EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
Among
COYOTE NETWORK SYSTEMS, INC.
PRIMARY KNOWLEDGE, INC.
DQE ENTERPRISES, INC.
BARBARA CONRAD
and
JERRY CONRAD
Dated as of May 10, 2000
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Table of Contents
Section Page
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ARTICLE 1: CERTAIN DEFINITIONS 1
ARTICLE 2: THE TRANSACTIONS 9
2.1 The Merger 9
2.2 Effective Time 9
2.3 Closing 10
2.4 Articles of Incorporation and Bylaws of the Surviving Corporation 10
2.5 Directors of the Surviving Corporation 10
2.6 Officers of the Surviving Corporation 10
2.7 Conversion of Securities 10
2.8 Deliveries at the Closing 11
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF EMPLOYEE AND THE COMPANY 13
3.1 Authority 13
3.2 Capitalization 13
3.3 Organization and Qualification; Subsidiaries 14
3.4 Articles of Incorporation and Bylaws; Records 14
3.5 Financial Statements 15
3.6 Absence of Changes 15
3.7 Title to Assets; Equipment; Real Property, Leases; Inventory 17
3.8 Receivables 18
3.9 Intellectual Property 18
3.10 Contracts 22
3.11 Compliance With Legal Requirements 25
3.12 Governmental Authorizations 25
3.13 Tax Matters 26
3.14 Employee and Labor Matters 27
3.15 Benefit Plans; ERISA 28
3.16 Environmental Matters 30
3.17 Sale of Products; Performance of Services 31
3.18 Insurance 31
3.19 Related Party Transactions 31
3.20 Proceedings; Orders 32
3.21 Non-Contravention; Consents 32
3.22 Brokers 34
3.23 Year 2000 Compliance 34
3.24 Tax Treatment 34
3.25 Full Disclosure 34
3.26 Powers of Attorney 35
3.27 Voting Arrangements 35
3.28 Change in Control Payments 35
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Section Page
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3.29 Board Approval 35
3.30 Vote Required 35
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS 35
4.1 Authority 35
4.2 Title to Shares 36
4.3 Brokers 36
4.4 Accredited Investor 36
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF COYOTE 36
5.1 Organization and Qualification; Subsidiaries 36
5.2 Capitalization 37
5.3 Authority 38
5.4 SEC Filings; Financial Statements 38
5.5 Title to Shares 38
5.6 Brokers 39
5.7 Board Approval 39
ARTICLE 6: COVENANTS 39
6.1 Conduct of Business of the Company 39
6.2 No Solicitation 41
6.3 Notification of Certain Matters 42
6.4 Shareholders' Meeting 42
6.5 Directors of Coyote 42
6.6. Voting Agreements 43
6.7 Best Efforts 43
6.8 Consents. 43
6.9 Certificate of Designations 44
6.10 Listing of Coyote Common Stock 44
6.11 Enterprises' Investment in the Company 44
6.12 Post-Closing Covenants of the Parties 44
6.13 Expenses 48
ARTICLE 7: CONDITIONS TO CLOSING 49
7.1 Conditions Precedent to Obligations of the Company
and the Shareholders 49
7.2 Additional Condition Precedent to Obligations of Enterprises 50
7.3 Conditions Precedent to Obligations of Coyote 50
ARTICLE 8: TERMINATION 51
8.1 Termination 51
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8.2 Effect of Termination 51
ARTICLE 9: SURVIVAL; INDEMNIFICATION 51
9.1 Survival 51
9.2 Indemnification by the Shareholders 52
9.3 Indemnification by Coyote 52
9.4 Notice of Claims 53
9.5 Third Party Claims 53
9.6 Limitation on Damages 53
9.7 No Circular Recovery 54
ARTICLE 10: MISCELLANEOUS 54
10.1 Representations 54
10.2 Dispute Resolution 54
10.3 Waiver 55
10.4 Assignment 55
10.5 Notices 55
10.6 Further Assurances 56
10.7 Severability 57
10.8 Counterparts 57
10.9 Construction 57
10.10 Entire Agreement; Amendment 57
10.11 No Third Party 57
10.12 Public Announcements 57
EXHIBITS
Annex I Form of Agreement of Merger I-1
Annex II Form of Certificate of Merger II-1
Annex III Form of Restated Articles of Incorporation III-1
Annex IV Form of Bylaws IV-1
Schedule of Exceptions
Exhibit A - Form of Personal Services Agreement A-1
Exhibit B - Form of Voting Agreement B-1
Exhibit C - Form of Certificate of Designations, Preferences C-1
and Rights of Series C Preferred Stock
Exhibit D - Form of Stock Purchase Warrant D-1
Exhibit E - Form of Opinion of Kirkpatrick and Lockhart LLP E-1
Exhibit F - Form of Opinion of Cassady & Klein F-1
Exhibit G - Form of Opinion of Morrison & Foerster LLP ` G-1
Exhibit H - Form of Put Agreement H-1
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
this 10th day of May, 2000 among Coyote Network Systems, Inc., a Delaware
corporation ("Coyote"), Primary Knowledge, Inc., a California corporation in the
process of changing its name to HomeAccess MicroWeb, Inc. (the "Company"), DQE
Enterprises, Inc., a Pennsylvania corporation ("Enterprises"), Barbara Conrad
("Conrad") and Jerry Conrad ("Employee"). Enterprises and Conrad are referred to
collectively herein as the "Shareholders" and individually as a "Shareholder",
and the Shareholders, the Company, Employee and Coyote are referred to
collectively herein as the "Parties" and individually as a "Party."
WITNESSETH:
WHEREAS, the boards of directors of Coyote and the Company deem it
advisable and in the best interests of their respective corporations and
shareholders that the business of the Company be combined with that of Coyote in
order to achieve the long-term business interests of Coyote and the Company;
WHEREAS, the combination of the business of the Company with that of
Coyote will be effected pursuant to the terms of this Agreement through a
transaction in which HomeAccess Acquisition Corp., a wholly owned subsidiary of
Coyote to be formed ("Acquisition"), will merge with and into the Company (the
"Merger"), whereupon the Company will become a wholly owned subsidiary of Coyote
and the Shareholders will become stockholders of Coyote;
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Company; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the promises and of the mutual
representations, warranties and covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall mean with respect to any Person, any other
Person which, directly or indirectly, controls, is controlled by, or is under a
common control with, such Person. The term "control" (including the terms
"controlled by" and "under common control with") as used in the preceding
sentence means the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
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"Alternative Transaction" means any of the following: (i) a
transaction pursuant to which any Person (or group of Persons) other than Coyote
or its Affiliates (a "Third Party") seeks to acquire, directly or indirectly,
any of the outstanding shares of capital stock of the Company, whether from the
Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving the Company pursuant to which any
Third Party acquires any of the outstanding equity securities of the Company or
the entity surviving such merger or business combination, (iii) any other
transaction pursuant to which any Third Party acquires control of all or
substantially all of the assets of the Company (including for this purpose the
outstanding equity securities of the Company's subsidiaries), (iv) the adoption
by the Company of a plan of liquidation, the declaration or payment by the
Company of an extraordinary dividend on any of its shares of capital stock or
the effectuation by the Company of a recapitalization or other type of
transaction that would involve either a change in the Company's outstanding
capital stock or a distribution of assets of any kind to the holders of such
capital stock, (v) the issuance by the Company of shares of capital stock to any
Person, other than as contemplated by this Agreement or (vi) the repurchase by
the Company of shares of the Company's capital stock.
"Associate" shall mean, with respect to any Person, any other
Person (i) five percent or more of the equity of which is owned, directly or
indirectly, by such Person or an Affiliate of such Person, (ii) any Person which
owns, directly or indirectly, five percent or more of such Person or (iii) any
Person five percent or more of the equity of which is owned, directly or
indirectly, by a Person identified in clause (i) or (ii) of this definition.
"Business Day" shall mean any day other than a Saturday,
Sunday or United States federal holiday.
"Company Common Stock" shall mean the common stock, no par
value per share, of the Company.
"Company Contract" shall mean any Contract:
(a) to which the Company is a party;
(b) by which the Company or any of its assets is or may become
bound or under which the Company has, or may become subject to, any
obligation; or
(c) under which the Company has or may acquire any right or
interest.
"Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
"Contract" shall mean, with respect to any Person, any legally
binding written, oral, implied or other agreement, contract, understanding,
arrangement, instrument, note, guaranty, indemnity, representation, warranty,
deed, assignment, power of attorney, certificate, purchase order, work order,
insurance policy, benefit plan, commitment, covenant, assurance, obligation,
promise or undertaking of any nature to which such Person is a party or by which
its properties or assets may be bound or affected or under which it or its
business, properties or assets receive benefits.
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"Coyote Common Stock" shall mean the common stock, par value
$1.00 per share, of Coyote.
"Current Benefit Plan" shall mean any Employee Benefit Plan
that is currently in effect and:
(a) that was established or adopted by the Company or any ERISA
Affiliate or is maintained or sponsored by the Company;
(b) in which the Company participates;
(c) with respect to which the Company or any ERISA Affiliate is
or may be required or permitted to make any contribution; or
(d) with respect to which the Company or any ERISA Affiliate is
or may become subject to any Liability.
"Defined Benefit Plan" shall mean either a plan described in
Section 3(35) of ERISA or a plan subject to the minimum funding standards set
forth in Section 302 of ERISA and Section 412 of the Code.
"Employee Benefit Plan" shall have the meaning specified in
Section 3(3) of ERISA.
"Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
"Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
"Environmental Laws" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
"ERISA Affiliate" shall mean any Person that is, was or would
be treated as a single employer with the Company under Section 414 of the Code.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean Generally Accepted Accounting Principles,
applied on a basis consistent with the basis on which the Financial Statements
were prepared.
"Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession,
approval, consent, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration,
qualification or authorization that is issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or
(b) right under any Contract with any Governmental Body.
"Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(d) multinational organization or body; or
(e) individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
"Hazardous Material" shall mean any substance, chemical, waste
or other material which is listed, defined or otherwise identified as hazardous,
toxic or dangerous under any applicable law; as well as any petroleum, petroleum
product or by-product, crude oil, natural gas, natural gas liquids, liquefied
natural gas, or synthetic gas useable for fuel, and "source," "special nuclear,"
and "by-product" material as defined in the Atomic Energy Act of 1954, 42 U.S.C.
ss.ss. 2011 et seq.
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"Investment Sharing Agreement" means that certain Investment
Sharing Agreement dated February 25, 1999, by and between Prehn, LP, an Idaho
limited partnership, Wachtell, LP, an Idaho limited partnership, Conrad and the
Company.
"Knowledge" shall mean an individual deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter.
A corporation shall be deemed to have "Knowledge" of a
particular fact or matter only if a director, officer or key employee of such
corporation has actual Knowledge, or could have had such Knowledge following
investigation as set forth in clause (b) above, of such fact or matter.
"Law" shall mean any foreign or domestic law, statute,
ordinance, rule, regulation, order, judgment or decree.
"Legal Requirement" shall mean any federal, state, local,
municipal, foreign or other law, statute, legislation, constitution, principle
of common law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation that is or has
been issued, enacted, adopted, passed, approved, promulgated, made, implemented
or otherwise put into effect by or under the authority of any Governmental Body.
"Liability" shall mean any debt, obligation, duty or liability
of any nature including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability, regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
"Multiemployer Plan" means a plan described in Section 3(37)
of ERISA.
"Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is issued, made, entered, rendered or otherwise put into
effect by or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is entered into
in connection with any Proceeding.
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"Ordinary Course of Business" shall mean an action taken by or
on behalf of the Company shall not be deemed to have been taken in the "Ordinary
Course of Business" unless:
(a) such action is recurring in nature, consistent with the
Company's past practices and taken in the ordinary course of the Company's
normal day to day operations;
(b) such action is not required to be authorized by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors and does not require any other separate or special
authorization of any nature; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any special or separate authorization, in the
ordinary course of the normal day to day operations of other Entities that are
employed in businesses similar to Company's business.
"Person" shall mean any individual, Entity or Governmental
Body.
"Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation,
commenced, brought, conducted or heard by or before, or otherwise has involved,
any Governmental Body or any arbitrator or arbitration panel.
"Related Party" shall mean each of the following:
(a) each individual who is, or who has at any time been, an
officer of the Company or a predecessor thereto;
(b) each member of the family of each of the individuals
referred to in clause "(a)" above;
(c) any Entity (other than the Company) in which any one of
the Persons referred to in clauses "(a)" or "(b)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.
"Representatives" of a specified party shall mean officers,
directors, employees, attorneys, accountants, advisors and representatives of
such party. The Related Parties shall be deemed to be "Representatives" of the
Company.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Series C Preferred Stock" shall mean the Series C Convertible
Preferred Stock, par value $.01 per share, of Coyote.
"Subsidiary" of a specified Person shall mean any corporation,
partnership, limited liability company, joint venture or other legal entity of
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which the specified Person (either alone and/or through and/or together with any
other Subsidiary) owns, directly or indirectly, 50% or more of the stock or
other equity or partnership interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such legal entity or of which the specified Person controls the
management.
"Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, estimated tax, gross receipts tax, value added tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax sharing agreement or similar Contract.
"Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
"Transaction Documents" shall mean, collectively, the Personal
Services Agreement, the Agreement of Merger, the Certificate of Merger, the
Promissory Note and the Warrant.
"Transactions" shall mean (a) the execution and delivery of
the respective Transaction Documents, and (b) all of the transactions
contemplated by the respective Transaction Documents, including, without
limitation, the Merger, and the performance by the Parties to the Transaction
Documents of their respective obligations under the Transaction Documents.
(b) Each of the following terms is defined in the Section or
reference set forth opposite such term below:
Term Section
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Acquisition........................................................Recitals
Additional Securities.......................................Section 6.12(e)
Agreement..........................................................Preamble
Agreement of Merger.............................................Section 2.2
Beneficially Owns...........................................Section 6.12(a)
Cassady & Klein Opinion......................................Section 2.8(b)
Certificate of Designation......................................Section 6.9
Certificate of Merger...........................................Section 2.2
CGCL............................................................Section 2.1
Closing.........................................................Section 2.3
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Closing Date....................................................Section 2.3
Code...............................................................Recitals
Company............................................................Preamble
Company Preferred Stock.........................................Section 3.2
Company Returns.............................................Section 3.13(b)
Company Technology...........................................Section 3.9(b)
Conrad.............................................................Preamble
Coyote.............................................................Preamble
Coyote Damages...............................................Section 9.2(a)
Coyote Indemnitees...........................................Section 9.2(a)
Coyote Preferred Stock..........................................Section 5.2
Coyote SEC Reports..............................................Section 5.4
Coyote Shareholder Approval.....................................Section 5.3
Coyote Subsidiaries.............................................Section 5.1
Damages.........................................................Section 9.4
DGCL............................................................Section 2.1
Disclosure Schedules..............................................Article 3
Domain Names.................................................Section 3.9(j)
Effective Time..................................................Section 2.2
Employee...........................................................Preamble
Enterprises........................................................Preamble
Expenses.......................................................Section 6.13
Financial Statements.........................................Section 3.5(a)
Incorporated Third Party Technology..........................Section 3.9(k)
Indemnified Party...............................................Section 9.4
Indemnifying Party..............................................Section 9.4
IP Registration..............................................Section 3.9(e)
IP Rights....................................................Section 3.9(e)
Leased Premises..............................................Section 3.7(c)
Marks........................................................Section 3.9(d)
Material Adverse Effect......................................Section 3.6(a)
Merger.............................................................Recitals
Millennial Dates.............................................Section 3.9(k)
Party..............................................................Preamble
Personal Services Agreement..................................Section 2.8(b)
Plans.......................................................Section 3.15(a)
Pledge Agreement.............................................Section 2.8(e)
Products.....................................................Section 3.9(b)
Promissory Note..............................................Section 2.8(b)
Proxy Statement.................................................Section 6.4
Put Agreement................................................Section 2.8(b)
Registrable Securities.........................................Section 6.10
Shareholder Damages.............................................Section 9.3
Shareholder Designees.......................................Section 6.12(a)
Shareholder Indemnitees.........................................Section 9.3
Shareholders.......................................................Preamble
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Superior Proposal............................................Section 6.2(a)
Surviving Corporation...........................................Section 2.1
Technology...................................................Section 3.9(b)
Technology Related Assets....................................Section 3.9(a)
Termination Date.............................................Section 8.1(c)
Third Party Licenses.........................................Section 3.9(c)
Third Party Technologies.....................................Section 3.9(c)
Voting Agreement................................................Section 6.6
Warrant.....................................................Section 6.12(f)
Year 2000 Compliant..........................................Section 3.9(k)
ARTICLE 2
THE TRANSACTIONS
2.1 The Merger. Subject to the terms and conditions set forth
in this Agreement, at the Effective Time Acquisition shall be merged with and
into the Company and the separate corporate existence of Acquisition shall
thereupon cease. The Company, as the surviving corporation of the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"), will be
governed by the laws of the State of California. The Merger shall have the
effects specified in the California General Corporation Law (the "CGCL") and the
General Corporation Law of the State of Delaware (the "DGCL"). Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
of the properties, rights, privileges, powers, franchises, debts, liabilities,
obligations and duties of the Company will continue in the Surviving Corporation
unaffected by the Merger.
2.2 Effective Time. As soon as practicable following the
satisfaction of the conditions set forth in Article 7, the Parties will file an
agreement of merger (the "Agreement of Merger") in substantially the form of
Annex I with the Secretary of State of the State of California and the
certificate of merger (the "Certificate of Merger") in the form of Annex II with
the Secretary of State of the State of Delaware, in such form as is required by
and executed in accordance with the relevant provisions of the CGCL and DGCL,
and will make all other filings or recordings required under the CGCL and DGCL
to consummate the Merger. The Merger will become effective upon the date and the
time of the filing of the Agreement of Merger with the Secretary of State of the
State of California and the Certificate of Merger with the Secretary of State of
the State of Delaware, whichever is later, or at such other time as the Parties
hereto may agree and as may be specified in the Agreement of Merger and
Certificate of Merger in accordance with applicable law. The date and time when
the Merger becomes effective is herein referred to as the "Effective Time."
2.3 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Kirkpatrick & Lockhart LLP, Pittsburgh, PA, as soon
as practicable (but in no event more than 5 Business Days) after satisfaction or
waiver of the conditions set forth in Article 7, unless another time, date or
place is agreed to in writing by the Parties. The date on which the Closing
occurs shall be referred to herein as the "Closing Date."
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2.4 Articles of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, in accordance with the CGCL, (i) the
Restated Articles of Incorporation, as amended, of the Company will be amended
to read in their entirety as set forth in Annex III, and (ii) the Bylaws of the
Company will be amended to read in their entirety as set forth in Annex IV.
2.5 Directors of the Surviving Corporation. At the Effective
Time, the directors of Acquisition then in office will become the directors of
the Surviving Corporation until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
2.6 Officers of the Surviving Corporation. At the Effective
Time, the officers of Acquisition will become the officers of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
2.7 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Shareholders or
any holders of any shares of capital stock of Acquisition:
(a) Each issued and outstanding share of common stock, par
value .001 per share, of Acquisition shall be converted into and become one
fully paid and non-assessable share of common stock, no par value, of the
Surviving Corporation.
(b) Each share of Company Common Stock outstanding immediately
prior to the Merger shall be converted into the right to receive that number of
fully paid and non-assessable shares of Coyote Common Stock equal to the
quotient of (x) (i) $28,350,000 divided by (ii) 90% of the Trading Price of
Coyote Common Stock as of the Closing Date (provided that if 90% of such Trading
Price is less than $7.00, it shall be deemed to be $7.00, and if 90% of such
Trading Price is greater than $9.875, it shall be deemed to be $9.875) divided
by (y) the number of shares of Company Common Stock outstanding immediately
prior to the Effective Time. For purposes of this Section, Trading Price shall
mean the last reported per share sale price of Coyote Common Stock or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case, as reported by the Nasdaq National
Market or such other United States securities exchange registered under the
Exchange Act on which Coyote Common Stock are listed or admitted to trading. The
conversion ratio as set forth in this Section 2.7(b) shall be subject to
appropriate adjustment upon the occurrence of any stock split, stock dividend or
combination of outstanding shares of Coyote Common Stock after the date of this
Agreement and prior to the Closing Date. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto except the right to receive the foregoing shares of Coyote
Common Stock.
(c) Each share of Company Preferred Stock outstanding
immediately prior to the Merger shall be converted into the right to receive
that number of fully paid and non-assessable shares of Series C Preferred Stock
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equal to the quotient of (x) 1,230,380 divided by (y) the number of shares of
Company Preferred Stock outstanding immediately prior to the Effective Time. The
conversion ratio as set forth in this Section 2.7(c) shall be subject to
appropriate adjustment upon the occurrence of any stock split, stock dividend or
combination of outstanding shares of Coyote Common Stock after the date of this
Agreement and prior to the Closing Date. All such shares of Company Preferred
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto except the right to receive the foregoing shares of Series C
Preferred Stock.
2.8 Deliveries at the Closing.
(a) At the Closing, Enterprises shall deliver to Coyote:
(i) stock certificates representing all of the Company Preferred Stock
owned by Enterprises;
(ii) the certificate of an executive officer of Enterprises required
to be delivered to Coyote by Enterprises pursuant to Section 7.3(c) of this
Agreement; and
(iii)an opinion of Kirkpatrick and Lockhart LLP substantially in the
form attached hereto as Exhibit E.
(b) At the Closing, Conrad shall deliver to Coyote:
(i) stock certificates representing all of the Company Common Stock
owned by Conrad;
(ii) the certificate required to be delivered to Coyote by Conrad
pursuant to the Section 7.3(c) of this Agreement;
(iii) an opinion of Cassady & Klein substantially in the form attached
hereto as Exhibit F (the "Cassady & Klein Opinion"); and
(iv) a put agreement in the form attached hereto as Exhibit H (the
"Put Agreement"), duly executed by Conrad.
(c) At the Closing or as otherwise set forth below, Coyote shall deliver or
cause to be delivered:
(i) to Enterprises, one or more certificates representing that number
of shares of Series C Preferred Stock determined in accordance with Section
2.7(c), issued in the name of Enterprises;
(ii) to Conrad, one or more certificates representing that number of
shares of Coyote Common Stock determined in accordance with Section 2.7(b),
rounded to the next whole share, issued in the name of Conrad, less that
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number of shares of Coyote Common Stock required to be pledged to Coyote by
an Affiliate of Conrad in accordance with the terms of the Pledge
Agreement, within three (3) Business Days after the Closing Date;
(iii) to Employee, Two Million Dollars ($2,000,000) in accordance with
the terms of the Personal Services Agreement;
(iv) to Employee, the personal services agreement in the form attached
hereto as Exhibit A (the "Personal Services Agreement"), duly executed by
Coyote;
(v) to each Shareholder, a copy of the Certificate of Designations
certified by the Secretary of State of the State of Delaware;
(vi) to each Shareholder, the Voting Agreements, duly executed by the
parties thereto;
(vii) to each Shareholder, the certificate required to be delivered to
the Shareholders by Coyote pursuant to Section 7.1(c) of this Agreement;
(viii) an opinion of Morrison & Foerster LLP substantially in the form
attached hereto as Exhibit G; and
(ix) the Put Agreement, duly executed by Coyote.
(d) At the Closing, the Company shall deliver to Coyote:
(i) the certificate required to be delivered to Coyote by the Company
pursuant to Section 7.3(c) of this Agreement; and
(ii) the Cassady & Klein Opinion.
(e) At the Closing, Employee shall deliver or cause to be delivered to
Coyote:
(i) the Personal Services Agreement, duly executed by Employee;
(ii) a promissory note in the amount of $2,000,000 in the form
attached to the Personal Services Agreement (the "Promissory Note"), duly
executed by Employee; and
(iii) the pledge and security agreement in the form attached to the
Personal Services Agreement (the "Pledge Agreement"), duly executed by an
executive officer of pledgor.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EMPLOYEE AND THE COMPANY
Except as specifically set forth in the disclosure schedule
delivered by Employee and the Company to Coyote at or prior to the execution of
this Agreement the parts of which are numbered to correspond to the Section
numbers of this Agreement (the "Disclosure Schedules"), Employee and the Company
hereby represent and warrant to Coyote that:
3.1 Authority. The Company has all necessary power and
authority to execute and deliver this Agreement and the Transaction Documents to
which it is or is to become a party, to perform its obligations hereunder and
thereunder and to consummate the Merger and the other transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Transaction Documents to which the Company is or is to become a party and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary action on the part of the
Company and no other proceedings on the part of the Company are necessary to
authorize this Agreement or any Transaction Document or to consummate such
transactions. This Agreement has been validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms. The Transaction Documents
to which the Company is or is to become a party, when executed and delivered by
the Company at the Closing, will constitute the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
3.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of 1,000,000 shares of Company
Common Stock. As of the date of this Agreement, 500,000 shares of Company Common
Stock are issued and outstanding, all of which are owned by Conrad, and
Enterprises owns warrants to purchase an aggregate of 214,286 shares of
preferred stock, $.01 par value per share ("Company Preferred Stock"), to be
designated Series A Convertible Preferred Stock. Immediately prior to the
Effective Time, the outstanding capital stock of the Company shall consist of
500,000 shares of Company Common Stock, all of which shall be owned by Conrad,
and 214,286 shares of Company Preferred Stock, all of which shall be owned by
Enterprises. Except as set forth in this Section 3.2, there are no options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights or other rights, agreements, arrangements or commitments of
any character to which the Company is a party or by which the Company is bound
relating to the issued or unissued capital stock of the Company or obligating
the Company to issue or sell any shares of capital stock of, or other equity
interests in, the Company. Except as set forth in the Investment Sharing
Agreement, all Company Common Stock and Company Preferred Stock are free and
clear of all Encumbrances and have been duly authorized, validly issued, fully
paid and nonassessable, will not be subject to preemptive rights and have been
issued in full compliance with all applicable securities laws and other Legal
Requirements. There are no outstanding contractual obligations of the Company to
repurchase, redeem or acquire any shares of capital stock of the Company or
security convertible into or exchangeable for any of the foregoing.
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3.3 Organization and Qualification; Subsidiaries.
(a) The Company has been duly organized and is
validly existing and in good standing under the laws of the State of California,
and has the requisite 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. The Company is duly qualified or licensed to do
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 would not have a Material Adverse Effect on the Company. The Company has
no Subsidiaries and has never owned beneficially or otherwise any equity
interest in any other Person.
(b) The Company has never conducted any business
under or otherwise used, for any purpose or in any jurisdiction, any fictitious
name, assumed name, trade name or name other than the name set forth in its
articles of incorporation, as amended. The Company is in the process of changing
its name to HomeAccess MicroWeb, Inc.
3.4 Articles of Incorporation and Bylaws; Records.
(a) The Company has delivered to Coyote accurate
and complete copies of: (i) the Company's articles of incorporation and bylaws,
including all amendments thereto; (ii) the stock records of the Company; and
(iii) the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the shareholders of the Company, and any predecessor thereto, and the board
of directors of the Company, and any predecessor thereto. There have been no
meetings or other proceedings of the shareholders of the Company, or any
predecessor thereto, or the board of directors of the Company, or any
predecessor thereto, that are not reflected in such minutes or other records.
(b) There has not been any violation of any of
the provisions of the Company's articles of incorporation or bylaws or of any
resolution adopted by the Company's shareholders or the Company's board of
directors, and to the Knowledge of the Company no event has occurred, and no
condition or circumstance exists, that likely would (with or without notice or
lapse of time) constitute or result directly or indirectly in such a violation.
(c) The books of account, stock records, minute
books and other records of the Company are accurate, up to date and complete,
and have been maintained in accordance with sound and prudent business
practices. All of the records of the Company and any predecessor thereto are in
the actual possession and direct control of the Company.
3.5 Financial Statements.
(a) The Company has delivered to Coyote the
unaudited balance sheet of the Company as of December 31, 1999 and the unaudited
balance sheet of the Company as of April 30, 2000 (the "Unaudited Interim
Balance Sheet"), and the related statements of operations, changes in
shareholders' equity and cash flows of the Company for the period from inception
(January 19, 1999) through December 31, 1999 and for the four month period
ending April 30, 2000, together with the notes thereto, if any (collectively,
the "Financial Statements").
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(b) All of the Financial Statements are accurate
and complete in all material respects. The Financial Statements are in
accordance with the books and records of the Company, present fairly the
financial position of the Company as of the respective dates thereof and the
results of operations and changes in shareholders' equity and cash flows of the
Company for the respective periods covered thereby.
(c) At the date of the Unaudited Interim Balance
Sheet, (i) the Company had no Liabilities of any nature (matured or unmatured,
fixed or contingent) required to be provided for in such Unaudited Interim
Balance Sheet which were not provided for and (ii) the Company had no other
material Liabilities of any nature (matured or unmatured, fixed or contingent).
(d) As of the date of this Agreement, the
Company has no Liabilities in excess of $10,000 individually or in the
aggregate, except for (i) Liabilities identified as such in the "liabilities"
column of the Unaudited Interim Balance Sheet; and (ii) accounts payable and
Liabilities incurred by the Company in the Ordinary Course of Business since the
date of the Unaudited Interim Balance Sheet.
3.6 Absence of Changes. Since April 30, 2000:
(a) there has not been any material adverse
change in the Company's business, condition, assets, liabilities, operations,
financial performance, results of operations or prospects, and no event has
occurred that likely would have an adverse effect on the business, condition,
assets, liabilities, operations, financial performance, results of operations or
prospects (a "Material Adverse Effect") of the Company;
(b) there has not been any material loss, damage
or destruction to, or any interruption in the use of, any of the Company's
assets (whether or not covered by insurance);
(c) the Company has not (i) declared, accrued,
set aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities;
(d) the Company has not sold or otherwise issued
any shares of capital stock or any other securities, except as contemplated by
this Agreement;
(e) the Company has not amended its articles of
incorporation or bylaws and has not effected or been a party to any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(f) the Company has not purchased or otherwise
acquired any asset from any other Person, except for assets acquired by the
Company in the Ordinary Course of Business;
(g) the Company has not leased or licensed any
asset from any other Person except for assets leased or licensed in the Ordinary
Course of Business;
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(h) the Company has not made any individual
capital expenditure, measured by invoice amount, in excess of $10,000;
(i) the Company has not sold or otherwise
transferred, and has not leased or licensed, any asset to any other Person
except for products sold by the Company from its inventory in the Ordinary
Course of Business;
(j) the Company has not written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness, except in the Ordinary Course of
Business;
(k) the Company has not pledged or hypothecated
any of its assets or otherwise permitted any of its assets to become subject to
any Encumbrance, except in the Ordinary Course of Business;
(l) the Company has not made any loan or advance
to any other Person, including without limitation, any shareholder of the
Company; (m) the Company has not (i) established or adopted any Employee Benefit
Plan or (ii) paid any bonus or made any profit sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees other than increases for non-officer employees consistent with the
Company's review and compensation policies in force prior to the date of this
Agreement;
(n) the Company has not entered into, and
neither the Company nor any of the assets owned or used by the Company has
become bound by, any Contract, except in the Ordinary Course of Business;
(o) no Contract by which the Company or any of
the assets owned or used by the Company is or was bound, or under which the
Company has or had any rights or interest, has been amended or terminated,
except in the Ordinary Course of Business;
(p) there has been no borrowing or agreement to
borrow by the Company or change in the contingent obligations of the Company by
way of guaranty, endorsement, indemnity, warranty or other-wise or grant of a
mortgage or security interest in any property of the Company, and the Company
has not incurred, assumed or otherwise become subject to any Liabilities, other
than accounts payable incurred by the Company in the Ordinary Course of
Business;
(q) the Company has not discharged any
Encumbrance or discharged or paid any indebtedness or other Liability, except
any that (i) are reflected as current liabilities in the Unaudited Interim
Balance Sheet or have been incurred by the Company since the date thereof in the
Ordinary Course of Business, and (ii) have been discharged or paid in the
Ordinary Course of Business;
(r) the Company has not forgiven any debt or
otherwise released or waived any right or claim;
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(s) the Company has not changed any of its
methods of accounting or accounting practices in any respect;
(t) the Company has not entered into any
transaction or taken any other action outside the Ordinary Course of Business;
and
(u) the Company has not agreed or committed
(in writing or otherwise) to take any of the actions referred to in clauses (c)
through (t) above.
3.7 Title to Assets; Equipment; Real Property, Leases; Inventory.
(a) The Company owns, and has good, valid and
marketable title to, all material assets it purports to own, including (i) all
assets reflected on the Unaudited Interim Balance Sheet; (ii) all assets
acquired by the Company since the date of the Unaudited Interim Balance Sheet;
and (iii) all other material assets reflected in the Company's books and records
as being owned by the Company. All of said assets are owned by the Company free
and clear of any Encumbrances, except liens for current taxes and assessments
not delinquent.
(b) To the Knowledge of the Company, each
material asset of the Company (i) is free of defects and deficiencies and in
good condition and repair, consistent with its age and intended use (ordinary
wear and tear excepted); (ii) complies in all respects, and is being operated
and otherwise used in full compliance, with all applicable Legal Requirements;
and (iii) is adequate for the uses to which it is being put.
(c) The Company does not own any real property
or any interest in real property, except for the leaseholds created under the
real property leases identified in Section 3.7(c) of the Disclosure Schedule
(the "Leased Premises"). Section 3.7(c) of the Disclosure Schedule provides an
accurate and complete description of the premises covered by said leases and the
facilities located on such premises. The Company enjoys peaceful and undisturbed
possession of such premises. The Company has delivered to Coyote complete copies
of all such leases. Coyote will obtain a valid leasehold interest in such
leases, in each case free and clear of all title defects, Encumbrances and
restrictions of any kind, except: (i) mechanics', carriers', workers' and other
similar liens arising in the Ordinary Course of Business since the date of the
Unaudited Interim Balance Sheet and (ii) liens for current taxes not yet due and
payable.
(d) All leases pursuant to which the Company
leases real or personal property are valid and effective in accordance with
their respective terms and, to the Company's Knowledge, there exists no default
thereunder or occurrence or condition which could result in a default thereunder
or termination thereof.
(e) The Company's Leased Premises are in a
condition adequate for the conduct of the business in the Ordinary Course of
Business, and the Company owns, or has a valid leasehold interest in or license
to, all assets necessary for the conduct of its business as presently conducted.
(f) The Company does not have any inventory.
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3.8 Receivables.
(a) All existing accounts receivable of the
Company (including those accounts receivable reflected on the Unaudited Interim
Balance Sheet that have not yet been collected and those accounts receivable
that have arisen since such date and have not yet been collected) (i) represent
valid obligations of customers of the Company arising from bona fide
transactions entered into in the Ordinary Course of Business; and (ii) are
current and, in the aggregate, will be collected in full (without any
counterclaim or setoff), net of reserves, on or before the later of 90 days from
the date of invoice or 60 days from the date hereof.
(b) The Company has no oral contracts or
agreements to deliver products or provide services
3.9 Intellectual Property.
(a) General. The Company owns or is licensed
and has all rights in and to the following as required to conduct its business
as now conducted and as proposed to be conducted in any written materials
furnished by the Company: (a) all products, tools, computer programs,
specifications, source code, object code, graphics, devices, techniques,
algorithms, methods, processes, procedures, packaging, trade dress, formula,
drawings, designs, improvements, discoveries, concepts, user interfaces,
software, "look and feel," development and other tools, content, inventions
(whether or not patentable or copyrightable and whether or not reduced to
practice), designs, logos, know-how, concepts and other technology that are now,
or during the two years prior to the date of this Agreement have been, or
currently are proposed to be, developed, produced, used, marketed or sold by the
Company (collectively, the "Technology-Related Assets"); and (b) all
intellectual property and other proprietary rights in the Technology-Related
Assets, including, without limitation, all trade names, trademarks, domain
names, service marks, logos, brand names and other identifiers, trade secrets,
copyrights and domestic and foreign letters patent, and the registrations,
applications, renewals, extensions and continuations (in whole or in part)
thereof, all goodwill associated therewith and all rights and causes of action
for infringement, misappropriation, misuse, dilution or unfair trade practices
associated therewith.
(b) Company Technology. Section 3.9(b) of the
Disclosure Schedule sets forth a list of all products and tools developed,
produced, used, marketed or sold by the Company during the two years prior to
the date of this Agreement and owned by the Company as of the date of the
Unaudited Interim Balance Sheet, together with all prior versions, predecessors
or precursors to such products or tools (collectively, the "Products"). Except
as set forth in Section 3.9(b) of the Disclosure Schedule and except for the
Third Party Technologies (as defined in Section 3.9(c)), the Company owns all
right, title and interest in and to the following (collectively, the
"Technology"), free and clear of all Encumbrances: (i) the Products, together
with any and all codes, techniques, software tools, formats, designs, user
interfaces, content and "look and feel" related thereto; (ii) any and all
updates, enhancements, corrections, modifications, improvements and new releases
related to the items set forth in clause (i) above; (iii) any and all technology
and work in progress related to the items set forth in clauses (i) and (ii)
above; and (iv) all inventions, discoveries, processes, designs, trade secrets,
know-how and other confidential or proprietary information related to the items
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set forth in clauses (i), (ii), and (iii) above. The Technology, excluding the
Third Party Technologies (as defined below), is sometimes referred to herein as
the "Company Technology."
(c) Third Party Technology. Section 3.9(c) of
the Disclosure Schedule sets forth a list of all Technology used in the
Company's business for which the Company does not own all right, title and
interest (collectively, the "Third Party Technologies"), and all license
agreements or other contracts pursuant to which the Company has the right to use
(in the manner used by the Company, or intended or necessary for use with the
Company Technology) the Third Party Technologies (the "Third Party Licenses"),
indicating, with respect to each of the Third Party Technologies listed therein,
the owner thereof and the Third Party License applicable thereto. The Company
has the lawful right to use (free of any material restriction not expressly set
forth in the Third Party Licenses) (a) all Third Party Technology that is
incorporated in or used in the development or production of the Company
Technology and (b) all other Third Party Technology necessary for the conduct of
the Company's business as now conducted and as proposed to be conducted in any
written materials furnished by the Company to Coyote. All Third Party Licenses
are valid, binding and in full force and effect, the Company and, to the
Company's Knowledge, each other party thereto have performed in all material
respects their obligations thereunder, and neither the Company nor, to the
Company's Knowledge, any other party thereto is in material default thereunder,
nor to the Company's Knowledge has there occurred any event or circumstance that
with notice or lapse of time or both would constitute a material default or
event of material default on the part of the Company or, to the Company's
Knowledge, any other party thereto or give to any other party thereto the right
to terminate or modify any Third Party License. The Company has not received
written notice or to the Company's knowledge any other notice that any party to
any Third Party License intends to cancel, terminate or refuse to renew (if
renewable) such Third Party License or to exercise or decline to exercise any
option or right thereunder.
(d) Trademarks. Section 3.9(d) of the Disclosure
Schedule sets forth a list of all trademarks, trade names, brand names, service
marks, logos or other identifiers for the Products or otherwise used by the
Company in its business (the "Marks"). Except as set forth in Section 3.9(d) of
the Disclosure Schedule, the Company has full legal and beneficial ownership,
free and clear of any Encumbrances, of all rights conferred by use of the Marks
in connection with the Products or otherwise in the Company's business and, as
to those Marks that have been registered in the United States Patent and
Trademark Office, by federal registration of the Marks.
(e) Intellectual Property Rights. Section 3.9(e)
of the Disclosure Schedule sets forth all patents, patent applications,
copyright registrations (and applications therefor) and trademark registrations
(and applications therefor) (collectively, the "IP Registrations") associated
with the Company Technology and the Marks. Except as set forth in Section 3.9(e)
of the Disclosure Schedule, the Company owns all right, title and interest, free
and clear of any Encumbrances, in and to the IP Registrations, together with any
other rights in or to any copyrights (registered or unregistered), rights in the
Marks (registered or unregistered), trade secret rights and other intellectual
property rights (including, without limitation, rights of enforcement) contained
or embodied in the Company Technology and the Marks (collectively, the "IP
Rights").
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(f) Maintenance of Rights. The Company has not
conducted its business, and has not used or enforced (or, to its knowledge,
failed to use or enforce) the IP Rights, in a manner that would result in the
abandonment, cancellation or unenforceability of any item of the IP Rights or
the IP Registrations, and the Company has not taken (or, to its knowledge,
failed to take) any action that would result in the forfeiture or relinquishment
of any IP Rights or IP Registrations, in each case where such abandonment,
cancellation, unenforceability, forfeiture or relinquishment has had or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Except as set forth in Section 3.9(f) of the
Disclosure Schedule, the Company has not granted to any third party any rights
or permissions to use any of the Technology or the IP Rights. To the best of the
Company's Knowledge, except pursuant to reasonably prudent safeguards, (a) no
third party has received any confidential information relating to the Technology
or the IP Rights and (b) the Company is not under any contractual or other
obligation to disclose to any third party any Company Technology.
(g) Third Party Claims. The Company has not
received written notice or to the Company's Knowledge any other notice or claim
(whether written, oral or otherwise) challenging the Company's ownership or
rights in the Company Technology or the IP Rights or claiming that any other
person or entity has any legal or beneficial ownership with respect thereto. All
the IP Rights are legally valid and enforceable without any material
qualification, limitation or restriction on their use, and the Company has not
received any written notice, or to the Company's Knowledge any other notice or
claim (whether written, oral or otherwise) challenging the validity or
enforceability of any of the IP Rights. To the Company's Knowledge, no other
person or entity is infringing or misappropriating any part of the IP Rights or
otherwise making any unauthorized use of the Company Technology.
(h) Infringement by the Company. The use of any
of the Technology in the Company's business does not infringe, violate or
interfere with or constitute an appropriation of any right, title or interest
(including, without limitation, any patent, copyright, trademark or trade secret
right) held by any other person or entity, and there have been no claims made
with respect thereto. The use of any of the Marks and other IP Rights in the
Company's business does not infringe, violate or interfere with or constitute an
appropriation of any right, title or interest (including, without limitation,
any patent, copyright, trademark or trade secret right) held by any other person
or entity, and there have been no claims made with respect thereto. The Company
has not received any written notice, or to the Company's Knowledge any other
kind of notice or claim (whether written, oral or otherwise) regarding any
infringement, misappropriation, misuse, abuse or other interference with any
third party intellectual property or proprietary rights (including, without
limitation, infringement of any patent, copyright, trademark or trade secret
right of any third party) by the Company, the Technology or the Marks or other
IP Rights, or claiming that any other entity has any claim of infringement with
respect thereto.
(i) Confidentiality. The Company has not
disclosed any source code regarding the Technology to any person or entity other
than those persons or entities set forth on Section 3.9(i) of the Disclosure
Schedule, all of whom have entered into a written nondisclosure agreement with
the Company. The Company has at all times maintained and diligently enforced
commercially reasonable procedures to protect all confidential information
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relating to the Technology. Neither the Company nor any escrow agent is under
any contractual or other obligation to disclose the source code or any other
proprietary information included in or relating to the Technology. The Company
has not deposited any source code relating to the Technology into any source
code escrows or similar arrangements. If, as disclosed in Section 3.9(i) of the
Disclosure Schedule, the Company has deposited any source code to the Technology
into source code escrows or similar arrangements, no event has occurred that has
or could reasonably form the basis for a release of such source code from such
escrows or arrangements.
(j) Domain Names. Section 3.9(j) of the
Disclosure Schedule sets forth a list of all Internet domain names used by the
Company in its business (collectively, the "Domain Names"). The Company has, and
upon the Closing the Surviving Corporation will have, a valid registration and
all material rights (free of any material restriction) in and to the Domain
Names, including, without limitation, all rights necessary to continue to
conduct the Company's business as it is currently conducted.
(k) Year 2000. The Company Technology, and to
the Company's Knowledge the Third Party Technology that is incorporated in or
used in the development or production of the Company Technology (the
"Incorporated Third Party Technology") is Year 2000 Compliant. The Company's
business, financial condition and results of operations will not be materially
adversely affected by Year 2000 Compliance related issues. The term "Year 2000
Compliant" as used herein means that (i) each item of Company Technology, and,
to the Company's knowledge, the Incorporated Third Party Technology, on dates on
and after January 1, 2000 (the "Millennial Dates"), will calculate any
information dependent on or relating to dates on or after January 1, 2000 in the
same manner, and with the same functionality, data integrity and performance, as
such Company Technology, and to the Company's Knowledge, Incorporated Third
Party Technology records, stores, processes, calculates and presents calendar
dates on or before any Millennial Date, and (ii) the Millennial Dates will not
adversely affect the operation of such Company Technology, and to the Company's
Knowledge, such Incorporated Third Party Technology, with respect to
date-dependent data or computations, output, or other routines or functions.
(l) Indemnification. Except pursuant to standard
end user licenses, (true and correct copies of which have been provided to
Coyote or its counsel), the Company has not entered into any agreement or
offered to indemnify any Person against any charge of infringement by the
Technology or IP Rights, or any other intellectual property or right. The
Company has not entered into any agreement granting any Person the right to
bring any infringement action with respect to, or otherwise to enforce, any of
the Technology or IP Rights.
(m) Restrictions on Intellectual Property. To
the Knowledge of the Company, none of the Company's officers or employees has
entered into any agreement regarding know-how, trade secrets, assignment of
rights in inventions, or prohibition or restriction of competition or
solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any Person other than the Company.
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3.10 Contracts.
(a) Section 3.10 of the Disclosure Schedule
lists each of the following Company Contracts:
(i) any Company Contract or series of
related Company Contracts requiring in the aggregate payments after the date
hereof by or to the Company of more than $10,000;
(ii) any Company Contract with or for the
benefit of any current or former officer, director, shareholder, employee or
consultant of the Company;
(iii) any Company Contract with any labor
union or association representing any employee of the Company;
(iv) any Company Contract for the purchase
or sale of materials, supplies, equipment, merchandise or services that contain
an escalation, renegotiation or redetermination clause or that obligate the
Company to purchase all or substantially all of its requirements of a particular
product from a supplier, or for periodic minimum purchases of a particular
product from a supplier;
(v) any Company Contract for sale of any
of the assets or properties of the Company other than in the Ordinary Course of
Business or for the grant to any Person of any options, rights of first refusal,
or preferential or similar rights to purchase any such assets or properties;
(vi) any agreement of surety, guarantee
or indemnification, other than agreements in the Ordinary Course of Business
with respect to obligations in an aggregate amount not in excess of $10,000;
(vii) any Company Contract containing
covenants of the Company not to compete in any line of business, in any
geographic area or with any Person or covenants of any other Person not to
compete with the Company or in any line of business of the Company;
(viii) any Company Contract granting or
restricting the right of the Company to use any Company Technology, Marks or IP
Rights;
(ix) any Company Contract with customers
or suppliers for the sharing of fees, the rebating of charges or other similar
arrangements;
(x) any Company Contract with any holder
of securities of the Company as such (including, without limitation, any Company
Contract containing an obligation to register any of such securities under any
federal or state securities laws);
(xi) any Company Contract obligating the
Company to deliver services or product enhancements or containing a "most
favored nation" pricing clause;
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(xii) any Company Contract relating to the
acquisition by the Company of any operating business or the capital stock of any
other person;
(xiii) any Company Contract requiring the
payment to any Person of a brokerage or sales commission or a finder's or
referral fee (other than arrangements to pay commission or fees to employees in
the Ordinary Course of Business);
(xiv) any Company Contract or note relating
to or evidencing outstanding indebtedness for borrowed money;
(xv) any lease, sublease or other Company
Contract under which the Company is lessor or lessee of any real property or
equipment or other tangible property with respect to obligations in excess of
$10,000; and
(xvi) any other material Company Contract
whether or not made in the Ordinary Course of Business.
(b) Each Company Contract is valid and in full
force and effect, and is enforceable by the Company in accordance with its
material terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity.
(c) Neither the Company nor any party to a
Company Contract is in default under any Company Contract. No event has
occurred, and no circumstance or condition exists, that likely would (with or
without notice or lapse of time) (i) result in a violation or breach of any of
the provisions of any Company Contract, (ii) give any Person the right to
declare a default or exercise any remedy or hinder any Company Contract, (iii)
give any Person the right to accelerate the maturity or performance of any
Company Contract, or (iv) give any Person the right to cancel, terminate or
modify any Company Contract. The Company has not waived any of its rights under
any Company Contract, except in the Ordinary Course of Business.
(d) To the Company's Knowledge, each Person
against which the Company has or may acquire any rights under any Company
Contract is solvent and is able to satisfy all of such Person's current and
future monetary obligations and other obligations and Liabilities to the
Company.
(e) (i) The Company has never guaranteed or
otherwise agreed to cause, insure or become liable for, and has never pledged
any of its assets to secure, the performance or payment of any obligation or
other Liability of any other Person except in the Ordinary Course of Business;
and (ii) the Company has never been a party to or bound by (A) any joint venture
agreement, partnership agreement, profit sharing agreement, cost sharing
agreement, loss sharing agreement or similar Contract, or (B) any Contract that
creates or grants to any Person, or provides for the creation or grant of, any
stock appreciation right, phantom stock right or similar right or interest.
(f) To the Knowledge of the Company, the
performance of the Company Contracts will not result in any violation of or
failure to comply with any Legal Requirement.
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(g) No Person is materially renegotiating, nor
has the contractual right to materially renegotiate, any amount paid or payable
to the Company under any Company Contract or any other material term or
provision of any Company Contract.
(h) Schedule 3.10(h) of the Disclosure Schedule
identifies and provides an accurate and brief description of each proposed
Contract as to which any bid, offer, written proposal, term sheet or similar
document has been submitted or received by the Company that would commit the
Company to deliver goods or provide services with a value in excess of $20,000
and is outstanding.
(i) No party to any Company Contract has notified
the Company or made a claim to the effect that the Company has failed to perform
an obligation thereunder. In addition, to the Knowledge of the Company, there is
no plan, intention or indication of any contracting party to any Company
Contract to cause the termination, cancellation or modification of such Contract
or to reduce or otherwise change its activity thereunder so as to adversely
affect the benefits derived or expected to be derived therefrom by the Company.
(j) The Contracts identified in Section 3.10 of
the Disclosure Schedule collectively constitute all of the Contracts necessary
to enable the Company to conduct its business in the manner in which its
business is currently being conducted.
3.11 Compliance With Legal Requirements.
(a) The Company is in compliance with each Legal
Requirement that is applicable to it or to the conduct of its business or the
ownership or use of any of its assets.
(b) To the Knowledge of the Company, no event
has occurred, and no condition or circumstance exists, that likely would (with
or without notice or lapse of time) constitute or result directly or indirectly
in a violation by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement.
(c) The Company has not received at any time any
notice or other communication (in writing or otherwise) from any Governmental
Body, or any other Person, regarding (i) any actual, alleged, possible or
potential violation of, or failure to comply with, any Legal Requirement, or
(ii) any actual, alleged, possible or potential obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any cleanup
or any remedial, corrective or response action of any nature.
(d) To the Knowledge of the Company, no
Governmental Body has proposed or is considering any Legal Requirement (other
than any Legal Requirement that would be applicable generally to the industry in
which the Company competes) that, if adopted or otherwise put into effect, would
specifically affect the Company and (i) may have an adverse effect on the
Company's business, condition, assets, liabilities, operations, financial
performance, results of operations or prospects or on the ability of the Company
to comply with or perform any covenant or obligation under this Agreement or any
of the other Transaction Documents, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
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3.12 Governmental Authorizations.
(a) Section 3.12 of the Disclosure Schedule
identifies (i) each Governmental Authorization that is held by the Company; and
(ii) each other Governmental Authorization that, to the Knowledge of the
Company, is held by any of the Company's employees and is used in connection
with the Company's business. The Company has delivered to Coyote accurate and
complete copies of all of the Governmental Authorizations identified in Section
3.12 of the Disclosure Schedule, including all renewals thereof and all
amendments thereto. Each Governmental Authorization identified or required to be
identified in Section 3.12 of the Disclosure Schedule is valid and in full force
and effect.
(b) The Governmental Authorizations identified
in Section 3.12 of the Disclosure Schedule constitute all of the Governmental
Authorizations necessary (i) to enable the Company to conduct its business in
the manner in which its business is currently being conducted and (ii) to permit
the Company to own and use its assets in the manner in which they are currently
owned and used.
3.13 Tax Matters.
(a) Each Tax required to have been paid, or
claimed by any Governmental Body to be payable, by the Company (whether pursuant
to any Tax Return or otherwise) has been duly paid in full on a timely basis.
Any Tax required to have been withheld or collected by the Company has been duly
withheld and collected, and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body.
(b) "Company Returns" means all Tax Returns
required to be filed by or on behalf of the Company with any Governmental Body
with respect to any taxable period ending on or before the date hereof. All
Company Returns (i) have been or will be filed when due, and (ii) have been, or
will be when filed, accurately and completely prepared in material compliance
with all applicable Legal Requirements. All amounts shown on the Company Returns
to be due on or before the date hereof, and all amounts otherwise payable in
connection with the Company Returns on or before the date hereof, have been
paid. The Company has delivered to Coyote accurate and complete copies of
Company Returns filed by the Company.
(c) The Company's liability for unpaid Taxes for
all periods ending on or before the date of the Financial Statements does not,
in the aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred taxes) reported in the Financial Statements.
The Company has established in the Ordinary Course of Business reserves for the
payment of all Taxes for the period from the date of the Financial Statements
through the date hereof and has disclosed the dollar amount of such reserves to
the Coyote.
(d) Section 3.13(d) of the Disclosure Schedule
accurately identifies each examination or audit of any Company Return that has
been conducted by any Governmental Body. The Company has delivered to Coyote
accurate and complete copies of all audit reports and similar documents relating
to Company Returns. No extension or waiver of the limitation period applicable
to any of the Company Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from the Company.
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(e) No claim or other Proceeding is pending or
to the Company's Knowledge has been threatened against or with respect to
Company in respect of any Tax. There are no unsatisfied Liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by the Company. The Company has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. The Company has not
been, and will not be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code
or any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing. The Company is in compliance with the terms and conditions of any
applicable Tax exemptions, Tax agreements or Tax orders of any Governmental Body
to which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse effect on such
compliance.
(f) There is no agreement, plan, arrangement or
other Contract covering any employee or independent contractor or former
employee or independent contractor of the Company that, individually or
collectively, could give rise directly or indirectly to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162 of
the Code.
(g) Company has no net operating losses or other
tax attributes presently subject to limitation under Code Sections 382, 383, or
384.
(h) The Company is not liable for Taxes incurred
by any individual, trust, corporation, partnership or other entity other than
Company, either as a transferee or pursuant to Treasury Regulations Section
1.1502-6, or pursuant to any other provision of federal, state or local law or
regulation. The Company is not, and has never been, a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
(i) The Company is not a party to any joint
venture, partnership or other arrangement or contract which could be treated as
a partnership for United States federal income tax purposes.
(j) The Company is not a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
and has not been a United States real property holding corporation within the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3.14 Employee and Labor Matters.
(a) Section 3.14(a) of the Disclosure Schedule
accurately sets forth, with respect to each significant employee of the Company
(including any significant employee of the Company who is on a leave of absence
or on layoff status) (i) the name of such employee and the date as of which such
employee was originally hired by the Company; (ii) such employee's title; (iii)
such employee's annualized compensation as of the date of this Agreement; (iv)
each Current Benefit Plan in which such employee participates or is eligible to
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participate; and (v) any Governmental Authorization that is held by such
employee and that is used in connection with the Company's business.
(b) Schedule 3.14(b) of the Disclosure Schedule
contains a list of individuals who are currently performing services for the
Company and are classified as "consultants" or "independent contractors," and
the respective compensation of each such "consultant" or "independent
contractor."
(c) There is no former employee of the Company
who is receiving or is scheduled to receive (or whose spouse or other dependent
is receiving or is scheduled to receive) any benefits (whether from the Company
or otherwise) relating to such former employee's employment with the Company.
(d) The Company is not a party to or bound by
any employment agreement or any union contract, collective bargaining agreement
or similar Contract.
(e) The employment of each of the Company's
employees is terminable by the Company at will. The Company has delivered to
Coyote accurate and complete copies of all employee manuals and handbooks,
disclosure materials, policy statements, employment agreements and other
materials relating to the employment of the current employees of the Company.
(f) To the Knowledge of the Company (i) no
significant employee of the Company intends to terminate his or her employment
with the Company and the Company does not have a present intention to terminate
the employment of any significant employee; (ii) no significant employee of the
Company is currently considering, an offer to join a business that likely would
be competitive with the Company's business; and (iii) no employee of the Company
is a party to or is bound by any confidentiality agreement, noncompetition
agreement or other Contract (with any Person) that likely would have an adverse
effect on (A) the performance by such employee of any of his or her duties or
responsibilities as an employee of the Company, or (B) the Company's business or
operations.
(g) The Company is not engaged, and has never
been engaged, in any unfair labor practice of any nature. There has never been
any slowdown, work stoppage, labor dispute or union organizing activity, or any
similar activity or dispute, affecting the Company or any of its employees.
There is not now pending, and to the Knowledge of the Company no Person has
threatened to commence, any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute, nor has any event
occurred, nor does any condition or circumstance exist, that likely would
directly or indirectly give rise to or provide a basis for the commencement of
any such slowdown, work stoppage, labor dispute or union organizing activity or
any similar activity or dispute.
3.15 Benefit Plans; ERISA.
(a) Section 3.15 of the Disclosure Schedule lists
(i) all Employee Benefit Plans, (ii) all employment agreements, including, but
not limited to, any individual benefit arrangement, policy or practice with
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respect to any current or former employee or director of the Company or any
ERISA Affiliate, and (iii) all other employee benefit, bonus or other incentive
compensation, stock option, stock purchase, stock appreciation, severance pay,
lay-off or reduction in force, change in control, sick pay, vacation pay, salary
continuation, retainer, leave of absence, educational assistance, service award,
employee discount, fringe benefit plans, arrangements, policies or practices,
whether legally binding or not, which the Company or any ERISA Affiliate
maintains, contributes to or has any obligation to or liability for
(collectively, the "Plans").
(b) None of the Plans is a Defined Benefit Plan,
and neither the Company nor any ERISA Affiliate has ever sponsored, maintained
or contributed to, or ever been obligated to contribute to, a Defined Benefit
Plan.
(c) None of the Plans is a Multiemployer Plan,
and neither the Company nor any ERISA Affiliate has ever contributed to, or ever
been obligated to contribute to, a Multiemployer Plan.
(d) The Company does not maintain or contribute
to any welfare benefit plan that provides health benefits to an employee after
the employee's termination of employment or retirement except as required under
Section 4980B of the Code and Sections 601 through 608 of ERISA.
(e) Each Plan that is an Employee Benefit Plan
complies by its terms and in operation with the requirements provided by any and
all statutes, orders or governmental rules or regulations currently in effect
and applicable to the Plan, including but not limited to ERISA and the Code.
(f) All reports, forms and other documents
required to be filed with any Governmental Body with respect to any Plan
(including without limitation, summary plan descriptions, Forms 5500 and summary
annual reports) have been timely filed and are accurate.
(g) Each Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable determination letter issued by
the Internal Revenue Service that provides that it so qualifies through the last
day of the "TRA 86 Remedial Amendment Period," as such term is defined in
Section 3.02 of Revenue Procedure 96-55 issued by the Internal Revenue Service
and that its related trust is exempt from taxation under Section 501 of the
Code. To the Company's Knowledge, nothing has occurred since the date of the
Internal Revenue Service's favorable determination letter that could adversely
affect the qualification of such Plan or the tax exempt status of its related
trust.
(h) All contributions for all periods ending
prior to the Closing (including periods from the first day of the current plan
year to the Closing) have been made prior to the Closing by the Company in
accordance with past practice and the recommended contribution in any applicable
actuarial report.
(i) All insurance premiums have been paid in
full, subject only to normal retrospective adjustments in the ordinary course,
with regard to the Plans for plan years ending on or before the Closing.
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(j) With respect to each Plan:
(i) no prohibited transactions (as defined
in Section 406 or 407 of ERISA or Section 4975 of the Code) have occurred for
which a statutory exemption is not available;
(ii) no action or claims (other than
routine claims for benefits made in the ordinary course of Plan administration
for which Plan administrative review procedures have not been exhausted) are
pending, threatened or imminent against or with respect to the Plan, any
employer who is participating (or who has participated) in any Plan or any
fiduciary (as defined in Section 3(21) of ERISA) of the Plan;
(iii) neither the Company nor any fiduciary
has any Knowledge of any facts which could give rise to any such action or
claim; and
(iv) it provides that it may be amended
or terminated at any time and, except for benefits protected under Section
411(d) of the Code, all benefits payable to current, terminated employees or any
beneficiary may be amended or terminated by the Company at any time without
liability.
(k) Neither the Company nor any ERISA Affiliate
has any liability or is threatened with any liability (whether joint or several)
(i) for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the
Code, or (ii) to a fine under Section 502 of ERISA.
(l) All of the Plans listed in the Disclosure
Schedule, to the extent applicable, are in compliance with the continuation of
group health coverage provisions contained in Section 4980B of the Code and
Sections 601 through 608 of ERISA.
(m) True, correct and complete copies of all
documents creating or evidencing any Plan listed in the Disclosure Schedule have
been delivered to Coyote, and true, correct and complete copies of all reports,
forms and other documents required to be filed with any governmental entity
(including, without limitation, summary plan descriptions, Forms 5500 and
summary annual reports for all plans subject to ERISA) have been delivered to
Coyote. There are no negotiations, demands or proposals which are pending or
have been made which concern matters now covered, or that would be covered, by
the type of agreements listed in the Disclosure Schedule.
(n) All expenses and liabilities relating to all
of the Plans described in the Disclosure Schedule have been, and will on the
Closing be fully and properly accrued on the Company's books and records and
disclosed in accordance with generally accepted accounting principles and in
Plan financial statements.
3.16 Environmental Matters. The Company is and has been at all
times in compliance in all respects with all Environmental Laws. The Company has
now and at all times has had all the necessary permits required under
Environmental Laws for the operation of its business, and is not and has not
been in violation of any of the terms and conditions of any of its permits. The
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Company has not received any notice or other communication (in writing or
otherwise) that alleges that the Company is not in compliance with any
Environmental Law. The Company has not generated, manufactured, produced,
transported, imported, used, treated, refined, processed, handled, stored,
discharged, released, or disposed of any Hazardous Materials (whether lawfully
or unlawfully) at any of the Leased Premises occupied or controlled by the
Company on or at any time prior to the date hereof other than common household
and office products in de minimis quantities. There are not and have not been
any releases or threatened releases of any Hazardous Materials in any quantity
(other than common household and office products in de minimis quantities) at,
on, or from the Leased Premises, and to the Knowledge of the Company (a) there
are no circumstances that may prevent or interfere with the Company's compliance
with any Environmental Law and (b) no former owner or user of the Leased
Premises engaged in any type of manufacturing or commercial activity which might
be reasonably expected to generate, manufacture, produce, transport, import,
use, treat, refine, process, handle, store, discharge, release, or dispose of
any Hazardous Materials (whether lawfully or unlawfully) on the Leased Premises.
3.17 Sale of Products; Performance of Services. The Company
has not made any express warranties or guarantees relating to its products that
are in effect as of the date hereof. No customer or other Person has ever
asserted or threatened to assert any material claim against the Company (i)
under or based upon any warranty provided by or on behalf of the Company, or
(ii) under or based upon any other warranty relating to any product sold by the
Company or any services performed by the Company. To the Knowledge of the
Company, no event has occurred, and no condition or circumstance exists, that
likely would (with or without notice or lapse of time) directly or indirectly
give rise to or serve as a basis for the assertion of any such claim. The
Company has received no customer complaints pursuant to which the Company gave a
credit or accepted a product return for a refund in either case in excess of
$1,000.
3.18 Insurance. The Company does not currently have any
insurance policies in place. The Company has not been refused any insurance with
respect to its assets or operations, nor has any insurance carrier to which it
has applied for any such insurance or with which it has carried insurance
limited its coverage.
3.19 Related Party Transactions.
(a) No Related Party has, and no Related Party
has at any time since January 1, 1999, had, any direct or indirect interest of
any nature in any asset used in or otherwise relating to the business of the
Company;
(b) no Related Party is, or has been, indebted
to the Company;
(c) no Related Party has entered into, or has
had any direct or indirect financial interest in, any Contract, transaction or
business dealing of any nature involving the Company and no such Contract,
transaction or business dealing of any nature is necessary to operate the
business of the Company as it is currently conducted;
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(d) to the Company's Knowledge, no Related Party
is competing, or has at any time competed, directly or indirectly, with the
Company in any market served by the Company;
(e) no Related Party has any claim or right
against the Company; and
(f) to the Knowledge of the Company, no event
has occurred, and no condition or circumstance exists, that likely would (with
or without notice or lapse of time) directly or indirectly give rise to or serve
as a basis for any claim or right in favor of any Related Party against the
Company.
3.20 Proceedings; Orders.
(a) There is no pending Proceeding, and to the
Knowledge of the Company, no Person has threatened to commence any Proceeding
(i) that involves the Company or that otherwise relates to or likely would
affect the Company's business or any of the assets owned or used by the Company
(whether or not the Company is named as a party thereto); or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Transactions. To the Knowledge of the
Company, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that likely would directly or indirectly give rise to or
serve as a basis for the commencement of any such Proceeding.
(b) No Proceeding has ever been commenced by or
against the Company, and no Proceeding otherwise involving or relating to the
Company has been pending or threatened at any time.
(c) The Company has delivered to Coyote accurate
and complete copies of all pleadings, correspondence and other written materials
to which the Company has access that relate to the Proceedings identified in
Section 3.20 of the Disclosure Schedule.
(d) There is no Order to which the Company, or
any of the assets owned or used by the Company, is subject.
(e) To the Knowledge of the Company, no officer
or employee of the Company is subject to any Order that prohibits such officer
or employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
(f) There is no Order that, or to the Knowledge
of the Company, proposed Order (other than any proposed Order that would be
applicable generally to the data integration industry) that, if issued or
otherwise put into effect, (i) likely would have a material adverse effect on
the ability of the Company to comply with or perform any covenant or obligation
under this Agreement or any of the other Transaction Documents, or (ii) may have
the effect of preventing, delaying, making legal or otherwise interfering with
any of the Transactions.
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3.21 Non-Contravention; Consents. Neither the execution and
delivery of this Agreement or the other Transaction Documents, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a
violation of (i) any of the provisions of the Company's articles of
incorporation or bylaws, or (ii) any resolution adopted by the Company's
shareholders, the Company's board of directors or any committee of the Company's
board of directors, if any;
(b) to the Knowledge of the Company, contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Company, or any of the assets owned or used by the Company, is subject;
(c) cause the Company to become subject to, or
to become liable for the payment of, any Tax;
(d) cause any of the assets owned or used by the
Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(e) to the Knowledge of the Company, contravene,
conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Company
or any of its employees or that otherwise relates to the Company's business or
to any of the assets owned or used by the Company;
(f) contravene, conflict with or result in a
violation or breach of, or result in a default under, any material provision of
any of the Company Contracts;
(g) give any Person the right to (i) declare a
default or exercise any remedy under any Company Contract, (ii) accelerate the
maturity or performance of any Company Contract, or (iii) cancel, terminate or
modify any Company Contract;
(h) give any Person the right to any payment by
the Company or give rise to any acceleration or change in the award, grant,
vesting or determination of options, warrants, rights, severance payments or
other contingent obligations of any nature whatsoever of the Company in favor of
any Person, in any such case as a result of the change in control of the Company
or otherwise resulting from the Transactions; or
(i) result in the imposition or creation of any
Encumbrance upon or with respect to any asset owned or used by the Company.
Except as set forth in Section 3.21 of the Disclosure Schedule, the Company will
not be required to make any filing with or give any notice to, or obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement and the other Transaction Documents or the consummation or performance
of any of the Transactions. As of the date hereof, all such filings, notices and
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Consents have been duly made, given or obtained and are in full force and
effect, other than those which by their nature are required to be made, given or
obtained after the execution of this Agreement, all of which shall be made,
given or obtained within the time required therefor.
3.22 Brokers. The Company has not agreed or become obligated
to pay, or taken any action that likely would result in any Person claiming to
be entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the Transactions.
3.23 Year 2000 Compliance. All of the Company's products
(including products currently under development) record, store, process and
calculate and present calendar dates falling on and after January 1, 2000,
calculate any information dependent on or relating to such dates in the same
manner and with the same functionality, data integrity and performance as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. All of the Company's material products lose no functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000. All of the Company's internal computer systems, including
without limitation, its accounting systems, are Year 2000 Compliant.
3.24 Tax Treatment. Neither the Company nor any of its
Affiliates has taken any action or knows of any fact, agreement, plan or other
circumstance that could pose a material risk to the status of the Merger as a
reorganization under the provisions of Section 368(a) of the Code.
3.25 Full Disclosure.
(a) Neither this Agreement (including all
Schedules, Exhibits and Annexes hereto), nor any of the Transaction Documents,
contains any untrue statement of material fact or omits to state any fact
necessary to make any of the representations, warranties or statements contained
therein on behalf of the Company or any of the Shareholders not misleading. To
the extent any representation or warranty permits omission of items otherwise
required to be discussed because they are not material or do not or would not
have a Material Adverse Effect on the Company, such omissions in the aggregate
will not and do not have a Material Adverse Effect on the Company.
(b) As of the date of this Agreement, the
Company has provided Coyote and Coyote's Representatives with full and complete
access to all of the Company's records and other documents and data requested by
them.
(c) There is no fact within the Knowledge of
Company (other than publicly known facts relating exclusively to political or
economic matters of general applicability) that (i) may have a Material Adverse
Effect on the Company's business, condition, assets, liabilities, operation,
financial performance, net income or prospects (in or any aspect or portion
thereof) or on the ability of the Company to comply with or perform any covenant
or obligation under this Agreement or any of the other Transaction Documents, or
(ii) may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
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(d) All of the information set forth in the
Disclosure Schedule, other information regarding the Company and its business,
condition, assets, liabilities, operation, financial performance, net income and
prospects that have been furnished to Coyote or any of its Representatives by or
on behalf of Company or any of the Company's Representatives, is accurate in all
material respects.
3.26 Powers of Attorney. The Company has not given a
power of attorney to any Person.
3.27 Voting Arrangements. There are no outstanding
shareholder agreements, voting trusts, proxies or other arrangements or
understandings relating to the voting of any shares of the capital stock of the
Company.
3.28 Change in Control Payments. The Company does not have any
plans, programs or agreements to which it is a party, or to which it is subject,
pursuant to which payments (whether in cash or property or the vesting of
property) may be required upon, or may become payable directly or indirectly as
a result of, a change of control of the Company.
3.29 Board Approval. The board of directors of the Company
has, as of the date of this Agreement, unanimously (i) approved, subject to
shareholder approval, this Agreement and the transactions contemplated hereby
and thereby, (ii) determined that the Merger is in the best interests of the
shareholders of Company and is on terms that are fair to such shareholders and
(iii) recommended that the shareholders of Company approve this Agreement and
the Merger.
3.30 Vote Required. The affirmative vote of a majority of the
votes that holders of the outstanding shares of Company Common Stock and the
Company Preferred Stock are entitled to vote with respect to the Merger is the
only vote of the holders of any class or series of Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as specifically set forth in the Disclosure Schedule
delivered by the Shareholders to Coyote at or prior to the execution of this
Agreement, each Shareholder hereby represents and warrants severally to Coyote
that:
4.1 Authority. The Shareholder has all necessary power and, in
the case of Enterprises, other than approval by Enterprises' Board of Directors,
authority to execute and deliver this Agreement and the Transaction Documents,
to perform its obligations under this Agreement and the Transaction Documents
and to consummate the Merger and the other transactions contemplated by this
Agreement and the Transaction Documents. The execution and delivery of this
Agreement and the Transaction Documents and the consummation by the Shareholder
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action other than, in the case of Enterprises,
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approval by Enterprises' Board of Directors, and no other proceedings on the
part of the Shareholder are necessary to authorize this Agreement or the
Transaction Documents or to consummate the transactions contemplated hereby or
thereby, other than, in the case of Enterprises, the approval of Enterprises'
Board of Directors. This Agreement has been validly executed and delivered by
the Shareholder and, in the case of Enterprises, subject to approval by
Enterprises' Board of Directors, constitutes a legal, valid and binding
obligation of the Shareholder, enforceable against it in accordance with its
terms. Each of the Transaction Documents will, when duly executed and delivered
by the Shareholder at the Closing, constitute a legal, valid and binding
obligation of the Shareholder, enforceable against it in accordance with its
terms.
4.2 Title to Shares. The Shareholder has legal, valid,
beneficial and exclusive title to the shares of the capital stock of the Company
owned by it, free and clear of all Encumbrances other than those imposed by the
Securities Act and except as set forth in the Investment Sharing Agreement.
4.3 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Shareholder.
4.4 Accredited Investor. The Shareholder is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act. The Shareholder (i) is purchasing the Series C Preferred Stock and the
Coyote Common Stock issuable pursuant to the terms of this Agreement for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof, in violation of the Securities Act, (ii) has had
an opportunity to ask questions of the officers and directors of, and has had
access to information concerning, Coyote, (iii) has knowledge, sophistication
and experience in business and financial matters and risks of such investment,
(iv) is able to bear the economic risk of such investment, and (v) is able to
afford the complete loss of such investment.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COYOTE
Except as specifically set forth in the Disclosure Schedule
delivered by Coyote to the Company and the Shareholders at or prior to the
execution of this Agreement, Coyote hereby represents and warrants to the
Company and to each Shareholder that:
5.1 Organization and Qualification; Subsidiaries. Coyote and
each Subsidiary of Coyote (collectively, the "Coyote Subsidiaries") has been
duly organized and is validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, as the case may be, and
has the requisite 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. Each of Coyote and each Coyote Subsidiary is duly qualified
or licensed to do 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 would not have a Material Adverse Effect on Coyote.
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Schedule 5.1 sets forth a complete and correct list of all of the Coyote
Subsidiaries. Neither Coyote nor any Coyote Subsidiary holds any equity interest
in any Person other than the Coyote Subsidiaries so listed.
5.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of Coyote consists of (i) 30,000,000 shares of Coyote
Common Stock and (ii) 5,000,000 shares of preferred stock, par value $.01 per
share ("Coyote Preferred Stock"), 700 shares of which are designated as 5%
Series A Convertible Preferred Stock and 3,157,895 shares of which are
designated Series B Preferred Stock. As of the date of this Agreement, (A) 124
shares of 5% Series A Convertible Preferred Stock are issued and outstanding,
which are convertible into 206,666 shares of Coyote Common Stock, (B) 3,157,895
shares of Series B Preferred Stock are issued and outstanding, which are
convertible into 3,157,895 shares of Coyote Common Stock, (C) 17,418,001 shares
of Coyote Common Stock are issued and outstanding, (D) 708,692 shares of Coyote
Common Stock are held in the treasury of Coyote, (E) 5,010,135 shares of Coyote
Common Stock are issuable upon the exercise of outstanding warrants, and (F)
4,235,000 shares of Coyote Common Stock are issuable upon the exercise of
outstanding options and options or restricted stock that may be granted under
certain stock incentive plans of Coyote. Except as described above in this
Section 5.2, there are no shares of capital stock of Coyote authorized, issued
or outstanding. As of the Effective Time, the authorized capital stock of Coyote
shall consist of (i) 80,000,000 shares of Coyote Common Stock and (ii)
10,000,000 shares of Coyote Preferred Stock, 700 shares of which shall be
designated as 5% Series A Convertible Preferred Stock, 3,157,895 shares of which
shall be designated as Series B Preferred Stock and 1,230,380 shares of which
shall be designated as Series C Preferred Stock. Except as set forth in filings
made by Coyote with the SEC under the Securities Act and the Exchange Act or in
this Section 5.2 and except for warrants and options and other rights granted as
set forth above and certain commitments that are contingent upon the amendment
to Coyote's certificate of incorporation that could amount to up to 3,150,000
additional options under the plans as amended by Coyote's preliminary proxy
statement, there are no options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights or other rights, agreements,
arrangements or commitments of any character to which Coyote or any Coyote
Subsidiary is a party or by which Coyote or any Coyote Subsidiary is bound
relating to the issued or unissued capital stock of Coyote or any Coyote
Subsidiary or obligating Coyote or any Coyote Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Coyote or any Coyote
Subsidiary. All shares of Coyote Common Stock and Series C Preferred Stock, upon
issuance to the Shareholders at Closing, and all shares of Coyote Common Stock
issuable upon conversion of the Series C Preferred Stock or otherwise pursuant
to this Agreement or the Warrant, when issued, will be free and clear of all
Encumbrances, other than those imposed by the Securities Act, and will be duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to preemptive rights. There are no outstanding contractual obligations of Coyote
or any Coyote Subsidiary to repurchase, redeem or acquire any shares of Coyote
Common Stock, Coyote Preferred Stock or any security convertible into or
exchangeable for any of the foregoing. Each outstanding share of capital stock
of each Coyote Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and not subject to preemptive rights and each such share owned by
Coyote or a Coyote Subsidiary is free and clear of all Encumbrances, other than
those imposed by the Securities Act.
5.3 Authority. Coyote has all necessary corporate power and
authority to execute and deliver this Agreement and the Transaction Documents to
which it is or is to become a party, to perform its obligations hereunder and
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thereunder and to consummate the Merger and the other transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Transaction Documents to which Coyote is or is to become a party and the
consummation by Coyote of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action other than
the approval of Coyote's stockholders and an increase in authorized shares by
Coyote by Coyote's stockholders (the "Coyote Shareholder Approval") and no other
corporate proceedings on the part of Coyote are necessary to authorize this
Agreement or any Transaction Document or to consummate such transactions, except
for the Coyote Shareholder Approval. This Agreement has been duly authorized and
validly executed and delivered by Coyote and constitutes a legal, valid and
binding obligation of Coyote, enforceable against it in accordance with its
terms. The Transaction Documents to which Coyote or Acquisition is or is to
become a party, when executed and delivered by Coyote or Acquisition at the
Closing, will constitute legal, valid and binding obligations of Coyote or
Acquisition, enforceable against it in accordance with their terms.
5.4 SEC Filings; Financial Statements. Except as set forth in
Section 5.4 of the Disclosure Schedule, Coyote has filed all forms, reports and
documents required to be filed by Coyote with the SEC since January 1, 1998
(collectively, together with any forms, reports and documents filed by Coyote
with the SEC after the date hereof until the Closing, the "Coyote SEC Reports").
Each such report, when filed, complied in all material respects as to form with
the requirements of the Exchange Act and, as of their respective dates, none of
such reports contained any untrue statement of a material fact or omitted 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. Each of the consolidated financial statements (including, in
each case, any related notes) contained in the Coyote SEC Reports complied as to
form in all material respects with the applicable rules and regulations of the
SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements)
and fairly presented the consolidated financial position of Coyote as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that unaudited interim financial statements
contained in any quarterly report on Form 10-Q (i) were or are subject to normal
year-end adjustments which were not or are not expected to be material in
amount, and (ii) do not contain footnote disclosure.
5.5 Title to Shares. At the Effective Time, each Shareholder
shall acquire legal and valid title to the shares of Coyote Common Stock or
Series C Preferred Stock issued to him or it, in each case free and clear of all
Encumbrances, other than those imposed by the Securities Act. Upon issuance,
each Shareholder shall acquire legal and valid title to the shares of Coyote
Common Stock underlying the Series C Preferred Stock and the Warrant and to all
other shares of Coyote Common Stock issued pursuant to this Agreement, in each
case free and clear of all Encumbrances, other than those imposed by the
Securities Act.
5.6 Brokers. Except with respect to fees incurred by Coyote in
connection with the fairness opinion to be issued by First Security Van Kasper
(the payment of which will be the sole responsibility of Coyote), no broker,
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finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Coyote.
5.7 Board Approval. The board of directors of Coyote has, as
of the date of this Agreement, unanimously (i) approved, subject to stockholder
approval, this Agreement and the transactions contemplated hereby and thereby,
(ii) determined that the Merger is in the best interests of the stockholders of
Coyote and is on terms that are fair to such stockholders and (iii) recommended
that the stockholders of Coyote approve this Agreement and the Merger.
ARTICLE 6
COVENANTS
6.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or with the prior written consent of Coyote, which consent
shall not be unreasonably withheld, during the period from the date of this
Agreement to the Closing, the Company shall conduct its operations only in the
ordinary course of business and shall use its reasonable best efforts to
preserve intact the business organization of the Company, to keep available the
services of the present officers and key employees of the Company, and to
preserve the good will of customers, suppliers and all other persons having
business relationships with the Company. Without limiting the generality of the
foregoing, and except as otherwise contemplated by this Agreement, prior to the
Closing, the Company shall not, without the prior written consent of Coyote,
which consent shall not be unreasonably withheld:
(a) amend or otherwise change the Company's
articles of incorporation or bylaws;
(b) except as contemplated by this Agreement,
issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale,
pledge, disposition or encumbrance of, any shares of Company capital stock of
any class, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of Company capital stock, or any other ownership
interest (including, without limitation, any phantom interest) of the Company,
any subsidiary or any of its affiliates;
(c) sell, pledge, dispose of or encumber any
assets or inventory of the Company (except for (i) sales of assets or inventory
in the Ordinary Course of Business, (ii) dispositions of obsolete or worthless
assets, and (iii) pledges of assets pursuant to existing agreements, or
agreements the Company is permitted to enter into in connection with the
purchase of assets), or take any action that would reasonably be expected to
result in any damage to, destruction or loss of any material asset of the
Company (whether or not covered by insurance);
(d) (i) declare, set aside, make or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of any Company Common Stock, (ii) split, combine
or reclassify any Company Common Stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of Company Common Stock, (iii) amend the terms of, repurchase, redeem
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or otherwise acquire any of its securities, except in accordance with
preexisting commitments as of the date hereof, or propose to do any of the
foregoing;
(e) (i) acquire (by merger, consolidation, or
acquisition of stock or assets) any Entity or division thereof, or enter into or
amend any Contract to effect any such acquisition, (ii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee (other than
guarantees of bank debt of a subsidiary entered into in the Ordinary Course of
Business) or endorse or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans or advances, except in each
case in the Ordinary Course of Business (including pursuant to existing credit
lines and lease facilities); (iii) provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in any Entity; (iv)
except in the Ordinary Course of Business or otherwise provided or permitted by
this Agreement, enter into or amend any material Contract which provides for the
sale, license, or purchase by the Company of assets; (v) authorize any capital
expenditures or purchase of fixed assets which are, in the aggregate, in excess
of $10,000; or (vi) enter into or amend any Contract to effect any of the
matters prohibited by this Section 6.1(e);
(f) increase the compensation payable or to
become payable to its officers or employees, except for increases in salary or
wages of employees of the Company who are not executive officers of the Company
in the Ordinary Course of Business in accordance with past practices, or grant
any severance or termination pay to, or enter into any employment or severance
agreement with any director, officer (except for officers who are terminated on
an involuntary basis), or, except as consistent with past practice and in the
Ordinary Course of Business, establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or
employees, except, in each case, as may be required by law;
(g) take any action to change accounting
policies or procedures (including, without limitation, procedures with respect
to revenue recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material Tax election inconsistent
with past practices or settle or compromise any material federal, state, local
or foreign Tax liability or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims,
Liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the Ordinary Course of Business;
(j) engage in any action or enter into any
transaction or permit any action to be taken or transaction to be entered into
that could reasonably be expected to delay the consummation of, or otherwise
adversely affect, any of the transactions contemplated by this Agreement;
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(k) undertake any revaluation of any of the
Company's assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the Ordinary
Course of Business;
(l) take, or allow to be taken or fail to take
any action which act or omission would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code; or
(m) take, or agree in writing or otherwise to
take, any of the actions described in Sections 6.1(a) through (l).
6.2 No Solicitation.
(a) The Company shall not, and shall not permit
or authorize its Representatives to initiate, solicit or encourage (including by
way of furnishing information or assistance) or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, any Alternative Transaction, or enter into
discussions (except as to the existence of these provisions) or negotiate with
any Person in furtherance of such inquiries or to obtain an Alternative
Transaction, or agree to, or endorse, any Alternative Transaction, or authorize
or permit any of the Representatives of the Company to take any such action and
the Company shall promptly notify Coyote of all relevant terms of any such
inquiries or proposals received by the Company or its Representative relating to
any of such matters and if such inquiry or proposal is in writing, the Company
shall promptly deliver or cause to be delivered to Coyote a copy of such inquiry
or proposal and promptly update Coyote as to any material changes with respect
to such inquiry or proposal; provided, however, that nothing contained in this
subsection (a) shall prohibit the board of directors of the Company and its
Representatives from (i) furnishing information to, entering into a
confidentiality agreement with, or entering into discussions or negotiations
with, any Persons in connection with an unsolicited bona fide proposal in
writing by such Person relating to an Alternative Transaction if, and only to
the extent that (A) the board of directors of the Company determines in good
faith, after consultation with its outside legal counsel, that such action is
reasonably necessary to comply with its fiduciary duties under California law,
(B) such action is in response to an unsolicited bona fide written proposal made
by a third party relating to an Alternative Transaction on terms which the
Company's board of directors in good faith believes to be more favorable to the
Company's shareholders than the Merger or may reasonably be expected to result
in an Alternative Transaction on terms that the Company's board of directors in
good faith believes is more favorable to the Company's shareholders than the
Merger, and in each case for which financing, to the extent required, is then
committed (a "Superior Proposal"), and (C) prior to furnishing such information
to, or entering into discussions or negotiations with, such Person the Company
provides written notice to Coyote to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such Person;
(ii) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Alternative Transaction; or (iii) in the event of a Superior Proposal,
entering into an agreement or understanding with respect to the Superior
Proposal.
(b) The Company shall immediately cease and
cause to be terminated any existing discussions or negotiations with any parties
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(other than Coyote and Acquisition) conducted heretofore with respect to any of
the foregoing. The Company agrees not to release any third party from any
confidentiality or standstill agreement to which the Company is a party.
(c) The Company shall ensure that the
Representatives of the Company are aware of the restrictions described in this
Section 6.2.
6.3 Notification of Certain Matters. Each Party shall promptly
notify the other Parties of (a) the occurrence or non-occurrence of any fact or
event which could reasonably be expected (i) to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing or (ii) to cause any
covenant, condition or agreement hereunder not to be complied with or satisfied
in all material respects, (b) any failure of such Party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder in any material respect; provided, however, that no such
notification shall affect the representations or warranties of such Party or the
conditions to the obligations of any Party hereunder, (c) any notice or other
material communications from any Governmental Body regarding the business or
operations (past, present or prospective) of the Company, Coyote or any Coyote
Subsidiary or in connection with the transactions contemplated by this Agreement
and (d) the commencement of any Proceeding against Coyote or any Coyote
Subsidiary.
6.4 Shareholders' Meeting. As promptly as practicable
following the date Coyote mails its proxy statement for the 2000 annual meeting
of stockholders (for which a preliminary proxy statement on Schedule 14A has
been submitted to the SEC) (but in no event more than ten (10) Business Days
after such date; provided that the Company and the Shareholders have provided
Coyote all information necessary to the preparation of the amendment to the
Proxy Statement), Coyote shall prepare and file with the SEC a preliminary proxy
statement for a special meeting of stockholders (the "Proxy Statement") that,
among other things, describes the transactions contemplated by this Agreement
and seeks the approval of Coyote's stockholders to the same. Coyote shall use
its best efforts to cause the Proxy Statement to be approved by the SEC as
promptly as practicable. Subject to the requirements of the SEC and the Exchange
Act, Coyote shall, as promptly as practicable, call a special meeting of its
stockholders and shall cause to be distributed to its stockholders the Proxy
Statement and shall use its best efforts to cause the Transactions to be
approved by Coyote's stockholders. No additional amendment or supplement to the
Proxy Statement shall be made without the approval of the Shareholders, which
approval shall not be unreasonably withheld or delayed.
6.5 Directors of Coyote. Coyote shall take all action
necessary (including, without limitation, adoption of an appropriate amendment
to Coyote's by-laws, if necessary) to ensure that as of the Effective Time, the
Board of Directors of Coyote shall be composed of 7 directors, 3 of whom shall
be designated by Enterprises and 1 of whom shall be designated by Conrad. One of
the 3 directors to be designated by Enterprises shall not be an Affiliate of
Coyote, the Company or either Shareholder and shall be knowledgeable about the
business of Coyote (as determined by Enterprises). The three directors
designated by Enterprises pursuant to this Section 6.5 shall be in separate
classes of Coyote's classified Board of Directors such that the initial terms of
those directors shall expire at the annual meetings of the stockholders of
Coyote to be held in 2001, 2002 and 2003, respectively. The initial term of the
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director designated by Conrad pursuant to this Section 6.5 shall expire at the
annual meeting of the stockholders of Coyote to be held in 2003.
6.6. Voting Agreements. Each person who is a director of
Coyote as of the Closing (other than the directors designated pursuant to
Section 6.5), each person who is an officer (as defined in Rule 16a-1 under the
Exchange Act) of Coyote as of the Closing and each stockholder of Coyote as of
the Closing in which any person specified above has a direct or indirect
interest, including, without limitation, KJR, LLC, shall execute and deliver to
the Shareholders at the Closing a voting agreement in the form attached hereto
as Exhibit B (each, a "Voting Agreement").
6.7 Best Efforts. Subject to the terms and conditions provided
in this Agreement and to applicable legal requirements, each of the Parties
agrees to use its best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, and to assist and cooperate with the other Parties in
doing, as promptly as practicable, all things necessary, proper or advisable
under applicable Laws to ensure that the conditions set forth in Article 5 are
satisfied and to consummate and make effective the transactions contemplated by
this Agreement including, but not limited to, (a) Coyote, the Company and the
Shareholders taking all steps necessary or desirable to consummate the Merger
and (b) Coyote using its best efforts to obtain the Coyote Shareholder Approval.
6.8 Consents. Prior to the Closing, each of the Parties shall
use its best efforts to (i) obtain from any Governmental Body any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by such Party in connection with the authorization, execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and (ii) make all necessary filings, and thereafter make any
other submissions either required or deemed appropriate by each of the Parties,
with respect to this Agreement and the transactions contemplated hereby required
(A) under the Exchange Act and any other applicable federal or state securities
laws, (B) under any other applicable Law, and (C) the rules and regulations of
the Nasdaq National Market. No Party to this Agreement shall consent to any
voluntary extension of any statutory deadline or waiting period or to any
voluntary delay of the consummation of the transactions contemplated hereby at
the behest of any Governmental Body without the consent and agreement of the
other Parties to this Agreement. Each Party hereto shall promptly inform the
others of any material communication from the SEC, the Nasdaq National Market or
any other Governmental Body regarding any of the transactions contemplated by
this Agreement. If any Party or any Affiliate thereof receives a request for
additional information or documentary material from any such Governmental Body
with respect to the transactions contemplated by this Agreement, then such Party
will endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other Parties, an appropriate
response in compliance with such request.
6.9 Certificate of Designation. Prior to the Closing, Coyote
(acting through its Board of Directors) shall create the Series C Preferred
Stock by adopting and filing with the Secretary of State of the State of
Delaware the Certificate of Designation attached hereto as Exhibit C (the
"Certificate of Designation").
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6.10 Listing of Coyote Common Stock. Coyote shall, at Coyote's
sole cost and expense, cause all shares of Coyote Common Stock that may be
issued to either Shareholder (i) at the Closing, (ii) upon conversion of the
Series C Preferred Stock, (iii) upon exercise of the Warrant or (iv) pursuant to
Section 6.12(d) and 6.12(e) of this Agreement (collectively, the "Registrable
Securities") to be approved for listing on the Nasdaq National Market as of the
Closing Date.
6.11 Enterprises' Investment in the Company. Notwithstanding
any restrictions on the operations of the Company set forth in Section 6.1, at
or prior to the Effective Time, Enterprises shall purchase securities in the
Company that constitute, or upon conversion or exercise will constitute, thirty
percent (30%) of the outstanding capital stock of the Company for an aggregate
purchase price of Seven Million Dollars ($7,000,000) in cash. Such purchase of
securities shall not be deemed an Alternative Transaction restricted pursuant to
Section 6.2 hereof.
6.12 Post-Closing Covenants of the Parties.
(a) Directors of Coyote. From and after the
Closing (i)(A) so long as Enterprises and/or its Affiliates collectively
beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act)
("Beneficially Owns") a number of shares of Coyote Common Stock equal to or
greater than fifty percent (50%) of the number of shares of Series C Preferred
Stock issued to Enterprises at the Closing (subject to adjustment in the event
of stock splits, stock dividends and other similar events), Enterprises shall be
entitled to designate for nomination by the Board of Directors of Coyote, and
the Board of Directors of Coyote shall so nominate for election by Coyote's
stockholders, three directors (in accordance with Section 6.5 of this
Agreement), (B) so long as Enterprises and/or its Affiliates collectively
Beneficially Own a number of shares of Coyote Common Stock equal to or greater
than twenty five percent (25%) but less than fifty percent (50%) of the number
of shares of Series C Preferred Stock issued to Enterprises at the Closing
(subject to adjustment in the event of stock splits, stock dividends and other
similar events), Enterprises shall be entitled to designate for nomination by
the Board of Directors of Coyote, and the Board of Directors of Coyote shall so
nominate for election by Coyote's stockholders, two directors and (C) so long as
Enterprises and/or its Affiliates collectively Beneficially Own any shares of
Coyote Common Stock but less than twenty five percent (25%) of the number of
shares of Series C Preferred Stock issued to Enterprises at the Closing (subject
to adjustment in the event of stock splits, stock dividends and other similar
events), Enterprises shall be entitled to designate for nomination by the Board
of Directors of Coyote, and the Board of Directors of Coyote shall so nominate
for election by Coyote's stockholders, one director, and (ii) so long as Conrad
Beneficially Owns a number of shares of Coyote Common Stock equal to or greater
than thirty three percent (33%) of the number of shares of Coyote Common Stock
issued to Conrad at the Closing (subject to adjustment in the event of stock
splits, stock dividends and other similar events), Conrad shall be entitled to
designate for nomination by the Board of Directors of Coyote, and the Board of
Directors of Coyote shall so nominate for election by Coyote's stockholders, one
director. The rights of each Shareholder under this Section 6.12(a) are freely
transferable to any Person to whom or to which all of the shares of Series C
Preferred Stock and Coyote Common Stock then Beneficially Owned by such
Shareholder and its Affiliates are transferred; provided, however, that in the
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case of a transfer of all of the shares of Series C Preferred Stock and Coyote
Common Stock Beneficially Owned by a Shareholder and its Affiliates, the rights
of such Shareholder under this Section 6.12(a) shall not be transferable to such
transferee unless such transferee is first approved by Coyote, such approval not
to be unreasonably withheld, conditioned or delayed; and provided, further, that
a transfer by a Shareholder (or any of its Affiliates) of shares of Series C
Preferred Stock and Coyote Common Stock and the rights of that Shareholder under
this Section 6.12(a) to the other Shareholder (or any of its Affiliates) shall
not require the prior approval of Coyote. Any disputes between a Shareholder and
Coyote pursuant to the preceding sentence shall be resolved in accordance with
the provisions of Section 10.2. So long as a Shareholder has rights to designate
a director under this Section 6.12(a), that Shareholder shall be entitled to
designate a successor to the director or directors designated by him or it in
the case of any vacancy resulting from the death, resignation or removal of such
designee prior to the expiration of his or her term. For so long as either
Shareholder has the right to designate one or more directors for nomination
pursuant to this Section 6.12(a), Coyote shall take all actions necessary to
maintain the number of directors at seven (7) and shall not expand the Board of
Directors or otherwise take any action to increase the number of directors to a
number greater than seven (7), in each case without the prior written consent of
each Shareholder. Within thirty (30) days after the date that Enterprises or
Conrad loses the right to designate for nomination a director or directors to
the Board of Directors of Coyote as set forth in this Section 6.12(a),
Enterprises or Conrad, as the case may be, shall cause that number of directors
that it no longer has the right to designate to resign from the Board of
Directors of Coyote and the remaining directors shall appoint a new director or
directors to fill the vacancy created by such resignation(s). From and after the
Closing, Coyote shall indemnify each director designated pursuant to this
Section 6.12(a) (collectively, the "Shareholder Designees") to the fullest
extent permitted by applicable Law with respect to any and all liabilities
arising from or related to acts or omissions arising out of such individuals'
services as directors of Coyote. Without limiting the foregoing, if any
Shareholder Designee is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including the
transactions contemplated by this Agreement, occurring on or after the Closing,
Coyote shall pay as incurred such Shareholder Designee's reasonable legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith in the same manner as the directors of Coyote
that are not Shareholder Designee's. From and after the Closing, Coyote shall
maintain in effect directors' and officers' liability insurance in favor of the
Shareholder Designees.
(b) Voting Agreements. From and after the
Closing and for so long as either Shareholder has the right to designate a
director pursuant to Section 6.12(a), Coyote shall use its best efforts to cause
each person who becomes a director of Coyote (other than any Shareholder
Designee) to execute a Voting Agreement.
(c) Strategic Relationships. After the Closing
and until the fourth anniversary of the Closing Date, Enterprises shall use its
best efforts to cause the utilities and non-regulated businesses with which it
is affiliated, and those with which it is not affiliated but with which it has
relationships, to participate in the rolling out of the Surviving Corporation's
services as such services exist on the Closing Date.
(d) Contingent Shares. After the Effective Time,
and for a period of four (4)years from the Closing Date, Coyote shall issue to
the Shareholders, collectively (and for allocation between the Shareholders
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seventy percent (70%) to Conrad and thirty percent (30%) to Enterprises), two
shares of Coyote Common Stock for every customer obtained by the Surviving
Corporation (or any Affiliate thereof) following the Closing; provided, however,
that each such customer shall be subject to the prior approval of Coyote (which
approval shall not be unreasonably withheld, conditioned or delayed) and
provided, further, that each such customer shall purchase merchandise and/or
services through the Surviving Corporation's electronic commerce systems with an
aggregate retail price of $100 or more during any continuous thirty (30) month
period before shares of Coyote Common Stock shall be issuable under this Section
6.12(d) with respect to that customer. For purposes of this Section 6.12, a
"customer" includes, but is not limited to, a subscriber to the Surviving
Corporation's electronic commerce system (whether or not such customer is then a
customer or prospect of the Surviving Corporation, Enterprises or the current or
future Affiliates of Enterprises). Shares of Coyote Common Stock to be issued
pursuant to this Section 6.12(d) shall be issued to the Shareholders on a
quarterly basis, in arrears, and not later than the tenth Business Day after the
end of each calendar quarter. The number of shares of Coyote Common Stock to be
issued pursuant to this Section 6.12(d) for each customer shall be subject to
adjustment in the event of any stock split, stock combination or other similar
transaction or recapitalization. Notwithstanding the foregoing, Coyote shall
have no obligation to issue additional shares of Coyote Common Stock pursuant to
this Section 6.12(d) if such additional shares would cause the number of shares
of Coyote Common Stock that have been issued pursuant to this Section 6.12(d) to
exceed thirteen percent (13%) of the total number of shares of Coyote Common
Stock outstanding as of the Closing Date (assuming, for purposes of this
calculation, the issuance of all shares of Coyote Common Stock issuable at the
Effective Time, the issuance of all shares of Coyote Common Stock underlying the
Series C Preferred Stock and the exercise of all options, warrants and other
rights to acquire Coyote Common Stock (whether or not then vested) outstanding
as of the Closing Date and the conversion of all securities outstanding as of
the Closing Date that are convertible (either as of the Closing Date or at any
time thereafter) into shares of Coyote Common Stock) (as such number may be
equitably adjusted for stock splits, stock combinations or other similar
transactions or recapitalizations).
(e) Registration of Registrable Securities.
(i) Within 120 days after the Closing
Date, Coyote shall file with the SEC a shelf registration statement under Rule
415 of the Securities Act on Form S-1 (or any successor form thereto) covering
the sale or other distribution of all of the Registrable Securities, and shall
keep such shelf registration statement effective until all Registrable
Securities have been sold. If such shelf registration statement is not filed
within 120 days after the Closing Date, or if such shelf registration statement
is not declared effective by the SEC before the first anniversary of the Closing
Date, then Coyote shall issue to each Shareholder on the fifth Business Day
following such first anniversary of the Closing Date such number of additional
shares of Coyote Common Stock as is equal to twelve percent (12%) of the
aggregate number of Registrable Securities held by such Shareholder on such
first anniversary of the Closing Date (the "Additional Securities"). Coyote
shall amend the shelf registration statement from time to time at the request of
either Shareholder to include in such registration statement Registrable
Securities issued to such Shareholder subsequent to the filing of the
registration statement (or any amendment thereto) with the SEC. Coyote shall
notify each Shareholder promptly (A) when the shelf registration statement or
any amendment or supplement thereto has been filed and when the same (as amended
or supplemented, as the case may be) has become effective, (B) of the issuance
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by the SEC or any state securities authority of any stop order suspending the
effectiveness of such registration statement or the initiation of any
proceedings for that purpose, (C) of the receipt by Coyote of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and (D) of the happening of any event or the
discovery of any facts that makes any statement made in the registration
statement, the prospectus constituting a part thereof or any document
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the registration statement, the prospectus
constituting a part thereof or any document incorporated therein by reference in
order to make the statements therein not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. Coyote shall make every effort to obtain the
withdrawal of any order suspending the effectiveness of such registration
statement at the earliest possible time. Coyote shall timely file all reports
required to be filed by it under Section 13 or Section 15(d) of the Exchange
Act. The issuance of Additional Securities shall not constitute a waiver of
Shareholders' right to seek specific performance of this Section 6.12(e).
(ii) The Shareholders agree that no
Shareholder may participate in or have its shares of Coyote Common Stock
included in any such shelf registration statement unless such Shareholder
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements or to ensure compliance with the requirements
of the Securities Act.
(iii) In addition to the information
required to be provided in a notice and questionnaire by each Shareholder to
Coyote, Coyote may require each Shareholder to furnish to Coyote such additional
information regarding each Shareholder and such Shareholder's intended method of
distribution of the Coyote Common Stock as Coyote may from time to time
reasonably request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each Shareholder agrees to
notify Coyote as promptly as practicable of any inaccuracy or change in
information previously furnished by such Shareholder to Coyote or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such Shareholder or such Shareholder's intended method
of disposition of the Coyote Common Stock or omits to state any material fact
regarding such Shareholder or such Shareholder's intended method of disposition
of the Coyote Common Stock required to be stated therein or necessary to make
statements therein not misleading in light of the circumstances then existing,
and promptly to furnish to Coyote any additional information required to correct
and update any previously furnished information or required so that such
prospectus shall not contain, with respect to such Shareholder or the
disposition of the applicable Coyote Common Stock an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing.
(f) Issuance of Warrant. Coyote shall issue to
Enterprises a warrant, exercisable for 3,200,000 shares of Coyote Common Stock
at an exercise price of $20.00 per share in substantially the form attached
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hereto as Exhibit D (the "Warrant") if and when Coyote and/or its Affiliates
have delivered 25,000 screen phones in the aggregate to persons or businesses
that are, at the time of delivery to such person or business, customers of
Enterprises or any of Enterprises' Associates (including, without limitation,
utility and non-utility Associates), all as reasonably determined jointly by
Enterprises and Coyote. Upon the request of Enterprises, Coyote shall provide to
Enterprises all documentation and information reasonably requested by
Enterprises, and upon reasonable prior notice by Enterprises (but not less than
ten (10) days), Coyote shall provide Enterprises access to the books and records
of Coyote and its Affiliates during normal business hours, so that Enterprises
can make the determination as aforesaid. The Warrant shall be issued no more
than ten (10) Business Days following the determination that the above described
condition is met. The number of shares of Coyote Common Stock issuable upon
exercise of the Warrant, and the exercise price per share of Coyote Common
Stock, shall each be subject to adjustment in the event of any stock split,
stock dividend, or other similar event, or in the event of a merger, sale of
assets or other transaction, in the same manner and to the same extent that the
Warrant would be adjusted pursuant to Article 2 of the Warrant if the Warrant
were issued and outstanding at the date of the event (or the record date with
respect thereof, if applicable) giving rise to such adjustment. If any dispute
arises between Enterprises and Coyote pursuant to this Section 6.12(f) such
dispute shall be resolved in accordance with the provisions of Section 10.2.
6.13 Expenses. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated hereby shall be paid by the Party incurring such
Expense; provided, however, that the expenses incurred by the Company shall be
paid by the Shareholders. For purposes of this Agreement, "Expenses" consist of
all out-of-pocket expenses (including, all reasonable fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a Party
hereto and its Affiliates) incurred by a Party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Proxy Statement, the solicitation of the Coyote Shareholder Approval and the
preparation, printing, filing and mailing of documents in connection therewith
and all other matters related to the closing of the transactions contemplated
hereby.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of the Company and the
Shareholders. The obligation of the Company and each Shareholder to consummate
the Merger is subject to the fulfillment (or waiver in writing by the Company or
such Shareholder) at or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Coyote contained in Article 5 of this
Agreement shall be true and correct in all material respects as of the Closing
Date (except for such representations and warranties as are made as of a
specified date, which shall be true and correct in all material respects as of
such specified date);
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(b) Covenants. All the covenants in this
Agreement to be complied with and performed by Coyote on or before the Closing
Date shall have been duly complied with and performed in all material respects;
(c) Officer's Certificate. A certificate in
form and substance acceptable to the Shareholders to the effect that the
conditions set forth in Sections 7.1(a) and 7.1(b) have been fulfilled, dated
the Closing Date and signed by an authorized executive officer of Coyote, shall
have been delivered to the Shareholders and to the Company;
(d) No Injunction. No order shall have been
entered and shall have remained in effect in any action or proceeding before any
Governmental Body that would prohibit or make illegal the consummation of the
Merger;
(e) Nasdaq Listing. Evidence acceptable to the
Shareholders that the Registrable Securities have been approved for listing on
the Nasdaq National Market, subject to official notice of issuance, shall have
been delivered to the Shareholders;
(f) Group Long Distance. The (i) acquisition by
INET Interactive Network System, Inc. of the assets of Group Long Distance, Inc.
and (ii) merger of Coyote-GLD Acquisition, Inc. with and into Group Long
Distance, Inc., with Group Long Distance, Inc. continuing as a Coyote
Subsidiary, each shall have been consummated;
(g) Regulatory Approvals. All notices, reports
and other filings required to be made prior to the Effective Time by Coyote
with, and all consents, registrations, approvals, permits and authorizations
required to be obtained prior to the Effective Time by Coyote from, any
Governmental Body in connection with the execution and delivery of this
Agreement and the consummation of the Merger shall have been made or obtained,
as the case may be; and
(h) Deliveries. Coyote and Employee shall have
delivered the documents and other items required to be delivered by each of them
at the Closing pursuant to Section 2.8 of this Agreement.
7.2 Additional Condition Precedent to Obligations of
Enterprises. The obligation of Enterprises to consummate the Merger is further
subject to the condition precedent that the Board of Directors of Enterprises
shall have approved, in its sole and absolute discretion, this Agreement, the
Transaction Documents and the transactions contemplated hereby and thereby.
7.3 Conditions Precedent to Obligations of Coyote. The
obligation of Coyote to consummate the Merger is subject to the fulfillment (or
waiver in writing by Coyote) at or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. Each of
the representations and warranties of the Company and the Shareholders contained
in Articles 3 and 4 of this Agreement shall be true and correct in all material
respects as of the Closing Date (except for such representations and warranties
as are made as of a specified date, which shall be true and correct in all
material respects as of such specified date);
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(b) Covenants. All the covenants in this
Agreement to be complied with and performed by the Shareholders on or before the
Closing Date shall have been duly complied with and performed in all material
respects;
(c) Officer's Certificates. Certificates, each
in form and substance acceptable to Coyote, to the effect that the conditions
set forth in Section 7.2, Section 7.3(a) and Section 7.3(b) have been fulfilled,
dated the Closing Date and signed by the Company, Conrad and an authorized
executive officer of Enterprises, as applicable, shall have been delivered to
Coyote;
(d) Coyote Shareholder Approval. The Coyote S
hareholder Approval shall have been obtained;
(e) Regulatory Approvals. All notices, reports
and other filings required to be made prior to the Effective Time by the Company
or either Shareholder with, and all consents, registrations, approvals, permits
and authorizations required to be obtained prior to the Effective Time by the
Company or either Shareholder from, any Governmental Body in connection with the
execution and delivery of this Agreement and the consummation of the Merger
shall have been made or obtained, as the case may be; and
(f) Deliveries. The Shareholders, the Company
and the Employee shall have delivered to Coyote the documents and other items
required to be delivered by each of them at the Closing pursuant to Section 2.8
of this Agreement.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated prior
to the Closing and the transactions contemplated hereby abandoned as
follows:
(a) by the mutual written consent of each
Shareholder and Coyote at any time prior to the Closing;
(b) by any Party if a final, non-appealable
order to restrain or otherwise prevent the consummation of the transactions
contemplated hereby shall have been entered by any Governmental Body of
competent jurisdiction;
(c) by the Shareholders, acting together, if the
Closing shall not have occurred on or before August 31, 2000 (the "Termination
Date"); provided, that the Shareholders shall not be entitled to terminate this
Agreement pursuant to this Section 8.1(c) if the failure results primarily from
the breach by the Shareholders of any of their representations, warranties or
covenants contained in this Agreement; or
(d) by any Party, if the Coyote Shareholder
Approval is not obtained at the meeting of Coyote's stockholders called pursuant
to Section 6.4, including any adjournment or postponement thereof.
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8.2 Effect of Termination. Except as provided in Article 9, in
the event of termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any Party, and all rights and obligations of each Party
hereto shall cease; provided, however, that nothing in this Agreement shall
relieve any Party from liability for the willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
ARTICLE 9
SURVIVAL; INDEMNIFICATION
9.1 Survival. All representations and warranties set forth
herein shall survive the Closing, but no claim may be made with respect to any
breach of any representation or warranty hereunder after the twenty-fourth
(24th) month anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 3.1, 4.1, 4.2, 5.3 and 5.5
shall survive without limitation as to time. The agreements and covenants of the
Parties set forth in Section 6.12, Section 6.13, Article 8, Article 9 and
Article 10 of this Agreement shall survive the Closing.
9.2 Indemnification by the Shareholders.
(a) By Enterprises. Subject to Section 9.6
below, Enterprises shall severally indemnify, defend, save and hold Coyote and
its officers, directors, employees, Affiliates and agents (including, after the
Closing, the Surviving Corporation) (collectively, "Coyote Indemnitees")
harmless from and against all demands, claims, actions or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses,
including reasonable attorneys' fees (collectively, "Coyote Damages") asserted
against, imposed upon, resulting to or incurred by any of the Coyote
Indemnitees, directly or indirectly, in connection with, or arising out of, or
resulting from (i) a breach of any of the representations and warranties made by
Enterprises in this Agreement, but only if a claim with respect thereto is made
within the time limits, if any, prescribed by the first sentence of Section 9.1
or (ii) a breach of any of the covenants or agreements made by Enterprises in or
pursuant to this Agreement and in any Transaction Document to which Enterprises
is a party.
(b) By Conrad and Employee. Subject to Section
9.6 below, Employee and Conrad shall jointly and severally indemnify, defend,
save and hold the Coyote Indemnitees harmless from and against all Coyote
Damages asserted against, imposed upon, resulting to or incurred by any of the
Coyote Indemnitees, directly or indirectly, in connection with, or arising out
of, or resulting from (i) a breach of any of the representations and warranties
made by the Company, Employee or Conrad in this Agreement, but only if a claim
with respect thereto is made within the time limits, if any, prescribed by the
first sentence of Section 9.1, (ii) a breach of any of the covenants or
agreements made by the Company, Employee or Conrad in or pursuant to this
Agreement and in any Transaction Document to which the Company, Employee or
Conrad is a party, (iii) the Memorandum of Understanding between SMI and PBNV
executed on July 30, 1999, or (iv) a breach of the covenants and agreements set
forth in the nondisclosure agreements transferred to the Company pursuant to the
terms of the Assignment and Assumption Agreement dated May 1, 2000 between the
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Company and HomeAccess MicroWeb, LLC, which occur prior to the Closing Date, or
any other liabilities incurred by the Coyote Indemnitees under such agreements
after the Closing Date, which liabilities are not the result of or caused by the
actions or inaction of the Coyote Indemnitees; provided, however, that Conrad
and her Affiliates, other than Employee, shall not be required to indemnify the
Coyote Indemnitees under the Promissory Note and the Personal Services Agreement
except to the extent set forth in the Pledge Agreement.
9.3 Indemnification by Coyote. Subject to Section 9.6 below,
Coyote shall indemnify, defend, save and hold each Shareholder and their
respective officers, directors, employees, Affiliates and agents (collectively,
"Shareholder Indemnitees") harmless from and against any and all demands,
claims, actions or causes of action, assessments, losses, damages, deficiencies,
liabilities, costs and expenses, including reasonable attorneys' fees
(collectively, "Shareholder Damages") asserted against, imposed upon, resulting
to or incurred by any of the Shareholder Indemnitees, directly or indirectly, in
connection with, or arising out of, or resulting from, (i) a breach of any of
the representations and warranties made by Coyote in this Agreement, but only if
a claim with respect thereto is made within the time limits, if any, prescribed
by the first sentence of Section 9.1 or (ii) a breach of any of the covenants or
agreements made by Coyote in or pursuant to this Agreement and in any
Transaction Document to which Coyote is a party.
9.4 Notice of Claims. If any Coyote Indemnitee or Shareholder
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred or
will suffer or incur any Coyote Damages or Shareholder Damages ("Damages") for
which it is entitled to indemnification under this Article 9, or if any legal,
governmental or administrative proceeding which may result in such damages is
threatened or asserted, such Indemnified Party shall so notify the party or
parties from whom indemnification is being claimed (the "Indemnifying Party")
with reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly notify
the Indemnifying Party of such action or suit. The failure of an Indemnified
Party to give any notice required by this Section 9.4 shall not affect any of
such party's rights under this Article except to the extent such failure is
actually prejudicial to the rights or obligations of the Indemnifying Party.
9.5 Third Party Claims. In case any legal, governmental or
administrative proceeding which may result in such Damages is instituted,
threatened or asserted by or against a third party with respect to which an
Indemnified Party intends to claim any Damages and the Indemnified Party
notifies the Indemnifying Party of such proceeding as provided in Section 9.4,
the Indemnifying Party shall be entitled to participate therein and, to the
extent that it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
Indemnified Party (who may be counsel to the Indemnifying Party), and after
notice from the Indemnifying Party to such Indemnified Party of its election so
to assume the defense thereof, the Indemnifying Party will not be liable to such
Indemnified Party under this Article 9 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened action in
respect of which any Indemnified Party is or could have been a party and
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indemnity could have been sought hereunder by such Indemnified Party unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on any claims that are the subject matter of such proceeding.
9.6 Limitation on Damages. Notwithstanding any provision under
this Article 9 to the contrary, no Party shall have any indemnity liability with
respect to a breach of any of the representations and warranties made by that
Party in this Agreement until the aggregate amount of Damages incurred by the
other Party with respect to such breaches by the first Party exceeds the sum of
$50,000, but if the aggregate amount of such Damages exceeds $50,000,
indemnification shall be made to the full extent of Damages; provided, however,
that, the foregoing limitations shall not apply to any matter relating to title
to the Company Common Stock, the Company Preferred Stock, the Series C Preferred
Stock or the Coyote Common Stock. In no event shall the liability of Enterprises
under this Article 9 exceed One Million Two Hundred Seventy Five Thousand
Dollars ($1,275,000) and in no event shall the liability of Conrad and Employee
under this Article 9 exceed Two Million Nine Hundred Seventy Five Thousand
Dollars ($2,975,000) in the aggregate; provided, however, that the limitations
on the liability of any Indemnifying Party set forth in this Article 9 shall not
apply, and no other remedy at law or in equity that an Indemnified Party may
have against an Indemnifying Party but for the provisions of this Article 9
shall be limited or restricted, in the event of such Indemnifying Party's actual
fraud; and provided, further, that any claims by Enterprises arising out of or
related to its purchase of securities from the Company (as contemplated by
Section 6.11) shall be made solely against Conrad and Employee and not the
Company or Coyote. All Damages payable hereunder shall be paid promptly in cash.
The Parties acknowledge and agree that the provisions of this Article 9 shall be
the sole and exclusive remedy of any Party for any and all breaches of the
representations and warranties of any other Party or the failure of any other
Party to perform any covenant or other agreement set forth in this Agreement;
provided, however, that the foregoing shall not constitute a waiver of any
Party's right to seek specific performance of any provisions of this Agreement.
9.7 No Circular Recovery. No Shareholder will be entitled to
make any claim for indemnification against the Surviving Corporation or any of
its Affiliates by reason of the fact that such Shareholder (or any of his, her
or its officers, directors, agents or other representatives) was a controlling
person, director, officer, employee, agent or other representative of the
Company or of any of its Affiliates or was serving as such for another Person at
the request of the Company or any of its shareholders or Affiliates (whether
such claim is for losses of any kind or otherwise and whether such claim is
pursuant to any statute, charter, by-law, contractual obligation or otherwise)
with respect to any action brought by Coyote or the Surviving Corporation
against such Shareholder or the Shareholders generally (whether such action is
pursuant to this Agreement, applicable law, or otherwise).
ARTICLE 10
MISCELLANEOUS
10.1 Representations. Each Party agrees that, except for the
representations and warranties contained in this Agreement, no Party has made
any other representations and warranties, and each Party disclaims any other
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representations and warranties, made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated by this Agreement, notwithstanding the delivery of
disclosure to any other Party or any Party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
10.2 Dispute Resolution. Any dispute between a Shareholder and
Coyote under Section 6.12(f) or Section 6.12(a) shall be settled by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association in Los Angeles, California. The arbitration proceeding shall be
conducted by one arbitrator selected in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration shall
be conducted in accordance with the following procedures and time schedules
unless otherwise mutually agreed to by such Shareholder and Coyote: (i) within
ten (10) days after the appointment of the arbitrator, such Shareholder and
Coyote shall provide the arbitrator with all documents, records and supporting
information reasonably necessary to resolve the dispute and a hearing on such
dispute shall be held; (ii) within three (3) days after the hearing, the
arbitrator shall render his or her decision; (iii) such Shareholder and Coyote
shall each be entitled to present the testimony of up to two (2) individuals,
which testimony shall not exceed four (4) hours in the aggregate; and (iv) no
discovery shall be allowed. The decision or award of the arbitrator shall be
final and binding upon such Shareholder and Coyote to same extent and to the
same degree as if the matter had been adjudicated by a court of competent
jurisdiction and shall be enforceable under the Federal Arbitrations Act. The
costs and expenses of the arbitration and of the prevailing party (including
reasonable attorneys' fees) shall be paid by the non-prevailing party.
10.3 Waiver. Except as expressly provided in this Agreement,
neither the failure nor any delay on the part of any Party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, or of any
other right, power or remedy; nor shall any single or partial exercise of any
right, power or remedy preclude any further or other exercise thereof, or the
exercise of any other right, power or remedy. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the Party against whom the waiver is
sought to be enforced.
10.4 Assignment. This Agreement (and all rights hereunder)
shall be binding on and inure to the benefit of the Parties hereto and their
successors and assigns.
10.5 Notices. Any and all notices or other communications
required or permitted under this Agreement shall be given in writing and
delivered in Person or sent by United States certified or registered mail,
postage prepaid, return receipt requested, or by overnight express mail, or by
telex, facsimile or telecopy to the address of such party set forth below. Any
such notice shall be effective upon receipt or three days after placed in the
mail, whichever is earlier.
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If to Coyote:
Coyote Network Systems, Inc.
4360 Park Terrace Drive
Westlake Village, CA 91316
Attention: Timothy G. Atkinson, General Counsel
Facsimile No.:
With copies to:
Morrison & Foerster, LLP
370 17th Street, Suite 5200
Denver, CO 80202
Attention : Warren L. Troupe, Esq.
Facsimile No. : (303) 592-1510
If to the Company, Conrad or Employee:
Primary Knowledge, Inc.
c/o Jerry Conrad
9500 Toledo Way
Irvine, California 92618-1806
With copies to:
Cassady & Klein
908 Kenfield Avenue
Los Angeles, CA 90049
Attention : Raymond M. Klein, Esq.
Facsimile No. : (310) 471-3006
And:
DQE Enterprises, Inc.
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212
Attention: President
Facsimile No.: (412) 231-2140
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If to Enterprises, to the address set forth above,
with a copy to:
Kirkpatrick and Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Attention : David J. Lehman, Esq.
Facsimile No.: (412) 355-6501.
Any Party may, by notice so delivered, change its
address for notice purposes hereunder.
10.6 Further Assurances. After the Closing each Party hereto
at the reasonable request of the other Party hereto and without additional
consideration, shall execute and deliver, or shall cause to be executed and
delivered, from time to time, such further certificates, agreements or
instruments of conveyance and transfer, assumption, release and acquittance and
shall take such other action as the other Party hereto may reasonably request,
to consummate or implement the transactions contemplated by this Agreement.
10.7 Severability. If any provision of this Agreement is
invalid, illegal or unenforceable, the balance of this Agreement shall remain in
full force and effect and this Agreement shall be construed in all respects as
if such invalid, illegal or unenforceable provision were omitted. If any
provision is inapplicable to any Person or circumstance, it shall, nevertheless,
remain applicable to all other Persons and circumstances.
10.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.
10.9 Construction. Any section headings in this Agreement are
for convenience of reference only, and shall be given no effect in the
construction or interpretation of this Agreement or any provisions thereof. No
provision of this Agreement will be interpreted in favor of, or against, any
Party by reason of the extent to which any such Party or its counsel
participated in the doing thereof or by reason of the extent to which any such
provision is inconsistent with any prior draft hereof or thereof.
10.10 Entire Agreement; Amendment. This Agreement, the
exhibits hereto, each of which is deemed to be a part hereof, and any other
agreements, instruments or documents executed and delivered by the Parties (or
their Subsidiaries) pursuant to the express terms of this Agreement, constitute
the entire agreement and understanding between the Parties, and it is understood
and agreed that all previous undertakings, negotiations and agreements between
the Parties regarding the subject matter hereof are merged herein; provided,
however, that the confidentiality agreement entered into between the Company and
Coyote shall remain in full force and effect. Without limitation of the
foregoing, the Letter of Intent dated April 3, 2000, as amended by the letter
agreement dated April 27, 2000, is hereby terminated of no further force or
effect. This Agreement may not be modified orally, but only by an agreement in
writing signed by each of the Parties.
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10.11 No Third Party Beneficiaries. Nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
Parties that this Agreement shall not be construed as a third party beneficiary
contract.
10.12 Public Announcements. Coyote and the Company shall
consult with each other before issuing any press release with respect to the
Merger or this Agreement and shall not issue any such press release or make any
such public statement until the content thereof has been approved by the other
party, which approval shall not be unreasonably withheld; provided, however,
that a party may, without the prior consent of the other party, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the Nasdaq National Market if it has used reasonable efforts
to consult with the other party. Each of Coyote and the Company shall make all
necessary filings with Governmental Authority and shall promptly provide the
other party with copies of filings made by such party between the date hereof
and the Effective Time.
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IN WITNESS WHEREOF, the Parties have duly executed and
delivered this Agreement on the date first written above.
COYOTE NETWORK SYSTEMS, INC.
By /s/James R. McCullough
--------------------------
James R. McCullough
Chief Executive Officer
PRIMARY KNOWLEDGE, INC.
By /s/Jerry Conrad
--------------------------
Jerry Conrad
President
DQE ENTERPRISES, INC.
By /s/Thomas A. Hurkmans
--------------------------
Thomas A. Hurkmans
President
EMPLOYEE
/s/Jerry Conrad
--------------------------
Jerry Conrad
CONRAD
/s/Barbara Conrad
--------------------------
Barbara Conrad
<PAGE>
JOINDER AGREEMENT
For valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the undersigned hereby
joins in the Agreement and Plan of Merger (the "Merger Agreement") dated May
___, 2000 among Coyote Network Systems, Inc., Primary Knowledge, Inc., DQE
Enterprises, Inc., Barbara Conrad and Jerry Conrad to which this Joinder
Agreement is attached solely for the purpose of agreeing to be bound by the
provisions of Section 6.6 of said Merger Agreement. By signing below, the
undersigned agrees that it will execute and deliver the Voting Agreement at the
Closing.
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement.
The undersigned intends to be legally bound hereby.
[ ]
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Dated: May ___, 2000
