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EXHIBIT 10.17
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AGREEMENT AND PLAN OF MERGER
by and among
NEXTRON COMMUNICATIONS, INC.
a California corporation
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
a California corporation
IMPULSESALE ACQUISITION SUB, INC.
a California corporation
and
The Selling Shareholders Named Herein
Dated as of August 8, 2000
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of August 8, 2000
by and among NEXTRON COMMUNICATIONS, INC., a California corporation ("Parent"),
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, a California corporation (the "Company"), IMPULSESALE
ACQUISITION SUB, INC., a California corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Messrs. Nail ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇▇ (together with ▇▇▇▇▇ and ▇▇▇▇▇▇▇, the
"Selling Shareholders") as holders of all of the outstanding shares of capital
stock of the Company. Unless otherwise defined herein, capitalized terms are
used in this Agreement as defined in Exhibit A.
RECITALS
A. The Parent Board, the Merger Sub Board and the Company Board each
has determined that the acquisition of the Company by Parent,
pursuant to the merger of Merger Sub with and into the Company upon
the terms, and subject to the conditions hereinafter set forth (the
"Merger"), is in the best interests of its shareholders, and each
has approved this Agreement and the principal terms of the Merger
and the other transactions contemplated hereby (the "Related
Transactions") by unanimous written consent.
B. Each Selling Shareholder has determined that the Merger is in the
best interests of the Company and the Selling Shareholder, and each
has approved this Agreement and the principal terms of the Merger
and the Related Transactions by unanimous written consent.
C. For federal income Tax purposes, it is intended that the Merger
constitute a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall constitute a plan of reorganization for
purposes of Section 368 of the Code.
AGREEMENT
In consideration of the premises and agreements of the parties herein,
Parent, the Company, Merger Sub and the Selling Shareholders, intending to be
legally bound hereby, agree as follows:
1. THE MERGER; THE EFFECTIVE TIME; THE SURVIVING CORPORATION.
1.1 THE MERGER.
Subject to the terms and conditions of this Agreement, at the Effective
Time, Merger Sub shall be merged with and into the Company, the Company shall be
the surviving corporation in such Merger (the "Surviving Corporation"), and the
separate existence of Merger Sub shall thereupon cease. The Merger shall have
the effects set forth in Sections 1107 and 1108 of the General Corporation Law
of the State of California (the "CGCL"). Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all property, rights,
powers, privileges and franchises of Merger Sub shall vest in the Surviving
Corporation, and all
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debts, liabilities and duties of Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation. Immediately following the Effective
Time, the Surviving Corporation shall be a wholly owned subsidiary of Parent.
1.2 EFFECTIVE TIME OF THE MERGER.
The Merger shall become effective upon the completion of the filing of
properly executed Agreement of Merger with the Secretary of State of the State
of California, which filing shall be made on or immediately following the
Closing Date. When used in this Agreement, the term "Effective Time" with
respect to the Merger shall mean the date and time at which such Agreement of
Merger has been accepted for filing by the Secretary of State of the State of
California.
1.3 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION.
The Articles of Incorporation of Merger Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation at the Effective Time until duly amended in accordance
with applicable law.
1.4 BYLAWS OF THE SURVIVING CORPORATION.
The Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation at the Effective Time
until thereafter amended in accordance with applicable law.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation at the
Effective Time and shall hold office until their respective successors are duly
elected or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
(b) The officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation at the Effective
Time and shall hold office until removed or until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
1.6 CAPITAL STOCK OF THE SURVIVING CORPORATION.
Each share of Merger Sub's common stock, no par value, outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
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2. MERGER.
2.1 TOTAL MERGER CONSIDERATION.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders of the Common Stock or the capital stock of
Parent or Merger Sub:
(i) All of the outstanding shares of common stock, no par value,
of the Company (the "Common Stock") outstanding immediately prior to the
Effective Time (other than Treasury Shares) shall be converted into the right to
receive 345,736 shares of Parent Stock (the "Total Merger Consideration"). The
total number of shares of Parent Stock that each Selling Shareholder shall
receive in exchange for such Selling Shareholder's Common Stock is set forth
opposite such Selling Shareholder's name on Schedule I hereto.
(ii) Each share of Common Stock, if any, held in the treasury of
the Company (the "Treasury Shares"), and each share of Common Stock, if any,
held by Parent or any subsidiary of Parent immediately prior to the Effective
Time shall be cancelled and retired and cease to exist, and no consideration
shall be given in exchange therefor.
(b) The shares of Parent Stock shall be delivered to the Selling
Shareholders, without interest thereon, upon the surrender of the certificates
formerly representing the outstanding shares of Common Stock (the
"Certificates") in accordance with Section 2.2, subject to the Escrow Amount (as
defined below) held by the Escrow Agent as set forth in Section 2.5.
(c) No fraction of a share of Parent Stock shall be issued in the
Merger. In lieu of fractional shares, each Selling Shareholder upon surrender of
his Certificates as set forth in Section 2.2 shall be paid an amount in cash,
without interest, rounded to the nearest whole cent, determined by multiplying
(i) the fractional interest of a share of Parent Stock to which such Selling
Shareholder would otherwise be entitled by (ii) the Parent Stock Price.
(d) The shares of Parent Stock issued in connection with the Merger
shall not be registered under the Securities Act. Such shares may not be
transferred or resold thereafter, except in compliance with the terms of this
Agreement and the other Transactional Agreements and following registration
under the Securities Act or in reliance on an exemption from registration under
the Securities Act.
2.2 MECHANICS OF EXCHANGE.
(a) At the Effective Time, the Selling Shareholders shall be
entitled to surrender to Parent the Certificate or Certificates, which
immediately prior to the Effective Time represented Common Stock, for
cancellation and exchange for the applicable number of shares of Parent Stock
into which such Common Stock was converted, subject to the provisions of Section
2.5 and the other provisions of this Agreement. No interest shall be paid or
accrued for the benefit of holders of any Certificates on the consideration
payable upon the surrender of any Certificates. It shall be a condition of
exchange that the Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer to Parent.
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(b) From and after the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the shares of Common Stock that
were outstanding immediately prior to the Effective Time.
(c) At Effective Time, Parent shall deliver to the Escrow Agent
shares of Parent Stock in an aggregate amount equal to the Escrow Amount.
(d) If any certificate for Parent Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the Person requesting
such exchange shall (i) pay to Parent any transfer or other Taxes required by
reason of the issuance of certificates for such securities in a name other than
that of the registered holder of the Certificate surrendered or (ii) establish
to the satisfaction of Parent that such Tax has been paid or is not applicable.
(e) Notwithstanding anything in this Agreement to the contrary,
neither Parent nor any other party hereto shall be liable to any Selling
Shareholder for any shares of Parent Stock, any dividend on shares of Parent
Stock or any cash payment in lieu of any fractional interests that are delivered
to a public official pursuant to applicable escheat laws following the passage
of time specified in such laws.
2.3 NO FURTHER RIGHTS IN COMMON STOCK.
All cash, cash equivalents or securities received by each Selling
Shareholder pursuant to this Agreement shall be deemed to have been delivered
and received in full satisfaction of all rights pertaining to such Selling
Shareholder's shares of Common Stock. At the Effective Time, the Selling
Shareholders shall cease to have any rights with respect to the Common Stock,
and their sole right shall be to receive shares of Parent Stock and cash in lieu
of fractional shares as set forth in this Section 2.
2.4 CLOSING.
The closing of the Merger and the Related Transactions (the "Closing")
shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Prince, LLP, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date on which all of the
conditions set forth in Section 3 are satisfied or waived, or at such other
date, time and place as the parties shall otherwise agree (the date of the
Closing being, the "Closing Date").
2.5 ESCROW.
(a) Parent shall deliver to ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Prince, LLP (the
"Escrow Agent") 50,000 shares of Parent Stock from the Total Merger
Consideration (the "Escrow Amount"), to be held by the Escrow Agent in escrow
(the "Escrow Account") in accordance with the terms and conditions of the Escrow
Agreement (as defined below). Subject to the provisions of Section 11, the
Escrow Account shall be a source for the payment of the indemnification
obligations of the Selling Shareholders set forth herein.
(b) On or promptly after the date which is 12 months after the
Closing Date, if and when there are no outstanding claims under or in connection
with this Agreement or any other Transactional Agreement, the Escrow Agent shall
distribute, in accordance with and
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subject to the terms of the Escrow Agreement, to the Selling Shareholders pro
rata based upon the total number of shares of Parent Stock each Selling
Shareholder received pursuant to the Merger as set forth on Schedule I hereto,
all shares of Parent Stock remaining in the Escrow Account.
2.6 PREPARATION OF CLOSING DATE BALANCE SHEET.
Parent shall prepare, as promptly as possible after the Closing, and in
no event later than 180 days after the Closing Date, an unaudited balance sheet
of the Company as of December 31, 1999 (the "1999 Balance Sheet") and an
unaudited balance sheet of the Company as of the Closing Date (the "Closing Date
Balance Sheet" and, together with the 1999 Balance Sheet, the "Balance Sheets"),
which shall be prepared in accordance with GAAP and on a consistent basis. The
Selling Shareholders shall have the right to review the Closing Date Balance
Sheet prior to Parent finalizing it; provided, however, that, absent manifest
error, the Closing Date Balance Sheet shall be final and binding upon the
parties. The cost of the preparation of the Balance Sheets shall be borne by
Parent. The Company and the Selling Shareholders shall fully cooperate with
Parent in the preparation of the Balance Sheets and the Financial Statements (as
defined below).
2.7 BALANCE SHEET ADJUSTMENT.
If the total liabilities on the Closing Date Balance Sheet exceeds the
total liabilities on the 1999 Balance Sheet, the Selling Shareholders shall be
liable for such excess amount (the "Total Liabilities Excess"), which shall be
payable pro rata by Selling Shareholders based upon the total number of shares
of Parent Stock each Selling Shareholder received pursuant to the Merger as set
forth on Schedule I hereto. The Total Liabilities Excess shall be payable by the
Selling Shareholders solely in the form of shares of Parent Stock. The total
number of shares of Parent Stock payable shall be determined by dividing the
Total Liabilities Excess by the Parent Stock Price.
3. CLOSING CONDITIONS.
3.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and to
take the other actions required to be taken by Parent and Merger Sub at the
Closing are subject to the satisfaction of each of the following conditions (any
of which may be waived by Parent, in whole or in part, in accordance with
Section 12.13):
(a) the representations and warranties made by the Company in
Section 4 and each Selling Shareholder in Section 5 and in each other
Transactional Agreement shall have been true and accurate in all material
respects as of the date made and as of the Closing Date as though made on and as
of the Closing Date (other than those representations and warranties that are
made as of a specified date, in which case such representations and warranties
shall be true and accurate in all material respects as of such specified date);
(b) all covenants, agreements and conditions contained in this
Agreement or in any other Transactional Agreement to be observed by the Company
and the Selling
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Shareholders on or prior to the Closing shall have been performed or complied
with in all material respects;
(c) the following documents shall be delivered to Parent:
(i) the escrow agreement in substantially the form attached
hereto as Exhibit B (the "Escrow Agreement"), duly executed by each Selling
Shareholder;
(ii) a restricted stock purchase agreement in substantially the
form attached hereto as Exhibit C (collectively, the "Restricted Stock
Agreements"), duly executed by each Key Employee;
(iii) an employment agreement and proprietary information and
invention agreement in substantially the form attached hereto as Exhibit D
(collectively, the "Employment Agreements"), duly executed by each Key Employee;
(iv) an employee confidentiality and nondisclosure agreement in
the form provided to counsel to Parent (collectively, "Nondisclosure
Agreements"), duly executed by the Company and each current and former director,
officer, employee, consultant and contractor of the Company;
(v) the legal opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP,
counsel to the Selling Shareholders and the Company, dated the Closing Date, in
substantially the form attached hereto as Exhibit E;
(vi) a certificate (the "Selling Shareholders Closing
Certificate" and the "Company Closing Certificate," respectively) duly executed
by the Selling Shareholders and a senior executive officer of the Company,
respectively, dated as of the Closing Date, and certifying to the satisfaction
of the conditions specified in Sections 4.1(a) and (b);
(vii) the written resignations of the members of the Company
Board; and
(viii) such other documents reasonably satisfactory to Parent as
Parent may reasonably request in good faith for the purpose of (A) evidencing
the accuracy of any representation or warranty made by the Company or any
Selling Shareholder, (B) evidencing the compliance by the Company and each
Selling Shareholder with, or the performance by the Company and each Selling
Shareholder of, any covenant or obligation set forth in this Agreement or any
other Transactional Agreement, (C) evidencing the satisfaction of the conditions
set forth in this Section 3.1 or (D) otherwise facilitating the consummation of
the Merger and the Related Transactions;
(d) all corporate and other proceedings required to be taken on the
part of the Company or any Selling Shareholder in connection with this
Agreement, the other Transactional Agreements, the Merger or the Related
Transactions, and all documents incident thereto, shall be reasonably
satisfactory in form and in substance to Parent and its counsel;
(e) each of the Consents identified in Part 4.5 of the Disclosure
Schedule, if any, shall have been obtained and shall be in full force and
effect;
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(f) except as described in the Disclosure Schedule, there shall have
been no material adverse change in the Company's business, financial condition,
assets, liabilities or results of operations (taken as a whole) since December
31, 1999 (a "Material Adverse Change");
(g) except as described in the Disclosure Schedule, there shall not
have been commenced or expressly threatened against Parent, the Company or any
of their affiliates any Proceeding (i) involving any challenge to, or seeking
damages or other relief in connection with, the Merger or any of the Related
Transactions, or (ii) that is likely to have the effect of preventing, delaying,
making illegal or otherwise interfering with the Merger or any of the Related
Transactions or have a material adverse effect on the Company's business,
financial condition, assets, liabilities or results of operations (taken as a
whole) (a "Material Adverse Effect");
(h) no Person shall have made or expressly threatened any claim
asserting that such Person (i) may be the holder or the beneficial owner or, or
may have the right to acquire or to obtain beneficial ownership of, any capital
stock or other securities, or securities convertible into capital stock, of the
Company, or (ii) may be entitled to all or any portion of the Total Merger
Consideration; and
(i) consummation of the Merger and any other Related Transaction,
and performance by the Company and the Selling Shareholders of their other
obligations hereunder and under any other Transactional Agreement, shall not,
directly or indirectly (with or without notice or lapse of time), contravene or
conflict with or result in a violation of, or cause Parent or the Company, or
any Person affiliated with Parent or the Company, to suffer any material adverse
consequence under, (i) any applicable legal requirement or Order, or (ii) any
legal requirement or Order that has been proposed by or before any Governmental
Body.
3.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.
The Company's obligation to consummate the Merger and to take the other
actions required to be taken by the Company at the Closing, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Company, in whole or in part, in accordance
with Section 12.13):
(a) the representations and warranties made by Parent and Merger Sub
in Section 6 and in any other Transactional Agreement shall have been true and
correct in all material respects as of the date made and as of the Closing Date
as though made on and as of the Closing Date (other than those representations
and warranties that are made as of a specified date, in which case such
representations and warranties shall be true and accurate in all material
respects as of such specified date);
(b) all covenants, agreements and conditions contained in this
Agreement or in any other Transactional Agreement to be observed by Parent or
Merger Sub on or prior to the Closing shall have been performed or complied with
in all material respects;
(c) the following documents shall be delivered to the Company:
(i) the Escrow Agreement, duly executed by Parent;
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(ii) the Employment Agreements, duly executed by Parent; and
(iii) a certificate (the "Parent Closing Certificate") executed
by a senior executive officer of Parent, dated the Closing Date and certifying
to the satisfaction of the conditions specified in Sections 4.2(a) and (b);
(iv) the legal opinion of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Prince, LLP,
counsel to Parent, dated the Closing Date, in substantially the form attached
hereto as Exhibit F; and
(v) such other documents reasonably satisfactory to Company as
the Company may reasonably request in good faith for the purpose of (A)
evidencing the accuracy of any representation or warranty made by Parent, (B)
evidencing the compliance by Parent with, or the performance by Parent of, any
covenant or obligation set forth in this Agreement or any other Transactional
Agreement, (C) evidencing the satisfaction of the conditions set forth in this
Section 3.2, or (D) otherwise facilitating the consummation of the Merger or any
of the Related Transactions;
(d) all corporate and other proceedings required to be taken on the
part of Parent and Merger Sub in connection with this Agreement, the other
Transactional Agreements, the Merger and the Related Transactions, and all
documents incident thereto, shall be reasonably satisfactory in form and in
substance to the Company and its counsel; and
(e) consummation of the Merger and any other Related Transaction,
and performance by Parent of its other obligations hereunder and under any other
Transactional Agreement, shall not, directly or indirectly (with or without
notice or lapse of time), contravene or conflict with or result in a violation
of, or cause the Selling Shareholders to suffer any adverse consequence under,
(i) any applicable legal requirement or Order, or (ii) any legal requirement or
Order that has been proposed by or before any Governmental Body.
Copies of all documents executed at the Closing shall be provided to the
Selling Shareholders.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as specifically set forth in the Disclosure Schedule provided by
the Company and attached hereto, the parts of which are numbered to correspond
to the Section numbers of this Agreement (provided, however, that disclosure in
any part of the Disclosure Schedule shall be deemed to be disclosure in another
part of the Disclosure Schedule for which such disclosure clearly describes the
facts and circumstances applicable to such other part of the Disclosure
Schedule), the Company hereby represents and warrants to Parent and Merger Sub
as follows:
4.1 ORGANIZATION, GOOD STANDING; QUALIFICATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, is duly
qualified to conduct business and is in both corporate and tax good standing
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification. The
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Company has all requisite corporate power and authority to own and operate its
properties and assets and to carry on its business as currently conducted.
(b) The Company has never approved, or commenced any proceeding, or
made any election contemplating, the dissolution or liquidation of the Company
or the winding up or cessation of the Company's business or affairs.
(c) The Company has no subsidiaries and does not own, and has not
owned, beneficially or otherwise, any shares or other securities of, or any
other direct or any other indirect interest of any nature in, any other Entity.
(d) The Company was never operated as a sole proprietorship, or any
other business entity, prior to its incorporation.
4.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS.
(a) The Company has made available to Parent accurate and complete
copies of:
(i) the Company's Articles of Incorporation and Bylaws,
including all amendments thereto, as presently in effect;
(ii) the stock records of the Company; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of the Company, the Company Board and all
committees of the Company Board. There have been no meetings or other
proceedings of the shareholders of the Company, the Company Board or any
committee of the Company Board that are not memorialized in such minutes or
other records.
(b) The Company has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name.
(c) There has not been any violation of the Company's Articles of
Incorporation or Bylaws or of any resolution adopted by the Company's
shareholders, the Company Board or any committee of the Company Board.
4.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, of which 4,127,660 shares are issued and
outstanding. No other shares of capital stock of the Company are authorized,
issued or outstanding. No Person other than those set forth on Schedule I
attached hereto are entitled to any portion of the Total Merger Consideration.
There are no: (i) outstanding subscription, option, call, warrant or other
rights (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company or that could give rise to any
right in the Total Merger Consideration; (ii) outstanding securities,
instruments or obligations that are or may become convertible into or
exchangeable for any shares of the capital stock or other securities of the
Company or that could
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give rise to any right in the Total Merger Consideration; (iii) to the knowledge
of the Company, conditions or circumstances that may directly or indirectly give
rise to or provide a basis for a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of the Company or could give rise to or provide for a claim by any
Person with respect to the Total Merger Consideration; or (iv) Treasury Shares.
(b) All issued and outstanding shares of the Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable, and have
been issued in full compliance with all applicable securities laws and other
applicable legal requirements. Schedule I hereto sets forth the total number of
shares of Common Stock owned by each Selling Shareholder opposite such Selling
Shareholder's name.
(c) The Company has never repurchased, redeemed or otherwise
reacquired (or agreed, committed or offered (in writing or otherwise) to
repurchase, redeem or otherwise reacquire) any shares of capital stock or other
securities.
4.4 AUTHORITY; BINDING NATURE OF AGREEMENTS.
The Company has the corporate power and authority to enter into and to
perform its obligations under this Agreement and the other Transactional
Agreements to which it is or is contemplated to be a party, and the execution,
delivery and performance by the Company of this Agreement and the other
Transactional Agreements have been duly authorized by all necessary action on
the part of the Company Board and the Company's shareholders. This Agreement and
the other Transactional Agreements constitute, or upon execution and delivery
shall constitute, the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
4.5 NON-CONTRAVENTION; CONSENTS.
The execution and delivery by the Company of this Agreement and the
other Transactional Agreements, and the consummation of the Merger and the
Related Transactions, by the Company shall not, directly or indirectly (with or
without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) the
Company's Articles of Incorporation or Bylaws or (ii) any resolution adopted by
the Company Board or any committee thereof or the shareholders of the Company;
(b) to the knowledge of the Company, contravene, conflict with or
result in a violation of, or give any Governmental Body or other Person the
right to challenge the Merger or any Related Transaction or to exercise any
remedy or obtain any relief under, any legal requirement or any Order to which
the Company or any assets owned or used by it are subject;
(c) to the knowledge of the Company, cause any assets owned or used
by the Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(d) to the knowledge of the Company, contravene, conflict with or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is
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held by the Company or any of its employees or that otherwise relates to the
Company's business or to any of the assets owned or used by the Company;
(e) contravene, conflict with or result in a violation or breach of,
or default under, any Company Contract;
(f) give any Person the right to any payment by the Company or give
rise to any acceleration or change in the award, grant, vesting or determination
of options, warrants, rights, severance payments or other contingent obligations
of any nature whatsoever of the Company in favor of any Person, in any such case
as a result of the change in control of the Company or otherwise resulting from
the Merger or the Related Transactions; or
(g) result in the imposition or creation of any encumbrance upon or
with respect to any asset owned or used by the Company.
Other than the filing of the Agreement of Merger with the Secretary of State of
the State of California and the filing required by Section 25103 of the
California Corporate Securities Law of 1968, as amended, the Company shall not
be required to make any filing with or give any notice to, or obtain any Consent
from, any Person in connection with the execution and delivery of this Agreement
and the other Transactional Agreements or the consummation of the Merger and the
Related Transactions.
4.6 INTELLECTUAL PROPERTY.
(a) Part 4.6 of the Disclosure Schedule sets forth a complete list
of all patents, trademarks, copyrights, registered maskworks, trade names and
service marks, and any applications therefor in respect of any of the foregoing,
included in the Company's Proprietary Assets, and specifies, where applicable,
the jurisdictions in which each such Proprietary Assets has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners. Part 4.6 also sets forth a complete list of all
licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which the Company or any other Person is authorized to use any
of the Company's Proprietary Assets (excluding object code and end-user licenses
granted to end-users in the Ordinary Course of Business that permit use of
software products without a right to modify, distribute or sublicense the same
("End-User Licenses")) or other trade secret of the Company, and includes the
identity of all parties thereto, a description of the nature and subject matter
thereof, the applicable royalty and the term thereof. The Company is not in
violation of any license, sublicense or agreement described on such list except
such violations as do not impair the Company's rights under such license,
sublicense or agreement. The execution and delivery of this Agreement by the
Company, and the consummation of the Merger and the Related Transactions, (i)
shall not cause the Company to be in violation or default under any such
license, sublicense or agreement, (ii) shall not entitle any other party to any
such license, sublicense or agreement to terminate or modify such license,
sublicense or agreement or (iii) shall not require the Company to repay any
funds already received by it from a third party.
(b) To the knowledge of the Company, the Company has all right,
title and interest in and to, and is the sole and exclusive owner or licensee of
the Company's Proprietary Assets, free and clear of any liens or encumbrances,
and has sole and exclusive rights (and is not
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contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company's Proprietary Assets
are being used.
(c) No claims with respect to the Company's Proprietary Assets have
been asserted or, to the knowledge of the Company, are threatened by any Person
nor are there any valid grounds, to the knowledge of the Company, for any bona
fide claims: (i) to the effect that the sale, licensing or use of any of the
products of the Company as now sold, licensed or used or proposed for sale,
licensing or use by the Company infringes on any third party's Proprietary
Assets; (ii) against the use by the Company used in the Company's business as
currently conducted; or (iii) challenging the ownership by the Company, validity
or effectiveness of any of the Company's Proprietary Assets. To the Company's
knowledge, all registered patents, trademarks, service marks and copyrights held
by the Company, if any, are valid and subsisting.
(d) To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation of any of the Company's Proprietary Assets by
any third party, including any employee or former employee of the Company.
(e) Except for licenses or similar arrangements between Parent and
the Company, the Company has distributed its software pursuant to licenses that
are consistent with industry practices.
(f) None of the Company's Proprietary Assets or product of the
Company is subject to any outstanding decree, Order, judgment, or stipulation
restricting in any manner the licensing thereof by the Company.
(g) The Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
4.7 PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding, and, to the Company's knowledge,
no Person has threatened to commence any Proceeding:
(i) that involves the Company, the Company's business or any of
the assets owned or used by the Company (whether or not the Company is named as
a party thereto); or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or any of the
Related Transactions or the Company's ability to comply with or perform its
obligations and covenants under this Agreement and the other Transactional
Agreements, and, to the knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that could reasonably,
directly or indirectly, give rise to or serve as a basis for the commencement of
any such Proceeding.
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(b) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject. To the knowledge of the Company, there
is no proposed Order that, if issued or otherwise put into effect, may have a
Material Adverse Effect or may have an adverse affect on its ability to comply
with or perform any of its covenants or obligations under this Agreement and the
other Transactional Agreements.
(c) To the knowledge of the Company, no Governmental Body has
proposed any legal requirement that, if adopted or otherwise put into effect
that, could result in a Material Adverse Effect or could adversely affect the
Company's ability to comply with or perform any of its covenants or obligations
under this Agreement or the other Transactional Agreements.
(d) No officer or employee of the Company is subject to any Order
that prohibits such officer or employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
4.8 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent all information (the
"Financial Information") necessary to prepare (i) the 1999 Balance Sheet and the
related unaudited statements of operations, changes in shareholder's equity and
cash flows of the Company for the period ended December 31, 1999, together with
the notes thereto (the "1999 Financial Statements"), and (ii) the unaudited
balance sheet of the Company as of March 31, 2000 and June 30, 2000 and the
related unaudited statements of operations, changes in shareholder's equity and
cash flows of the Company for the period ended March 31, 2000 and June 30, 2000
(the "Interim Financial Statements" and, together with the 1999 Financial
Statements, the "Financial Statements"). The Financial Information is attached
hereto as Exhibit G.
(b) The Financial Information is accurate and complete in all
material respects, were prepared in accordance with the books and records of the
Company and present fairly the financial position of the Company as of the
respective dates thereof and the results of operations of the Company, changes
in shareholder's equity and cash flows for the periods covered thereby.
(c) The Company has no Liabilities, except for Liabilities
identified as such in the "liabilities" column of the balance sheets of the
Financial Statements and Liabilities incurred in the Ordinary Course of Business
since the date of the Interim Financial Statements.
4.9 TITLE TO ASSETS.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, free and clear of any liens or
encumbrances, except liens for current taxes and assessments not delinquent.
(b) Part 4.9(b) of the Disclosure Schedule identifies each item of
equipment, furniture, fixtures, improvements and other tangible assets owned by
the Company with a value over $1,000, and sets forth the original cost and book
value of each of such assets.
(c) Each asset identified in Part 4.9(b) of the Disclosure Schedule:
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(i) is free of defects and deficiencies and in good condition
and repair, consistent with its age and intended use; and
(ii) is adequate for the uses to which it is being put.
(d) The Company does not own any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Part 4.9(d) of the Disclosure Schedule. Part 4.9(d) lists the
premises covered by such leases. The Company enjoys peaceful and undisturbed
possession of such premises.
(e) Part 4.9(e) of the Disclosure Schedule identifies all assets
that are leased or licensed to the Company that have a value in excess of
$1,000. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms and, to the knowledge of the Company, there exists no
default thereunder.
4.10 CONTRACTS.
(a) Part 4.10 of the Disclosure Schedule identifies and describes
each material Contract of the Company, including each loan to the Company made
by a director, officer or employee of the Company (collectively, the "Company
Contracts"). The Company has made available to Parent accurate and complete
copies of all Company Contracts identified in Part 4.10, including all
amendments thereto.
(b) Each Company Contract is currently valid and in full force and
effect, and is enforceable by the Company in accordance with its terms.
(c) The Company is not in default under any Company Contract, and,
to the knowledge of the Company, (i) no Person has violated or breached, or
declared or committed any default under, any Company Contract; and (ii) the
Company has not waived any of its rights under any Company Contract.
(d) (i) The Company has never guaranteed or otherwise agreed to
cause, insure or become liable for, and has never pledged any of its assets to
secure, the performance or payment of any obligation or other Liability of any
other Person; and (ii) the Company has never been a party to or bound by any
joint venture agreement, partnership agreement, profit-sharing agreement,
cost-sharing agreement, loss-sharing agreement or similar Contract.
(e) No Person is renegotiating or, to the knowledge of the Company,
planning to renegotiate any amount paid or payable to the Company under any
Company Contract or any other term or provision of any Company Contract.
(f) Part 4.10(f) of the Disclosure Schedule identifies and provides
an accurate and complete description of each proposed Company Contract as to
which any bid, offer, written proposal, term sheet or similar document has been
submitted to or received by the Company and is outstanding.
(g) No party to any Company Contract has notified the Company to the
effect that the Company has failed to perform any obligation thereunder.
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4.11 EMPLOYEES.
(a) Part 4.11(a) of the Disclosure Schedule contains a list of all
current and former employees of the Company and their respective titles and
annualized compensation.
(b) Other than the employees of the Company, no Entity is performing
or has performed services for the Company as a "consultant", "independent
contractor" or otherwise.
(c) The Company has no collective bargaining agreements, union or
similar contracts with any of its employees. To the knowledge of the Company,
there is no labor union organizing activity pending or threatened with respect
to the Company. The employment of each of the Company's employees is terminable
by the Company at will; and no employee has any agreement or contract, written
or verbal, regarding his or her employment. No officer or employee has given
notice of his or her intent to terminate his or her employment with the Company,
and no employee of the Company has received an offer to join a business that is
or likely would be competitive with the Company.
(d) To the Company's knowledge, (i) no consultant or independent
contractor of the Company is in violation of any term of any consulting or
similar contract, proprietary information agreement or any other agreement with
the Company and (ii) and the performance of the Company's Contracts with its
independent contractors shall not result in any such violation. The Company has
not received any notice (written or otherwise) alleging that any such violation
has occurred.
4.12 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) The Company is in compliance with all legal requirement that are
applicable to it or to the conduct of its business or the ownership or use of
any of its assets.
(b) The Company has not received, at any time, any notice from any
Governmental Body or any other Person regarding (i) any actual, alleged,
possible or potential violation of, or failure to comply with, any legal
requirement by the Company, or (ii) any actual, alleged, possible or potential
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any cleanup or any remedial, corrective or response
action of any nature.
4.13 GOVERNMENTAL AUTHORIZATIONS.
The Company holds all Governmental Authorizations that are required by
it to conduct its business as it is currently conducted and to permit the
Company to own and use its assets in the manner in which they are currently
owned and used. To the knowledge of the Company, no Governmental Authorization
is necessary (a) to enable the Company to conduct its business in the manner in
which it is anticipated being conducted or (b) to permit the Company to own or
use its assets in the manner in which they are anticipated to be owned or used.
4.14 TAX MATTERS.
(a) Except as set forth in the Financial Statements, each Tax
required to have been paid, or claimed by any Governmental Body to be payable,
by the Company (whether
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pursuant to any Company Return or otherwise) has been duly paid in full on a
timely basis. Any Tax required to have been withheld or collected by the Company
has been duly withheld and collected, and, to the extent required, each such Tax
has been paid to the appropriate Governmental Body.
(b) Part 4.14 of the Disclosure Schedule accurately identifies all
Tax returns required to be filed by or on behalf of the Company with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date ("Company Returns"). All Company Returns (i) have been, or shall
be, filed when due, and (ii) have been, or shall be when filed, accurately and
completely prepared pursuant to applicable law. All amounts shown on the Company
Returns to be due on or before the Closing Date, and all amounts otherwise
payable in connection with the Company Returns on or before the Closing Date,
have or shall have been paid on or before the Closing Date. The Company has made
available to Parent copies of all Company Returns.
(c) The Company's liability for unpaid Taxes for all periods ending
on or before the date of the Financial Statements does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred taxes) reported in the Financial Statements.
(d) Part 4.14 of the Disclosure Schedule identifies each examination
or audit of any Company Return that has been conducted by any Governmental Body.
The Company has made available to Parent copies of all audit reports and similar
documents (to which the Company has access) relating to Company Returns. No
extension or waiver of the limitation period applicable to any of the Company
Returns has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from the Company.
(e) No claim or Proceeding is pending or has been threatened in
writing against or with respect to the Company in respect of any Tax. The
Company has not entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code. The Company has not been, and shall not
be, required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing. The Company has
never been in a "consolidated group" within the meaning of Treas. Reg. Section
1.1502(1)(h), and is not liable for Taxes incurred by any individual, trust,
corporation, partnership or any other Entity either as a transferee, pursuant to
Treasury Regulations Section 1.1502-6, or pursuant to any other provision of
federal, territorial, state, local or foreign law or regulations. The Company is
not a party to any joint venture, partnership or other arrangement or contract
that could be treated as a partnership for United States federal income tax
purposes.
(f) The Company is not party to any agreement, plan, arrangement or
other Contract covering any employee or independent contractor or former
employee or independent contractor of the Company that, individually or
collectively, could give rise directly or indirectly to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162(m)
of the Code. The Company is not, and has never been, a party to or bound by any
tax indemnity agreement, tax-sharing agreement, tax allocation agreement or
similar Contract, and has not otherwise assumed the tax liability of any other
Person under contract.
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(g) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and has not been
a United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(h) Except as specified in the Disclosure Schedule, the Company has
no net operating losses or other tax attributes presently subject to limitation
under Code Section 382, 383 or 384, or the federal consolidated return
regulations.
4.15 SECURITIES LAWS COMPLIANCE; REGISTRATION RIGHTS.
The Company has complied with all federal and state securities laws in
connection with all offers and sales of securities issued by the Company. The
Company has not granted any other holder of its securities the right to require
the Company to register any securities under the Securities Act or to qualify
for any exemption thereunder.
4.16 FINDERS AND BROKERS; FEES.
Neither the Company nor any Entity acting on behalf of the Company has
engaged any finder, broker, intermediary or any similar Entity in connection
with the Merger or the Related Transactions. The Company has not entered into a
contract or other agreement that provides that a fee shall be paid to any Entity
if the Merger or any of the Related Transactions are consummated.
4.17 ENVIRONMENTAL COMPLIANCE.
The Company is and has been at all times in compliance with all
Environmental Laws.
4.18 INSURANCE.
(a) Part 4.18 of the Disclosure Schedule sets forth each insurance
policy maintained by or at the expense of, or for the direct or indirect benefit
of, the Company:
(b) The Company has made available to Parent copies of all of the
insurance policies identified in Part 4.18 of the Disclosure Schedule (including
all renewals thereof and endorsements thereto) and binders relating thereto.
(c) Each of the policies identified in Part 4.18 of the Disclosure
Schedule is in full force and effect. All of the information contained in the
applications submitted in connection with such policies was (at the times such
applications were submitted) accurate and complete, and all premiums and other
amounts owing with respect to such policies have been paid in full on a timely
basis. Each of the policies identified in Part 4.18 shall, subject to their
respective terms and conditions, continue in full force and effect following the
Closing, and the Company has paid all premiums due, and has otherwise performed
all of its obligations, under each policy to which it is a party or that
provides coverage to it or any of its directors or officers in connection with
their performance of services to the Company.
(d) There is no pending claim under or based upon any of the
policies identified in Part 4.18 of the Disclosure Schedule, and no event has
occurred, and no condition or
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circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such claim.
(e) The Company has not received:
(i) any notice or other communication (in writing or otherwise)
regarding the actual or possible cancellation or invalidation of any of the
policies identified in Part 4.18 of the Disclosure Schedule or regarding any
actual or possible adjustment in the amount of the premiums payable with respect
to any of such policies; or
(ii) any notice or other communication (in writing or otherwise)
regarding any actual or possible refusal of coverage under, or any actual or
possible rejection of any claim under, any of the policies identified in Part
4.18 of the Disclosure Schedule.
4.19 RELATED PARTY TRANSACTIONS.
(a) No Related Party has or has had, any direct or indirect material
interest of any nature in the Company or any asset of the Company or any Company
Contract (other than ownership of Common Stock).
(b) No Related Party is or has been, indebted to the Company for any
amount.
(c) No Related Party has entered into, or has had any direct or
indirect material financial interest in, any Company Contract, transaction or
business dealing of any nature involving the Company.
(d) No Related Party is competing, or has at any time competed,
directly or indirectly, with the Company in any market served by the Company.
4.20 ABSENCE OF CERTAIN CHANGES.
Since December 31, 1999:
(a) there has not been any Material Adverse Change and, to the
knowledge of the Company, no event has occurred that could have a Material
Adverse Effect;
(b) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock;
(c) the Company has not amended its Articles of Incorporation or
Bylaws and has not effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(d) the Company has not made any individual capital expenditure in
excess of $1,000;
(e) the Company has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any lien or
encumbrance;
(f) the Company has not made any loan or advance;
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(g) the Company has not paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;
(h) except as specifically contemplated by this Agreement, there has
been no resignation or termination of employment of any officer or employee of
the Company;
(i) except as described in Part 4.10 of the Disclosure Schedule,
there has been no borrowing or agreement to borrow by the Company or change in
the contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise or grant of a mortgage or security interest in
any property of the Company;
(j) the Company has not discharged any lien or encumbrance or
discharged, paid or forgiven any indebtedness or any other Liability, except for
accounts payable that (i) are reflected as current liabilities in the
"liabilities" column of the balance sheets of the Financial Statements or have
been incurred by the Company since June 30, 2000 in the Ordinary Course of
Business and (ii) have been discharged or paid in the Ordinary Course of
Business;
(k) the Company has not released or waived any right or claim;
(l) the Company has not changed any of its methods of accounting or
accounting practices;
(m) the Company has not received notice that there has been a loss
of, or cancellation any order by, any customer of the Company; and
(n) the Company has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses (b) through (m) above.
4.21 POWERS OF ATTORNEY.
The Company has not given a power of attorney to any Person or Entity
4.22 BENEFIT PLANS; ERISA.
(a) The Company has no "employee benefit plans" within the meaning
of Section 3(3) of ERISA.
(b) The Company has no other employee benefit, bonus or other
incentive compensation, stock option, stock purchase, stock appreciation,
severance pay, lay-off or reduction in force, change in control, sick pay,
vacation pay, salary continuation, retainer, leave of absence, educational
assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices of any kind.
(c) The Company does not maintain or contribute to any welfare
benefit or other plan or arrangement that provides health benefits to an
employee after the employee's termination of employment or retirement.
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(d) Neither the Company nor any Member of the Controlled Group has
any liability or is threatened with any liability (whether joint or several) (i)
for any excise tax imposed by Section 4971, 4975, 4976, 4977 or 4979 of the
Code, or (ii) for a fine under Section 502 of ERISA.
4.23 FULL DISCLOSURE.
(a) Neither this Agreement (including the Disclosure Schedule and
all other Schedules and Exhibits hereto) nor any other Transactional Agreement,
contains or shall contain any untrue statement of material fact or omits to
state any material fact necessary to make any of the representations, warranties
or other statements or information contained herein or therein not misleading.
(b) There is no fact within the knowledge of the Company that could
have (i) a Material Adverse Effect or (ii) an adverse effect on the ability of
any Selling Shareholder or the Company to comply with or perform any covenant or
obligation under this Agreement or any other Transactional Agreement.
(c) All information set forth in the Disclosure Schedule, and all
other information (including copies of documents) regarding or relating to the
Company and its business, financial condition, assets, liabilities, results of
operations and prospects, which has been furnished to Parent or any of its
representatives by or on behalf of the Company or any of its representatives, is
accurate and complete in all material respects.
4.24 DUE DILIGENCE INFORMATION.
The Company has provided Parent and Parent's representatives with full
and complete access to all of the Company's material records and other documents
and data, and has produced all material documents and related materials in
response to the reasonable requests of Parent.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS.
Each Selling Shareholder, jointly but not severally, hereby represents
and warrants as follows:
5.1 OWNERSHIP OF COMMON STOCK.
Such Selling Shareholder owns, beneficially and of record, that number
of shares of Common Stock specified opposite such Selling Shareholder's name on
Schedule I attached hereto, free and clear of any lien or encumbrance.
5.2 AUTHORITY; BINDING NATURE OF AGREEMENTS.
Such Selling Shareholder has the absolute and unrestricted right, power
and authority to enter into and perform such Selling Shareholder's obligations
under this Agreement and the other Transactional Agreements to which such
Selling Shareholder is or is contemplated to be a party. This Agreement and the
other Transactional Agreements constitute, or upon execution and delivery shall
constitute, the legal, valid and binding obligations of such Selling
Shareholder, enforceable against him in accordance with their respective terms.
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5.3 NON-CONTRAVENTION.
To the knowledge of such Selling Shareholder, the execution and delivery
of this Agreement and the other Transactional Agreements, and the consummation
of the Merger and the Related Transactions, by such Selling Shareholder, shall
not, directly or indirectly (with or without notice or lapse of time) (a)
contravene, conflict with or result in a violation of, or give any Governmental
Body or other Person the right to challenge the Merger or any Related
Transaction or to exercise any remedy or obtain any relief under, any legal
requirement or any Order to which such Selling Shareholder is subject or (b)
give any Person the right to any payment by such Selling Shareholder.
5.4 PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding, and, to such Selling
Shareholder's knowledge, no Person has threatened to commence any Proceeding,
that challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the Related
Transactions or such Selling Shareholder's ability to comply with or perform his
material obligations and covenants under this Agreement and the other
Transactional Agreements, and, to such Selling Shareholder's knowledge, no event
has occurred, and no claim, dispute or other condition or circumstance exists,
that might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) There is no Order to which such Selling Shareholder is subject.
To the knowledge of such Selling Shareholder, there is no proposed Order to
which such Selling Shareholder would be subject.
(c) To the knowledge of such Selling Shareholder, no Governmental
Body has proposed any legal requirement that, if adopted or otherwise put into
effect, could adversely affect his ability to comply with or perform any of his
covenants or obligations under this Agreement or the other Transactional
Agreements.
5.5 FINDERS AND BROKERS; FEES.
Neither such Selling Shareholder nor any Person acting on his behalf has
negotiated with any finder, broker, intermediary or any similar Person in
connection with the Merger and the Related Transactions.
5.6 INFORMATION ACCURATE AND COMPLETE.
All information regarding such Selling Shareholder that such Selling
Shareholder has furnished to the Company or Parent or any of their
representatives is accurate and complete in all material respects.
5.7 CAPACITY AND FINANCIAL CAPABILITY.
Such Selling Shareholder has the capacity and financial capability to
comply with and perform all his covenants and obligations under this Agreement
and each of the other Transactional Agreements. Such Selling Shareholder
acknowledges that the Total Merger Consideration represents reasonably
equivalent value for the Common Stock.
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5.8 INVESTMENT PURPOSE.
Such Selling Shareholder is acquiring Parent Stock for investment for
such Selling Shareholder's own account, not as a nominee or agent and not with
the view to, or any intention of, a resale or distribution thereof, in whole or
in part, or the grant of any participation therein. Such Selling Shareholder
understands that Parent Stock has not been registered under the Securities Act
or state securities laws by reason of a specific exemption from the registration
provisions of the Securities Act and applicable state securities laws that
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of such Selling Shareholder's representations as expressed in
this Agreement. Such Selling Shareholder has not been formed for the specific
purpose of acquiring Parent Stock.
5.9 RESTRICTIONS ON TRANSFER OF PARENT STOCK.
Such Selling Shareholder hereby acknowledges that, because of the
restrictions on transfer of Parent Stock to be issued in connection with this
Agreement, such Selling Shareholder may have to bear the economic risk of the
investment commitment in Parent Stock for an indefinite period of time.
5.10 NON-REGISTRATION OF PARENT STOCK.
Such Selling Shareholder understands and acknowledges that Parent Stock
shall not be registered under the Securities Act or qualified under applicable
law (including applicable blue sky laws) on the grounds that the offering and
sale of securities contemplated by this Agreement are exempt from registration
under the Securities Act and exempt from qualification pursuant to the
applicable provisions of applicable law (including applicable blue sky laws),
and that Parent's reliance upon such exemptions is predicated upon such Selling
Shareholder's representations and warranties set forth in this Agreement. Such
Selling Shareholder acknowledges and understands that Parent Stock must be held
indefinitely unless the Parent Stock is subsequently registered under the
Securities Act and qualified under applicable law (including applicable blue sky
laws) or an exemption from such registration and such qualification is
available.
5.11 COMPLIANCE WITH SECURITIES ACT.
Such Selling Shareholder shall observe and comply with the Securities
Act and the rules and regulations promulgated thereunder, as now in effect and
as from time to time amended, in connection with any offer, sale, pledge,
transfer or other disposition of Parent Stock. In furtherance of the foregoing,
and in addition to any restrictions contained in this Agreement or any other
Transactional Agreement, such Selling Shareholder shall not offer to sell,
exchange, transfer, pledge, or otherwise dispose of any of Parent Stock unless
at such time at least one of the following is satisfied:
(a) a registration statement under the Securities Act covering
Parent Stock proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, shall have been filed with the
SEC and made effective under the Securities Act;
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(b) such transaction shall be permitted pursuant to the provisions
of Rule 144; or
(c) counsel representing such Selling Shareholder, satisfactory to
Parent, shall have advised Parent in a written opinion letter reasonably
satisfactory to Parent and its counsel, and upon which Parent and its counsel
may rely, that no registration under the Securities Act would be required in
connection with the proposed sale, transfer or other disposition.
5.12 INVESTMENT IN PARENT STOCK INVOLVES SUBSTANTIAL RISK.
Such Selling Shareholder understands that an investment in Parent Stock
involves substantial risks. Such Selling Shareholder has been given the
opportunity to make a thorough investigation of the proposed activities of
Parent and, upon request by such Selling Shareholder, has been furnished with
materials relating to Parent and its proposed activities. Such Selling
Shareholder has been afforded the opportunity to obtain any information deemed
necessary by such Selling Shareholder to verify the accuracy of any
representations made or information conveyed to such Selling Shareholder. Such
Selling Shareholder confirms that all documents, records and books pertaining to
its investment in Parent Stock and requested by such Selling Shareholder have
been made available or delivered to such Selling Shareholder. Such Selling
Shareholder has had an opportunity to ask questions of and receive answers from
Parent, or from a Person or Persons acting on Parent's behalf, concerning the
terms and conditions of this investment.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub hereby represent and warrant to each of the
Selling Shareholders as follows:
6.1 ORGANIZATION, GOOD STANDING; QUALIFICATION.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, is qualified to conduct
business and is in both corporate and tax good standing under the laws of each
jurisdiction in which the failure to be so qualified would reasonably likely
have a materially adverse effect on the business, financial condition, assets,
liabilities and results of operations of Parent and its subsidiaries (taken as a
whole) (a "Parent Material Adverse Effect"). Parent has the corporate power and
authority to own and operate its properties and assets and to carry on its
business as currently conducted. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
is qualified to conduct business and is in both corporate and tax good standing
under the laws of each jurisdiction in which the failure to be so qualified
would reasonably likely have a Parent Material Averse Effect. Merger Sub has the
corporate power and authority to own and operate its properties and assets and
to carry on its business as currently conducted.
6.2 SUBSIDIARIES.
Except for Merger Sub and Just Doin' Java Unlimited, a California
corporation, Parent has no subsidiaries, does not own or control, beneficially
or otherwise, any shares of other securities of, or any other direct or indirect
interest of any nature in, any other Entity.
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6.3 CAPITALIZATION.
(a) The authorized capital of Parent as of April 13, 2000 consisted
of: (i) 20,000,000 shares of Common Stock, of which 1,923,252 shares were issued
and outstanding and 350,000 shares were anticipated to be issued and (ii)
10,000,000 shares of Preferred Stock, of which (A) 33,334 shares have been
designated Series A Preferred Stock, all of which were issued and outstanding,
(B) 5,154,167 shares have been designated Series B Preferred Stock, of which
2,500,000 shares were issued and outstanding and 2,654,167 shares were reserved
for issuance under outstanding warrants, and (C) 2,750,000 shares have been
designated Series C Preferred Stock, of which 2,498,119 were issued and
outstanding and 250,000 were reserved for issuance under outstanding warrants.
The rights, privileges and preferences of the Preferred Stock are as stated in
the Articles of Incorporation of Parent and (ii).
(b) All of the outstanding shares of capital stock of Parent have
been duly authorized and validly issued, are fully paid and are nonassessable
and issued in full compliance with all applicable federal and state securities
laws and other applicable legal requirements.
(c) As of April 13, 2000, Parent had reserved 3,041,334 shares of
Common Stock for issuance to officers, directors, employees and consultants of
the Company pursuant to its 1999 Equity Incentive Plan and the 1997 Equity
Incentive Plan (the "Stock Plans"). Of such reserved shares of Common Stock, (i)
no shares had been issued pursuant to restricted stock purchase agreements, (ii)
options to purchase 1,672,090 shares had been granted and were then outstanding
and (iii) 1,369,244 shares of Common Stock remained available for issuance to
officers, directors, employees and consultants pursuant to the Stock Plans.
(d) Except (i) as described in this Section 6.3, (ii) for options
issued or issuable pursuant to the Stock Plans, (iii) the rights of first offer
contained in the Investors' Rights Agreement, dated as of February 25, 2000, by
and among Parent and the purchasers party thereto and (iv) pursuant to the terms
of Conversion Agreement, dated as of November 24, 1999, by and between Safeguard
Scientifics, Inc. and the Company, there are no outstanding securities,
instruments or obligations that are or may become convertible into or
exchangeable for any shares of capital stock or other securities of the Company.
6.4 PARENT STOCK.
Parent Stock to be issued to the Selling Shareholders, when issued
pursuant to the terms of this Agreement, shall be duly authorized, validly
issued, fully paid and nonassessable.
6.5 AUTHORITY; BINDING NATURE OF AGREEMENTS.
Parent has the corporate power and authority to enter into and to
perform its obligations under this Agreement and the other Transactional
Agreements to which it is or is contemplated to be a party, and the execution,
delivery and performance by Parent of this Agreement and the other Transactional
Agreements have been duly authorized by all necessary action on the part of the
Parent Board and Parent's shareholders. This Agreement and the other
Transactional Agreements constitute, or upon execution and delivery shall
constitute, the legal, valid and binding obligations of Parent, enforceable
against Parent in accordance with their respective terms. Merger Sub has the
corporate power and authority to enter into and to perform its obligations under
this Agreement and the other Transactional Agreements to which it is or is
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contemplated to be a party, and the execution, delivery and performance by
Merger Sub of this Agreement and the other Transactional Agreements have been
duly authorized by all necessary action on the part of the Merger Sub Board and
Merger Sub's shareholders. This Agreement and the other Transactional Agreements
constitute, or upon execution and delivery shall constitute, the legal, valid
and binding obligations of Merger Sub, enforceable against Merger Sub in
accordance with their respective terms.
6.6 NON-CONTRAVENTION; CONSENTS.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Merger and the Related Transactions, by
Parent and Merger Sub shall not, directly or indirectly (with or without notice
or lapse of time):
(a) contravene, conflict with or result in a material violation of
(i) Parent and Merger Sub's Certificate of Incorporation or Bylaws, or (ii) any
resolution adopted by Parent and Merger Sub Board or any committee thereof or
the shareholders of Parent and Merger Sub;
(b) to the knowledge of Parent and Merger Sub, contravene, conflict
with or result in a material violation of, or give any Governmental Body the
right to challenge the Merger or any of the Related Transactions or to exercise
any remedy or obtain any relief under, any legal requirement or any Order to
which Parent and Merger Sub or any material assets owned or used by it are
subject;
(c) to the knowledge of Parent and Merger Sub, cause any material
assets owned or used by Parent and Merger Sub to be reassessed or revalued by
any taxing authority or other Governmental Body;
(d) to the knowledge of Parent and Merger Sub, contravene, conflict
with or result in a material violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by Parent or
Merger Sub or any of their respective employees or that otherwise relates to
Parent and Merger Sub's business or to any of the material assets owned or used
by Parent and Merger Sub;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any Parent Contract;
(f) give any Person the right to any payment by Parent or Merger Sub
or give rise to any acceleration or change in the award, grant, vesting or
determination of options, warrants, rights, severance payments or other
contingent obligations of any nature whatsoever of Parent or Merger Sub in favor
of any Person, in any such case as a result of the change in control of Merger
Sub or otherwise resulting from the Merger or the Related Transactions; or
(g) result in the imposition or creation of any material encumbrance
upon or with respect to any material asset owned or used by Parent and Merger
Sub.
Other than the filing of the agreement of merger with the Secretary of State of
the State of California and the filing required by Section 25103 of the
California Corporate Securities Law of 1968, as amended, the Parent and Merger
Sub shall not be required to make any filing with or
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give any notice to, or obtain any Consent from, any Person in connection with
the execution and delivery of this Agreement and the other Transactional
Agreements or the consummation or performance of the Merger or any of the
Related Transactions.
6.7 INTELLECTUAL PROPERTY.
To its knowledge, Parent owns or possesses sufficient legal rights to
all patents, trademarks, service marks, tradenames, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business without any conflict with, or infringement of, the rights of others.
Parent has not received any communications alleging that Parent has violated or,
by conducting its business, would violate any of the patents, trademarks,
service marks, tradenames, copyrights, trade secrets or other proprietary rights
or processes of any other Entity. Parent is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of Parent or that would conflict
with Parent's business. Neither the execution or delivery of this Agreement, nor
the carrying on of Parent's business by the employees of Parent, nor the conduct
of Parent's business as proposed, will, to Parent's knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant or instrument under which any such
employee is now obligated. Parent does not believe it is or will be necessary to
use any inventions of any of its employees (or Persons it currently intends to
hire) made prior to their employment by Parent.
6.8 PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding, and, to the knowledge of Parent
and Merger Sub, no Person has threatened to commence any Proceeding:
(i) that involves Parent, Merger Sub, their respective business
or any of their respective assets owned or used by the Company (whether or not
the Company is named as a party thereto) that, if adversely determined, would
reasonably result in a Parent Material Adverse Effect; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or any of the
Related Transactions or the ability of Parent and Merger Sub to comply with or
perform their obligations and covenants under this Agreement and the other
Transactional Agreements, and, to the knowledge of Parent and Merger Sub, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that could reasonably, directly or indirectly, give rise to or serve as
a basis for the commencement of any such Proceeding.
(b) There is no Order to which Parent or Merger Sub, or any of the
assets owned or used by Parent or Merger Sub, is subject which would reasonably
likely result in a Parent Material Adverse Effect. To the knowledge of Parent
and Merger Sub, there is no proposed Order that, if issued or otherwise put into
effect, would reasonably likely result in a Parent Material Adverse Effect or
may have an adverse affect on its ability to comply with or perform any of its
covenants or obligations under this Agreement and the other Transactional
Agreements.
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(c) To the knowledge of Parent and Merger Sub, no Governmental Body
has proposed any legal requirement that, if adopted or otherwise put into effect
that, would reasonably likely result in a Parent Material Adverse Effect or
adversely affect Parent's or Merger Sub's ability to comply with or perform any
of its covenants or obligations under this Agreement or the other Transactional
Agreements.
6.9 FINANCIAL STATEMENTS.
Parent has made available to the Company and each Selling Shareholder
its audited financial statements (including balance sheet, income statement and
statement of cash flows) as of December 31, 1999 and its unaudited financial
statements (including balance sheet, income statement and statement of cash
flows) as of March 31, 2000 (collectively, the "Parent Financial Statements").
The Parent Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except that the unaudited Financial Statements may not
contain all footnotes required by generally accepted accounting principles. The
Parent Financial Statements fairly present the financial condition and operating
results of Parent as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments.
6.10 TITLE TO ASSETS.
Parent owns its assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair Parent's ownership or use of
such property or assets. With respect to the property and assets it leases,
Parent is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
6.11 TAX RETURNS AND PAYMENTS.
Parent has filed all tax returns and reports as required by law. These
returns and reports are true and correct in all material respects. Parent has
paid all taxes and other assessments due.
6.12 FINDERS AND BROKERS' FEES.
Neither Parent or Merger Sub nor any Person acting on behalf of Parent
or Merger Sub has engaged any finder, broker, intermediary or any similar Entity
in connection with the Merger or the Related Transactions. Neither Parent nor
Merger Sub has entered into a contract or other agreement that provides that a
fee shall be paid to any Entity if the Merger or any of the Related Transactions
are consummated.
6.13 INSURANCE.
Parent has in full force and effect fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed, the absence of which would reasonably have a Parent Material
Adverse Effect.
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6.14 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS.
Each employee, consultant and officer of Parent has executed an
agreement with Parent regarding confidentiality and proprietary information
substantially in the form or forms delivered to the counsel for the Company and
the Selling Shareholders. Parent is not aware that any of its employees or
consultants is in violation thereof, and Parent will use its best efforts to
prevent any such violation.
6.15 INVESTMENT REPRESENTATIONS.
(a) Parent understands that the Common Stock has not been registered
under the Securities Act. Parent also understands that the Stock is being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Parent's representations contained in this
Section 6.15.
(b) Parent is acquiring the Common Stock for Parent's own account,
not as a nominee or agent, for investment only, and not with the view or current
intention of, a resale or distribution thereof, in whole or in part, or the
grant of any participation therein. Parent understands that the Common Stock has
not been registered under the Securities Act or any state securities laws.
(c) Parent represents that by reason of its, or of its management's
business or financial experience, Parent has the capacity to protect its own
interests in connection with the Transactions contemplated in this Agreement and
the other Transactional Agreements. Parent is able to bear the loss of its
entire investment in Parent. Parent is not a corporation, partnership or other
entity specifically formed for the purpose of consummating this transaction.
(d) Parent is an "accredited investor" as that term is defined in
Rule 501(a) of Regulation D promulgated pursuant to the Securities Act.
6.16 COMPLETE COPIES OF REQUESTED REPORTS.
Parent has delivered or made available true and complete copies of each
document that has been reasonably requested by the Company or the Selling
Shareholders or their counsel in connection with their due diligence review of
Parent.
6.17 INVESTIGATION.
Parent has been given the opportunity to make a thorough investigation
of the Company and, upon request by Parent, has been furnished with materials
relating to the Company. Parent has been afforded the opportunity to obtain any
information deemed necessary by Parent to verify the accuracy of any
representations made or information conveyed to Parent. Parent confirms that all
documents, records and books pertaining to the acquisition of the Common Stock
and requested by Parent have been made available or delivered to Parent. Parent
has had an opportunity to ask questions of and receive answers from the Company,
or from a Person or Persons acting on the Company's behalf, concerning the terms
and conditions of the acquisition.
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7. PRE-CLOSING COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
7.1 ACCESS AND INVESTIGATION.
The Company and the Selling Shareholders shall ensure that, at all times
during the Pre-Closing Period:
(a) The Company and its representatives provide Parent and its
representatives with such copies of existing books, records, Tax Returns, work
papers and other documents and information relating to the Company as Parent may
reasonably request in good faith; and
(b) The Company and its representatives compile and provide Parent
and its representatives with such additional financial, operating and other data
and information regarding the Company as Parent may reasonably request in good
faith.
7.2 OPERATION OF BUSINESS.
The Company and the Selling Shareholders shall ensure that, during the
Pre-Closing Period:
(a) the Selling Shareholders do not directly or indirectly sell or
otherwise transfer any of his Common Stock or any interest in or right relating
to any of such Stock;
(b) the Selling Shareholders do not permit any of the Common Stock
to become subject, directly or indirectly, to any lien or encumbrance;
(c) the Company conducts its operations exclusively in the Ordinary
Course of Business and in substantially the same manner as such operations have
been conducted prior to the date of this Agreement;
(d) the Company preserves intact its current business organization,
uses best efforts to keep available the services of its current officers and
employees and uses best efforts to maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with the Company;
(e) the Company keeps in full force all insurance policies
identified in Part 4.18 of the Disclosure Schedule;
(f) the Company's officers confer regularly with Parent concerning
material operational matters and otherwise report regularly to Parent concerning
the status of the Company's business, financial condition, assets, liabilities,
results of operations, financial performance and prospects;
(g) the Company immediately notifies Parent of any inquiry, proposal
or offer from any Person relating to any Acquisition Transaction;
(h) the Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and does not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
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(i) the Company does not sell or otherwise issue (or grant any
warrants, options or other rights to purchase) any shares of capital stock or
any other securities;
(j) except as contemplated under this Agreement, the Company does
not amend its Articles of Incorporation or Bylaws, and does not effect or become
a party to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction, or enter into
any transaction or take any other action of the type referred to in Section
4.20(b) through (m);
(k) the Company does not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(l) the Company does not make any capital expenditure expenditures,
unless approved in advance in writing by Parent;
(m) the Company does not enter into, or permit any of the material
assets owned or used by the Company to become bound by, any Contract;
(n) the Company does not incur, assume or otherwise become subject
to any obligation or liability, unless approved in advance in writing by Parent;
(o) the Company does not establish or adopt any "employee benefit
plan" within the meaning of Section 3(3) of ERISA or any other plan,
arrangement, policy or practice of any kind, and does not pay any bonus or make
any profit-sharing or similar payment to, or increase the amount of wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees;
(p) the Company does not change any of its methods of accounting or
accounting practices in any material respect;
(q) the Company does not make any Tax election;
(r) the Company does not commence any Proceeding; and
(s) neither any of the Selling Shareholders nor the Company agrees,
commits or offers (in writing or otherwise) or attempts to take any of the
actions described in the preceding clauses of this Section 7.2.
7.3 FILINGS AND CONSENTS.
The Company and each of the Selling Shareholders shall ensure that:
(a) each filing or notice required to be made or given (pursuant to
any applicable legal requirement, Order or Contract, or otherwise) by the
Company or such Selling Shareholder in connection with the execution and
delivery of this Agreement or any of the other Transactional Agreements or in
connection with the consummation or performance of the Merger or any of the
Related Transactions is made or given as soon as reasonably possible after the
date of this Agreement;
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(b) each Consent required to be obtained (pursuant to any applicable
legal requirement, Order or Contract, or otherwise) by the Company or such
Selling Shareholder in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions is obtained as soon as reasonably possible after the
date of this Agreement and remains in full force and effect through the Closing
Date;
(c) the Company promptly delivers to Parent a copy of each filing
made, each notice given and each Consent obtained by the Company or such Selling
Shareholder during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Company and its
representatives cooperate with Parent and with Parent's representatives, and
prepare and make available such documents and take such other actions as Parent
may request in good faith, in connection with any filing, notice or Consent that
Parent is required or elects to make, give or obtain.
7.4 NO NEGOTIATiON.
Except with respect to the Merger, during the Pre-Closing Period,
neither the Company nor the Selling Shareholders nor any of their respective
representatives, nor any of their employees, directors, representatives,
affiliates or advisors (including legal, accounting, financial and investment
banking advisors) shall directly or indirectly on behalf of the Company or any
of the Selling Shareholders:
(a) enter into any agreement with respect to any Acquisition
Transaction or grant any option or other right to sell, transfer or otherwise
dispose of the shares of capital stock or the assets of the Company or issue any
shares of capital stock of the Company, directly or indirectly, to any Person;
(b) hold any discussion with, or provide any information to, any
Person concerning the Company in connection therewith or provide any information
to, any Person concerning the Company in connection therewith; or
(c) respond to any inquiry made by any Person concerning a proposed
Acquisition Transaction, except to advise such Person that the Company has
entered into this Agreement. The Company and the Selling Shareholders further
agree to advise Parent immediately upon receiving any inquiry from any such
Person. If the Company receives a bona fide offer concerning a proposed
Acquisition Transaction, the Company shall, in addition to notifying Parent of
the receipt of such offer, identify the identity of the proposed buyer.
8. BEST EFFORTS.
During the Pre-Closing Period, each party hereto shall use its best
efforts to cause the conditions set forth in Section 3 to be satisfied on a
timely basis, and shall not take any action or omit to take any action, the
taking or omission of which would or could reasonably be expected to result in
any of the representations and warranties set forth in Section 4, 5 or 6 of this
Agreement becoming untrue, or in any of the conditions of Closing set forth in
Section 3 not being satisfied. The Company and the Selling Shareholders shall
not take any action that could result in the business of the Company becoming
materially less valuable to Parent.
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9. OTHER AGREEMENTS.
9.1 CONFIDENTIALITY.
Each of the parties hereto hereby agrees to and reaffirms the terms and
provisions of the Confidentiality Agreement, dated as of December 13, 1999, by
and Parent, the Company and the certain of the Selling Shareholders.
9.2 PUBLIC DISCLOSURE.
Unless otherwise required by law (including securities laws), prior to
the Effective Time, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement or any other Transactional Agreement shall
be made by any party hereto unless approved by Parent and the Company prior to
release; provided, that such approval shall not be unreasonably withheld,
provided, further, that the parties agree and understand that certain
disclosures regarding the Merger and the Related Transactions may be made to (i)
employees of and advisors to Parent and the Company and (ii) third parties whose
consent or approval may be required in connection with the Merger and the
Related Transactions, in each case without any prior written consent.
10. TERMINATION.
10.1 TERMINATION EVENTS.
This Agreement may be terminated prior to Closing:
(a) by Parent if (i) a representation or warranty of the Company or
any Selling Shareholder is not true and correct in all material respects and
such breach cannot be cured or has not been cured within 15 business days after
written notice is made to the Company or (ii) there is a material breach of any
covenant or obligation of the Company or the Selling Shareholders and such
breach has not been cured within 15 business days of after written notice of
such breach is given to the Company;
(b) by the Company if (i) a representation or warranty of the Parent
or Merger Sub is not true and correct in all material respects and such breach
cannot be cured or has not been cured within 15 business days after written
notice is made to Parent or (ii) there is a material breach of any covenant or
obligation of Parent and such breach has not been cured within 15 business days
of after written notice of such breach is given to Parent;
(c) by either Parent or the Company if the Closing has not taken
place on or before August 15, 2000; or
(d) by the mutual consent of Parent and the Company.
10.2 TERMINATION PROCEDURES.
If Parent wishes to terminate this Agreement pursuant to Section 10.1(a)
or Section 10.1(c), Parent shall deliver to the Company a written notice stating
that Parent is terminating
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this Agreement and setting forth a brief description of the basis on which
Parent is terminating this Agreement. If the Company wishes to terminate this
Agreement pursuant to Section 10.1(b) or Section 10.1(c), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.
10.3 EFFECT OF TERMINATION.
If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement shall terminate; provided, that
each party shall otherwise remain liable for any breaches of this Agreement
prior to its termination and provided, further, that Sections 9, 10.3, 11, 12.2,
12.3, 12.5, 12.10, 12.13, 12.14 and 12.16 shall survive the termination of this
Agreement.
11. SURVIVAL AND INDEMNIFICATION.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The representations, warranties, covenants and obligations of
each party set forth in this Agreement shall survive the Closing until the date
which is 12 months after the Closing Date, at which time they shall terminate
(unless a claim shall have been made with respect to a representation, warranty,
covenant or obligation, in which event such representation, warranty, covenant
or obligation shall survive until such time as such claim has been finally
settled or otherwise resolved and is not subject to any appeals or similar
actions). Notwithstanding the foregoing, the representations and warranties set
forth in Section 4.3 shall survive the Closing indefinitely.
(b) The representations, warranties, covenants and obligations of
the respective parties, and the rights and remedies that may be exercised by any
of them, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by, or the knowledge of, any
of the parties or any of their respective representatives (other than as
specifically disclosed herein or in the Disclosure Schedules).
11.2 INDEMNIFICATION BY THE SELLING SHAREHOLDERS.
(a) Subject to the provisions of this Section 11, and to the extent
of each Selling Shareholder's pro rata share of the Total Merger Consideration,
each Selling Shareholder, jointly but not severally, covenants and agrees to
defend, indemnify and hold harmless Parent and each of its officers, directors,
employees, agents, attorneys and representatives (collectively, the
"Indemnitees" and individually each an "Indemnitee") from and against, and shall
compensate and reimburse each of the Indemnitees for, any Damages which are
suffered or incurred by any of Indemnitees (regardless of whether or not such
Damages relate to any third party claim) directly or indirectly arising or
resulting from or connected with any breach of any representation, warranty,
covenant or other obligation made by the Company in this Agreement or any other
Transactional Agreement; provided however that the obligations to indemnify and
hold harmless set forth in this Section 11.2 shall not apply to any Damages to
the extent arising out of gross negligence, willful misconduct or fraud on the
part of any of the Indemnitees.
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(b) The aggregate amount payable by the Selling Shareholders, on the
one hand, and Parent, on the other hand, pursuant to a breach of any
representation, warranty, covenant or other obligation under this Agreement and
the other Transactional Agreements shall not in any event exceed $200,000, and
the sole source for the payment of the indemnification obligations of the
Selling Shareholders set forth herein shall be in the form of Parent Stock in
the Escrow Account or Parent Stock otherwise received by the Selling
Shareholders pursuant to the Merger (the "Liability Cap"). Notwithstanding the
foregoing, the Liability Cap shall not apply to any breach of any representation
or warranty set forth in Section 4.3.
(c) The Selling Shareholders acknowledge and agree that if there is
any breach of any representation, warranty, covenant or other obligations by the
Selling Shareholders or the Company, then Parent itself shall be deemed, by
virtue of its ownership of the Common Stock, to have incurred Damages as a
result of such breach, and Parent shall be entitled to such indemnification as
may be available pursuant to the terms of this Section 11. Nothing contained in
this Section 11.2(c) shall have the effect of (i) limiting the circumstances
under which Parent may otherwise be deemed to have incurred Damages for purposes
of this Agreement, (ii) limiting the other types of Damages that Parent may be
deemed to have incurred (whether in connection with any such breach or
otherwise) or (iii) limiting the rights of Parent or any of the other
Indemnitees under this Section 11.2.
(d) The number of shares of Parent Stock to be released to Parent
pursuant to the terms of this Agreement and the Escrow Agreement shall be
calculated by dividing the dollar amount of the Damages by the amount equal to
the Parent Stock Price.
(e) The Selling Shareholders are not required to make any
indemnification payment hereunder (or incur any obligation to defend or hold
harmless) unless a claim is made by an Indemnitee prior to expiration of the
applicable survival period set forth in Section 11.1(a).
11.3 NO CONTRIBUTION.
With respect to the matters for which Parent or any other Indemnitee is
entitled to the right of indemnification, defense or hold harmless pursuant to
this Agreement, the parties hereby agree that after the Closing the remedy for
Parent or any Indemnitee seeking indemnification from the Selling Shareholders
hereunder be a remedy solely against the Selling Shareholders and not against
the Company. Accordingly, the Selling Shareholders agree, subject to an
obligation to indemnify, defend or hold harmless arising under this Agreement,
to waive any right they may have for contribution on the part of the Company as
to such indemnification, defense or hold harmless obligation. The Selling
Shareholders further acknowledge that the foregoing waivers, acknowledgments and
agreements of such shareholders contained in this Section 11.3 are an essential
inducement to Parent in entering into this Agreement and agreeing to consummate
the Merger and the Related Transactions.
11.4 INTEREST.
Any party that is required to indemnify or otherwise pay Damages to any
other Person pursuant to this Section 11 or otherwise under this Agreement or
any other Transactional Agreement, shall also be required to pay to such other
Person interest on the amount of such Damages (for the period commencing as of
the date on which such Person first incurred or otherwise became subject to such
Damages and ending on the date on which the applicable
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payment is made to such Person) at rate equal to 8%, except to the extent
interest has been included in the amount of Damages awarded.
11.5 SETOFF.
In addition to any rights of setoff or other rights that any Person may
have at common law or otherwise, each Person shall have the right to set off any
amount that may be owed to it by the other under this Section 11 against any
amount otherwise payable by such Person hereunder.
11.6 DEFENSE OF THIRD PARTY CLAIMS.
(a) In the event of the assertion or commencement by any Person of
any claim or Proceeding with respect to which a party hereto may become
obligated hereunder to indemnify, hold harmless, compensate or reimburse any
Indemnitee pursuant to this Section 11, the party to be indemnified (the
"Indemnified Party") shall reasonably promptly, but in any event within 30 days
following the Indemnified Party's actual knowledge thereof, notify the Person
providing the indemnification hereunder (the "Indemnifying Party") of such claim
or Proceeding by providing notice to each of the Selling Shareholders or to
Parent, as the case may be; provided, however, that failure by the Indemnified
Party to provide such notice shall not release or otherwise affect the
obligation of the Indemnifying Party hereunder or under any other Transactional
Agreement. The Indemnified Party shall also provide the Indemnifying Party with
all information the Indemnified Party may have with respect to such claim or
Proceeding.
(b) In the event of such notice, the Indemnifying Party may proceed
with the defense of such claim or Proceeding and the Indemnifying Party shall
bear and pay all costs and expenses (including attorneys fees and costs) in
connection with the Indemnified Party's defense of any such claim or Proceeding
(whether or not incurred by the Indemnified Party). The Indemnifying Party shall
not settle, adjust or compromise such claim or Proceeding without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(c) If the Indemnifying Party fails to defend promptly and
diligently such claim or Proceeding, the Indemnified Party may proceeds with
such defense and:
(i) all expenses (including, without limitation, attorneys'
fees) reasonably incurred and relating to the defense of such claim or
Proceeding (whether or not incurred by the Indemnified Party) shall be borne and
paid exclusively by the Indemnifying Party;
(ii) the Indemnifying Party shall make available to the
Indemnified Party any documents and materials in the possession or control of
the Indemnifying Party that may be necessary to the defense of such claim or
Proceeding; and
(iii) the Indemnified Party shall not settle, adjust or
compromise such claim or Proceeding without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.
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12. MISCELLANEOUS.
12.1 FURTHER ASSURANCES.
Each party hereto shall execute and/or cause to be delivered to each
other party hereto such instruments and other documents, and shall take such
other actions, as such other party may reasonably request (prior to, at or after
the Closing) for the purpose of carrying out or evidencing any of the
Transactions.
12.2 FEES AND EXPENSES.
Subject to the provisions of this Agreement (including the
indemnification and other obligations of the Selling Shareholders pursuant to
Section 11), each party shall bear and pay all fees, costs and expenses that
have been incurred or that are in the future incurred by or on behalf of such
party in connection with the Merger and the Related Transactions. In furtherance
of the foregoing, all legal fees and other expenses incurred by the Company on
its behalf or on behalf of the Selling Shareholders shall be paid in full at or
prior to the Closing.
12.3 ATTORNEYS' FEES.
If any legal action or other legal proceeding (including arbitration)
relating to the Transactions or the enforcement of any provision of any of the
Transactional Agreements is brought against any party hereto, 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).
12.4 TRANSFER TAXES.
The Selling Shareholders shall be responsible for sales, use and
transfer taxes, including any value added, stock transfer, gross receipts, stamp
duty and real, personal or intangible property transfer taxes, due by reason of
or in connection with the consummation of the Merger, including any interest or
penalties in respect thereof.
12.5 GOVERNING LAW; ARBITRATION.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
(b) Any dispute arising out of or in connection with this Agreement
shall be resolved only by binding arbitration, conducted by the Judicial
Arbitration and Mediation Service (JAMS) (or their successor, and if no
successor, then by the American Arbitration Association), in the City of San
Francisco, State of California according to the rules of such service effective
as of notice, as amended hereby. Written notice of the demand for arbitration
shall be served on the other parties hereto and filed with the arbitration
service. The demand for arbitration shall be made within a reasonable time after
the dispute has arisen, and in no event shall it be made after the date upon
which it would have been barred by the terms of this Agreement or applicable
law. Any arbitrator must be experienced in the subject matter of the
arbitration. Arbitration shall be completed not later than 180 days following
its initiation. In reaching an award, the arbitrator(s) shall follow and be
bound by substantive California law, as if
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they were judges sitting in a California court of law. However, arbitrators
shall in no manner award punitive damages (or damages calculated by applying a
multiplier) or damages for emotional distress. The award shall be in writing and
shall contain findings of fact and conclusion of law and shall set forth the
nature, amount and manner of calculation of all damages. The award shall be
final and binding, and judgment may be entered upon it in any court having
jurisdiction. This provision has been expressly agreed to by the parties with
full understanding that it acts to waive their respective constitutional rights
to a trial by judge or jury and their respective rights to punitive or emotional
distress damages.
12.6 SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided herein, the provisions hereof
shall be solely for the benefit of the parties hereto and shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto and the Indemnitees and shall inure to the
benefit of and be enforceable by each Person who shall be a holder of the Stock
from time to time. None of the parties hereto may assign any of its or their
rights or obligations hereunder to any other party (by contract, operation of
law or otherwise) without the prior written consent of the other, and any
attempted assignment in violation thereof shall be void and of no effect.
12.7 ENTIRE AGREEMENT.
The Transactional Agreements, the Schedules and the Exhibits thereto and
the other documents contemplated expressly thereby constitute the full and
entire understanding and agreement between the parties with regard to the
subjects thereof and supersede all prior agreements and understandings among or
between any of the parties relating to the subject matter hereof.
12.8 SEPARABILITY.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
12.9 AMENDMENTS.
This Agreement may be amended or modified and any provision may be
waived only upon the consent of Parent, the Company and the Selling Shareholders
owning a majority of the outstanding shares of Common Stock. Any amendment or
modification effected pursuant to this Section 12.9 shall be binding upon
Parent, Merger Sub, the Company and the Selling Shareholders.
12.10 NOTICES.
Any notice or other communication required or permitted to be delivered
to any party under this Agreement shall be in writing and shall be deemed
properly delivered, given and received (i) upon delivery if by hand, by
registered mail, by courier or express delivery service or by telecopier during
business hours or (ii) on the following business day if by telecopier after
business hours, to the address or telecopier number set forth beneath the name
of such party
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below (or to such other address or telecopier number as such party shall have
specified in a written notice given to the other parties hereto):
if to the Company or any Selling Shareholder:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ (call first)
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to Parent or Merger Sub:
Nextron Communications, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Prince, LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
12.11 PUBLICITY AND USE OF CONFIDENTIAL INFORMATION.
(a) Notwithstanding anything to the contrary contained in any
agreement among the parties hereto, Parent shall have the right to disclose the
Company's financial statements and related information, the terms of this
Agreement and the identity of the Company to potential investors of Parent,
through the use of printed offering materials or otherwise or as otherwise
required by applicable legal requirements.
(b) The Company (prior to the Closing) and the Selling Shareholders
shall keep strictly confidential, and shall not use, or disclose to any other
Person, any non-public document or other information in the possession of the
Company or any of the Selling Shareholders that relates directly or indirectly
to the business of the Company, Parent or any affiliate of Parent.
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(c) The shareholders shall not issue or disseminate any press
release or other publicity concerning the Merger or any of the Related
Transactions, or permit any press release or other publicity concerning the
Merger or any of the Related Transactions to be issued or otherwise disseminated
by or on behalf of the shareholders without Parent's prior written consent, and
the Selling Shareholders shall continue to keep the terms of this Agreement and
the other Transactional Agreements strictly confidential.
12.12 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
12.13 DELAYS OR OMISSIONS; WAIVERS.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise or waiver of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
12.14 SPECIFIC PERFORMANCE.
Each of the parties agrees that:
(a) in the event of any breach or threatened breach by a party of
any covenant, obligation or other provision set forth in this Agreement, the
other party shall be entitled (in addition to any other remedy set forth in this
Agreement that may be available to it) to (i) a decree or order of specific
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining such
breach or threatened breach; and
(b) neither Parent nor any other Indemnitee, on the one hand, nor
the Selling Shareholders, on the other, shall be required to provide any bond or
other security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.
12.15 HEADINGS.
The headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.
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12.16 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise specified, all references in this Agreement
to "Sections," "Exhibits" and "Schedules" are intended to refer to Sections of
this Agreement and Exhibits and Schedules to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT AND
PLAN OF MERGER as of the date set forth in the first paragraph hereof.
PARENT: NEXTRON COMMUNICATIONS, INC.
a California corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
COMPANY: ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
a California corporation
By
--------------------------------------
Name:
Title:
MERGER SUB: IMPULSESALE ACQUISITION SUB, INC.
a California corporation
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
43
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT AND
PLAN OF MERGER as of the date set forth in the first paragraph hereof.
PARENT: NEXTRON COMMUNICATIONS, INC.
a California corporation
By
--------------------------------------
Name:
Title:
COMPANY: ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
a California corporation
By /s/ Nail ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: Nail ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President/CEO
MERGER SUB: IMPULSESALE ACQUISITION SUB, INC.
a California corporation
By
--------------------------------------
Name:
Title:
44
SELLING SHAREHOLDERS:
/s/ Nail ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Nail ▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
45
SELLING SHAREHOLDERS:
-----------------------------------------
Nail ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
46
AGREEMENT AND PLAN OF MERGER
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms (provided they
appear in the capitalized form) shall have the meanings:
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or assets (other than in the Ordinary Course
of Business);
(b) the issuance, sale or other disposition of (i) any capital stock
of the Company, (ii) any option, call, warrant or right (whether
or not immediately exercisable) to acquire any capital stock of
the Company, or (iii) any security, instrument or obligation that
is or may become convertible into or exchangeable for any capital
stock of the Company;
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company; or
(d) any proposed transaction involving any of the foregoing.
COMPANY BOARD. "Company Board" shall mean the members of the board of
directors of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean, with respect to any Person, any written
or oral or other contract, arrangement or other agreement to which such Person
is a party or by which its properties or assets may be bound or affected or
under which it or its respective business, properties or assets receive
benefits.
DAMAGES. "Damages" shall include any direct or consequential (but
excluding any incidental) loss, damage, injury, decline in value, liability,
settlement, judgment, award, fine, penalty, Tax, fee (including any reasonable
legal fee, expert fee, accounting fee or advisory fee), charge, cost (including
any cost of investigation) or expense of any nature.
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust or company (including any limited
liability company or joint stock company).
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign legal requirement relating to pollution or protection of human
health or the environment.
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ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
GAAP. "GAAP" shall mean United States generally accepted accounting
principles.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, approval, consent,
permission, clearance, waiver, certification, designation,
registration, qualification or authorization issued, granted,
given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any legal requirement; or
(b) right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, province, territory, county,
municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or
(c) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
KEY EMPLOYEES. "Key Employees" shall refer to each of ▇▇▇▇▇ and ▇▇▇▇▇▇▇.
LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
MEMBER OF THE CONTROLLED GROUP. "Member of the Controlled Group" shall
mean each trade or business, whether or not incorporated, which would be treated
as a single employer with the Company under Section 4001 of ERISA or Section
414(b), (c), (m) or (o) of the Code.
MERGER SUB BOARD. "Merger Sub Board" shall refer to the Board of
Directors of Merger Sub.
ORDER. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling, subpoena,
writ or award that is or has been issued, made, entered, rendered
or otherwise put into effect by or under the authority of any
court, administrative agency or other Governmental Body or any
arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is or has been entered
into in connection with any Proceeding.
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ORDINARY COURSE OF BUSINESS. An action taken by or on behalf of the
Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is recurring in nature, is consistent with the
Company's past practices and is taken in the ordinary course of
the Company's normal day to day operations;
(b) such action is taken in accordance with sound and prudent
business practices; and
(c) such action is not required to be authorized by the Company's
shareholders, the Company Board or any committee of the Company
Board and does not require any other separate or special
authorization of any nature.
PARENT BOARD. "Parent Board" shall refer to the Board of Directors of
Parent.
PARENT STOCK. "Parent Stock" shall refer to the Common Stock of Parent,
par value $0.001 per share.
PARENT STOCK PRICE. "Parent Stock Price" shall mean (a) as of the date
hereof, $2.00 and (b) after the date hereof, (i) if shares of Parent Stock are
not traded on a public securities exchange or on the Nasdaq National Market, the
price per share determined in good faith by the Parent Board from time to time
(provided that such price shall in no event be less than the per share price at
which shares of Parent Stock (or their equivalents) were last issued or at which
options were last granted) and (ii) if shares of Parent Stock are traded on a
public exchange or on the Nasdaq National Market, the average closing price for
the most recent five trading days immediately prior to the date on which a
determination of an amount under this Agreement is made, as adjusted in each
case to reflect stock dividends, stock splits, reverse stock splits or
recapitalizations of the Parent Stock.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PRE-CLOSING PERIOD. "Pre-Closing Period" shall mean the period from the
date of this Agreement until the Closing Date.
PROCEEDING. "Proceeding" shall mean any material action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding and any informal
proceeding), hearing, inquiry, audit or investigation that is or has been
commenced, brought, conducted or heard by or before, or that otherwise has
involved or may involve, any Governmental Body or any arbitrator or arbitration
panel.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service ▇▇▇▇ (whether registered or unregistered), service ▇▇▇▇
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset.
RELATED PARTY. Each of the following shall be deemed to be a "Related
Party":
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(a) the Selling Shareholders;
(b) each individual who is, or who has at any time been, an officer
of the Selling Shareholders or the Company;
(c) each member of the family of each of the individuals referred to
in clause (b) above; and
(d) any Entity (other than the Selling Shareholders or the Company)
in which any one of the Persons referred to in clause (a), (b) or
(c) above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
SEC. "SEC" shall mean the Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
in the future may be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax sharing
agreement or similar Contract.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or in the future may be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
legal requirement relating to any Tax.
TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean this
Agreement, the Escrow Agreement, the Restricted Stock Agreements, the Employment
Agreements, the Nondisclosure Invention Agreements, the Selling Shareholders
Closing Certificate, the Company Closing Certificate, the Parent Closing the
Certificate, the Agreement of Merger to be filed with the Secretary of State of
the State of California and the filing required by Section 25103 of the
California Corporate Securities Law of 1968, as amended.
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