SECTION 10.1(D) to occur.
(e) CERTIFICATES. The President or other duly authorized officer
of the Company shall have delivered to Parent a certificate on behalf of the
Company to the effect that each of the conditions specified above in SECTION
10.1(A) to 10.1(D) (inclusive) has been satisfied in all respects.
(f) GOVERNMENTAL AUTHORIZATIONS. The Parties shall have received
all authorizations, consents and approvals of Governmental Bodies referred to in
SECTION 6.4, SECTION 8.2 or SECTION 8.8 above or disclosed in a corresponding
section in the Company Disclosure Letter the failure to obtain which would
prevent the consummation of the Contemplated Transactions.
(g) STOCKHOLDER CERTIFICATE. Each Company Affiliate shall have
executed and delivered to Parent and Sub a Stockholder Certificate in
substantially the form attached hereto as EXHIBIT H.
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(h) LEGAL OPINION. Parent shall have received from ▇▇▇▇▇▇
Godward LLP, counsel to the Company, an opinion dated as of the Closing Date and
covering such matters with respect to the Company as Parent may reasonably
request (and is customary in a transaction such as the Merger).
(i) STOCKHOLDER VOTE. This Agreement and the Merger shall have
been approved by the vote of the holders of more than fifty percent (50%) of the
outstanding Company Capital Stock (the "REQUISITE COMPANY STOCKHOLDER VOTE") and
holders of not more than ten percent (10%) of Company Capital Stock shall
continue to have a right to exercise appraisal, dissenters or similar rights
under Delaware Law with respect to their Company Capital Stock by virtue of the
Merger.
(j) NO MATERIAL ADVERSE EFFECT. There shall not have occurred
any Material Adverse Effect on the Company since October 31, 1999.
(k) RESIGNATION OF DIRECTORS. Except for ▇▇▇▇▇ ▇▇▇▇▇▇, each of
the directors of the Company shall have resigned or been removed from office.
(l) TERMINATION OR EXERCISE OF ALL WARRANTS. As of immediately
prior to the Effective Time, all outstanding Warrants shall have been exercised
or terminated.
(m) RELEASES. Each Company Affiliate shall have executed and
delivered a Release in favor of the Company in substantially the form attached
hereto as EXHIBIT L.
(n) STOCKHOLDERS AGREEMENT. Parent, the Company and the Major
Stockholders shall have executed and delivered a Stockholders Agreement in
substantially the form attached hereto as EXHIBIT O.
(o) LICENSE AGREEMENT. Parent and the Company shall have
executed and delivered a Technology License Agreement in substantially the form
attached hereto as EXHIBIT P.
(p) JOINT MARKETING AND REFERRAL AGREEMENT. Parent and the
Company shall have executed and delivered a Joint Marketing Agreement in
substantially the form attached hereto as EXHIBIT Q.
(q) SUPPORT SERVICES AGREEMENT. Parent and the Company shall
have executed and delivered a Support Services Agreement in substantially the
form attached hereto as EXHIBIT R.
Parent may waive any condition (in whole or in part) specified in
this SECTION 10.1 by executing a writing so stating at or prior to the Closing.
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10.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligation of the
Company to consummate the Merger and enter into the remainder of the
Contemplated Transactions is subject to satisfaction of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent set forth in SECTION 7 shall be true and correct
(determined without regard to any materiality qualifiers, including without
limitation, "Material Adverse Effect") (i) as of the date hereof (unless the
Aggregate Breach Amount attributable to the Breach by Parent of such
representations or warranties (individually or in the aggregate) as of the date
hereof shall be less than $5,000,000), and (ii) as of the Closing Date as though
made on and as of the Closing Date (unless the effect of the Breach by Parent of
such representations and warranties (individually or in the aggregate) as of the
Closing Date shall not be a Material Adverse Effect on Parent or the Parent
Wireless Assets), provided that in the cases of both clauses (i) and (ii), any
such representation and warranty made as of a specific date shall only be true
and correct as of such specific date.
(b) COVENANTS. Parent and Sub shall have performed and complied
in all material respects with all of their covenants hereunder that are required
to be performed or complied with at or prior to the Closing.
(c) NO ACTIONS. No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator with respect to
which there is a reasonable likelihood of an unfavorable injunction, judgment,
order, decree, ruling, or charge that would (A) prevent consummation of any of
the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect), and no law, statute, ordinance, rule, regulation or order
shall have been enacted, enforced or entered which has caused, or would
reasonably be expected to cause, any of the effects under clause (A) or (B) of
this SECTION 10.2(C) to occur. All waiting periods under the HSR Act relating to
the transactions contemplated hereby shall have expired or terminated early.
(d) CERTIFICATE. The President or other duly authorized officer
of each of the Parent Entities shall have delivered to the Company a certificate
to the effect that each of the conditions specified above in SECTION 10.2(A) to
10.2(C) (inclusive) has been satisfied in all respects.
(e) GOVERNMENTAL AUTHORIZATIONS. The Parties shall have received
all authorizations, consents and approvals of Governmental Bodies referred to in
SECTION 6.4, SECTION 8.2 or SECTION 8.8 or disclosed in a corresponding section
in the Company Disclosure Letter the failure to obtain which would prevent the
consummation of the Contemplated Transactions.
(f) LEGAL OPINION. The Company shall have received from ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel to Parent and Sub,
an opinion dated as of
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the Closing Date and covering such matters with respect to Parent and Sub as the
Company may reasonably request (and is customary in a transaction such as the
Merger).
(g) NO MATERIAL ADVERSE EFFECT. There shall not have occurred a
Material Adverse Effect on Parent or the Parent Wireless Assets since October
31, 1999; PROVIDED, for purposes of this condition, a decline in the trading
price of the Parent Common Stock, whether occurring at any time or from time to
time, as reported by the Nasdaq National Market or any other automated quotation
system or exchange shall not in and of itself be deemed to constitute a Material
Adverse Effect on Parent.
(h) STOCKHOLDERS AGREEMENT. Parent, the Company and the Major
Stockholders shall have executed and delivered a Stockholders Agreement in
substantially the form attached hereto as EXHIBIT O.
(i) LICENSE AGREEMENT. Parent and the Company shall have
executed and delivered a Technology License Agreement in substantially the form
attached hereto as EXHIBIT P.
(j) JOINT MARKETING AND REFERRAL AGREEMENT. Parent and the
Company shall have executed and delivered a Joint Marketing Agreement in
substantially the form attached hereto as EXHIBIT Q.
(k) SUPPORT SERVICES AGREEMENT. Parent and the Company shall
have executed and delivered a Support Services Agreement in substantially the
form attached hereto as EXHIBIT R.
(l) PARENT COMMON STOCK. Parent shall have taken such actions as
may be necessary or appropriate to ensure that all Parent Common Stock issuable
to Company Stockholders by reason of the Merger is freely tradable immediately
following the Effective Time.
The Company may waive any condition (in whole or in part) specified in
this SECTION 10.2 by executing a writing so stating at or prior to the Closing.
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNITY;
ESCROW.
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants of the
Company to be performed prior to the Effective Time, and all representations and
warranties of the Company in this Agreement or in any instrument delivered
pursuant to this Agreement, shall survive the Merger for a period of one (1)
year from the Effective Time. All covenants of Parent to be performed prior to
the Effective Time, and all representations and warranties of Parent in this
Agreement or in any instrument delivered pursuant to this Agreement shall
terminate at the Effective Time; provided, all covenants of Parent to be
performed after the Effective Time and the representations and warranties of
Parent in Sections 7.7 through 7.15 and in any instrument delivered pursuant to
this Agreement
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and relating to the Parent Wireless Assets shall survive the Merger for a period
ending on one (1) year from the Effective Time.
11.2 ESCROW ARRANGEMENTS.
(a) COMPANY INDEMNITY OBLIGATIONS; ESCROW FUND.
(i) Subject to the limitations set forth herein, from and
after the Closing Date, the Major Stockholders, jointly and severally, agree to
indemnify (subject to Section 11.3) and hold Parent and its Representatives and
Affiliates (including the Company) (collectively, the "PARENT INDEMNIFIED
PERSONS") harmless from and against all claims, losses, liabilities, damages,
deficiencies, costs and expenses (including reasonable attorneys' fees and
expenses of investigation) (hereinafter individually a "PARENT LOSS" and
collectively "PARENT LOSSES") incurred or directly or indirectly borne by the
Parent Indemnified Persons as a result of (A) any Breach of a representation or
warranty of the Company contained in this Agreement, or (B) any failure by the
Company to perform or comply with any covenant contained in this Agreement that
is required to be performed by the Company prior to the Closing. The Escrow Fund
(as defined herein) shall be the sole remedy to compensate the Parent
Indemnified Persons for such Parent Losses, and without limiting the foregoing,
Parent agrees and acknowledges that (a) no Major Stockholder shall have
indemnity liability with respect to matters for which Parent is entitled to
indemnity under Section 11 or any other liability or exposure whatsoever with
respect to any matters for which Parent may be entitled to recourse hereunder in
excess of the shares of Parent Common Stock in the Escrow Fund, and (b) no
Company Stockholder other than the Major Stockholders shall have any indemnity
or escrow obligation hereunder or any other liability or exposure whatsoever
with respect to any matters for which Parent may be entitled to recourse
hereunder. The Major Stockholders shall not have any right of contribution from
Parent with respect to any Parent Loss claimed by the Parent Indemnified
Persons. Parent and the Company each acknowledge that such Parent Losses, 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
Merger Consideration.
(ii) As soon as practicable after the Effective Time,
shares of Parent Common Stock which comprise the Escrow Amount, without any act
of any Major Stockholder, will be deposited with an escrow agent to be selected
by Parent prior to the Closing Date with the reasonable consent of the Company
(the "ESCROW Agent"), such deposit to constitute an escrow fund (the "ESCROW
FUND") to be governed by the terms set forth herein. The portion of the Escrow
Amount contributed on behalf of each Major Stockholder shall be in proportion to
the respective numbers of shares of Parent Common Stock to which each Major
Stockholder would otherwise be entitled under SECTION 3.1. The Escrow Agent
shall not be responsible for confirming that the shares contributed to the
Escrow Fund comprise the Escrow Amount or that the portion contributed on behalf
of each Major Stockholder is in the proper proportion, which determination shall
be made by Parent.
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(iii) Notwithstanding anything contained herein to the
contrary, the Major Stockholders shall not have any liability or obligation to
indemnify any Parent Indemnified Person for any Parent Losses unless and until
Parent Losses which equal or exceed five hundred thousand dollars ($500,000) in
the aggregate for all Parent Losses (the "PARENT BASKET AMOUNT") have been
incurred by Parent Indemnified Persons. At such time as Officer's Certificates
with respect to such incurred Parent Losses which meet the foregoing threshold
have been delivered, the Parent Indemnified Persons shall be entitled to
indemnification for all Parent Losses, including the Parent Basket Amount.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW
PERIOD. Subject to the following requirements, the Escrow Fund shall remain in
existence during the period following the Closing until the first anniversary of
the Closing Date (the "ESCROW PERIOD"). At the expiration of the Escrow Period a
portion of the Escrow Fund shall be released from Escrow to the Major
Stockholders in an amount equal to the Escrow Amount less an amount equal to the
sum of (i) all amounts theretofore distributed out of the Escrow Fund to Parent
and the other Parent Indemnified Persons pursuant to this SECTION 11, and (ii)
an amount equal to such portion of the Escrow Fund which, in the reasonable
judgment of Parent, subject to the objection of the Stockholder Agent and the
subsequent arbitration of the matter in the manner provided in SECTION 11.2(F),
is necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate theretofore delivered to the Escrow Agent prior to the end of the
Escrow Period, which amount shall remain in the Escrow Fund (and the Escrow Fund
shall remain in existence) until such claims have been resolved. As soon as all
such claims have been resolved (such resolution to be evidenced by the written
agreement of Parent and the Stockholder Agent or the written decision of the
arbitrators as described in SECTION 11.2(F)), the Escrow Agent shall deliver to
the Major Stockholders the remaining portion of the Escrow Fund not required to
satisfy such claims. Deliveries of Escrow Amounts to Major Stockholders pursuant
to this SECTION 11.2(B) and SECTION 11.2(D)(III) shall be made in proportion to
their respective original contributions to the Escrow Fund, as calculated by the
Stockholder Agent and delivered to the Escrow Agent in writing.
(c) PROTECTION OF ESCROW FUND. The Escrow Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Parent and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(d) DISTRIBUTIONS; VOTING; CLAIMS UPON ESCROW FUND.
(i) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("NEW SHARES") in respect of Parent Common Stock in the Escrow Fund which
have not been released from the Escrow Fund, shall be added to the Escrow Fund
and become a part thereof. Any cash dividends paid on Parent Common Stock in the
Escrow Fund, shall be paid to the Major Stockholders in accordance with their
respective contributions to the Escrow Fund. New Shares and cash dividends
issued in respect of
-▇▇-
▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock, which have been released from the Escrow Fund shall not be
added to the Escrow Fund, but shall be distributed to the record holders
thereof.
(ii) The Major Stockholders shall have voting rights with
respect to the shares of Parent Common Stock in the Escrow Fund held on behalf
of such Major Stockholder (and on any voting securities added to the Escrow Fund
in respect of such New Shares) so long as such shares of Parent Common Stock or
other voting securities are held in the Escrow Fund.
(iii) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that the Parent Indemnified
Persons have incurred and paid or properly accrued Parent Losses, or reasonably
anticipates that it will have to pay or accrue Parent Losses, and (B) specifying
in reasonable detail the individual items of Parent Losses included in the
amount so stated, the date on which each such item was incurred and paid or
properly accrued, or the basis for such anticipated liability, and the nature of
the Breach to which such item is related, the Escrow Agent shall, subject to the
provisions of SECTION 11.2(E) hereof, deliver to Parent (or at the direction of
Parent, to the Surviving Corporation) out of the Escrow Fund, as promptly as
practicable after the expiration of the 30-day period referred to in SECTION
11.2(E), such amounts held in the Escrow Fund equal to such Parent Losses, the
shares of Parent Common Stock to be valued as provided in clause (iv) below.
(iv) For the purposes of determining the number of shares
of Parent Common Stock to be disbursed to Parent out of the Escrow Fund, the
shares of Parent Common Stock shall be valued at the closing price of the Parent
Common Stock as reported in the Wall Street Journal on the Nasdaq National
Market on the day immediately preceding the date of delivery of such shares by
the Escrow Agent.
(v) Notwithstanding anything to the contrary herein, in
the event the Escrow Agent is obligated to deliver shares of Parent Common Stock
from the Escrow Fund directly to Parent pursuant to SECTION 11.1(D), the Escrow
Agent shall only deliver eighty percent (80%) or such lesser percentage as shall
then represent Parent's percentage ownership of the issued and outstanding
capital stock of the Surviving Corporation of the number of shares of Parent
Common Stock which would otherwise be deliverable (as calculated under SECTION
11.1(D)(IV)); PROVIDED, HOWEVER, that if Parent directs the Escrow Agent to
deliver shares of Parent Common Stock from the Escrow Fund pursuant to SECTION
11.1(D) directly to the Surviving Corporation, the Escrow Agent shall deliver
one hundred percent (100%) of the number of shares of Parent Common Stock
otherwise deliverable (as calculated under SECTION 11.1(D)(IV)).
(e) OBJECTIONS TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Stockholder Agent, and for a period of thirty (30)
days after such delivery the Escrow Agent shall make no delivery to Parent of
any Escrow Amount specified in such Officer's Certificate unless the
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Escrow Agent shall have received written authorization from the Stockholder
Agent to make such delivery. After the expiration of such thirty (30) day
period, the Escrow Agent shall make delivery of an amount from the Escrow Fund
in accordance with such Officer's Certificate and SECTION 11.2(D), PROVIDED,
HOWEVER, that no such payment or delivery may be made if the Stockholder Agent
shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
prior to the expiration of such thirty (30) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Stockholder Agent shall so object in
writing to any claim or claims made in any Officer's Certificate within 30 days
after delivery of such Officer's Certificate, the Stockholder Agent and Parent
shall attempt in good faith to agree upon the rights of the respective Parties
with respect to each of such claims. If the Stockholder Agent and Parent should
so agree, a memorandum setting forth such agreement shall be prepared and signed
by such parties and shall be furnished to the Escrow Agent. The Escrow Agent
shall be entitled to rely on any such memorandum and distribute amounts from the
Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder Agent may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both such parties agree to arbitration; and
in either such event the matter shall be settled by arbitration conducted by one
arbitrator mutually agreeable to Parent and the Stockholder Agent. In the event
that within forty-five (45) days after submission of any dispute to arbitration,
Parent and the Stockholder Agent cannot mutually agree on one arbitrator, Parent
and the Stockholder Agent shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrator or
arbitrators, as the case may be, shall set a limited time period not to exceed
forty-five (45) days and establish procedures designed to limit the cost and
time for discovery while allowing such parties an opportunity, adequate in the
sole judgement of the arbitrator or majority of the three arbitrators, as the
case may be, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the same extent as a competent court of law or equity, should
the arbitrators or a majority of the three arbitrators, as the case may be,
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of the arbitrator or a majority of the three arbitrators, as the case
may be, as to the validity and amount of any claim in such Officer's Certificate
shall be binding and conclusive upon the Parties to this Agreement, and
notwithstanding anything in SECTION 11.2(E) to the hereof, the Escrow Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith. Such decision shall be
written and shall be supported by written findings of fact and conclusions which
shall set forth the award, judgment, decree or order
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awarded by the arbitrator(s). In the event that the Escrow Agent has not
received evidence of resolution under SECTION 11.2(F)(I) or this SECTION
11.2(F)(II), the Escrow Agent shall continue to hold the Escrow Fund in
accordance herewith.
(iii) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in King County, Washington, under the rules then in effect of the American
Arbitration Association. Each Party to any arbitration pursuant to this SECTION
11.2(F) shall pay its own expenses; the fees of each arbitrator and the
administrative fee of the American Arbitration Association shall be borne
equally by Parent, on the one hand and the Major Stockholders, on the other.
Neither the expenses that the Stockholder Agent incurs in the course of any
arbitration pursuant to this SECTION 11.2(F) nor the Stockholder Agent's portion
of the fees of the arbitrators or the administrative fees for the American
Arbitration Association shall be deducted from any amounts held in the Escrow
Fund.
(g) STOCKHOLDER AGENT; POWER OF ATTORNEY.
(i) In the event that the Merger is approved by the
Company Stockholders, effective upon such vote, and without any further act of
any Major Stockholder, the Stockholder Agent shall be appointed as agent and
attorney-in-fact for each Major Stockholder, to give and receive notices and
communications, to authorize delivery to Parent of shares from the Escrow Fund
in satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholder Agent for the accomplishment of the foregoing. The Stockholder Agent
may be changed by the Major Stockholders from time to time upon not less than
thirty (30) days' prior written notice to Parent and Escrow Agent; PROVIDED that
the Stockholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Amount in the Escrow Fund agree to such removal and to the
identity of the substituted agent. Any vacancy in the position of Stockholder
Agent may be filled by approval of the holders of a majority in interest of the
Escrow Amount in the Escrow Fund. No bond shall be required of the Stockholder
Agent, and the Stockholder Agent shall not receive compensation for his
services. Notices or communications to or from the Stockholder Agent shall
constitute notice to or from each of the Major Stockholders.
(ii) The Stockholder Agent shall not be liable for any act
done or omitted hereunder as Stockholder Agent while acting in good faith and in
the exercise of reasonable judgment. The Major Stockholders shall jointly and
severally indemnify the Stockholder Agent and hold the Stockholder Agent
harmless against any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on the part of the Stockholder Agent and arising
out of or in connection with the acceptance or administration of the Stockholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Stockholder Agent.
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(h) ACTIONS OF THE STOCKHOLDER AGENT. A decision, act, consent
or instruction of the Stockholder Agent shall constitute a decision of all the
Major Stockholders and shall be final, binding and conclusive upon each of such
Major Stockholders, and the Escrow Agent and Parent may rely upon any such
decision, act, consent or instruction of the Stockholder Agent as being the
decision, act, consent or instruction of each Major Stockholder. The Escrow
Agent and Parent are hereby relieved from any liability to any Person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Stockholder Agent.
(i) THIRD-PARTY CLAIMS. In the event that Parent becomes aware
of a third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Stockholder Agent in writing of such claim,
and the Stockholder Agent and the Major Stockholders shall be entitled, at their
expense, to participate in any defense of such claim. Parent shall have the
right in its sole discretion to settle any such claim; PROVIDED, HOWEVER, that
except with the consent of the Stockholder Agent, no settlement of any such
claim with third-party claimants shall be determinative of the amount of any
claim against the Escrow Fund. In the event that the Stockholder Agent has
consented to any such settlement, the Stockholder Agent shall have no power or
authority to object under any provision of this SECTION 11 to the amount of any
claim by Parent against the Escrow Fund with respect to such settlement to the
extent that such amount is consistent with the terms of such settlement.
(j) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent's duties are purely ministerial in
nature, and the Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth in this Agreement and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Parent and the
Stockholder Agent, and may rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have been
signed or presented by the proper Party or Parties. The Escrow Agent shall not
be liable for any action taken, suffered or omitted hereunder as Escrow Agent
absent Gross Negligence, willful misconduct or bad faith, and the Escrow Agent
shall be fully protected and shall incur no liability for any action taken,
suffered or omitted pursuant to the advice of counsel.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the Parties hereto or by any
other Person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
Parties hereto or to any other Person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
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(iii) The Escrow Agent shall not be liable in any respect
on account of the identity, authority or rights of the Parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any Party for damages, claims, liabilities,
losses, or expenses, except for Gross Negligence, willful misconduct or bad
faith on the part of the Escrow Agent (which for all purposes of any section of
this Agreement as it pertains to the Escrow Agent shall be finally determined by
a court of competent jurisdiction). The Escrow Agent shall not incur any such
liability for (A) any action taken, suffered or omitted in good faith, or (B)
any action taken, suffered or omitted in reliance upon any instrument, including
any written statement or affidavit provided for in this Agreement that the
Escrow Agent shall in good faith believe to be genuine, nor will the Escrow
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, the Escrow
Agent may consult with legal counsel in connection with Escrow Agent's duties
under this Agreement and shall be fully protected in any action taken, suffered,
or omitted by it in accordance with the advice of counsel. The Escrow Agent is
not responsible for determining and verifying the authority of any Person acting
or purporting to act on behalf of any Party to this Agreement. The Escrow Agent
shall have the right to perform any of its duties hereunder through agents,
custodians or nominees, and the Escrow Agent shall not be liable or responsible
for any misconduct or negligence on the part of any such agent, custodian or
nominee absent Gross Negligence, willful misconduct or bad faith on the part of
the Escrow Agent in the selection and continued employment thereof.
(vi) If any controversy arises between the Parties to this
Agreement, or with any other Party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may be required, despite what may be
set forth elsewhere in this Agreement. In such event, the Escrow Agent will not
be liable for damages. Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the Parties to answer and litigate any claims
and rights among themselves. The Escrow Agent is authorized to deposit with the
clerk of the court all documents and funds held in escrow, except all cost,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent
through such time and which the Parties jointly and severally agree to pay. Upon
initiating such action, the Escrow Agent shall be fully released and discharged
of and from all obligations and liability imposed by the terms of this
Agreement.
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(vii) The Parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, costs, fines, settlement judgments,
penalties, demands, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, including allocated costs of in-house
counsel and disbursements that may be imposed on Escrow Agent or incurred by
Escrow Agent in connection with the execution of this Agreement or the
performance of its duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter other
than arising out of its negligence or willful misconduct.
(viii) The Escrow Agent may resign at any time upon giving
at least thirty (30) days written notice to the Parties; PROVIDED, HOWEVER, that
no such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the Parties shall use their
Best Efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the Parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of Washington.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. Upon appointment of a successor escrow
agent, the Escrow Agent shall be discharged from any further duties and
liability under this Agreement. Alternatively, if a successor escrow agent is
not appointed within the above time frames, then the Escrow Agent may apply to a
court of competent jurisdiction for appointment of a successor escrow agent.
(ix) In no event shall the Escrow Agent be liable for
special, indirect, incidental, punitive or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits) even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(x) Any Person into which the Escrow Agent may be merged
or converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the Escrow Agent in its
individual capacity shall be a party, or any Person to which substantially all
the business of the Escrow Agent may be transferred, shall be the Escrow Agent
under this Agreement without further act.
(k) FEES. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent in accordance with the schedule of the
Escrow Agent delivered to Parent at or prior to the execution of this Agreement.
Such fee schedule may be amended or modified upon mutual consent of Parent and
the Escrow Agent. It is understood that the fees and usual charges agreed upon
for services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Escrow Agent renders any
service not provided for in this Agreement, or if the Parties request a
substantial modification of its terms, or if any controversy
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(*) Confidential Treatment Requested
arises, or if the Escrow Agent is made a Party to, or intervenes in, any
litigation pertaining to the Escrow Fund or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, including allocated costs of in-house counsel,
and expenses occasioned by such default, delay, controversy or litigation and
the Escrow Agent shall not be obligated to take any such action unless and until
it is reasonably satisfied that it will receive such compensation and
reimbursement.
(l) SURVIVAL. The obligations of the Parties under SECTION
11.2(K) and SECTION 11.2(J)(VII) shall survive termination of this Agreement and
resignation or substitution of the Escrow Agent.
11.3 EXCLUSIVE REMEDY. The indemnity set forth in SECTION 11.2 and the
Escrow Fund provided for therein shall apply only to Breaches by the Company of
any representation, warranty, covenant or agreement of the Company contained
herein or in any other certificate or document delivered pursuant hereto and,
except as otherwise provided below, resort to the Escrow Fund shall be the
exclusive right and remedy of Parent for such Breaches, or for Breaches of any
Stockholder Certificate or otherwise under or in connection with this Agreement,
once the Closing occurs. Notwithstanding the foregoing, the existence of this
SECTION 11 and of the rights and restrictions set forth herein do not limit any
other potential remedies of Parent against Persons who may be liable for fraud
under common law in connection with the Contemplated Transactions. In addition,
this SECTION 11.3 shall not apply if the Merger does not close.
11.4 PARENT INDEMNIFICATION FOR CERTAIN LOSSES.
(a) INDEMNITY. The Company Stockholders shall be intended third
party beneficiaries for purposes of SECTION 11.4 and Parent agrees to indemnify
and hold each Company Stockholder (collectively, the "COMPANY STOCKHOLDER
INDEMNIFIED PERSONS") harmless on a pro rata basis from and against all claims,
losses, liabilities, damages, deficiencies, costs and expenses (including
reasonable attorneys' fees and expenses of investigation) (hereinafter
individually a "COMPANY LOSS" and collectively "COMPANY LOSSES") incurred or
directly or indirectly borne by the Company Stockholder Indemnified Persons as a
result of (*)
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and (iii) the existence of this SECTION 11 and of the rights and restrictions
set forth herein do not limit any other potential remedies of the Company
Stockholders with respect to any liability of Parent for fraud under common law
or under the Securities Act in connection with the Contemplated Transactions.
Furthermore, notwithstanding anything to the contrary contained herein, Parent
shall not have any liability or obligation under clauses (A) and (B) and (C) of
the first sentence of this Section 11.4(a) to indemnify the Company Stockholders
for any Company Losses unless and until such Company Losses equal or exceed five
hundred thousand dollars ($500,000) in the aggregate for all Company Losses (the
"COMPANY BASKET AMOUNT"); provided, in the event that Company Losses exceed the
Company Basket Amount, the Company Stockholders shall be entitled to
indemnification for all Company Losses, including the Company Basket Amount.
(b) CLAIM PROCEDURE; ARBITRATION. Any claim for Company Losses
shall be resolved pursuant to binding arbitration in the manner set forth in
Section 11.2(f).
12. TERMINATION.
12.1 TERMINATION OF THE AGREEMENT. The Parties may terminate this
Agreement as provided below:
(a) Parent and the Company may terminate this Agreement as to
all Parties by mutual written consent at any time prior to the Closing;
(b) Parent or the Company may terminate this Agreement prior to
the Closing by written notice if: (i) the Closing has not occurred by March 31,
2000 (the "EXPIRATION DATE") (PROVIDED, in the event Parent determines that a
3(a)(10) Permit is not available and that it must prepare and file an S-4 as
provided in SECTION 8.7, such Expiration Date shall be extended to April 30,
2000); PROVIDED, HOWEVER, that the right to terminate this Agreement under this
SECTION 12.1(B)(I) shall not be available to any Party whose action or failure
to act has been a principal cause of or resulted in the failure of the Closing,
to occur on or before such date and such action or failure to act constitutes a
Breach of this Agreement; (ii) there shall be a final nonappealable
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order of a court of competent jurisdiction in effect preventing consummation of
the Closing, or (iii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Closing, by any
Governmental Body that would make consummation of the Closing illegal;
(c) Parent may terminate this Agreement prior to the Closing by
written notice if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Closing, by any Governmental Body, which would (i) prohibit the Surviving
Corporation's or the Company's ownership or operation of all or a portion of the
business of the Company or the Parent Wireless Assets or (ii) compel the
Surviving Corporation to dispose of or hold separate all or a portion of the
business or assets of the Company or the Parent Wireless Assets as a result of
the Closing;
(d) Parent may terminate this Agreement prior to the Closing by
written notice if it is not in Breach of its obligations under this Agreement
and there has been a Breach of any representation, warranty, covenant or
agreement contained in this Agreement on the part of the Company, and as a
result of such Breach, the conditions set forth in SECTION 10.1(A) or 10.1(B),
as the case may be, would not be satisfied; PROVIDED, HOWEVER, if such Breach is
curable by the Company prior to the Closing through the exercise of its
reasonable best efforts, then so long as the Company continues to exercise such
reasonable best efforts, Parent may not terminate this Agreement under this
SECTION 12.1(D) unless such Breach is not cured prior to the Closing
(notwithstanding the foregoing, in no event shall such cure period extend beyond
the Expiration Date); PROVIDED, FURTHER, HOWEVER, that, no cure period shall be
required for a Breach which by its nature cannot be cured through the exercise
of such reasonable best efforts;
(e) the Company may terminate this Agreement prior to the
Closing by written notice if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Closing, by any Governmental Body, which would (i) prohibit the Surviving
Corporation's or the Company's ownership or operation of all or a portion of the
business of the Company or the Parent Wireless Assets, or (ii) compel the
Surviving Corporation to dispose of or hold separate all or a portion of the
business or assets of the Company or the Parent Wireless Assets as a result of
the Closing;
(f) the Company may terminate this Agreement prior to the
Closing by written notice if it is not in Breach of its obligations under this
Agreement and there has been a Breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of Parent, and as a result
of such Breach, the conditions set forth in SECTION 10.2(A) OR 10.2(B), as the
case may be, would not be satisfied; PROVIDED, however, if such Breach is
curable by Parent prior to the Closing through the exercise of its reasonable
best efforts, then so long as Parent continues to exercise such reasonable best
efforts, the Company may not terminate this Agreement under this SECTION 12.1(F)
unless such Breach is not cured by the Closing (notwithstanding the foregoing,
in no event shall such cure period extend beyond the Expiration Date); PROVIDED,
FURTHER,
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HOWEVER, that, no cure period shall be required for a Breach which by its nature
cannot be cured through the exercise of such reasonable best efforts;
(g) Parent or the Company may terminate this Agreement prior to
the Closing, by written notice if the Company Stockholders shall have taken a
final vote on the matters set forth in SECTION 10.1(I), and such matters shall
not have been approved by the Requisite Company Stockholder Vote;
(h) Parent may terminate this Agreement prior to the Closing by
written notice if an event having a Material Adverse Effect on the Company shall
have occurred after the date of this Agreement; PROVIDED, HOWEVER, if such
Material Adverse Effect is curable by the Company prior to the Closing through
the exercise of its reasonable best efforts, then so long as the Company
continues to exercise such reasonable best efforts, Parent may not terminate
this Agreement under this SECTION 12.1(H) unless such Material Adverse Effect is
not cured by the Closing (notwithstanding the foregoing, in no event shall such
cure period extend beyond the Expiration Date); PROVIDED, FURTHER, HOWEVER,
that, no cure period shall be required for a Material Adverse Effect which by
its nature cannot be cured through the exercise of such reasonable best efforts;
(i) Parent may terminate this Agreement prior to the Closing by
giving written notice to the Company in the event that at the Expiration Date
the Dissenting Shares equal or exceed ten percent (10%) of the aggregate number
of issued and outstanding shares of Company Capital Stock; and
(j) the Company may terminate this Agreement prior to the
Closing by written notice if an event having a Material Adverse Effect on Parent
or the Parent Wireless Assets shall have occurred after the date of this
Agreement (notwithstanding the foregoing, for purposes of this SECTION 12.1(J),
a decline in the trading price of the Parent Common Stock, whether occurring at
any time or from time to time, as reported by the Nasdaq National Market or any
other automated quotation system or exchange, shall not in and of itself be
deemed to constitute a Material Adverse Effect on Parent); PROVIDED, HOWEVER, if
such Material Adverse Effect is curable by Parent prior to the Closing through
the exercise of its reasonable best efforts, then so long as Parent continues to
exercise such reasonable best efforts, the Company may not terminate this
Agreement under this SECTION 12.1(J) unless such Material Adverse Effect is not
cured by the Closing (notwithstanding the foregoing, in no event shall such cure
period extend beyond the Expiration Date); PROVIDED, FURTHER, HOWEVER, that, no
cure period shall be required for a Material Adverse Effect which by its nature
cannot be cured through the exercise of such reasonable best efforts.
12.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 12.1, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in Breach); PROVIDED, in the event Parent
terminates this Agreement in accordance with SECTION 12.1 and is entitled to and
receives a termination fee pursuant to SECTION 12.3, the liability of the
Company shall be limited to
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such termination fee. Notwithstanding the foregoing, the provisions contained in
SECTIONS 9.3 (confidentiality), 12.3 (termination fees and other events) and 13
(miscellaneous) shall survive termination.
12.3 TERMINATION FEES AND OTHER EVENTS.
(a) The Company shall pay to Parent a termination fee of
$10,000,000 plus Expenses, payable in cash by wire transfer or cashier's check
(or assets, if sufficient cash is not readily available), in the event, and only
in the event, that (1) the Closing does not occur because this Agreement is
validly terminated by Parent pursuant to SECTION 12.1(D), (2) Parent has not
materially Breached any of its covenants and has not willfully, knowingly or
materially Breached any material representation or warranty contained in this
Agreement, and (3) one or both of the following events has occurred:
(i) the Company has willfully, knowingly and materially
Breached any material representation, warranty, covenant or agreement contained
in this Agreement; or
(ii) the Board of Directors of the Company shall have failed
to recommend the Merger, shall have changed its recommendation concerning the
Merger and the Contemplated Transactions, or shall have recommended an
alternative Acquisition Proposal, or shall have disclosed, in any manner, its
intention not to recommend the Merger, to change its recommendation to
stockholders concerning the Merger or to recommend an alternative Acquisition
Proposal.
(b) The Company shall pay to Parent an additional termination
fee of $15,000,000, payable in cash by wire transfer or cashier's check (or
assets, if sufficient cash is not readily available), in the event, and only in
the event, that (1) the Company becomes obligated to pay the termination fee
described in Section 12.3(a), and (2) any of the following events shall occur
within 180 days following the date of termination of this Agreement: (i) the
Company shall file a registration statement on Form S-1 (or any successor form)
with the Securities and Exchange Commission for the purpose of conducting an
initial public offering of Company Capital Stock; or (ii) the Company and a
third party shall have entered into a definitive acquisition agreement to
acquire all of the issued and outstanding Company Capital Stock or all of the
assets of the Company or to effect a Change of Control of the Company; or (iii)
the Company and a third party shall execute and deliver a letter of intent
providing for a Change of Control of the Company and, within 180 days after the
execution and delivery of such letter of intent, the Company and such third
party shall enter into a definitive acquisition agreement incorporating the
terms (as such terms may be further negotiated) set forth in such letter of
intent (in which case such additional termination fee shall only be payable
following the execution and delivery of such definitive acquisition agreement by
the Company and such third party).
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(c) The Company shall pay to Parent a termination fee of
twenty-five million dollars ($25,000,000) plus Expenses, payable in cash by wire
transfer or cashier's check (or assets, if sufficient cash is not readily
available), in the event, and only in the event, that the Closing does not occur
because this Agreement has been validly terminated pursuant to Section 12.1(G)
and Parent has not materially Breached its obligations under this Agreement and
has not willfully, knowingly or materially Breached any material representation
or warranty of Parent contained in this Agreement; PROVIDED, the amount of the
Company's obligation for such termination fee shall be reduced (or repaid by
Parent to the Company if payment has already been made) to the extent of any
amounts collected from the Major Stockholders pursuant to a Breach of the Voting
Agreements and PROVIDED FURTHER that no termination fee shall be payable
pursuant to this Section 12.3 (c) unless any of the following events shall occur
within 180 days following the date of termination of this Agreement: (i) the
Company shall file a registration statement on Form S-1 (or any successor form)
with the Securities and Exchange Commission for the purpose of conducting an
initial public offering of Company Capital Stock; or (ii) the Company and a
third party shall have entered into a definitive acquisition agreement to
acquire all of the issued and outstanding Company Capital Stock or all of the
assets of the Company or to effect a Change of Control of the Company, or (iii)
the Company and a third party shall execute and deliver a letter of intent
providing for a Change of Control of the Company and, within 180 days after the
execution and delivery of such letter of intent, the Company and such third
party shall enter into a definitive acquisition agreement incorporating the
terms (as such terms may be further negotiated) set forth in such letter of
intent (in which case such termination fee shall be payable only following the
execution and delivery of such definitive acquisition agreement by the Company
and such third party).
(d) Without limiting Parent's liability for any claims, losses,
liabilities, damages, deficiencies, costs and expenses (including reasonable
attorneys' fees and expenses of investigation) incurred by the Company as a
result of Parent's Breach of this Agreement, Parent shall pay to the Company a
termination fee in an amount equal to the greater of (i) the Company's actual
damages or (ii) $10,000,000 plus Expenses, payable by wire transfer or cashier's
check (or assets, if sufficient cash is not readily available), in the event,
and only in the event, that (1) the Closing does not occur because this
Agreement is validly terminated by the Company pursuant to SECTION 12.1(F), (2)
the Company has not materially Breached any of its obligations under this
Agreement and has not willfully, knowingly or materially Breached any material
representation or warranty of the Company contained in this Agreement, and (3)
Parent or Sub has knowingly, willfully and materially Breached any material
representation, warranty, covenant or agreement contained in this Agreement.
(e) For purposes of this Section "EXPENSES" shall mean the
amount of any documented out-of-pocket expenses incurred by a Party and its
Affiliates in connection with the negotiation and preparation of this Agreement
and any other ancillary agreements executed and delivered in connection with the
transactions contemplated hereby and thereby and its due diligence review
(including fees of counsel and accountants) up to the date of termination of
this Agreement.
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(f) The Company and Parent each acknowledge and agree that the
agreements contained in this SECTION 12.3 are an integral part of the
transactions contemplated by this Agreement. Notwithstanding anything to the
contrary contained in this SECTION 12.3, if any Party fails to pay the other
Party any fees or expenses due under this SECTION 12.3 within the time required
under this Agreement or, if no time period is specified, within five (5)
business days of the event giving rise to the payment of such fees and expenses,
in addition to any other amounts paid or payable pursuant to this Agreement, the
delinquent Party shall pay the out-of-pocket costs and expenses (including
reasonable legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment together
with interest on the amount of any unpaid fees and expenses at the publicly
announced prime rate of Chase Manhattan Bank from the date on which such fees
and expenses were required to be paid.
(g) The Parties acknowledge and agree that it is difficult or
impossible to determine with precision the amount of damages that would or might
be incurred by Parent if Parent were to terminate this Agreement as contemplated
by Section 12.3(a), Section 12.3(b) or Section 12.3(c). It is understood and
agreed by the Parties that if Parent were damaged by such a termination, (i) it
would be impracticable or extremely difficult to fix the actual damages
resulting therefrom, (ii) the termination fee is in the nature of liquidated
damages, and not a penalty, and is fair and reasonable, and (iii) the
termination fee represents a reasonable estimate of fair compensation for the
losses that may reasonably be anticipated from such a termination, and shall be
the sole and exclusive measure of damages with respect to any such termination.
Once such liquidated damages have been paid in accordance with the provisions of
this Agreement, the non-terminating Party and its Affiliates shall be relieved
of any further liability in respect of damages relating to the fact or
circumstance giving rise to such liquidated damages. Nothing contained in this
Section 12.3(g) shall limit any Party's rights or remedies with respect to any
termination of this Agreement not described herein.
13. MISCELLANEOUS.
13.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party; PROVIDED, HOWEVER, that Parent may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case Parent will
use its Best Efforts to advise the Company prior to making the disclosure). In
furtherance of the foregoing sentence, the Parties agree and acknowledge that
Parent will issue a press release following the execution and delivery of this
Agreement by the Parties.
13.2 NO THIRD-PARTY BENEFICIARIES. Except as otherwise provided
herein, this Agreement shall not confer any rights or remedies upon any Person
other than the Parties, and their respective successors and permitted assigns.
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13.3 ENTIRE AGREEMENT AND MODIFICATION. This Agreement (including
the exhibits hereto) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof; PROVIDED, HOWEVER,
that the letter agreement between Parent and the Company dated November 9, 1999
relating to the Parties' mutual nondisclosure obligations and certain other
matters shall remain in full force and effect notwithstanding the execution and
delivery of this Agreement and the consummation of the Merger. This Agreement
may not be amended except by a written agreement executed by all Parties.
13.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties; PROVIDED, HOWEVER, that Parent may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder; provided FURTHER, that no such assignment or designation shall
release Parent from any of its obligations or liabilities hereunder or relieve
Parent from primary liability for any of such matters.
13.5 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
13.6 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed to the intended recipient as set forth below:
If to Parent:
▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Vice President, Legal and Business Affairs
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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Copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇▇▇.▇▇▇ inc
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇▇▇ Godward LLP
Five Palo Alto Square
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties ten (10) days' advance written notice to the other Parties pursuant to
the provisions above.
13.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Washington
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Washington or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Washington; PROVIDED, HOWEVER, that all provisions regarding the rights, duties
and obligations of the Escrow Agent shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.
13.9 FORUM SELECTION; CONSENT TO JURISDICTION. All disputes arising
out of or in connection with this Agreement (other than matters subject to
arbitration pursuant to the terms of this
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Agreement or the other agreements delivered by the Parties pursuant hereto)
shall be solely and exclusively resolved by a court of competent jurisdiction in
the State of Washington. The Parties hereby consent to the jurisdiction of the
Courts of the State of Washington and the United States District Court of the
Western District of Washington and waive any objections or rights as to forum
nonconvenience, lack of personal jurisdiction or similar grounds with respect to
any dispute relating to this Agreement.
13.10 WAIVERS. The rights and remedies of the Parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any Party in exercising any right, power or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one Party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other Party; (b) no waiver that
may be given by a Party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one Party will be deemed to
be a waiver of any obligation of such Party or of the right of the Party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
13.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13.12 EXPENSES. Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. In the event the Merger
is consummated, Parent will bear the costs and expenses (including accounting
and legal fees and expenses) of the Company incurred in connection with this
Agreement and the transactions contemplated thereby, up to a maximum of
$750,000; any costs or expenses in excess of such amount shall be borne by the
Company Stockholders in proportion to the amount of Merger Consideration
received.
13.13 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation.
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13.14 COMPANY DISCLOSURE LETTER. In the event of any inconsistency
between the statements in the body of this Agreement and those in the Company
Disclosure Letter (other than an exception expressly set forth as such in the
Company Disclosure Letter with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control.
13.15 ATTORNEYS' FEES. If any legal proceeding or other action
relating to this Agreement is brought or otherwise initiated, the prevailing
Party shall be entitled to recover reasonable attorneys fees, costs and
disbursements (in addition to any other relief to which the prevailing Party may
be entitled).
13.16 FURTHER ASSURANCES. The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
13.17 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
PARENT: ▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Title: SR. VICE PRESIDENT, LEGAL & BUSINESS AFFAIRS
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THE COMPANY: ▇▇▇▇▇▇▇.▇▇▇ INC
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
Title: CHIEF EXECUTIVE OFFICER
--------------------------------------------
SUB: IC ACQUISITION I CORPORATION
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Title: SR. VICE PRESIDENT, LEGAL & BUSINESS AFFAIRS
---------------------------------------------
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