AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

ZEBRA TECHNOLOGIES CORPORATION,

WALDO ACQUISITION CORP.,

and

WHERENET CORP.

dated as of January 11, 2007

TABLE OF CONTENTS

 

 

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Exhibit Index

 

 

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GLOSSARY OF DEFINED TERMS

 

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), is dated January 11, 2007 by and among ZEBRA TECHNOLOGIES CORPORATION, a Delaware corporation (“ Parent ”), WALDO ACQUISITION CORP., a California corporation (“ Merger Sub ”), WHERENET CORP., a California corporation (the “ Company ”) and each of CROSSPOINT VENTURE PARTNERS 1996, LLP, a California limited liability partnership and Daniel Doles (subject to Section 11.1 , each the “ Shareholders’ Representative ”) acting solely in its/his capacity as the Shareholders’ Representative and not in its/his individual capacity. Each of the parties named above may be referred to as a “ Party ” and collectively as the “ Parties .”

RECITALS

A. The Company is engaged in the business of developing, marketing, selling and servicing wireless solutions for tracking and managing enterprise assets (the “ Business ”).

B. The Parties hereto desire to enter into this Agreement and, subject to the conditions hereof and in accordance with the provisions of the California General Corporation Law (the “ GCL ”), consummate the transactions contemplated hereby pursuant to which the Parent will acquire all of the capital stock of the Company through a merger of Merger Sub with and into the Company (the “ Merger ”), following which the Company shall continue as the surviving corporation.

C. The Board of Directors of the Company (the “ Board ”) has approved and adopted the terms and conditions of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, and has determined to submit the execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby to the Shareholders for their approval and adoption required under the GCL and the Company’s Articles of Incorporation.

D. The Board has carefully considered the terms and conditions of this Agreement and has determined that the terms and conditions of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, are fair to and in the best interests of the Company and the Shareholders, and the Board recommends that the Shareholders vote to approve and adopt the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

E. The Company, on the one hand, and Parent and Merger Sub, on the other hand, desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also prescribe various conditions to the Merger.

F. Concurrently with the execution of this Agreement, the parties identified on Schedule A hereto, being holders of shares of Series A-1 Stock, Series B-1 Stock and/or Common Stock constituting approximately eighty-five percent (85%) of the Company Shares (each a “ Principal Shareholder ” and collectively, the “ Principal Shareholders ”), are entering into a voting and support agreement (the “ Support Agreement ”) by and among the Principal

Shareholders, Parent and Merger Sub, providing, among other things, that, subject to the terms and conditions thereof, each of the Principal Shareholders will vote his, her or its shares of Company Stock in favor of the Merger and the approval and adoption of this Agreement.

AGREEMENTS

In consideration of the mutual covenants of the parties as hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the following capitalized terms shall have the meanings specified in this Article 1 .

“ Acquired Shares ” has the meaning set forth in Section 3.1(a) .

“ Acquisition Proposal ” means any proposal relating to a possible (1) merger, consolidation or similar transaction involving the Company or any Subsidiary thereof, (2) sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange or otherwise, of any assets of the Company or any Subsidiary thereof representing, in the aggregate, twenty percent (20%) or more of the assets of such entity on a consolidated basis, (3) issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing twenty percent (20%) or more of the votes attached to the outstanding securities of the Company or any Subsidiary thereof, (4) liquidation, dissolution, or other similar type of transaction with respect to the Company or any Subsidiary thereof or (5) transaction which is similar in form, substance or purpose to any of the foregoing transactions; provided , however , that the term “Acquisition Proposal” shall not include the transactions contemplated hereby.

“ Affiliate ” means, with respect to any Person, any other Person: (i) which owns, directly or indirectly, more than ten percent (10%) of the voting or economic interests in such Person; (ii) in which such Person owns, directly or indirectly, more than ten percent (10%) of the voting or economic interests; or (iii) in which more than ten percent (10%) of the voting or economic interests are owned, directly or indirectly, by a Person who has a relationship with such Person described in clause (i) or (ii) above. In addition, any Person who is a stockholder, director or executive officer of the Company or any Subsidiary thereof shall be deemed an “Affiliate” thereof.

“ Affiliate Transactions ” has the meaning set forth in Section 4.18.

“ Affiliated Group ” means an affiliated group as defined in Section 1504 of the Code (or analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law).

 

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“ Agreement ” has the meaning set forth in the preamble hereto.

“ Agreement of Merger ” has the meaning set forth in Section 2.2 .

“ Applicable Closing Per Share Merger Consideration ” means, when referring to the Closing Merger Consideration to be received by a Shareholder with respect to each share of Company Stock held by such Shareholder, the Common Closing Per Share Merger Consideration or the Series A-1 Per Share Merger Consideration, as applicable.

“ Applicable Per Share Merger Consideration ” means, when referring to the Merger Consideration to be received by a Shareholder with respect to each share of Company Stock held by such Shareholder, the Common Per Share Merger Consideration or the Series A-1 Per Share Merger Consideration, as applicable.

“ Arbiter ” has the meaning set forth in Section 3.4(e) .

“ Board ” has the meaning set forth in the recitals hereto.

“ Board Recommendation ” has the meaning set forth in Section 4.2 .

“ Books and Records ” means all books and records of the Company and any Subsidiary thereof, including, but not limited to, all records, files, papers, sales and purchase correspondence, minute books, stock record books and other books of account and financial and employment records, whether in tangible or digital form.

“ Business ” has the meaning set forth in the recitals hereto.

“ Business Day ” means a day other than Saturday, Sunday or a public holiday on which banks are closed under the laws of the State of California.

“ Cap Amount ” has the meaning set forth in Section 10.6(c) .

“ Certificates ” has the meaning set forth in Section 3.3(a)(i) .

“ Closing ” has the meaning set forth in Section 2.2 .

“ Closing Date ” has the meaning set forth in Section 2.2 .

“ Closing Date Net Cash ” means the difference of (a) the amount of cash and cash equivalents of the Company and its Subsidiaries (excluding the Closing Option Proceeds) as of immediately prior to the Closing, less (b) the amount of Indebtedness of the Company and its Subsidiaries as of immediately prior to the Closing, as determined in accordance with GAAP.

“ Closing Date Net Cash Statement ” has the meaning set forth in Section 3.4(c) .

“ Closing Merger Consideration ” has the meaning set forth in Section 3.2(e) .

“ Closing Option Proceeds ” means the cash proceeds received by the Company upon the exercise of any Company Options immediately prior to the Closing.

 

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“ COBRA ” has the meaning set forth in Section 4.17(g) .

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Common Closing Merger Consideration ” means the product of (i) the sum of (A) the Stock Closing Merger Consideration, plus (B) the Vested Option Aggregate Exercise Price, multiplied by (ii) the Common Ratio.

“ Common Closing Per Share Merger Consideration ” means the quotient of (i) the Common Closing Merger Consideration, divided by (ii) the number of shares of Common Stock outstanding immediately prior to the Effective Time.

“ Common Merger Consideration ” means the product of (i) the sum of (A) the Stock Merger Consideration, plus (B) the Vested Option Aggregate Exercise Price, multiplied by (ii) the Common Ratio.

“ Common Per Share Merger Consideration ” means the quotient of (i) the Common Merger Consideration, divided by (ii) the number of shares of Common Stock outstanding immediately prior to the Effective Time.

“ Common Ratio ” means the quotient of (i) the number of shares of Common Stock outstanding immediately prior to the Effective Time, divided by (ii) the sum of (A) the number of shares of Common Stock outstanding immediately prior to the Effective Time and (B) the number of shares of Common Stock subject to Vested Company Options which remain unexercised at the Effective Time.

“ Common Shareholders ” means, collectively, the holders of Common Stock immediately prior to the Effective Time (other than Dissenting Shareholders and the Company).

“ Common Stock ” means the Company’s common stock.

“ Company ” has the meaning set forth in the preamble hereto.

“ Company Option ” has the meaning set forth in Section 3.5(a) .

“ Company Option Plan ” means the WhereNet 1997 Stock Option Plan.

“ Company Plan Affiliate ” means the Company, any Subsidiary thereof and predecessor of any of them and any other Person who constitutes or has constituted all or part of a controlled group or has been or is under common control with, or whose employees were or are treated as employed by, the Company, any Subsidiary thereof and/or any predecessor or any of them, under Section 414 of the Code or Section 4001 of ERISA.

“ Company Share ” means a share of Company Stock.

“ Company Stock ” means collectively the Common Stock, the Series A-1 Stock and the Series B-1 Stock.

 

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“ Contracts ” means any agreements, contracts, commitments, purchase orders, licenses and leases, whether written or oral, to which the Company or any Subsidiary is a party or by which Company or any Subsidiary is bound, including any amendment, supplement or modification thereto, other than nondisclosure agreements entered into in ordinary course which impose no material restrictions on the Business.

“ Customs Laws and Regulations ” has the meaning set forth in Section 4.25.

“ Defense Counsel ” has the meaning set forth in Section 10.4.

“ Defense Notice ” has the meaning set forth in Section 10.4.

“ Direct Claim ” has the meaning set forth in Section 10.5.

“ Direct Indemnification Defense Notice ” has the meaning set forth in Section 10.5.

“ Direct Indemnification Notice ” has the meaning set forth in Section 10.5.

“ Dissenting Shares ” has the meaning set forth in Section 3.3(d) .

“ Due Diligence Period ” has the meaning set forth in Section 6.1.

“ Effective Time ” has the meaning set forth in Section 2.2 .

“ Employee Benefit Plan ” means any of the following (whether written, unwritten or terminated): (A) any employee welfare benefit plan, as defined in Section 3(1) of ERISA, including, but not limited to, any medical plan, life insurance plan, short-term or long-term disability plan, dental plan, or sick leave plan; (B) any “employee pension benefit plan,” as defined in Section 3(2) of ERISA, including, but not limited to, any excess benefit, top hat or deferred compensation plan or any nonqualified deferred compensation or retirement plan or arrangement or any qualified defined contribution or defined benefit plan; or (C) any other plan, policy, program, arrangement or agreement which provides employee benefits or benefits to any current or former employee, dependent, beneficiary, director, independent contractor or like person, including, but not limited to, any severance agreement or plan, personnel policy, vacation time, holiday pay, tuition reimbursement program, service award, moving expense reimbursement programs, tool allowance, safety equipment allowance, material fringe benefit plan or program, bonus or incentive plan, equity appreciation, stock option, restricted stock, stock bonus or deferred bonus plan, salary reduction, change-of-control or employment agreement or consulting agreement.

“ Employee Benefit Plans of the Company ” has the meaning set forth in Section 4.17(a) .

“ Environmental and Safety Requirements ” means any Law that is related to (i) pollution, contamination, cleanup, preservation, protection, reclamation or remediation of the environment, (ii) health or safety, (iii) the Release or threatened Release of any Hazardous Material, including investigation, study, assessment, testing, monitoring, containment, removal, remediation, response, cleanup, abatement, prevention, control or regulation of such Release or threatened Release or (iv) the management of any Hazardous Material, including the manufacture,

 

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generation, formulation, processing, labeling, use, treatment, handling, storage, disposal, transportation, distribution, re-use, recycling or reclamation of any Hazardous Material; and includes the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq .), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. § 6091 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Clean Water Act (33 U.S.C. § 7401 et seq .), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq .), the Toxic Substance Control Act (15 U.S.C. § 2601 et seq .) and the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq .).

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Escrow Agreement ” means that certain Escrow Agreement, dated as of the Closing Date, by and among Parent, the Shareholders’ Representative and the Escrow Agent as defined therein, substantially in the form of Exhibit 1 attached hereto.

“ Escrow Amount ” means a portion of the Purchase Price equal to Thirteen Million Six Hundred Thousand Dollars ($13,600,000).

“ Escrow Funds ” has the meaning set forth in Section 3.2(a) .

“ Estimated Closing Date Net Cash Statement ” has the meaning set forth in Section 3.4(b) .

“ Financial Statements ” has the meaning set forth in Section 4.5 .

“ Fundamental Representations ” means those representations and warranties set forth in Sections 4.2 and 4.4 .

“ GAAP ” means U.S. generally accepted accounting principles consistently applied.

“ GCL ” has the meaning set forth in the recitals hereto.

“ Governmental Authority ” means any: (a) nation, state, county, city, town, village, 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 agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature; or (f) air quality management district.

“ Hazardous Material ” means (i) hazardous substances, as defined by the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq .; (ii) hazardous wastes, as defined by the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq .; (iii) petroleum, including without limitation, crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute); (iv) radioactive material, including, without limitation, any source, special nuclear, or by-product material as defined in 42 U.S.C. §2011 et seq .; (v) asbestos that is friable or reasonably likely to become friable; (vi) polychlorinated biphenyls; (vii) microbial

 

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matter, biological toxins, mycotoxins, mold or mold spores; and (viii) other material, substance or waste to which liability or standards of conduct may be imposed under any applicable Environmental and Safety Requirements.

“ HIPAA ” has the meaning set forth in Section 4.17(i) .

“ HSR Act ” means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder.

“ Indebtedness ” means with respect to any Person (i) all obligations of such Person for borrowed money, whether current or funded, secured or unsecured, (ii) all obligations of such Person for the deferred purchase price of any property or services (other than trade accounts payable arising in the ordinary course of the business of such Person), (iii) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of a default may be limited to repossession or sale of such property), (iv) all obligations of such Person secured by a purchase money mortgage or other lien to secure all or part of the purchase price of property subject to such mortgage or lien, (v) all obligations under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable as lessee, (vi) any obligation of such Person in respect of bankers’ acceptances or letters of credit, (vii) any obligations secured by liens on property acquired by such Person, whether or not such obligations were assumed by such Person at the time of acquisition of such property, (viii) all obligations of a type referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii) above which is directly or indirectly guaranteed by such Person or which it has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a credit against loss, and (ix) any refinancings of any of the foregoing obligations.

“ Indemnified Party ” has the meaning set forth in Section 10.4 .

“ Indemnifying Party ” has the meaning set forth in Section 10.4 .

“ Information Statement ” has the meaning set forth in Section 6.11(d) .

“ Intellectual Property ” means all U.S. and foreign intellectual property or proprietary rights of any description of any Person, including all rights of any Person in and to (a) patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, reexaminations, provisionals, divisions, renewals, revivals, and foreign counterparts thereof and all registrations and renewals in connection therewith (“ Patents ”), (b) trademarks, service marks, trade dress, logos, trade names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith (“ Marks ”), (c) copyrightable works, copyrights and all applications, registrations and renewals in connection therewith (“ Copyrights ”), (d) mask works and all applications, registrations and renewals in connection therewith (“ Mask Works ”), (e) trade secrets, inventions (whether or not patentable and whether or not reduced to practice) and

 

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confidential business information (including ideas, research and development information, know-how, formulae, compositions, manufacturing and production processes and techniques, technical data, improvements, designs, drawings, specifications, customer and supplier lists and information (including all account information, files, programs, plans, data and related information), sales data and plans, pricing and cost information, business and marketing plans and proposals, assembly, test, installation, service and inspection instructions and procedures, technical, operating and service and maintenance manuals and data, hardware reference manuals and engineering, programming, service and maintenance notes and logs and related documentation) (“ Proprietary Information ”), (f) computer software (including all source code, object code, firmware, data and related documentation) (“ Software ”), and all documentation, specifications, manuals, user guides, promotional material, internal notes and memos, technical documentation, drawings, flow charts, diagrams, source language statements, demo disks, benchmark test results, and other written materials related to, associated with or used or produced in the development of the Software (collectively, the “ Design Documentation ”), (g) Internet addresses, URL, domain names, websites and web pages (“ Domain Name Rights ”), (h) all advertising, marketing, promotional materials, regardless of the media in which such materials are used, distributed and disseminated (“ Marketing Materials ”), and (i) goodwill related to all of the foregoing.

“ Interim Financial Statements ” has the meaning set forth in Section 4.5 .

“ Inventory ” means all raw materials, work-in-process and finished goods inventory of the Company or any Subsidiary thereof.

“ IP Licenses ” means all licenses, sublicenses and other agreements or permissions related to Company’s and Company’s Subsidiaries’ Intellectual Property under which the Company and/or any Subsidiary thereof are a licensor or licensee but excluding licenses to readily available commercial “shrink-wrap” or “off-the-shelf” software of less than $100,000 in the aggregate for all such related licenses.

“ Latest Balance Sheet Date ” has the meaning set forth in Section 4.5 .

“ Law ” means the common law of any state, or any provision of any foreign, federal, state or local law, statute, rule, regulation, order, permit, judgment, injunction, decree or other decision of any court or other tribunal or governmental entity or agency legally binding on the relevant party or its properties.

“ Letter of Transmittal ” has the meaning set forth in Section 3.3(a)(ii) .

“ Liabilities ” means Indebtedness, liabilities or obligations of any nature (whether accrued, absolute, contingent, direct, indirect, known, unknown, perfected, inchoate, unliquidated or otherwise, whether due or to become due).

“ Liens ” means any claims, liens, charges, rights, restrictions, options, preemptive rights, mortgages, deeds of trust, hypothecations, assessments, pledges, encumbrances, claims of equitable interest or security interests of any kind or nature whatsoever.

“ Losses ” has the meaning set forth in Section 10.1 .

 

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“ Material Adverse Effect ” means any event, circumstance, change or effect that has resulted in, or would reasonably be expected to result in, a material adverse change in, or has had, or would reasonably be expected to have, a material adverse effect on, (a) the ability of the Company to consummate any of the transactions contemplated herein or perform any of its obligations under this Agreement or (b) the business, assets, liabilities, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole, other than the following (but only to the extent the Company and its Subsidiaries are not disproportionately affected thereby relative to other participants in the industry in which the Business is currently conducted): (i) changes that are the result of general economic conditions or competitive circumstances in the markets in which the Business is currently conducted, (ii) changes that are the result of local, regional, national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack or (iii) changes in financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index).

“ Merger ” has the meaning set forth in the recitals hereto.

“ Merger Consideration ” means the Purchase Price less the Payoff Amount, as adjusted as provided in Sections 3.2(c) and 3.4 .

“ Merger Sub ” has the meaning set forth in the preamble hereto.

“ Non-Patent IP ” has the meaning set forth in Section 4.12(a)(i) .

“ Option Cancellation Agreements ” has the meaning set forth in Section 3.5 .

“ Parent ” has the meaning set forth in the preamble hereto.

“ Parent Indemnified Parties ” has the meaning set forth in Section 10.1 .

“ Parent Shares ” has the meaning set forth in Section 3.5.

“ Parties ” has the meaning set forth in the preamble hereto.

“ Paying Agent ” has the meaning set forth in Section 3.3(a)(i) .

“ Paying Agent Agreement ” has the meaning set forth in Section 3.3(a)(i) .

“ Payoff Amount ” has the meaning set forth in Section 3.2(b) .

“ Payoff Letter ” has the meaning set forth in Section 3.2(b) .

“ PBGC ” has the meaning set forth in Section 4.17(h) .

“ Per Share Escrow Consideration ” means, with respect to each release of Escrow Funds, if any, to the Common Shareholders and Vested Option Holders pursuant to the terms and conditions of the Escrow Agreement, the quotient of (i) the amount of such release, divided by

 

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(ii) the sum of (A) the number of shares of Common Stock outstanding immediately prior to the Effective Time and (B) the number of shares of Common Stock subject to Vested Company Options which remain unexercised at the Effective Time.

“ Permits ” means all permits, licenses, certifications, approvals and authorizations by or of, or registrations with, any Governmental Authority, including but not limited to, vehicle and business licenses.

“ Permitted Liens ” means any (a) inchoate mechanics’, carriers’, workers’ and other similar Liens arising in the ordinary course of business that are not delinquent and that in the aggregate are not material in amount and do not interfere with the present use of the assets to which they apply; and (b) inchoate Liens for current Taxes and assessments not yet due and payable; provided , however , that if any inchoate Lien described in clause (a) or (b) above becomes a choate Lien, the cost of removing such Lien shall be deemed funded Indebtedness for the purpose of determining Closing Date Net Cash.

“ Person ” means any individual, sole proprietorship, general partnership, limited partnership, limited liability company, joint venture, trust, unincorporated association, corporation, entity or government (whether federal, state, county, city or otherwise, including, without limitation, any instrumentality, division, agency or department thereof).

“ Post-Closing Adjustment ” has the meaning set forth in Section 3.4(a) .

“ Principal Shareholder ” has the meaning set forth in the recitals hereto.

“ Proceeding ” means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative or investigative) involving the Company or any Subsidiaries thereof commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority.

“ Publicly Available Software ” means any software that is, contains (whether in the source code, object code or an executable), is derived from (in whole or in party), is distributed in connection with, requires for use or operation, links to, or is otherwise intended for use with, software that is distributed as free software, open source software (e.g., Linux) or distributed under similar licensing or distribution models, or software that requires as a condition of use, modification and/or distribution of such software that such software or other software distributed with such software (a) be disclosed or distributed in source code form, (b) include the right for any licensee to prepare derivative works therefrom, (c) be redistributable at no charge, or (d) be distributed only under an open source license or the license under which the software was licensed to the Company. Publicly Available Software includes, without limitation, software licensed or distributed under any of the following licenses or distribution models, or licenses or distribution models similar to any version of the following: (i) GNU General Public License (GPL) or Lesser/Library General Public License (LGPL); (ii) The Artistic License (e.g., PERL); (iii) the Mozilla Public License; (iv) the Netscape Public License; (v) the Sun Community Source License (SCSL); (vi) the Sun Industry Standards License (SISL); (vii) the BSD License; (viii) the MIT License; (ix) the Apache License; (x) the Common Public License; (xi) the Open Software License; (xii) the Academic Free License; or (xiii) any other open source license listed or identified by the Open Source Initiative (OSI).

 

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“ Purchase Price ” means One Hundred Twenty-Six Million Dollars ($126,000,000).

“ Ratio ” has the meaning set forth in Section 3.5(a) .

“ Real Property ” has the meaning set forth in Section 4.9(b) .

“ Release ” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping into the indoor or outdoor environment.

“ Replacement Stock Option ” has the meaning set forth in Section 3.5(a) .

“ Review Period ” has the meaning set forth in Section 3.4(d) .

“ Seller Indemnified Parties ” has the meaning set forth in Section 10.3 .

“ Series A-1 Merger Consideration ” means the product of (i) the Series A-1 Per Share Merger Consideration multiplied by (ii) the number of shares of Series A-1 Stock outstanding immediately prior to the Effective Time.

“ Series A-1 Per Share Merger Consideration ” means with respect to each outstanding share of Series A-1 Stock, an amount equal to the sum of One Dollar and sixty-eight cents ($1.68).

“ Series A-1 Shareholders ” means, collectively, the holders of Series A-1 Stock immediately prior to the Effective Time (other than Dissenting Shareholders and the Company).

“ Series A-1 Stock ” means the Company’s Series A-1 Preferred Stock.

“ Series B-1 Stock ” means the Company’s Series B-1 Preferred Stock.

“ Shareholders ” means, collectively, the Common Shareholders and the Series A-1 Shareholders.

“ Shareholders’ Approval ” has the meaning set forth in Section 4.2 .

“ Shareholders’ Representative ” has the meaning set forth in the preamble hereto.

“ Solicitation ” has the meaning set forth in Section 6.11(a) .

“ Stock Closing Merger Consideration ” means the difference of (i) the Stock Merger Consideration, less (ii) the Escrow Amount.

“ Stock Merger Consideration ” means the difference of (i) the Merger Consideration, less (ii) the Series A-1 Merger Consideration, less (iii) the Warrant Merger Consideration.

 

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“ Subsidiary ” means, with respect to any Person, any corporation, partnership, limited liability company, association or other entity of which securities or other ownership interests representing more than fifty percent (50%) of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

“ Support Agreement ” has the meaning set forth in the recitals hereto.

“ Surviving Corporation ” has the meaning set forth in Section 2.1 .

“ Tax ” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; the foregoing shall include any transferee or secondary liability for a Tax and any liability assumed by agreement or arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included or required to be included) in any Tax Return relating thereto.

“ Tax Returns ” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes of any party or the administration of any Laws or administrative requirements relating to any Taxes.

“ Third Party Claim ” has the meaning set forth in Section 10.4 .

“ Threatened ” means that a party has received a demand or notice of a claim, Proceeding or dispute.

“ Threshold Amount ” has the meaning set forth in Section 10.6(b) .

“ Transaction Documents ” means each of the agreements, documents, certificates and instruments being delivered pursuant to this Agreement.

“ Transaction Related Expenses ” means any expenses incurred by any Shareholder, the Company or any Subsidiary of the Company to the extent the Company or any of its Subsidiaries is liable therefor in connection with the transactions contemplated by this Agreement, including, (i) the fees and disbursements of the Company’s investment bankers, independent accountants and the legal or other advisors to any Shareholder or the Company or any of its Subsidiaries in connection with the transactions contemplated hereby to the extent payable by the Company or any of its Subsidiaries, and (ii) any stay-bonus, transaction completion bonus or other similar payment made or required to be made to the employees of the Company or any of its Subsidiaries on or after Closing as a result of the transactions contemplated by this Agreement, which payment is made pursuant to an agreement that either is not disclosed on the Schedules hereto or, without Parent’s prior written approval, entered into by the Company or any of its Subsidiaries after the date hereof and prior to Closing.

 

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“ Transfer Tax ” means any stamp or other sales, transfer, use, value added, excise or similar transaction Tax imposed under the Laws of the United States or any state, country or municipality or other subdivision thereof, arising as a result of the consummation of any of the transactions contemplated hereby.

“ Vested Company Option ” means any outstanding Company Options that are vested as of the Closing.

“ Vested Option Aggregate Exercise Price ” means the aggregate exercise price for all Company Shares subject to Vested Company Options.

“ Vested Option Closing Merger Consideration ” means the difference of (i) the Stock Closing Merger Consideration, less (ii) the Common Closing Merger Consideration.

“ Vested Option Closing Per Share Merger Consideration ” means, with respect to any Vested Company Option, the difference of (i) the Common Closing Per Share Merger Consideration, less (ii) the exercise price per Company Share for which such Vested Company Option may be exercised.

“ Vested Option Holder ” means the holder of any Vested Company Option outstanding immediately prior to the Effective Time.

“ Vested Option Merger Consideration ” means the difference of (i) the Stock Merger Consideration, less (ii) the Common Merger Consideration.

“ Warrant ” means any warrant representing the right, upon exercise thereof, to acquire any shares of Company Stock, each of which is listed on Schedule 4.4 hereto.

“ Warrant Exercise Price ” means with respect to each outstanding Warrant, an amount equal to the sum of eighty-four cents ($0.84).

“ Warrant Holder ” means the holder of any Warrant outstanding immediately prior to the Effective Time.

“ Warrant Merger Consideration ” means the product of (i) the Warrant Per Share Merger Consideration, multiplied by (ii) the number of Company Shares subject to each Warrant outstanding immediately prior to the Effective Time.

“ Warrant Per Share Merger Consideration ” means the difference of (i) the Series A-1 Per Share Merger Consideration, less (ii) the Warrant Exercise Price.

 

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ARTICLE 2

THE MERGER

Section 2.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the GCL, at the Effective Time (as herein defined), Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall thereupon cease, and the Company shall be the successor or surviving corporation and shall continue its existence under the laws of the State of California. The Company, as the surviving corporation after the consummation of the Merger, is sometimes hereinafter referred to as the “ Surviving Corporation. ”

Section 2.2 Closing; Effective Time; Filing of Agreement of Merger . Subject to the fulfillment or waiver of each of the conditions contained in Article 8 , as soon as it is reasonably practicable but no later than within three (3) Business Days following the satisfaction or waiver of all of the conditions contained in Article 8 , other than those conditions which by their terms are to be satisfied or waived at Closing, a closing (the “ Closing ”) of the transactions contemplated by this Agreement shall take place at the offices of Katten Muchin Rosenman LLP, 525 West Monroe Street, Chicago, Illinois (or such other place and time as the Parties may agree). The “ Closing Date ” shall be the date on which the Closing shall actually occur. Subject to the terms of this Agreement, the Parties shall, on the Closing Date, cause the Merger to be consummated by filing a properly executed agreement of merger, in a form mutually acceptable to the Company and Parent, or other appropriate documents (the “ Agreement of Merger ”), with the Secretary of State of the State of California in accordance with the provisions of the GCL. When used herein, the term “ Effective Time ” shall mean the date and time when the Agreement of Merger have been accepted for filing by the Secretary of the State of California or on such date and time as the Parent and the Company may mutually agree to, as specified in the Agreement of Merger.

Section 2.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the GCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 2.4 Articles of Incorporation and By-laws of the Surviving Corporation .

(a) Articles of Incorporation; Name . The Agreement of Merger shall include such amendments, schedules or supplements as may be required under the GCL to provide that the Articles of Incorporation of the Surviving Corporation from and after the Effective Time shall be, or be the same as, the Articles of Incorporation of Merger Sub as in effect immediately prior to the Effective Time, until thereafter changed or amended as provided therein or by applicable law. The name of the Surviving Corporation shall be WhereNet Corp.

 

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(b) Bylaws . At the Effective Time, the by-laws of Merger Sub in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation, until thereafter amended as provided therein and by applicable law.

Section 2.5 Directors and Officers of the Surviving Corporation .

(a) Directors . The directors of Merger Sub shall be the initial directors of the Surviving Corporation, until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and by-laws.

(b) Officers . The officers of Merger Sub shall be the initial officers of the Surviving Corporation, until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and by-laws.

ARTICLE 3

CONSIDERATION AND MANNER OF PAYMENT

Section 3.1 Consideration for the Merger; Conversion or Cancellation of Shares in the Merger . At the Effective Time, the manner of converting or canceling shares of the Company and Merger Sub shall be as follows:

(a) Conversion of Company Stock . Each Company Share issued and outstanding immediately prior to the Effective Time (excluding any Company Shares described in Sections 3.1(c) and 3.3(d) ), shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted automatically into the right to receive the Applicable Per Share Merger Consideration in accordance with the further provisions of this Agreement. All Company Shares to be converted into the right to receive the Applicable Per Share Merger Consideration pursuant to this Section 3.1(a) (such shares, the “ Acquired Shares ”) shall, by virtue of the Merger and without any action on the part of the holders thereof, cease to be outstanding, be canceled and cease to exist, and each holder of a certificate representing any such Acquired Shares shall thereafter cease to have any rights with respect to such Acquired Shares, except the right to receive for each of the Acquired Shares upon the surrender of such certificate in accordance with Section 3.3 , (i) the Applicable Closing Per Share Merger Consideration, and (ii) with respect to the Common Shares, subject to and in accordance with the terms and conditions of the Escrow Agreement, the Per Share Escrow Consideration.

(b) Stock of Merger Sub . Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

(c) Cancellation of Parent Owned Company Shares and Treasury Stock . All of the Company Shares that are owned by Parent, any direct or indirect wholly-owned

 

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Subsidiary of Parent or by the Company as treasury stock shall automatically cease to be outstanding, shall be canceled and shall cease to exist and no portion of the Merger Consideration shall be delivered in exchange therefor.

Section 3.2 Closing; Payment of Closing Payment . Subject to the terms and conditions hereof and in reliance upon the representations and warranties contained herein, at the Closing:

(a) Parent shall deposit the Escrow Amount on behalf of the Shareholders with the Escrow Agent. Such funds (plus all income accrued thereon) (the “ Escrow Funds ”) shall be maintained by Escrow Agent to secure the Shareholders’ obligations under Section 3.4(e) and Article 10 of this Agreement and for payment of certain expenses, charges and liabilities incurred by the Shareholders’ Representative pursuant to Section 11.1(c) of this Agreement, and shall be administered and payable in accordance with the Escrow Agreement;

(b) Parent shall pay to each holder of Indebtedness or a security interest in and to the Company’s assets, for the benefit of and on behalf of the Company and the Shareholders, and to each party owed Transaction Related Expenses, by wire transfer of immediately available funds to the account or accounts at a bank or banks in the amount or amounts specified in a pay-off letter indicating that upon payment of a specified amount, such holder of Indebtedness or the party owed Transaction Related Expenses shall be paid in full and, if applicable, such holder of Indebtedness shall release its security interest and authorize Parent and the Surviving Corporation to file Uniform Commercial Code termination statements, or such other documents or endorsements necessary to release or discharge the financing statements, security interests or other Liens of such holder of Indebtedness, and evidence the release or discharge of such financing statements, security interests or other Liens on or against the assets of the Company or its Subsidiaries (a “ Payoff Letter ”), the amount specified in such Payoff Letter (the aggregate amount of all such payments pursuant to Payoff Letters, the “ Payoff Amount ”);

(c) The Merger Consideration shall be reduced by the amount of any Post-Closing Adjustment based upon the Estimated Closing Date Net Cash Statement;

(d) The Vested Option Closing Merger Consideration shall be delivered to the Company to provide for payment of the Vested Option Closing Per Share Merger Consideration to Vested Option Holders who have delivered an Option Cancellation Agreement (as defined below) through and in accordance with the Company’s payroll policies and systems; and

(e) The balance of the Merger Consideration remaining after deposit of the Escrow Amount, payment of the Vested Option Closing Merger Consideration pursuant to Section 3.2(d) and any reduction pursuant to Section 3.2(c) (the “ Closing Merger Consideration ”) shall be deposited with the Paying Agent for distribution to the Shareholders and Warrant Holders in accordance with the terms set forth in Section 3.3 .

 

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Section 3.3 Payment for Shares in the Merger . The manner of making payment for Acquired Shares in the Merger shall be as follows:

(a) Payment of Closing Merger Consideration .

(i) From and after the Effective Time, J.P. Morgan Trust Company, National Association (or its successor in interest) shall act as paying agent (the “ Paying Agent ”) pursuant to an agreement to be entered into by and among the Paying Agent, the Parent and the Shareholders’ Representative on or prior to the Effective Time in substantially the form attached hereto as Exhibit 3.3(a)(i) (the “ Paying Agent Agreement ”) and effect the payment of the Closing Merger Consideration in respect of (i) stock certificates (the “ Certificates ”) that, prior to the Effective Time, represented Company Stock entitled to payment of the Closing Merger Consideration pursuant to Section 3.1(a) of this Agreement and (ii) Warrants that, prior to the Effective Time, were exercisable for Company Shares and are entitled to payment of the Warrant Merger Consideration pursuant to Section 3.6 of this Agreement. At the Effective Time, the Parent shall deposit, or cause to be deposited, with the Paying Agent the Closing Merger Consideration to which the Shareholders and Warrant Holders shall be entitled pursuant to this Article 3 .

(ii) Within a reasonable period prior to the Effective Time, the Company shall provide to the Paying Agent a form of letter of transmittal in a customary form mutually agreed upon by the Parties (the “ Letter of Transmittal ”) which shall, among other things, specify that delivery shall be effected, and risk of loss and title to the Certificates and Warrants shall pass, only upon proper delivery of the Certificates and/or Warrants to the Paying Agent, and instructions for surrendering such Certificates and/or Warrants and receiving the Applicable Closing Per Share Merger Consideration, Per Share Escrow Consideration or Warrant Per Share Merger Consideration, as applicable, in respect thereof. The Parent shall cause the Paying Agent to mail on or prior to the Effective Time, or as soon thereafter as is practicable but not later than five (5) Business Days following the Effective Time, the Letter of Transmittal to each Shareholder and Warrant Holder. In accordance with the Paying Agent Agreement, upon the surrender of each such Certificate, the Paying Agent shall pay, as promptly as practicable, to the holder of such Certificate an aggregate amount equal to (i) the Applicable Closing Per Share Merger Consideration, multiplied by (ii) the number of Company Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be cancelled. In accordance with the Paying Agent Agreement, upon the surrender of each such Warrant, the Paying Agent shall pay, as promptly as practicable, to the holder of such Warrant an aggregate amount equal to (i) the Warrant Per Share Merger Consideration, multiplied by (ii) the number of Company Shares formerly represented by such Warrant, in consideration therefor, and such Warrant shall forthwith be cancelled. Until so surrendered, each such Certificate (other than Certificates representing Company Stock held by the Company or held in the treasury of the Company) and each such Warrant shall represent solely the right to

 

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receive the Applicable Closing Per Share Merger Consideration, Per Share Escrow Consideration or Warrant Per Share Merger Consideration, as applicable, multiplied by the number of shares of Company Stock represented thereby. No interest or dividends shall be paid or accrued on the Merger Consideration. If the Applicable Closing Per Share Merger Consideration, Per Share Escrow Consideration or Warrant Per Share Merger Consideration, as applicable (or any portion thereof) is to be delivered to any Person other than the Person in whose name the Certificate formerly representing Company Stock, or Warrant formerly exercisable for shares of Company Stock, as applicable, surrendered thereof is registered, it shall be a condition to such right to receive payment of such Applicable Closing Per Share Merger Consideration, Per Share Escrow Consideration or Warrant Per Share Merger Consideration, as applicable, that the Certificate or Warrant so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Paying Agent the transfer or other similar taxes required by reason of payment of the Applicable Closing Per Share Merger Consideration, Per Share Escrow Consideration or Warrant Per Share Merger Consideration, as applicable, to a Person other than the registered holder of the Certificate or Warrant so surrendered, or shall establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable.

(iii) In the event that any Certificate or Warrant shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact and delivering an indemnity agreement by the Person claiming such Certificate or Warrant to be lost, stolen or destroyed, in such substance and form as the Surviving Corporation may reasonably direct, to the Parent and the Paying Agent with respect to such Certificate or Warrant, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate or Warrant the portion of the Applicable Closing Per Share Merger Consideration, the Per Share Escrow Consideration or Warrant Per Share Merger Consideration, as applicable, with respect to such Certificate to which such Person is entitled pursuant to this Article 3 .

(b) Payment of Remainder of Merger Consideration . Any remaining amount of the Merger Consideration to be paid to Common Shareholders and Vested Option Holders after the Effective Time shall be paid out of the Escrow Funds in accordance with the terms and conditions of the Escrow Agreement.

(c) Stock Transfer Books . After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any shares of Company Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing shares of Company Stock, or Warrants formerly exercisable for shares of Company Stock, are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the Merger Consideration relating to each such share or Warrant, as provided in this Article 3 .

 

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(d) Dissenting Shares . Notwithstanding any provision of this Agreement to the contrary, shares of Company Stock that are outstanding immediately prior to the Effective Time and which are held by Shareholders who shall not have voted in favor of the Merger or consented thereto in writing and who shall have exercised dissenters’ rights or rights of appraisal for such shares of Company Stock in accordance with the GCL and who, as of the Effective Time, have not effectively withdrawn or lost such dissenters’ rights (collectively, the “ Dissenting Shares ”), shall not be converted into or represent the right to receive any portion of the Merger Consideration, but the holders thereof shall only be entitled to such rights as are granted by the GCL. All Dissenting Shares held by Shareholders who shall have failed to perfect or who effectively shall have withdrawn or lost their dissenters’ rights shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the later of the Effective Time or the occurrence of such event, the right to receive the Merger Consideration to be paid with respect thereto, without any interest thereon, upon surrender, in the manner provided in Sections 3.3(a) and (b) , of the Certificates that formerly evidenced such shares. The Company shall give Parent (i) prompt notice of any written demands for appraisal or payment of the fair value of any Company Shares, withdrawals of such demands, and any other instruments served pursuant to the GCL received by the Company, and (ii) the opportunity to direct and control all negotiations and proceedings with respect to demands for appraisal under the GCL. The Company may participate in such negotiations or proceedings but shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of Parent, settle or offer to settle any such demands.

(e) Certificates and Warrants . In the event this Agreement is terminated without the occurrence of the Effective Time, the Parent shall, or shall cause the Paying Agent to, return promptly, but, in any event, within three (3) Business Days after such termination, any Certificates or Warrants theretofore submitted or delivered to the Paying Agent, without charge to the Person who submitted such Certificate or Warrant.

(f) Escheatment of Funds . None of the Parties nor any other Person shall be liable to any former Shareholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. All funds held by the Paying Agent for payment to the holders of unsurrendered Certificates or Warrants and unclaimed two years after the Effective Date shall be returned to the Parent, after which time any holder of unsurrendered Certificates or Warrants shall look as a general creditor only to the Parent for payment of the funds to which the holder of unsurrendered Certificates or Warrants may be due, subject to applicable Laws. Any such amounts remaining unclaimed by any Shareholder or Warrant Holder immediately prior to such time when such amounts would otherwise escheat to or become the property of any Governmental Authority, shall, to the extent permitted by applicable Laws, become the property of the Parent, free and clear of all claims or interest of any Person previously entitled thereto.

Section 3.4 Purchase Price Adjustment .

(a) Determination of Adjustment Amount . The parties hereto have agreed that the Purchase Price was determined based on the assumption that the Closing Date

 

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Net Cash of the Company would be not less than a deficit of Five Hundred Thousand Dollars (-$500,000) and that all Transaction Related Expenses would be paid from the Purchase Price. The Purchase Price shall be adjusted on a dollar-for-dollar basis (the “ Post-Closing Adjustment ”) to the extent that (i) the Closing Date Net Cash is less (i.e. a larger deficit) than a deficit of Five Hundred Thousand Dollars (-$500,000) and (ii) any Transaction Related Expenses were not included in the Payoff Amount.

(b) Estimated Closing Date Net Cash Statement. At least two (2), but not more than five (5) Business Days prior to the Closing Date, the Company shall cause to be prepared and delivered to Parent a statement (setting out in specific detail each of the items comprising such calculation), setting forth the Company’s good faith estimate of the Closing Date Net Cash (the “ Estimated Closing Date Net Cash Statement ”) to be delivered in a form satisfactory to Parent. Upon receipt of the Estimated Closing Date Net Cash Statement, Parent shall be given reasonable access to all of the Company’s books and records relating to such statement.

(c) Preparation and Review of Closing Date Net Cash Statement . As promptly as practicable, but not later than thirty (30) days after the Closing Date, the Company shall cause to be prepared and delivered to Parent: (i) reconciled bank statements indicating the cash balances of the Company and its Subsidiaries as of immediately prior to the Closing excluding all proceeds from the exercise of any options; (ii) a statement of Indebtedness of the Company and its Subsidiaries on a consolidated basis as of immediately prior to the Closing; and (iii) invoices for all paid and unpaid Transaction Related Expenses (collectively, the “ Closing Date Net Cash Statement ”). The Indebtedness of the Company and its Subsidiaries on a consolidated basis as of immediately prior to Closing shall be subtracted from the cash balance shown in the Company’s reconciled bank statements as of the Closing Date to determine the Closing Date Net Cash of the Company, subject to the review process provided below in the further provisions of this Section 3.4 .

(d) Within thirty (30) days of the receipt of the Company’s calculation of the Closing Date Net Cash and the Post-Closing Adjustment, if any (the “ Review Period ”), Parent shall propose to the Shareholders’ Representative such adjustments (if any) therein as shall in Parent’s judgment be required. Unless Parent notifies the Shareholders’ Representative in writing within such Review Period of an objection to the Company’s calculation of the Closing Date Net Cash and the Post-Closing Adjustment, if any, specifying in reasonable detail the basis for such objection, the Company’s calculation of the Closing Date Net Cash and the Post-Closing Adjustment, if any, shall be binding on the parties hereto. Any portion or amount of the Post-Closing Adjustment that is not so disputed shall be paid within five (5) Business Days after the termination of the Review Period by the Escrow Agent, on behalf of Parent, to the Shareholders, or by the Escrow Agent, on behalf of the Shareholders, jointly and severally, to the Parent, as applicable pursuant to this Section 3.4 .

(e) Dispute Resolution . Any dispute concerning any portion or amount of the Post-Closing Adjustment which cannot be resolved by the Shareholders’ Representative and Parent within fifteen (15) days of the Shareholders’ Representative’s receipt of

 

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Parent’s written objection will be submitted no later than fifteen (15) days after the termination of the Review Period for determination to Mohler, Nixon & Williams (the “ Arbiter ”) for resolution of the disputed items and determination of the Closing Date Net Cash and Post-Closing Adjustment. Prior to referring the matter to the Arbiter, the parties shall agree on the procedures to be followed by the Arbiter, including procedures with regard to the presentation of evidence. If the parties are unable to agree upon procedures within the time prescribed for referral of the dispute to the Arbiter, the Arbiter shall establish such procedures giving due regard to the intention of the parties to resolve disputes as quickly, efficiently and inexpensively as possible, which procedures may, but need not, be those proposed by either Parent or the Shareholders’ Representative. Parent, Shareholders’ Representative and their respective representatives will each furnish to the Arbiter such work papers, schedules and other documents relating to the unresolved disputed issues as the Arbiter may request. The Arbiter shall be directed to render a written report on the unresolved disputed issues with respect to the Closing Date Net Cash and Post-Closing Adjustment as promptly as practicable, and to resolve only those issues in dispute. The determination by the Arbiter shall be based solely on presentations by Parent, on the one hand, and the Shareholders’ Representative, on the other hand, and shall not involve independent review. Any determination by the Arbiter shall not be outside the range defined by the respective amounts of the Closing Date Net Cash and the Post-Closing Adjustment proposed by the Company and Parent’s proposed adjustments thereto, and such determination shall be final and binding upon the parties. Each of Parent on the one hand, and the Shareholders, on the other hand, shall bear that percentage of the fees and expenses of the Arbiter equal to the proportion of the dollar value of the unresolved disputed issues determined in favor of the other party. Fees and expenses of the Arbiter, if any, on behalf of the Shareholders shall be paid by the Representative.

(f) If the Closing Date Net Cash as finally determined pursuant to this Section 3.4 as compared to the amount calculated in the Estimated Closing Date Net Cash Statement indicates (i) an additional reduction in the Purchase Price is required from that made pursuant to Section 3.2(c) , then the difference shall be paid from the Escrow Funds to Parent, or (ii) a lesser reduction in the Purchase Price is required from that made pursuant to Section 3.2(c) , then Parent shall deposit in the Escrow Funds the amount necessary to reflect the excess reduction previously effected under Section 3.2(c) . In addition, any Transaction Related Expenses finally determined not to have been included in the Payoff Amount shall be paid to Parent from the Escrow Funds.

(g) Payment of Post-Closing Adjustment . Within five (5) Business Days following the termination of the Review Period, if no written objection to the Company’s calculation of the Closing Date Net Cash and the Post-Closing Adjustment, if any, has been delivered by Parent, the acceptance by the Shareholders’ Representative of Parent’s proposed adjustments thereto, or resolution by the Arbiter of any Post-Closing Adjustment disputes pursuant to subsection (e) above, the payments set forth in subsection (f) above shall be made in accordance with the terms and conditions of the Escrow Agreement.

 

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Section 3.5 Treatment of Options .

(a) Each of Parent and the Company shall take all necessary action to ensure that, as of the Effective Time, the Company Option Plan and all unvested Company Options (as defined below) issued thereunder are assumed by Parent. Each option to purchase Company Shares (each, a “ Company Option ”) that is outstanding and unexercised pursuant to the Company Option Plan in effect on the date hereof and which is unvested immediately prior to the Effective Time shall become and represent an option to purchase (a “ Replacement Stock Option ”) a number of shares of Parent common stock (the “ Parent Shares ”) equal to the number of Company Shares covered by such Company Option, divided by a ratio (the “ Ratio ”) equal to (i) the average closing price of the Parent’s common stock, based upon the closing price for each of the twenty (20) trading days up to and including the trading day ending two (2) days prior to the Closing Date divided by (ii) the Common Per Share Merger Consideration and with an exercise price per Parent Share equal to the exercise price for such Company Option multiplied by the Ratio. It is the intent of the Parties that (A) the Replacement Stock Options shall qualify following the Effective Time as “incentive stock options” as defined in Section 422 of the Code to the extent that the related Company Options qualified as incentive stock options immediately prior to the Effective Time, and (B) each Replacement Stock Option will have an economic value equivalent to the Company Option it replaces, such that each Replacement Stock Option will not be subject to Section 409A of the Code, and (C) the provisions of this Section 3.5 shall be applied consistent with the foregoing intents. After the Effective Time, except as provided above in this Section 3.5 , each Replacement Stock Option shall be exercisable upon the same terms and conditions as were applicable under the related Company Option immediately prior to the Effective Time but only with accelerated vesting as a result of Termination After Change in Control (as such term is defined in the Company Option which such Replacement Stock Option replaces). The Company agrees that, after the date of this Agreement, it will not grant any stock appreciation rights or stock options and will not permit cash payments to holders of Company Options in lieu of the substitution therefor of Replacement Stock Options, as described in this Section 3.5 . Parent will reserve a sufficient number of Parent Shares for issuance under this Section 3.5 .

(b) Parent shall use its commercially reasonable efforts to file with the Securities and Exchange Commission no later than the Effective Time a registration statement on an appropriate form or a post-effective amendment to a previously filed registration statement under the Securities Act of 1933, as amended, with respect to Parent Shares subject to Replacement Stock Options issued pursuant to this Section 3.5 , and shall use its commercially reasonable efforts to maintain the current status of the prospectus contained therein, as well as comply with any applicable state securities or “blue sky” laws, for so long as such options remain outstanding.

(c) The Company shall take such actions as are necessary to ensure that, and shall obtain and deliver to Parent on or prior to the Closing an irrevocable written agreement, in form and substance reasonably acceptable to Parent (an “ Option Cancellation Agreement ”), from each Vested Option Holder providing that, as of the Effective Time, each Vested Company Option, by virtue of the Merger and without any further action on the part of Parent or Merger Sub, the Company or the holder of such Vested Company Option, shall be converted automatically into the right to receive, in lieu

 

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of the Company Shares otherwise acquirable and receivable upon the exercise of such Vested Company Option immediately prior to the Effective Time, an aggregate amount in cash, without interest, equal to the Vested Option Merger Consideration, subject to withholding Taxes payable in part at Closing and in part from the Escrow Funds. From and after the Effective Time, the Vested Company Options, as so converted in accordance with this Section 3.5(c) , shall represent solely the right to receive the Vested Option Merger Consideration in accordance with Section 3.3 hereof, and shall not be exercisable for the purchase of Company Shares or any Parent Shares.

Section 3.6 Treatment of Warrants . The Company shall take such actions as are necessary to ensure that, and shall obtain and deliver to Parent on or prior to the Closing an irrevocable written agreement, in form and substance reasonably acceptable to Parent, from each Warrant Holder providing that, as of the Effective Time, each Warrant, by virtue of the Merger and without any further action on the part of Parent or Merger Sub, the Company or the holder of such Warrant, shall be converted automatically into the right to receive, in lieu of the Company Shares otherwise acquirable and receivable upon the exercise of such Warrant immediately prior to the Effective Time, an aggregate amount in cash, without interest, equal to the Warrant Merger Consideration. From and after the Effective Time, the Warrants, as so converted in accordance with this Section 3.6 , shall represent solely the right to receive the Warrant Merger Consideration in accordance with Section 3.3 hereof, and shall not be exercisable for the purchase of Company Shares or any Parent Shares.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub as follows:

Section 4.1 Organization . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California. Each Subsidiary of the Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation, as the case may be. Each of the Company and the Subsidiaries thereof has full power and authority to carry on the Business as conducted by it and to own or hold under lease the properties and assets it now owns or holds under lease. Each of the Company and the Subsidiaries thereof is duly qualified to do business and is in good standing as a foreign corporation or company (as applicable) in all jurisdictions where the nature of the property owned or leased by it, or the nature of its business, makes such qualification necessary and where the absence of such qualification would reasonably be expected to have a Material Adverse Effect, which jurisdictions are listed opposite such company’s name on Schedule 4.1 . The Company has no Subsidiaries other than those set forth on Schedule 4.1 . Other than as set forth on Schedule 4.1 , the Company owns beneficially and of record 100% of the outstanding capital stock of each Subsidiary thereof set forth thereon, free and clear of all Liens. The name of each director and officer of the Company and each Subsidiary thereof is set forth opposite the position held by same, on Schedule 4.1 .

 

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Section 4.2 Authorization . Each of the Company and the Shareholders’ Representative has the requisite power and authority to execute and deliver this Agreement and the Transaction Documents to which it or he is a party, to perform its or his obligations under this Agreement and the Transaction Documents to which it or he is a party, and to consummate the transactions contemplated by this Agreement and the Transaction Documents to which it or he is a party. The execution and delivery of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company (other than in the case of the Merger, obtaining the Shareholders’ Approval prior to the Closing). The Board has unanimously (i) approved this Agreement, the Transaction Documents, and the Merger, (ii) determined that in its opinion this Agreement and the Transaction Documents and transactions contemplated hereby and thereby, including the Merger, are in the best interests of the Shareholders and are on terms that are fair to the Shareholders, and (iii) recommended that the Shareholders approve this Agreement, the Transaction Documents and the Merger and directed that this Agreement be submitted to the Shareholders of the Company for approval (the “ Board Recommendation ”). The affirmative votes or written consent of the (i) holders of a majority in interest of all of the outstanding shares of Series A-1 Stock and Series B-1 Stock, voting together as a class, (ii) holders of a majority of all of the outstanding shares of Common Stock and Preferred Stock, voting on an as-if-converted basis and (iii) holders of a majority of all the outstanding shares of Common Stock, to adopt this Agreement are the only votes of the holders of any class or series of the Company’s capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby, including the Merger and the Transaction Documents to which the Company is or is to be a party (together, the “ Shareholders’ Approval ”). If the Closing occurs, the Shareholders’ Approval will have been duly obtained. This Agreement has been duly executed and delivered by each of the Company and the Shareholders’ Representative, and the Transaction Documents to which it or he is a party have been (or when executed and delivered by them after the date hereof will have been), duly executed and delivered by each of the Company and the Shareholders’ Representative and, assuming the due authorization, execution and delivery in each case by the other Persons hereto and thereto, will constitute, upon such execution and delivery, legal, valid and binding obligations of the Company and the Shareholders’ Representative, enforceable in accordance with their terms and conditions except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors rights generally, and general principles of equity (regardless of whether such enforceability is considered in a proceeding in Law or equity). The Shareholders’ Representative, effective upon the Closing, will have been duly authorized to act for and on behalf of the Shareholders in all matters as provided in Section 11.1 hereto.

Section 4.3 No Conflicts . Except as set forth on Schedule 4.3 , neither the execution and delivery of this Agreement and the Transaction Documents by the Company nor the performance by the Company of the transactions contemplated hereby or thereby will:

(a) violate or conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of the Company or any Subsidiary thereof;

(b) violate or conflict with or result in a breach of any Law or conflict with or result in the breach of any of the terms, conditions or provisions thereof;

 

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(c) constitute (with or without notice or lapse of time or both) a default under or otherwise violate any Permit listed or required to be listed on Schedule 4.16(a) or Contract listed or required to be listed on Schedule 4.8(a) ;

(d) constitute an event which would permit any party to terminate, or accelerate the maturity of any Indebtedness or other obligation under, any Contract listed or required to be listed on Schedule 4.8(a) ;

(e) result in the creation or imposition of any Lien upon the Shares, the assets of the Company or any Subsidiary thereof; or

(f) require any Permit, authorization, consent, approval, exemption or other action by or notice to any Person, court or administrative or governmental body pursuant to any Laws.

Section 4.4 Capitalization . Schedule 4.4 sets forth (i) the entire authorized capital stock and the total number of issued and outstanding shares of capital stock of each of the Company and any Subsidiary thereof, (ii) any preemptive rights, rights of first refusal or other voting, purchase or sale rights in or to such shares of capital stock, and (iii) any options, warrants or other securities convertible or exchangeable into such shares of capital stock, including the names of the holders thereof, and the respective exercise price and amounts of vested and unvested securities as of the date hereof and the vesting dates for any unvested securities, if any, applicable thereto. All of the outstanding shares of capital stock of the Company and any Subsidiary thereof have been validly issued and are fully paid and non-assessable. No shares of capital stock of the Company or any Subsidiary are subject to, nor have been issued in violation of preemptive or similar rights. Except as set forth on Schedule 4.4 , neither the Company nor any Subsidiary thereof has any outstanding stock other than the Company Shares, or other securities convertible into or exchangeable for shares of its capital stock or containing profit participation features, and neither the Company nor any Subsidiary thereof has any outstanding options, warrants or rights to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for capital stock. Neither the Company nor any Subsidiary thereof is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. All issuances, sales and repurchases by the Company and any Subsidiary thereof of its respective capital stock have been effected in compliance with all applicable laws, including, without limitation, applicable federal and state securities laws.

Section 4.5 Financial Statements . Schedule 4.5 contains the following financial statements of the Company (collectively, the “ Financial Statements ”):

(a) The audited consolidated balance sheet of the Company as of December 31, 2003, 2004 and 2005, and the related audited consolidated statements of income, shareholders’ equity and cash flows for the year then ended together with a true and correct copy of the report on such audited information for 2003 and 2004 by PricewaterhouseCoopers, LLP, and for 2005 by Mohler, Nixon & Williams, and all letters from such accountants with respect to the results of such audits;

 

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(b) The unaudited consolidated balance sheet of the Company as of September 30, 2006 (the “ Latest Balance Sheet Date ”), and the unaudited related consolidated statements of income, shareholders’ equity and cash flows for the portion of the Company’s fiscal year then ended (collectively, the “ Interim Financial Statements ”).

The Financial Statements are consistent with the Books and Records (which, in turn, accurately and fairly reflect in all material respects all the transactions of, acquisitions and dispositions of assets by, and incurrence of liabilities by, the Company and its Subsidiaries) and fairly present the financial condition, assets and liabilities of the Company, taken as a whole, as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP, except that the Interim Financial Statements lack the footnote disclosure and are subject to normal year end adjustments otherwise required by GAAP, which will not be material individually or in the aggregate. Since December 31, 2005 there has been no change in the Company’s reserve on accrual amounts or policies. The reserves reflected in the Financial Statements are adequate, appropriate and reasonable and have been calculated in a consistent manner.

Section 4.6 Absence of Undisclosed Liabilities . Except as set forth on Schedule 4.6 , none of the Company nor any Subsidiary thereof has any Liabilities, whether due or to become due, arising out of transactions entered into on or prior to the date hereof, or any transaction, series of transactions, action or inaction occurring on or prior to the date hereof, or any state of facts or condition existing on or prior to the date hereof (regardless of when such liability or obligation is asserted), including, without limitation, Liabilities on account of Taxes or Employee Benefit Plans, or in respect thereof, except as reflected and accrued for or reserved against in, the Interim Financial Statements or incurred in the ordinary course of business consistent with past practice since the date of the Interim Financial Statement (none of which is a Liability for breach of contract, breach of warranty, product liability, tort or infringement, or a claim or lawsuit, or an environmental liability). If the Closing Date Net Cash were determined as of December 31, 2006, such amount would be equal to negative Five Hundred Sixty Thousand Seven Hundred Sixty dollars (-$560,760).

Section 4.7 Tangible Personal Property .

(a) Title . The Company or a Subsidiary thereof is in possession of and has good title to, or valid leasehold interests in or valid rights under Contract to use, all tangible personal property (including, without limitation, all fixtures, leasehold improvements, equipment (including computer hardware and communications equipment), whether or not such equipment constitutes a fixture under applicable Law, machinery, tools and tooling, parts, office, operating and other supplies, vehicles (whether or not registered under motor vehicle registration laws), fuel, furniture, and other tangible personal property of the Company or any Subsidiary thereof) used in the conduct of the Business by the Company and the Subsidiaries thereof as presently conducted, including all tangible personal property reflected on the balance sheet included in the Interim Financial Statements and tangible person property acquired since the Latest Balance Sheet Date, other than property disposed of since such date in the ordinary course of business consistent with past practice. All such tangible personal property is free and

 

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clear of all Liens, other than Permitted Liens. Other than as set forth on Schedule 4.7(a) , no Person other than the Company and its Subsidiaries owns or has any right to the use or possession of such tangible personal property other than lessors and licensors of such tangible personal property which constitute leasehold interests or licenses.

(b) Inventories . The Inventory is in good and useable condition and consists of items of a quality and quantity historically useable or saleable in the ordinary course of business, except for obsolete, damaged, below-standard quality, slow-moving or otherwise unusable materials, all of which have been sufficiently written off, written down to net realizable value or otherwise reserved for in the balance sheet included in the Interim Financial Statements. Except as set forth on Schedule 4.7(b) , all items included in the Inventory are the property of the Company or its Subsidiaries free and clear of any Liens, except for Permitted Liens, and none of such items are pledged as collateral or held by the Company or its Subsidiaries on consignment from others. None of the Company nor its Subsidiaries is committed to purchase inventory in amounts greater than are reasonably expected to be usable or saleable in the ordinary course of business as presently conducted by the Company and its Subsidiaries. With respect to inventory in the hands of suppliers for which the Company or its Subsidiaries will be committed on or as of the Closing Date, such inventory on the Closing Date will be reasonably expected to be usable or saleable in the ordinary course of business as presently being conducted by the Company and its Subsidiaries. All items included in the Inventory conform in all material respects to all standards applicable to such inventory for its use, sale or lease imposed by any applicable Law. Except as set forth on Schedule 4.7(b) and Inventory that may be in transit, all of the Inventory is located on premises owned or leased by the Company.

(c) Condition . Except as set forth on Schedule 4.7(c) , all of the assets of the Company and its Subsidiaries are in good condition and repair consistent with industry standards, and are useable in the ordinary course of business. Schedule 4.7(c) includes all of the fixed assets of each of the Company and its Subsidiaries, and each item of tangible personal property owned by the Company and its Subsidiaries, other than inventory and supplies (whether finished goods, work-in-process or raw materials), having a net book value of less than $100,000 individually, and the location thereof. Schedule 4.7(c) lists all leases of tangible personal property to which any of the Company or its Subsidiaries is a party or is bound providing for lease payments in excess of $100,000 in the aggregate, and the lessee and location of such leased tangible personal property.

Section 4.8 Contracts .

(a) Schedule 4.8(a) is a correct and complete list, and the Company has delivered to Parent or Parent’s authorized representatives true and complete copies of all Contracts described in clauses (i) through (xviii) below:

(i) each Contract that involves executory performance of services or delivery of goods or materials by or to the Company or a Subsidiary of an amount

 

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or value in excess of $100,000 and which is not terminable by the Company or a Subsidiary, as applicable, on thirty (30) days’ (or less) prior notice without liability;

(ii) each Contract relating to Indebtedness of the Company or a Subsidiary or creating any Lien on the assets of the Company or any of its Subsidiaries;

(iii) each Contract not in the ordinary course of business involving expenditures or receipts of the Company or a Subsidiary in excess of $100,000;

(iv) each lease, rental or occupancy agreement, installment and conditional sale agreement, and other Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any personal property (other than leases of personal property with remaining obligations of less than $100,000) to which either the Company or a Subsidiary is a party;

(v) each Contract with a current or, if the Company or any of its Subsidiaries has any remaining obligations thereto, a former employee, officer, director or manager of the Company or any Subsidiary, and Contracts with any labor union or other employee representative of a group of employees relating to wages, hours or other conditions of employment other than Contracts (A) that are offer letters provided in ordinary course to such individuals in forms delivered to Parent or (B) that relate solely to the issuance of Company Shares or Company securities issued under the Company Option Plan in forms delivered to Parent;

(vi) each Contract providing for the Company or a Subsidiary to indemnify, defend or hold harmless any Person or make contribution upon the finding of liability on the part of any Person for Intellectual Property infringement due to such Person’s use of a Company product or service;

(vii) each Contract with a consultant or other independent contractor to which either the Company or a Subsidiary is a party under which the Company made any payments since January 1, 2005;

(viii) each Contract of which the Company has knowledge to which any employee, consultant or contractor of the Company or a Subsidiary is bound that in any manner purports to (A) restrict such employee’s, consultant’s or contractor’s freedom to engage in any line of business or activity or to compete with any other Person, or (B) assign to any other Person such employee’s, consultant’s or contractor’s rights to any Intellectual Property;

(ix) each Contract pursuant to which the Company or a Subsidiary licenses Intellectual Property from another Person (other than readily available commercial “shrink-wrap” or “off-the-shelf” software having an acquisition price of less than $100,000 in the aggregate for all such related software);

 

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(x) each joint venture, partnership and other Contract (however named) involving a sharing of profits, losses, costs or liabilities by the Company or a Subsidiary with any other Person;

(xi) each Contract containing covenants that in any way purport to restrict the Company’s or a Subsidiary’s business activity or limit the freedom of the Company or a Subsidiary to engage in any line of business or to compete with any Person;

(xii) each “requirements” Contract to which either the Company or a Subsidiary is a party;

(xiii) each Contract with any dealer, distributor, reseller, manufacturer’s representative, sales agent and sales representative to which the Company or a Subsidiary is a party, in each case identifying what exclusive rights, if any, such Contract contains with respect to territories or products, (A) under which any such Person made any sales since January 1, 2005, and (B) under which no sales have been made since January 1, 2005 (but in each case excluding any license agreements set forth in Schedule 4.8(a)(ix) to or from the Company or a Subsidiary);

(xiv) each power of attorney relating to the Company or a Subsidiary that is currently effective and outstanding;

(xv) each Contract containing a written performance warranty for the Company’s products or services that is materially different from the Company’s standard warranties for such products or services;

(xvi) each Contract relating to the acquisition or disposition of any business, line of business, real property or operations (whether by merger, sale of membership interests, sale of assets or otherwise);

(xvii) each Contract providing for the indemnification or holding harmless of any director, officer or employee; and

(xviii) any other Contract of the Company or a Subsidiary (A) involving since January 1, 2005 obligations or benefits in excess of $100,000 or (B) which is otherwise material to the Business.

Excluding purchase orders or sales of inventory in the ordinary course of business on customary terms valued at less than $100,000 in the aggregate, all material terms and provisions of each oral Contract of the Company or any Subsidiary thereof are described on Schedule 4.8(a) . Except as set forth on Schedule 4.8(b) , neither the Company nor any Subsidiary thereof is in material default of, nor has any event occurred which with the giving of notice or the passage of time or both would constitute a material default by the Company or any Subsidiary thereof, under any Contract, and, to the knowledge of the Company, no event has occurred which with the giving of notice or the passage of time or both would constitute a material default by any other party to any such Contract. Each of the Contracts of the Company and its Subsidiaries is in full

 

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force and effect, is valid and enforceable in accordance with its terms, and, to the knowledge of the Company, is not subject to any claims, charges, set-offs or defenses. Except as set forth on Schedule 4.3 , all of the Contracts of the Company and its Subsidiaries listed or required to be listed on Schedule 4.8(a) will continue in full force and effect without any change or modification after the consummation of the transactions contemplated by this Agreement, without the necessity of obtaining any consent, approval, novation or waiver of any third party. Neither the Company nor any Subsidiary thereof is a party to or bound by any Contract that has been or could reasonably be expected to be, individually or in the aggregate with any other such Contracts, materially adverse or unduly burdensome to the Business, Real Property, Intellectual Property, Tangible Personal Property, or the condition (financial or otherwise), assets, operations, operating results, prospects, employees or customer relations of the Company or any Subsidiary thereof. Except as set forth on Schedule 4.8(c) , neither the Company nor any of its Subsidiaries is a party to, or bound by the provisions of, any Contract (including purchase orders, blanket purchase orders and agreements and delivery orders) that remains executory in whole or in part with any Federal, state, local or foreign Governmental Authority or governmental body. Except as set forth on Schedule 4.8(e) , no Contract of the Company or any of its Subsidiaries is required to be treated as a capital lease by GAAP. Except as set forth on Schedule 4.8(f) , there are no pending renegotiations of any of the Contracts listed or required to be listed on Schedule 4.8(a) and all new Contracts which are being actively negotiated and which would be required to be listed on Schedule 4.8(a) are so listed on Schedule 4.8(f) and indicated as “pending.”

Section 4.9 Real Property .

(a) The Company and its Subsidiaries do not own any real property.

(b) Schedule 4.9(b) lists all real property used or held for use by the Company or any Subsidiary thereof which is leased by the Company or any Subsidiary thereof from third parties (the “ Real Property ”). Each of the Company and the Subsidiaries thereof is the sole legal and equitable owner of the leasehold interest it holds in the Real Property and possesses a valid leasehold interest thereto, free and clear of all Liens (other than Permitted Liens) that could impair the ability of the Company or a Subsidiary thereof to realize the benefits of the rights provided to it under lease, and the right to quiet enjoyment of such Real Property. Accurate and complete copies of all existing lease agreements with respect to the Real Property have heretofore been delivered to the Parent. Neither the Company nor any Subsidiary thereof has exercised any option to purchase any parcel of Real Property. The Real Property constitutes the only real property used or occupied by the Company or any Subsidiary thereof in the conduct of the Business. Except for the leases described on Schedule 4.9(b) there are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of any parcel of the Real Property. To the knowledge of the Company and other than as set forth on Schedule 4.9(b) , there are no parties (other than the Company or any Subsidiary thereof) in possession of any parcel of the Real Property and the Company and its Subsidiaries thereof enjoy peaceful and undisturbed possession of the Real Property, subject to the terms and conditions of the leases set forth on Schedule 4.9(b) in the case of the Real Property. Other than as set forth on Schedule 4.9(b) , all facilities located on each parcel of the Real Property are supplied with utilities and other services necessary for the operation of such facilities in the ordinary course of

 

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business of the Company and any Subsidiary thereof, including gas, electricity, water and telephone, all of which services are adequate for the operation of the Business as presently conducted in accordance with all applicable Laws.

Section 4.10 Litigation . Except as set forth in Schedule 4.10 , there is no suit, action, proceeding, investigation, arbitration, mediation, claim or order pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary thereof (or pending or, to the knowledge of the Company, threatened against any of the current or former officers, directors or employees of the Company or any Subsidiary thereof with respect to their service as an officer, director or employee of the Company or any Subsidiary thereof) before any court, or before any governmental department, commission, board, agency, or instrumentality; nor, to the knowledge of the Company, is there any reasonable basis for any such action, proceeding or investigation. Except as set forth in Schedule 4.10 , none of the Company nor any Subsidiary thereof (a) is subject to any judgment, order or decree of any court or governmental agency; (b) is engaged in any legal action to recover monies due it or for damages sustained by it, or (c) has received any opinion or memorandum or legal advice from counsel to the effect that any of them is exposed, from a legal standpoint, to any Liability which may have a Material Adverse Effect. Schedule 4.10 also sets forth a complete and correct list and description of all resolved claims, suits, actions, proceedings and investigations made, filed or otherwise initiated in connection with the Company which have been resolved in the past two (2) years and the resolution thereof. Prior to the execution of this Agreement, the Company has made available to Parent all responses of counsel for the Company or any Subsidiary thereof to auditors’ requests for information delivered in connection with the Audited Financial Statements (together with any updates provided by such counsel) regarding any suit, action, proceeding, investigation, arbitration, mediation, claim or order pending or threatened against, relating to or affecting the Company or its Subsidiaries.

Section 4.11 Compliance with Applicable Laws . Except as set forth on Schedule 4.11 , in the past two (2) years, (i) the Company and its Subsidiaries have not been in material violation of any Law in connection with the conduct, ownership, use, occupancy or operation of the Business, its assets or the Real Property, including, without limitation, regarding any alleged failure to possess any license, Permit, authorization or other approval, (ii) the Company or any Subsidiary thereof has not received notice of any such violation, and (iii) to the knowledge of the Company, no facts or circumstances ex