AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER BY AND AMONG STARVOX ACQUISITION INC., AND STARVOX COMMUNICATIONS, INC. Dated as of February 6, 2007
AMENDED
AND RESTATED AGREEMENT AND PLAN OF MERGER
BY
AND AMONG
U.S.
WIRELESS DATA, INC.,
STARVOX
ACQUISITION INC.,
AND
STARVOX
COMMUNICATIONS, INC.
Dated
as of February 6, 2007
AGREEMENT
AND PLAN OF MERGER
THIS
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
made and entered into as of February 6, 2007, by and among U.S. Wireless
Data,
Inc., a Delaware corporation (“Parent”),
StarVox Acquisition, Inc., a California corporation and a wholly-owned
subsidiary of Parent (“Merger
Sub”),
and
StarVox Communications, Inc., a California corporation (the “Company”).
RECITALS
A. Parent,
Merger Sub and the Company intend to enter into a business combination
transaction by means of a merger (the “Merger”)
of
Merger Sub with and into the Company in accordance with this Agreement
and the
California General Corporation Law (the “CGCL”),
with
the Company to be the surviving corporation of the Merger, through an exchange
of all the issued and outstanding shares of capital stock of the Company
for
shares of capital stock of Parent.
B. Pursuant
to the Merger, each outstanding share of Company common stock, $.001 par
value
per share (the “Company
Common Stock”),
and
each outstanding share of Company Series A Preferred Stock, $.001 par value
per
share (“Company
Preferred Stock”)
shall be
converted into the right to receive the Merger Consideration (as defined
in
Section 1.5(b)),
upon
the terms and subject to the conditions set forth herein.
C. The
Merger is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”),
and
this Agreement is intended to constitute a “plan of reorganization” within the
meaning of the regulations promulgated under Section 368 of the
Code.
D The
Board
of Directors of the Company has unanimously (i) determined that the Merger
is fair to, and in the best interests of, the Company and its shareholders,
and
(ii) approved this Agreement, the Merger and the other transactions
contemplated by this Agreement.
E. The
respective Boards of Directors of Parent and Merger Sub have approved this
Agreement, the Merger and the other transactions contemplated by this
Agreement.
F.
Parent, Merger Sub and the Company previously entered into that certain
Agreement and Plan of Merger, dated as of June 14, 2006 (the “Original
Agreement”)
and
the parties desire to amend and restate the Original Agreement in its entirety.
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger.
At the Effective Time (as defined in Section 1.2)
and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the CGCL, Merger Sub shall be merged with and
into
Company (the “Merger”),
the
separate corporate existence of Merger Sub shall cease and Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the “Surviving
Corporation.”
1.2 Effective
Time; Closing.
Subject to the conditions of this Agreement, the parties hereto shall cause
the
Merger to be consummated by filing with the Secretary of State of the State
of
California a properly executed agreement of merger (the “Agreement
of Merger”)
in
such form as may be agreed by the parties hereto and as required by the
relevant
provisions of the CGCL (the time of such filing with the Secretary of State
of
the State of California, or such later time as may be agreed in writing
by
Company and Parent and specified in the Agreement of Merger, being the
“Effective
Time”)
as
soon as practicable on or after the Closing Date (as herein defined). The
term
“Agreement” as used herein refers to this Agreement and Plan of Merger, as the
same may be amended from time to time, and all schedules hereto (including
the
Company Schedule and the Parent Schedule, as defined in the preambles to
Articles II
and
III
hereof,
respectively). Unless this Agreement shall have been terminated pursuant
to
Section 7.1,
the
closing of the Merger (the “Closing”)
shall
take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional
Corporation (“WSGR”),
counsel to the Company, at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
at a
time and date to be specified by the parties, which shall be no later than
the
second business day after the satisfaction or waiver of the conditions
set forth
in Article VI,
or at
such other time, date and location as the parties hereto agree (the
“Closing
Date”).
Closing signatures may be transmitted by facsimile.
1.3 Effect
of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in
this
Agreement and the applicable provisions of the CGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time
all the
property, rights, privileges, powers and franchises of the Company and
Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities
and
duties of the Company and Merger Sub shall become the debts, liabilities
and
duties of the Surviving Corporation.
1.4 Articles
of Incorporation and Bylaws;
Parent Certificate of Designation.
(a) At
the
Effective Time, the Articles of Incorporation of Merger Sub shall be the
Articles of Incorporation of the Surviving Corporation, except that the
name of
the Surviving Corporation shall be amended to “StarVox Communications,
Inc.”
(b) Also
at
the Effective Time, the Bylaws of Merger Sub shall be the Bylaws of the
Surviving Corporation.
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(c) Prior
to
the Effective Time, Parent shall designate a Series A preferred stock,
$.01 par
value per share (“Parent
Preferred Stock”),
with
such rights, preferences, privileges and restrictions as are set forth
in
substantially the form of the Certificate of Designation attached hereto
as
Exhibit
B
(“Certificate
of Designation”),
and
shall file the Certificate of Designation with the Secretary of State of
the
State of Delaware.
(d) The
Company and Parent agree that the conversion rights reflected in the Certificate
of Designation are based on the allocation of equity to the security holders
of
the Company as set forth in Schedule 1.4(d) attached hereto. In the event
that
it becomes necessary to update the information set forth in Schedule 1.4(d)
to
ensure its accuracy prior to the Effective Time, the parties agree that
the
conversion rights reflected in Section
1.5(a)
below
and in the Certificate of Designation shall be adjusted to reflect as nearly
as
practicable their intended allocation of equity
1.5 Effect
on Capital Stock.
Subject to the terms and conditions of this Agreement, at the Effective
Time, by
virtue of the Merger and this Agreement and without any action on the part
of
Merger Sub, the Company or the holders of any of the following securities,
the
following shall occur:
(a) All
shares of Company Common Stock and Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any shares
of
Company Common Stock to be cancelled and retired pursuant to Section
1.5(d)
and any
Dissenting Shares as defined in Section
1.13
below)
shall be converted, on a pro rata basis, automatically into the right to
receive
301,593.97 shares of fully paid and non-assessable shares of Parent Preferred
Stock which, when converted, will equal 22,224,700.70 fully paid and
non-assessable shares of Parent Common Stock. For purposes of this Agreement,
the “Company
Stock Exchange Ratio”
shall
initially be the per share conversion ratio of one share of either of Company
Common Stock or Company Preferred Stock (together, the “Company
Capital Stock”)
into
0.00140303 shares of Parent Preferred Stock, subject to adjustment as set
forth
in Section 1.5(h).
(b) From
and
after the Effective Time, all shares of Company Common Stock, and Company
Preferred Stock (together, “Company
Capital Stock”)
(other
than any shares of Company Capital Stock to be canceled and retired pursuant
to
Section 1.5(d)
and any
Dissenting Shares) shall be deemed canceled and shall cease to exist, and
each
holder of a certificate which previously represented any such share of
Company
Capital Stock (each, a “Company
Certificate”
and,
collectively, the “Company
Certificates”)
shall
cease to have any rights with respect thereto except as set forth herein
or
under applicable law. The shares of Parent Preferred Stock to be issued
pursuant
to Section 1.5(a)
are
collectively referred to herein as the “Merger
Shares”
or
the
“Merger
Consideration.”
(c) Certificates
for Shares.
The
certificates representing the shares of Parent Preferred Stock issuable
with
respect to certificates for shares of Company Capital Stock (“Certificates”)
shall
be issued to the holders of the shares of Company Capital Stock upon surrender
of the Certificates representing such shares in the manner provided in
Section 1.6
(or in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and indemnity, if required) in the manner provided in Section 1.8).
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(d) Cancellation
of Treasury and Parent-Owned Stock.
Each
share of Company Capital Stock held by the Company or owned by Merger Sub,
Parent or any direct or indirect wholly-owned subsidiary of the Company
or of
Parent immediately prior to the Effective Time shall be canceled and
extinguished without any conversion or payment in respect thereof.
(e) Stock
Options.
All
options to purchase Company Common Stock then outstanding under the Company’s
2007 Stock Plan (the “Company
Stock Option Plan”)
shall
be assumed by Parent in accordance with Section 5.11.
(f) Warrants.
All
warrants to purchase Company Common Stock (the “Company
Warrants”)
then
outstanding shall be assumed by Parent in accordance with Section 5.11,
provided, however, that if a Company Warrant cannot be assumed in accordance
with its terms consistent with Section
5.11,
or if
the Company and Parent mutually agree that a modification to the Company
Warrant
is required in connection with its assumption prior to the Closing, then
such
modification shall be satisfactory to each of the Company and Parent.
(g) Capital
Stock of Merger Sub.
Each
share of Common Stock, no par value per share, of Merger Sub (the “Merger
Sub Common Stock”)
issued
and outstanding immediately prior to the Effective Time shall be converted
automatically into one validly issued, fully paid and non-assessable share
of
common stock, $.001 par value per share, of the Surviving Corporation.
Each
certificate evidencing ownership of shares of Merger Sub Common Stock shall
evidence ownership of such shares of common stock of the Surviving
Corporation.
(h) Adjustments
to Exchange Ratios.
The
numbers of shares of Parent Preferred Stock that the holders of the Company
Capital Stock are entitled to receive as a result of the Merger shall be
equitably adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution
of
securities convertible into Parent Preferred Stock or Company Capital Stock),
extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change
with
respect to Parent Preferred Stock or Company Capital Stock occurring on
or after
the date hereof and prior to the Effective Time.
(i) Fractional
Shares.
Following the increase of the authorized Parent Common Stock as contemplated
by
Section
5.16
below,
no fraction of a share of Parent Common Stock will be issued by virtue
of the
Merger, and each holder of shares of Company Capital Stock who would otherwise
be entitled to a fraction of a share of Parent Common Stock (after aggregating
all fractional shares of Parent Common Stock that otherwise would be received
by
such holder) shall, upon compliance with Section 1.6,
receive
from Parent, in lieu of such fractional share, one (1) share of Parent
Common
Stock.
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1.6 Surrender
of Certificates.
The procedures for exchanging outstanding shares of Company Capital Stock
for
Merger Consideration pursuant to the Merger are set forth in Exhibit A
attached
hereto, which is incorporated by reference herein as if set forth in
full.
1.7 No
Further Ownership Rights in Company Stock.
All shares of Parent Preferred Stock issued in accordance with the terms
hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Stock and there shall be no further
registration of transfers on the records of the Surviving Corporation of
shares
of Company Capital Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented
to the
Surviving Corporation for any reason, they shall be canceled and exchanged
as
provided in this Article I.
1.8 Lost,
Stolen or Destroyed Certificates.
In the event that any Certificates shall have been lost, stolen or destroyed,
Parent shall issue in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof, the
certificates representing the shares of Parent Preferred Stock that the
shares
of Company Common Stock formerly represented by such Certificates were
converted
into and any dividends or distributions payable pursuant to Section 1.6;
provided,
however,
that,
as a condition precedent to the issuance of such certificates representing
shares of Parent Preferred Stock and other distributions, the owner of
such
lost, stolen or destroyed Certificates shall indemnify Parent against any
claim
that may be made against Parent or the Surviving Corporation with respect
to the
Certificates alleged to have been lost, stolen or destroyed.
1.9 Tax
Consequences.
It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code. The parties
hereto adopt this Agreement as a “plan of reorganization” within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the Treasury Regulations under the
Code.
1.10 Taking
of Necessary Action; Further Action.
If, at any time after the Effective Time, any further action is necessary
or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub,
the
officers and directors of the Company and Merger Sub will take all such
lawful
and necessary action.
1.11 Rule 145.
All shares of Parent Preferred Stock issued pursuant to this Agreement
to
“affiliates” of the Company will be subject to certain resale restrictions under
Rule 145 promulgated under the Securities Act and all certificates
representing such shares shall bear an appropriate restrictive legend.
1.12 Notice
to Holders of Derivative Securities.
As promptly as practicable after the execution of this Agreement, the Company,
after consultation with Parent, shall give the holders of derivative securities
of the Company any required notices pursuant to the terms thereof, with
the
expectation that each such derivative security shall be assumed by Parent
in
accordance with the provisions of Section 5.11, provided, however, that
if a
derivative security cannot be assumed in accordance with its terms consistent
with Section 5.11, or if the Company and Parent mutually agree that a
modification to the derivative security is required in connection with
its
assumption prior to the Closing, then such modification shall be satisfactory
to
each of the Company and Parent.
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1.13 Shares
Subject to Dissenters’ Rights.
(a) Notwithstanding
any provisions of this Agreement to the contrary, Dissenting Shares (as
hereinafter defined) shall not be converted into a right to receive Parent
Preferred Stock and the holders thereof shall be entitled only to such
rights as
are granted by the CGCL. Each holder of Dissenting Shares who becomes entitled
to payment for such shares pursuant to the CGCL shall receive payment therefor
from the Surviving Corporation in accordance with the CGCL, provided,
however,
that
(i) if any shareholder of the Company who asserts dissenters’ rights in
connection with the Merger (a “Dissenter”)
shall
have failed to establish his entitlement to such rights as provided in
the CGCL,
or (ii) if any such Dissenter shall have effectively withdrawn his demand
for payment for such shares or waived or lost his right to payment for
his
shares under the appraisal rights process under the CGCL, the shares of
Company
Common Stock held by such Dissenter shall be treated as if they had been
converted, as of the Effective Time, into a right to receive Parent Preferred
Stock and as provided in Section 1.5.
The
Company shall give Parent prompt notice of any demands for payment received
by
the Company from a person asserting dissenters’ rights, and Parent shall have
the right to participate in all negotiations and proceedings with respect
to
such demands. The Company shall not, except with the prior written consent
of
Parent, make any payment with respect to, or settle or offer to settle,
any such
demands.
(b) As
used
herein, “Dissenting
Shares”
means
any shares of Company Common Stock held by shareholders of the Company
who are
entitled to dissenters’ rights under the CGCL, and who have properly exercised,
perfected and not subsequently withdrawn or lost or waived their rights
to
demand payment with respect to their shares in accordance with the
CGCL.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Subject
to the exceptions set forth in Schedule 2 attached hereto (the
“Company
Schedule”),
the
Company hereby represents and warrants to Parent and Merger Sub, as follows
(as
used in this Article II and elsewhere in this Agreement, the term “Company”
includes the Subsidiaries of the Company, as hereinafter defined, unless
the
context clearly otherwise indicates):
2.1 Organization
and Qualification.
(a) The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. The
Company is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders (“Approvals”)
necessary to own, lease and operate the properties it purports to own,
operate
or lease and to carry on its business as it is now being conducted, except
where
the failure to have such Approvals would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company.
Complete and correct copies of the articles of incorporation and bylaws
(or
other comparable governing instruments with different names) (collectively
referred to herein as “Charter
Documents”)
of the
Company, as amended and currently in effect, have been heretofore delivered
to
Parent or Parent’s counsel. The Company is not in violation in any material
respects of any of the provisions of the Company’s Charter
Documents.
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(b) The
Company is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities
makes
such qualification or licensing necessary, except for such failures to
be so
duly qualified or licensed and in good standing that would not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
the Company. Each jurisdiction in which the Company is so qualified or
licensed
is listed in Schedule 2.1.
(c) The
minute books of the Company contain records of all meetings and consents
in lieu
of meetings of its Board of Directors (and any committees thereof), similar
governing bodies and stockholders (“Corporate
Records”)
that
are true, complete and accurate in all material respects since June 28,
2004.
Copies of such Corporate Records of the Company have been heretofore made
available to Parent or Parent’s counsel.
(d) The
stock
transfer, warrant and option transfer and ownership records of the Company
contain records of the securities ownership that are true, complete and
accurate
in all material respects as of the date of such records and the transfers
involving the capital stock and other securities of the Company since June
28,
2004. Copies of such records of the Company have been heretofore made available
to Parent or Parent’s counsel.
2.2 Subsidiaries.
(a) The
Company has no subsidiaries other than those listed on Schedule 2.2 (each,
a “Subsidiary”
and,
collectively, the “Subsidiaries”).
Except for the Subsidiaries, the Company does not own, directly or indirectly,
any ownership, equity, profits or voting interest in any Person or have
any
agreement or commitment to purchase any such interest, and has not agreed
and is
not obligated to make nor is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note,
option,
warranty, purchase order, license, sublicense, insurance policy, benefit
plan,
commitment or undertaking of any nature, as of the date hereof or as may
hereafter be in effect under which it may become obligated to make, any
future
investment in or capital contribution to any other entity.
(b) Each
Subsidiary that is a corporation is duly incorporated, validly existing
and in
good standing under the laws of its state of incorporation (as listed on
Schedule 2.2) and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business
as it
is now being conducted. Each Subsidiary that is a limited liability company
is
duly organized or formed, validly existing and in good standing under the
laws
of its state of organization or formation (as listed on Schedule 2.2) and
has the requisite power and authority to own, lease and operate its assets
and
properties and to carry on its business as it is now being conducted. Each
Subsidiary is in possession of all Approvals necessary to own, lease and
operate
the properties it purports to own, operate or lease and to carry on its
business
as it is now being conducted, except where the failure to have such Approvals
would not, individually or in the aggregate, reasonably be expected to
have a
Material Adverse Effect on the Company. Complete and correct copies of
the
Charter Documents of each Subsidiary, as amended and currently in effect,
have
been heretofore delivered to Parent or Parent’s counsel. No Subsidiary is in
violation in any material respects of any of the provisions of its Charter
Documents.
(c) Each
Subsidiary is duly qualified or licensed to do business as a foreign corporation
or foreign limited liability company and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated
by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed
and in
good standing that would not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on the Company. Each jurisdiction
in
which each Subsidiary is so qualified or licensed is listed in
Schedule 2.2.
2.3 Capitalization.
(a) The
authorized capital stock of Company consists of 36,000,000 shares of Common
Stock, $.001 par value per share, of which there were 3,460,000 shares
issued
and outstanding as of the date of this Agreement; and 25,900,000 shares
of
Preferred Stock, $.001 par value per share. Of the authorized Preferred
Stock,
24,000,000 shares have been designated Series A Preferred Stock, of which a
total of 18,835,688 shares were issued and outstanding as of the date of
this
Agreement; and 1,900,000 shares have been designated Series A-1 Preferred
Stock,
all of which are issued and outstanding as of the date of this Agreement.
No
other shares of Preferred Stock are issued or outstanding. All outstanding
shares of Company Common Stock and Company Preferred Stock are duly authorized,
validly issued, fully paid and non-assessable and are not subject to preemptive
rights created by statute, the Charter Documents of Company or any agreement
or
document to which the Company is a party or by which it is bound, and were
issued in compliance in all material respects with all applicable federal
and
state securities laws. All shares of Company Common Stock subject to issuance
as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and non-assessable. Schedule 2.3(a) hereto lists
each holder of Company Common Stock and Company Preferred Stock, each
outstanding option (the “Company
Stock Option”)
and
warrant (the “Company
Warrant”)
and
each outstanding convertible debenture, promissory note or other indebtedness
(the “Company
Convertible Security”)
to
acquire shares of Company Common Stock or Company Preferred Stock, as
applicable, the number of shares subject to such Company Option, Company
Warrant
or Company Convertible Security, and the exercise price of such Company
Option
or Company Warrant or conversion price of such Company Convertible Security.
The
Company has delivered to Parent or Parent’s Counsel true and accurate copies of
the forms of documents used for the issuance of Company Stock Options,
Company
Warrants and Company Convertible Securities.
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(b) Except
as
contemplated by this Agreement and except as set forth in Section 2.3(a)
hereof,
there are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Company
is a
party or by which it is bound obligating the Company to issue, deliver
or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares
of
capital stock, partnership interests or similar ownership interests of
the
Company or obligating the Company to grant, extend, accelerate the vesting
of or
enter into any such subscription, option, warrant, equity security, call,
right,
commitment or agreement.
(c) Except
as
contemplated by this Agreement and except as set forth on Schedule 2.3(c)
hereto, there are no registration rights, and there is no voting trust,
proxy,
rights plan, anti-takeover plan or other agreement or understanding to
which the
Company is a party or by which the Company is bound with respect to any
equity
security of any class of the Company.
(d) The
authorized and outstanding capital stock or membership interests of each
Subsidiary are set forth in Schedule 2.3(d) hereto. Except as set forth in
Schedule 2.3(d), the Company owns all of the outstanding equity securities
of each Subsidiary, free and clear of all Liens, either directly or indirectly
through one or more other Subsidiaries. There are no outstanding options,
warrants or other rights to purchase securities of any Subsidiary.
2.4 Authority
Relative to this Agreement.
The Company has all necessary corporate power and authority to execute
and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby (including the Merger).
The
execution and delivery of this Agreement and the consummation by the Company
of
the transactions contemplated hereby (including the Merger) have been duly
and
validly authorized by all necessary corporate action on the part of the
Company
(including the approval by its Board of Directors and its shareholders,
subject
in all cases to the satisfaction of the terms and conditions of this Agreement,
including the conditions set forth in Article VI),
and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby
pursuant to the CGCL and the terms and conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by the Company
and,
assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes the legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
2.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company shall not, (i) conflict with
or violate the Company’s Charter Documents, (ii) subject to obtaining the
adoption of this Agreement and the Merger by the shareholders of the Company,
conflict with or violate any Legal Requirements (as defined in Section 8.2(b)),
(iii) except as set forth in Schedule 2.5, result in any breach of or
constitute a default (or an event that with notice or lapse of time or
both
would become a default) under, or materially impair the Company’s rights or
alter the rights or obligations of any third party under, or give to others
any
rights of termination, amendment, acceleration or cancellation of, or result
in
the creation of a lien or encumbrance on any of the properties or assets
of the
Company pursuant to, any Company Contracts or (iv) except as set forth in
Schedule 2.5, result in the triggering, acceleration or increase of any
payment to any Person pursuant to any Company Contract, including any “change in
control” or similar provision of any Company Contract, except, with respect to
clauses (ii), (iii) or (iv), for any such conflicts, violations, breaches,
defaults, triggerings, accelerations, increases or other occurrences that
would
not, individually and in the aggregate, have a Material Adverse Effect
on the
Company. For purposes of this Agreement, the term “Contract”
shall
mean all contracts, agreements, leases, mortgages, indentures, notes, bonds,
licenses, permits, commitments and obligations of any kind, whether written
or
oral, to which the Company (or Parent, as applicable) is a party or by
or to
which any of the properties or assets of Company (or Parent, as applicable)
may
be bound.
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(b) The
execution and delivery of this Agreement by the Company does not, and the
performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any
Governmental Entity, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act or Blue Sky Laws, and the rules and regulations
thereunder, and appropriate documents received from or filed with the relevant
authorities of other jurisdictions in which the Company is licensed or
qualified
to do business, (ii) for the filing of any notifications required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
“HSR
Act”)
and
the expiration of the required waiting period thereunder, (iii) any necessary
filings and approvals relating to the Federal Communications Commission
(“FCC”),
and
(iv) consents, approvals, authorizations or permits the failure of which to
obtain would not reasonably be expected to result in a Material Adverse
Effect
on the Company. For purposes of this Agreement, the term “Governmental Entity”
shall mean any government, governmental, statutory, regulatory or administrative
authority, agency, body or commission or any court, tribunal or judicial
body,
whether federal, state, local or foreign.
2.6 Compliance.
The Company has complied with and is not in violation of any Legal Requirements
with respect to the conduct of its business, or the ownership or operation
of
its business, except for failures to comply or violations which, individually
or
in the aggregate, have not had and are not reasonably likely to have a
Material
Adverse Effect on the Company. Except as set forth in Schedule 2.6, no
written notice of non-compliance with any Legal Requirements has been received
by the Company (and the Company has no knowledge of any such notice delivered
to
any other Person). The Company is not in violation of any term of any Company
Contract, except for failures to comply or violations which, individually
or in
the aggregate, have not had and are not reasonably likely to have a Material
Adverse Effect on the Company.
2.7 Brokers;
Third Party Expenses.
Except as set forth in Schedule 2.7 hereto, the Company has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage,
finders’
fees, agent’s commissions or any similar charges in connection with this
Agreement or any transactions contemplated hereby.
2.8 Corporate
Approvals.
The Board of Directors of the Company has, as of the date of this Agreement,
(i) approved the Merger and the transactions contemplated by this
Agreement, and (ii) approved an amendment to the Company’s Articles of
Incorporation to enable the exchange of Company Preferred Stock for Parent
Preferred Stock based on the Company Stock Exchange Ratio.
2.9 Company
Information; Financial Statements.
(a) The
Company has furnished or will furnish to Parent all information concerning
itself, its Subsidiaries, their respective directors, officers and stockholders
and such other matters as may be reasonably necessary or advisable in connection
with the preparation of the Merger Form 8-K (as hereafter defined), or any
other statement, filing, notice or application made by or on behalf of
the
Company to any third party and/or any Governmental Entity in connection
with the
Merger and the other transactions contemplated hereby (collectively, the
“Company
Information”).
The
Company warrants and represents that all Company Information shall be true
and
correct in all material respects and will not contain any untrue statement
of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. The Merger Form
8-K,
to the extent of information relating to or provided by the Company: (i)
was
prepared in accordance and complies in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable,
and (ii)
did not at the time it will be filed contain any untrue statement of a
material
fact or omit to state a material fact required to be stated therein or
necessary
to make the statements therein, in light of the circumstances under which
they
were made, not misleading.
(b) Each
set
of financial statements (including, in each case, any related notes thereto)
provided in the Company Information supplied to Parent on or after October
1,
2006 complied or will comply as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, was or
will be
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto)
and each
fairly presents or will fairly present in all material respects the financial
position of the Company at the respective dates thereof and the results
of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were, are or will be subject to normal adjustments
which were not or are not expected to have a Material Adverse Effect on
the
Company taken as a whole.
2.10 Survival
of Representations and Warranties.
The representations and warranties of Company set forth in this Agreement
shall
not survive the Closing.
-9-
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except
as
set forth in Schedule 3 attached hereto (the “Parent
Schedule”),
Parent represents and warrants to the Company, as follows:
3.1 Organization
and Qualification.
(a) Parent
is
a corporation duly incorporated, validly existing and in good standing
under the
laws of the State of Delaware and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry
on
its business as it is now being conducted. Parent is in possession of all
Approvals necessary to own, lease and operate the properties it purports
to own,
operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such Approvals would not, individually
or in
the aggregate, reasonably be expected to have a Material Adverse Effect
on
Parent.
(b) Parent
is
duly qualified or licensed to do business as a foreign corporation and
is in
good standing, in each jurisdiction where the character of the properties
owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so
duly
qualified or licensed and in good standing that would not, individually
or in
the aggregate, reasonably be expected to have a Material Adverse Effect
on
Parent.
(c) Merger
Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of California and has the requisite corporate
power
and authority to own, lease and operate its assets and properties and to
carry
on its business as it is now being or currently planned by Parent to be
conducted. Merger Sub is not in violation in any material respects of any
of the
provisions of the Merger Sub’s Charter Documents.
3.2 Subsidiaries.
Except for Merger Sub, which is a wholly-owned subsidiary of Parent, Parent
has
no Subsidiaries and does not own, directly or indirectly, any ownership,
equity,
profits or voting interest in any Person or has any agreement or commitment
to
purchase any such interest, and Parent has not agreed and is not obligated
to
make nor is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan, commitment
or undertaking of any nature, as of the date hereof or as may hereafter
be in
effect under which it may become obligated to make, any future investment
in or
capital contribution to any other entity.
3.3 Capitalization.
(a) As
of the
date of this Agreement, the authorized capital stock of Parent consists
of
19,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred
stock, $.01 par value per share, 600,000 of which prior to the Effective
Time
will be designated as Parent Preferred Stock. A total of 9,499,730 shares
of
Parent Common Stock are issued and outstanding, all of which are validly
issued,
fully paid and non-assessable; and no shares of Parent Preferred Stock
have been
issued or are outstanding. The outstanding shares of Parent Common Stock
are not
subject to preemptive rights created by statute, the Charter Documents
of Parent
or any agreement or document to which Parent is a party or by which it
is bound,
and were issued in compliance in all material respects with all applicable
federal and state securities laws. On or prior to the Closing, the Certificate
of Designation shall be filed by Parent with the Delaware Secretary of
State.
Parent has reserved a total of 600,000 shares of Parent Preferred Stock
for
issuance upon the Closing, and the rights, preferences, privileges and
restrictions of the Parent Preferred Stock are stated in their entirety
in the
Certificate of Designation. Except as contemplated in this Section
3.3(a)
or as
set forth in Schedule 3.3(a), (i) no shares of Parent Common Stock or
Parent Preferred Stock are reserved for issuance upon the exercise of
outstanding options to purchase Parent Common Stock or Parent Preferred
Stock
granted to employees of Parent or other parties (“Parent
Stock Options”)
and
there are no outstanding Parent Stock Options; (ii) no shares of Parent
Common Stock or Parent Preferred Stock are reserved for issuance upon the
exercise of outstanding warrants to purchase Parent Common Stock or Parent
Preferred Stock (“Parent
Warrants”)
and
there are no outstanding Parent Warrants; and (iii) no shares of Parent
Common Stock or Parent Preferred Stock are reserved for issuance upon the
conversion of the Parent Preferred Stock or any outstanding convertible
notes,
debentures or securities (“Parent
Convertible Securities”).
All
shares of Parent Preferred Stock subject to issuance as aforesaid, upon
issuance
on the terms and conditions specified in this Agreement and the Certificate
of
Designation, will be duly authorized, validly issued, fully paid and
non-assessable; and all shares of Parent Common Stock, upon receipt of
approval
of the stockholders of Parent as required under Section
5.16
below
and upon conversion of the Parent Preferred Stock into Parent Common Stock,
will, without further action on the part of Parent or any stockholder of
Parent,
be duly authorized, validly issued, fully paid and non-assessable.
-10-
(b) Except
as
contemplated by this Agreement and except as set forth in Section 3.3(a)
hereof,
there are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Parent is
a party
or by which it is bound obligating Parent to issue, deliver or sell, or
cause to
be issued, delivered or sold, or repurchase, redeem or otherwise acquire,
or
cause the repurchase, redemption or acquisition of, any shares of capital
stock,
partnership interests or similar ownership interests of Parent or obligating
Parent to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment
or
agreement.
(c) Except
as
set forth in Schedule 3.3(b) or as contemplated by this Agreement, there
are no registrations rights, and there is no voting trust, proxy, rights
plan,
anti-takeover plan or other agreements or understandings to which the Parent
is
a party or by which the Parent is bound with respect to any equity security
of
any class of the Parent.
3.4 Authority
Relative to this Agreement. Each
of Parent and Merger Sub has all necessary corporate power and authority
to
(i) execute, deliver and perform this Agreement and each ancillary document
which Parent or Merger Sub has executed or delivered or is to execute or
deliver
pursuant to this Agreement, (ii) file immediately the Certificate of Designation
with the Delaware Secretary of State, and (iii) carry out Parent’s and
Merger Sub’s obligations hereunder and thereunder and, to consummate the
transactions contemplated hereby (including the Merger). The execution
and
delivery of this Agreement, the filing of the Certificate of Designation,
and
the consummation by Parent and Merger Sub of the transactions contemplated
hereby (including the Merger) have been duly and validly authorized by
all
necessary corporate action on the part of Parent and Merger Sub (including
the
approval by their respective Boards of Directors and Parent as the sole
stockholder of Merger Sub, subject in all cases to the satisfaction of
the terms
and conditions of this Agreement, including the conditions set forth in
Article
VI),
and no
other corporate proceedings on the part of Parent or Merger Sub are necessary
to
authorize this Agreement, to file the Certificate of Designation, or to
consummate the transactions contemplated hereby. This Agreement has been
duly
and validly executed and delivered by Parent and Merger Sub and, assuming
the
due authorization, execution and delivery thereof by the other parties
hereto,
constitutes the legal and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms,
except
as may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally and by general
principles of equity.
-11-
3.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by Parent and Merger Sub do not,
and
the performance of this Agreement by Parent and Merger Sub shall not
(i) conflict with or violate Parent’s or Merger Sub’s Charter Documents,
(ii) conflict with or violate any Legal Requirements, or (iii) result
in any breach of or constitute a default (or an event that with notice
or lapse
of time or both would become a default) under any indenture, mortgage,
loan or
credit agreement, deed of trust, note, contract, franchise, lease or other
agreement, obligation, condition, covenant or instrument to which Parent
is a
party or by which it may be bound, or to which any of the property or assets
of
Parent is subject, except, with respect to clauses (ii) or (iii), for any
such conflicts, violations, breaches, defaults or other occurrences that
would
not, individually and in the aggregate, have a Material Adverse Effect
on
Parent.
(b) The
execution and delivery of this Agreement by Parent and Merger Sub do not,
and
the performance of their respective obligations hereunder will not, require
any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if
any, of the Securities Act, the Exchange Act, Blue Sky Laws, and the rules
and
regulations thereunder, and appropriate documents with the relevant authorities
of other jurisdictions in which Parent is qualified to do business,
(ii) for the filing of any notifications required under the HSR Act and the
expiration of the required waiting period thereunder, (iii) any necessary
filings or approvals with the FCC, (iv) the qualification of Parent as a
foreign corporation in those jurisdictions in which the business of the
Company
makes such qualification necessary, and (v) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or
notifications, would not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on Parent, or prevent consummation
of
the Merger or otherwise prevent the parties hereto from performing their
obligations under this Agreement.
-12-
3.6 Compliance.
Parent has complied with, is not in violation of, any Legal Requirements
with
respect to the conduct of its business, or the ownership or operation of
its
business, except for failures to comply or violations which, individually
or in
the aggregate, have not had and are not reasonably likely to have a Material
Adverse Effect on Parent. The business and activities of Parent have not
been
and are not being conducted in violation of any Legal Requirements. Parent
is
not in default or violation in any material respects of any term, condition
or
provision of its Charter Documents. No written notice of non-compliance
with any
Legal Requirements has been received by Parent.
3.7 Brokers;
Third Party Expenses.
Except as set forth in Schedule 3.7 hereto, Parent has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage, finders’
fees, agent’s commissions or any similar charges in connection with this
Agreement or any transactions contemplated hereby.
3.8 Corporate
Approvals.
The Board of Directors of Parent has, as of the date of this Agreement,
(i)
approved the Merger and the transactions contemplated by this Agreement,
(ii)
authorized the filing of the Certificate of Designation with the Delaware
Secretary of State, and (iii) approved the issuance of stock contemplated
by
this Agreement.
3.9 SEC
Filings; Financial Statements.
(a) Parent
has made available to the Company a correct and complete copy of each report,
registration statement and definitive proxy statement filed by Parent with
the
SEC (the “Parent
SEC Reports”),
which
are all the forms, reports and documents required to be filed by Parent
with the
SEC prior to the date of this Agreement. As of their respective dates the
Parent
SEC Reports (i) were prepared in accordance and complied in all material
respects with the requirements of the Securities Act or the Exchange Act,
as the
case may be, and the rules and regulations of the SEC thereunder applicable
to
such Parent SEC Reports, and (ii) did not at the time they were filed (and
if amended or superseded by a filing prior to the date of this Agreement
then on
the date of such filing and as so amended or superseded) contain any untrue
statement of a material fact or omit to state a material fact required
to be
stated therein or necessary in order to make the statements therein, in
light of
the circumstances under which they were made, not misleading. Except to
the
extent set forth in the preceding sentence, Parent makes no representation
or
warranty whatsoever concerning the Parent SEC Reports as of any time other
than
the time they were filed.
(b) Each
set
of financial statements (including, in each case, any related notes thereto)
contained in Parent SEC Reports, including each Parent SEC Report filed
after
the date hereof until the Closing, complied or will comply as to form in
all
material respects with the published rules and regulations of the SEC with
respect thereto, was or will be prepared in accordance with U.S. GAAP applied
on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly
presents or will fairly present in all material respects the financial
position
of Parent at the respective dates thereof and the results of its operations
and
cash flows for the periods indicated, except that the unaudited interim
financial statements were, are or will be subject to normal adjustments
which
were not or are not expected to have a Material Adverse Effect on Parent
taken
as a whole.
-13-
3.10 Business
of Parent; Contracts; Undisclosed Liabilities.
(a) Parent
is
currently not engaged in any operating business.
(b) There
are
no oral or written Contracts to which Parent is a party or by which it
may be
bound, except as set forth in Schedule 3.10(b).
(c) Parent
does not have any liabilities, either accrued or contingent (whether or
not
required by GAAP to be reflected in financial statements), other than
(i) provided for on the balance sheet of the Parent as of September 30,
2006, or (ii) incurred in connection with the transactions contemplated by
this Agreement.
3.11 Survival
of Representations and Warranties.
The representations and warranties of Parent set forth in this Agreement
shall
not survive the Closing.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business by Company and Parent.
During the period from the date of this Agreement and continuing until
the
earlier of the termination of this Agreement pursuant to its terms or the
Closing (the “Interim
Period”),
each
of the Company, Parent and Merger Sub shall, except to the extent that
the other
party shall otherwise consent in writing (which consents shall not be
unreasonably withheld or delayed), carry on its business in the usual,
regular
and ordinary course consistent with past practices, in substantially the
same
manner as heretofore conducted and in compliance with all applicable laws
and
regulations (except where noncompliance would not have a Material Adverse
Effect), pay its debts and taxes when due subject to good faith disputes
over
such debts or taxes, pay or perform other material obligations when due,
and use
its commercially reasonable efforts consistent with past practices and
policies
to (i) preserve substantially intact its present business organization,
(ii) keep available the services of its present officers and employees and
(iii) preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has significant business
dealings. In addition, except as required or permitted by the terms of
this
Agreement or as set forth in Schedule 4.1 hereto without the prior written
consent of the other party (which shall not be unreasonably withheld or
delayed), during the period from the date of this Agreement and continuing
until
the earlier of the termination of this Agreement pursuant to its terms
or the
Closing, each of the Company, Parent and Merger Sub shall not do any of
the
following:
(a) Transfer
or license to any person or otherwise extend, amend or modify any material
rights to any intellectual property of the Company or Parent, as applicable,
or
enter into grants to transfer or license to any person future patent rights,
other than in the ordinary course of business consistent with past practices
provided
that
in no
event shall the Company or Parent license on an exclusive basis or sell
any
intellectual property of the Company, or Parent as applicable;
-14-
(b) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(c) Issue,
deliver, sell, authorize, pledge or otherwise encumber, or agree to any
of the
foregoing with respect to, any shares of capital stock or any securities
convertible into or exchangeable for shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into or exchangeable for shares of capital stock,
or
enter into other agreements or commitments of any character obligating
it to
issue any such shares or convertible or exchangeable securities, other
than the
grant of options to purchase Company Common Stock in the ordinary course
of
business consistent with past practices, and other than the issuance of
Company
Common Stock prior to the Closing in connection with the exercise of any
Company
Options or Company Warrants or the conversion of the Company Convertible
Securities;
(d) Amend
its
Charter Documents unless required to do so hereunder;
(e) Acquire
or agree to acquire by merging or consolidating with, or by purchasing
any
equity interest in or a portion of the assets of, or by any other manner,
any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any
assets which are material, individually or in the aggregate, to the business
of
Parent or the Company as applicable, or enter into any joint ventures,
strategic
partnerships or alliances or other arrangements that provide for exclusivity
of
territory or otherwise restrict such party’s ability to compete or to offer or
sell any products or services;
(f) Sell,
lease, license, encumber or otherwise dispose of any properties or assets,
except (A) sales of services and licenses of software in the ordinary
course of business consistent with past practice, (B) sales of inventory in
the ordinary course of business consistent with past practice, (C) and the
sale, lease or disposition (other than through licensing) of property or
assets
that are not material, individually or in the aggregate, to the business
of such
party in the ordinary course of business consistent with past
practices;
(g) (i) In
the case of the Company, incur any indebtedness for borrowed money in excess
of
$50,000 in the aggregate (other than purchase money debt in connection
with the
acquisition by the Company of vehicles, office equipment, new locations
and
operating equipment not exceeding $500,000 in the aggregate) or (ii) with
case of Parent, incur any indebtedness for borrowed money; or in either
case,
guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of Parent or the Company, as applicable, enter into any “keep well”
or other agreement to maintain any financial statement condition or enter
into
any arrangement having the economic effect of any of the foregoing;
-15-
(h) Adopt
or
amend any employee benefit plan, policy or arrangement, any employee stock
purchase or employee stock option plan, or enter into any employment contract
or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable “at will”), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage
rates
or fringe benefits (including rights to severance or indemnification) of
its
directors, officers, employees or consultants, except in the ordinary course
of
business consistent with past practices, and except in connection with
the
implementation of employment or equity incentive agreements or arrangements,
as
may be considered appropriate by the Company, resulting from the Company’s
acquisition of Capital Telecommunications, Inc. (“CTI”,
and,
with reference to such acquisition, the “CTI
Acquisition”);
(i) Except
in
the ordinary course of business consistent with past practices, in the
case of
the Company, incur or enter into any agreement, contract or commitment
requiring
such party to pay in excess of $100,000 in any 12-month period;
(j) Engage
in
any action that would reasonably be expected to cause the Merger to fail
to
qualify as a “reorganization” under Section 368(a) of the
Code;
(k) Form,
establish or acquire any subsidiary except as contemplated by this
Agreement;
(l) Enter
into any transaction with or distribute or advance any assets or property
to any
of its officers, directors, partners, stockholders or other affiliates
(other
than payment of salary and benefits in the ordinary course of business
consistent with past practice); or
(m) Agree
in
writing or otherwise agree, commit or resolve to take any of the actions
described in Section 4.1(a)
through
(l)
above.
4.2 No
Solicitation of Other Proposals.
(a) During
the Interim Period, neither the Company nor Parent shall, and each shall
cause
their respective directors, officers, employees, representatives, advisors
or
agents not to: (i) solicit or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an offer for a
merger,
consolidation, business combination, purchase or sale of substantial assets,
purchase or sale of shares of capital stock or similar transaction or series
of
transactions involving the Company, Parent, or their respective Subsidiaries,
other than the transactions contemplated by this Agreement and other than
the
acquisition activity contemplated by the Company as set forth in Schedule
4.2
(any of the foregoing, an “Acquisition
Proposal”);
or
(ii) engage in discussions concerning, or agree to any Acquisition
Proposal.
(b) Each
party shall notify the other as soon as practicable (and in any event within
24 hours) after receipt by such party (or its advisors) of any Acquisition
Proposal or any request for access to the properties, books, records or
other
information of such party by any Person that informs such party that it
is
considering making, or has made, an Acquisition Proposal. Such notice shall
be
made both orally and in writing and shall indicate in reasonable detail
the
identity of the offeror and the terms and conditions of such proposal or
inquiry. Each party shall notify the other of any discussions with any
such
offeror and disclose the substance of such discussions to Parent in reasonable
detail within 24 hours of such discussions.
-16-
(c) Each
party shall be entitled to provide copies of this Section 4.2
to third
parties who, on an unsolicited basis after the date of this Agreement,
contact
such party regarding an Acquisition Proposal, provided
that
the
other party shall concurrently be notified of such contact and delivery
of such
copy.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Merger
Form 8-K; Other Filings.
(a) At
least
five (5) days prior to Closing, Parent shall prepare a draft Form 8-K
announcing the Closing, together with, or incorporating by reference, the
financial statements prepared by the Company and its accountant, and such
other
information that may be required to be disclosed with respect to the Merger
in
any report or form to be filed with the SEC (“Merger
Form 8-K”),
which
shall be in a form reasonably acceptable to the Company and in a format
acceptable for ▇▇▇▇▇ filing. Prior to Closing, Parent and the Company shall
prepare the press release announcing the consummation of the Merger hereunder
(“Press
Release”).
Simultaneously with the Closing, Parent shall file the Merger Form 8-K with
the SEC and distribute the Press Release. In connection with the preparation
of
the Merger Form 8-K and Press Release, and for such other reasonable
purposes, the Company and Parent each shall, upon request by the other,
furnish
the other with all information concerning themselves, their respective
directors, officers and stockholders (including the directors of Parent
and the
Company to be elected effective as of the Closing pursuant to Section 5.2
hereof)
and such other matters as may be reasonably necessary or advisable in connection
with the Merger, or any other statement, filing, notice or application
made by
or on behalf of the Company and Parent to any third party and/or any
Governmental Entity in connection with the Merger and the other transactions
contemplated hereby. Each party warrants and represents to the other party
that
all such information shall be true and correct in all material respects
and will
not contain any untrue statement of a material fact or omit to state a
material
fact required to be stated therein or necessary to make the statements
contained
therein, in light of the circumstances under which they were made, not
misleading.
(b) As
promptly as practicable after the execution of this Agreement, the Company
and
Parent will prepare and file any other filings, including a Form 8-K announcing
the execution of this Agreement and any other transactions entered into
between
Parent and Company, required under the Exchange Act, the Securities Act
or any
other Federal, foreign or Blue Sky laws relating to the Merger and the
transactions contemplated by this Agreement (collectively, the “Other
Filings”).
Each
party will notify the other party promptly upon the receipt of any comments
from
the SEC or its staff and of any request by the SEC or its staff or any
other
governmental officials for amendments or supplements to any Other Filing
or for
additional information and will supply the other party with copies of all
correspondence between such party or any of its representatives, on the
one
hand, and the SEC, or its staff or other government officials, on the other
hand, with respect to the Merger or any Other Filing. The Other Filings
will
comply in all material respects with all applicable requirements of law
and the
rules and regulations promulgated thereunder. Whenever any event occurs
which is
required to be set forth in an amendment or supplement to any Other Filing,
the
Company or Parent, as the case may be, will promptly inform the other party
of
such occurrence and cooperate in filing with the SEC or its staff or any
other
government officials, and/or mailing to stockholders of Parent, such amendment
or supplement. Prior to the Closing Date, Parent shall use its commercially
reasonable best efforts to cause the shares of Parent Preferred Stock to
be
issued pursuant to the Merger to be registered or qualified under all applicable
Blue Sky Laws of each of the states and territories of the United States
in
which it is believed, based on information furnished by the Company, holders
of
the Company Common Stock reside and to take any other such actions that
may be
necessary to enable the Parent Preferred Stock to be issued pursuant to
the
Merger in each such jurisdiction.
-17-
5.2 Directors
and Officers of Parent and the Company and the Subsidiaries After
Merger.
Parent and the Company shall take all necessary action so that the persons
listed on Schedule 5.2 are elected to the positions of officers and
directors of Parent and the Company, as set forth therein, to serve in
such
positions effective immediately after the Closing.
5.3 HSR
Act.
If required pursuant to the HSR Act, as promptly as practicable after the
date
of this Agreement, Parent and the Company shall each prepare and file the
notification required of it thereunder in connection with the transactions
contemplated by this Agreement and shall promptly and in good faith respond
to
all information requested of it by the Federal Trade Commission and Department
of Justice in connection with such notification and otherwise cooperate
in good
faith with each other and such Governmental Entities. Parent and the Company
shall (a) promptly inform the other of any communication to or from the
Federal Trade Commission, the Department of Justice or any other Governmental
Entity regarding the transactions contemplated by this Agreement, (b) give
the other prompt notice of the commencement of any action, suit, litigation,
arbitration, proceeding or investigation by or before any Governmental
Entity
with respect to such transactions and (c) keep the other reasonably
informed as to the status of any such action, suit, litigation, arbitration,
proceeding or investigation. Filing fees with respect to the notifications
required under the HSR Act shall be shared equally by Parent and the
Company.
5.4 Other
Actions.
The Company and Parent shall further cooperate with each other and use
their
respective commercially reasonable best efforts to take or cause to be
taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the
Merger
and the other transactions contemplated hereby as soon as practicable,
including
preparing and filing as soon as practicable all documentation to effect
all
necessary notices, reports and other filings and to obtain as soon as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party (including the
respective independent accountants of the Company and Parent) and/or any
Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated hereby.
-18-
5.5 Confidentiality;
Access to Information.
(a) Confidentiality.
Any
confidentiality agreement previously executed by the parties shall be superseded
in its entirety by the provisions of this Agreement. Each party agrees
to
maintain in confidence any non-public information received from the other
party,
and to use such non-public information only for purposes of consummating
the
transactions contemplated by this Agreement. Such confidentiality obligations
will not apply to (i) information which was known to the one party or their
respective agents prior to receipt from the other party; (ii) information
which is or becomes generally known; (iii) information acquired by a party
or their respective agents from a third party who was not known to be bound
to
an obligation of confidentiality; and (iv) disclosure required by law. In
the event this Agreement is terminated as provided in Article VIII
hereof,
each party (i) will return or cause to be returned to the other all
documents and other material obtained from the other in connection with
the
Merger contemplated hereby, and (ii) will use its commercially reasonable
best efforts to delete from its computer systems all documents and other
material obtained from the other in connection with the Merger contemplated
hereby.
(b) Access
to Information.
(i) Company
will afford Parent and its financial advisors, accountants, counsel and
other
representatives reasonable access during normal business hours, upon reasonable
notice, to the properties, books, records and personnel of the Company
during
the Interim Period to obtain all information concerning the business, including
the status of product development efforts, properties, results of operations
and
personnel of the Company, as Parent may reasonably request. No information
or
knowledge obtained by Parent in any investigation pursuant to this Section 5.5
will
affect or be deemed to modify any representation or warranty contained
herein or
the conditions to the obligations of the parties to consummate the
Merger.
(ii) Parent
will afford the Company and its financial advisors, underwriters, accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Parent during the Interim Period to obtain all information concerning
the
business, including the status of product development efforts, properties,
results of operations and personnel of Parent, as the Company may reasonably
request. No information or knowledge obtained by the Company in any
investigation pursuant to this Section 5.5
will
affect or be deemed to modify any representation or warranty contained
herein or
the conditions to the obligations of the parties to consummate the
Merger.
(iii) Notwithstanding
anything to the contrary contained herein, each party (“Subject
Party”)
hereby
agrees that by proceeding with the Closing, it shall be conclusively deemed
to
have waived for all purposes hereunder any inaccuracy of representation
or
breach of warranty by another party which is actually known by the Subject
Party
prior to the Closing.
-19-
5.6 Public
Disclosure.
From the date of this Agreement until Closing or termination, the parties
shall
cooperate in good faith to jointly prepare all press releases and public
announcements pertaining to this Agreement and the transactions governed
by it,
and no party shall issue or otherwise make any public announcement or
communication pertaining to this Agreement or the transaction without the
prior
consent of Parent (in the case of the Company) or the Company (in the case
of
Parent), except as required by any legal requirement or by the rules and
regulations of, or pursuant to any agreement of a stock exchange or trading
system. Each party will not unreasonably withhold approval from the others
with
respect to any press release or public announcement. If any party determines
with the advice of counsel that it is required to make this Agreement and
the
terms of the transaction public or otherwise issue a press release or make
public disclosure with respect thereto, it shall, at a reasonable time
before
making any public disclosure, consult with the other party regarding such
disclosure, seek such confidential treatment for such terms or portions
of this
Agreement or the transaction as may be reasonably requested by the other
party
and disclose only such information as is legally compelled to be disclosed.
This
provision will not apply to communications by any party to its counsel,
accountants and other professional advisors. Notwithstanding the foregoing,
the
parties hereto agree that promptly as practicable after the execution of
this
Agreement, Parent will file with the SEC a Current Report on Form 8-K
pursuant to the Exchange Act to report the execution of this Agreement
and the
filing of the Certificate of Designation, the form and substance of which
shall
be subject to the Company’s prior consent (which shall not be unreasonably
withheld).
5.7 Commercially
Reasonable Best Efforts.
Upon the terms and subject to the conditions set forth in this Agreement,
each
of the parties agrees to use its commercially reasonable best efforts to
take,
or cause to be taken, all actions, and to do, or cause to be done, and
to assist
and cooperate with the other parties in doing, all things necessary, proper
or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable best efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI
to be
satisfied, (ii) the obtaining of all necessary actions, waivers, consents,
approvals, orders and authorizations from Governmental Entities and the
making
of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if
any) and
the taking of all reasonable steps as may be necessary to avoid any suit,
claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all consents, approvals or waivers from third parties required
as a
result of the transactions contemplated in this Agreement, (iv) the
defending of any suits, claims, actions, investigations or proceedings,
whether
judicial or administrative, challenging this Agreement or the consummation
of
the transactions contemplated hereby, including seeking to have any stay
or
temporary restraining order entered by any court or other Governmental
Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated
by,
and to fully carry out the purposes of, this Agreement. In connection with
and
without limiting the foregoing, Parent and its board of directors and the
Company and its board of directors shall, if any state takeover statute
or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use
its
commercially reasonable best efforts to enable the Merger and the other
transactions contemplated by this Agreement to be consummated as promptly
as
practicable on the terms contemplated by this Agreement. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be deemed
to
require Parent or the Company to agree to any divestiture by itself or
any of
its affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of
any of
them to conduct their business or to own or exercise control of such assets,
properties and stock.
-20-
5.8 Treatment
as a Reorganization.
None of Parent, Merger Sub or the Company shall take any action prior to
or
following the Merger that could reasonably be expected to cause the Merger
to
fail to qualify as a “reorganization” within the meaning of Section 368(a)
of the Code, and none of the parties shall take any position on any tax
return,
or take any other reporting position, that is inconsistent with the treatment
of
the Merger as a “reorganization” within the meaning of Section 368(a) of the
Code
5.9 No
Securities Transactions.
Except as contemplated by this Agreement, neither the Company nor Parent
nor any
of their respective affiliates, directly or indirectly, shall engage in
any
transactions involving the securities of Parent prior to the time of public
disclosure of all material terms of the transactions contemplated by this
Agreement. The Company and Parent shall use their commercially reasonable
best
efforts to require each of its respective officers, directors, employees,
agents
and representatives to comply with the foregoing requirement.
5.10 Disclosure
of Certain Matters.
Each of Parent and the Company will provide the other with prompt written
notice
of any event, development or condition that (a) would cause any of such
party’s representations and warranties to become untrue or misleading to the
extent the conditions set forth in Section
6.2(a)
or
6.3(a)
will not
be satisfied, or (b) is of a nature that would reasonably be expected to
result in a Material Adverse Effect on such party.
5.11 Stock
Options and Warrants.
(a) At
the
Effective Time, each Company Stock Option, whether vested or unvested,
shall be
assumed by Parent. Accordingly, each Company Stock Option shall be deemed
to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, a number of shares of Parent
Preferred Stock, such that upon conversion of such Parent Preferred Stock,
the
holder of the option would receive the same number of shares of Parent
Common
Stock as the holder of such Company Stock Option would have been entitled
to
receive pursuant to the Merger had such holder exercised such option in
full
including as to unvested shares, immediately prior to the Effective Time
(rounded down to the nearest whole number), at a price per share (rounded
up to
the nearest whole cent) equal to (i) the aggregate exercise price for the
shares of Company Common Stock otherwise purchasable pursuant to such Company
Stock Option divided by (ii) the number of full shares of Parent Common
Stock deemed purchasable pursuant to such Parent stock option in accordance
with
the foregoing. As soon as practicable after the Effective Time, Parent
shall
deliver to the holders of Company Stock Options appropriate notice evidencing
the foregoing assumption and setting forth such participants’ rights pursuant
thereto, and the grants shall continue in effect on the same terms and
conditions as existed on the date of this Agreement (subject to the adjustments
required by this Section 5.11
after
giving effect to the Merger). In the case of any Company Stock Option to
which
Section 422 of the Code applies (“Incentive
Stock Options”),
Parent shall comply with the terms of the Company Option Plan to ensure,
to the
extent required by, and subject to the provisions of, such plan, that Company
Stock Options which qualified as Incentive Stock Options prior the Effective
Time continue to qualify as Incentive Stock Options after the Effective
Time.
-21-
(b) Within
30
days after the Closing, Parent will issue warrants to acquire shares of
Parent
Preferred Stock, with such number of shares of Parent Preferred Stock to
be
based on the Company Stock Exchange Ratio, as applicable, to existing warrant
holders of the Company (such issuance to be conditioned upon delivery to
Parent
and cancellation of existing Company warrants) such that the holder of
such
warrants upon exercise will receive that number of shares of Parent Common
Stock
as such holder would have been entitled to receive pursuant to the Merger
had
such holder exercised such warrants immediately prior to the Effective
Time
(rounded down to the nearest whole number), with the same expiration date
as
currently exists and at a per share exercise price proportionately adjusted
for
the Company Stock Exchange Ratio, as applicable.
(c) Parent
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Parent Preferred Stock for delivery under Company Stock
Options and Company Warrants assumed in accordance with this Section 5.11.
5.12
Employment
Agreements.
On or
before the Closing, each of ▇▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇ shall have
entered
into employment agreements with Parent on such terms as are mutually agreeable
to the Company and Parent.
5.13 Company
Consents.
On or
before the Closing, the Company shall use its commercially reasonable best
efforts to obtain such terminations, consents, waivers or amendments from
those
parties in respect of such agreements as are set forth in Schedule 5.13,
subject
to the approval of Parent, which approval shall not be unreasonably
withheld.
5.14
Parent
Consents.
On or
before the Closing, Parent shall use its commercially reasonable best efforts
to
obtain such terminations, consents, waivers or amendments from those parties
in
respect of such agreements as are set forth in Schedule 5.14, subject to
the
approval of the Company, which approval shall not be unreasonably
withheld.
5.15 Conversion
of Company Convertible Securities.
On or
before the Closing, the Company and Parent shall ensure that the Company
Convertible Securities issued to ▇▇▇▇▇ ▇▇▇▇▇, Novus Ventures II, L.P.,
▇▇▇▇▇▇
Capital Master Fund, Ltd., and their respective affiliates, in the total
aggregate principal amount of $4,320,000 plus any accrued interest thereon,
as
set forth in Schedule 2.3(a), shall have converted on or before the Effective
Time to Company Preferred Stock, and that upon such conversion, the Company
Convertible Securities shall be surrendered for cancellation.
5.16.
Parent
Stockholder Approval.
Promptly following the Closing, Parent shall take all necessary steps to
secure
approval of the stockholders of Parent of the filing of an amendment to
Parent’s
certificate of incorporation to increase the authorized Parent Common Stock
to
100,000,000 shares.
-22-
5.17
Cancellation
of Parent Company Loans.
At the
Effective Time, (a) loans from Parent to the Company in the principal aggregate
amount of $3,000,000 out of the $3,500,000 set forth in Schedule 2.3(a),
plus
all accrued interest on all such $3,500,000 of loans, shall be cancelled
and
contributed to the equity of Parent and (b) loans from Parent to the Company
in
the principal aggregate amount of $500,000 out of the $3,500,000 set forth
in
Schedule 2.3(a), shall be repaid by the Company to Parent at least 5 days
prior
to Closing.
5.18
Assumption
of Other Convertible Loans.
At the
Closing, Parent shall assume outstanding promissory notes in the aggregate
principal amount of $14,000,000, as set forth in Schedule 2.3(a).
5.19.
Exercise
of Bridge Warrants and Cancellation of Bridge Notes.
On or
before the Closing, the Company shall ensure that each of the warrants
(the
“Bridge
Warrants”)
to
purchase in the aggregate 181,387,689 shares of Company Common Stock of
the
Company issued pursuant to the October 19, 2006 Bridge Financing shall
be
exercised in full, and that each Bridge Warrant be exercised pursuant to
the
terms thereof by surrender and cancellation of the corresponding demand
promissory note (the “Bridge
Notes”)
issued
with such Bridge Warrant.
ARTICLE
VI
CONDITIONS
TO THE TRANSACTION
6.1 Conditions
to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to effect the
Merger
shall be subject to the satisfaction at or prior to the Closing Date of
the
following conditions:
(a) Readiness
of the Form 8-K.
The
Merger Form 8-K shall be in a form reasonably acceptable to each party and
in a format acceptable for ▇▇▇▇▇ filing.
(b) HSR
Act; No Order.
All
specified waiting periods under the HSR Act shall have expired and no
Governmental Entity shall have enacted, issued, promulgated, enforced or
entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect
and which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger, substantially on the terms contemplated by
this
Agreement.
(c)
No
Order.
No
order shall have been entered to (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect materially and adversely or otherwise encumber
the title of the shares of Parent Preferred Stock to be issued by Parent
in
connection with the Merger and no order, judgment, decree, stipulation
or
injunction to any such effect shall be in effect.
-23-
6.2 Additional
Conditions to Obligations of Company.
The obligations of the Company to consummate and effect the Merger shall
be
subject to the satisfaction at or prior to the Closing Date of each of
the
following conditions, any of which may be waived, in writing, exclusively
by the
Company:
(a) Representations
and Warranties.
Each
representation and warranty of Parent contained in this Agreement shall
have
been true and correct (i) as of the date of this Agreement and (ii) on
and as of the Closing Date with the same force and effect as if made on
the
Closing Date, in each case, other than such failures to be true and correct
that
would not reasonably be expected to have a Material Adverse Effect on Parent.
The Company shall have received a certificate with respect to the foregoing
signed on behalf of Parent by an authorized officer of Parent (“Parent
Closing Certificate”).
(b) Agreements
and Covenants.
Parent
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with
by it
on or prior to the Closing Date, except to the extent that any failure
to
perform or comply (other than a willful failure to perform or comply or
failure
to perform or comply with an agreement or covenant reasonably within the
control
of Parent) does not, or will not, constitute a Material Adverse Effect
with
respect to Parent, and the Parent Closing Certificate shall include a provision
to such effect.
(c)
Opinion
of Counsel.
The
Company shall have received from Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo,
P.C., counsel to Parent, an opinion of counsel in substantially the form
of
Exhibit
C
annexed
hereto.
6.3 Additional
Conditions to the Obligations of Parent.
The obligations of Parent to consummate and effect the Merger shall be
subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations
and Warranties.
Each
representation and warranty of the Company contained in this Agreement
shall
have been true and correct (i) as of the date of this Agreement and
(ii) on and as of the Closing Date with the same force and effect as if
made on the Closing Date, in each case, other than such failures to be
true and
correct that would not reasonably be expected to have a Material Adverse
Effect
on the Company. The Parent shall have received a certificate with respect
to the
foregoing signed on behalf of the Company by an authorized officer of Parent
(“Company
Closing Certificate”).
(b) Agreements
and Covenants.
The
Company shall have performed or complied in all material respects with
all
agreements and covenants required by this Agreement to be performed or
complied
with by them at or prior to the Closing Date except to the extent that
any
failure to perform or comply (other than a willful failure to perform or
comply
or failure to perform or comply with an agreement or covenant reasonably
within
the control of Company) does not, or will not, constitute a Material Adverse
Effect on the Company, and the Company Closing Certificate shall include
a
provision to such effect.
(c) Opinion
of Counsel.
Parent
shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the
Company, an opinion of counsel in substantially the form of Exhibit
D
annexed
hereto.
-24-
ARTICLE
VII
TERMINATION
7.1 Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by
mutual
written agreement of Parent and the Company at any time;
(b) by
either
of the Company or Parent if the Merger shall not have been consummated
by
February 28, 2007; provided,
however,
that
the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before
such
date and such action or failure to act constitutes a breach of this
Agreement.
(c) by
either
Parent or the Company if a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect
of
permanently restraining, enjoining or otherwise prohibiting the Merger,
which
order, decree, ruling or other action is final and nonappealable;
(d) by
the
Company, upon a material breach of any representation, warranty, covenant
or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either
case
such that the conditions set forth in 6.2(a)
or
(b)
would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided
that
if such
breach by Parent is curable by Parent prior to the Closing Date, then the
Company may not terminate this Agreement under this Section 7.1(c)
for
thirty (30) days after delivery of written notice from the Company to Parent
of
such breach, provided Parent continues to exercise commercially reasonable
efforts to cure such breach (it being understood that the Company may not
terminate this Agreement pursuant to this Section 7.1(c)
if it
shall have materially breached this Agreement or if such breach by Parent
is
cured during such thirty (30)-day period);
(e) by
Parent, upon a material breach of any representation, warranty, covenant
or
agreement on the part of the Company set forth in this Agreement, or if
any
representation or warranty of the Company shall have become untrue, in
either
case such that the conditions set forth in 6.3(a)
or
(b)
would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided
that
if such
breach is curable by the Company prior to the Closing Date, then Parent
may not
terminate this Agreement under this Section 7.1(d)
for
thirty (30) days after delivery of written notice from Parent to the Company
of
such breach, provided the Company continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Parent may not terminate
this Agreement pursuant to this Section 7.1(d)
if it
shall have materially breached this Agreement or if such breach by the
Company
is cured during such thirty (30)-day period);
-25-
7.2 Notice
of Termination; Effect of Termination.
Any termination of this Agreement under Section 7.1
above
will be effective immediately upon (or, if the termination is pursuant
to
Section 7.1(c)
or
Section 7.1(d)
and the
proviso therein is applicable, thirty (30) days after) the delivery of
written
notice of the terminating party to the other parties hereto. In the event
of the
termination of this Agreement as provided in Section 7.1,
this
Agreement shall be of no further force or effect and the Merger shall be
abandoned, except for and subject to the following: (i) Sections 5.6,
7.2
and
7.3
and
Article VIII
(General
Provisions) shall survive the termination of this Agreement, and
(ii) nothing herein shall relieve any party from liability for any willful
breach of any representation, warranty, covenant or agreement contained
in this
Agreement.
7.3 Fees
and Expenses.
All fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 Notices.
All notices and other communications hereunder shall be in writing and
shall be
deemed given if delivered personally or by commercial delivery service,
or sent
via telecopy (receipt confirmed) to the parties at the following addresses
or
telecopy numbers (or at such other address or telecopy numbers for a party
as
shall be specified by like notice):
if
to
Parent, to:
U.S.
Wireless Data, Inc.
▇/▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇
Avenue of the Stars, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇ ▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇ ▇.
▇▇▇▇, Esq.
Mintz
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇, P.C.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
-26-
if
to the
Company, to:
StarVox
Communications, Inc.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
8.2 Interpretation.
When a reference is made in this Agreement to an Exhibit or Schedule, such
reference shall be to an Exhibit or Schedule to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections or
subsections, such reference shall be to a Section or subsection of this
Agreement. Unless otherwise indicated the words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the
meaning or interpretation of this Agreement. When reference is made herein
to
“the business of” an entity, such reference shall be deemed to include the
business of all direct and indirect Subsidiaries of such entity. Reference
to
the Subsidiaries of an entity shall be deemed to include all direct and
indirect
Subsidiaries of such entity. For purposes of this Agreement:
(a) the
term
“Material
Adverse Effect”
when
used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with
other
changes, events, violations, inaccuracies, circumstances or effects (an
“Effect”),
that
is materially adverse to the business, assets (including intangible assets),
revenues, financial condition or results of operations of such entity and
its
subsidiaries, taken as a whole, or the ability of the party in question
to
consummate the transactions contemplated hereby, it being understood that
none
of the following alone or in combination shall be deemed, in and of itself,
to
constitute a Material Adverse Effect: (i) any Effect generally affecting
national or regional economic conditions, (ii) in the case of the Company,
any Effect generally affecting the industries in which the Company operates,
(iii) any Effect resulting from the announcement or pendency of the
transactions contemplated by this Agreement or the CTI Acquisition, (iv) in
the case of the Company, any failure to meet or exceed internal financial
projections, or (v) any SEC rulemaking requiring enhanced disclosure of
reverse merger transactions with a public shell.
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(b) the
term
“Legal
Requirements”
means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity and all requirements set forth in applicable
Company
Contracts or Parent Contracts;
(c) the
term
“Person”
shall
mean any individual, corporation (including any non-profit corporation),
general
partnership, limited partnership, limited liability partnership, joint
venture,
estate, trust, company (including any limited liability company or joint
stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity;
(d) the
term
“knowledge”
(including any derivation thereof such as “known” or “knowing”) shall mean the
actual knowledge of the officers and directors of the Company and its
Subsidiaries.
(e) the
term
“Lien”
means
any mortgage, pledge, security interest, encumbrance, lien, restriction
or
charge of any kind (including, without limitation, any conditional sale
or other
title retention agreement or lease in the nature thereof, or any agreement
to
give any security interest);
(f) the
term
“Affiliate”
means,
as applied to any Person, any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with, such Person.
For
purposes of this definition, “control”
(including with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the
ownership of voting securities, by contract or otherwise; and
(g) all
monetary amounts set forth herein are referenced in United States dollars,
unless otherwise noted.
8.3 Counterparts;
Facsimile Signatures.
This Agreement may be executed in one or more counterparts, all of which
shall
be considered one and the same agreement and shall become effective when
one or
more counterparts have been signed by each of the parties and delivered
to the
other party, it being understood that all parties need not sign the same
counterpart. Delivery by facsimile to counsel for the other party of a
counterpart executed by a party shall be deemed to meet the requirements
of the
previous sentence.
8.4 Entire
Agreement; Third Party Beneficiaries.
This Agreement and the documents and instruments and other agreements among
the
parties hereto as contemplated by or referred to herein, including the
Schedules
hereto (a) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to
the
subject matter hereof including the Original Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder
(except as specifically provided in this Agreement). This Agreement amends
and
restates the Original Agreement to read as set forth herein.
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8.5 Severability.
In the event that any provision of this Agreement, or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal,
void
or unenforceable, the remainder of this Agreement will continue in full
force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent
of the
parties hereto. The parties further agree to use commercially reasonable
efforts
to replace such void or unenforceable provision of this Agreement with
a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable
provision.
8.6 Other
Remedies; Specific Performance.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive
of any
other remedy conferred hereby, or by law or equity upon such party, and
the
exercise by a party of any one remedy will not preclude the exercise of
any
other remedy. The parties hereto agree that irreparable damage would occur
in
the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any
state
having jurisdiction, this being in addition to any other remedy to which
they
are entitled at law or in equity.
8.7 Governing
Law.
This Agreement shall be governed by and construed in accordance with the
law of
the State of New York regardless of the law that might otherwise govern
under
applicable principles of conflicts of law thereof.
8.8 Rules
of Construction.
The parties hereto agree that they have been represented by counsel during
the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the
party drafting such agreement or document.
8.9 Assignment.
No party may assign either this Agreement or any of its rights, interests,
or
obligations hereunder without the prior written approval of the other parties.
Subject to the first sentence of this Section
8.9,
this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
8.10 Amendment.
This Agreement may be amended by the parties hereto at any time by execution
of
an instrument in writing signed on behalf of each of the parties.
8.11 Extension;
Waiver.
At any time prior to the Closing, any party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in
the representations and warranties made to such party contained herein
or in any
document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions for the benefit of such party contained herein.
Any
agreement on the part of a party hereto to any such extension or waiver
shall be
valid only if set forth in an instrument in writing signed on behalf of
such
party. Delay in exercising any right under this Agreement shall not constitute
a
waiver of such right.
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8.12 Jurisdiction.
Each party hereby consents to the exclusive jurisdiction of the federal
and
state courts located in the City of San Francisco, in the State of California,
for such purpose. All rights and remedies of the parties shall be cumulative
and
in addition to any other rights and remedies obtainable from
arbitration.
[THE
REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first written above.
| U.S. WIRELESS DATA, INC. | ||
| By: |
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| STARVOX ACQUISITION, INC. | ||
| By: | ||
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| STARVOX COMMUNICATIONS, INC. | ||
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| By: | ||
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INDEX
OF EXHIBITS AND SCHEDULES
|
EXHIBIT A
|
Exchange
Procedures
|
|
|
EXHIBIT
B
|
Certificate
of Designation
|
|
|
EXHIBIT C
|
Opinion
of Parent Counsel
|
|
|
EXHIBIT
D
|
Opinion
of Company Counsel
|
|
SCHEDULES
|
||
|
Schedule
1.4(d)
|
StarVox
Equity Schedule
|
|
|
Schedule 2
|
Company
Schedule
|
|
|
Schedule 2.1
|
Organization
and Qualification
|
|
|
Schedule 2.2
|
Subsidiaries
|
|
|
Schedule 2.3
|
Capitalization
|
|
|
Schedule 2.3(a)
|
Security
Holders
|
|
|
Schedule
2.3(b)
|
Rights
to Capital Stock
|
|
|
Schedule 2.3(c)
|
Rights
with Respect to Equity Securities
|
|
|
Schedule
2.3(d)
|
Subsidiary
Stock or Interests
|
|
|
Schedule 2.5
|
No
Conflict
|
|
|
Schedule 2.6
|
Non-Compliance
with Legal Requirements
|
|
|
Schedule 2.7
|
Brokers;
Third Party Expenses
|
|
|
Schedule 3
|
Parent
Schedule
|
|
|
Schedule 3.3(a)
|
Parent
Stock Options and Warrants
|
|
|
Schedule 3.3(b)
|
Other
Agreements
|
|
|
Schedule
3.10(b)
|
Parent
Contracts
|
|
|
Schedule 4.1
|
Conduct
of Business by Company and Parent
|
|
|
Schedule 5.2
|
Directors
and Officers of Parent after Merger
|
|
|
Schedule
5.13
|
Company
Consents
|
|
|
Schedule
5.14
|
Parent
Consents
|
EXHIBIT A
EXCHANGE
PROCEDURES
(a) As
promptly as practicable before or after the Effective Time, the parties
will
send to each shareholder of the Company a letter of transmittal, in form
approved by the Company and Parent, for use in exchanging all Certificates
registered in the name of such shareholder for the Merger Consideration
to which
such shareholder may be entitled as determined in accordance with the provisions
of this Agreement. Upon surrender by a shareholder of all Certificates
(or lost
certificate affidavits) registered in the name of such shareholder to Parent,
together with a duly executed letter of transmittal, such shareholder will
be
entitled to receive, in exchange for all of such Certificates, the portion
of
the Merger Consideration to which such shareholder may be entitled (as
determined in accordance with the provisions of this Agreement), and such
Certificates will be canceled. It is intended that such letter of transmittal
will contain provisions requiring each executing shareholder thereof to,
among
other things, (a) acknowledge and agree to be bound by the terms of this
Agreement, including Section 1.5 (Effect on Capital Stock), (b) make certain
representations and warranties with respect to such executing shareholder
and
the shares of Company Stock owned or held by such executing shareholder,
(c)
waive all appraisal or dissenters’ rights, and (d) deliver original Certificates
(or an affidavit of loss and indemnity) together with blank stock powers
and
other instruments of transfer, in each case in a form reasonably satisfactory
to
Parent and as a condition precedent to Parent's obligation to issue shares
of
Parent Preferred Stock or Parent Common Stock to such shareholder.
(b) The
Merger Consideration issued pursuant to the Merger shall be deemed to have
been
issued at the Effective Time. If any certificate representing shares of
Parent
Preferred Stock or Parent Common Stock are to be issued in a name other
than
that in which the certificate surrendered is registered, it shall be a
condition
of such exchange that the person requesting such exchange shall deliver
to
Parent all documents necessary to evidence and effect such transfer and
shall
pay to Parent any transfer or other taxes required by reason of the issuance
of
a certificate representing shares of Parent Preferred Stock or Parent Common
Stock in a name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of Parent that such tax has
been
paid or is not applicable.