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EXECUTION COPY
EXHIBIT 2.7
AGREEMENT AND PLAN OF MERGER
dated as of August 25, 2000
by and among
AETHER SYSTEMS, INC.,
CERULEAN ACQUISITION, INC.
and
CERULEAN TECHNOLOGY, INC.
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . 10
Section 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.5 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . 10
Section 2.6 Directors and Officers of the Surviving Corporation . . . . . . . . . 10
ARTICLE III. CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.1 Conversion of Capital Stock of Merger Sub . . . . . . . . . . . . . . 11
Section 3.2 Conversion of Company Options . . . . . . . . . . . . . . . . . . . . 12
Section 3.3 General Conversion Mechanics . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.5 Escrow Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.6 Dividends, Fractional Shares, Etc. . . . . . . . . . . . . . . . . . . 14
Section 3.7 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF CERULEAN . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.1 Organization and Qualifications; Subsidiaries . . . . . . . . . . . . 16
Section 4.2 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . 17
Section 4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.4 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . 18
Section 4.5 No Conflict; Required Filings and Consents; Certain Contracts . . . . 19
Section 4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 21
Section 4.8 Conformity with Law; Relations with Governments; Litigation . . . . . 21
Section 4.9 Employee Benefit Plans and Related Matters; ERISA . . . . . . . . . . 22
Section 4.10 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . 24
Section 4.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.12 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.16 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 31
Section 4.18 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Section 4.19 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.20 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.21 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.22 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF AETHER AND MERGER SUB . . . . . . . . . . . . . . . . 32
Section 5.1 Organization and Qualifications; Subsidiaries . . . . . . . . . . . . 33
Section 5.2 Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.4 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . 34
Section 5.5 No Conflict; Required Filings and Consents . . . . . . . . . . . . . . 34
Section 5.6 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . 35
Section 5.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.8 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.9 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.1 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . 36
Section 6.2 Further Action, Reasonable Efforts; Consents and Approvals . . . . . . 36
Section 6.3 Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.4 Conduct of Business of Cerulean Pending the Closing . . . . . . . . . 37
Section 6.5 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.6 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.7 Company Stockholder Meeting . . . . . . . . . . . . . . . . . . . . . 40
Section 6.8 Preparation of the Disclosure Statements . . . . . . . . . . . . . . . 41
Section 6.9 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.10 Accredited Investor Questionnaires . . . . . . . . . . . . . . . . . . 41
Section 6.11 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.12 Stockholder's Representative . . . . . . . . . . . . . . . . . . . . . 42
Section 6.13 Directors' and Officers' Indemnification and Insurance . . . . . . . . 43
Section 6.14 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.15 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . 44
Section 6.16 Company Stockholders' Agreement . . . . . . . . . . . . . . . . . . . 44
Section 6.17 Employee Retention . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.18 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.19 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.20 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.1 General Indemnification . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.2 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.3 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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ARTICLE VIII. CONDITIONS TO THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . 48
Section 8.2 Conditions to Obligations of Cerulean to Effect the Merger . . . . . . 49
Section 8.3 Conditions to Obligations of Aether and Merger Sub to
Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IX. TERMINATION, WAIVER, AMENDMENT AND CLOSING . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.3 Amendment or Supplement . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.4 Extension of Time, Waiver, Etc. . . . . . . . . . . . . . . . . . . . 53
Section 9.5 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE X. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.3 Modification; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.7 Survival of Representations, Warranties and Covenants . . . . . . . . 56
Section 10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.9 Successors and Assigns; Third Parties. . . . . . . . . . . . . . . . 57
Section 10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.11 Interpretation; References . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.12 Dispute Resolution and Jurisdiction . . . . . . . . . . . . . . . . . 57
Section 10.13 Exhibits, Schedules and Company Disclosure Schedule . . . . . . . . . 58
Section 10.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.15 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.16 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.17 Negotiation of Agreement . . . . . . . . . . . . . . . . . . . . . . . 58
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EXHIBITS
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Exhibit A -- Form of Stockholders Voting Agreement
Exhibit B -- Form of Registration Rights Agreement
Exhibit C -- Form of Escrow Agreement
Exhibit D -- Form of Legal Opinion of Wilmer, Cutler & Pickering, Counsel to Aether and Merger Sub
Exhibit E -- Form of Legal Opinion of Hale and Dorr LLP, Counsel to Cerulean
Exhibit F -- [Reserved.]
Exhibit G -- [Reserved.]
Exhibit H -- Form of Certificate of Incorporation of Surviving Corporation
Exhibit I -- Form of By-laws of Surviving Corporation
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 25, 2000 (the
"Agreement"), by and among AETHER SYSTEMS, INC., a Delaware corporation
("Aether" or "Parent"), CERULEAN ACQUISITION, INC., a Delaware corporation and
a wholly-owned direct subsidiary of Aether ("Merger Sub"), and CERULEAN
TECHNOLOGY, INC., a Delaware corporation ("Cerulean" or the "Company").
WHEREAS, the Board of Directors of each of Parent, Merger Sub and the
Company has approved the merger (the "Merger") of the Company with and into
Merger Sub, in accordance with the General Corporation Law of the State of
Delaware (the "DGCL") and subject to the conditions set forth herein, and the
Company has approved and declared this Agreement advisable and in the best
interests of its stockholders;
WHEREAS, to satisfy a condition to Parent and Merger Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, Persons holding
approximately 85% f the Company's voting securities have entered into a
Stockholders Voting Agreement, in the form of Exhibit A, with Aether and
Cerulean pursuant to which they have each agreed, among other things, to vote
for the Merger and grant a proxy to officers of Aether with respect to the
Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of
Sections 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual representations,
warranties and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. The capitalized terms used in this
Agreement and not otherwise defined shall have the following meanings (unless
the context otherwise requires, such capitalized terms shall include the
singular and plural and the conjunctive and disjunctive forms of the terms
defined):
"Acquisition Proposal" shall have the meaning set forth in Section 6.6.
"Aether Common Stock" shall mean Common Stock, par value $.01 per
share, of Aether.
"Aether Disclosure Schedule" shall mean the letter dated as of the date
of this Agreement from Parent and Merger Sub to the Company and attaching the
schedules referred to in this Agreement.
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"Aether Indemnified Party" means Aether, Merger Sub and their officers,
directors, employees, stockholders, assigns, successors and affiliates as an
Indemnified Party.
"Aether Option" shall mean an Option of Aether.
"Aether SEC Reports" shall have the meaning set forth in Section 5.6.
"Aether Stock Plans" shall have the meaning set forth in Section 5.3.
"Affiliate" shall mean, as to any Person, any other Person controlling,
controlled by, or under common control with such Person.
"Appraisal Shares" shall have the meaning set forth in Section 3.8.
"Average Aether Stock Price" with respect to any period shall mean (i)
the sum of the daily closing sales prices per share of Aether Common Stock on
the Nasdaq National Market as reported in The Wall Street Journal (Eastern
edition) (and confirmed by Friedman, Billings & Ramsey) for each of the Trading
Days in the period divided by (ii) the number of Trading Days in the period.
"Benefit Arrangement" shall mean any benefit arrangement, obligation,
or practice, whether or not legally enforceable, to provide benefits currently
or in the future (other than merely as salary or under a Benefit Plan), as
compensation for services rendered, to present or former directors, employees,
agents, or independent contractors, including, but not limited to, employment or
consulting agreements, severance agreements or pay policies, executive or
incentive compensation programs or arrangements, sick leave, vacation pay, plant
closing benefits, salary continuation for disability, workers' compensation,
retirement, deferred compensation, bonus, stock option or purchase, tuition
reimbursement or scholarship programs, employee discount programs, meals,
travel, or vehicle allowances, any plans subject to Section 125 of the Code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership or effective control, or sale of a substantial portion
(including all or substantially all) of the assets of any business or portion
thereof, in each case with respect to any present or former employees,
directors, or agents.
"Benefit Plan" shall mean an employee benefit plan as defined in
Section 3(3) of ERISA, together with plans or arrangements that would be so
defined if they were not (i) otherwise exempt from ERISA by that or another
section, (ii) maintained outside the United States, or (iii) individually
negotiated or applicable only to one person.
"Blue Sky Laws" shall mean the securities laws of the states of the
United States as currently in effect.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in Baltimore, Maryland or New York City, New
York are not required to be open.
"Certificate of Merger" shall have the meaning set forth in Section
2.2.
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"Certificate" shall have the meaning set forth in Section 3.3.
"Claim Notice" shall have the meaning set forth in Section 7.2.
"Claims" shall have the meaning set forth in Section 7.2.
"Closing" shall have the meaning set forth in Section 2.3.
"Closing Date" shall have the meaning set forth in Section 2.3.
"COBRA" shall have the meaning set forth in Section 4.9.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Consideration" shall have the meaning set forth in Section
3.1(b).
"Company Benefit Arrangement" shall mean any Benefit Arrangement any
Related Employer sponsors or maintains or with respect to which any Related
Employer has or may have any current or future liability (whether actual,
contingent, with respect to any of its assets or otherwise), in each case with
respect to any present or former service providers to any Related Employer.
"Company Capital Stock" shall mean the Company Common Stock, Company
Preferred Stock, and any other capital stock of Cerulean other than Company
Options and Company Warrants.
"Company Common Stock" shall mean the common stock, par value $.005 per
share, of the Company.
"Company Disclosure Schedule" shall mean the letter dated as of the
date of this Agreement from the Company to Parent and Merger Sub and attaching
the schedules referred to in this Agreement.
"Company Indemnified Party" means Cerulean, its Subsidiaries and their
officers, directors, employees, stockholders, assigns, successors and affiliates
as an Indemnified Party.
"Company Intellectual Property" means all Intellectual Property, other
than Third Party Intellectual Property, that is being, has been, or is
reasonably anticipated by Cerulean to be, used, or is currently under
development for use, in the business of Cerulean or its Subsidiaries.
"Company Meeting" shall have the meaning set forth in Section 6.7.
"Company Option" shall mean an Option of the Company (excluding the
Company Warrants).
"Company Plan" shall mean any Benefit Plan that any Related Employer
maintains or has maintained or to which any Related Employer is obligated to
make payments or has or may have any liability, in each case with respect to any
present or former employees of any Related Employer.
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"Company Preferred Stock" shall be a collective reference to (i) the
Series A Convertible Participating Preferred Stock, par value $.005 per share;
(ii) the Series B Convertible Participating Preferred Stock, par value $.005 per
share; (iii) the Series C Convertible Participating Preferred Stock, par value
$.005 per share; and (iv) the Series D Convertible Participating Preferred
Stock, par value $.005 per share of Cerulean, each of which is convertible into
Company Common Stock.
"Company Third Party Consents" shall have the meaning set forth in
Section 4.20.
"Company Stockholder Approval" shall have the meaning set forth in
Section 6.7.
"Company Warrants" shall mean (i) the Imperial Warrant; (ii) the Common
Stock Purchase Warrant issued April 7, 1999 to Commsys, Inc. and (iii) any
warrant to purchase Company Common Stock issued to Foxstar Corporation.
"Confidential Information" shall have the meaning set forth in Section
6.5.
"Confidentiality Agreement" shall have the meaning set forth in Section
6.5.
"Consents" shall have the meaning set forth in Section 6.2.
"Contract" shall mean, with respect to any Person, any contract,
contractual right, note, bond, indenture, lease, license, permit, franchise,
deed of trust, mortgage, loan agreement or other document, instrument,
obligation or agreement, oral or written, to which such Person or any of its
Subsidiaries is a party or by which any of them or their assets or properties is
bound or affected.
"Damages" shall have the meaning set forth in Section 7.1.
"DGCL" means the General Corporation Law of the State of Delaware.
"Effective Day" shall mean the day on which the Effective Time occurs.
"Effective Day Stock Value" shall mean the aggregate value of the
Aether Common Stock to be issued as Preferred Stock Consideration as of the
Effective Time valued at the closing sales price per share of Aether Common
Stock on the Nasdaq National Market on the Effective Day as reported by the
Nasdaq National Market.
"Effective Time" shall have the meaning set forth in Section 2.2.
"EPA" shall have the meaning set forth in Section 4.14.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and all regulations and rules issued thereunder, or any successor
law.
"ERISA Affiliate" shall mean any person or entity that, together with
the entity referenced, would be or was at any time treated as a single employer
under Code Section 414 or ERISA Section 4001 (including any entities excluded
from the definition because they are not
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subject to U.S. jurisdiction) and any general partnership of which such entity
is or has been a general partner.
"Escrow Agent" shall mean Branch Bank & Trust Company.
"Escrow Agreement" shall mean the escrow agreement to be entered into
by Aether, the Stockholders' Representative and the Escrow Agent, substantially
in the form of Exhibit C.
"Escrow Amount" shall have the meaning set forth in Section 3.5.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean any government or any agency,
bureau, board, commission, court, judicial or quasi-judicial body, department,
authority, official, political subdivision, tribunal or other instrumentality of
any government, whether Federal, state or local, domestic or foreign.
"HSR Act" shall have the meaning set forth in Section 4.5.
"HSR Filings" shall have the meaning set forth in Section 6.3.
"Imperial Warrant" shall mean the Warrant to Purchase Stock issued May
17, 1999 to Imperial Bancorp.
"Indemnified Officers/Directors" shall have the meaning set forth in
Section 6.13.
"Indemnified Party" shall have the meaning set forth in Section 7.1.
"Indemnifying Party" shall have the meaning set forth in Section 7.1.
"Intellectual Property" means (i) all patents, trademarks, trade names,
service marks, trade dress, copyrights and any renewal rights therefor, mask
works, schematics, technology, inventions, manufacturing processes, supplier
lists, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
moral rights, computer software programs or applications (in both source and
object code form), and all applications, renewals and registrations for any of
the foregoing; (ii) all software and firmware listings, and updated software
source code, and complete system build software and instructions related to all
software described herein; (iii) all documents, records and files relating to
design, end user documentation, manufacturing, quality control, sales, marketing
or customer support for all intellectual property described herein; (iv) all
other tangible or intangible proprietary information and materials owned or held
by or on behalf of the intellectual-property holder.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
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<PAGE> 11
"Knowledge" shall mean, with respect to Cerulean and Aether, the actual
knowledge of all directors or officers, including without limitation the Chief
Executive Officer, President, Secretary, Treasurer, Chief Financial Officer,
Chief Operating Officer, Chief Technology Officer, Vice President, Finance, and
any other Vice President of each such party, as well as any knowledge of any
fact or circumstance that would have or should have come to the attention of any
such director or officer in the course of discharging his or her duties in a
reasonable and prudent manner consistent with sound business practices.
"Law" shall mean any law, statute, rule, regulation, ordinance, decree
or order of any Governmental Authority.
"Leases" shall have the meaning set forth in Section 4.21.
"Letter of Transmittal" shall have the meaning set forth in Section
3.4.
"Lien" shall mean any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge, option, right of others or
restriction (whether on voting, sale, transfer, disposition or otherwise) or
other encumbrance of any kind, whether imposed by agreement, understanding, law
or equity, or any conditional sale contract, title retention contract or other
contract to give or to refrain from giving any of the foregoing.
"Liquidation Preference" shall mean the liquidation amount per share of
Company Preferred Stock as set forth in Article Fourth, Section 2(a) of the
Company's Fourth Amended and Restated Certificate of Incorporation, as amended.
"Losses" shall have the meaning set forth in Section 6.13.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on (i) the validity or enforceability of this Agreement,
(ii) the ability of such Person to perform its obligations under this Agreement
or (iii) the business, properties (including intangible properties), assets or
liabilities, business prospects, financial condition or results of operations of
the Person and its Subsidiaries, taken as a whole other than (a) changes or
effects which are or result from occurrences relating to the economy in general
or any Person's industry in general and (x) not specifically relating to such
Person or (y) that affect such Person materially disproportionately relative to
other similarly-situated participants in such Person's industry, (b) changes or
effects which result from the loss of customers or delay or cancellation or
cessation of orders for any Person's products directly attributable to the
announcement of the parties' intention to enter into, or the execution of, this
Agreement provided that such losses, delays or cancellations were not reasonably
foreseeable to such Person as of the date of this Agreement, (c) liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, or (d) solely as a result of the decline in the market price of the
shares Aether Common Stock.
"Material Contracts" shall have the meaning set forth in Section 4.20.
"Measurement Period" means the 15 Trading Days ending on the Trading
Day that is the Trading Day immediately preceding the Closing Date.
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"Merger" shall have the meaning set forth in the preamble to this
Agreement.
"Merger Consideration" shall have the meaning set forth in Section 3.1.
"Merger Filing" shall have the meaning set forth in Section 2.2.
"Multiemployer Plan" means any plan described in ERISA Section 3(37).
"Nasdaq" means the Nasdaq Stock Market.
"Net Exercise" shall mean the number of shares of Company Capital Stock
equal to the quotient obtained by dividing (i) the value of the warrant or
option on the Effective Day (which value shall be determined by subtracting (A)
the aggregate exercise price for all of the shares issuable under the warrant or
option from (B) the fair market value of all of the shares issuable upon
exercise of the warrant or option on the date of such exercise), by (ii) the
fair market value of one share of Company Capital Stock on such date. For
purposes of Section 3 hereof, the fair market value of the Company Capital Stock
shall mean the Common Consideration or the Preferred Consideration, as the case
may be.
"Notice Period" shall have the meaning set forth in Section 7.1.
"Notices" shall have the meaning set forth in Section 10.4.
"Option" shall mean, with respect to any Person, any option, warrant,
call, subscription, convertible or exchangeable security or other right,
agreement, arrangement or commitment of any kind or character to which such
Person or any of its Subsidiaries is a party relating to the issued or unissued
capital stock of such Person or any of its Subsidiaries, or obligating such
Person or any of its Subsidiaries to issue, transfer, grant or sell any shares
of capital stock of, or other equity interest in, or securities convertible into
or exchangeable for any capital stock or other equity interest in, such Person
or any of its Subsidiaries.
"Option Exchange Ratio" shall have the meaning set forth in Section
3.2.
"Organizational Documents" shall mean (i) with respect to a corporation
or association, its certificate or articles of incorporation or association and
bylaws, (ii) with respect to any limited liability company, its certificate of
formation, articles of organization, regulations, operating agreement and
limited liability company agreement, as applicable, (iii) with respect to any
limited partnership, its certificate of limited partnership and limited
partnership agreement, (iv) with respect to any general partnership, its
partnership agreement, and (v) all other similar organizational documents.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
similar charges, incurred in the ordinary course of business that are not yet
due and payable; (b) pledges or deposits made in the ordinary course of
business; (c) Liens of mechanics, materialmen, warehousemen or other like Liens
securing obligations incurred in the ordinary course of business that are not
yet due and payable; and (d) similar Liens and encumbrances which are incurred
in the ordinary course of business and which do not in the aggregate materially
detract
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from the value of such assets or properties or materially impair the use
thereof in the operation of such business.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company, limited liability
partnership, proprietorship, trust, union, association, court, tribunal, agency,
government, department, commission, self-regulatory organization, arbitrator,
board, bureau, instrumentality or other entity, enterprise, authority or
business organization.
"Preferred Consideration" shall have the meaning set forth in Section
3.1(c).
"Preferred Cash Consideration" shall have the meaning set forth in
Section 3.1.
"Preferred Stock Consideration" shall have the meaning set forth in
Section 3.1.
"Qualified Plan" shall mean any Company Plan intended to meet the
requirements of Section 401(a) of the Code, including any previously terminated
plan.
"Real Property" shall have the meaning set forth in Section 4.2.
"Registration Rights Agreement" means a registration rights agreement
substantially in the form of Exhibit B.
"Related Employer" means Cerulean and every ERISA Affiliate.
"Representatives" means, with respect to any Person, the officers,
directors, employees, auditors and other agents and representatives of such
Person.
"Requisite Regulatory Approvals" shall have the meaning set forth in
Section 4.5.
"SEC" shall mean the Securities and Exchange Commission or any
successor commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholder Representative" shall mean Robert P. Badavas.
"Stockholders Voting Agreement" means a voting agreement substantially
in the form of Exhibit A.
"Subsidiary" of an entity shall mean any entity (i) required by GAAP to
be consolidated in the financial statements of such entity or (ii) over 50% of
whose voting securities are controlled directly or indirectly by a single
entity.
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Tax" or "Taxes" shall mean (a) all Federal, state, local and foreign
taxes and other assessments and governmental charges of a similar nature
(whether imposed directly or through withholdings), including any interest,
penalties and additions to tax applicable thereto, (b) any
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<PAGE> 14
liability for payment of amounts described in clause (a) as a result of
transferee liability, of being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through operation of
law, and (c) any liability for payment of amounts described in clause (a) or
(b) as a result of any tax sharing, tax indemnity or allocation agreement or
any other express or implied agreement to indemnify any other person for
amounts described in clause (a) or (b).
"Tax Returns" shall mean all Federal, state, local and foreign returns,
declarations, statements, reports, schedules, forms and information returns
relating to or required to be filed with any governmental authority in
connection with the determination, assessment, collection or payment of Taxes,
and all amendments thereto.
"Termination Fee" has the meaning set forth in Section 9.5.
"Third Party Intellectual Property" means all Intellectual Property
owned by or on behalf of persons other than Cerulean or its Subsidiaries that is
being, has been, or is reasonably anticipated by Cerulean to be, used, or is
currently under development for use, in the business of Cerulean or its
Subsidiaries.
"Trading Day" shall mean a day on which Aether Common Stock is traded
on the Nasdaq.
"Transactions" shall mean the transactions contemplated by this
Agreement in ARTICLE III.
"Written Consent" shall have the meaning set forth in Section 6.7(b).
ARTICLE II.
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, in accordance with the
DGCL, Cerulean shall be merged with and into Merger Sub in accordance with this
Agreement and the separate existence of Cerulean shall cease. Merger Sub shall
be the surviving corporation in the Merger (hereinafter sometimes referred to
as the "Surviving Corporation") and shall continue to be governed by Delaware
law as a wholly-owned subsidiary of Parent. Upon the effectiveness of the
Merger, the name of Merger Sub will be changed to "Cerulean Technology, Inc."
Section 2.2 Effective Time of the Merger. Upon the terms and
subject to the conditions hereof, a certificate of merger (the "Certificate of
Merger") shall be duly prepared, executed and acknowledged by the Surviving
Corporation and thereafter delivered to the Secretary of State of the State of
Delaware, for filing on the Closing Date (as defined in Section 2.3). The
Merger shall become effective as of 4:00 p.m. Eastern Standard Time on the date
the Certificate of Merger pursuant to Section 252 of the DGCL and any other
documents necessary to effect the Merger in accordance with the DGCL are duly
filed (the "Merger Filing") with the Secretary of State of the State of
Delaware or at such subsequent date as shall be agreed by
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<PAGE> 15
Aether and Cerulean and specified in the Certificate of Merger (the time the
Merger becomes effective pursuant to the DGCL being referred to herein as the
"Effective Time").
Section 2.3 Closing. Subject to the satisfaction or waiver of
all of the conditions to closing contained in ARTICLE VIII, the closing of the
Merger (the "Closing") will take place at such time and such date as specified
by the parties, which shall be no later than the first Business Day after the
satisfaction or waiver of the conditions to Closing contained in ARTICLE VIII,
at the offices of Wilmer, Cutler & Pickering, 2445 M Street, NW, Washington,
D.C. 20037, unless another date, time or place is agreed to in writing by the
parties hereto. The date and time at which the Closing occurs is referred to
herein as the "Closing Date."
Section 2.4 Effects of the Merger. The Merger shall have the
effects set forth in the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Cerulean and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Cerulean
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.5 Certificate of Incorporation and Bylaws. At the
Effective Time and without any further action on the part of the parties
hereto, (a) the certificate of incorporation of Merger Sub shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by the DGCL, which shall be substantially in the form of
Exhibit H hereto, and (b) the bylaws of Merger Sub, which shall be
substantially in the form of Exhibit I hereto, shall be the bylaws of the
Surviving Corporation until thereafter amended as provided by the DGCL.
Section 2.6 Directors and Officers of the Surviving Corporation.
The directors of Merger Sub immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and the bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's certificate of incorporation and
bylaws. The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, except that David
C. Reymann shall be appointed Treasurer.
ARTICLE III.
CONVERSION OF SECURITIES
Section 3.1 Conversion of Capital Stock of Merger Sub. At the
Effective Time and subject to the provisions of this Article III, by virtue of
the Merger and without any further action on the part of any holder thereof,
the Company Capital Stock shall be converted and exchanged for the right to
receive the merger consideration described below (the "Merger Consideration"):
(a) The Merger Consideration shall be allocated in the following
order of priority (and shall be paid in cash and/or shares of Aether Common
Stock as described in Sections 3.1(b), (c) and (d) below):
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(i) First, each share of Company Preferred Stock shall be
entitled to receive the amounts set forth below, which shall represent the
full amount of the Liquidation Preference with respect to such share:
(A) each share of Series A Company Preferred
Stock shall receive $.50;
(B) each share of Series B Company Preferred
Stock shall receive $.9783;
(C) each share of Series C Company Preferred
Stock (including shares deemed outstanding upon automatic exercise of the
Imperial Warrant on a net exercise basis) shall receive $1.26; and
(D) each share of Series D Company Preferred
Stock shall receive $2.5792.
(ii) Second, each share of Company Capital Stock shall be
entitled to an amount equal to a fraction, the numerator of which is
$150,000,000 minus the amount of the adjustment, if any, to the Merger
Consideration provided for in Section 10.5 hereof minus the aggregate
Liquidation Preference paid pursuant to Section 3.1(a)(i) and the denominator
of which is the sum of (x) the number of shares of Company Capital Stock
outstanding immediately prior to the Effective Time plus (y) the number of
shares of Company Capital Stock issuable upon Net Exercise of then outstanding
Company Warrants plus (z) the number of shares of Company Capital Stock
issuable upon Net Exercise of all then outstanding Company Options.
(b) Each share of Company Common Stock issued and outstanding as
of the Effective Time (including shares deemed outstanding upon Net Exercise of
then outstanding Company Warrants other than the Imperial Warrant) shall be
converted into and exchanged for a right to receive the amount described in
Section 3.1(a)(ii) in cash (the "Common Consideration").
(c) Each share of Company Preferred Stock issued and outstanding
as of the Effective Time (including shares deemed outstanding upon Net Exercise
of the Imperial Warrant, if outstanding) shall be converted into and exchanged
for the right to receive the consideration described in Section 3.1(a)(i) and
(ii) (the "Preferred Consideration"). The Preferred Consideration shall
consist of cash (the "Preferred Cash Consideration") and a number of validly
issued, fully paid and nonassessable unregistered shares of Aether Common Stock
(the "Preferred Stock Consideration"), provided that Aether shall not issue
Aether Common Stock to more than five Persons who are not "accredited
investors" as that term is defined under Rule 501(a) of Regulation D
promulgated under the Securities Act. Each holder of Company Preferred Stock
will receive an amount of Preferred Cash Consideration such that the sum of the
Common Consideration, and the Preferred Cash Consideration paid shall equal 50%
of the Merger Consideration, and the balance of the Preferred Consideration
shall be payable in the form of Preferred Stock Consideration; provided,
however, that if the value of the Preferred Stock Consideration would be less
than 45% of the sum of the Common Consideration plus the Preferred
Consideration then the Preferred Stock Consideration shall be increased and the
Preferred Cash Consideration shall be decreased so that the Preferred Stock
Consideration is
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equal to at least 45% of the sum of the Common Consideration and the Preferred
Consideration. The Preferred Stock Consideration shall be valued at the
Average Aether Stock Price for the Measurement Period, with any resulting
fractional shares being rounded downward to the nearest whole share and any
fractional amount being paid in cash as further provided in Section 3.6(b)
hereof. The Preferred Cash Consideration per share of Company Preferred Stock
shall be allocated in the following priority: (i) first, to an amount equal to
the Liquidation Preference attributable to such share and (ii) second, pro rata
based on the number of shares of Company Preferred Stock.
(d) Notwithstanding anything in Section 3.1(c) to the contrary, if
the Effective Day Stock Value is less than 45% of the sum of the Common
Consideration, the Preferred Cash Consideration and the Effective Day Stock
Value, the amount of Preferred Stock Consideration shall be increased and the
amount of Preferred Cash Consideration shall be decreased by such amounts so
that the Effective Day Stock Value is equal to at least 45% of the sum of the
Common Consideration, the Preferred Cash Consideration and the Effective Day
Stock Value.
Section 3.2 Conversion of Company Options.
(a) Subject to Section 3.3(b), at the Effective Time, each issued
and outstanding Company Option shall be converted into the right to receive an
Aether Option, with terms and conditions substantially similar to the Company
Option, except that (i) each such Company Option will be exercisable for that
number of whole shares (and no fractional shares, for which cash shall be paid
based on the last sale price per share of Aether Common Stock on the Trading Day
immediately preceding the date of exercise of Aether Common Stock equal to the
product of the number of shares of Company Common Stock that were issuable upon
the exercise of such Company Option multiplied by a fraction the numerator of
which is the Common Consideration per share and the denominator of which is the
Average Aether Stock Price for the Measurement Period (the "Option Exchange
Ratio") and (ii) the per share exercise price for the shares of Aether Common
Stock issuable upon the exercise of such Company Stock Option will be equal to
the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Stock Option would have been exercisable
immediately prior to the Effective Time by the Option Exchange Ratio, rounded up
to the nearest whole cent; provided, however, that the foregoing conversions
would be adjusted with respect to Options that qualify as incentive stock
options under Section 422 of the Code to the extent necessary to comply with
Section 424 of the Code; provided, further that nothing in this Section 3.2
shall authorize any increase in the exercise price of any Company Option except
resulting from application of the formula set forth in subsection (ii) herein.
Section 3.3 General Conversion Mechanics.
(a) As a result of the Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of Company Capital Stock
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of shares of Company Capital Stock
shall thereafter cease to have any rights with respect to such shares of Company
Capital Stock, except (i) the right to receive, without interest, the Merger
Consideration and cash for fractional shares of Aether Common Stock in
accordance with Section 3.1 and Section 3.6 upon the surrender of a certificate
that, immediately prior to the
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Effective Time, represented an outstanding share or shares of Company Capital
Stock (a "Certificate"); or (ii) the appraisal rights described in Section 3.8.
(b) Notwithstanding anything contained in this ARTICLE III to the
contrary, each share of Company Capital Stock issued and held in Cerulean's
treasury or by a wholly-owned Subsidiary of the Company immediately prior to the
Effective Time, and each share of Company Capital Stock or Company Option owned
by Parent or Merger Sub at or immediately prior to the Effective Time, if any,
shall, by virtue of the Merger, cease to be outstanding and shall be cancelled
and retired and shall cease to exist without payment of any consideration
therefor.
Section 3.4 Exchange of Certificates.
(a) Within ten (10) Business Days after the Effective Time, Aether
shall mail to each holder of record of Company Capital Stock immediately prior
to the Effective Time (excluding any Appraisal Shares) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to Parent), which shall be in customary form with such customary
provisions as Aether shall reasonably specify (the "Letter of Transmittal") and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration.
(b) Upon surrender of a Certificate, in such form and with such
endorsements, stock powers and signature guaranties as may be required by the
Letter of Transmittal for cancellation to Aether or to such other agent or
agents as may be appointed by Aether, together with the Letter of Transmittal,
duly executed, and such other documents as Aether shall reasonably request, the
holder of such Certificate shall be entitled to receive in exchange therefor
promptly after the Effective Time, the Merger Consideration (in each case, less
the amount of any required withholding Taxes), and the Certificate so
surrendered shall forthwith be cancelled. Until surrendered as contemplated by
this Section 3.4(b), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
with respect to the shares of Company Capital Stock formerly represented
thereby.
(c) Aether and the Stockholder's Representative shall jointly have
the right to make rules, not inconsistent with the terms of this Agreement,
governing the issuance and delivery of the Merger Consideration.
(d) The shares of Aether Common Stock delivered to each holder of
Company Preferred Stock have not been and will not be registered under the
Securities Act and therefore may not be resold without compliance with the
Securities Act. The Aether Common Stock issued to the holders of Company
Preferred Stock will bear a legend to such effect.
Section 3.5 Escrow Amount.
(a) The "Escrow Amount" shall mean an aggregate of 10% of the
Merger Consideration, comprising a pro rata portion of the Common Consideration
and the Preferred Stock Consideration otherwise payable to the holders of
Company Capital Stock (i.e., the Escrow Amount shall represent cash in the case
of each holder of Company Common Stock and cash and Aether Common Stock in the
case of each holder of Company Preferred Stock). A pro rata portion of the
Escrow Amount shall be withheld from each person who is a stockholder of
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<PAGE> 19
Cerulean (based on the amount of Merger Consideration received by such
stockholder) immediately before the Effective Time and deposited by Aether at
the Closing with the Escrow Agent pursuant to an Escrow Agreement in the form
of Exhibit C.
(b) The adoption of this Agreement and the approval of the Merger
by the Company Stockholders shall constitute approval of the Escrow Agreement
and of all of the arrangements thereto, including without limitation the
placement of the Escrow Amount in escrow.
Section 3.6 Dividends, Fractional Shares, Etc.
(a) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on Aether
Common Stock shall be paid to the holder of any unsurrendered Certificates of
Company Preferred Stock until such Certificates are surrendered for exchange as
provided in this ARTICLE III. Subject to the effect of applicable laws,
following the surrender of any such Certificate, there shall be paid, without
interest, to the Person in whose name the certificates representing the shares
of Aether Common Stock into which the shares of Company Preferred Stock
formerly represented by such Certificate were converted are registered, (i) at
the time of such surrender, the amount of all dividends and other distributions
with a record date after the Effective Time theretofore payable with respect to
such whole shares of Aether Common Stock and not paid, less the amount of any
withholding Taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent
to surrender payable with respect to such whole shares of Aether Common Stock,
less the amount of any withholding Taxes which may be required thereon.
(b) All fractional shares of Aether Common Stock that a holder of
shares of Company Capital Stock would otherwise be entitled to receive as a
result of the Merger shall be aggregated and, if a fractional share results
from such aggregation, such holder shall be entitled to receive, in lieu
thereof, an amount in cash determined by multiplying (i) the fraction of a
share of Aether Common Stock to which such holder would otherwise have been
entitled (net any exercise price, if applicable) by (ii) the Average Aether
Stock Price for the Measurement Period. No interest will be paid or will
accrue on any cash paid or payable in lieu of any fractional shares of Aether
Common Stock.
(c) At and after the Effective Time, there shall be no further
registration of transfers of shares of Company Capital Stock. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration in accordance
with the procedures set forth in this ARTICLE III.
(d) If any portion of the Merger Consideration is to be paid to a
Person other than the registered holder of the shares of Company Capital Stock
represented by the Certificate or Certificates surrendered in exchange
therefor, it shall be a condition to such payment that the Certificate or
Certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such payment shall pay
to Aether any transfer or other Taxes required as a result of such payment to a
Person other than the registered holder of such Certificates or establish to
the satisfaction of Aether that such Tax has been paid or is not payable.
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(e) None of Aether, Cerulean or the Surviving Corporation shall be
liable to any former holder of shares of Company Capital Stock for any amount
paid to a Governmental Authority pursuant to any applicable abandoned property,
escheat or similar laws. Any amounts remaining unclaimed by holders of
Certificates five years after the Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become the property of any Governmental Authority) shall, to the extent
permitted by applicable law, become the property of Aether free and clear of
any claims or interest of any person previously entitled thereto.
(f) In the event that any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Aether, the posting by such Person of a bond in a customary amount as indemnity
against any claim that may be made against it with respect to such Certificate,
Aether will issue in exchange for such lost, stolen or destroyed Certificate
the applicable Merger Consideration, cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Aether Common Stock deliverable
in respect thereof pursuant to this Agreement.
(g) If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
capital stock of Aether shall occur, including by reason of any
reclassification, reorganization, recapitalization, stock split or combination,
exchange or readjustment of shares, or any stock dividend thereon with a record
date during such period, the number of shares of Aether Common Stock
constituting all or part of the Merger Consideration shall be appropriately
adjusted in accordance with such change.
Section 3.7 Tax Treatment. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of
Sections 368(a) of the Code. The parties hereto adopt this Agreement as a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the United
States Income Tax Regulations.
Section 3.8 Appraisal Rights. Company Capital Stock which is
not voted in favor of the Merger and with respect to which a demand for
appraisal shall have been properly made in the manner provided by the DGCL
("Appraisal Shares") shall not be converted into the right to receive any
Merger Consideration and the holders of Appraisal Shares shall be entitled only
to such rights as are contemplated by the DGCL; provided, however, that if a
holder of Appraisal Shares shall withdraw his, her or its demand for such
payment or shall become ineligible for such payment, pursuant to the DGCL, then
as of the Effective Time or the occurrence of such event of withdrawal or
ineligibility, whichever later occurs, such holder's Appraisal Shares shall
cease to be Appraisal Shares and shall be converted into the right to receive
the applicable Merger Consideration. Cerulean shall give Aether prompt notice
of any Appraisal Shares (and shall also give Aether prompt notice of any
withdrawals of such demands for appraisal rights) and Aether shall have the
right to direct all negotiations and proceedings with respect to any such
demands. Cerulean shall not, except with the prior written consent of Aether,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal rights.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF CERULEAN
Each exception set forth in the Company Disclosure Schedule to the
representations and warranties in this Article IV and each other matter set
forth in the Company Disclosure Schedule is identified by reference to, or has
been grouped under a heading referring to, a specific individual Section of this
Agreement and relates only to such Section, except to the extent that one
section of the Company Disclosure Schedule specifically refers to another
section thereof. Except as set forth in the Company Disclosure Schedule, the
Company represents and warrants to Parent and Merger Sub as follows:
Section 4.1 Organization and Qualifications; Subsidiaries.
Cerulean and each Subsidiary of Cerulean is a corporation, partnership, or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has the
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each of Cerulean and its
Subsidiaries is duly qualified or licensed as a foreign corporation or
partnership to transact business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, except
where the failure to so qualify or be licensed would not have a Material
Adverse Effect on Cerulean. Schedule 4.1 to the Company Disclosure Schedule
lists each Subsidiary of the Company and its respective jurisdiction of
incorporation.
Section 4.2 Certificate of Incorporation and Bylaws. Complete
and correct copies of the articles of incorporation or charter and bylaws of
Cerulean and each of its Subsidiaries, as amended to date, are included with
Schedule 4.2 to the Company Disclosure Schedule. Such Organizational Documents
are in full force and effect and reflect all amendments or modifications
adopted as of the date hereof. Cerulean is not in violation of any provision
of its Organizational Documents. No Subsidiary of Cerulean is in violation of
any provision of its Organizational Documents.
Section 4.3 Capitalization.
(i) The authorized capital stock of the Company consists
of 33,574,408 shares of Company Common Stock and 19,881,330 shares of
preferred stock, par value $.005 per share (the "Company Preferred Stock"). As
of the date hereof (1) 7,625,426 shares of Company Common Stock were issued and
outstanding, (2) 19,659,330 shares of Company Preferred Stock were issued and
outstanding, of which 6,311,088 shares are designated Series A Convertible
Participating Preferred Stock, 6,133,092 shares are designated Series B
Convertible Participating Preferred Stock, 5,364,968 shares are designated
Series C Convertible Participating Preferred Stock, 2,072,182 shares are
designated Series D Convertible Participating Preferred Stock, (3) 536,268 (as
of June 30, 2000) shares of Company Common Stock were held by the Company in
its treasury, (4) no shares of Company Common Stock were held by one or more of
the Company's subsidiaries, (5) 3,450,537 shares of Company Common Stock were
reserved for issuance pursuant to the Company's stock option plans (the "Option
Plans") (of which 3,080,650 are subject to outstanding options to purchase
shares of Company Common Stock ("Company
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Options")) and (6) 30,000 shares of Company Common Stock and 111,000 shares of
Series C Convertible Participating Preferred Stock were reserved for issuance
pursuant to exercise of the Company Warrants. Except as set forth above, at
the time of execution of this Agreement, no shares of capital stock or other
equity or voting securities of the Company are issued, reserved for issuance or
outstanding. All outstanding shares of Company Capital Stock and other equity
or voting securities of the Company (including all options, warrants and other
convertible securities) are, and all shares which may be issued pursuant to the
Option Plans, Company Options or any other outstanding options, warrants or
other convertible securities will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any preemptive right, purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right. There are no
outstanding bonds, debentures, notes or other indebtedness or securities (other
than Company Capital Stock) of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which any stockholders of the Company may vote. All of the
issued and outstanding shares of Company Capital Stock and of the capital stock
of each Subsidiary of Cerulean were offered, issued, sold and delivered by
Cerulean in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares was issued in
violation of any preemptive rights.
(ii) Except as set forth above, there are no outstanding
securities, options, warrants, calls, rights, commitments or Contracts of any
kind to which the Company or any of its subsidiaries is a party or by which any
of them is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity or voting securities (including options, warrants
and other convertible securities) of the Company or of any of its subsidiaries
or obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment or
Contract. Except as set forth in Schedule 4.3 of the Company Disclosure
Schedule, there are no outstanding rights, commitments or Contracts of any kind
obligating the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or other equity or voting
securities of the Company or any of its Subsidiaries or any securities of the
type described in the two immediately preceding sentences. The Company has
delivered or made available to Parent complete and correct copies of each of
the Option Plans and all forms of Company Options, and all outstanding options
to purchase capital stock of the Company were granted under the Option Plans.
Schedule 4.3 of the Company Disclosure Schedule sets forth a complete and
accurate list of all options to purchase shares of Company Common Stock
outstanding as of the date of this Agreement and the exercise price of each
such outstanding option. Except as described in Schedule 4.3 of the Company
Disclosure Schedule, as of the date hereof, there are no stock-appreciation
rights, stock-based performance units, "phantom" stock rights or other
Contracts of any character (contingent or otherwise) to which the Company or
any of its Subsidiaries is a party or by which any of them is bound pursuant to
which any person is or may be entitled to (1) receive any payment or other
value based on the revenues, earnings or financial performance, stock price
performance or other attribute of the Company or any of its subsidiaries or
assets or calculated in accordance therewith (other than ordinary course
payments or commissions to sales representatives of the Company based upon
revenues generated by them without augmentation as a result of the transactions
contemplated hereby), or (2) cause the Company or any of its Subsidiaries to
file a registration statement under the Securities Act, or which otherwise
relate to the registration of any securities of the Company.
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Except as set forth in Schedule 4.3 of the Company Disclosure Schedule, there
are no voting trusts, proxies, antitakeover plans or other Contracts of any
character to which the Company or any of its Subsidiaries is a party or by
which any of them is bound, to the Knowledge of the Company, or to which any of
the Company's stockholders is a party or by which any of them is bound, in each
case, with respect to the issuance, holding, acquisition, voting or disposition
of any shares of capital stock of the Company or any of its subsidiaries.
Except for the capital stock of its Subsidiaries or as set forth in Schedule
4.3 of the Company Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock, security or other ownership or equity interest
in any person.
Section 4.4 Authority Relative to This Agreement. (a) Cerulean
has all necessary corporate power and authority to execute and deliver this
Agreement, and, subject to the Company Stockholder Approval, to perform its
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by Cerulean, the performance by Cerulean of its
obligations hereunder and the consummation by Cerulean of the Transactions have
been duly and validly approved by the Board of Directors of Cerulean, the Board
of Directors of Cerulean has recommended approval of this Agreement by the
stockholders of Cerulean and directed that this Agreement be submitted to the
stockholders of Cerulean for their consideration, and no other corporate
proceedings on the part of Cerulean are necessary to authorize this Agreement
or to consummate the Transactions (other than the Company Stockholder Approval
and the Merger Filing). This Agreement has been duly and validly executed and
delivered by Cerulean and, assuming the due authorization, execution and
delivery thereof by Aether and Merger Sub, constitutes the legal, valid and
binding obligation of Cerulean, enforceable against Cerulean in accordance with
its terms, except as enforceability may be limited by bankruptcy or other
similar laws and general principles of equity.
(b) As of the date hereof and, except as permitted by Section 6.9,
as of the Effective Time, the Board of Directors of the Company has, at a
meeting duly called and held, (i) unanimously approved and declared advisable
the Merger and this Agreement, (ii) determined that the transactions
contemplated hereby and thereby are advisable, fair to and in the best interests
of the holders of Company Capital Stock, (iii) resolved to recommend adoption of
this Agreement by the stockholders of the Company and (iv) directed that this
Agreement be submitted to the stockholders of the Company for their adoption.
The Board of Directors has not withdrawn, rescinded or modified such approval,
determination, and resolution to recommend. The affirmative vote of a majority
of all outstanding shares of Company Capital Stock, two-thirds of all
outstanding shares of Company Preferred Stock and of each series of Company
Preferred Stock for the adoption of this Agreement are the only votes of the
holders of any class or series of capital stock or other security of the Company
necessary to adopt this Agreement or to approve or authorize the Merger and the
other transactions contemplated hereby and thereby. As of the date hereof, the
holders of the Company Capital Stock that are parties to the Stockholders Voting
Agreement own (beneficially and of record) and have the right to vote, in the
aggregate, 26,567,210 shares of Company Capital Stock.
Section 4.5 No Conflict; Required Filings and Consents; Certain
Contracts.
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(a) The execution and delivery of this Agreement by Cerulean does
not, and the performance of its obligations under this Agreement and the
consummation of the Transactions by Cerulean will not,
(i) except as set forth in Schedule 4.5 to the Company
Disclosure Schedule, conflict with, result in a breach of, cause a dissolution
or require the consent or approval of any Person under, or violate any provision
of, the Organizational Documents of Cerulean or any of its Subsidiaries,
(ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except for
(A) applicable requirements of the Hart- Scott-Rodino Antitrust Improvements Act
of 1976 (as amended, the "HSR Act"), including any rules and regulations
promulgated thereunder, (B) the Merger Filing, (C) the Company Stockholder
Approval, (D) such consents, authorizations, filings, approvals and
registrations required under contracts with Governmental Authorities for the
purchase or sale of the Company's product and services entered into the ordinary
course of business, and (E) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not result in a
Material Adverse Effect on Cerulean or Aether,
(iii) subject to the making of the filings and obtaining the
approvals identified in clause (ii), conflict with or violate any Law, order,
judgment, rule, regulation, ordinance, writ, injunction or decree applicable to
Cerulean or any of its Subsidiaries or by which any property or asset of
Cerulean or any Subsidiary is bound or affected, which conflict or violation
would result in a Material Adverse Effect on Cerulean or the Surviving
Corporation, or
(iv) except as set forth in Schedule 4.5 to the Company
Disclosure Schedule, conflict with or result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, result in the loss by Cerulean or any of its Subsidiaries or
modification in a manner materially adverse to Cerulean or any of its
Subsidiaries of any right or benefit under, or give to others any right of
termination, amendment, acceleration, repurchase or repayment, increased
payments or cancellation of, or result in the creation of a Lien or other
encumbrance on any Company Capital Stock or any material property or asset of
Cerulean or any Subsidiary of Cerulean pursuant to, any Contract of Cerulean,
except (A) arising under any Contract for the purchase or sale of the Company's
products or services entered into in the ordinary course of business or (B), in
each case, such as would not, individually or in the aggregate have a Material
Adverse Effect on Cerulean. The notices, consents or approvals, filings or
registrations, and expirations or terminations of waiting periods referred to in
clauses (ii)(A)-(ii)(C) above are hereinafter referred to as the "Requisite
Regulatory Approvals."
(b) Except as set forth in Schedule 4.5 of the Company Disclosure
Schedule, there are no Contracts to which Cerulean or any Subsidiary of Cerulean
is a party or by which Cerulean or any Subsidiary of Cerulean or any asset of
Cerulean or any Subsidiary of Cerulean is bound, which by its terms materially
limits the ability of Cerulean or any Subsidiary of Cerulean, or after
consummation of the Transactions, would by its terms materially limit the
ability of Aether or any of its Affiliates, to engage in any business in any
area or for any period.
Section 4.6 Financial Statements
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(a) The consolidated financial statements of Cerulean and its
Subsidiaries for the years ended December 31, 1998 and December 31, 1999 and for
the six-month period ended June 30, 2000 (the "Financial Statements") included
as Schedule 4.6(a) to the Company Disclosure Schedule hereto, were prepared in
accordance with GAAP applied on a basis consistent with prior periods (except
for the absence of notes and schedules in the case of the June 30, 2000
Financial Statements) and fairly present in all material respects except for
necessary, normal, recurring, year-end adjustments the consolidated financial
position of Cerulean and its consolidated Subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended and do not contain any material misstatements of
the financial condition or results of operations of Cerulean at such dates or
for the periods then ended.
(b) Since June 30, 2000, neither Cerulean nor any of its
Subsidiaries has incurred any liabilities or obligations (whether absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise and whether
due or to become due) of any nature, except as set forth in Schedule 4.6(b) to
the Company Disclosure Schedule and except liabilities, obligations or
contingencies (i) which were incurred after June 30, 2000 in the ordinary course
of business consistent with past practices under any contract, commitment or
agreement specifically disclosed in the Company Disclosure Schedule or not
required to be disclosed thereon because of the term or amount involved or
otherwise, (ii) which were incurred as a result of the Transactions contemplated
by this Agreement, (iii) which were disclosed or reserved against on the balance
sheet to the Financial Statements or which would not be required under GAAP to
be reported on the balance sheet to the Financial Statements, or (iv) which
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Cerulean. Cerulean and its Subsidiaries have timely
filed all forms, reports and other documents material to the business of
Cerulean and its Subsidiaries required to be filed prior to the date hereof with
any Governmental Authority, except where the failure to so file would not have a
Material Adverse Effect on Cerulean.
(c) Since December 31, 1999, there has been no change in any of the
significant accounting (including Tax accounting) policies, practices or
procedures of Cerulean or any Subsidiary of Cerulean, except changes to comply
with changes in accounting pronouncements of the Financial Accounting Standards
Board or changes in applicable laws or rules or regulations thereunder as
disclosed on Schedule 4.6(c) to the Company Disclosure Schedule.
Section 4.7 Absence of Certain Changes or Events. Except as a
result of this Agreement and the Transactions or as set forth in Schedule 4.7
to the Company Disclosure Schedule, since December 31, 1999, (a) each of
Cerulean and its Subsidiaries has conducted its respective business only in the
ordinary course consistent with past practices, and has not taken any of the
actions set forth in paragraphs (a) through (l) of Section 6.4 and (b) there
has not occurred or arisen any event that, individually or in the aggregate,
has had or, insofar as can be reasonably foreseen, would have a Material
Adverse Effect on Cerulean or any of its Subsidiaries.
Section 4.8 Conformity with Law; Relations with Governments;
Litigation. Neither Cerulean nor any of its Subsidiaries is in violation of
any law or regulation or any order of any Governmental Authority having
jurisdiction over it which have had or would reasonably be
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expected to have a Material Adverse Effect. Neither Cerulean nor any of its
Subsidiaries has offered anything of value to any governmental official,
political party or candidate for government office nor has it otherwise taken
any action that would cause Cerulean to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect. Schedule 4.8
to the Company Disclosure Schedule lists, as of the date hereof and the Closing
Date, all claims, suits, actions or proceedings pending or, to the Knowledge of
each of Cerulean and its Subsidiaries, threatened or contemplated, including
any investigations or reviews by any Governmental Authority pending or, to the
Knowledge of each of Cerulean and its Subsidiaries, threatened or contemplated,
against, relating to or affecting each of Cerulean and its Subsidiaries
(collectively, the "Claims"). If adversely determined, the Claims will not,
individually or in the aggregate, have a Material Adverse Effect on Cerulean or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. There is no judgment, decree, order,
injunction, stipulation, award (other than an award for the purchase of
products or services by a Governmental Authority) or writ of any Governmental
Authority outstanding against Cerulean or any of its Subsidiaries.
Section 4.9 Employee Benefit Plans and Related Matters; ERISA.
(a) Schedule 4.9(a) to the Company Disclosure Schedule contains a
complete and accurate list of all Company Plans and Company Benefit Arrangements
and specifically identifies all Company Plans (if any) that are Qualified Plans.
(b) With respect, as applicable, to Benefit Plans and Benefit
Arrangements:
(i) Cerulean has delivered or made available true, correct,
and complete copies of the following documents with respect to all Company Plans
and Company Benefit Arrangements to Aether: (A) all plan or arrangement
documents, including but not limited to trust agreements, insurance policies,
service agreements and formal and informal amendments to each; (B) the most
recent Forms 5500 or 5500C/R and any attached financial statements and related
actuarial reports, and those for the prior three years; (C) the last IRS
determination letter, the last IRS determination letter that covered the
qualification of the entire plan (if different), and the materials submitted to
obtain those letters; (D) summary plan descriptions and summaries of material
modifications, and any prospectuses that describe the Company Benefit
Arrangements or Company Plans; (E) written descriptions of all non-written
agreements relating to any such plan or arrangement; (F) all reports submitted
within the three years preceding the date of this Agreement by third-party
administrators, actuaries, investment managers, consultants, or other
independent contractors (other than participant statements); (G) all notices
that the IRS, Department of Labor or any other governmental agency or entity
issued to the Company within the four years preceding the date of this
Agreement; (H) employee manuals or handbooks containing personnel or employee
relations policies; (I) the most recent quarterly listing of workers'
compensation claims and a schedule of workers' compensation claims of the
Company for the last three fiscal years; and (J) any other documents Aether has
requested;
(ii) the Qualified Plans qualify under Section 401(a) of
the Code, and nothing has occurred with respect to the operation of any
Qualified Plan that could cause the imposition of any liability, lien, penalty,
or tax under ERISA or the Code; each Company Plan and each Company Benefit
Arrangement has been maintained in all material respects in accordance with
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its constituent documents and with all applicable provisions of domestic and
foreign laws, including federal and state securities laws and any reporting and
disclosure requirements; with respect to each Company Plan, no transactions
prohibited by Code Section 4975 or ERISA Section 406 and no breaches of
fiduciary duty described in ERISA Section 404 have occurred, and no Company
Plan contains any security issued by any Related Employer;
(iii) the Related Employers have never sponsored or
maintained, had any obligation to sponsor or maintain, or had any liability
(whether actual or contingent, with respect to any of their assets or otherwise)
with respect to any Benefit Plan subject to Section 302 of ERISA or Section 412
of the Code or Title IV of ERISA (including any Multiemployer Plan);
(iv) there are no pending claims (other than routine benefit
claims) or lawsuits that have been asserted or instituted by, against, or
relating to, any Company Plans or Company Benefit Arrangements, nor to the
Company's Knowledge is there any basis for any such claim or lawsuit. No Company
Plans or Company Benefit Arrangements are or have been under audit or
examination (nor has notice been received of a potential audit or examination)
by any domestic or foreign governmental agency or entity, and no matters are
pending with respect to any Company Plan under the IRS's Employee Plans
Compliance Resolutions System or any successor or predecessor program;
(v) [except as set forth in Schedule 4.9(b),] no Company
Plan or Company Benefit Arrangement contains any provision or is subject to any
law that would accelerate or vest any benefit or require severance, termination
or other payments or trigger any liabilities as a result of the transactions
this Agreement contemplates; no Related Employer has declared or paid any bonus
or incentive compensation related to the transactions this Agreement
contemplates; and no payments under any Company Plan or Company Benefit
Arrangement would, individually or collectively, be nondeductible under Code
Section 280G;
(vi) all reporting, disclosure, and notice requirements of
ERISA and the Code have been satisfied with respect to each Company Plan and
each Company Benefit Arrangement;
(vii) each Related Employer has paid all amounts it is
required to pay as contributions to the Company Plans as of the date of this
Agreement; all benefits accrued under any unfunded Company Plan or Company
Benefit Arrangement will have been paid, accrued, or otherwise adequately
reserved in accordance with GAAP as of the date of this Agreement; and all
monies withheld from employee paychecks with respect to Company Plans have been
transferred to the appropriate plan within the time applicable regulations
specify;
(viii) to Cerulean's Knowledge, no statement, either written
or oral, has been made by the Related Employers to any person with regard to any
Company Plan or Company Benefit Arrangement that was not in accordance with the
Company Plan or Company Benefit Arrangement and that would involve a material
increase in expense or liability under such plan or arrangement;
(ix) the Related Employers have no liability (whether
actual, contingent, with respect to any of its assets or otherwise) with respect
to any Benefit Plan or Benefit Arrangement that is not a Company Plan or Company
Benefit Arrangement or with respect to any Benefit Plan
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sponsored or maintained (or which has been or should have been sponsored or
maintained) by any ERISA Affiliate; and
(x) all group health plans of the Related Employers
materially comply with the requirements of Part 6 of Title I of ERISA ("COBRA"),
Code Section 5000, and the Health Insurance Portability and Accountability Act;
the Related Employers have no liability under or with respect to COBRA for their
own actions or omissions or those of any predecessor; the Related Employers'
voluntary employee beneficiary association, if any, is exempt from tax and
complies with all requirements applicable to it; no employee or former employee
(or beneficiary of either) of a Related Employer is entitled to receive any
benefits, including, without limitation, death or medical benefits (whether or
not insured) beyond retirement or other termination of employment, other than as
applicable laws require.
Section 4.10 Labor and Employment Matters. With respect to
employees of and service providers to the Related Employers:
(a) the Related Employers are complying and have complied in all
material respects with all applicable domestic and foreign laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws respecting
employment discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and no claims or investigations are pending or, to the Knowledge
of Cerulean, threatened with respect to such laws, either by private individuals
or by governmental agencies and all employees are at-will;
(b) no Related Employer is or has been engaged in any unfair labor
practice, and there is not now, nor within the past three years has there been,
any unfair labor practice complaint against any Related Employer pending or, to
the Knowledge of Cerulean, threatened, before the National Labor Relations Board
or any other comparable foreign or domestic authority or any workers' council;
(c) no labor union represents or has ever represented the Related
Employers' employees and no collective bargaining agreement is or has been
binding against any Related Employer. No Related Employer is currently
negotiating to create such agreements. No grievance or arbitration proceeding
arising out of or under collective bargaining agreements or employment
relationships is pending, and no claims therefor exist or have, to the Knowledge
of Cerulean, been threatened;
(d) no labor strike, lock-out, slowdown, or work stoppage is or has
ever been pending or threatened against or directly affecting any Related
Employer; and
(e) all persons who are or were performing services for any Related
Employer and are or were classified as independent contractors do or did satisfy
and have satisfied the requirements of law to be so classified, and the
appropriate Related Employer has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
Section 4.11 Insurance. Schedule 4.11 to the Company Disclosure
Schedule sets forth (a) an accurate list of each material insurance policy
providing coverage for liability exposure
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(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) to which each of
Cerulean and its Subsidiaries is currently, or has been during the past three
years, a party, a named insured or otherwise the beneficiary of coverage and
(b) all insurance loss runs or workers' compensation claims received for the
past three policy years. With respect to each such insurance policy, to the
Knowledge of each of Cerulean and its Subsidiaries: (a) the policy is legal,
valid, binding, enforceable and in full force and effect; (b) there will be no
breach or other violation of the policy resulting from the Transactions; and
(c) each of Cerulean and its Subsidiaries is not in breach or default
(including with respect to the payment of premiums or the giving of notices);
and (d) no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification or
acceleration, under the policy.
Section 4.12 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based on any arrangement or agreement made by or on
behalf of each of Cerulean and its Subsidiaries.
Section 4.13 Taxes.
(a) Except as set forth on Schedule 4.13(a), each of Cerulean and
its Subsidiaries has timely filed all Tax Returns that were required to be filed
and all such Tax Returns are true, correct and complete in all respects.
(b) Each of Cerulean and its Subsidiaries has paid in full on a
timely basis all Taxes owed by it, whether or not shown on any Tax Return.
(c) Except as set forth on Schedule 4.13(c), no claim has ever been
made by an authority in a jurisdiction where Cerulean or any of its Subsidiaries
do not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(d) The liability of Cerulean and its Subsidiaries for unpaid Taxes
did not as of the dates of the Financial Statements described in Section 4.6,
exceed the liability accruals for Taxes (excluding reserves for deferred Taxes)
set forth on such Financial Statements. The liability of Cerulean and its
Subsidiaries for unpaid Taxes as of the Effective Day will not exceed such
accruals as set forth on the Financial Statements dated as of June 30, 2000.
(e) There are no ongoing audits, examinations or claims against
Cerulean or any of its Subsidiaries for Taxes, and no written notice of any
audit, examination, or claim for Taxes has been received.
(f) No director or officer (or employee responsible for Tax
matters) of Cerulean or any of its Subsidiaries expects any Governmental
Authority to assess any additional Taxes for any period for which Tax Returns
have been filed.
(g) Cerulean has a taxable year ending on December 31.
(h) Each of Cerulean and its Subsidiaries currently utilizes the
accrual method of accounting for income tax purposes and such method of
accounting has not changed since its incorporation. Neither Cerulean nor any of
its Subsidiaries has agreed to, and neither Cerulean
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nor any of its Subsidiaries is or will be required to, make any adjustments
under Code section 481(a) as a result of a change in accounting methods.
(i) Each of Cerulean and its Subsidiaries has withheld and paid
over to the proper Governmental Authorities all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid to any employee, independent
contractor, creditor, or other third party.
(j) Neither Cerulean nor any of its Subsidiaries has entered into
any agreement extending, or having the effect of extending, the period of
assessment or collection of any Taxes and no power of attorney with respect to
any Taxes has been executed or filed with the IRS or any other taxing authority.
(k) Copies of filed Tax Returns of each of Cerulean and its
Subsidiaries for taxable years beginning after December 31, 1996, and copies of
any Tax examinations, audit reports, or notices of deficiencies of each of
Cerulean and its Subsidiaries, without regard to time, have been delivered to
Aether.
(l) To the Knowledge of the Company, there are (and as of
immediately following the Closing there will be) no Liens on the assets of
Cerulean or any of its Subsidiaries relating or attributable to Taxes (other
than Permitted Liens).
(m) There is no reasonable basis for the assertion of any claim
relating or attributable to Taxes which, if adversely determined, would result
in any Lien (other than Permitted Liens) on the assets of Cerulean or any of it
Subsidiaries.
(n) Neither Cerulean nor any of its Subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code).
(o) Neither Cerulean nor any of its Subsidiaries is, or has ever
been, a party to a Tax sharing, Tax indemnity or Tax allocation agreement, and
neither Cerulean nor any of its Subsidiaries has assumed the Tax liability of
any other Person under contract.
(p) Neither Cerulean nor any of its Subsidiaries is, or has ever
been, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(q) Neither Cerulean nor any of its Subsidiaries has been a member
of an affiliated group filing a consolidated federal income Tax Return other
than a group of which Cerulean is the common parent. Neither Cerulean nor any of
its Subsidiaries has any liability for the Taxes of another Person under Treas.
Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law)
as a transferee or successor, by contract or otherwise.
(r) Neither Cerulean nor any of its Subsidiaries is a party to any
joint venture, partnership or other arrangement that is treated as a partnership
for federal income tax purposes.
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(s) Neither the Company nor any Subsidiary has or had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country, or is
otherwise subject to Tax in any foreign country.
(t) As of December 31, 1999, neither the Company nor any Subsidiary
has any excess loss account (as defined in Treas. Reg. Section 1.1502-19) with
respect to any Subsidiary.
(u) Schedule 4.13(u) to the Company Disclosure Schedule sets forth
the amount of any net operating loss, net capital loss, unused investment,
foreign tax or other credit allocable to Cerulean or any of its Subsidiaries.
Section 4.14 Environmental Matters. Each of Cerulean and its
Subsidiaries is in compliance in all material respects with all environmental
laws, rules, regulations and standards promulgated, adopted or enforced by the
Environmental Protection Agency ("EPA") and of similar agencies in states in
which they conduct their respective businesses, except for violations of laws,
rules, regulations or standards that have not had and would not reasonably be
expected to have a Material Adverse Effect on Cerulean. There is no suit,
claim, action or proceeding now pending before any court, governmental agency
or board or other forum or, to the Knowledge of each of Cerulean and its
Subsidiaries, threatened by any Person, (a) for alleged noncompliance with any
environmental law, rule or regulation or (b) relating to the discharge or
release into the environment of any hazardous material or waste at or on a site
presently or formerly owned, leased or operated by each of Cerulean and its
Subsidiaries.
Section 4.15 Intellectual Property.
(a) Schedule 4.15(a) to the Company Disclosure Schedule lists: (i)
all applications and registrations for patents, copyrights, trademarks, service
marks and trade dress which are included in the Company Intellectual Property
and are owned by or on behalf of each of Cerulean and its Subsidiaries; (ii)
all material hardware products and tools, software products and tools, and
services that are currently published, offered, or under development by
Cerulean; (iii) all material licenses, sublicenses and other agreements to
which each of Cerulean and its Subsidiaries is a party and pursuant to which
each of Cerulean and its Subsidiaries authorizes any other person to use the
Company Intellectual Property or exercise any other right with regard thereto
except licenses entered into in the ordinary course of business with end users
and resellers; and (iv) all agreements with third parties pursuant to which
Cerulean and its subsidiaries are granted the right to use material Third Party
Intellectual Property.
(b) In addition to Intellectual Property defined in Section 1.1,
Company Intellectual Property also consists of (i) items and rights solely owned
by Cerulean, and (ii) any and all inventions conceived or reduced to practice on
or before the Closing Date by Cerulean employees and officers in the course of
their employment with Cerulean or any party that has an obligation to assign
such inventions to Cerulean.
(c) Each of Cerulean and its Subsidiaries has all rights, title and
interest in the Company Intellectual Property, and all necessary licenses,
permissions and other rights in the Third Party Intellectual Property, necessary
to carry out the business of Cerulean or its
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Subsidiaries as it has been, is currently, or is reasonably anticipated (as of
the date of this Agreement and as of the Closing) by Cerulean and its
Subsidiaries to be conducted.
(d) To its knowledge, each of Cerulean and its Subsidiaries is the
rightful owner of any and all rights in Company Intellectual Property for its
current technologies or those under development by Cerulean or its subsidiaries
on or before the Closing Date, including without limitation rights to make, use,
import, reproduce, modify, adapt, create derivative works based on, translate,
distribute (directly and indirectly), transmit, display and perform publicly,
license, rent, lease, assign, and sell the Company Intellectual Property and
products embodying the Company Intellectual Property, in all fields of use, in
each country in which Cerulean conducts business, and to sublicense any or all
such rights to third parties, including the right to grant further sublicenses.
(e) Each of Cerulean and its Subsidiaries has obtained the rights
to Company Intellectual Property in writing from its officers, employees and
third parties, including independent contractors and sub- contractors to assign,
license, sublicense, transfer or grant any and all the rights and licenses
conveyed under this Agreement.
(f) All necessary registration, maintenance and renewal fees
currently due have been made with respect to, and all necessary documentation,
recordations and certifications have been filed with the relevant authorities
for purposes of maintaining, all Company Intellectual Property applications and
registrations listed on Schedule 4.15(a) to the Company Disclosure Schedule.
(g) Each of Cerulean and its Subsidiaries' employees and officers
has taken any and all reasonably necessary steps to protect material Company
Intellectual Property (except for the filing of patent applications), including
securing patent, copyright, trademark, trade secret, mask works or other
intellectual property rights (except patents), as appropriate, in works of
authorship, inventions, trade secrets and other confidential information
conceived or reduced to practice on or before the Closing Date. Each of Cerulean
and its Subsidiaries' employees and officers has exercised reasonable efforts
and due diligence to protect such Company Intellectual Property and has not
engaged or will not engage in an act or omission that would prevent, now, or in
the future, securing or protecting Company Intellectual Property and rights in
current technologies or those under development. Each of Cerulean and its
Subsidiaries, employees, or officers has not engaged in any act or omission that
would constitute a bar to the U.S. patentability of any patent applications
listed on Schedule 4.15(a) to the Company Disclosure Schedule, or any patent
applications being prepared for filing, including but not limited to, any
publication, public use, or offer for sale of an invention.
(h) Each of Cerulean and its Subsidiaries, employees, or officers
has complied with the required duty of candor before the United States Patent
and Trademark Office in connection with any patent application filed on behalf
of Cerulean or in connection with any Company Intellectual Property.
(i) Each of Cerulean and its Subsidiaries' current use,
reproduction, modification, distribution, licensing, sublicensing, sale, or any
other exercise of, or use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of any Company Intellectual Property
currently reasonably anticipated by Cerulean (including rights in any
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product, work, technology, service or process) does not, to Cerulean's
Knowledge, interfere with, infringe upon, or misappropriate any copyright,
patent, trade secret, trademark, service mark, trade name, firm name, logo,
trade dress, mask work, moral right, other Intellectual Property right, right
of privacy or right in personal data of any person.
(j) Each of Cerulean and its Subsidiaries' commercially available
products, including hardware or software products and tools, services, or
technologies, either alone or in combination, do not, to Cerulean's Knowledge,
infringe any patent or other intellectual property right or similar right of a
third party.
(k) The current marketed versions of each of Cerulean and its
Subsidiaries' products substantially conform to the current published
specifications and marketing materials relating to such products.
(l) Each of Cerulean and its Subsidiaries has obtained written
agreements from all of its officers, employees and third party contractors or
agents (other than its law firms, accounting firms and other professional
advisors that are subject to preexisting confidentiality obligations to
Cerulean) to not assert any intellectual property right, including any patent,
copyright, trademark, trade secret, rights in mask works or other intellectual
property rights, included in or relating to the Company Intellectual Property.
(m) Each of Cerulean and its Subsidiaries is not, nor as a result
of the execution or delivery of this Agreement, or performance of Cerulean's
obligations hereunder, will each of Cerulean and its Subsidiaries be, in
violation or default of any license, sublicense or other agreement to which each
of Cerulean and its Subsidiaries is a party or otherwise bound. The consummation
of the transactions contemplated by this Agreement will not trigger the release
of any of each of Cerulean and its Subsidiaries' source code to any third party.
Each of Cerulean and its Subsidiaries is not in breach or default in any respect
under any agreement or arrangement relating to Third Party Intellectual
Property, nor has each of Cerulean and its Subsidiaries given or received a
notice of default under any agreement or arrangement relating to Third Party
Intellectual Property incorporated in each of Cerulean and its Subsidiaries'
products, including hardware or software products and tools, services, or
technologies. Except as set forth on Schedule 4.15(m) to the Company Disclosure
Schedule, each item of Intellectual Property owned or used by each of Cerulean
and its Subsidiaries immediately prior to the Closing hereunder will continue to
be owned or available for use by the Surviving Corporation on identical terms
and conditions immediately subsequent to the Closing hereunder.
(n) Except as set forth in Schedule 4.15(n) to the Company
Disclosure Schedule, each of Cerulean and its Subsidiaries is not obligated to
provide any consideration (whether financial or otherwise) to any third party,
nor is any third party otherwise entitled to any consideration, with respect to
any exercise of rights by Cerulean in the Company Intellectual Property or the
Third Party Intellectual Property.
(o) Except as set forth in Schedule 4.15(o) to the Company
Disclosure Schedule, no claim, complaint, demand or notice (i) challenging the
validity, effectiveness, enforceability or ownership by Cerulean of any of the
Company Intellectual Property, (ii) charging that either Cerulean or any
Subsidiary has not performed its obligations under any license, sublicense, or
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agreement relating to the Third Party Intellectual Property, (iii) to the effect
that the use, reproduction, modification, distribution, licensing, sublicensing,
sale, or any other exercise of, or Cerulean's reasonably anticipated use,
reproduction, modification, distribution, licensing, sublicensing, sale, or any
other exercise of any Company Intellectual Property (including rights in any
product, work, technology, service or process as used, provided or offered at
any time) interferes with, infringes upon, or misappropriates or will interfere
with, infringe upon, or misappropriate any Intellectual Property or other
proprietary or personal right of any person, has ever been, to the Knowledge of
Cerulean, alleged, asserted or threatened by any person, nor, to the Knowledge
of Cerulean, are there nor has there ever been any valid grounds for any bona
fide claim, complaint, demand or notice of any such kind.
(p) To the Knowledge of Cerulean, there is no unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property by
any third party, employee or former employee.
(q) Except as set forth on Schedule 4.15(q) to the Company
Disclosure Schedule, no parties other than Cerulean possess any current or
contingent rights to any source code which is part of the Company Intellectual
Property.
(r) Schedule 4.15(r) to the Company Disclosure Schedule lists all
Persons who have created any portion of, or otherwise have any rights as authors
or inventors in or to, the Company Intellectual Property. Cerulean has secured
from all such Persons, including all Persons currently or formerly employed or
engaged as an employee or consultant, valid and enforceable written assignments
of any such work or other rights, confidentiality agreements, and non-disclosure
agreements for the purpose of protecting the confidential information of
Cerulean and has made available true and complete copies of such assignments and
agreements to the Surviving Company.
(s) Schedule 4.15(s) to the Company Disclosure Schedule includes a
true and complete list of support and maintenance agreements relating to Company
Intellectual Property.
(t) Neither Cerulean nor any of its Subsidiaries has granted any
exclusive licenses in the Company Intellectual Property to third parties, and no
Person has a license to use or the right to acquire a license to use any future
version of Cerulean's software programs or any future product based on the
Company Intellectual Property other than a right to license such updates to, new
releases of and new versions of Cerulean's software programs that Cerulean makes
generally available to its licensees.
Section 4.16 Books and Records. The books and records, minutes
books, stock record books and other records of each of Cerulean and its
Subsidiaries and all of its Subsidiaries, all of which have been made available
to Aether, are complete and correct in all material respects and have been
maintained in accordance with sound business practices, except for minutes of
meetings of the Board of Directors that have not been completed or approved by
the Board of Directors as of the date of this Agreement (provided that
summaries of any such minutes have been made available to Aether). The
respective minutes books of each of Cerulean and its Subsidiaries and each of
its Subsidiaries contain accurate and complete records of all meetings held of,
and corporate action taken by, the stockholders and the Boards of Directors of
each of
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Cerulean and its Subsidiaries. Cerulean has not engaged in any transactions
that individually or in the aggregate are material to Cerulean and its
Subsidiaries that have not been reflected in its books and records.
Section 4.17 Transactions with Affiliates. Except as set forth
on Schedule 4.17 to the Company Disclosure Schedule, since December 31, 1999,
neither Cerulean nor any of its Subsidiaries has entered into any transaction
with any current director, officer or 5% or larger stockholder of each of
Cerulean and its Subsidiaries, and all ongoing contracts with any director or
officer are on arms' length terms no less favorable to each of Cerulean and its
Subsidiaries than would have been obtained from any unaffiliated third party.
Section 4.18 Reliance. In entering into this Agreement, Cerulean
has relied solely on representations made in this Agreement, including the
Aether SEC Reports, and any certificates and documents required to be provided
by Aether and Merger Sub pursuant to this Agreement. Cerulean has been
represented by counsel and has had sufficient opportunity to examine and
understand the business and assets of Aether.
Section 4.19 Disclosure. All written agreements, lists,
schedules, instruments, exhibits, documents, certificates, reports, statements
and other writings furnished to Aether and any of its Representatives pursuant
hereto or in connection with this Agreement or the transactions contemplated
hereby, are and will be complete and true copies of such materials. No
representation or warranty by Cerulean contained in this Agreement, in the
Schedules attached to the Company Disclosure Schedule or in any certificate
furnished or to be furnished in connection herewith or pursuant hereto contains
or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary in order to make any statement contained
herein or therein not misleading.
Section 4.20 Material Contracts.
(a) Schedule 4.20(a) to the Company Disclosure Schedule is a
complete and accurate list of all agreements to which Cerulean or any of its
Subsidiaries is a party that obligates Cerulean or any Subsidiary to pay, or
entitles them to receive, amounts of $10,000 or greater ("Material Contracts").
All Material Contracts are in full force and effect and are not subject to any
default thereunder by any party.
(b) Cerulean has obtained, or will obtain prior to the Effective
Time, all necessary consents, waivers and approvals of parties to those
Material Contracts that are specifically identified on Schedule 4.20(b) that
(i) are required in connection with any of the transactions contemplated
hereby, (ii) are required by any governmental agency or other third party, or
(iii) are advisable in order that any such Material Contract remain in effect
without modification after the Merger and without giving rise to any right to
termination, cancellation or acceleration or loss of any right or benefit
("Company Third Party Consents"). All Company Third Party Consents are listed
in Schedule 4.5 to the Company Disclosure Schedule.
Section 4.21 Real Property. Cerulean does not own and never has
owned any Real Property in fee. "Real Property" means all interests in real
property, including, without limitation, improvements, and fixtures located on
such real property. All oral or written leases,
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subleases, licenses, concession agreements or other use or occupancy agreements
pursuant to which Cerulean leases to or from any other party any real property,
including all renewals, extensions, modifications or supplements to any of the
foregoing or substitutions for any of the foregoing (collectively, the
"Leases"), are valid and in full force and effect, and have not been assigned,
modified, supplemented or amended. Cerulean leases all Real Property necessary
to conduct its business. Cerulean has made available to Aether true and
complete copies of all of the Leases, all amendments thereto, and all material
correspondence related thereto, including all correspondence pursuant to which
any party to any of the Leases declared a default thereunder or provided notice
of the exercise of any operation granted to such party under such Lease. The
Leases and Cerulean's interests thereunder are free of all Liens, other than
Permitted Liens.
Section 4.22 Personal Property. Schedule 4.22 to the Company
Disclosure Schedule sets forth an accurate list of all personal property owned
or leased by Cerulean with a current book value in excess of $25,000. Cerulean
currently owns or leases all personal property necessary to conduct the
business and operations of Cerulean.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF AETHER AND MERGER SUB
Each exception set forth in the Aether Disclosure Schedule to the
representations and warranties in this Article V, if any, and each other matter
set forth in the Aether Disclosure Schedule is identified by reference to, or
has been grouped under a heading referring to, a specific individual Section of
this Agreement and relates only to such Section, except to the extent that one
section of the Aether Disclosure Schedule specifically refers to another section
thereof. Except as set forth in the Company Disclosure Schedule, Parent and
Merger Sub represent and warrant to the Company as follows:
Section 5.1 Organization and Qualifications; Subsidiaries. Each
of Aether and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where failure to obtain such
approvals would not have a Material Adverse Effect upon Aether. Each of Aether
and Merger Sub is duly qualified or licensed as a foreign corporation,
partnership or limited liability company to transact business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary and where the failure to so qualify would cause a
Material Adverse Effect upon such entity. Merger Sub is a direct, wholly-owned
Subsidiary of Aether.
Section 5.2 Charter and Bylaws. Complete and correct copies of
the certificate of incorporation and bylaws of Aether and Merger Sub, as
amended to date, have been made available to Cerulean. Such Organizational
Documents are in full force and effect and have not been amended or modified in
any respect. Aether is not in violation of any provision of its Organizational
Documents. No Subsidiary of Aether is in violation of any provision of its
Organizational Documents.
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Section 5.3 Capitalization. The authorized capital stock of
Aether consists of 1,000,000,000 shares of Aether Common Stock, par value $.01
per share, and 1,000,000 shares of preferred stock of Aether, par value $.01
per share. As of July 31, 2000, (i) (A) 38,145,125 shares of Aether Common
Stock were outstanding, all of which were validly issued, fully paid and
nonassessable, and (B) zero (0) shares of preferred stock of Aether were issued
and outstanding; and (ii)(A) 5,104,448 shares of Aether Common Stock were
reserved for issuance under Aether employee or director benefit programs
(collectively, the "Aether Stock Plans") and for exercise of outstanding
warrants, (B) 100 shares of Aether Common Stock were classified as treasury
shares, (C) Options to purchase 4,072,615 shares of Aether Common Stock were
issued and outstanding, and (D) warrants to purchase 1,031,833 shares of Aether
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable. Except as set forth above, as of July 31, 2000,
no shares of Aether Common Stock or other voting securities of Aether were
issued, reserved for issuance or outstanding. All shares of Aether Common
Stock subject to issuance as aforesaid and all shares of Aether Common Stock
subject to issuance as Merger Consideration, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There
are no outstanding contractual obligations of Aether to repurchase, redeem or
otherwise acquire any shares of Aether Common Stock or any other shares of
capital stock of Aether, or make any material investment (in the form of a
loan, capital contribution or otherwise) in any Subsidiary of Aether or any
other Person, other than a wholly-owned Subsidiary of Aether or a Person
wholly-owned by one or more wholly-owned Subsidiaries of Aether. Each
outstanding share of capital stock of each Subsidiary of Aether is duly
authorized, validly issued, fully paid and nonassessable and each such share
owned by Aether or any Subsidiary of Aether is owned free and clear of any
Liens except that the shares of OmniSky Corporation that are owned by a
Subsidiary of Aether are subject to certain transfer restrictions. All of the
shares of Aether Common Stock to be issued pursuant to the terms of this
Agreement have been duly authorized and, upon consummation of the Merger, shall
be validly issued, fully paid and nonassessable, and will be free of
restrictions on transfer, other than restrictions on transfer under applicable
state and federal securities laws.
Section 5.4 Authority Relative to This Agreement. Aether and
Merger Sub have all necessary corporate power and authority to execute and
deliver this Agreement, and to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
Aether and Merger Sub, the performance by Aether and Merger Sub of its
obligations hereunder and the consummation by Aether and Merger Sub of the
Transactions have been duly and validly approved by the Board of Directors of
Aether and Merger Sub, and no other corporate proceedings on the part of Aether
and Merger Sub are necessary to authorize this Agreement or to consummate the
Transactions (other than the Merger Filing). This Agreement has been duly and
validly executed and delivered by Aether and Merger Sub and, assuming the due
authorization, execution and delivery thereof by Cerulean, constitutes the
legal, valid and binding obligation of Aether and Merger Sub, enforceable
against Aether and Merger Sub in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity.
Section 5.5 No Conflict; Required Filings and Consents. The
execution and delivery of this Agreement by Aether and Merger Sub do not, and
the performance of their respective obligations under this Agreement and the
consummation of the Transactions by Aether and
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Merger Sub will not, (a) conflict with, result in a breach of, cause a
dissolution or require the consent or approval of any Person under, or violate
any provision of, the Organizational Documents of Aether or Merger Sub, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for (i) applicable
requirements, if any, of the Exchange Act, the Securities Act, the Blue Sky
Laws and the HSR Act, in each case, including any rules and regulations
promulgated thereunder, (ii) the Merger Filing, (iii) the Company Stockholder
Approval, and (iv) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Material Adverse
Effect, (c) subject to the making of the filings and obtaining the approvals
identified in clause (b), conflict with or violate any Law, judgment, order,
writ, injunction or decree applicable to Aether or Merger Sub or by which any
property or asset of Aether or Merger Sub is bound or affected, which conflict
or violation would result in a loss of material benefits to or in any material
liability to Cerulean, Aether or the Surviving Corporation, or (d) conflict
with or result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, result in the
loss by Aether or Merger Sub or modification in a manner materially adverse to
Aether or Merger Sub of any right or benefit under, or give to others any right
of termination, amendment, acceleration, repurchase or repayment, increased
payments or cancellation of, or result in the creation of a Lien or other
encumbrance on any Aether Common Stock issued pursuant to the Merger or any
material property or asset of Aether or Merger Sub or any Subsidiary of Aether
or Merger Sub pursuant to, any Contract of Aether or Merger Sub, except, in
each case, such as would not, individually or in the aggregate have a Material
Adverse Effect on Aether. Assuming delivery by the Company of completed
questionnaires from all holders of the Company Preferred Stock, not more than
five of whom shall fail to qualify as "Accredited Investors" within the meaning
of Rule 501(a) of the Securities Act, the offer, issuance, sale and delivery of
shares of Aether Common Stock in accordance with the terms of this Agreement is
exempt from the registration requirements of the Securities Act.
Section 5.6 SEC Reports and Financial Statements. Since October
26, 1999, Aether has filed all forms, reports, schedules and documents required
to be filed with the SEC under the Securities Act or the Exchange Act. Each
form, report, schedule, registration statement and definitive proxy statement
filed by Aether with the SEC prior to the date hereof (as such documents have
been amended prior to the date hereof, the "Aether SEC Reports"), as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations thereunder. None of the Aether SEC Reports, as of the date on
which such SEC Report was declared effective pursuant to the Securities Act or
the date on which such SEC Report was filed pursuant to the Exchange Act, as
applicable, contained or contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of Aether and
its Subsidiaries included in such reports comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP, consistently applied (except, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly present in all material respects (subject, in the case of the
unaudited interim financial statements, to normal, year-end audit adjustments)
the consolidated financial position of Aether and its Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended.
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Section 5.7 Brokers. Other than Friedman, Billings & Ramsey, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based on any
arrangement or agreement made by or on behalf of Aether.
Section 5.8 Merger Sub. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Merger
Sub has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever nor entered into any
agreement or arrangement with any person.
Section 5.9 Reliance. In entering into this Agreement, Aether
and Merger Sub have relied solely on representations made in this Agreement and
any certificates and documents required to be provided by Cerulean pursuant to
this Agreement. Aether and Merger Sub have been represented by counsel and have
had sufficient opportunity to examine and understand the business and assets of
Cerulean.
Section 5.10 Absence of Changes. Except as set forth in Schedule
5.10 to the Aether Disclosure Schedule, since the date of the most recent
Aether SEC Report that has been filed with the SEC, there has not occurred or
arisen any event that, individually or in the aggregate, has had or, insofar as
can be reasonably foreseen, would have a Material Adverse Effect on Aether or
any of its Subsidiaries.
ARTICLE VI.
COVENANTS
Section 6.1 Notification of Certain Matters. Each of the
parties hereto shall give prompt notice to the other parties hereto of the
occurrence or nonoccurrence of any event of which such party becomes aware, the
occurrence or nonoccurrence of which would be reasonably likely to cause (a)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (b) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in any
material respect. The delivery of any notice pursuant to this Section 6.1
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 6.2 Further Action, Reasonable Efforts; Consents and
Approvals. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use commercially reasonable efforts to take, or cause to
be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions in as expeditious a manner as is
reasonably practicable, including, without limitation, using commercially
reasonable efforts to obtain the licenses, permits, consents, approvals,
authorizations, certificates, qualifications and orders of the third parties
identified on, and make the filings set forth on Schedule 6.2 (collectively
"Consents"), except the Company shall not be required to obtain any Consent
identified in Schedule 6.2 if the failure to obtain such Consent would not have
a Material Adverse Effect on Cerulean or Aether. Cerulean shall, as soon as
possible prior to the Closing, deliver to Aether
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copies of all Consents obtained by Cerulean. Aether shall, as soon as possible
prior to the Closing, deliver to Cerulean copies of all Consents obtained by
Aether. In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, each of
Aether and Cerulean shall use its commercially reasonable efforts to take all
such action. Prior to the Closing, each party shall use its commercially
reasonable efforts not to take any action, or enter into any transaction, that
would cause any of its representations or warranties contained in this
Agreement to be untrue.
Section 6.3 Regulatory Filings.
(a) The parties have filed, and Cerulean has caused any shareholder
of Company Capital Stock obligated to file, a Pre-Merger Notification and Report
Form under the HSR Act ("HSR Filings").
(b) Without limiting the generality of Section 6.2 hereof, Aether
and Cerulean shall (i) take promptly all actions necessary to make the filings
required of Aether, Cerulean, or any of their respective Affiliates in order to
obtain any Requisite Regulatory Approval, (ii) comply at the earliest
practicable date with any request for information or documentary material
received by Aether, Cerulean, or any of their respective Affiliates from any
Governmental Authority and (iii) cooperate with each other in connection with
any such filing and with resolving any investigation or other inquiry concerning
the transactions contemplated by this Agreement commenced by any Governmental
Authority.
(c) In furtherance and not in limitation of the covenants contained
in Section 6.2 and Section 6.3(b) hereof, each of Aether and Cerulean shall use
its reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the Merger or any other transactions contemplated by
this Agreement under any applicable law. If any administrative, judicial or
legislative action or proceeding is instituted (or threatened to be instituted)
challenging the Merger or any other transaction contemplated by this Agreement
as violative of any applicable law, each of Aether and Cerulean shall cooperate
and use its reasonable best efforts vigorously to contest and resist any such
action or proceeding, and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the Merger or any other transaction contemplated by the
Agreement.
(d) Each of Aether and Cerulean shall promptly inform the other of
any communications received by such party or any of its Affiliates from any
Governmental Authority regarding any of the transactions contemplated hereby,
except communications received by Cerulean with respect to Contracts entered
into with a Governmental Authority for purchase or sale of the Company's
products in the ordinary course of business. Each of Aether and Cerulean shall
advise the other promptly of any understandings, undertakings or agreements
which such party or any of its Affiliates proposes to make or enter into with
any Governmental Authority in connection with the transactions contemplated
hereby. Neither Aether nor any of its Affiliates shall be obligated to enter
into any undertakings, understandings or agreements with any Governmental
Authority if such undertakings, understandings or agreements are reasonably
unacceptable to Aether.
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Section 6.4 Conduct of Business of Cerulean Pending the Closing.
From the date hereof through the Closing, except as expressly permitted or
contemplated by this Agreement, unless Aether shall otherwise agree in writing
prior to the taking of any action prohibited by the terms of this Section 6.4,
Cerulean and its Subsidiaries shall conduct their operations and business in
the ordinary and usual course of business and use reasonable best efforts
(which shall not include any offer to pay any retention or stay bonus without
Aether's consent) to keep available the services of its present officers and
key employees and preserve the goodwill and business relationships with all
Persons having business relationships with it. Without limiting the generality
of the foregoing, and except as otherwise expressly permitted by this
Agreement, prior to the Closing, without the prior written consent of Aether,
neither Cerulean nor any of its Subsidiaries shall:
(a) amend or modify its Organizational Documents;
(b) issue, sell, pledge or dispose of, grant or otherwise create,
or agree to issue, sell, pledge or dispose of, grant or otherwise create any
capital stock or other equity securities, any debt or other securities
convertible into or exchangeable for any of its capital stock or other equity
securities, or any Option with respect thereto, except for (i) the issuance of
Company Common Stock upon conversion of the Company Preferred Stock, (ii) upon
the exercise of outstanding Company Options or Company Warrants, or (iii) the
issuance of Options to be granted to Cerulean employees in the ordinary course
of business consistent with past practice.
(c) purchase, redeem or otherwise acquire or retire, or offer to
purchase, redeem or otherwise acquire or retire, any of its capital stock or
other equity securities (including any Options with respect to any of its
capital stock or other equity securities and any securities convertible or
exchangeable into any of its capital stock or other equity securities), except
the repurchase of capital stock at cost upon termination of employment or
retirement in accordance with existing stock restriction agreements, or
retirement of any Options upon exercise thereof, or any long term debt;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or other equity securities, or subdivide, reclassify,
recapitalize, split, combine or exchange any of its capital stock or other
equity securities;
(e) incur or become contingently liable with respect to any
indebtedness for borrowed money or guarantee any such indebtedness or issue any
debt securities, except for additional indebtedness incurred under existing debt
agreements or credit facilities, or new credit facilities;
(f) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business entity;
(g) mortgage or otherwise encumber or subject to any Lien other
than Permitted Liens, or sell, transfer or otherwise dispose of, any assets or
properties that are material, individually or in the aggregate, to Cerulean and
its Subsidiaries, taken as a whole, other than
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Liens incurred in the ordinary course of business consistent with past practice,
and sales and dispositions in the ordinary course of business consistent with
past practice;
(h) except in the ordinary course of business consistent with past
practice (which shall include normal periodic performance reviews and related
benefit increases) or pursuant to the existing terms of any collective
bargaining agreement, Cerulean will not, nor will it permit any of the
Subsidiaries to (i) hire or terminate any employee or consultant; (ii) increase
in any manner the compensation of any of the officers or other employees of
Cerulean or any of its Subsidiaries; (iii) adopt, amend, terminate, or increase
liability with respect to any Company Plan or Company Benefit Arrangement or
commit to do so; or (iv) enter into, or negotiate, any collective bargaining
agreement with respect to employees of Cerulean or any of its Subsidiaries
except as required by law, in which case Cerulean or such Subsidiary shall first
notify Aether;
(i) take any action, other than reasonable actions in the ordinary
course of business, with respect to accounting policies or procedures (including
Tax accounting policies, procedures and elections relating to Taxes that would
apply to Cerulean and its Subsidiaries, Aether or the Surviving Corporation
after the Merger), except as may be required by GAAP, consistently applied, or
Law;
(j) settle any material audit or litigation or, except as required
by Law, amend in any respect any Tax Return;
(k) enter into, modify, amend, extend or terminate any agreement or
agreements for goods, property rights or services with (i) any director or
officer, or any Affiliate of any such Person, or (ii) any other Person which
obligates Cerulean, or any Affiliate of Cerulean, to pay in excess of $25,000 in
any twelve (12) month period other than in the ordinary course of business
consistent with past practice; provided, however, that Cerulean may offer
employment to individuals consistent with past practice; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 6.5 Access to Information. From the date hereof to the
Effective Time, each of Cerulean and Aether shall (and shall cause their
respective Subsidiaries and Representatives to) afford the other's
Representatives with reasonable access at all reasonable times during normal
business hours to its officers, employees, agents, properties, offices, plants
and other facilities, books, records and Tax Returns, and shall furnish such
Representatives with all financial, operating and other data and information as
may be reasonably requested. All such information shall be subject to the letter
agreement between Cerulean and Aether dated August 11, 2000 regarding
confidentiality (the "Confidentiality Agreement") which shall remain in full
force and effect.
Section 6.6 No Solicitation.
(a) Cerulean shall not, and it shall instruct its Representatives
(including, without limitation, any investment banker, attorney or accountant
retained by Cerulean or a Subsidiary of Cerulean) not to, directly or
indirectly, for or on its behalf (i) initiate, solicit or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, or business combination of
Cerulean or any of its Subsidiaries,
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or the sale of assets representing a substantial portion of the assets of
Cerulean and its Subsidiaries, taken as a whole, or the sale of shares of
capital stock of Cerulean or any Subsidiary (other than to Cerulean or a
Subsidiary of Cerulean or as permitted by Section 6.4 hereto), including,
without limitation, by way of a tender offer or exchange offer by any Person
other than the Transactions (any of the foregoing inquiries or proposals being
referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in
negotiations or discussions concerning, or provide to any Person or entity
(other than Aether and its Representatives) any Confidential Information or
data relating to Cerulean or any Subsidiary of Cerulean for the purposes of, or
otherwise cooperate with or assist or participate in, facilitate or encourage,
any inquiries or the making of any Acquisition Proposal, (iii) agree to,
approve or recommend any Acquisition Proposal, or (iv) take any other action
inconsistent with the obligations and commitments assumed by Cerulean pursuant
to this Section 6.6; provided, however, that nothing contained in this
Agreement shall prevent Cerulean or its Board of Directors from furnishing
Confidential Information to, or entering into discussions or negotiations with,
any person or entity in connection with an unsolicited bona fide written
Acquisition Proposal to Cerulean or its stockholders, if and only to the extent
that (1) the Board of Directors of Cerulean determines in good faith (after
consultation with outside legal counsel) that such action is required for such
Board of Directors to comply with its fiduciary duties to stockholders under
applicable law, and (2) prior to furnishing such Confidential Information to,
or entering into discussions or negotiations with, such person or entity,
Cerulean receives from such person or entity an executed confidentiality
agreement. Cerulean and its Representatives will immediately cease and cause
to be terminated any existing activities, discussions or negotiations by
Cerulean or its Representatives with any parties conducted heretofore with
respect to any of the foregoing. In addition, notwithstanding the provisions
of this Section 6.6 or any other provision of this Agreement, Cerulean may
withdraw, modify, or refrain from making its recommendation in accordance with
Section 6.8 provided that it simultaneously terminates this Agreement in
accordance with its terms and pays to Parent the Termination Fee.
(b) Cerulean shall (i) promptly notify Aether in writing after
receipt by Cerulean (or its Representatives) of any Acquisition Proposal or any
inquiries indicating that any Person is considering making or wishes to make an
Acquisition Proposal, which notification shall be in writing and shall contain
the principal financial terms of any such Acquisition Proposal, and (ii)
promptly notify Aether in writing after receipt of any request for Confidential
Information relating to it or any of its Subsidiaries or for access to its or
any of its Subsidiaries' properties, books or records by any person that, to
Cerulean's Knowledge, may be considering making, or has made, an Acquisition
Proposal.
Section 6.7 Company Stockholder Meeting. Cerulean shall take
all action necessary, in accordance with the DGCL and Cerulean's Organizational
Documents, to
(a) call a meeting of its stockholders (the "Company Meeting") to
be held as promptly as practicable after the date of this Agreement but not
later than September 18, 2000, and before terminating this Agreement to accept
an Acquisition Proposal, for the purpose of considering and voting upon this
Agreement and the Merger; or
(b) solicit by written consent of stockholders (the "Written
Consent") pursuant to Section 228 of the DGCL a consent of stockholders to this
Agreement and the Merger
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(in either case, the "Company Stockholder Approval"). The Board of Directors of
Cerulean shall recommend that the stockholders of Cerulean approve this
Agreement and vote in favor of the Merger; provided, however, that the Board of
Directors of Cerulean, by action of a majority of the entire Board of Directors
of Cerulean, may withdraw, modify or refrain from making such recommendation if
such Board of Directors determines in good faith, after receipt of an
Acquisition Proposal and after consultation with outside legal counsel, that the
withdrawal or modification of or failure to make such recommendation is required
for such Board of Directors to comply with its fiduciary duties under applicable
law. The Company's obligation to call, give notice of, convene and hold the
Company Meeting or solicit the Written Consent in accordance with this Section
6.7 shall not be limited or affected by the commencement, disclosure,
announcement or submission to Company of any Acquisition Proposal, or by any
withholding, withdrawal, amendment or modification of the recommendation of the
Board of Directors of the Company with respect to this Agreement or the Merger.
Section 6.8 Preparation of the Disclosure Statements. Cerulean
will, as promptly as practicable, prepare the disclosure statements in
connection with the vote of the stockholders of Cerulean in respect of the
Merger. At the request of Cerulean and as soon as practicable, Aether shall
provide Cerulean with all information deemed necessary in order for Cerulean
and Aether to satisfy their disclosure obligations under the Securities Act in
connection with the Company Stockholder Meeting, and Aether will cooperate with
Cerulean in the preparation of such disclosure statements.
Section 6.9 Public Announcements. At all times at or before the
Closing, neither Cerulean nor Aether shall issue or make, directly or
indirectly, any reports, statements or releases to the public with respect to
this Agreement or the Transactions contemplated hereby without the prior
written consent of the other, which consents shall not be unreasonably withheld
or delayed; provided, however, that Cerulean and Aether may, without the prior
written consent of the other, issue or make, directly or indirectly, any
report, statement or release required by Law, its fiduciary obligations or any
listing agreement or arrangement to which such Person is a party with a
national securities exchange or national market system, if the other parties to
this Agreement are so notified as soon as possible in advance of such report,
statement or release and, to the extent practicable, given a reasonable
opportunity to review and comment on the report, statement or release. The
parties will agree to the text of the press releases announcing the signing of
the Agreement prior to the issuance of such releases.
Section 6.10 Accredited Investor Questionnaires. The Company
shall obtain from each holder of Company Preferred Stock, and deliver to
Aether, a questionnaire, in form and substance satisfactory to Aether,
certifying whether such holder is an "accredited investor" within the meaning
of Regulation D promulgated under the Securities Laws, and including
representations to the effect that such holder is willing to bear the economic
risk of an investment in the Aether Common Stock and has the knowledge and
experience necessary to evaluate the risks and merits of the investment.
Section 6.11 Blue Sky. Aether shall use its commercially
reasonable efforts to obtain prior to the Effective Time all approvals or
permits required to carry out the transactions contemplated hereby under
applicable Blue Sky Laws in connection with the issuance of shares of Aether
Common Stock in the Merger and as contemplated by this Agreement; provided,
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however, that with respect to such qualifications neither Aether nor Cerulean
shall be required to register or qualify as a foreign corporation or to take
any action which would subject it to general service of process or taxation in
any jurisdiction where any such entity is not now so subject.
Section 6.12 Stockholder's Representative.
(a) Upon the Effective Time and without further act of any
stockholder of the Company, the Stockholders' Representative shall be appointed
as agent and attorney-in-fact for each stockholder, for and on behalf of each
such stockholder, with full power and authority to represent the Stockholders
and their successors with respect to all matters arising under this Agreement
and the Escrow Agreement, and all actions taken by the Stockholders'
Representative hereunder shall be binding upon such stockholders and their
successors as if expressly ratified and confirmed in writing by each of them.
Without limiting the generality of the foregoing, the Stockholders'
Representative shall have full power and authority, on behalf of all the
stockholders of Cerulean and their successors, to interpret all the terms and
provisions of this Agreement, to dispute or fail to dispute any Claim for
Damages against the Escrow Amount made by an Indemnified Party, to assert Claims
for Damages against any Indemnifying Party, to negotiate and compromise any
dispute which may arise under this Agreement, to sign any releases or other
documents with respect to any such dispute, and to authorize delivery of Escrow
Amount pursuant to the Escrow Agreement or any other payments to be made with
respect thereto. All determinations of the Stockholders' Representative shall be
decided by a majority thereof in the event there is more than one Stockholders'
Representative.
(b) In performing any of their duties under this Agreement, or upon
the claimed failure to perform his duties hereunder, the Stockholders'
Representative shall not be liable to the stockholders of the Company for any
damages, losses or expenses which they may incur as a result of any act, or
failure to act under this Agreement or the Escrow Agreement; provided, however,
that the Representative shall be liable for damages arising out of actions or
omissions that both (i) were taken or omitted not in good faith and (ii)
constituted willful misconduct or gross negligence under this Agreement or the
Escrow Agreement. Accordingly, the Stockholders' Representative shall not incur
any such Liability with respect to (i) any action taken or omitted to be taken
in good faith upon advice of his counsel given with respect to any questions
relating to the duties and responsibilities of the Stockholders' Representative
hereunder; or (ii) any action taken or omitted to be taken in reliance upon any
document, including any written notice or instructions provided for in this
Agreement or the Escrow Agreement, not only as to its due execution and to the
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which the Stockholders'
Representative shall in good faith believe to be genuine, to have been signed or
presented by the purported proper person or persons and to conform with the
provisions of this Agreement and the Escrow Agreement. The limitation of
liability provisions of this Section shall survive the termination of this
Agreement and the resignation of the Representative. The stockholders of
Cerulean shall severally indemnify the Stockholders' Representative and hold him
harmless against any loss, liability or expense (including any expenses of legal
counsel retained by the Stockholders' Representative) incurred without willful
default, gross negligence or bad faith on the part of the Stockholders'
Representative and arising out of or in connection with the acceptance or
administration of his duties hereunder.
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Section 6.13 Directors' and Officers' Indemnification and
Insurance.
(a) From and after the Effective Time, subject to the limitations
set forth in the first sentence of Section 7.3(e), the Surviving Corporation
shall indemnify, defend and hold harmless the present and former officers and
directors of Cerulean and its Subsidiaries (the "Indemnified
Officers/Directors") against all losses, expenses (including attorneys fees),
claims, damages, liabilities or amounts ("Losses") that are paid in settlement
(provided that such settlement has been approved by Aether) of, or otherwise in
connection with, any claim, action, suit, proceeding or investigation, based in
whole or in part on the fact that such person is or was a director or officer of
Cerulean and arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the Transactions), in each case,
to the full extent permitted under the DGCL and Cerulean's certificate of
incorporation and bylaws (to the extent permitted by applicable law), and under
any agreements as in effect on the date of this Agreement (true and correct
copies of which have been previously provided to Aether) (including rights to
reimbursement or advancement of expenses and exculpation from liability).
(b) For a period of three years from the Effective Time, the
Surviving Corporation shall keep in effect provisions in its certificate of
incorporation and bylaws providing for exculpation of director liability and
indemnification of the Indemnified Officers/Directors to the fullest extent
permitted under the DGCL, which provisions shall not be amended except as
required by applicable law or except to make changes permitted by law that would
enlarge the right of indemnification of the Indemnified Officers/Directors. The
Surviving Corporation shall keep in effect and comply with the terms and
conditions of the indemnification agreements between Cerulean and each of its
directors in effect as of the date of this Agreement.
(c) For a period of three years after the Effective Time, the
Surviving Corporation shall maintain in effect the current policies of
directors' and officers' liability insurance maintained by Cerulean, a true and
correct summary of which is set forth on Schedule 6.13 to the Company Disclosure
Schedule, or policies providing substantially the same coverage, covering
persons who are currently covered by Cerulean's officers' and directors'
liability insurance policies with respect to actions or omissions occurring at
or prior to the Effective Time, to the extent that such policies are available.
(d) The provisions of this Section 6.13 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Officers/Directors.
Section 6.14 Tax-Free Reorganization. Aether, Merger Sub and
Cerulean each acknowledges and agrees that (i) it intends the Merger to
constitute a reorganization within the meaning of Section 368(a) of the Code
and (ii) to the extent permissible by law, each will report the Merger as such
a reorganization within the meaning of Section 368(a) of the Code or similar
provisions of state and local Tax laws in any and all federal, state and local
income Tax returns filed by it. No party shall take any action either prior to
or after the Effective Day that results in the Merger failing to qualify as a
"reorganization" under Section 368(a) of the Code.
Section 6.15 Notification of Certain Matters. Cerulean shall
give prompt notice to Aether and Merger Sub, and Aether and Merger Sub shall
give prompt notice to Cerulean, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would
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be likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at or prior to the Effective
Time, (ii) any material failure of the Cerulean, Aether or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, (iii) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement, or (iv) any facts or circumstances arising that could
reasonably be expected to result in a Material Adverse Effect.
Section 6.16 Company Stockholders' Agreement. The Company shall
use its commercially reasonable efforts to cause each stockholder of the
Company named on the signature pages to the Stockholders Voting Agreement to
execute and deliver to Parent, concurrently with the execution of this
Agreement, and to comply with, the Stockholders Voting Agreement. The Company
acknowledges and agrees to be bound by and comply with the provisions of
Section 1.4 of the Stockholders Voting Agreement as if a party thereto with
respect to transfers of ownership of shares of the Company Capital Stock, and
agrees to notify the transfer agent for any Company Capital Stock and provide
such documentation and do such other things as may be necessary to effectuate
the provisions of such Stockholders Voting Agreement.
Section 6.17 Employee Retention. To the extent requested by
Parent, Parent and the Company shall consult with each other promptly after the
date hereof on the design and implementation of retention arrangements and
noncompetition agreements to retain key employees of the Company and its
subsidiaries. To the extent requested by Parent, the Company agrees to act in
good faith and implement any such arrangements agreed upon between Parent and
the Company and encourage the retention of key employees, and the Company
hereby waives any claim it may have against Parent, any of Parent's affiliates
or such employees resulting from any employment negotiations which they may
undertake. Notwithstanding anything to the contrary contained herein, except
as specifically set forth in Schedule 6.17, the failure of any employee to
enter into any retention arrangement or noncompetition agreement shall not
constitute a Material Adverse Effect.
Section 6.18 Nasdaq Listing. Aether shall use commercially
reasonable efforts to list on Nasdaq the shares of Aether Common Stock issued
as Merger Consideration.
Section 6.19 Form S-8. No later than 30 days after the Effective
Time, Aether shall prepare and file with the SEC a registration statement on
Form S-8 (or another appropriate form) registering a number of shares of Aether
Common Stock subject to Aether Options issued pursuant to Section 3.2(a)
herein, unless such Aether Common Stock is already subject to an effective
registration statement on Form S-8. Such registration statement shall be kept
effective (and the current status of the prospectus required thereby shall be
maintained in accordance with the relevant requirements of the Securities Act
and the Exchange Act) at least for so long as any such Aether Options remain
outstanding.
Section 6.20 Leases. Cerulean shall use commercially reasonable
efforts to obtain assignments of the leases described on Schedule 6.20 to
Aether or the Surviving Company prior to the Closing Date.
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ARTICLE VII.
INDEMNIFICATION
Section 7.1 General Indemnification. Each party (the
"Indemnifying Party") covenants and agrees to indemnify, defend, protect and
hold harmless the other parties and their respective officers, directors,
employees, stockholders, assigns, successors and affiliates (individually, an
"Indemnified Party" and collectively, "Indemnified Parties") from, against and
in respect of:
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Indemnifying Party set forth in this Agreement or any schedule or certificate
delivered by or on behalf of the Indemnifying Party in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement on
the part of the Stockholders of the Indemnifying Party or, prior to the
Effective Time, the Indemnifying Party, in this Agreement; and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 7.1.
Section 7.2 Indemnification Procedures. All claims for
indemnification under Section 7.1 ("Claims") shall be asserted and resolved as
follows:
(a) In the event that any Indemnified Party has a Claim against
any Indemnifying Party which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness send a Claim Notice with respect to such Claim to the
Stockholders' Representative if the Indemnified Party is an Aether Indemnified
Party or Aether if the Indemnified Party is a Company Indemnified Party. The
Indemnified Party's failure to give prompt notice or to provide copies of
documents or to furnish relevant data shall not constitute a defense (in whole
or in part) to any claim by the Indemnified Party against the Indemnifying
Party for indemnification, except and only to the extent that such failure
shall have caused or increased such liability or adversely affected the ability
of the Indemnifying Party to defend against or reduce its liability. If the
Indemnifying Party objects to such Claim, the Indemnifying Party shall provide
written objection to the Indemnified Party within 30 days of receipt of the
Claim Notice. In case an objection is made in writing in accordance with this
Section 7.2, the Indemnified Party shall have thirty (30) days to respond in
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a written statement to the objection. If after such thirty (30) day period
there remains a dispute as to any Claims, the parties shall attempt in good
faith for sixty (60) days to agree upon the rights of the respective parties
with respect to each of such Claims. If the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties. The actions and decisions of the Stockholders' Representative shall be
binding upon all Stockholders.
(b) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party shall within 15 days
of receipt of notice of such claim notify the Stockholders' Representative if
the Indemnified Party is an Aether Indemnified Party or Aether if the
Indemnified Party is a Company Indemnified Party of such Claim, specifying the
nature of such Claim and the amount or the reasonably estimated amount thereof
to the extent then feasible (which estimate shall not be conclusive of the
final amount of such Claim) (the "Claim Notice"). The Indemnifying Party (or
its representative) shall have 30 days from the receipt of the Claim Notice
(the "Notice Period") to notify the Indemnified Party (i) whether or not such
party disputes the liability to the Indemnified Party hereunder with respect to
such Claim and (ii) if such party does not dispute such liability, whether or
not the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend against such Claim, provided that such party is
hereby authorized (but not obligated) prior to and during the Notice Period to
file any motion, answer or other pleading and to take any other action which
the Indemnifying Party shall deem necessary or appropriate to protect the
Indemnifying Party's interests. In the event that the Indemnifying Party (or
its representative) notifies the Indemnified Party within the Notice Period
that the Indemnifying Party does not dispute the Indemnifying Party's
obligation to provide indemnification hereunder and desires to defend the
Indemnified Party against such Claim and except as hereinafter provided, such
party shall have the right to defend by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by such party to a final
conclusion, provided that such party may not settle any matter (in whole or in
part) without the prior written consent of the Indemnified Party (which shall
not be unreasonably withheld) and unless such settlement includes a complete
and unconditional release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement the
Indemnified Party may do so at its sole cost and expense. If the Indemnifying
Party elects not to defend the Indemnified Party against such Claim, whether by
failure of such party to give the Indemnified Party timely notice as provided
above or otherwise, then the Indemnified Party, without waiving any rights
against such party, may settle or defend against any such Claim in the
Indemnified Party's sole discretion and the Indemnified Party shall be entitled
to recover from the Indemnifying Party the amount of any settlement or judgment
and, on an ongoing basis, all indemnifiable costs and expenses of the
Indemnified Party with respect thereto, including interest from the date such
costs and expenses were incurred. The actions and decisions of the
Stockholders' Representative shall be binding upon all of the persons entitled
to the Merger Consideration.
(c) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Stockholders'
Representative if the Indemnified Party is an Aether Indemnified Party or
Aether if the Indemnified Party is a Company Indemnified Party, any such Claim
seeks or will likely result in material prospective or other relief which could
have a Material Adverse Effect on the assets, liabilities (including without
limitation Tax liabilities), financial condition or results of operations of
the Company Indemnified Party, Aether or the
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Surviving Company, the Indemnified Party shall have the right to control or
assume (as the case may be) the defense of any such Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall
be included as part of the indemnification obligations of the Indemnifying
Party hereunder, provided that such party may not settle any matter (in whole
or in part) without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld). If the Indemnified Party should elect to
exercise such right, the Stockholders' Representative if the Indemnified Party
is an Aether Indemnified Party or Aether if the Indemnified Party is a Company
Indemnified Party shall have the right to participate in, but not control, the
defense of such claim or demand at the sole cost and expense of the
Indemnifying Party.
(d) The Indemnified Party's failure to give reasonably prompt
notice as required by this Section 7.2 of any actual, threatened or possible
claim or demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless the failure to give
such notice materially and adversely prejudiced the Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under Section 7.1; provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy if the Indemnifying Party agrees that pursuing any such
payment is not commercially reasonable.
Section 7.3 Exclusive Remedy.
(a) Notwithstanding anything in this Agreement to the contrary an
Indemnified Party's right to indemnification under this Agreement or in any
certificate or writing furnished herewith shall terminate on the later to occur
of (i) the first anniversary of the Closing Date or (ii) with respect to a Claim
made prior to the first anniversary of the Closing Date, the resolution of such
Claim pursuant to Section 7.2 or as otherwise provided in the Escrow Agreement.
(b) An Aether Indemnified Party's sole and exclusive right to
compensation for the indemnification obligations set forth in this Agreement or
otherwise shall be limited to claims against the Escrow Amount and an Aether
Indemnified Party shall have no right to pursue any Claims under this Agreement
or otherwise against any former holder of Company Common Stock. For purposes of
the preceding sentence, the value of the Escrow Shares used to satisfy payments
of amounts owed to Aether shall be the Average Aether Stock Price for the
Measurement Period. An Aether Indemnified Party shall not be entitled to any
indemnification for Damages under this Agreement, unless and until the aggregate
amount of Damages exceeds $100,000 in which case Aether shall only be entitled
to the amount of damages in excess of $100,000.
(c) A Company Indemnified Party's sole and exclusive right to
indemnification under this Agreement shall be limited to an amount not to exceed
the value of the Escrow Amount as of the Closing Date and shall expire as
specified in Section 7.3(a) hereof.
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(d) After the Closing, to the extent permitted by Law, the
indemnities set forth in ARTICLE VII shall be the exclusive remedies of the
parties hereto and their respective officers, directors, employees, agents and
Affiliates for any misrepresentation, breach of warranty or breach of any
covenant or agreement contained in this Agreement, and the parties shall not be
entitled to a rescission of this Agreement or any further indemnification rights
or claims of any nature whatsoever in respect thereof, all of which the parties
hereto hereby waive
(e) Each Cerulean director, officer and stockholder waives any
right of contribution, indemnification or other similar right against Merger Sub
or Aether arising out of any Claim for indemnification under this Agreement.
ARTICLE VIII.
CONDITIONS TO THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the following conditions:
(a) All consents, approvals and action of any Governmental
Authority identified on Schedule 6.2 that are required to permit the
consummation of the Transactions shall have been obtained or made, free of any
condition that would have a Material Adverse Effect on Aether or Cerulean.
(b) No action shall have been taken, and no statute, rule,
regulation, executive order, judgment, decree, or injunction (other than a
temporary restraining order) shall have been enacted, entered, promulgated or
enforced (and not repealed, superseded, lifted or otherwise made inapplicable),
by any court of competent jurisdiction or Governmental Authority which
restrains, enjoins or otherwise prohibits the consummation of the Merger (each
party agreeing to use its commercially reasonable efforts to avoid the effect of
any such statute, rule, regulation or order or to have any such order, judgment,
decree or injunction lifted).
(c) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) Cerulean shall have received the Cerulean Stockholder Approval.
(e) The Registration Rights Agreement shall have been executed by
each of the parties to it.
(f) The parties hereto and the Escrow Agent shall have entered into
the Escrow Agreement, and the Escrow Amount shall have been deposited with the
Escrow Agent.
(g) Aether, Merger Sub and Cerulean shall have agreed on customary
tax representation letters to be delivered to Wilmer, Cutler & Pickering and
Hale and Dorr LLP for purposes of the opinions described in Section 8.2(e) and
Section 8.3(i).
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Section 8.2 Conditions to Obligations of Cerulean to Effect the
Merger. The obligations of Cerulean to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by Cerulean:
(a) The representations and warranties of Aether and Merger Sub
contained herein shall be true and accurate in all material respects (except for
those representations and warranties that are qualified as to materiality (which
shall be true in all respects)) at and as of the Effective Time as though made
at the Effective Time (except to the extent a representation or warranty speaks
specifically as of an earlier date or has become untrue or inaccurate because of
Transactions contemplated herein).
(b) Aether and Merger Sub shall have, in all material respects,
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by them prior to the Effective Time.
(c) Aether shall have delivered to Cerulean a certificate, dated
the Effective Time and signed by its Chief Executive Officer or Chief Financial
Officer evidencing compliance with Section 8.2(a) and (b).
(d) Aether shall not have experienced any Material Adverse Effects
and Cerulean shall have received a certificate signed on behalf of Aether dated
the Closing Date to such effect.
(e) Cerulean shall have received an opinion from Hale and Dorr LLP
in form and substance reasonably satisfactory to Cerulean dated as of the
Closing Date and to the effect that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code.
(f) Aether shall have delivered to Cerulean a Secretary's
Certificate dated the Closing Date and signed by the Secretary or Assistant
Secretary of Aether certifying that attached thereto are (i) a true and complete
copy of the certificate of incorporation of Aether, as in effect on the Closing
Date; (ii) a true and complete copy of the by-laws of Aether, as in effect on
the Closing Dated and (iii) a true and complete copy of resolutions of Aether
authorizing the execution, delivery and performance of this Agreement, which
resolutions have not been modified, rescinded or revoked.
(g) Cerulean shall have received an opinion from Wilmer, Cutler &
Pickering, counsel to Aether and Merger Sub, in form and substance reasonably
satisfactory to Cerulean, addressing the matters set forth in Exhibit D.
Section 8.3 Conditions to Obligations of Aether and Merger Sub to
Effect the Merger. The obligations of Aether and Merger Sub to effect the
Merger are subject to the satisfaction of the following conditions, unless
waived by Aether and Merger Sub:
(a) The representations and warranties of each of Cerulean and its
Subsidiaries contained herein shall be true and accurate in all material
respects (except for those representations and warranties that are qualified as
to materiality (which shall be true in all respects)) at and as of the Effective
Time as though made at the Effective Time (except in each case to the extent a
representation or warranty speaks specifically as of an earlier date or has
become untrue or inaccurate because of Transactions contemplated herein).
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(b) Cerulean shall have performed in all material respects all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time.
(c) Cerulean shall have delivered to Aether a certificate, dated
the Effective Time and signed by its Chief Executive Officer or Chief Financial
Officer, evidencing compliance with Section 8.3(a) and (b).
(d) Aether and Merger Sub shall have received an opinion of Hale
and Dorr LLP, counsel to Cerulean, in form and substance reasonably satisfactory
to Aether and Merger Sub, addressing the matters set forth in Exhibit E.
(e) Shareholders of Cerulean representing at least 85% of
Cerulean's voting securities shall have executed Voting Agreements which shall
have been received by Aether and which shall be in full force and effect and
shall not have been modified or terminated without the written consent of
Aether.
(f) Cerulean shall not have experienced any Material Adverse
Effects and Aether shall have received a certificate signed on behalf of
Cerulean dated the Closing Date to such effect.
(g) Cerulean shall have assigned to Merger Sub and Aether all
Non-competition and Non-disclosure Agreements to which it is party, and a
Confirmation and Non-Compete Agreement in the form of Exhibit F shall have been
executed by the persons identified on Schedule 8.3(g).
(h) Aether and Merger Sub shall have received from the Company (i)
a properly executed certificate for purposes of satisfying Aether and Merger
Sub's obligations under Section 1.1445-2(c)(3) of the Treasury Regulations, and
(ii) a form of notice to the Internal Revenue Service in accordance with the
requirements of Section 1.897-2(h)(2) of the Treasury Regulations, along with
written authorization for Aether to deliver such notice form to the Internal
Revenue on behalf of the Company.
(i) Aether and Merger Sub shall have received an opinion from
Wilmer, Cutler & Pickering in form and substance reasonably satisfactory to
Aether dated as of the Closing Date and to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code.
(j) Cerulean shall have delivered to Aether a Secretary's
Certificated dated the Closing Date and signed by the Secretary or Assistant
Secretary of Cerulean certifying that attached thereto are (i) a true and
complete copy of the certificate of incorporation of Cerulean, as in effect on
the Closing Date; (ii) a true and complete copy of the by-laws of Cerulean, as
in effect on the Closing Dated (iii) a true and complete copy of resolutions of
Cerulean authorizing the execution, delivery and performance of this Agreement,
which resolutions have not been modified, rescinded or revoked and (iv) a true
and complete copy of resolutions duly adopted by the stockholders of Cerulean
authorizing, approving and adopting this Agreement, which resolutions have not
been modified, rescinded or revoked.
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(k) Cerulean shall have delivered to Aether Accredited Investor
Questionnaires completed by each holder of Company Preferred Stock.
(l) There shall be no more than 1,371,000 shares of Company Capital
Stock not voted in favor of the Merger.
ARTICLE IX.
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 9.1 Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval of this Agreement or the Merger by the stockholders of Cerulean:
(a) by the mutual written consent of Cerulean and Aether;
(b) by Cerulean or Aether, if (i) the Effective Time shall not have
occurred on or before 5:00 p.m. Washington, D.C. time on the date forty-five
(45) days after the date on which the last required HSR Filing is made, (ii) any
Governmental Authority, the consent of which is a condition to the obligations
of Cerulean and Aether to consummate the Transactions, shall have determined not
to grant its consent and all appeals of such determination shall have been taken
and have been unsuccessful or (iii) any court of competent jurisdiction shall
have issued an order, judgment or decree (other than a temporary restraining
order) restraining, enjoining or otherwise prohibiting the Merger and such
order, judgment or decree shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement pursuant to clause (i) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by Cerulean, if there has been a breach by Aether of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten (10) Business Days following receipt
by Aether of notice of such breach from Cerulean; provided, however, that the
right to terminate this Agreement pursuant to this (c) shall not be available to
Cerulean if Cerulean, at such time, is in breach of any representation,
warranty, covenant or agreement set forth in this Agreement;
(d) by Aether, if there has been a breach by Cerulean of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten (10) Business Days following receipt
by Cerulean of notice of such breach from Aether; provided, however, that the
right to terminate this Agreement pursuant to this (d) shall not be available to
Aether if Aether, at such time, is in breach of any representation, warranty,
covenant or agreement set forth in this Agreement;
(e) by the Company, if at any time prior to the Company Meeting or
the effective date of the Written Consent, in connection with the exercise of
the Company's rights in accordance with Section 6.7; provided, that the Company
has complied in all respects with all
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provisions of Section 6.6, including payment of the Termination Fee to Parent
simultaneously with termination of this Agreement;
(f) by Aether, if the Company, Board of Directors of the Company or
any committee thereof, or any subsidiary of the Company shall have: (1) adopted,
approved or recommended, or proposed or resolved to adopt, approve or recommend,
any Acquisition Proposal other than the Merger, (2) breached its obligation to
present and recommend the adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company, (3) withheld, withdrawn,
terminated or modified, or proposed or resolved to withhold, withdraw, terminate
or modify, in a manner adverse to Parent or Merger Sub, its recommendation or
approval of the Merger, this Agreement or the transactions contemplated hereby,
(4) entered, or caused the Company or any subsidiary to enter, into any
Contract, letter of intent or agreement in principle of any kind relating to any
Acquisition Proposal, (5) materially breached any provision of Section 6.6, or
(6) resolved, proposed or announced its intention to do any of the foregoing;
(g) by Aether, if at the Company Meeting (including any adjournment
or postponement thereof or pursuant to the Written Consent), the requisite vote
of the stockholders of the Company to adopt and approve this Agreement shall not
have been obtained; or
(h) by Aether, if any stockholder of the Company that is a party to
the Stockholders Voting Agreement shall have breached or failed to perform in
any material respect any representation, warranty, covenant or agreement
contained therein, that, individually or in the aggregate, would reasonably be
expected to materially impede the ability of the parties to consummate the
Merger as contemplated herein.
Section 9.2 Effect of Termination. In the event of termination
of this Agreement by Cerulean or Aether as provided in Section 9.1 hereof, this
Agreement shall forthwith become void and of no further force or effect, and no
party hereto (or any of its affiliates, directors, trustees, executors,
officers, agents or representatives) shall have any liability or obligation
hereunder, except in any such case (i) in accordance with the provisions of
Section 6.5, Section 6.6(b), Section 6.9, Section 9.2, Section 9.5, Section
10.1, and Section 10.5, each of which shall survive any such termination and
(ii) to the extent such termination results from the breach or inaccuracy by
such party of any of its representations, warranties or covenants contained in
this Agreement. Notwithstanding the foregoing, no party hereto shall be
relieved from liability for any willful breach of this Agreement.
Section 9.3 Amendment or Supplement. It is understood and
agreed that, from time to time prior to the Closing, Aether and Cerulean may
amend or supplement the Schedules to the Aether Disclosure Schedule or the
Company Disclosure Schedule, as the case may be, with respect to any matter
that is required to be set forth or described in such a Schedule or that is
necessary to complete or correct any information in any representation or
warranty of such party contained in this Agreement; provided, that such
amendment or supplement may only be made if a party did not have Knowledge of
such matter prior to the date of the disclosure to be amended or supplemented,
and provided further that the disclosure provided in any such amended
supplemented or revised Schedule shall in no way affect or be deemed to limit a
party's ability to terminate this Agreement and the Transactions prior to the
Closing.
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Section 9.4 Extension of Time, Waiver, Etc. At any time prior to
the Effective Time:
(a) Aether may extend the time for the performance of any of the
obligations or acts of Cerulean, and Cerulean may extend the time for the
performance of any of the obligations or acts of Aether or Merger Sub;
(b) Aether may waive any inaccuracies in the representations and
warranties of Cerulean contained herein or in any document delivered pursuant
hereto, and Cerulean may waive any inaccuracies in the representations and
warranties of Aether contained herein or in any document delivered pursuant
hereto; or
(c) Aether may waive compliance with any of the agreements of
Cerulean contained herein, and Cerulean may waive compliance with any of the
agreements of Aether or Merger Sub contained herein;
provided, however, that no failure or delay by Cerulean or Aether in exercising
any right hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right hereunder.
Section 9.5 Termination Fee.
(a) If this Agreement is terminated pursuant to Section 9.1(e),
Section 9.1(f), Section 9.1(g), or Section 9.1(h), then Cerulean shall pay to
Aether by wire transfer of immediately available funds no later than two days
following termination of this Agreement (or, in the case of a termination
pursuant to Section 9.1(e), simultaneously with, and as a condition to the
effectiveness of, such termination) a termination fee equal to $8,000,000 (the
"Termination Fee").
(b) The agreement contained in this Section 9.5 is an integral part
of the Transactions and constitutes liquidated damages in the event of the
occurrence of the circumstances specified in Section 9.5(a) above and not a
penalty.
ARTICLE X.
MISCELLANEOUS
Section 10.1 Governing Law.
(a) This Agreement and the legal relations among the parties hereto
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware without regard to its principles of conflicts of law.
(b) Each party to this Agreement shall have the right to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity or under this Agreement. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State
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of Delaware or any Delaware state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (ii) agrees that
such party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (iii) agrees that
such party will not bring any action relating to this Agreement or any of the
transactions contemplated hereby in any court other than a court of the United
States located in the State of Delaware or a Delaware state court. It is
further agreed that any breaching or defaulting party hereunder shall pay to
the other parties hereto such out of pocket costs and expenses, including legal
and accounting fees, as are reasonably incurred in pursuit of such parties'
remedies hereunder.
Section 10.2 Entire Agreement. This Agreement, including the
exhibits and schedules attached hereto, and the Confidentiality Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, letters of
intent, negotiations and discussions, whether oral or written, of the parties,
including without limitation any discussions, commitments or agreements between
the parties concerning Cerulean equity issuances or debt financings, and there
are no warranties, representations or other agreements, express or implied,
made to any party by any other party in connection with the subject matter
hereof except as specifically set forth herein or in the documents delivered
pursuant hereto or in connection herewith.
Section 10.3 Modification; Waiver. No supplement, modification,
extension, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
Section 10.4 Notices. All notices, consents, requests, reports,
demands or other communications hereunder (collectively, "Notices") shall be in
writing and may be given personally, by registered mail, fax or by Federal
Express (or other reputable overnight delivery service):
if to Aether or Merger Sub, to it at:
Aether Systems, Inc.
11460 Cronridge Drive
Owings Mills, MD 21117
Attention: Chief Financial Officer
Tel: (410) 654-6400
Fax: (410)
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Mark Dewire, Esq.
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Tel: (202) 663-6000
Fax: (202) 663-6363
if to Cerulean, to it at:
Cerulean Technology, Inc.
300 Nickerson Road
Marlborough, MA 01752
Attention: Robert P. Badavas
Tel: (508) 460-4000
Fax: (508) 460-4099
with a copy to:
Hale and Dorr
60 State Street
Boston, MA 02109
Attention: Peter B. Tarr, Esq.
Tel: (617) 526-6000
Fax: (617) 526-5000
or to such other address or such other person as the addressee party shall have
last designated by notice to the other party. All Notices shall be deemed to
have been given (i) when delivered personally, (ii) three (3) days after being
sent by registered mail with proper postage prepaid, (iii) upon transmission by
fax and receipt of confirmation of such transmission by the sender's fax
machine, or (iv) one day after being sent by Federal Express (or other
reputable overnight delivery service) with proper postage prepaid.
Section 10.5 Expenses. Immediately following Closing, Aether
shall be responsible for its fees, costs and expenses incurred in connection
with the negotiation of the proposed Transaction (including, under the HSR Act)
and the Company shall be responsible for up to $500,000 in reasonable fees,
costs and expenses incurred by the Company in connection with the negotiation
of the proposed Transaction, including but not limited to, commissions or fees
of any broker or finder referred by them and any reasonable attorney's fees (at
reasonable hourly rates) incurred by them in connection with the proposed
Transaction. Any fees, costs and expenses in excess of the $500,000 set forth
in the preceding sentence shall be deducted from the Purchase Price. At
Closing, the Company shall deliver to Purchaser a complete statement and
listing of all fees, expenses and disbursements incurred or to be incurred
(including an estimate of unbilled amounts, whether or not incurred) in
connection with the subject matter of this Agreement for purposes of
establishing the amount, if any, to be deducted from the Purchase Price.
Section 10.6 Assignment. No party hereto shall have the right,
power or authority to assign or pledge this Agreement or any portion of this
Agreement, or to delegate any duties or obligations arising under this
Agreement, voluntarily, involuntarily, or by operation of law, without the
prior written consent of the other parties hereto.
Section 10.7 Survival of Representations, Warranties and
Covenants. All representations, warranties and covenants made by Cerulean in
or pursuant to this Agreement or
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in any document delivered pursuant hereto shall be deemed to have been made on
the date of this Agreement (except as otherwise provided herein) and, if a
Closing occurs, as of the Closing Date and Effective Time, subject to the
provisions of Section 9.3. The representations and warranties of Aether and
Cerulean will survive the Closing and will remain in effect until, and will
expire upon, the first anniversary of the Closing Date and the covenants of
Aether and Cerulean will survive the Closing and will remain in effect in
accordance with the terms therein; provided, however, in no event shall such
covenants survive beyond the first anniversary of the Closing Date.
Section 10.8 Severability. Any provision or part of this
Agreement which is invalid or unenforceable in any situation in any
jurisdiction shall, as to such situation and such jurisdiction, be ineffective
only to the extent of such invalidity and shall not affect the enforceability
of the remaining provisions hereof or the validity or enforceability of any
such provision in any other situation or in any other jurisdiction.
Section 10.9 Successors and Assigns; Third Parties. Subject to
and without waiver of the provisions of Section 10.6, all of the rights,
duties, benefits, liabilities and obligations of the parties shall inure to the
benefit of, and be binding upon, their respective successors, assigns, heirs
and legal representatives. Except as specifically set forth in Section 3.1,
Section 3.2, Section 3.4, Section 3.5, Section 6.12, Section 6.13, Section 6.14
and ARTICLE VII, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or entity, other than the
parties hereto and their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
Section 10.10 Counterparts. This Agreement may be executed in as
many counterparts as may be deemed necessary and convenient, and by the
different parties hereto on separate counterparts each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute one and the same instrument.
Section 10.11 Interpretation; References. Any use of masculine,
feminine or neuter pronouns herein shall not be limiting, but shall be
construed as referring to persons of any gender, as the context may require.
Any use of the singular or plural form herein shall not be limiting, but shall
be construed as referring to either the plural or singular, as the context may
require. References to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule attached to the Company Disclosure Schedule or an
Exhibit attached to this Agreement, and references to an "Article" or a
"Section" are, unless otherwise specified, to an Article or a Section of this
Agreement. The Article and Section headings of this Agreement are for
convenience of reference only and shall not be deemed to modify, explain,
restrict, alter or affect the meaning or interpretation of any provision
hereof.
Section 10.12 Dispute Resolution and Jurisdiction.
(a) Each party to this Agreement shall appoint a Representative to
coordinate with the other party the implementation of this Agreement. If any
dispute arises with respect to either party's performance hereunder, the
Representatives shall meet to attempt to resolve such dispute, either in person
or by telephone, within two (2) Business Days after the written request of
either Representative. If the Representatives are unable to resolve such
dispute, the chief executive
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officer of Cerulean and the chief financial officer of Aether shall meet,
either in person or by telephone, within ten (10) Business Days after either
Representative provides written notice that the Representatives have been
unable to resolve such dispute. If such officers are unable to resolve such
dispute, either party may submit such dispute to an independent
nationally-recognized accounting firm, if such dispute is solely of a financial
nature.
Section 10.13 Exhibits, Schedules and Company Disclosure Schedule.
All exhibits and schedules attached hereto and the Company Disclosure Schedule
are hereby incorporated by reference as though set out in full herein.
Section 10.14 Attorneys' Fees. In the event that any party hereto
brings an action or proceeding against the other party to enforce or interpret
any of the covenants, conditions, agreements or provisions of this Agreement,
the prevailing party in such action or proceeding shall be entitled to recover
all costs and expenses of such action or proceeding, including, without
limitation, reasonable attorneys' fees, charges, disbursements and the fees and
costs of expert witnesses.
Section 10.15 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT
WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN ANY OF THE PARTIES HERETO
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENT OR AGREEMENT RELATING TO THE TRANSACTIONS.
Section 10.16 Further Assurances. Each of the parties shall,
without further consideration, use reasonable efforts to execute and deliver
such additional documents and take such other action as the other parties, or
any of them, may reasonably request to carry out the intent of this Agreement
and the Transactions.
Section 10.17 Negotiation of Agreement. Each of the parties
acknowledges that it has been represented by independent counsel of its choice
throughout all negotiations that have preceded the execution of this Agreement
and that it has executed the same with consent and upon the advice of said
independent counsel. Each party and its counsel cooperated in the drafting and
preparation of this Agreement and the documents referred to herein, and any and
all drafts relating thereto shall be deemed the work product of the parties and
may not be construed against any party by reason of its preparation.
Accordingly, any rule of law or any legal decision that would require
interpretation of any ambiguities in this Agreement against the party that
drafted it is of no application and is hereby expressly waived. The provisions
of this Agreement
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shall be interpreted in a reasonable manner to effect the intentions of the
parties and this Agreement.
(signature page follows)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be duly executed and delivered as of the date first above
written.
AETHER SYSTEMS, INC.
By:
-----------------------------------
Name:
Title:
CERULEAN ACQUISITION, INC.
By:
-----------------------------------
Name:
Title:
CERULEAN TECHNOLOGY, INC.
By:
-----------------------------------
Name:
Title:
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EXHIBITS TO
AGREEMENT AND PLAN OF MERGER
dated as of August 25, 2000
by and among
AETHER SYSTEMS, INC.,
CERULEAN ACQUISITION, INC.
and
CERULEAN TECHNOLOGY, INC.
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WCP DRAFT #3
8/21/00
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
________, 2000 (the "Effective Date"), is by and among each of the parties set
forth on Exhibit A hereto (collectively the "Holders") and Aether Systems, Inc.,
a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, as a result of the Merger (as defined below), the Holders
beneficially own the numbers of shares of Common Stock (as defined below) set
forth opposite such Holder's name on Exhibit A to this Agreement; and
WHEREAS, it is a condition to the closing of the Merger that the
Holders and the Company execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other consideration, the receipt and adequacy of which hereby is
acknowledged, the parties agree as follows:
1. Definitions; Certain Rules of Construction. Certain
capitalized terms are used in this Agreement with the specific meanings defined
below in this Section 1. Except as otherwise explicitly specified to the
contrary or unless the context clearly requires otherwise, (a) the capitalized
term "Section" refers to sections of this Agreement, (b) the capitalized term
"Exhibit" refers to exhibits to this Agreement, (c) references to a particular
Section include all subsections thereof, (d) the word "including" shall be
construed as "including without limitation", (e) references to a particular
statute or regulation include all rules and regulations thereunder and any
successor statute, regulation or rules, in each case as from time to time in
effect, (f) words in the singular or plural form include the plural and singular
form, respectively, and (g) references to a particular Person include such
Person's successors and assigns to the extent not prohibited by this Agreement.
1.1. "1933 Act" means the Securities Act of 1933, as amended and
all regulations thereunder.
1.2. "1934 Act" means the Securities Exchange Act of 1934, as
amended and all regulations thereunder.
1.3. "Board of Directors" means the Board of Directors of the
Company.
1.4. "Common Stock" means the Company's common stock, par value
$.01 per share and other securities issued in respect of shares of Common Stock.
1.5. "Company" is defined in the recitals to this Agreement.
<PAGE> 65
1.6. "Company Indemnitees" is defined in Section 2.8(b).
1.7. "Effective Period" means the period from the date on which a
shelf registration becomes effective to the date on which all of the Registrable
Securities cease to be Registrable Securities.
1.8. "Escrow Agreement" means the Escrow Agreement, dated
___________, 2000 between and among the Company, [Branch Bank & Trust Company],
as escrow agent, and Robert P. Badavas, as Stockholder Representative.
1.9. "Form S-1", "Form S-3", "Form S-4", and "Form S-8" mean such
respective registration forms in effect on the date hereof (or any successor
registration forms subsequently adopted by the SEC) under the 1933 Act.
1.10. "Holder" means (a) any Person that owns, or has the right to
acquire, Registrable Securities and (b) any assignee thereof in accordance with
Section 2.11.
1.11. "Holder Indemnitee" is defined in Section 2.8(a).
1.12. "Indemnitee" means each of the Company Indemnitees and the
Holder Indemnities.
1.13. "Merger" means the merger of Cerulean Technologies, Inc. with
a wholly-owned subsidiary of the Company, pursuant to that certain Agreement and
Plan of Merger, dated as of August ___, 2000.
1.14. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
1.15. "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act and the automatic
effectiveness, or the declaration or ordering of effectiveness, of such
registration statement or document.
1.16. "Registrable Securities" means (i) shares of Common Stock
received by a Holder pursuant to the Merger; (ii) any Common Stock of the
Company or other securities issued or issuable in respect of the shares
described in (i) in any corporate reorganization, merger or consolidation; and
(iii) shares of the Company's Common Stock or other securities issued or
issuable in respect of the shares described in clause (i) or (ii) upon any stock
split, stock dividend, recapitalization, or similar event; provided however that
any share of Common Stock previously sold to the public pursuant to a registered
public offering or pursuant to an exemption from the registration requirements
of the 1933 Act shall not be a Registrable Security.
1.17. "Rule 144" is defined in Section 2.9(a).
1.18. "Rule 144 Information" is defined in Section 2.9(b).
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1.19. "SEC" means the Securities and Exchange Commission.
1.20. "Shelf Registration" means a registration statement for an
offering of Common Stock to be made on a delayed or continuous basis pursuant to
Rule 415 promulgated under the 1933 Act.
1.21. "Violation" means, with respect to any registration statement
which includes any Registrable Securities:
(a) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto;
(b) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; or
(c) any violation or alleged violation by the Company of the 1933
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law in
connection with any matter relating to such registration statement.
2. Registration Rights.
2.1. Shelf Registration.
(a) If, any Holder or its respective permitted assignees, requests
in writing that the Company file a Shelf Registration and the Company is
entitled to use Form S-3 (or a successor form) to register securities for such
an offering for a sale of Registrable Securities, the Company shall file a Shelf
Registration for such offering promptly (and in no event later than the later of
(i) 45 days after receipt of such request or (ii) May 1, 2001). The Company
shall use commercially reasonable efforts to effect such registration
(including, without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with the Securities Act). The Company shall have no
obligation to facilitate any underwritten offering of shares sold pursuant to
the Shelf Registration.
(b) The Company is obligated to effect only one (1) registration
pursuant to Section 2.1(a), counting for this purpose only registrations which
have been declared effective and registrations which have been withdrawn by the
Holders.
(c) Notwithstanding the provisions of this Section 2.1, in the
event that the Company is requested to file any registration statement pursuant
to Section 2.1(a), if the Company shall furnish to the Holders a certificate
signed by the president of the Company stating that, in the good faith judgment
of the Board of Directors, it would not be in the best interests of the Company
and its shareholders generally for such registration statement to be filed, the
Company shall have the right to defer such filing for a period of not more than
one hundred twenty (120) days after receipt of the request of the relevant
Holders; provided, however that the Company may not utilize the right set forth
in this Section 2.1(c) more than once in any 12-month period.
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(d) Upon the receipt of any request for registration pursuant to
Section 2.1(a), the Company shall promptly give written notice of such proposed
registration to all other Holders. Such Holders shall have the right, by giving
written notice to the Company within 30 days after the Company provides its
notice, to elect to have included in such registration such of their Registrable
Shares as such Holders may request in such notice of election (the Company shall
include in such notice appropriate information to permit the Holder to include
Registrable Shares held under the Escrow Agreement). Thereupon, the Company
shall, as expeditiously as possible, use commercially reasonable efforts to
effect the registration on an appropriate registration form of all Registrable
Shares which the Company has been requested to so register, including shares
held under the Escrow Agreement.
(e) The Company shall keep the Shelf Registration continuously
effective under the 1933 Act until the earlier of (i) two years from the Closing
Date, or (ii) such date that all of the Registrable Securities registered
thereunder have been sold.
2.2. Incidental Registration. If the Company proposes to register
any of its capital stock under the 1933 Act, whether for its own account or for
the account of shareholders other than the Holders (other than a registration on
Form S-8 relating solely to the sale of securities to participants in a Company
stock plan or a registration on Form S-4), the Company shall, each such time,
promptly give each Holder written notice of such registration. Upon the written
request of any Holder given within twenty (20) days after mailing of such notice
by the Company, the Company shall, subject to the provisions of Section 2.7, use
commercially reasonable efforts to cause a registration statement covering all
of the Registrable Securities that each such Holder has requested to be
registered to become effective under the 1933 Act. The Company shall be under no
obligation to complete any offering of its securities it proposes to make and
shall incur no liability to any Holder for its failure to do so.
2.3. Obligations of the Company. Whenever required under this
Section 2 to use commercially reasonable efforts to effect the registration of
any Registrable Securities, the Company shall:
(a) prepare and file with the SEC an appropriate form of
registration statement and such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement, and use commercially reasonable efforts to
cause the registration statement, each such amendment and supplement to
become effective, as may be necessary to comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered
by such registration statement;
(b) furnish to the Holders such reasonable number of copies
of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(c) use commercially reasonable efforts to register or
qualify the securities covered by such registration statement under
such other securities or blue sky laws of such states and jurisdictions
as shall be reasonably requested by the Holders, and do any
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and all other acts and things that may be necessary or desirable to
enable the Holders to consummate in such states the public sale or
other disposition of the Registrable Shares owned by the Holder except
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or file a general consent
to service of process in any such state or jurisdiction;
(d) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto covered by such registration statement is required to be
delivered under the 1933 Act of the happening of any event as a result
of which the prospectus included in such registration statement, as
then in effect includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing and promptly file such amendments and
supplements which may be required pursuant to Section 2.3(a) on account
of such event and use commercially reasonable efforts to cause each
such amendment and supplement to become effective;
(e) promptly apply for listing and use commercially
reasonable efforts to list the Registrable Securities being registered
on any national securities exchange on which a class of the Company's
equity securities is listed or, if the Company does not have a class of
equity securities listed on a national securities exchange, apply for
qualification and use commercially reasonable efforts to qualify the
Registrable Securities being registered for inclusion on the automated
quotation system of the National Association of Securities Dealers,
Inc.;
(f) as expeditiously as possible, notify each Holder,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed; and
(g) as expeditiously as possible following the
effectiveness of such registration statement, notify each Holder of
such Registrable Shares of any request by the SEC for the amending or
supplementing of such registration statement or prospectus.
2.4. Furnish Information.
(a) it shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 2 in respect of
the Registrable Securities of any selling Holder that such selling
Holder shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of
disposition of such Registrable Securities as shall be required to
effect the registration of such Registrable Securities. The Company
shall have no responsibility to any Holder, to the extent such Holder
fails to provide such information in a timely manner, and if the
Company determines it appropriate, the Company may delay the filing of
any such registration statement until the Holder provides such
information.
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(b) No Holder shall distribute any prospectus or make any
offer to sell (or solicit any offer to purchase) or sell any
Registrable Securities in a transaction covered by a prospectus from
and after the time that the Company notifies the Holder that the
prospectus fails to state a material fact, contains a material
misstatement or fails to state a fact necessary in order to make the
statements included in the prospectus not misleading until the Company
has provided a revised, amended or supplemented prospectus that
corrects the misstatement or omission.
(c) Each Holder shall comply with the prospectus delivery
requirements of the Securities Act in connection with offers to sell,
solicitations of offers to purchase, and sales of Registrable
Securities in connection with any offer or sale pursuant to a
registration statement.
2.5. Expenses of Registration. The Company shall bear all expenses
relating to Registrable Securities incurred in connection with each
registration, filing or qualification pursuant to Section 2.1, including all
registration, filing and qualification fees, exchange listing fees, Blue Sky
fees and expenses, printing and accounting fees, fees and disbursements of
counsel for the Company and, up to $15,000 in fees and disbursements of one
counsel selected by the Holders to represent the Holders. Any underwriting
discounts and commissions relating to Registrable Securities included in any
registration effected pursuant to Section 2.1 and the fees and disbursements of
the selling Holders' own counsel (other than the counsel selected to represent
all Holders) will be borne and paid ratably by the Holders of such Registrable
Securities and the Company.
2.6. Expenses of Company Registration. The Company shall bear and
pay all Expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to any registration
pursuant to Section 2.2 for each Holder, including all registration, filing and
qualification fees, printing and accounting fees, exchange listing fees, Blue
Sky fees and expenses, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders. All
underwriting discounts and commissions relating to Registrable Securities
included in any registration effected pursuant to Section 2.2 will be borne and
paid ratably by the Holders of such Registrable Securities and the Company.
2.7. Underwriting Requirements. In connection with any offering
involving an underwriting of securities being issued by the Company, the Company
shall not be required under Section 2.2 to include any of the Holders'
securities in such underwriting unless such Holders accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it, and then only in such quantity, if any, as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company. If the
managing underwriter for the offering shall advise the Company in writing that
the total amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities to
be sold other than by the Company that can be successfully offered, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the managing underwriter
believes will not jeopardize the success of the offering. The securities so
included in the offering will be reduced as follows:
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(a) first, all securities which shareholders other than
(i) the Company; (ii) those holders of Common Stock party to that
certain Amended and Restated Registration Rights Agreement dated March
3, 2000 (the "March 3, 2000 Holders"); and (iii) the Holders seek to
include in the offering shall be excluded from the offering to the
extent limitation on the number of shares included in the underwriting
is required; and
(b) if further limitation on the number of shares to be
included in the offering is required, then the number of shares held by
Holders that may be included in the underwriting shall be reduced pro
rata among the selling Holders in accordance with the number of shares
of Registrable Securities held by each such Holder before reducing the
number of shares included with respect to the Company or the March 3,
2000 Holders.
For purposes of the preceding sentence concerning apportionment, for any selling
shareholder which is a Holder of Registrable Securities and which is a
partnership or a corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
collectively be deemed to be a "selling Holder," and any pro rata reduction with
respect to such "selling Holder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "selling Holder," as defined in this sentence.
2.8. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) The Company will indemnify and hold harmless each Holder, the
officers, directors, partners, agents and employees of each Holder, any
underwriter (as defined in the 1933 Act) for such Holder and each Person, if
any, who controls such Holder or underwriter within the meaning of the 1933 Act
or the 1934 Act (collectively, the "Holder Indemnitees"), against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the 1933 Act, the 1934 Act or any other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any Violation. The Company will
reimburse each Holder Indemnitee for any legal or other expenses reasonably
incurred by such Holder Indemnitee in connection with investigating or defending
any such loss, claim, damage, liability or action. The indemnity agreement
contained in this Section 2.8(a) shall not apply to amounts paid in settlement
of any loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable to any Holder Indemnitee in any such
case for any such loss, claim, damage, liability or action (i) to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by or on behalf of such Holder Indemnitee; or
supplied by another Holder or (ii) in the case of a sale directly by a Holder of
Registrable Securities (including a sale of such Registrable Securities through
any underwriter retained by such Holder engaging in a distribution solely on
behalf of such Holder), such untrue statement or alleged untrue statement or
omission or alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such Holder failed to deliver a
copy of the final or amended prospectus at or prior to the confirmation of the
sale of the
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Registrable Securities to the Person asserting any such loss, claim, damage or
liability in any case in which such delivery is required by the 1933 Act.
(b) Each Holder which includes any Registrable Securities in any
registration statement (i) will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act, each agent and any underwriter for the Company, and any other
Holder or other shareholder selling securities in such registration statement or
any of its directors, officers, partners, agents or employees or any Person who
controls such Holder or such other shareholder or such underwriter
(collectively, the "Company Indemnitees"), against any losses, claims, damages
or liabilities (joint or several) to which any Company Indemnitee may become
subject under the 1933 Act, the 1934 Act or other federal or state law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by or on behalf of such Holder
expressly for use in connection with such registration and (ii) will reimburse
any legal or other expenses reasonably incurred by any Company Indemnitee in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the liability of any Holder
hereunder shall be limited to the amount of net proceeds (after deduction of all
underwriters' discounts and commissions paid by such Holder in connection with
the registration in question) received by such Holder in the offering giving
rise to the Violation; and provided, further that the indemnity agreement
contained in this Section 2.8(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld) nor, in the case of a sale directly by the Company of its
securities (including a sale of such securities through any underwriter retained
by the Company to engage in a distribution solely on behalf of the Company),
shall such Holder be liable to the Company in any case in which such untrue
statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final or amended
prospectus, and the Company failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of the sale of the securities to the
Person asserting any such loss, claim, damage or liability in any case in which
such delivery is required by the 1933 Act.
(c) Promptly after receipt by any Company Indemnitee or Holder
Indemnitee (collectively, the "Indemnitees") under this Section 2.8 of notice of
the commencement of any action (including any governmental action), such
Indemnitee will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.8, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
and control the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that such Indemnitee shall have the right to retain
its own counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such Indemnitee by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests, as reasonably determined by either party, between such Indemnitee and
any other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable
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time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the Indemnitee under this Section 2.8 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to such Indemnitee otherwise than under
this Section 2.8.
(d) The obligations of the Company and the Holders under this
Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement whether under this Section 2 or
otherwise.
(e) If the indemnification provided for in this Section 2.8 is
unavailable to a party that would have been an Indemnitee under this Section 2.8
in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to herein, then each party that would
have been an indemnifying party hereunder shall, in lieu of indemnifying such
Indemnitee, contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative fault of such indemnifying party, on the one hand, and such
Indemnitee, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof). The relative fault shall be determined by
reference to, among other things, whether the Violation relates to information
supplied by such indemnifying party or such Indemnitee and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Violation. The parties agree that it would not be just and equitable if
contribution pursuant to this Section 2.8(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the preceding sentence. The amount
paid or payable by a contributing party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 2.8(e) shall include any legal or other expenses
reasonably incurred by such Indemnitee in connection with investigating or
defending any such action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The liability of any Holder of Registrable Securities in
respect of any contribution obligation of such Holder (after deduction of all
underwriters' discounts and commissions paid by such Holder in connection with
the registration in question) arising under this Section 2.8(e) shall not in any
event exceed an amount equal to the net proceeds to such Holder from the
disposition of the Registrable Securities disposed of by such Holder pursuant to
such registration.
2.9. Reports Under Securities Exchange Act of 1934.
(a) With a view to making available to the Holders the benefits of
Rule 144 promulgated under the 1933 Act ("Rule 144") and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration, the Company agrees to:
(i) use commercially reasonable efforts to make and keep
public information available, as those terms are understood and defined
in Rule 144, at all times; and
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(ii) use commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act; and
(iii) furnish to any Holder or Registrable Shares upon
request (i) a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 and of the 1933 Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other reports and documents of
the Company as such Holder may reasonably request to avail itself of
any similar rule or regulation of the SEC allowing it to sell any such
securities without registration.
2.10. Lock-up Agreements. If reasonably requested by the Company and
the managing underwriter, the Holders agree with respect to any registration
pursuant to Section 2.2 in which Registrable Shares held by them are included to
enter into lock-up agreements pursuant to which they will not, for a period of
no longer than ninety (90) days following the effective date of a registration
statement for the Company's public offering of the Company's securities, offer,
sell or otherwise dispose of any Registrable Securities (except Registrable
Securities sold pursuant to such registration statement) without the prior
consent of the Company and the underwriter, provided that the executive officers
and directors of the Company and other selling security holders in the offering
enter such lock-up agreements for the same period and on the same terms.
2.11. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by any Holder to a permitted transferee, and by such transferee to a
subsequent permitted transferee; provided, however, that such transfer does not
constitute a "distribution" within the meaning of the 1933 Act. Any transferee
to which rights under this Agreement are transferred shall: (i) as a condition
to such transfer, deliver to the Company a written instrument by which such
transferee agrees to be bound by the obligations imposed upon Holders under this
Agreement to the same extent as if such transferee were a Holder under this
Agreement; and (ii) be deemed to be a Holder hereunder.
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3. Termination. The right of any Holder to request registration
or inclusion in any registration pursuant to this Agreement shall terminate on
the earliest of (a) the second anniversary hereof; or (b) such date that all
Registrable Securities held or entitled to be held upon conversion by such
Holder have been sold to a person who is not (and does not as a result of such
transaction become) a Holder. This Agreement shall terminate when the rights of
all Holders have terminated.
4. Specific Performance. The parties recognize that their
respective rights under this Agreement are unique, and, accordingly, each party
shall, in addition to such other remedies as may be available to it at law or in
equity, have the right to enforce its rights hereunder by actions for injunctive
relief and specific performance to the extent permitted by law. This Agreement
is not intended to limit or abridge any rights of either party which may exist
apart from this Agreement.
5. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing and delivered in
Person, transmitted by facsimile transmission (fax) or sent by registered or
certified mail (return receipt requested) or recognized overnight delivery
service, postage pre-paid, addressed (a) if to a Holder to such address as such
holder shall have furnished the Company in writing, or, until any such Holder so
furnishes an address to the Company, then to and at the address of the last
Holder of such securities who has so furnished an address to the Company or (b)
if to the Company, to 11460 Cronridge Drive, Owings Mills, Maryland 21117 to the
attention of the Corporate Secretary, or to such other address as such party may
notify to the other parties in writing. A notice or communication will be
effective (i) if delivered in Person or by overnight courier, on the business
day it is delivered, (ii) if transmitted by telecopier, on the business day of
actual confirmed receipt by the addressee thereof, and (iii) if sent by
registered or certified mail, three (3) business days after dispatch.
6. Binding Effect, Assignment. This Agreement shall be binding
upon, and inure to the benefit of, the parties and their respective personal
representatives, successors and permitted assigns; provided, however that the
Company shall not have the right to assign its rights and obligations hereunder,
or any interest herein, without the prior written consent of the holders of a
majority of the Registrable Securities then outstanding.
7. Course of Dealing; Amendments, Waivers and Consents. No course
of dealing between the parties shall operate as a waiver of any party's rights
under this Agreement. Each party acknowledges that if any party, without being
required to do so by this Agreement, gives any notice or information to, or
obtains any consent from, the other party, such party shall not by implication
have amended, waived or modified any provision of this Agreement, or created any
duty to give any such notice or information or to obtain any such consent on any
future occasion. No delay or omission on the part of any party in exercising any
right under this Agreement shall operate as a waiver of such right or any other
right hereunder or thereunder. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
No amendment, waiver or consent with respect to this Agreement shall be binding
unless it is in writing and signed by each of the Company and the holders of a
majority of the Registrable Securities then outstanding.
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8. Miscellaneous. If any provision of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable, the
parties hereby waive such provision to the extent that it is found to be invalid
or unenforceable. Such provision shall, to the maximum extent allowable by law,
be modified by such court so that it becomes enforceable, and, as modified,
shall be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect. The headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation hereof. This Agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof and supersedes any and all
prior understandings and agreements, whether written or oral, with respect to
such subject matter. This Agreement may be executed in counterparts, which
together shall constitute one and the same instrument. This Agreement shall be
governed by and construed in accordance with the laws (other than the conflict
of laws rules) of the State of Delaware.
[Signature pages follow]
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REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Time of the Merger.
AETHER SYSTEMS, INC.
By:
----------------------------------------
Name:
Title:
Address: 11460 Cronridge Drive
Owings Mills, MD 21117
Fax No. 410-654-6554
[INSERT CERULEAN HOLDERS SIGNATURE PAGES]
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