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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 1998
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BROADCAST.COM INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE 000-24591 75-2600532
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State or Other Jurisdiction Commission File Number (IRS Employer Identification No.)
of Incorporation
2914 Taylor Street
Dallas, Texas 75226
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(Address of Principal Executive Offices) Zip Code
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Registrant's telephone number, including area code: (214) 748-6660
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Not Applicable.
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(Former name or former address, if changed since last report)
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Item 2 Acquisition of Disposition of Assets.
On November 30, 1998 broadcast.com inc., a Delaware corporation
("broadcast.com") acquired all of the outstanding capital stock of Simple
Network Communications, Inc., a California Corporation ("SimpleNet"), pursuant
to an Agreement and Plan of Reorganization, dated as of November 16, 1998 (the
"Merger Agreement"), by and among broadcast.com, SN Acquisition, Inc., a
Delaware corporation and wholly-owned subsidiary of broadcast.com ("MergerCo"),
and SimpleNet. In accordance with the terms of the Merger Agreement, MergerCo
merged with and into SimpleNet, with SimpleNet as the surviving corporation
(the "Merger"). In the Merger, all of the outstanding shares of common stock of
SimpleNet were exchanged for 410,809 shares of broadcast.com Common Stock. The
Merger will be accounted for as a pooling of interests.
Under the terms of the Merger Agreement and the related Escrow
Agreement dated November 30, 1998, a total of 20,540 shares of broadcast.com
Common Stock will be held in escrow for the purpose of indemnifying
broadcast.com against certain liabilities of SimpleNet. Such escrow will
terminate on March 31, 1999.
A copy of the Merger Agreement and broadcast.com's press release
announcing the consummation of the Merger are filed as exhibits to this report
and are incorporated by reference herein. The description of the Merger
Agreement contained herein is qualified in its entirety by the provisions of the
Merger Agreement.
The press release filed as an exhibit to this report includes "safe
harbor" language, pursuant to the Private Securities Litigation Reform Act of
1995, indicating that certain statements about the Company's business contained
in the press release are "forward-looking" rather than "historic." The press
release also states that a more thorough discussion of factors affecting the
Company's operating results is included in the Company's Quarterly Reports on
Form 10-Q filed with the Securities and Exchange Commission.
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
The relevant financial statements, which are not included in this
initial report, will be filed pursuant to an amendment to this initial report on
or before February 13, 1999.
(b) Pro Forma Financial Information.
The relevant pro forma financial information, which is not included in
this initial report, will be filed pursuant to an amendment to this initial
report on or before February 13, 1999.
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(c) Exhibits
Exhibit Number Description
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2.1 Agreement and Plan of Reorganization, dated
as of November 16, 1998, by and among
broadcast.com inc., SN Acquisition, Inc. and
Simple Network Communications, Inc.
99.1 Press Release dated December 1, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
BROADCAST.COM INC.
(Registrant)
By: /s/ JACK A. RIGGS
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Name: Jack A. Riggs
Title: Chief Financial Officer
Dated: December 15, 1998
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EXHIBIT INDEX
Exhibit Number Description
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2.1 Agreement and Plan of Reorganization, dated
as of November 16, 1998, by and among
broadcast.com inc., SN Acquisition, Inc. and
Simple Network Communications, Inc.
99.1 Press Release dated December 1, 1998
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
by and among
SIMPLE NETWORK COMMUNICATIONS, INC.
and
SN ACQUISITION, INC.
and
BROADCAST.COM INC.
As of November 16, 1998
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
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Definitions ................................................................2
ARTICLE II THE MERGER
Section 2.1. The Merger......................................................5
Section 2.2. Closing; Effective Time.........................................5
Section 2.3. Articles of Incorporation.......................................5
Section 2.4. Bylaws..........................................................6
Section 2.5. Directors and Officers..........................................6
ARTICLE III CONVERSION OF SHARES; SHAREHOLDER APPROVAL
Section 3.1. Effect on Capital Stock.........................................6
Section 3.2. Escrow..........................................................7
Section 3.3. Dissenting Shares...............................................7
Section 3.4. Exchange of Certificates........................................7
Section 3.5. Treatment of Fractional Shares..................................7
Section 3.6. Shareholders' Meeting...........................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1. Corporate Organization..........................................8
Section 4.2. Capital Stock...................................................9
Section 4.3. Subsidiaries....................................................9
Section 4.4. Corporate Authority.............................................9
Section 4.5. Financial Statements...........................................10
Section 4.6. Operations Since December 31, 1997.............................11
Section 4.7. No Undisclosed Liabilities.....................................12
Section 4.8. Taxes 12
Section 4.9. Governmental Permits...........................................13
Section 4.10. Real Property..................................................13
Section 4.11. Real Property Leases...........................................13
Section 4.12. Intellectual Property..........................................14
Section 4.13. Labor Relations................................................15
Section 4.14. Employee Benefit Plans.........................................15
Section 4.15. Contracts......................................................17
Section 4.16. No Violation, Litigation or Regulatory Action..................18
Section 4.17. Insurance......................................................19
Section 4.18. Certain Transactions or Arrangements...........................19
Section 4.19. Customer and Supplier Relationships............................19
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Section 4.20. Finders.......................................................19
Section 4.21. Disclosure....................................................19
Section 4.22. Bank Accounts.................................................20
Section 4.23. Payment of Certain Expenses...................................20
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGERCO
Section 5.1. Organization...................................................20
Section 5.2. Authority......................................................20
Section 5.3. No Finder......................................................21
Section 5.4. Absence of Proceedings.........................................21
Section 5.5. Capitalization.................................................21
Section 5.6. Financial Statements...........................................22
Section 5.7. SEC Reports....................................................22
Section 5.8. Absence of Adverse Changes.....................................22
Section 5.9. Governmental Consents..........................................22
Section 5.10. No Undisclosed Liabilities.....................................22
Section 5.11. Compliance with Laws...........................................23
ARTICLE VI ADDITIONAL COVENANTS
Section 6.1. Investigation of the Company by Parent.........................23
Section 6.2. Certain Agreements.............................................23
Section 6.3. Operations Prior to the Effective Time.........................24
Section 6.4. No Public Announcement.........................................25
Section 6.5. Governmental Filings; Consents.................................26
Section 6.6. Employee Benefits..............................................26
Section 6.7. Parent to Fund Certain Obligations.............................26
Section 6.8. Guaranteed Company Debt........................................26
Section 6.9. Affiliates of the Company and Parent...........................26
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
OF PARENT AND MERGERCO
Section 7.1. No Misrepresentation or Breach of Covenants and Warranties.....27
Section 7.2. Resignations of Directors......................................27
Section 7.3. Litigation.....................................................27
Section 7.4. Necessary Approvals and Consents...............................27
Section 7.5. Corporate Action...............................................28
Section 7.6. Adoption of Agreement..........................................28
Section 7.7. Pooling of Interests...........................................28
Section 7.8. Agreement with Founder.........................................28
Section 7.9. Tax Representation Letters.....................................28
Section 7.10. Escrow Agreement...............................................28
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ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
Section 8.1. No Misrepresentation or Breach of Covenants and Warranties.....28
Section 8.2. Litigation.....................................................28
Section 8.3. Tax Representation Letters.....................................29
Section 8.4. Escrow Agreement...............................................29
ARTICLE IX TERMINATION
Section 9.1. Termination....................................................29
Section 9.2. No Liability Upon Termination..................................29
ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
PROVISIONS
Section 10.1. Survival of Representations and Warranties....................29
Section 10.2. Indemnification...............................................30
Section 10.3. Appointment of Representative.................................30
Section 10.4. Control of Actions and Proceedings............................30
ARTICLE XI GENERAL PROVISIONS
Section 11.1. Notices.......................................................31
Section 11.2. Partial Invalidity............................................32
Section 11.3. Execution in Counterparts.....................................32
Section 11.4. Governing Law.................................................32
Section 11.5. Assignment; Successors and Assigns............................32
Section 11.6. Titles and Headings...........................................32
Section 11.7. Schedules and Exhibits........................................32
Section 11.8. Entire Agreement; Amendments..................................32
Section 11.9. Waivers.......................................................33
Section 11.10. Specific Performance..........................................33
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is
dated as of November 16, 1998, by and among Simple Network Communications, Inc.,
a California corporation (the "Company") and broadcast.com inc., a Delaware
corporation ("Parent") and SN Acquisition, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent ("MergerCo") .
W I T N E S S E T H
WHEREAS, MergerCo is a recently formed California corporation
organized for the purpose of effecting the transactions contemplated by this
Agreement;
WHEREAS, Parent is the owner of all of the issued and
outstanding shares of the capital stock of MergerCo;
WHEREAS, the parties hereto desire to adopt a plan of
reorganization as contemplated by Section 368(a) of the Internal Revenue Code of
1986, as amended;
WHEREAS, the respective Boards of Directors of MergerCo and
the Company deem it advisable and in the best interests of MergerCo and the
Company, respectively, and their respective shareholders, that MergerCo merge
with and into the Company (the "Merger") pursuant to this Agreement and an
agreement of merger (the "Merger Agreement") substantially in the form of
Exhibit A attached hereto, with the result that the Company will become a
wholly-owned subsidiary of Parent and the shares of capital stock of the Company
(the "Shares") issued and outstanding immediately prior to the Effective Time
(as defined in Section 2.2) will be converted into the right to receive shares
of Common Stock issued by Parent;
WHEREAS, to induce Parent and MergerCo to enter into this
Agreement, the shareholders of the Company have entered into a Shareholder
Voting Agreement pursuant to which such shareholders have agreed to vote in
favor of the transactions contemplated hereby and to take certain additional
actions with respect thereto;
WHEREAS, for accounting purposes it is intended that the
Merger shall be accounted for as a pooling of interests transaction;
WHEREAS, as a further condition and inducement to Parent's
willingness to enter into this Agreement, certain employees of the Company who
are also shareholders of the Company have, concurrently with the execution of
this Agreement, executed and delivered non-competition agreements which
agreements shall only become effective at the Effective Time; and
WHEREAS, the Company, MergerCo and Parent desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and to prescribe various conditions to the Merger.
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NOW, THEREFORE, in consideration of the mutual terms,
conditions and other covenants and agreements set forth herein, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
In addition to the other words and terms defined elsewhere in
the Agreement, as used in this Agreement, the following words and terms have the
meanings specified or referred to below:
"Affiliate" means, with respect to any Person, any other
Person who, directly or indirectly, controls, is controlled by or is under
common control with such Person.
"APB No. 16 Affiliate Letter" has the meaning specified in
Section 6.9.
"Certificate" has the meaning specified in Section 3.4.
"Closing" has the meaning specified in Section 2.2.
"Closing Date" has the meaning specified in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the preamble to this
Agreement.
"Company Common Stock" has the meaning specified in Section
4.2.
"Company Group" has the meaning specified in Section 4.14(a).
"Company Options" has the meaning specified in Section 4.2.
"Company's Knowledge" means the knowledge after due inquiry of
any officer or director of the Company.
"December 1997 Balance Sheet" has the meaning specified in
Section 4.5.
"Deductible" has the meaning specified in Section 10.2.
"Deficiency or "Deficiencies" has the meaning specified in
Section 10.2.
"Defined Benefit Plan" has the meaning specified in Section
4.14(a).
"Dissenting Shares" has the meaning specified in Section 3.3.
"Effective Time" has the meaning specified in Section 2.2.
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"Employee Benefit Plan" has the meaning specified in Section
4.14(a).
"Employee Plan" has the meaning specified in Section 4.14(a).
"Encumbrance" means any lien, claim, charge, security,
interest, mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title, covenant or other encumbrance or restriction of any
kind.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" has the meaning specified in Section 3.2.
"Exchange Ratio" means the number of shares of Parent Common
Stock to be issued pursuant to this Agreement in exchange for one Share.
"Financial Statements" has the meaning specified in Section
4.5.
"Foreign Plan" has the meaning specified in Section 4.14(a).
"GCL" has the meaning specified in Section 2.1.
"Governmental Body" means any federal, state, local or foreign
court, government, department, commission, board, bureau, agency, official or
other regulatory, administrative or governmental authority.
"Governmental Permits" has the meaning specified in Section
4.9.
"Intellectual Property" has the meaning specified in Section
4.12(a).
"IRS" means the Internal Revenue Service.
"Knowledge" means the Company's Knowledge or Parent's
Knowledge, as indicated by the context.
"Material Adverse Effect" means a material adverse effect on
(i) the financial condition, businesses or results of operations of the Company
or (ii) the ability of the Company to consummate the transactions contemplated
hereby.
"Material Leases" has the meaning specified in Section 4.11.
"Merger" has the meaning specified in the preamble to this
Agreement.
"Merger Agreement" has the meaning specified in the preamble
to this Agreement.
"MergerCo" has the meaning specified in the preamble to this
Agreement.
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"Merger Consideration" has the meaning specified in Section
3.1(c).
"Multiemployer Plan" has the meaning specified in Section
4.14(a).
"Owned Real Property" has the meaning specified in Section
4.10.
"Parent" has the meaning specified in the preamble to this
Agreement.
"Parent Common Stock" means the common stock of Parent, $0.01
par value per share.
"Parent's Knowledge" means the knowledge after due inquiry of
any officer or director of Parent.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA, or any other
governmental agency, department or instrumentality succeeding to the functions
of said Corporation.
"Permitted Encumbrances" means only with respect to real
estate and interests therein, easements, covenants, conditions, restrictions and
other matters of record, and incidental mechanics' and other similar liens, none
of which, individually or in the aggregate, materially affect the value of, or
marketability of title to, the property subject thereto or the use to which such
property is presently put.
"Person" means and includes an individual, a partnership, a
corporation, a trust, a joint venture, other similar entities, an unincorporated
organization and any governmental or regulatory body or other agency or
authority.
"Representative" has the meaning specified in Section 10.3.
"Returns" has the meaning specified in Section 4.8(a).
"SEC" means the Securities and Exchange Commission.
"SEC Reports" has the meaning specified in Section 5.7.
"Secretary of State" means the Secretary of State of the State
of California.
"September 1998 Interim Balance Sheet" has the meaning
specified in Section 4.5.
"Shareholder Group" has the meaning specified in Section 10.2.
"Shareholders' Approval" has the meaning specified in Section
3.6.
"Shares" has the meaning set forth in the preamble of this
Agreement.
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"Subsidiary" shall mean, as of the applicable point in time,
with respect to any Person, each corporation, partnership, joint venture or
other entity, of which such Person owns, directly or indirectly, more than 50%
of the outstanding voting securities or equity interests.
"Surviving Corporation" has the meaning specified in Section
2.1.
"Tax" or "Taxes" has the meaning specified in Section 4.8(a).
"Treasury Regulations" has the meaning specified in Section
4.8(d).
"USRPHC" has the meaning specified in Section 4.8(d).
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Subject to the terms and conditions
of this Agreement and the Merger Agreement, at the Effective Time (as defined in
Section 2.2 hereof) and in accordance with the applicable provisions of Chapter
11 of the General Corporation Law of the State of California (the "GCL"),
MergerCo will be merged with and into the Company and the Company shall be the
surviving corporation in the Merger (the "Surviving Corporation") and the
separate existence of MergerCo shall cease and the other effects of the Merger
shall be as set forth in applicable provisions of Chapter 11 of the GCL. The
name of the Surviving Corporation shall continue to be Simple Network
Communications, Inc. To effectuate the Merger, MergerCo and the Company shall,
concurrently with the Closing (as hereafter defined), execute and file, among
other things, the Merger Agreement in the office of the Secretary of State of
the State of California ("Secretary of State") in accordance with the applicable
provisions of Chapter 11 of the GCL.
SECTION 2.2. CLOSING; EFFECTIVE TIME. Subject to the
provisions of Articles VII and VIII, the closing of the Merger (the "Closing")
shall take place in San Diego, California at the offices of Gibson, Dunn &
Crutcher LLP, 401 West A Street, Suite 1900, San Diego, California 92101, as
soon as practicable but in no event later than 10:00 a.m. Pacific Standard Time
on the third business day after the date on which each of the conditions set
forth in Articles VII and VIII have been satisfied or waived by the party or
parties entitled to the benefit of such conditions, or at such other place, at
such other time or on such other date as Parent and the Company may mutually
agree. The date on which the Closing actually occurs is hereinafter referred to
as the "Closing Date". At the Closing, MergerCo and the Company shall cause a
the Merger Agreement to be executed and filed with the Secretary of State in
accordance with the GCL. The Merger shall become effective as of the date and
time of such filing (the "Effective Time").
SECTION 2.3. ARTICLES OF INCORPORATION. At the Effective Time,
and without any further action on the part of the Company or MergerCo, the
articles of
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incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation, until
thereafter altered, amended or repealed as provided therein and in accordance
with applicable law.
SECTION 2.4. BYLAWS. The bylaws of the Company, as in effect
immediately prior to the Effective Time, shall become, from and after the
Effective Time, the bylaws of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
SECTION 2.5. DIRECTORS AND OFFICERS. The directors and
officers of MergerCo immediately prior to the Effective Time shall become, from
and after the Effective Time, the directors and officers of the Surviving
Corporation, until their respective successors are duly elected or appointed and
shall qualify or their earlier resignation or removal.
ARTICLE III
CONVERSION OF SHARES; SHAREHOLDER APPROVAL
SECTION 3.1. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Shares or any shares of capital stock of MergerCo:
(a) Common Stock of MergerCo. Each share of common stock of
MergerCo, par value $0.01 per share, issued and outstanding immediately prior to
the Effective Time shall be converted into and become one share of common stock,
par value $0.01 per share, of the Surviving Corporation.
(b) Parent and MergerCo-Owned Stock. Each Share owned by
Parent, MergerCo or any Affiliate of Parent or MergerCo shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(c) Conversion of Shares. All other issued and outstanding
Shares and all rights existing with respect thereto shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding and shall be converted into that number of fully paid and
nonassessable shares of Parent Common Stock (the "Merger Consideration") equal
to the following fraction:
(i) the numerator shall be 410,810; and
(ii) the denominator shall be the number of Shares as
of immediately prior to the Effective Time (other than Shares, if any,
canceled by Section 3.1(b)); provided, however, that "Dissenting
Shares" (as hereafter defined) shall be governed by Section 3.3 hereof
and provided further that cash will be paid in lieu of any fractional
shares as provided in Section 3.5.
(d) Certain Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any
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dividend or distribution of securities convertible into Parent Common Stock or
Shares), reorganization, recapitalization or other like change with respect to
Parent Common Stock or Shares occurring after the date hereof and prior to the
Effective Time.
SECTION 3.2. ESCROW. At the Closing, Parent shall place into
escrow ( the "Escrow ") 20,540 shares of Parent Common Stock pursuant to the
terms of an escrow agreement (the "Escrow Agreement") to be executed and
delivered at the Closing substantially in the form attached hereto as Exhibit B.
The Escrow will serve as a fund for the indemnity obligations set forth in
Article X hereof. Such shares of the Parent Common Stock represent the aggregate
number of shares to be contributed to the Escrow by the holders of record of
Shares as of immediately prior to the Effective Time, the allocation of which
shall be in proportion to the respective shareholdings of such holders.
SECTION 3.3. DISSENTING SHARES. Shares which constitute
"dissenting shares" under Section 1300(b) of the Corporations Code (the
"Dissenting Shares") shall have only such rights as are afforded to the holder
thereof by the provisions of Chapter 13 of the GCL.
SECTION 3.4. EXCHANGE OF CERTIFICATES. Subject to the
provisions regarding the treatment of fractional shares herein and after
deduction of the contributions of the Company shareholders to the Escrow as
specified in the Escrow Agreement, Parent shall, as promptly as practicable
after the Effective Time, make available stock certificates representing the
shares of Parent Common Stock issued in the Merger to the persons legally
entitled thereto upon surrender of certificates which immediately prior to
Effective Time represented Shares. At the Effective Time, each Share converted
into the right to receive the Merger Consideration pursuant to Section 3.1(c)
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
Shares (a "Certificate") shall, to the extent such Certificate represents such
Shares, cease to have any rights with respect thereto, except the right to
receive the Merger Consideration applicable thereto, upon surrender of such
Certificate. After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for transfer or for any
other reason, they shall be canceled and exchanged for Parent Common Stock and
cash in lieu of any fractional share as provided in this Article III, except as
otherwise provided by law and as adjusted for any dividends paid or other
distributions made after the Effective Time with respect to Parent Common Stock,
if the record date set for such dividends or distributions is a date occurring
after the Effective Time.
SECTION 3.5. TREATMENT OF FRACTIONAL SHARES. No fractional
share of Parent Common Stock nor scrip certificate for such fractional share
shall be issued in the Merger. In lieu thereof, any holder of Shares otherwise
entitled to receive a fractional share of Parent Common Stock shall be paid an
amount in cash equal to the value of such fractional share interest based on a
value of $50.51 per whole share of Parent Common Stock. If more that one
Certificate representing Shares shall be surrendered at one time for the account
of the same shareholder, the number of full shares of Parent Company Stock for
which such Certificates shall be delivered shall be computed on the basis of the
aggregate number of Shares represented by such Certificates so surrendered.
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SECTION 3.6. SHAREHOLDERS' MEETING. The Company shall, as
promptly as practicable following the date of this Agreement, (i) take all
action necessary in accordance with applicable law to convene a meeting of, or
obtain a written consent from, its shareholders for the purpose of considering,
approving and adopting this Agreement and the transactions contemplated hereby
(the "Shareholders' Approval"), (ii) include in the notice for such
Shareholders' Approval the recommendation of the Board of Directors of the
Company that the shareholders of the Company vote in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby and (iii)
use its reasonable best efforts to obtain the necessary approval of this
Agreement and the transactions contemplated hereby by its shareholders.
SECTION 3.7. TAX AND ACCOUNTING CONSEQUENCES.
(a) 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 United States Income Tax
Regulations.
(b) It is intended by the parties hereto that the merger shall
qualify for accounting treatment as a pooling of interests.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and MergerCo to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
represents and warrants to Parent and MergerCo as follows:
SECTION 4.1. CORPORATE ORGANIZATION. The Company is a
corporation duly organized, legally existing and in good standing under the laws
of the State of California. Except as set forth on Schedule 4.1, the Company is
duly qualified to transact business as a foreign corporation and is in good
standing in each of the jurisdictions listed in Schedule 4.1. The jurisdictions
set forth on Schedule 4.1 are the only jurisdictions in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification (except where the failure to so qualify would not have a Material
Adverse Effect). The Company has all requisite corporate power to own or lease
and to operate and use its properties and assets and to carry on its business as
currently conducted. The Company has delivered or made available to Parent and
MergerCo complete and correct copies of its Articles of Incorporation and
Bylaws, each as in effect on the date hereof. Prior to the date hereof, the
Company has not been a subsidiary of any other corporation or entity.
SECTION 4.2. CAPITAL STOCK. As of the date hereof, the
authorized capital stock of the Company consists of 20,000 shares of common
stock, par value $.01 per share (the "Company Common Stock"). As of the date
hereof, 2,000 shares of Company Common Stock
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are issued and outstanding and are owned by the Persons and in the amounts set
forth on Schedule 4.2 hereof. Except as set forth on Schedule 4.2, no options to
purchase shares of Company Common Stock (the "Company Options") are currently
outstanding. None of the issued and outstanding shares of capital stock of the
Company has been issued in violation of, or is subject to, any preemptive or any
subscription rights. Except as provided in this Agreement and the transactions
contemplated hereby, and except as set forth on Schedule 4.2, there are no
agreements, arrangements, warrants, options, puts, calls, rights, option or
other employee benefit plans or other commitments or understandings of any
character to which the Company or, to the Company's Knowledge, any shareholder
of the Company is a party relating to the issuance, sale, purchase, redemption,
conversion, exchange, registration, voting or transfer of any shares of Company
Common Stock or other securities of the Company. The names of the record holders
of all such warrants, options, puts, calls and rights, and the names of the
parties to all such agreements, arrangements, plans, commitments or
understandings, are set forth on Schedule 4.2. All of the outstanding shares of
Company Common Stock are duly authorized and validly issued and fully paid and
nonassessable, free of any preemptive or subscription rights, free and clear of
all Encumbrances (except as set forth in Schedule 4.2) and were issued in
compliance with all applicable securities laws. The Company is not in active
discussions, formal or informal, with any person or entity regarding the
issuance of any form of additional Company equity that has not been issued or
committed to prior to the date of this Agreement. Except as provided in this
Agreement and other transaction documents or any transaction contemplated hereby
or thereby, there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of shares of the Company's Common
Stock.
SECTION 4.3. SUBSIDIARIES. The Company has no Subsidiaries.
Schedule 4.3 contains a list of each Person in which the Company owns, directly
or indirectly, at least 10% of the voting securities or other equity interests.
Schedule 4.3 contains (A) the name, jurisdiction of incorporation or
organization, authorized and outstanding shares or other equity capital and
percentage of outstanding shares or other equity interests of each such Person
and (B) to the Company's Knowledge, the name of the owner and the number and
percentage of outstanding shares or other equity interests of each of such
Person.
SECTION 4.4. CORPORATE AUTHORITY.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to consummate the transactions,
subject to the conditions set forth herein, contemplated hereby and to comply
with the terms, conditions and provisions hereof. The execution, delivery and
performance of this Agreement by the Company have been duly authorized by all
requisite corporate action. This Agreement has been duly executed and delivered
by the Company and constitutes, and each other instrument contemplated hereby or
thereby, when executed and delivered by the Company, will constitute, the valid
and binding obligation of the Company enforceable in accordance with its terms.
(b) Except as set forth in Schedule 4.4, neither the execution
and delivery by the Company of this Agreement or of any of the other instruments
contemplated hereby, nor the consummation by the Company of any of the
transactions contemplated hereby, nor compliance by the Company with or
fulfillment thereby of the terms, conditions and provisions hereof will:
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(i) violate any provision of the Company's charter or
bylaws;
(ii) result in the acceleration of, or entitle any
party to accelerate (whether after the giving of notice or lapse of
time or both), any debt obligation of the Company;
(iii) violate, or result with giving of notice or
lapse of time or both in any violation of, or result in the creation or
imposition of, any Encumbrance upon any of the properties of the
Company pursuant to any provision of, any mortgage, lien, lease,
agreement, Governmental Permit, item of Intellectual Property,
indenture, license, instrument, law, regulation, order, arbitration
award, judgment or decree to which the Company is a party or by which
the Company or any of its properties is bound, the effect of all of
which violations, creations and impositions would result in liability
to the Company in excess of $50,000 in the aggregate;
(iv) constitute an event permitting modification,
amendment or termination of a mortgage, lien, lease, agreement,
Governmental Permit, item of Intellectual Property, indenture, license,
instrument, order, arbitration award, judgment or decree to which the
Company is a party or by which the Company or any of its properties is
bound, which modification(s), amendment(s) or termination(s) would
result in liability to the Company in excess of $50,000 in the
aggregate; or
(v) except for the filings contemplated in Section
2.1, require the approval, consent, authorization or act of, or the
making by the Company or any other Person, of any declaration, filing
or registration with any third Person or any Governmental Body, except
to the extent that the failure to obtain any of the foregoing does not
result in a Material Adverse Effect.
SECTION 4.5. FINANCIAL STATEMENTS. Schedule 4.5 contains true
and complete copies of (a) the balance sheet of the Company as of December 31,
1997 (the "December 1997 Balance Sheet") and the related statements of income
and shareholders' equity and cash flows for the year then ended, as audited by,
and accompanied by the opinion of, Levitz, Zacks and Ciceric, independent
certified public accountants; and (b) the unaudited interim balance sheet of the
Company as of September 30, 1998 (the "September 1998 Interim Balance Sheet")
and the related interim statements of income, shareholders' equity and cash
flows for the nine months then ended. The financial statements referred to in
the preceding sentence are herein referred to collectively as the "Financial
Statements". Subject, in the case of the September 1998 Interim Balance Sheet,
to normal year-end audit adjustments, all of the Financial Statements present
fairly the financial condition and results of operations of the Company and its
consolidated subsidiaries as of such dates and for such periods; such balance
sheets and the notes thereto disclose all liabilities, direct or contingent, of
the Company and its consolidated subsidiaries as of the dates thereof required
to be disclosed by generally accepted accounting principles; and such financial
statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as specified in the notes
thereto.
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SECTION 4.6. OPERATIONS SINCE DECEMBER 31, 1997.
(a) Except as set forth in the Financial Statements, since
December 31, 1997 there has been no Material Adverse Effect.
(b) Except as described in Schedule 4.6 and except for the
transactions contemplated by this Agreement or described herein, since December
31, 1997 the Company has conducted its business in the ordinary course and in
conformity with past practice and, without limiting the foregoing:
(i) the Company has not made any capital expenditures
or commitments for the acquisition or construction of any assets
characterized as "property and equipment" on the Financial Statements
exceeding $20,000 per item or exceeding $50,000 in the aggregate;
(ii) there has been no declaration, setting aside or
payment of any dividend or other distribution in respect of the capital
stock of the Company, and no issuance of any capital stock of the
Company or of any securities convertible into or exchangeable or
exercisable for, or otherwise representing any right to acquire, any
such capital stock;
(iii) the Company has not redeemed, repurchased, or
otherwise acquired any of its capital stock or securities convertible
into or exchangeable or exercisable for its capital stock or any other
securities of the Company, and has not entered into any agreement,
arrangement or other commitment to do so;
(iv) the Company has not adopted or amended any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation or other plan, agreement, trust fund or
arrangement or other plan for the benefit of its employees;
(v) the Company has not granted any bonus or other
special compensation or increased compensation or benefits payable or
to become payable to any of its directors, officers or employees
except, in the case of employees, for increases, bonuses or special
compensation in the ordinary course of business consistent with past
compensation practice, nor taken any action with respect to the grant
or increase of severance or termination pay nor entered into any
employment, consulting or similar agreement;
(vi) the Company has not incurred any indebtedness for
money borrowed;
(vii) the Company has not disposed of or acquired any
assets or properties, other than in the ordinary course of business
consistent with past practice;
(viii) the Company has not been the subject of any
change in accounting methods, principles or practice, except insofar as
may have been required by a change in generally accepted accounting
principles;
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(ix) there has been no damage, destruction or loss to
tangible or intangible property which has resulted in a Material
Adverse Effect; and
(x) the Company has not entered into any agreement,
arrangement or understanding, or otherwise resolved or committed, to do
any of the foregoing.
SECTION 4.7. NO UNDISCLOSED LIABILITIES. Except as set forth
in Schedule 4.7 or as is expressly set forth in any other Schedule to this
Agreement, the Company is not subject to any obligation or liability of any
nature (whether accrued, absolute, contingent, inchoate or otherwise, including,
without limitation, unasserted claims), which would individually or in the
aggregate be required by generally accepted accounting principles to be
reflected on a balance sheet of the Company but is not reflected on the December
1997 Balance Sheet or the notes thereto, other than (i) obligations pursuant to
or in connection with this Agreement or the transactions contemplated hereby,
(ii) liabilities and obligations incurred in the ordinary course of business
after December 31, 1997 or which are reflected on the September 1998 Interim
Balance Sheet or the notes thereto and (iii) liabilities which do not have a
Material Adverse Effect.
SECTION 4.8. TAXES.
(a) Except as set forth on Schedule 4.8, the Company has filed
or caused to be filed all federal, state, foreign and local, tax returns, tax
information returns, reports and estimates ("Returns"), for all taxable or
reporting periods ending at or before the Effective Time (taking into account
applicable extension periods) to the extent required to be filed by the Company
under the applicable federal, foreign, state or local law, at or before the
Effective Time; all Taxes shown to be due on such Returns have been paid in full
when due; and all such Returns are true, complete and accurate in all material
respects. As used in this Agreement, "Taxes" or "Tax" means all taxes of any
kind and any interest or penalties related thereto, including, without
limitation, net income, capital gains, gross receipts, franchise, or withholding
taxes validly imposed upon, the Company with respect to such taxes.
(b) Except as set forth in Schedule 4.8, there are no claims
or investigations by any taxing authority pending or to Company's Knowledge
threatened against the Company for any past due Taxes for periods ending prior
to the Effective Time.
(c) The Company has (i) withheld all amounts required to be
withheld from the wages of its employees, with respect to tax withholding and
taxes due from such employees under the Federal Insurance Contributions Act or
any other foreign, federal, state, or local unemployment tax laws for payroll
periods ending before the close of business on the day before the Effective Time
and (ii) filed all foreign, federal, state or local returns and reports that
were required by the applicable foreign, federal, state or local law to be filed
on or before the day before the Effective Time (taking into account applicable
extension periods) with respect to such withholding for such periods.
(d) The Company is not a United States Real Property Holding
Corporation (a "USRPHC") within the meaning of Section 897 of the Code and was
not a USRPHC on any
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"determination date" (as defined in Section 1.897-2(c) of the regulations
promulgated by the Treasury Department pursuant to the Code (the "Treasury
Regulations"))that occurred in the five-year period preceding the Effective
Time.
(e) The Company has not agreed and is not required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state or local law by reason of a change in accounting method initiated by it or
any other relevant party or it has no Knowledge that the IRS has proposed any
such adjustment or change in accounting method, or has any application pending
with any taxing authority requesting permission for any changes in accounting
methods that relate to the business or assets of the Company.
SECTION 4.9. GOVERNMENTAL PERMITS. The Company owns, holds or
possesses all governmental licenses, franchises, permits, privileges,
immunities, approvals and other authorizations which are necessary for its
ownership, leasing, operation and use of its assets and properties and which are
required for its carrying on and conducting its businesses as currently
conducted and as proposed to be conducted (herein collectively called
"Governmental Permits"), except where the failure to own, hold or possess the
same would not have a Material Adverse Effect. Each of such material
Governmental Permits is valid, and in full force and effect and, to the
Company's Knowledge, no suspension or cancellation of any of the same is
threatened, except for such suspensions or cancellations that would not have a
Material Adverse Effect. Except as set forth in Schedule 4.9, no written notice
of cancellation, of default or of any dispute concerning any Governmental
Permit, or of any event, condition or state of facts which constitutes or, after
notice or lapse of time or both, would constitute a breach or default under any
Governmental Permit has been received by the Company, except for those that,
singly or in the aggregate, would not have a Material Adverse Effect. To the
Company's Knowledge, there are no pending or proposed changes in permit
requirements that would require the Company to make material additional monetary
payments in order to obtain, renew or comply with any Governmental Permit,
except for those that would not in the aggregate have a Material Adverse Effect.
SECTION 4.10. REAL PROPERTY. The Company is not the record or
beneficial owner of any real property.
SECTION 4.11. REAL PROPERTY LEASES. The leases, subleases and
other agreements and documents with respect to real property which are
identified on Schedule 4.11 constitute (a) the lease of the Company's
headquarters in San Diego, California and (b) the lease of all other facilities
material to the Company and are hereinafter referred to as the "Material
Leases". Correct and complete copies of the Material Leases have been delivered
to the Parent. The Company holds good and valid leasehold title to each of the
properties which are the subject of the Material Leases, in each case free of
all Encumbrances, except for liens for (x) Taxes not yet due and payable or
which are being contested in good faith, (y) Encumbrances which neither
materially interfere with the intended use of the property which is the subject
of the Material Lease nor have a material adverse effect upon the use by the
Company of such property or the business currently conducted thereon or proposed
to be conducted thereon and (z) Permitted Encumbrances. To the Company's
Knowledge, except as identified on Schedule 4.11, there are no existing defaults
under any Material Lease, and no event has occurred which with notice or
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lapse of time, or both, could constitute an event of default under any Material
Lease, which default would result in a Material Adverse Effect. The transactions
contemplated by this Agreement will not result in a default under any Material
Lease (which default would have a Material Adverse Effect).
SECTION 4.12. INTELLECTUAL PROPERTY.
(a) Schedule 4.12 contains a complete and correct list of all
United States and foreign patents, patent applications, registered trademarks,
trademark applications, registered service marks, service mark applications,
trade names and registered copyrights which are material to the business the
Company (the "Intellectual Property"), including, if applicable, (i) the date of
issuance or registration, (ii) the serial, patent or registration number, (iii)
the date of application, (iv) the expiration date and (v) the country of
registration of such items of Intellectual Property and any material licenses
thereunder.
(b) Except as set forth in Schedule 4.12, the right, title or
interest of the Company in each item of Intellectual Property is free and clear
of Encumbrances which would have a Material Adverse Effect.
(c) Except as set forth in Schedule 4.12, the Company has not
received written notice that is still pending to the effect that the Company has
infringed upon any patent, trademark, service mark, trade name, copyright, brand
name, logo, symbol or other intellectual property right of any third party; nor
is there any action pending or, to the Company's Knowledge, threatened, against
the Company claiming that the Company has, whether directly, contributorily or
by inducement, infringed any trade secret or misappropriated any other
intellectual property which infringement, notice, charge, claim, or assertion,
as the case may be, would have a Material Adverse Effect.
(d) Except as set forth in Schedule 4.12, the Company has not
sent or otherwise communicated to another Person any notice, charge, claim or
other assertion of, and the Company has no Knowledge of, any present, impending
or threatened patent, trademark or copyright infringement of any Intellectual
Property which infringement would have a Material Adverse Effect.
SECTION 4.13. LABOR RELATIONS. Except as described in Schedule
4.13, there are no pending labor grievances or unfair labor practice claims or
charges against the Company which would have a Material Adverse Effect. Except
as described in Schedule 4.13, the Company's Knowledge there are no organizing
efforts by any union or other group seeking to represent any employees of the
Company. There is not pending any decertification which would result in
withdrawal liability to any Multiemployer Plan, except such efforts, petitions
or decertifications which would not have a Material Adverse Effect.
SECTION 4.14. EMPLOYEE BENEFIT PLANS.
(a) The term "Employee Plan" shall mean any pension,
retirement, profit-sharing, deferred compensation, stock purchase, stock option,
bonus or incentive plan, any
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medical, vision, dental or other health plan, any life insurance plan, vacation,
severance, disability or any other employee benefit plan, program, policy, or
arrangement, whether written, unwritten, formal or informal, including, without
limitation, any "Employee Benefit Plan" as defined in Section 3(3) of ERISA, any
employee benefit plan covering any employees of the Company in any foreign
country or territory (a "Foreign Plan") or any other entity which, together with
the Company, constitutes a single employer within the meaning of Section 414 of
the Code (hereinafter collectively referred to as the "Company Group") to which
any member of the Company Group has any outstanding present or future
obligations to make payments to or to contribute to, whether voluntary,
contingent or otherwise, is a party or is bound and under which any employees of
the Company Group are eligible to participate or derive a benefit, except any
government-sponsored program or government-required benefit. Schedule 4.14 lists
each Employee Plan which is presently in effect, or which was previously in
effect (if it may result in a material liability), and identifies each Employee
Plan (other than a Foreign Plan) which is a defined benefit plan as defined in
Section 3(35) of ERISA (a "Defined Benefit Plan") or which is a multiemployer
plan within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan").
(b) As of the date hereof:
(i) Each of the Employee Plans that purports to be
qualified under Section 401(a) of the Code is qualified and any trusts
under such Employee Plans are exempt from income tax under Section
501(a) of the Code or will be qualified and exempt by a submission of
such plan and trust for an IRS determination in a timely fashion, if
not already submitted, and the timely making of such amendments as may
be required as a condition for issuance of a favorable determination.
Each Employee Plan intended to be qualified under Section 401 of the
Code has been administered in all material respects according to its
terms, and neither the Company Group, nor any fiduciary of any Employee
Plan has done anything which would adversely affect its qualified
status or the qualified status of the related trusts. The Employee
Plans and each member of the Company Group are in material compliance
with all other laws (including, without limitation, ERISA and the
Code), orders, government rules and regulations, and any collective
bargaining agreement applicable to Employee Plans. All material reports
and material disclosures relating to the Employee Plans required to be
filed with or furnished to governmental agencies, participants, or
beneficiaries prior to the Effective Time have been or will be filed or
furnished in a timely manner and in accordance with applicable law.
Other than routine claims for benefits submitted by participants or
beneficiaries, there is no litigation, legal action, investigation,
claim, or proceeding pending or, to the Company's Knowledge, threatened
against any Employee Plan or against any fiduciary of any Employee
Plan, with respect to actions taken or omitted relating to the Employee
Plan.
(ii) With respect to any Employee Plan, no prohibited
transaction (within the meaning of Section 406 of ERISA and/or Section
4975 of the Code) exists which could subject the Company Group to any
civil penalty assessed pursuant to Section 502(1) of ERISA or tax
imposed by Section 4975 of the Code. Neither any member of the Company
Group, nor any administrator or fiduciary of any Employee Plan (or
agent of any of the foregoing) has engaged in any transaction or acted
or failed to act in a
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manner which is likely to subject any member of the Company Group to
any liability for a breach of fiduciary or other duty under ERISA or
any other applicable law which would have a Material Adverse Effect. To
the extent applicable, the representations and warranties contained in
this paragraph (ii) are true and accurate with respect to each
Multiemployer Plan.
(iii) No Defined Benefit Plan has been terminated or
partially terminated after September 1, 1974, except as set forth on
Schedule 4.14. Each Defined Benefit Plan listed as terminated on
Schedule 4.14 has met the requirements for standard termination of
single-employer plans contained in Section 4041(b) of ERISA to the
extent such requirements were applicable to such Defined Benefit Plans.
(iv) Except as provided in Schedule 4.14, no member
of the Company Group has completely or partially withdrawn from any
Multiemployer Plan. No member of the Company Group has suffered a 70%
decline in "contribution base units" (within the meaning of Section
4205(b) (1) (A) of ERISA) in any plan year beginning after 1979. No
termination liability to the PBGC or withdrawal liability to any
Multiemployer Plan that is material in the aggregate has been or is
expected to be incurred with respect to any Employee Plan by any member
of the Company Group. The PBGC has not instituted, and is not expected
to institute, any proceedings to terminate any Employee Plan. Except as
provided in Schedule 4.14, there has been no reportable event (within
the meaning of Section 4043(b) of ERISA) with respect to any Employee
Plan.
(c) Each member of the Company Group has made full and timely
payment of all amounts required under the terms of each of the Employee Plans
that are employee pension benefit plans (as defined in Section 3(2) of ERISA),
including the Multiemployer Plans, to have been paid as contributions to such
plan. No accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any
Employee Plan. Each member of the Company Group has made full and timely payment
of, or has accrued pending full and timely payment, all amounts which are
required under the terms of each Employee Plan to be paid as a contribution to
each such Employee Plan. The assets of each Defined Benefit Plan are sufficient
to provide all of the benefits under each such Defined Benefit Plan, except as
set forth on Schedule 4.14.
(d) Each member of the Company Group has complied in material
respects with the continuation coverage requirements of Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(e) Except as provided in Schedule 4.14, no member of the
Company Group has any outstanding, present or future obligations to make payment
to any insurers for reserves of any Employee Plan which is an employee welfare
or benefit plan (within the meaning of Section 3(1) of ERISA) provided under a
minimum premium arrangement with an insurer.
(f) Neither the consummation of the transactions contemplated
by this Agreement nor its execution will accelerate or increase any liability
under any Employee Plan
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because of an acceleration or increase of any of the rights or benefits to which
employees may be entitled thereunder. Prior to the Effective Time, except as
contemplated by this Agreement, no member of the Company Group shall amend any
Employee Plan, except to the extent necessary to maintain compliance with the
Code or ERISA, increase any benefits or rights under any Employee Plan, or adopt
any new plan, program, policy, or arrangement which, if it existed as of the
date hereof, would constitute an Employee Plan.
(g) No state of facts exists with respect to the Foreign Plans
which would have a Material Adverse Effect.
SECTION 4.15. CONTRACTS.
(a) Except as set forth in Schedule 4.15, the Company is not a
party to, nor bound by, nor is any of its properties subject to, any written or
oral agreement described as follows:
(i) any contract (except purchase orders that involve
the purchase or sale of goods) with a value, or involving payments the
Company, of more than $50,000 and which is not cancelable within six
months after the date of notice of cancellation without liability upon
such notice given at or after the Effective Time;
(ii) any contract for the employment of any officer
or employee (other than, with respect to any employee, contracts which
are terminable without liability upon notice of 30 days or less and do
not provide for any further payments following such termination) or
with a former officer or employee pursuant to which payments by the
Company may be required to be made at any time following the date
hereof;
(iii) any mortgage or other form of secured
indebtedness, or any other indebtedness for money borrowed;
(iv) any unsecured debentures, notes or installment
obligations or other instruments for or relating to any unsecured
borrowing of money by the Company, or any letter of credit issued to
secure any obligation of a third party other than borrowings less than
$50,000 in the aggregate; or
(v) any agreement containing any covenant not to
compete.
(b) Complete and correct copies of all contracts, agreements
and other instruments referred to in Schedule 4.15 have heretofore been made
available to Parent and MergerCo by the Company.
(c) Except as disclosed in Schedule 4.15, the Company, or, to
the Company's Knowledge, any third party, is not in default under, and no event
has occurred which with notice or lapse of time, or both, could reasonably be
expected to result in a material default under, or violation of, any contract,
agreement or instrument identified in subsection (a) above, which defaults and
violations in the aggregate would have a Material Adverse Effect.
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SECTION 4.16. NO VIOLATION, LITIGATION OR REGULATORY ACTION.
(a) The Company has complied in all material respects in the
conduct of its business with all material foreign, federal, state and local
laws, except failures to comply which would not have a Material Adverse Effect.
Without limiting the foregoing, and except as set forth in Schedule 4.16, the
Company has not been notified in writing that it may be a potentially
responsible party under or otherwise in material violation of or material
noncompliance with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, the Federal Water
Pollution Control Act, 33 U.S.C. Section 1201, the Clean Water Act, 33 U.S.C.
Section 1321, the Clean Air Act, 42 U.S.C. Section 7401, and the Toxic
Substances Control Act, 15 U.S.C. Section 2601, in each case, as amended from
time to time, or any other federal, state or local law, ordinance or regulation
dealing with the protection of human health, natural resources and/or the
environment, and there are no events or facts known to the Company that indicate
that the Company will be a "potentially responsible party", including without
limitation, any disposal, release, burial or placement of hazardous or toxic
substances, pollutants, contaminants, petroleum or gas products or asbestos
containing materials by the Company or on properties owned or leased by the
Company.
(b) Except as set forth in Schedule 4.16, there is no action,
suit, proceeding or investigation pending or, to the Company's Knowledge,
threatened against, the Company which if adversely determined could reasonably
be expected to result in damages in excess of $50,000 that are not covered by
insurance, nor has the Company entered into or received any consent decree,
compliance order or administrative order (whether relating to environmental
protection or otherwise); and the Company is not in default (or would not be in
default with the giving of notice or lapse of time or both) in respect of any
judgment, order, writ, injunction or decree of any court or any Governmental
Body which defaults in the aggregate would have a Material Adverse Effect.
SECTION 4.17. INSURANCE. Schedule 4.17 is a complete and
correct schedule of all currently effective material insurance policies or
binders of insurance or programs of self-insurance which relate to the business
of the Company (excluding insurance funding Employee Plans which are set forth
on Schedule 4.14). The coverage under each such policy and binder is in full
force and effect, and no notice of cancellation or nonrenewal with respect to,
or disallowance of any claim under, or material increase of premium for, any
such policy or binder has been received by the Company, except such notices,
disallowances or increases which would in the aggregate not have a Material
Adverse Effect.
SECTION 4.18. CERTAIN TRANSACTIONS OR ARRANGEMENTS. To the
Company's Knowledge, except as described on Schedule 4.18, pursuant to employee
benefit arrangements, employment agreements or arrangements or as expressly
contemplated by this Agreement, no securityholder, officer or director of the
Company (and no Person with whom any such securityholder, officer or director
has any direct or indirect relation by blood, marriage or adoption) and no
Affiliate or associate (as such term is defined in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended), of any of the foregoing is
presently, directly or indirectly, a party to any agreement, arrangement or
understanding with the Company (other
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than arising out of the employment at will of that securityholder by the
Company), including without limitation: (a) any contract, agreement,
understanding, commitment or other arrangement providing for the furnishing of
services or rental of real or personal property to or from, or otherwise
relating to the business or operations of, the Company; (b) any loans or
advances to or from the Company or any of the Subsidiaries; (c) any arrangement
pursuant to which the Company or an Affiliate thereof may have any obligation or
liability whatsoever; and (d) any transaction of a kind which would be required
to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission, if the Company were subject thereto.
SECTION 4.19. CUSTOMER AND SUPPLIER RELATIONSHIPS. Except as
set forth on Schedule 4.19, to the Company's Knowledge, the relationships of the
Company with its material customers and suppliers are, in the aggregate,
satisfactory, and the Company is not aware of any fact or circumstance
(including the entering into of this Agreement) that would cause any change in
such relationships, which change would have a Material Adverse Effect.
SECTION 4.20. FINDERS. Neither the Company nor any party
acting on its behalf has paid or become obligated to pay any fee or commission
to any broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement, except (i) Alliant Partners, who have been
retained by the Company to serve as financial advisors in connection with the
transactions contemplated hereby, (ii) Joseph Sullivan who has been retained by
the Company to serve as a financial advisor in connection with the transactions
contemplated hereby and (iii) those advisors retained by the Company which are
identified in Schedule 4.20.
SECTION 4.21. DISCLOSURE. All information relating to and
concerning the Company contained in this Agreement or in any other certificate,
instrument, schedule or other document given by the Company in connection with
this Agreement and the Merger is true and correct in all material respects and
no material facts necessary to prevent the statements made herein and therein
from being misleading have been omitted.
SECTION 4.22. BANK ACCOUNTS. Schedule 4.22 contains an
accurate and complete list of bank accounts and/or safe deposit boxes maintained
by the Company indicating the name and branch of the bank, the account number,
the type of account, and the names of all persons authorized to draw thereon or
who have access thereto.
SECTION 4.23. PAYMENT OF CERTAIN EXPENSES. Except as provided
in Section 6.7 hereof, the Company has not paid or agreed to pay on behalf of
any shareholder of the Company any costs incurred by any such shareholder in
connection with this Agreement or the transactions contemplated hereby.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGERCO
As an inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, Parent and MergerCo
represent and warrant to the Company as follows:
SECTION 5.1. ORGANIZATION. Each of Parent and MergerCo is a
corporation duly organized, legally existing and in good standing under the laws
of the jurisdiction of its formation and has full corporate power and authority
to own or lease and to operate and use its properties and assets and to carry on
its business as now conducted. Prior to the date hereof, true and complete
copies of the charter and bylaws of Parent and MergerCo have been delivered to
the Company.
SECTION 5.2. AUTHORITY.
(a) Each of Parent and MergerCo has the requisite power and
authority to execute and deliver this Agreement and all of the other instruments
contemplated hereby to be executed by it, to consummate the transactions
contemplated hereby and to comply with the terms, conditions and provisions
hereof. The execution, delivery and performance of this Agreement by Parent and
MergerCo has been duly authorized and approved by all necessary corporate action
on Parent and MergerCo's behalf and do not require any further authorization or
consent of Parent or MergerCo or their respective shareholders. This Agreement
has been duly executed and delivered by Parent and MergerCo. This Agreement is,
and each other instrument of Parent and MergerCo contemplated hereby to be
executed by Parent and MergerCo will be, the legal, valid and binding obligation
of each of Parent and MergerCo, enforceable against them in accordance with its
terms.
(b) The execution and delivery by each of Parent and MergerCo
of this Agreement or any of the other instruments contemplated hereby, the
consummation by each of Parent and MergerCo of the transactions contemplated
hereby and the compliance by each of Parent and MergerCo with, or fulfillment by
each of them of the terms, conditions and provisions hereof, will not:
(i) conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under its charter or by-laws or any
note, instrument, agreement, mortgage, lease, license, franchise,
Governmental Permit or judgment, order, award or decree to which it is
a party, to which any of its properties are subject, or by which it is
bound; or
(ii) require the approval, consent, authorization or
act of, or the making by it of any declaration, filing or registration
with, any third Person or any Governmental Body.
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SECTION 5.3. NO FINDER. Except as provided in Section 6.7
hereof, neither Parent nor any party acting on its behalf has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary for
or on account of the transactions contemplated by this Agreement.
SECTION 5.4. ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding or investigation pending, or to Parent's Knowledge, threatened,
against Parent or MergerCo which might adversely affect or restrict Parent or
MergerCo's ability to consummate the transactions contemplated by this
Agreement.
SECTION 5.5. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
5,000,000 shares of Preferred Stock, $.01 par value per share, none of which is
outstanding and 60,000,000 shares of Parent Common Stock of which 17,092,031
shares were issued and outstanding at November 6, 1998. At November 6, 1998,
there were no outstanding options, warrants or other rights to subscribe for or
purchase from Parent any capital stock of Parent or securities convertible into
or exchangeable for Parent Common Stock except options, warrants or other rights
to purchase or acquire not exceeding 3,000,000 shares of Parent Common Stock
under outstanding warrants or stock option, stock purchase and stock bonus
plans. As of the date hereof, no shares of Parent capital stock have been issued
subsequent to November 6, 1998 other than in connection with the exercise of
outstanding stock options or warrants.
(b) The authorized capital stock of MergerCo consists of 1,000
shares of Common Stock, $.01 par value per share, of which 100 shares are issued
and outstanding.
(c) The outstanding Parent Common Stock is, and the Parent
Common Stock to be issued in the Merger will be, duly and validly authorized and
issued, fully paid and non-assessable and will be free of any liens or
encumbrances created by or resulting from the actions of Parent or MergerCo.
SECTION 5.6. FINANCIAL STATEMENTS. Parent has furnished to the
Company balance sheets of Parent at December 31, 1996 and 1997, and September
30, 1998 (unaudited) and related statements of operations and cash flows for the
year ended December 31, 1996 and 1997 and the nine months ended September 30,
1998 (unaudited). Such financial statements, with the notes thereto, are in
accordance with the books and records of Parent, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be stated in the notes to such statements) throughout the
periods covered by such statements and present fairly in all material respects
the financial condition of Parent and the results of its operations and cash
flows for the periods indicated.
SECTION 5.7. SEC REPORTS. Parent has delivered to Company true
and complete copies of the following reports of Parent (the "SEC Reports")
heretofore filed with the SEC: Form 10-Q for the fiscal quarter ended June 30,
1998 and Form 10-Q for the fiscal quarter ended September 30, 1998. Except as
disclosed therein, none of the SEC Reports as of their respective dates of
filing contained any untrue statement of a material fact or omitted to state a
material fact
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necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.8. ABSENCE OF ADVERSE CHANGES. Except as may be
disclosed in the SEC Reports, since December 31, 1997 Parent has not suffered
any material adverse change in the business, assets, operations or financial
condition of Parent and its subsidiaries taken as a whole.
SECTION 5.9. GOVERNMENTAL CONSENTS. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required to be made or obtained by Parent or MergerCo
in connection with the execution, of this Agreement.
SECTION 5.10. NO UNDISCLOSED LIABILITIES. The Parent is not
subject to any obligation or liability of any nature (whether accrued, absolute,
contingent, inchoate or otherwise, including, without limitation, unasserted
claims), which would individually or in the aggregate be required by generally
accepted accounting principles to be reflected on a balance sheet of the Parent
but is not reflected in the balance sheet included in the Form 10-Q for the
Parent's fiscal quarter ended September 30, 1998 or the notes thereto, other
than: (i) obligations pursuant to or in connection with this Agreement or the
transactions contemplated hereby, (ii) liabilities and obligations incurred in
the ordinary course of business after September 30, 1998, and (iii) liabilities
which do not have a material adverse effect on the financial condition,
businesses or operations of the Parent or the ability of the Parent or MergerCo
to consummate the transactions contemplated hereby.
SECTION 5.11. COMPLIANCE WITH LAWS. Each of Parent and
MergerCo has complied in all material respects in the conduct of its business
with all material foreign, federal, state and local laws, except failures to
comply which do not have a material adverse effect on the financial condition,
businesses or operations of the Parent or the ability of the Parent or MergerCo
to consummate the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL COVENANTS
The respective parties hereto covenant and agree to take, or
to cause the Company to take, the following actions between the date hereof and
the Effective Time:
SECTION 6.1. INVESTIGATION OF THE COMPANY BY PARENT. The
Company shall afford to the officers, employees and authorized representatives
of Parent (including, without limitation, independent public accountants,
attorneys, consultants and engineers) reasonable access during normal business
hours to the offices, properties, employees and business and financial records
(including computer files, retrieval programs and similar documentation) of the
Company to the extent Parent shall reasonably deem necessary or desirable and
shall furnish to Parent or its authorized representatives, such additional
information concerning the Company
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and its properties, assets, businesses and operations as shall be reasonably
requested, including all such information as shall be necessary to enable Parent
or its representatives to verify the accuracy of the representations and
warranties contained in Article IV, to verify that the covenants of the Company
in Section 6.3 have been complied with and to determine whether the conditions
set forth in Article VII have been satisfied. Parent covenants that such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operations of the Company. No investigation by Parent or
its representatives hereunder shall affect the representations and warranties of
the Company.
SECTION 6.2. CERTAIN AGREEMENTS. Each of the parties hereto
shall use its commercially reasonable best efforts to consummate the
transactions contemplated by this Agreement. Each party shall promptly notify
the others of any action suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. The Company shall
promptly notify Parent of any lawsuit, claim, proceeding or investigation that
may be threatened, brought, asserted or commenced after the date hereof against
the Company that would have been required to be included on Schedule 4.16, and,
in the case of any of the foregoing pending on the date hereof, of any material
development with respect thereto. The Company on the one hand, and Parent on the
other, shall give prompt notice to the other party of (a) any notice or other
communication received by any such party from any Governmental Body or third
Person alleging that the consent of such Governmental Body or third Person is or
may be required in connection with the transactions contemplated by this
Agreement, (b) the occurrence of any event or circumstance which could have a
Material Adverse Effect, and of which such party has Knowledge or (c) the breach
of any material representation, warranty, covenant or other material agreement
of any such party.
SECTION 6.3. OPERATIONS PRIOR TO THE EFFECTIVE TIME.
(a) Subject to Section 6.3(b) hereof, the Company shall
operate and carry on its business only in the ordinary course, except as
otherwise expressly contemplated by this Agreement. In furtherance and not in
limitation of the foregoing, the Company shall use commercially reasonable best
efforts to (i) keep and maintain its assets and properties in normal operating
condition and repair, (ii) maintain the business organization of the Company
intact and (iii) preserve the goodwill of the suppliers, contractors, licensors,
employees, customers, distributors and others having business relations with the
Company.
(b) Except as contemplated by this Agreement, without the
express prior written approval of Parent (which shall not be unreasonably
withheld) the Company shall not:
(i) amend its Articles of Incorporation or Bylaws;
(ii) except as set forth on Schedule 4.2, issue or
agree to issue capital stock of the Company (by the issuance or
granting of options, warrants or rights to purchase any capital stock
issued thereby), any securities exchangeable or exercisable for or
convertible into such capital stock, or other securities;
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(iii) split, combine or reclassify any shares of
capital stock or declare, set aside or pay any dividends or make any
other distributions (whether in cash, stock or other property) in
respect of such shares;
(iv) except as set forth on Schedule 4.2, issue,
transfer, sell or deliver any shares of its capital stock (or
securities convertible into or exchangeable or exercisable for, with or
without additional consideration, such capital stock) or any other
interest therein;
(v) redeem, purchase or otherwise acquire for any
consideration (A) any outstanding shares of its capital stock or
securities carrying the right to acquire, or which are convertible into
or exchangeable or exercisable for, with or without additional
consideration, such stock, (B) any other securities of the Company or
(C) any interest in any of the foregoing;
(vi) incur any indebtedness for borrowed money, or
amend, supplement or otherwise modify any of the terms of any
instrument or agreement evidencing indebtedness for borrowed money;
(vii) make any acquisition or disposition of stock or
assets of any entity;
(viii) incur capital expenditures not otherwise
provided for in applicable budgets or in connection with the projects
referenced on Schedule 4.6, and which expenditures are in excess of
$50,000;
(ix) merge or consolidate with any corporation or other
entity;
(x) enter into any employment or similar contract
with, or materially increase the compensation payable to, any officer
or employee;
(xi) alter in any respect its practices and policies
relating to the payment and collection, as the case may be, of accounts
payable and accounts receivable;
(xii) except as contemplated by or described in this
Agreement, adopt, amend in any material respect or terminate any
Employee Plan, severance plan or collective bargaining agreement or
make awards or distributions under any Employee Plan, except awards or
distributions to any participant or employee in the ordinary course of
business consistent with past practices;
(xiii) create, assume or suffer to be incurred any
Encumbrance of any kind on any of its properties or assets other than
(A) Encumbrances in the ordinary course of business consistent with
past practices, as long as the creation, assumption or sufferance
thereof does not interfere with, hinder or delay the transactions
contemplated hereby and (B) Permitted Encumbrances;
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(xiv) amend, supplement or modify any contract set
forth on Schedule 4.15 or relinquish any material right or privilege of
the Company, except, in the case of any contract set forth on Schedule
4.15, for any such amendments, supplements or modifications which are
not materially adverse to the Company; or
(xv) agree, commit or resolve to do or authorize any
of the foregoing.
(c) Prior to the Closing, the Company shall:
(i) promptly comply with all filing requirements
which foreign, federal or state law may impose on the Company with
respect to the transactions contemplated hereby; and
(ii) use its reasonable efforts to obtain any
consent, authorization or approval of, or exemption by, any
Governmental Body or other third Person, including without limitation,
landlords and lenders and those persons (other than the Company) who
are parties to the agreements described on Schedule 4.4 hereto,
required to be obtained or made by it in connection with the
transactions contemplated hereby.
SECTION 6.4. NO PUBLIC ANNOUNCEMENT. Prior to the Effective
Time, no party hereto shall make any press release or other public announcement
concerning the transactions contemplated by this Agreement, except as and to the
extent that such party shall be so obligated by law, in which the other party
shall be advised, and Parent and the Company shall use their commercially
reasonable best efforts to cause a mutually agreeable release or announcement to
be issued. On the date hereof and at the Effective Time, the parties shall issue
a joint press release which shall be reasonably acceptable to Parent and the
Company.
SECTION 6.5. GOVERNMENTAL FILINGS; CONSENTS. Parent and the
Company shall cooperate with each other in filing any necessary applications,
reports or other documents with any federal or state agencies, authorities or
bodies (domestic or foreign) having jurisdiction with respect to this Agreement
and the transactions contemplated hereby, and in seeking necessary consultation
with and prompt favorable action by, including required consents of, any such
agencies, authorities or bodies.
SECTION 6.6. EMPLOYEE BENEFITS. From and after the Closing,
Parent and the Company shall perform all obligations pursuant to employee
benefit plans and policies that have accrued or otherwise become due on or
before the Closing.
SECTION 6.7. PARENT TO FUND CERTAIN OBLIGATIONS. At the
Effective Time, Parent shall pay or contribute or otherwise make such funds
available to the Company and cause the Company to pay the fees, expenses and
disbursements of the Company's financial advisors, counsel and accountants
incurred by the Company in connection with the negotiation and preparation of
this Agreement and its performance and compliance with the terms and conditions
contained herein; provided that the aggregate total of such fees, expenses and
disbursements as set forth on Schedule 6.7 and any other expenses of the Company
incurred in connection with the transactions contemplated hereby shall not
exceed $800,000, and any amounts in excess of such
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amounts shall be borne by parties that are shareholders of the Company
immediately prior to the Effective Time.
SECTION 6.8. GUARANTEED COMPANY DEBT. Following the Closing,
Parent shall offer to guaranty the Company debt set forth on Schedule 6.8 on
terms acceptable to Parent in lieu of and to the extent that such debt remains
subject to the personal guaranties of the shareholders of the Company, as
described on Schedule 6.8.
SECTION 6.9. AFFILIATES OF THE COMPANY AND PARENT. As soon as
practicable, the Company and Parent shall each deliver to the other a letter
pursuant to Staff Accounting Bulletins 65 and 76 and Accounting Series Releases
130 and 135 (the "APB No. 16 Affiliate Letter") identifying all persons who may
be deemed affiliates of the Company or Parent, respectively, for purposes of the
foregoing, including, without limitation, all directors and executive officers
of the Company or Parent as of the date of the APB No. 16 Affiliate Letter. Each
of the Company and Parent shall use its best efforts to obtain as soon as
practicable from each person listed on the respective APB No. 16 Affiliate
Letter and in any event prior to the Closing Date, an agreement not to sell
shares of Company Common Stock or Parent Common Stock in excess of an amount
which would, in the aggregate, contravene the provisions of the foregoing until
combined results of operations covering at least thirty (30) days of combined
operations are made public.
ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF PARENT AND MERGERCO
The obligations of Parent and MergerCo to consummate the
transactions contemplated by this Agreement shall, at the option of Parent and
MergerCo, be subject to the satisfaction, on or prior to the Closing Date, of
the following conditions:
SECTION 7.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by the Company in the
performance of any of its covenants, agreements and obligations herein; none of
the representations and warranties contained or referred to in Article IV hereof
shall fail to be true and correct on the date hereof and at the Effective Time
as though made at the Effective Time, except for (a) representations and
warranties that speak as of a specific date or time other than the Effective
Time (which need only be true and correct as of such date or time), (b)
representations and warranties which are not qualified by Material Adverse
Effect or otherwise by material adversity (which need be true and correct except
for such inaccuracies as in the aggregate (together with the inaccuracies
referred to in the following clause (c)) would not have a Material Adverse
Effect), (d) representations and warranties which are qualified by Material
Adverse Effect or otherwise by material adversity shall also be true and correct
without regard to such qualification except for such inaccuracies as in the
aggregate (together with the inaccuracies referred to in the preceding clause
(b)) would not have a Material Adverse Effect, (d) the representations and
warranties set forth in Section 4.2 shall be true and correct on the date hereof
and at the Effective Time and (e) changes therein specifically resulting
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from any transaction expressly consented to in writing by Parent; and there
shall have been delivered to Parent and MergerCo a certificate to such effect,
dated the Effective Time and signed by the President or other senior executive
officer of the Company.
SECTION 7.2. RESIGNATIONS OF DIRECTORS. Prior to the Closing,
Parent shall notify the Company of those directors of the Company from whom it
will require resignations. The Company shall have furnished Parent with such
signed resignations, effective as of the Closing.
SECTION 7.3. LITIGATION. As of the Effective Time, there shall
be no injunction, restraining order or decree of any nature of any court or
other Governmental Body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions or other material
obligations of the parties hereto as contemplated hereby.
SECTION 7.4. NECESSARY APPROVALS AND CONSENTS. The Company
shall have delivered to Parent such evidence as Parent may reasonably request of
the receipt of all consents, approvals and actions of any third Person or
Governmental Body specified in Schedule 4.4.
SECTION 7.5. CORPORATE ACTION. The Board of Directors of the
Company shall have taken all action necessary to approve the transactions
contemplated by this Agreement, and the Company shall have furnished Parent with
certified copies of resolutions adopted by the Board of Directors of the
Company, in form and substance reasonably satisfactory to counsel for Parent, in
connection with such transactions.
SECTION 7.6. ADOPTION OF AGREEMENT. This Agreement shall have
been adopted by the affirmative vote of the shareholders of the Company by the
requisite vote in accordance with applicable law.
SECTION 7.7. POOLING OF INTERESTS. Parent shall have been
advised by PricewaterhouseCoopers LLP that the Merger shall be treated as a
"pooling of interests" for accounting purposes.
SECTION 7.8. AGREEMENT WITH FOUNDER. Robert Bingham shall have
entered into a noncompetition agreement pursuant to which he shall agree not to
engage, directly or indirectly, whether as a partner, consultant, officer,
director, employee, greater-than-five-percent (5%) shareholder, sales
representative, proprietor or otherwise in any business activities in
competition with Company for a term of two years after the Closing Date, such
noncompetition agreement to be in form and substance reasonably satisfactory to
Parent.
SECTION 7.9 ESCROW AGREEMENT. The shareholders of record of
Company as of the Closing Date shall have executed and delivered the Escrow
Agreement as set forth in Exhibit B.
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ARTICLE VIII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions
contemplated by this Agreement shall, at its option, be subject to the
satisfaction at or prior to the Effective Time, of the following conditions:
SECTION 8.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by Parent or MergerCo in
the performance of any of their covenants and agreements herein; each of the
representations and warranties of Parent and MergerCo contained or referred to
in this Agreement shall be true and correct at the Effective Time as though made
at the Effective Time, except for (a) representations and warranties that speak
as of a specific date or time other than the Effective Time (which need only be
true and correct as of such date or time), (b) representations and warranties
which are not qualified by material adverse effect or otherwise by material
adversity (which need be true and correct except for such inaccuracies as in the
aggregate (together with the inaccuracies referred to in the following clause
(c)) would not have a material adverse effect) and (c) representations and
warranties which are qualified by material adverse effect or otherwise by
material adversity shall also be true and correct without regard to such
qualification except for such inaccuracies as in the aggregate (together with
the inaccuracies referred to in the preceding clause (b)) would not have a
material adverse effect; and there shall have been delivered to the Company a
certificate to such effect, dated the Effective Time and signed by the Chief
Executive Officer or other senior executive officer of Parent.
SECTION 8.2. LITIGATION. As of the Effective Time, there shall
be no injunction, restraining order or decree of any nature of any court or
other Governmental Body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions or other material
obligations of the parties hereto as contemplated hereby.
SECTION 8.3. TAX REPRESENTATION LETTERS. Parent and MergerCo
shall provide Tax Representation Letters in form and substance reasonably
satisfactory to the Company, as set forth in Exhibit C.
SECTION 8.4. ESCROW AGREEMENT. Parent shall have executed and
delivered the Escrow Agreement.
ARTICLE IX
TERMINATION
SECTION 9.1. TERMINATION. Anything contained in this Agreement
to the contrary notwithstanding, this Agreement may be terminated at any time
prior to the Effective Time: (a) by the mutual consent of Parent and the
Company; (b) by Parent in the event that any
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condition set forth in Article VII shall not be satisfied and shall not be
reasonably capable of being remedied at or prior to the November 30, 1998, (c)
by the Company in the event that any condition set forth in Article VIII shall
not be satisfied and shall not be reasonably capable of being remedied at or
prior to November 30, 1998; and (d) by Parent or the Company if the Effective
Time shall not have occurred on or before November 30, 1998 (or, if Parent and
the Company shall have agreed to a later date pursuant to Section 2.2, on or
before any such later date); provided, however, that no party may terminate this
Agreement pursuant to clause (b), (c) or (d) if the failure of any condition in
Article VII or Article VIII to be satisfied or the failure of the Effective Time
to occur on or before November 30, 1998 (or, if Parent and the Company shall
have agreed to a later date pursuant to Section 2.2, on or before any such later
date), results from the willful and material breach by such party of any
covenant of this Agreement.
SECTION 9.2. NO LIABILITY UPON TERMINATION. In the event that
this Agreement shall be terminated pursuant to this Article IX, all obligations
of the parties under this Agreement (other than under this Section 9.2) shall be
terminated without liability or penalty on the part of any party or its officers
or directors to any other party, other than as may result from any willful and
material breach by a party of this Agreement.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION PROVISIONS
SECTION 10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each of the parties contained herein shall
survive the Merger regardless of any investigation by the other parties or their
agents until the Termination Date (as defined in the Escrow Agreement);
provided, however, that liability on the part of any shareholder of Company for
any misrepresentation or breach of warranty hereunder shall be limited to such
shareholder's pro rata interest in the Escrow, except for intentional or
reckless misrepresentations which shall not be so limited and liability for
which shall survive the Termination Date.
SECTION 10.2. INDEMNIFICATION. In view of the fact that upon
the Effective Time the Company will become a wholly-owned subsidiary of Parent
and in order to provide protection for Parent from and after the Closing, the
Escrow shall be established on behalf of those persons who immediately prior to
the Closing were shareholders of record of Company as set forth in Schedule 4.2
(the "Shareholder Group"), which Escrow shall, subject to and to the extent
provided in the Escrow Agreement, indemnify and hold Parent and Company harmless
in respect of any losses or liabilities (including without limitation legal and
other out-of-pocket expenses for investigating or defending any actions or
threatened actions) incurred by Parent or Company in connection with any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by Company in this Agreement or in any certificate, instrument,
schedule or document given by Company in connection with this Agreement (all of
which are herein collectively referred to as "Deficiencies" and individually as
a "Deficiency"); provided, however, that indemnity shall be due under this
Section 10.2 only to the extent that the actual
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loss suffered by Parent or Company attributable to such Deficiencies exceeds a
cumulative aggregate amount of $100,000 (the "Deductible"), Parent and Company
shall be entitled to recover damages for breach of any representation or
warranty of Company under this Agreement after the Closing only pursuant to the
provisions of the Escrow Agreement, except for intentional or reckless
misrepresentations as set forth in Section 10.1 hereof.
SECTION 10.3. APPOINTMENT OF REPRESENTATIVE. Approval of this
Agreement by a majority of the outstanding Shares shall constitute appointment
by the Shareholder Group of Robert Bingham as the representative (the
"Representative") of the Shareholder Group with respect to the Escrow pursuant
to the Escrow Agreement. The actions of the holders of a majority of the shares
of Parent Common Stock contributed to the Escrow shall be binding upon all
members of the Shareholder Group. The Representative shall in no event be liable
to any of the Shareholder Group or to Parent, MergerCo or the Company for any
action taken in good faith by the Representative in the scope of performing his
role hereunder.
SECTION 10.4. CONTROL OF ACTIONS AND PROCEEDINGS. Parent shall
be entitled to fully control the defense and settlement of any claim by a third
party against Company even though such claim is or may be covered by the
indemnification provisions hereof; provided, however, that Parent shall not
settle or compromise any third party claim which is the subject of a claim
against the Escrow without the written consent of the Representative, which
consent will not be unreasonably withheld; and provided further that Parent may
nevertheless settle or compromise any such third party claim without the
Representative's written consent if the failure to so settle or compromise in a
timely manner will in the reasonable judgment of Parent materially and adversely
affect Parent or Company (any such settlement shall not prejudice the rights of
any party to maintain that such settlement should not result in a claim for
indemnification in the amount of the settlement or at all).
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ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. NOTICES. All notices and other communications
given or made pursuant to this Agreement shall be in writing and shall be deemed
to have been duly given or made (a) five business days after being sent by
registered or certified mail, return receipt requested, (b) upon delivery, if
hand delivered, (c) one business day after being sent by prepaid overnight
carrier with guaranteed delivery, with a record of receipt, or (d) upon
transmission with confirmed delivery if sent by cable, telegram, facsimile or
telecopy, to the parties at the following addresses (or at such other addresses
as shall be specified by the parties by like notice):
(a) if to Parent:
broadcast.com inc.
2914 Taylor Street
Dallas, Texas 75226
Attn.: Todd Wagner
Telecopy: 214.748.6657
with copies to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attn.: Sean P. Griffiths
Telecopy: 212.351.4035
(b) if to the Company:
Simple Network Communications, Inc.
225 Broadway, Thirteenth Floor
San Diego, CA 92101
Attention: Robert Bingham
Telecopy: 619.881.3098
with copies to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attn: Elisabeth Eisner
Telecopy: 619.677.1477
SECTION 11.2. PARTIAL INVALIDITY. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in the case
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that any provision contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 11.3. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties and delivered to each of Parent and the Company.
SECTION 11.4. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas, without
regard to principles of conflicts of laws.
SECTION 11.5. ASSIGNMENT; SUCCESSORS AND ASSIGNS. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
or assigns, heirs, legatees, distributees, executors, administrators and
guardians. Nothing in this Agreement, expressed or implied, is intended or shall
be construed upon any Person (other than the parties hereto and the successors
and assigns permitted by this Section 11.5) any right, remedy or claim under or
by reason of this Agreement.
SECTION 11.6. TITLES AND HEADINGS. Titles and headings to
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 11.7. SCHEDULES AND EXHIBITS. The schedules and
exhibits referred to in this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if the same had been set
forth verbatim herein.
SECTION 11.8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement
including the schedules and exhibits, the Confidentiality Agreement dated as of
August 20, 1998 and the letter agreement regarding negotiations dated October
16, 1998, contains the entire understanding of the parties hereto with regard to
the subject matter contained herein. The parties hereto, by mutual agreement in
writing, may amend, modify and supplement this Agreement.
SECTION 11.9. WAIVERS. Any term or provision of this Agreement
may be waived, or the time for its performance may be extended, by the party or
parties entitled to the benefit thereof. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be construed to be
a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each
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and every such provision. No waiver of any breach of this Agreement shall be
held to constitute a waiver of any other or subsequent breach.
SECTION 11.10. SPECIFIC PERFORMANCE. The parties acknowledge
that irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such a remedy shall, however, not
be exclusive, and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
[Signatures on next page]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
SIMPLE NETWORK COMMUNICATIONS, BROADCAST.COM INC., a Delaware
INC., a California corporation corporation
By: /s/ ROBERT W. BINGHAM By: /s/ TODD R. WAGNER
-------------------------------- --------------------------------
Name: Robert W. Bingham Name: Todd R. Wagner
Title: Chief Executive Officer Title: Chief Executive Officer
SN ACQUISITION, INC., a Delaware
corporation
By: /s/ TODD R. WAGNER
--------------------------------
Name: Todd R. Wagner
Title: President
34
<PAGE> 1
EXHIBIT 99.1
PRESS CONTACTS:
Sherry Manno
broadcast.com
214.748.6660 ext. 2156
FOR IMMEDIATE RELEASE
BROADCAST.COM TO ACQUIRE SIMPLENET
Broadcast.com Expands Into Internet Broadcasting Services for Consumers and
Small Businesses
DALLAS, Texas - November 17, 1998 - Broadcast.com (Nasdaq: BCST) today
announced it has signed a definitive agreement to acquire Simple Network
Communications, Inc., a premier provider of Web hosting services. The
acquisition will accelerate the expansion of broadcast.com's Internet
broadcasting services into the consumer and small business markets, while
increasing broadcast.com's network infrastructure.
Under the terms of the agreement, broadcast.com will issue shares of
broadcast.com common stock valued at approximately $20.75 million. The
transaction is intended to be accounted for as a pooling of interests. The
acquisition, which is subject to certain conditions, is expected to be completed
in the fourth quarter of 1998. Following the acquisition, SimpleNet will be a
wholly owned subsidiary of broadcast.com.
"The acquisition of SimpleNet strengthens broadcast.com's position as a
leading portal and destination for video and audio on the Web, by giving us
access to the consumer and small business markets, two markets with significant
growth potential for audio and video streaming," said Mark Cuban, president of
broadcast.com. "By leveraging SimpleNet's worldwide customer base, we hope to
deliver the power of Internet broadcasting to people everywhere, from large
corporations to individual consumers."
Broadcast.com and SimpleNet will work together to introduce
self-service audio and video streaming to customers of SimpleNet's Web hosting
service. Users will be able to create and broadcast their own personalized audio
and video programming, including Internet-only radio and television shows,
business presentations, or home movies, which will be accessible within minutes
of setting up their service.
"We are pleased to be joining the leading aggregator and broadcaster of
streaming media programming on the Web," said Robert Bingham, president and CEO
of Simple Network Communications. "Through this transaction, we can
differentiate SimpleNet's Web hosting services by leveraging broadcast.com's
sales and marketing expertise and extending the company's Internet broadcasting
services to our client base of over 15,000 consumer and small business accounts
in over 100 countries."
Todd Wagner, chief executive officer of broadcast.com added: "The
addition of SimpleNet's Internet access facility provides redundancy and
increases broadcast.com's leading
<PAGE> 2
Internet broadcast network infrastructure. The design of SimpleNet's
infrastructure fits well within our unicast network strategy to be multi-homed
to major backbone providers for delivery of our audio and video programming."
SimpleNet provides a full selection of Web hosting services to
consumers and small businesses. Customers can select from a menu of options to
customize their web sites, including email and electronic commerce services.
Visitors to its customers' web sites make SimpleNet one of the top 20 most
trafficked Web sites on the Internet, according to Media Metrix. SimpleNet has
developed a reliable and expandable network with access to large quantities of
bandwidth. The company has a multi-tier Internet access facility that combines
the networks of leading upstream Internet service providers (ISPs) including
@Home, Frontier Global Center, GTE Internetworking, Sprint, UUNET and Verio. In
addition, this connectivity is also carried through five divergent competitive
access providers (CAPs) including MFS/WorldCom, ICG, TCG, WinStar and PacBell.
ABOUT BROADCAST.COM
Broadcast.com (Nasdaq: BCST) is the leading aggregator and broadcaster
of streaming media programming on the Web with the network infrastructure and
expertise to deliver or "stream" hundreds of live and on-demand audio and video
programs over the Internet or intranets to hundreds of thousands of users. The
broadcast.com Web sites offer a large and comprehensive selection of
programming, including sports, talk and music radio, television, business
events, full-length CDs, news, video, commentary and full-length audiobooks,
serving an average of over 520,000 unique users per day. Broadcast.com
broadcasts on the Internet 24 hours a day, seven days a week, and its
programming includes more than 370 radio stations and networks, 30 television
stations and cable networks, and game broadcasts and other programming for over
420 college and professional sports teams. Broadcast.com also provides Internet
and intranet broadcasting services to businesses and other organizations,
including turnkey production of live and archived press conferences, earnings
conference calls, investor conferences, trade shows, stockholder meetings,
product introductions, training sessions, distance learning telecourses and
media events. For more information on broadcast.com and its live and on-demand
programming, visit broadcast.com.
###
This announcement contains forward looking statements that involve
risks and uncertainties, including those relating to broadcast.com's ability to
successfully complete the acquisition of SimpleNet, to leverage SimpleNet's
access to the consumer and small business markets and to effectively integrate
SimpleNet's operations. More information about potential factors which could
affect broadcast.com's business and financial results is included in the
Company's quarterly reports on Form 10-Q on file with the Securities and
Exchange Commission. The Company cautions investors that its business and
financial performance are subject to substantial risks and uncertainties.
Broadcast.com is a trademark of broadcast.com inc. All other names
mentioned are trademarks of their respective companies.
2
