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EXHIBIT 2.1
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NEXTWAVE WIRELESS INC.,
GO ACQUISITION CORP.,
GO NETWORKS, INC.
AND
NECHEMIA J. PERES
as the Stockholder Representative
Dated as of December 31, 2006
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS.....................................................1
1.1 Certain
Definitions................................................1
ARTICLE II THE
MERGER.....................................................14
2.1 The
Merger........................................................14
2.2
Closing...........................................................14
2.3 Effective
Time....................................................14
2.4 Effects of the
Merger.............................................14
2.5 Certificate of Incorporation and
By-laws..........................15
2.6
Directors.........................................................15
2.7
Officers..........................................................15
ARTICLE III EFFECT OF THE MERGER ON THE SECURITIES OF THE
COMPANY AND MERGER
SUB.........................................15
3.1 Effect on Capital
Stock...........................................15
3.2 Payment of Merger
Consideration...................................17
3.3 Aggregate Consideration
Spreadsheet...............................20
3.4 Stockholder Representative
Reserve................................20
3.5 Appraisal
Rights..................................................21
ARTICLE IV TERMINATION, AMENDMENT AND
WAIVER..............................22
4.1 Termination of
Agreement..........................................22
4.2 Effect of
Termination.............................................22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE
COMPANY..................23
5.1 Organization and Good
Standing....................................23
5.2 Authorization of
Agreement........................................23
5.3 Conflicts; Consents of Third
Parties..............................24
5.4
Capitalization....................................................25
5.5
Subsidiaries......................................................26
5.6 Corporate
Records.................................................26
5.7 Financial
Statements..............................................27
5.8 No Undisclosed
Liabilities........................................27
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.9 Absence of Certain
Developments...................................28
5.10
Taxes.............................................................29
5.11 Property and
Assets...............................................33
5.12 Technology and Intellectual
Property..............................34
5.13
Insurance.........................................................38
5.14 Material Contracts and
Obligations................................39
5.15
Compliance........................................................39
5.16 Employee
Benefits.................................................39
5.17 Labor and Employment
Matters......................................42
5.18
Litigation........................................................43
5.19 Grants, Incentives and
Subsidies..................................43
5.20 Related Party
Transactions........................................44
5.21
Banks.............................................................44
5.22 State Takeover
Statutes...........................................44
5.23 Financial
Advisors................................................44
5.24 Loan
Obligation...................................................45
5.25 Note
Obligation...................................................45
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER
SUB.....................................................45
6.1 Organization and Good
Standing....................................45
6.2 Authorization of
Agreement........................................45
6.3 Conflicts; Consents of Third
Parties..............................46
6.4 Compliance with
Laws..............................................46
6.5 Charter Documents;
Capitalization.................................46
6.6 Merger
Sub........................................................47
6.7 Financial
Statements..............................................47
6.8
Litigation........................................................48
6.9 Financial
Advisors................................................48
6.10
Financing.........................................................48
6.11
Disclosure........................................................48
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VII [INTENTIONALLY
OMITTED.].......................................48
ARTICLE VIII
COVENANTS......................................................48
8.1 Access to
Information.............................................48
8.2 Conduct of the Business Pending the
Closing.......................49
8.3 Notice of
Changes.................................................52
8.4 Reasonable Best Efforts; Regulatory
Approvals.....................52
8.5 Transaction Related
Litigation....................................53
8.6 No Solicitation by the Company;
Etc...............................53
8.7 Indemnification;
Insurance........................................54
8.8
Confidentiality...................................................54
8.9
Publicity.........................................................54
8.10 Transaction
Expenses..............................................55
8.11 Employee
Matters..................................................55
8.12 Employee
Agreements...............................................55
8.13 Options and
Warrants..............................................56
8.14 Assumption of Certain Payment
Obligations.........................56
8.15 Private Placement and S-3
Registration............................56
8.16 Funding of
Operations.............................................58
8.17 Board of
Director.................................................58
8.18 Anti-Money Laundering
Information.................................58
8.19 Bridge
Loan.......................................................58
8.20 Stockholder
Consents..............................................58
ARTICLE IX CONDITIONS TO
CLOSING..........................................59
9.1 Conditions Precedent to Obligations of Parent and
Merger
Sub........................................................59
9.2 Conditions Precedent to Obligations of the
Company................61
ARTICLE X
INDEMNIFICATION................................................62
10.1 Survival of Representations and
Warranties........................62
10.2
Indemnification...................................................62
10.3 Escrow
Arrangements...............................................63
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.4 Exclusive
Remedy..................................................67
10.5 Tax
Losses........................................................68
10.6 Tax Treatment of Indemnity
Payments...............................68
ARTICLE XI
MISCELLANEOUS..................................................68
11.1 Stockholder
Representative........................................68
11.2 Specific
Performance..............................................71
11.3 Submission to Jurisdiction; Consent to Service of
Process...........................................................72
11.4 Governing
Law.....................................................72
11.5 Entire Agreement; No Third-Party
Beneficiaries....................72
11.6 Amendment and
Waivers.............................................72
11.7
Notices...........................................................73
11.8
Severability......................................................74
11.9
Assignment........................................................74
11.10
Counterparts......................................................74
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EXHIBITS
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Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Amended and Restated Certificate of
Incorporation
Exhibit C - Form of Release Agreement
Exhibit D - Form of Non-Competition Agreement
Exhibit E - Form of Go Networks, Inc. Stock Bonus Plan
Exhibit F - Letter of Transmittal
Exhibit G - Form of Opinion
Exhibit H - Bridge Note
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 31,
2006
(this "AGREEMENT"), by and among NextWave Wireless Inc., a Delaware
corporation
("PARENT"), Go Acquisition Corp., a corporation existing under the
laws of
Delaware and a wholly-owned subsidiary of Parent ("MERGER SUB"), Go
Networks,
Inc., a Delaware corporation (the "COMPANY") and Nechemia J. Peres
as the
Stockholder Representative.
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub
and the Company have approved and declared advisable this Agreement
and the
merger of Merger Sub with and into the Company (the "MERGER"), with
the Company
being the surviving entity in the Merger, upon the terms and
subject to the
conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company has recommended
the
adoption of this Agreement to the stockholders of the Company and
the
stockholders of the Company have adopted this Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain
representations, warranties, covenants and agreements in connection
with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties,
covenants and agreements contained in this Agreement, the parties
hereto agree
as follows:
ARTICLE I
DEFINITIONS
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1.1 Certain Definitions.
(a) For purposes of this Agreement, the following terms shall
have
the meanings specified in this Section 1.1:
"ADDITIONAL MILESTONE 1 SHARES" means that number of validly
issued,
fully paid and non-assessable shares of Parent Common Stock equal
to the product
of the Exchange Ratio and the pro ratio factor that results from
dividing the
actual number of Product Units for which Customer Acceptance has
been achieved
in excess of 1,000 by 2,000; provided, however, that in no event
will such
number be greater than the Exchange Ratio.
"ADDITIONAL MILESTONE 2 SHARES" means if (a) the Company
achieves
clause (i) in the definition of Milestone 1, (b) but did not
achieve Customer
Acceptance of at least 1,000 Product Units on the 12 month
anniversary of the
Closing Date, and (c) the Company does achieve Milestone 2, that
number of
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validly issued, fully paid and non-assessable shares of Parent
Common Stock
equal to the Exchange Ratio, after reduction for any Milestone 1
Shares
previously issued (i.e., the numerator of the Milestone
Consideration used to
calculate the Exchange Ratio for the payment of the Additional
Milestone 2
Shares shall be reduced by an amount equal to the aggregate value
of the
Milestone 1 Shares previously issued, based on the Average Closing
Price at the
time of achievement of Milestone 1).
"AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries,
controls, or is
controlled by, or is under common control with, such Person, and
the term
"control" (including the terms "controlled by" and "under common
control with")
means the possession, directly or indirectly, of the power to
direct or cause
the direction of the management and policies of such Person,
whether through
ownership of voting securities, by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the meaning
of
Section 1504 of the Code or any comparable or analogous group under
state, local
or foreign Law.
"AGGREGATE CONSIDERATION SPREADSHEET" means a spreadsheet, to
be
prepared by the Company and the Stockholder Representative,
calculating and
allocating to each holder of any Company Stock, Company Stock
Option or Company
Warrant, the Cash Consideration or Warrant Consideration, as
applicable, and
setting forth the Transaction Expenses and the Note Obligation and
the payees
thereof, all in reasonable detail and in a form reasonably
satisfactory to
Parent and Merger Sub, a preliminary draft of which will be
delivered to Parent
and Merger Sub by the Company and the Stockholder Representative on
the date
hereof, which preliminary draft shall be updated as provided in
Section 3.3.
"AVERAGE CLOSING PRICE" means an amount equal to the average
per
share closing price of Parent Common Stock (or if no closing sale
price is
reported, the average of the closing bid and closing ask prices)
(i) on any
national securities exchange on which Parent Common Stock is listed
(as reported
by Bloomberg, or, if not reported thereby, any other authoritative
source), or
(ii) if Parent Common Stock is not listed on a national securities
exchange,
quoted in the Over-The-Counter Market Summary, in either case for
the 20 trading
days ending with the second trading day immediately preceding the
relevant
determination date. In the absence of such a listing or quotation,
the Average
Closing Price shall be determined in good faith by Parent and
Stockholder
Representative. If no such agreement can be reached after ten (10)
days between
Parent and Stockholder Representative, either Parent or the
Stockholder
Representative may demand arbitration and such arbitration shall be
conducted by
one arbitrator mutually agreeable to Parent and the Stockholder
Representative.
In the event that, within thirty (30) days after submission of any
dispute to
arbitration, Parent and the Stockholder Representative cannot
mutually agree on
one arbitrator, then, within fifteen (15) days after the end of
such thirty (30)
day period, Parent and the Stockholder Representative shall each
select one
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arbitrator. The two arbitrators so selected shall select a third
arbitrator. If
one party but not the other fails to select an arbitrator during
this fifteen
(15)-day period, then the parties agree that the arbitration will
be conducted
by the one arbitrator selected by the party which has made such a
selection. Any
such arbitration shall be held in San Diego, California, under the
rules and
procedures then in effect of the American Arbitration Association.
The
arbitrator(s) shall determine how all expenses relating to the
arbitration shall
be paid including the respective expenses of each party, the fees
of each
arbitrator and the administrative fee of the American Arbitration
Association.
The decision of the arbitrator or a majority of the three
arbitrators, as the
case may be, shall be final, binding, and conclusive upon the
parties to this
Agreement.
"BUSINESS DAY" means any day of the year on which national
banking
institutions in New York are open to the public for conducting
business and are
not required or authorized to close.
"CAUSE" shall mean with respect to an employee or director of
the
Company or the Surviving Corporation: (i) an unauthorized use or
disclosure by
such employee or director of the Company's confidential information
or trade
secrets, which use or disclosure causes material harm to the
Company; (ii) a
material breach by such employee or director of any agreement
between the
employee or director and the Company; (iii) a material failure by
such employee
or director to comply with the Company's written policies or rules;
(iv) such
employee's or director's conviction of, or plea of "guilty" or "no
contest" to,
a felony under the laws of the United States or any state thereof
or any foreign
jurisdiction in which the Company conducts business which if
occurring in the
United States would constitute a felony under its laws or the laws
of any state
thereof; (v) such employee's gross negligence or willful
misconduct; or (vi) a
continued failure by such employee to perform assigned duties after
receiving
written notification of such failure from the Company's Board of
Directors.
"CODE" means the Internal Revenue Code of 1986, as amended from
time
to time.
"COMPANY STOCK OPTION" means each option to purchase shares of
Common Stock or other right to receive shares of Common Stock under
the Go
Networks, Inc. 2003 Stock Plan which is outstanding immediately
prior to the
Effective Time.
"COMPANY STOCKHOLDERS" means the holders of any shares of
Common
Stock issued and outstanding immediately prior to the Effective
Time, after
giving effect to the Preferred Stock Conversion and any option or
warrant
exercises at the Effective Time including Cashless Exercises.
"COMPANY WARRANT" means each warrant to purchase shares of
capital
stock of the Company (including, without limitation, shares of the
Company's
Preferred Stock) which is outstanding immediately prior to the
Effective Time.
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"CONTRACT" means any contract, agreement, indenture, note,
bond,
loan, instrument, lease, commitment or other legally binding
arrangement or
agreement, whether written or oral.
"COST" means the actual cost incurred by the Company to produce
a
Product Unit plus a reasonable allocation as approved by the Board
of Directors
of the Surviving Corporation to reserve for expected product
warranty and return
costs.
"CUSTOMER ACCEPTANCE" means the acceptance by a customer of a
Product Unit which has been sold at or in excess of Cost, as
evidenced by the
earlier of (i) receipt by the Company or Parent of an acceptance
letter, (ii)
collection by the Company or Parent of partial payment toward the
Product Unit,
(iii) the time such Product Unit is placed into operation by the
customer, or
(iv) the ability of the Company or Parent, as the case may be, to
recognize
revenue related to such Product Unit under GAAP; provided, however,
that the
Board of Directors of the Surviving Corporation may eliminate the
Cost
requirement and decide to sell Product Units below Cost, provided,
further, that
during the 17th and 18th months after the Closing Date, solely for
customers
that have previously accepted Product Units in accordance with this
definition,
Customer Acceptance shall occur when the customer takes delivery of
the Product
Unit.
"ERISA" means the Employee Retirement Income Security Act of
1974,
as amended.
"ESCROW AGREEMENT" means that certain Escrow Agreement to be
entered
into on the Closing Date by and among Parent, the Stockholder
Representative and
the Escrow Agent (as therein defined), substantially in the form of
Exhibit A
hereto.
"ESCROW AMOUNT" means $1,700,000, plus any interest that accrues
on
such amount while it is held in the Escrow Fund.
"EXCHANGE RATIO" means the quotient obtained by dividing the
Milestone Consideration by the Average Closing Price at the time of
achievement
of Milestone 1 and rounded to the nearest 1/10,000 (with 0.00005
and higher
rounded up), provided, that if Milestone 1 is not achieved prior to
the
achievement of Milestone 2, the Exchange Ratio shall mean the
quotient obtained
by dividing the Milestone Consideration by the Average Closing
Price at the time
of the achievement of Milestone 2.
"FAIR MARKET VALUE" means the closing price of a share of
Parent
Common Stock on the last trading day immediately prior to the date
on which
Parent delivers the applicable Milestone Spreadsheet.
"GAAP" means generally accepted accounting principles in the
United
States.
"GOOD REASON" shall mean with respect to an employee of the
Company
or the Surviving Corporation, (i) the material adverse alteration
of such
employee's title or position from that held by such employee as of
the Closing
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Date without such employee's written consent, (ii) the material
reduction of
such employee's total annual compensation as of the Closing without
such
employee's written consent, or (iii) without such employee's
written consent,
the relocation of such employee's primary place of employment to a
location more
than 35 miles away from the location of such primary place of
employment as of
the Closing Date.
"GOVERNMENTAL BODY" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether
federal,
state, local or foreign, or any agency, instrumentality or
authority thereof, or
any court or arbitrator (public or private).
"INDEBTEDNESS" of any Person means, without duplication, (i)
the
principal of and premium (if any), prepayment penalties (if any) in
respect of
(A) indebtedness of such Person for money borrowed and (B)
indebtedness
evidenced by notes, debentures, bonds or other similar instruments
for the
payment of which such Person is responsible or liable; (ii) all
obligations of
such Person issued or assumed as the deferred purchase price of
property, all
conditional sale obligations of such Person and all obligations of
such Person
under any title retention agreement (but excluding trade accounts
payable and
other accrued current liabilities arising in the Ordinary Course of
Business);
(iii) all obligations of such Person under leases required to be
capitalized in
accordance with GAAP; (iv) all obligations of such Person for the
reimbursement
of any obligor on any letter of credit, banker's acceptance or
similar credit
transaction; and (v) all obligations of the type referred to in
clauses (i)
through (iv) of any Persons for the payment of which such Person is
responsible
or liable or for which any property or asset of such Person is
secured by a
Lien, under any legally binding obligation, including as obligor,
guarantor,
surety or otherwise.
"INTELLECTUAL PROPERTY" means any rights available with respect
to
the Technology under patent, copyright, trade secret or trademark
law or any
other statutory provision or common law doctrine, and also domain
names.
"IRS" means the Internal Revenue Service.
"KEY EMPLOYEES" means those individuals identified as key
employees
on Schedule 1.1.
"KNOWLEDGE" means (i) with respect to the Parent, the actual
knowledge of the individual(s) listed on Schedule 1.1 and such
knowledge as
would reasonably be expected to be known by such individuals in the
ordinary and
usual course of the performance of their professional
responsibilities, and (ii)
with respect to the Company, the actual knowledge of the Gideon
Ben-Efraim,
Yaron Fein, Barbara Velline, Oz Leave and Sigal Ben Eliyahu and
such knowledge
as would reasonably be expected to be known by such individual(s)
in the
ordinary and usual course of the performance of their
professional
responsibilities.
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"LAW" means any foreign, federal, state or local law (including
common law), statute, code, ordinance, rule, regulation or other
requirement
issued, enacted, adopted, promulgated, implemented or otherwise put
into effect
by or under the authority of any Governmental Body.
"LEGAL PROCEEDING" means any judicial, administrative or
arbitral
actions, suits, proceedings (public or private) or claims or
proceedings by or
before a Governmental Body.
"LIABILITY" means any debt, loss, damage, adverse claim,
liability
or obligation (whether direct or indirect, known or unknown,
asserted or
unasserted, absolute or contingent, accrued or unaccrued,
liquidated or
unliquidated, or due or to become due, and whether in contract,
tort, strict
liability or otherwise).
"LIEN" shall mean any lien, mortgage, encumbrance, security
interest, claim, lease, charge, or pledge that is not a Permitted
Exception.
"LOSSES" means any and all damages, losses, liabilities, Taxes
and
Tax Losses (including any Taxes incurred or resulting from receipt
of a payment
in respect of an indemnifiable Loss) obligations, costs and
expenses, and any
and all claims, demands or suits (by any Person, including without
limitation
any Governmental Body), including the costs and expenses of any and
all actions,
suits, proceedings, demands, assessments, judgments, settlements
and compromises
relating thereto and including reasonable attorneys' and other
advisors' fees,
costs and expenses in connection therewith.
"MATERIAL ADVERSE EFFECT" means, with respect to any party, any
condition, change, situation or set of circumstances (any such
item, an
"EFFECT") that has had or would reasonably be expected to have a
material
adverse effect on (i) such party and its Subsidiaries, taken as a
whole, or the
business, assets, properties, liabilities, financial condition,
operations, or
results of operations of such party and its Subsidiaries, taken as
a whole, or
(ii) the ability of such party to consummate the Merger and the
other
transactions contemplated by this Agreement or perform its material
obligations
under this Agreement or the Company Documents, if applicable;
provided, however,
that a Material Adverse Effect shall not include any condition,
change,
situation or set of circumstances or effect relating to (A) the
economy in
general in the United States or Israel, (B) United States, Israeli
or global
financial or securities markets or conditions or any act of
terrorism, epidemic,
natural disaster or war, (C) the telecommunications and wireless
industries
generally, (D) changes in applicable law or regulations, (E) any
Effect
resulting from compliance with the terms and conditions of this
Agreement, or
(F) any Effect resulting from the announcement or pendency of the
Merger,
including loss of any customers, suppliers, partners or
distributors.
"MERGER CONSIDERATION" means the Common Stock Merger
Consideration, and Warrant Consideration.
"MILESTONE" means Milestone 1 or Milestone 2, as applicable.
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"MILESTONE 1" means the achievement of each of the following
criteria: (i) the continuous employment from the Closing Date
through the 12
month anniversary thereof by each of the Key Employees, other than
a termination
of any Key Employee without Cause or the termination by any Key
Employee for
Good Reason, and (ii) Customer Acceptance on or before the 12 month
anniversary
of the Closing Date of a minimum of 1,000 Product Units.
Notwithstanding the
foregoing, (A) in the event that clause (i) is not satisfied due to
the
termination of employment of no more than 4 Key Employees
(excluding Oz Leave,
Amir Adler, Ronen Akerman, Roy Kinamon and Yuval Mor) the Company
will be deemed
to have satisfied clause (i) if, in consultation with Parent, the
Company
replaces such Key Employee(s) with a new employee or employees, as
applicable,
of comparable skill and experience, and (B) in the event that the
Company
satisfies clause (i) but fails to satisfy clause (ii) above, the
Company will be
deemed to have achieved Milestone 1 if it nonetheless achieves
Customer
Acceptance of at least 500 Product Units; provided, that if the
Company achieves
Customer Acceptance of less than 1,000 Product Units but at least
500 Product
Units, the number of Milestone 1 Shares payable pursuant to Section
3.2(g) shall
equal the product of the Exchange Ratio and the pro ratio factor
that results
from dividing the actual number of Product Units for which Customer
Acceptance
has been achieved on or before the 12 month anniversary of the
Closing Date by
1,000. For example, if the Company reaches Customer Acceptance of
750 Product
Units by the 12 month anniversary of the Closing Date, then the
number of
Milestone 1 Shares payable pursuant to Section 3.2(g) shall be
adjusted to
750/1,000 x the Exchange Ratio, such adjustment being referred to
as the
"MILESTONE 1 PRICE ADJUSTMENT".
"MILESTONE 1 SHARES" means that number of validly issued, fully
paid
and non-assessable shares of Parent Common Stock equal to the
Exchange Ratio.
"MILESTONE 2" means the achievement on or before the 18 month
anniversary of the Closing Date of Customer Acceptance of a minimum
of 3,000
cumulative Product Units. Notwithstanding the foregoing, in the
event that the
Company does not achieve Customer Acceptance of 3,000 cumulative
Product Units,
it will be deemed to have achieved Milestone 2 if it nonetheless
achieves
Customer Acceptance of at least 2,000 cumulative Product Units;
provided, that
if the Company achieves acceptance of less than 3,000 cumulative
Product Units,
the number of Milestone 2 Shares payable pursuant to Section 3.2(g)
shall equal
the product of the Exchange Ratio and the pro ratio factor that
results from
dividing (A) the number of Product Units for which Customer
Acceptance has been
achieved on or before the 18 month anniversary of the Closing Date
less the
actual number of Product Units factored in the calculation of the
Milestone 1
Shares, and, if applicable, the Additional Milestone 1 Shares or
Additional
Milestone 2 Shares by (B) 2,000; provided, however, that in no
event will such
pro ratio factor be greater than one. For example, if the Company
only achieves
Customer Acceptance of 250 Product Units prior to the 12 month
anniversary of
the Closing Date, and thereafter reaches Customer Acceptance of
2,000 cumulative
units by the 18 month anniversary of the Closing Date, then 1,000
Product Units
shall be used for the calculation of Additional Milestone 2 Shares,
and the
Milestone 2 Shares payable pursuant to Section 3.2(g) shall be
adjusted to
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1,000/2,000 x the Exchange Ratio per share, such adjustment being
referred to as
the "MILESTONE 2 PRICE ADJUSTMENT".
"MILESTONE 2 SHARES" means that number of validly issued, fully
paid
and non-assessable shares of Parent Common Stock equal to the
Exchange Ratio;
provided, however, that in the event Additional Milestone 1 Shares
are paid
under this Agreement, then the numerator of the Milestone
Consideration used to
calculate the Exchange Ratio for the payment of Milestone 2 Shares
shall be
reduced by an amount equal to the aggregate value of the Additional
Milestone 1
Shares, based on the Average Closing Price at the time of
achievement of
Milestone 1, thereby decreasing such Exchange Ratio.
"MILESTONE CONSIDERATION" means an amount equal to
$12,847,057.95
divided by the Total Number of Shares.
"ORDER" means any order, injunction, judgment, decree, ruling,
writ,
assessment or arbitration award of a Governmental Body.
"ORDINARY COURSE OF BUSINESS" means the ordinary and usual course
of
day-to-day operations of the business of the Company and the
Company
Subsidiaries through the date hereof consistent with past
practice.
"PARENT COMMON STOCK" means the common stock, par value $0.001
per
share, of Parent.
"PERMITS" means any approvals, authorizations, consents,
licenses,
permits or certificates of a Governmental Body.
"PERMITTED EXCEPTIONS" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed
in policies of
title insurance which have been made available to Parent; (ii)
statutory liens
for current Taxes, assessments or other governmental charges not
yet delinquent
or the amount or validity of which is being contested in good faith
by
appropriate proceedings provided that adequate reserves have been
set aside on
the books and records of the Company or the Company Subsidiaries in
accordance
with GAAP; (iii) mechanics', carriers', workers', repairers' and
similar Liens
arising or incurred in the Ordinary Course of Business that are not
material to
the business, operations and financial condition of the assets of
the Company so
encumbered; (iv) zoning, entitlement and other land use and
environmental
regulations by any Governmental Body, provided that such
regulations have not
been violated by the Company; (v) statutory or common law liens to
secure
obligations to landlords, lessors or renters under leases or rental
agreements;
(vi) deposits or pledges made in connection with, or to secure
payment of,
workers' compensation, unemployment insurance or similar programs
mandated by
applicable Law; (vii) liens arising solely by virtue of any
statutory or common
law provision relating to banker's liens, rights of setoff or
similar rights and
remedies as to deposit accounts or other funds maintained with a
creditor
depository institution; and (viii) liens in favor of other
financial
8
<PAGE>
institutions arising in connection with the Company's deposit
accounts or
securities accounts held at such institutions to secure customary
fees, charges,
and the like.
"PERSON" means any individual, corporation, partnership, firm,
joint
venture, association, joint-stock company, trust, unincorporated
organization,
Governmental Body or other entity.
"PRE-CLOSING TAX PERIOD" means any taxable year or period (or
portion thereof) that ends on or before the Closing Date.
"PREFERRED STOCK" means, collectively, the Series A Preferred
Stock
and the Series A-1 Preferred Stock.
"PRO RATA PORTION" means, for any holder of Company Stock, the
ratio
of (i) the number of shares of Common Stock such holder owns
immediately prior
to the Effective Time (after giving effect to the Preferred Stock
Conversion and
any option exercises, including Cashless Exercises, at or prior to
the Effective
Time), over (ii) the Total Number of Shares.
"PRODUCT UNIT" means one MBW WLS Micro Cellular Wi-Fi Sector
Base
Station or one MBW WLP Pico Cellular Wi-Fi Base Station, each
incorporating the
Company's xRF(TM) smart antenna technology.
"SOFTWARE" means any and all computer programs, whether in
source
code or object code form, together with all related
documentation.
"STOCK CONSIDERATION" means the Milestone 1 Shares together with
the
Milestone 2 Shares, and, if applicable, the Additional Milestone 1
Shares or the
Additional Milestone 2 Shares. The Stock Consideration shall be
deemed to
include cash in lieu of such shares paid pursuant to Section
3.1(c)(ii)and(iii).
"STOCKHOLDER REPRESENTATIVE RESERVE" means $100,000, intended
to
defray the costs and expenses incurred by the Stockholder
Representative in
connection with his obligations under this Agreement.
"STRADDLE PERIOD" means any taxable year or period that
includes,
but does not end on, the Closing Date.
"SUBSIDIARY" means any Person of which any other Person directly
or
indirectly owns voting securities, other voting rights or voting
partnership
interests which are sufficient to elect at least a majority of such
first
Person's board of directors or other governing body (or, if there
are no such
voting interests, the second Person directly or indirectly owns 50%
or more of
the equity interests of such first Person).
"TAKEOVER PROPOSAL" means any inquiry, proposal or offer from
any
Person or "group" (as defined in Section 13(d) of the Securities
Exchange Act of
1934, as amended, (the "EXCHANGE ACT")), other than Parent and its
Subsidiaries,
relating to any (A) direct or indirect acquisition (whether in a
single
9
<PAGE>
transaction or a series of related transactions) of assets of the
Company and
the Company Subsidiaries (including securities of Subsidiaries)
equal to 20% or
more of the Company's consolidated assets or to which 20% or more
of the
Company's revenues or earnings on a consolidated basis are
attributable, (B)
direct or indirect acquisition (whether in a single transaction or
a series of
related transactions) of 20% or more of any class of equity
securities of the
Company, (C) tender offer or exchange offer that if consummated
would result in
any Person or "group" (as defined in Section 13(d) of the Exchange
Act)
beneficially owning 20% or more of any class of equity securities
of the Company
or (D) merger, consolidation, share exchange, business
combination,
recapitalization, liquidation, dissolution or similar transaction
involving the
Company or any of the Company Subsidiaries; in each case, other
than the
transactions contemplated by this Agreement.
"TAX RETURN" means any return, report or statement required to
be
filed with respect to any Tax (including any schedules or
attachments thereto,
and any amendment thereof), including any information return, claim
for refund,
amended return or declaration of estimated Tax, and including,
where permitted
or required, combined, consolidated or unitary returns for any
group of entities
that includes the Company, any of the Company Subsidiaries, or any
of their
Affiliates.
"TAXES" means (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including all
net income,
gross receipts, capital, sales, use, ad valorem, value added,
transfer,
franchise, profits, inventory, capital stock, license, withholding,
payroll,
employment, social security, unemployment, national insurance or
health, excise,
severance, stamp, occupation, property and estimated taxes, customs
duties,
fees, assessments and other taxes of any kind whatsoever, (ii) all
interest,
penalties, fines, additions to tax or additional amounts imposed by
any Taxing
Authority in connection with any item described in clause (i), and
(iii) any
liability in respect of any items described in clauses (i) and/or
(ii) payable
by reason of Contract, assumption, transferee liability, operation
of Law,
Treasury Regulation Section 1.1502 6(a) (or any predecessor or
successor thereof
of any analogous or similar provision under Law) or otherwise.
"TAXING AUTHORITY" means the IRS and any other Governmental
Body
responsible for the administration of any Tax.
"TECHNOLOGY" means, collectively, all designs, formulae,
algorithms,
procedures, methods, techniques, ideas, know-how, Software,
programs,
subroutines, tools, inventions, creations, improvements, works of
authorship and
other similar materials, and all recordings, graphs, drawings,
reports,
analyses, and other writings, and any other embodiments of the
above, in any
form whether or not specifically listed herein, and all related
technology, that
are used in, incorporated or embodied in or displayed by any of the
foregoing or
used or useful in the design, development, reproduction,
maintenance or
modification of any of the foregoing.
10
<PAGE>
"TOTAL NUMBER OF SHARES" means the total number of shares of
Common
Stock issued and outstanding immediately prior to the Effective
Time (other than
such shares of Common Stock held by the Company or any Company
Subsidiary) after
giving effect to the Preferred Stock Conversion and any option
exercises,
including Cashless Exercises, at or prior to the Effective
Time.
"TRANSACTION EXPENSES" means all the transaction costs for which
the
Company or the Stockholder Representative (excluding the
Stockholder
Representative Reserve) are liable including brokers' or finders'
fees and fees
and expenses of counsel, advisors, consultants, investment bankers,
accountants,
auditors and experts, incurred in connection with the negotiation
and execution
of this Agreement and the consummation of the transactions
contemplated by this
Agreement.
"TREASURY REGULATIONS" means the regulations promulgated under
the
Code.
"WARRANT CONSIDERATION" means, with respect to each Company
Warrant
instrument, an amount equal to the product of $0.17 and the number
of shares of
Common Stock for which such Company Warrant was exercisable
immediately prior to
the Effective Time.
(b) Terms Defined Elsewhere in this Agreement. For purposes of
this Agreement, the following terms have meanings set forth in the
sections
indicated:
Term Section
---- -------
Agreement Preamble
Approved Enterprise 5.19
Balance Sheet 5.7
Balance Sheet Date 5.7
Bank Obligation 5.24
Cash Consideration 3.1(c)(i)
Cashless Exercise 3.1(d)
Certificate 3.1(c)(iii)
Certificate of Formation 6.5(a)
Certificate of Merger 2.3
Closing 2.2
Closing Date 2.2
COBRA 5.16(d)
Common Stock 3.1
Common Stock Merger Consideration 3.1(c)
Company Preamble
Company Documents 5.2(a)
Company Plans 5.16(a)
Company Stock Options 3.1(e)(i)
Company Stockholder Approval 5.2(c)
Company Subsidiary 5.5
11
<PAGE>
Company Warrants 3.1(f)
Confidentiality Agreement 8.8
Deductible 10.2(d)
Dissenting Shares 3.5
Dissenting Stockholders 3.5
DGCL 2.1
Effective Time 2.3
Employees 5.16(a)
ERISA Affiliate 5.16(a)
Escrow Agent 3.1(g)
Escrow Fund 3.1(g)
Escrow Payment 3.1(c)(iv)
Escrow Period 10.3(b)
Expiration Date 10.1(a)
Financial Statements 5.7
Foreign Plan 5.16(f)
Grants 5.19
Information Statement 6.11
Material Contracts 5.14
Merger Recitals
Merger Sub Preamble
Merger Sub Common Stock 3.1
Milestone 1 Price 8.11(c)
Milestone 1 Shares 3.1(c)(ii)
Milestone 2 Shares 3.1(c)(iii)
Milestone Spreadsheet 3.2(e)
Multiemployer Plan 5.16(b)
Note Obligation 5.25
NWL 3.1(a)
OCS 5.19
Officer's Certificate 10.3(b)
Parent Preamble
Parent Documents 6.2
Parent Indemnified Parties 10.2
Parent Indemnifiable Losses 10.2(c)
Preferred Stock 3.1
Preferred Stock Conversion 5.2(d)
Prospectus 8.15(b)
SEC 6.9
Securities Act 5.14
Series A Preferred Stock 5.4
Shares 3.5
Shelf Registration 8.15(a)
Shelf Registration Statement 8.15(a)
12
<PAGE>
Suspension Period 8.15(c)
Stock Bonus Plan 8.11(c)
Stockholder Representative 11.1(a)
Stockholder Representative Documents 11.1(h)
Surviving Corporation 2.1
Tax Losses 10.5(a)
Third-Party Interests 5.5
Title IV Plans 5.16(b)
Treaty 3.2(k)
United States 5.10(s)
Unresolved Claim 10.3(b)
(c) Other Definitional and Interpretive Matters. Unless
otherwise
expressly provided, for purposes of this Agreement, the following
rules of
interpretation shall apply:
(i) Calculation of Time Period. When calculating the period of
time before which, within which or following which any act is to be
done or step
taken pursuant to this Agreement, the date that is the reference
date in
calculating such period shall be excluded. If the last day of such
period is a
non-Business Day, the period in question shall end on the next
succeeding
Business Day.
(ii) Dollars. Any reference in this Agreement to $ or dollars
shall
mean U.S. dollars.
(iii) Exhibits/Schedules. The Exhibits and Schedules to this
Agreement are hereby incorporated and made a part hereof and are an
integral
part of this Agreement. All Exhibits and Schedules annexed hereto
or referred to
herein are hereby incorporated in and made a part of this Agreement
as if set
forth in full herein. Any capitalized terms used in any Schedule or
Exhibit but
not otherwise defined therein shall be defined as set forth in this
Agreement.
(iv) Gender and Number. Any reference in this Agreement to
gender
shall include all genders, and words imparting the singular number
only shall
include the plural and vice versa.
(v) Headings. The provision of a Table of Contents, the
division
of this Agreement into Articles, Sections and other subdivisions
and the
insertion of headings are for convenience of reference only and
shall not affect
or be utilized in construing or interpreting this Agreement. All
references in
this Agreement to any "Section" are to the corresponding Section of
this
Agreement unless otherwise specified.
(vi) Herein. The words such as "HEREIN," "HEREINAFTER,"
"HEREOF,"
and "HEREUNDER" refer to this Agreement as a whole and not merely
to a
subdivision in which such words appear unless the context otherwise
requires.
13
<PAGE>
(vii) Including. The word "INCLUDING" or any variation thereof
means "INCLUDING, WITHOUT LIMITATION" and shall not be construed to
limit any
general statement that it follows to the specific or similar items
or matters
immediately following it.
(viii) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an
ambiguity or
question of intent or interpretation arises, this Agreement shall
be construed
as jointly drafted by the parties hereto and no presumption or
burden of proof
shall arise favoring or disfavoring any party by virtue of the
authorship of any
provision of this Agreement.
ARTICLE II
THE MERGER
----------
2.1 The Merger. Upon the terms and subject to the conditions
set
forth in this Agreement and in accordance with the General
Corporation Law of
the State of Delaware (the "DGCL"), Merger Sub shall be merged with
and into the
Company at the Effective Time. Following the Effective Time, the
separate
corporate existence of Merger Sub shall cease, and the Company
shall continue as
the surviving corporation in the Merger (the "SURVIVING
CORPORATION") and shall
succeed to and assume all the rights and obligations of Merger Sub
in accordance
with the DGCL.
2.2 Closing. Subject to the satisfaction of the conditions set
forth in Sections 9.1 and 9.2 (or the waiver thereof by the party
entitled to
waive that condition), the closing of the Merger (the "CLOSING")
shall take
place at the offices of Weil, Gotshal & Manges LLP located at
767 Fifth Avenue,
New York, New York 10153 (or at such other place as the parties may
designate in
writing) at 10:00 a.m. (New York time) on a date to be specified by
the parties,
which date shall be no later than the second (2nd) Business Day
after the
satisfaction or waiver of each conditions to the Closing set forth
in Article IX
(other than conditions that by their nature are to be satisfied at
the Closing,
but subject to the satisfaction or waiver of such conditions),
unless another
time or date, or both, are agreed to in writing by the parties
hereto. The date
on which the Closing shall be held is referred to in this Agreement
as the
"CLOSING DATE."
2.3 Effective Time. Subject to the provisions of this
Agreement,
as soon as practicable on the Closing Date, the parties shall file
a certificate
of merger (the "CERTIFICATE OF MERGER") executed in accordance with
the relevant
provisions of the DGCL and, as soon as practicable on or after the
Closing Date,
shall make all other filings or recordings required under the DGCL.
The Merger
shall become effective at such time as the Certificate of Merger is
duly filed
with the Secretary of State of the State of Delaware, or at such
other time as
Parent and the Company shall agree and shall specify in the
Certificate of
Merger (the time the Merger becomes effective being the "EFFECTIVE
TIME").
2.4 Effects of the Merger. The Merger shall have the effects
set
forth in the DGCL.
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<PAGE>
2.5 Certificate of Incorporation and By-laws.
(a) The certificate of incorporation of the Surviving
Corporation
shall be amended at or prior to the Effective Time to be in the
form of Exhibit
B and, as so amended, such certificate of incorporation shall be
the certificate
of incorporation of the Surviving Corporation until thereafter
changed or
amended as provided therein or by applicable Law.
(b) The bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving
Corporation until
thereafter changed or amended as provided therein or by applicable
Law.
2.6 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving
Corporation until the
earlier of their resignation or removal or until their respective
successors are
duly elected and qualified, as the case may be.
2.7 Officers. The officers of Merger Sub immediately prior to
the
Effective Time shall be the officers of the Surviving Corporation,
until the
earlier of their resignation or removal or until their respective
successors are
duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE
---------------------------
SECURITIES OF THE COMPANY AND MERGER SUB
----------------------------------------
3.1 Effect on Capital Stock. As of the Effective Time, by
virtue
of the Merger and without any action on the part of Merger Sub, the
Company or
the holders of (i) (A) any shares of the Company's common stock,
par value
$0.00001 per share (the "COMMON STOCK") or (B) any shares of the
Company's
Preferred Stock, par value $0.00001 per share (the "PREFERRED
STOCK" and
together with the Common Stock, the "COMPANY STOCK"), or (ii) any
shares of
common stock, par value $0.01 per share, of Merger Sub ("MERGER SUB
COMMON
STOCK"), the following shall occur:
(a) Common Stock of Merger Sub. The shares of Merger Sub Common
Stock issued and outstanding immediately prior to the Effective
Time shall be
converted into and exchangeable as a whole for 1,000 shares of
common stock of
the Surviving Corporation. Immediately after the Effective Time,
Parent shall
contribute all of the shares of common stock of the Surviving
Corporation to
NextWave Wireless LLC ("NWL"), a direct, wholly owned Subsidiary of
Parent,
which shall thereby be the sole stockholder of the Surviving
Corporation.
(b) Cancellation of Treasury Stock. Each share of Common Stock
and
Preferred Stock issued and outstanding immediately prior to the
Effective Time
that is owned by the Company (as treasury stock or otherwise)
shall
15
<PAGE>
automatically be cancelled and retired and shall cease to exist,
and no cash or
other consideration shall be delivered or deliverable in exchange
thereof.
(c) Conversion of Common Stock. Subject to Sections 3.2(i),
3.2(k), 3.5 and the last sentence of 10.3(a), each share of Common
Stock issued
and outstanding immediately prior to the Effective Time (other than
such shares
of Common Stock held by the Company or any Company Subsidiary),
after giving
effect to the Preferred Stock Conversion and any option exercise,
including
Cashless Exercises, shall be entitled to receive:
(i) an amount in cash, without interest, equal to the Milestone
Consideration less the quotient obtained by dividing the sum of (A)
50% of the
Transaction Expenses, (B) the Escrow Amount and (C) the
Stockholder
Representative Reserve by the Total Number of Shares; (such amount
payable under
this Section 3.1(c)(i), the "CASH CONSIDERATION"); provided that
payments in
respect of shares of Common Stock issued upon Cashless Exercises
shall be made
net of the exercise price per share applicable to the underlying
Company Stock
Option; plus
(ii) at the time of the achievement of Milestone 1, and subject
to
the Milestone 1 Price Adjustment, the Milestone 1 Shares, plus, if
the Company
satisfies all the conditions of Milestone 1 and achieves Customer
Acceptance of
at least 2,000 Product Units on or before the 12 month anniversary
of the
Closing Date, the Additional Milestone 1 Shares; provided, however,
that the
stockholders listed on Schedule 3.1(c) shall receive, in lieu of
such Milestone
1 Shares and, if applicable, Additional Milestone 1 Shares, cash in
an amount
equal to the Fair Market Value of such shares; plus
(iii) at the time of the achievement of Milestone 2, and subject
to
the Milestone 2 Price Adjustment, the Milestone 2 Shares, plus, in
the event
there was a Milestone 1 Price Adjustment or there were no Milestone
1 Shares
issued pursuant to Section 3.1(c)(ii), the Additional Milestone 2
Shares, if
any; provided, however, that the stockholders listed on Schedule
3.1(c) shall
receive, in lieu of such Milestone 2 Shares and, if applicable,
Additional
Milestone 2 Shares, cash in an amount equal to the Fair Market
Value of such
shares; plus
(iv) at the time set forth in, and subject to, Section 10.3
(and
with respect to the disbursement of any amounts remaining in the
Stockholder
Reserve, Section 3.4), such holder's Pro Rata Portion of the Escrow
Payment, if
any. The aggregate "ESCROW PAYMENT" is an amount equal to (I) the
Escrow Amount,
less (II) the aggregate amounts paid or payable in respect of
indemnifiable
Losses or any other expenses or amounts deducted from the Escrow
Fund, in each
case in accordance with Article X or the Escrow Agreement, plus
(III) any
amounts remaining in the Stockholder Representative Reserve.
Collectively, the Cash Consideration, the Stock Consideration and
the Escrow
Payment, if any, payable pursuant to this Section 3.1(c), which
shall not in the
aggregate exceed $38,541,173.85, subject to fluctuations in the
Fair Market
16
<PAGE>
Value of the Parent Common Stock following establishment of the
Exchange Ratio,
are referred to as the "COMMON STOCK MERGER CONSIDERATION".
At the Effective Time, all shares of Company Stock issued and
outstanding immediately prior to the Effective Time shall no longer
be
outstanding and such shares of Company Stock shall be cancelled and
retired and
shall cease to exist, and each certificate (a "Certificate")
formerly
representing any such shares of Company Stock (other than such
shares held by
the Company or any Company Subsidiary) shall thereafter represent
only the right
to receive the applicable portion of the Common Stock Merger
Consideration.
(d) Company Stock Options. The Company shall effectuate, as
described in the following sentence, the cashless exercise (the
"CASHLESS
EXERCISE"), as of the Effective Time, of all Company Stock Options
outstanding
that were not previously exercised immediately prior to the
Effective Time so
that as of the Effective Time such Company Stock Options shall be
cancelled and
shall no longer represent the right to purchase Company Common
Stock or any
other equity security of the Company, Parent or Merger Sub;
provided, however,
that any Company Stock Option with an exercise price greater than
the Cash
Consideration shall be cancelled immediately prior to the Effective
Time and
shall no longer represent the right to purchase Company Common
Stock or any
other equity security of the Company, Parent or Merger Sub unless
the holder of
such option exercises such option by paying the applicable exercise
price in
cash. Each holder of a Company Stock Option, upon such Cashless
Exercise, shall
be entitled to receive the Common Stock Merger Consideration
provided for under
Section 3.1(c) above.
(e) Warrants. As of the Effective Time, all unexercised Company
Warrants whether or not exercisable, shall no longer be outstanding
and shall
cease to exist and each holder of any Company Warrants shall cease
to have any
rights with respect thereto, and each instrument formerly
representing a Company
Warrant shall thereafter represent only the right to receive the
applicable
portion of the Warrant Consideration, which shall not in the
aggregate exceed
$498,834.57.
(f) Escrow Fund. At the Closing, Parent shall cause to be
deposited with a mutually agreed upon escrow agent (the "ESCROW
AGENT"), the
Escrow Amount, which is to be held in an interest-bearing account
in accordance
with the terms of the Escrow Agreement and Article X (the "ESCROW
FUND").
3.2 Payment of Merger Consideration. At the Effective Time,
Parent
shall make the following disbursements, in each case in accordance
with the
final Aggregate Consideration Spreadsheet delivered pursuant to
Section 3.3:
(a) Parent shall disburse to the Escrow Agent, the Escrow
Amount.
(b) Parent shall disburse the Stockholder Representative
Reserve
in accordance with Section 3.4.
17
<PAGE>
(c) Parent shall disburse to the Persons indicated on the
Aggregate Consideration Spreadsheet amounts equal to the
Transaction Expenses.
(d) Parent shall disburse to each Company Stockholder such
Company
Stockholder's portion of the Cash Consideration; provided that
prior to any such
disbursement to any Company Stockholder, such Company Stockholder
shall have
delivered to Parent a properly completed letter of transmittal
substantially in
the form of Exhibit F hereto together with such Company
Stockholder's
Certificate. Upon surrender of a Certificate for cancellation to
Parent,
together with such letter of transmittal, duly completed and
validly executed,
as of the Effective Time, the holder of such Certificate shall be
entitled to
receive in exchange therefor, and Parent shall pay to such holder
in immediately
available funds, the amount of the Cash Consideration into which
the shares
formerly represented by such Certificate shall have been converted
pursuant to
the terms of this Article III, and the Certificate so surrendered
shall
forthwith be cancelled. All cash paid upon the surrender for
exchange of
Certificates in accordance with, and subject to, the terms of
Section 3.2(g)
shall be deemed to have been paid in full satisfaction of all
rights pertaining
to the shares of Company Stock previously represented by such
Certificates, and
at the Effective Time the stock transfer books of the Company shall
be closed
and there shall be no further registration of transfers on the
stock transfer
books of the Surviving Corporation of the shares of Company Stock
that were
outstanding immediately prior to the Effective Time. If, at any
time after the
Effective Time, Certificates are presented to the Surviving
Corporation or
Parent for any reason, they shall be cancelled and exchanged as
provided in this
Section 3.2(d).
(e) Parent shall disburse to each holder of a Company Warrant
such
holder's portion of the Warrant Consideration.
(f) Parent shall disburse to the Company for payment to each
holder of a Company Stock Option, the Option Cash
Consideration.
(g) Promptly after (i) the 12-month anniversary of the Closing
Date and (ii) the earlier of (A) the attainment of Milestone 2 and
(B) the
18-month anniversary of the Closing Date, but in no event later
than ten (10)
Business Days after Parent has verified that the applicable
Milestone has been
achieved (or the occurrence of the applicable anniversary of the
Closing Date),
Parent shall deliver to the Stockholder Representative either a
statement that
no Milestone Shares have been earned or a reasonably detailed
spreadsheet (a
"Milestone Spreadsheet") calculating and allocating to each Company
Stockholder
whose shares of Common Stock were converted pursuant to Section
3.1(c) into the
right to receive the Common Stock Merger Consideration and who
complied with the
requirements of Section 3.2(d), (A) that number of whole Milestone
1, Additional
Milestone 1, Milestone 2, and/or Additional Milestone 2 Shares, as
applicable,
that such holder has the right to receive pursuant to the
provisions of this
Article III and (B) cash in lieu of any fractional shares of
Milestone 1,
Additional Milestone 1, Milestone 2, and/or Additional Milestone 2
Shares to
which such holder is entitled pursuant to Section 3.2(i), or (C)
with respect to
the stockholders listed on Schedule 3.1(c), the cash in lieu of
shares that such
18
<PAGE>
stockholder is entitled to receive. The Stockholder Representative
shall, within
ten (10) Business Days of its receipt of the Milestone Spreadsheet,
notify
Parent of any objections to the calculations or allocations set
forth therein.
If the Stockholder Representative agrees with the calculations and
allocations
by providing written notice thereof to Parent or does not raise any
written
objection thereto to Parent within such ten (10) Business Day
period, Parent
shall, within five (5) Business Days thereafter, deliver or cause
to be
delivered to each former Company Stockholder a certificate (or
evidence of
shares in book entry form) representing that number of whole
Milestone 1 and/or
Milestone 2 Shares (and cash in lieu of fractional shares, if any)
such holder
is entitled to receive as set forth in the applicable Milestone
Spreadsheet, or,
with respect to the stockholders listed on Schedule 3.1(c), the
cash in lieu of
shares that such stockholder is entitled to receive. In the event
the
Stockholder Representative objects to the calculations or
allocations set forth
in either Milestone Spreadsheet, the parties shall resolve the
dispute pursuant
to the procedures set forth in Section 10.3(e). Parent shall have
no obligation
to make any payments under this Section 3.2(e) until a final
determination has
been made pursuant to Section 10.3(e).
In the event of a transfer of ownership of a share of Company
Stock
that is not registered in the stock transfer books of the Company,
the proper
amount of the Merger Consideration (as determined in accordance
with, and
subject to, the terms of this Article III) may be paid in exchange
therefor to a
Person other than the Person in whose name the Stock Certificate so
surrendered
is registered if such Certificate shall be properly endorsed or
otherwise be in
proper form for transfer and accompanied by all the documents
required by
Section 3.2(d), and the Person requesting such payment shall pay
any transfer or
other Taxes required by reason of the payment to a Person other
than the
registered holder of such Certificate or establish to the
satisfaction of Parent
that such Tax has been paid or is not applicable. No interest shall
be paid or
shall accrue on the cash payable upon surrender of any
Certificate.
(h) No Liability. None of the Surviving Corporation, NWL,
Parent
or the Company shall be liable to any Person in respect of any cash
delivered to
a public official pursuant to any applicable abandoned property,
escheat or
similar Law.
(i) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the
payment of the
Stock Consideration, no dividends or other distributions of Parent
shall relate
to such fractional shares and such fractional shares will not
entitle the owner
thereof to vote or to any rights of a stockholder of Parent. In
lieu of such
fractional shares, Parent shall pay to each holder of a Certificate
(at such
time as Parent is required to deliver any Stock Consideration to
such holder) an
amount in cash equal to the product obtained by multiplying (A) the
fractional
share to which such holder (after taking into account all shares of
Common Stock
held at the Effective Time by such holder) would otherwise be
entitled by (B)
the applicable Average Closing Price.
(j) Lost, Stolen or Destroyed Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an
affidavit of
that fact by the Person claiming such Certificate to be lost,
stolen or
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destroyed and, if required by Parent, the posting by such Person of
a bond, in
such reasonable amount as Parent may direct, as indemnity against
any claim that
may be made against it with respect to such Certificate, Parent
will issue, in
exchange for such lost, stolen or destroyed Certificate, the
Merger
Consideration, and cash in lieu of any fractional shares of Parent
Common Stock
to which such holder would be entitled pursuant to Section 3.2(i),
in each case
pursuant to this Agreement.
(k) Withholding Taxes. Parent and the Escrow Agent shall be
entitled to deduct and withhold from that portion of the Merger
Consideration,
otherwise payable to a holder of shares of Company Stock or stock
options,
pursuant to this Agreement, such amounts as may be required to be
deducted and
withheld with respect to the making of such payment under the Code,
or under any
provision of state, local or foreign Tax Law; provided, however,
that Parent and
Escrow Agent hereby agree that they shall not withhold any amounts
pursuant to
the Israeli income tax ordinance with respect to any payments
pursuant to this
Agreement made directly or indirectly to a "United States resident"
(as such
term is defined in the Income Tax Treaty Between Israel and the
United States
(the "Treaty") to extent that the Company provides, at the time of
each such
payment, a legal opinion from Israeli counsel, reasonably
acceptable to Parent,
to the effect that the Company is not a resident of Israel and/or
that United
States residents otherwise qualify for an exemption pursuant to the
Treaty. It
being understood that nothing herein shall derogate from any
liability of such
United States resident to any taxes and from any indemnification
provisions set
forth in this Agreement. The parties agree that an opinion
substantially as set
forth in Exhibit G would be reasonably acceptable to Parent;
provided, that
Parent is reasonably satisfied that the assumptions underlying the
opinion are
factually accurate at the time(s) the opinion is given. To the
extent amounts
are so withheld, Parent shall be treated as though it withheld from
the type of
consideration from which withholding is required, an appropriate
amount
otherwise payable pursuant to this Agreement to any holder of
shares of Company
Stock, in order to provide for such withholding obligation and such
withheld
amounts shall be treated for the purposes of this Agreement as
having been paid
to the former holder of the shares of Company Stock or stock
option.
(l) Tax Treatment. The parties agree that a portion of the
Merger
Consideration paid pursuant to Section 3.1(c)(ii), (iii) and (iv)
shall be
treated as interest pursuant to Section 483 of the Code.
3.3 Aggregate Consideration Spreadsheet. Three (3) Business
Days
prior to the Closing Date, the Company and the Stockholder
Representative shall
deliver to Parent an updated draft of the Aggregate Consideration
Spreadsheet.
At the Closing, the Company and the Stockholder Representative
shall deliver to
Parent the final Aggregate Consideration Spreadsheet setting forth
the final
calculation of the amounts for distribution in accordance with
Section 3.2.
3.4 Stockholder Representative Reserve. At the Closing, Parent
shall cause to be deposited, in an account designated by the
Stockholder
Representative, the Stockholder Representative Reserve. The
Stockholder
Representative Reserve (and earnings thereon) may be applied as the
Stockholder
Representative, in its sole discretion, determines appropriate to
defray,
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offset, or pay any charges, fees, costs, liabilities or expenses of
the
Stockholder Representative incurred in connection with the
transactions
contemplated by this Agreement or the Escrow Agreement. The balance
of the
Stockholder Representative Reserve held pursuant to this Section
3.4, if any,
and any income earned thereon, shall be distributed to the Company
Stockholders
who are entitled to receive the Merger Consideration by depositing
such amount
with the Escrow Agent for distribution concurrently with, and as
part of, any
remaining Escrow Payment. Notwithstanding the foregoing, the
Stockholder
Representative Reserve shall only be so distributed when the
Stockholder
Representative determines, in its sole discretion, that such
distribution is
appropriate. Parent and the Surviving Corporation shall have no
liability or
responsibility to the Company Stockholders with respect to the
Stockholder
Representative Reserve or the actions and responsibilities of the
Stockholder
Representative contemplated by this Section 3.4.
3.5 Appraisal Rights. Notwithstanding anything in this
Agreement
to the contrary, shares of Common Stock or Preferred Stock (the
"SHARES") that
are issued and outstanding immediately prior to the Effective Time
and which are
held by a stockholder who did not vote in favor of the Merger (or
consent
thereto in writing) and who is entitled to demand and properly
demands appraisal
of such shares pursuant to, and who complies in all respects with,
the
provisions of Section 262 of the DGCL (the "DISSENTING
STOCKHOLDERS"), shall not
be converted into or be exchangeable for the right to receive the
Common Stock
Merger Consideration (the "DISSENTING SHARES"), but instead such
holder shall be
entitled to payment of the fair value of such Shares in accordance
with the
provisions of Section 262 of the DGCL (and at the Effective Time,
such
Dissenting Shares shall no longer be outstanding and shall
automatically be
canceled and shall cease to exist, and such holder shall cease to
have any
rights with respect thereto, except the right to receive the fair
value of such
Dissenting Shares in accordance with the provisions of Section 262
of the DGCL),
unless and until such holder shall have failed to perfect or shall
have
effectively withdrawn or lost rights to appraisal under the DGCL.
If any
Dissenting Stockholder shall have failed to perfect or shall have
effectively
withdrawn or lost such right, such holder's Shares shall thereupon
be treated as
if they had been converted into and become exchangeable for the
right to
receive, as of the Effective Time, the Common Stock Merger
Consideration for
each such Share, in accordance with Section 3.1(c), without any
interest
thereon. The Company shall give Parent (i) prompt notice of any
written demands
for appraisal of any Shares, attempted withdrawals of such demands
and any other
instruments served pursuant to the DGCL and received by the Company
relating to
stockholders' rights of appraisal, and (ii) the opportunity to
participate in
all negotiations and proceedings with respect to demands for
appraisal under the
DGCL. The Company shall not, except with the prior written consent
of Parent,
voluntarily make any payment with respect to, or settle, or offer
or agree to
settle, any such demand for payment.
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ARTICLE IV
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
4.1 Termination of Agreement. This Agreement may be terminated
at
any time prior to the Effective Time as follows:
(a) At the election of either Parent or the Company on or after
March 31, 2007, (the "END DATE") if the Closing shall not have
occurred by the
close of business on such date; provided, however, that the right
to terminate
this Agreement under this Section 4.1(a) shall not be available to
any party who
is in material default of any of its obligations hereunder;
(b) by mutual written consent of Parent and the Company (in the
case of the Company, as evidenced by the unanimous vote or consent
of the Board
of Directors of the Company);
(c) by either Parent or the Company if (i) there shall be in
effect a final nonappealable Order of a Governmental Body of
competent
jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of
the transactions contemplated hereby or (ii) there shall be any Law
enacted,
promulgated or issued or deemed applicable to the Merger by any
Governmental
Body that would make consummation of the Merger illegal;
(d) by Parent, so long as Parent is not in material breach of
its
representations, warranties, covenants or agreements under this
Agreement, if
there shall have been a material breach of any representation,
warranty,
covenant or agreement of the Company set forth in this Agreement,
which breach
would give rise to a failure of a condition set forth in Sections
9.1(a), 9.1(b)
or 9.1(c) and is incapable of being cured or, if capable of being
cured, shall
not have been cured within twenty (20) Business Days following
receipt by the
Company of notice of such breach from Parent;
(e) by the Company, so long as the Company is not in material
breach of its representations, warranties, covenants or agreements
under this
Agreement, if there shall have been a material breach of any
representation,
warranty, covenant or agreement of Parent set forth in this
Agreement, which
breach would give rise to a failure of a condition set forth in
Sections 9.2(a)
or 9.2(b) and is incapable of being cured or, if capable of being
cured, shall
not have been cured within twenty (20) Business Days following
receipt by Parent
of notice of such breach from the Company.
4.2 Effect of Termination. In the event of the termination of
this
Agreement as provided in Section 4.1, written notice thereof shall
be given to
the other party or parties, specifying the provision hereof
pursuant to which
such termination is made, and this Agreement shall forthwith become
null and
void (other than this Section 4.2 and Article XI, all of which
shall survive
22
<PAGE>
termination of this Agreement), provided, however, that nothing
contained herein
shall relieve any party from liability for fraud or any willful
breach hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to each of Parent
and
Merger Sub on the date hereof that, subject to such exceptions and
disclosures
as set forth in the disclosure letter supplied by the Company to
Parent dated as
of the date hereof (the "COMPANY DISCLOSURE LETTER"):
5.1 Organization and Good Standing. The Company is a
corporation
duly organized, validly existing and in good standing under the
laws of the
State of Delaware and has all requisite corporate power and
authority to own,
lease and operate its properties and to carry on its business as
now conducted.
The Company is duly qualified or authorized to do business as a
foreign
corporation and is in good standing under the laws of each
jurisdiction in which
it owns or leases real property and each other jurisdiction in
which the conduct
of its business or the ownership of its properties requires such
qualification
or authorization, except where the failure to be so qualified,
authorized or in
good standing would not have a Material Adverse Effect with respect
to the
Company (a "COMPANY MATERIAL ADVERSE EFFECT").
5.2 Authorization of Agreement.
(a) The Company has all requisite power, authority and legal
capacity to execute and deliver this Agreement and each other
agreement,
document, or instrument or certificate contemplated by this
Agreement or to be
executed by the Company in connection with the consummation of the
transactions
contemplated by this Agreement (together with this Agreement, the
"COMPANY
DOCUMENTS"), to consummate the transactions contemplated hereby and
thereby. The
execution and delivery of this Agreement and each of the Company
Documents by
the Company, the performance of its obligations hereunder and
thereunder and the
consummation of the transactions contemplated hereby and thereby
have been duly
authorized by its Board of Directors and no other corporate action
on the part
of the Company is necessary to authorize the execution, delivery
and performance
by the Company of this Agreement and the consummation of the
transactions
contemplated hereby.
(b) This Agreement and each of the Company Documents has been
duly
and validly executed and delivered by the Company and (assuming the
due
authorization, execution and delivery by the other parties hereto
and thereto)
this Agreement constitutes, and each of the Company Documents when
so executed
and delivered will constitute, legal, valid and binding obligations
of the
Company, as applicable, enforceable against the Company in
accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally,
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<PAGE>
and subject, as to enforceability, to general principles of equity,
including
principles of commercial reasonableness, good faith and fair
dealing (regardless
of whether enforcement is sought in a proceeding at law or in
equity).
(c) The Board of Directors of the Company, at a meeting duly
called and held at which all the directors of the Company were
present in person
or by telephone (or, in lieu of a meeting, by the written consent
of the
directors of the Company), duly and unanimously adopted resolutions
(i)
approving and declaring advisable this Agreement, the Merger and
the other
transactions contemplated by this Agreement, (ii) directing that
the adoption of
this Agreement be submitted to the stockholders of the Company and
(iii)
recommending that the stockholders of the Company adopt this
Agreement, which
resolutions have not been subsequently rescinded, modified or
withdrawn in any
way.
(d) Schedule 5.2(d) sets forth a true, correct and complete
list
of the holders of Company Stock as of the date hereof. The Company
has delivered
to Parent true, correct and complete copies of the irrevocable
written consents,
which are valid and effective under Section 228 of the DGCL, of
holders of a
majority of the issued and outstanding Company Stock, including
holders of a
majority of the issued and outstanding Preferred Stock (the
"STOCKHOLDER
CONSENTS") to the Merger and, in the case of holders of Preferred
Stock, to
convert all shares of Preferred Stock into Common Stock immediately
prior to the
Effective Time pursuant to Section 4(b) of Article V of the
Company's Amended
and Restated Certificate of Incorporation (the "PREFERRED STOCK
CONVERSION").
The Stockholder Consents are the only approval of holders of any
class or series
of Company capital stock necessary or required (under applicable
Law, the
Company's certificate of incorporation and bylaws, or otherwise) to
approve this
Agreement and the transactions contemplated hereby, including the
Merger and the
Preferred Stock Conversion. From and after the time of such
delivery to Parent,
the Stockholder Consents are in full force and effect and are valid
and
effective under Section 228 or the DGCL.
5.3 Conflicts; Consents of Third Parties.
(a) Other than the consents set forth in Section 5.3(b), each
of
which the Company has heretofor received, none of the execution and
delivery by
the Company of this Agreement or the Company Documents, the
consummation of the
Merger and the transactions contemplated hereby or thereby, or
compliance by the
Company with any of the provisions hereof or thereof will conflict
with, or
result in any violation of, default or breach (with or without
notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or
acceleration of any obligation or to loss of a material benefit
under, or give
rise to any obligation of the Company to make any payment under, or
to the
increased, additional, accelerated or guaranteed rights or
entitlements of any
Person under, or result in the creation of any Liens upon any of
the properties
or assets of Company or any Company Subsidiary under, any provision
of (i) the
certificate of incorporation and by-laws or comparable
organizational documents
of the Company or any Company Subsidiary; (ii) any Intellectual
Property,
Technology, Material Contract or Permit to which the Company or any
Company
24
<PAGE>
Subsidiary is a party or by which any of the properties or assets
of the Company
or any Company Subsidiary are bound; (iii) any Order of any
Governmental Body
applicable to the Company or any Company Subsidiary or any of the
properties or
assets of the Company or any Company Subsidiary; or (iv) any
applicable Law;
except in the case of clause (ii), any conflict, violation,
default, loss or
benefit that would not, individually or in the aggregate, be
material to the
Company and its subsidiaries, taken as a whole.
(b) No consent, waiver, approval, Order, Permit or
authorization
of, or declaration or filing with, or notification to, any Person
or
Governmental Body is required on the part of the Company or any
Company
Subsidiary in connection with (i) the execution and delivery of
this Agreement
or the Company Documents, the compliance by the Company with any of
the
provisions hereof, or the consummation by the Company of the Merger
or the other
transactions contemplated hereby, or (ii) the continuing validity
and
effectiveness immediately following the Closing of any Permit or
Material
Contract of the Company or any Company Subsidiary, except for those
consents and
filings set forth on Schedule 5.3(b).
5.4 Capitalization.
(a) The authorized capital stock of the Company consists of:
(i) 62,000,000 shares of Common Stock, par value $0.00001 per
share, of which 8,552,030 shares are issued and outstanding,
(ii) 42,100,000 shares of Series A Preferred Stock, par value
$0.00001 per share ("SERIES A PREFERRED STOCK"), of which
30,710,646 shares are
issued and outstanding, and
(iii) 4,000,000 shares of Series A-1 Preferred Stock, par value
$0.00001 per share, of which no shares are issued and
outstanding.
All of the issued and outstanding shares of Common Stock and
Preferred Stock have been duly authorized, are validly issued,
fully paid, and
nonassessable, and are held of record by the Company Stockholders
as set forth
in Schedule 5.4(a), which includes each Company Stockholder's
residency. In the
event of the exercise of any Company Stock Options after the date
hereof and
prior to the Closing, an updated Schedule 5.4(a) shall be provided
at Closing.
For those Company Stockholders who are resident in the United
States, less than
35 of such Company Stockholders are not "accredited investors"
within the
meaning of Regulation D under the Securities Act.
(b) Except as set forth on Schedule 5.4(b), there is no
existing
option, warrant, call, right or Contract of any character to which
the Company
is a party requiring, and there are no securities of the Company
outstanding
which upon conversion or exchange would require, the issuance, sale
or transfer
of any additional shares of capital stock or other equity
securities of the
Company or other securities convertible into, exchangeable for or
evidencing the
25
<PAGE>
right to subscribe for or purchase shares of capital stock or other
equity
securities of the Company. Schedule 5.4(b) lists the name and
residency of each
holder of any option to purchase shares of Company stock, including
the number
of shares subject to such option, the date of grant, the strike
price, and the
termination date of such option. Except as set forth on Schedule
5.4(b), the
Company is not a party to any voting trust or other Contract with
respect to the
voting, redemption, sale, transfer or other disposition of the
capital stock of
the Company.
5.5 Subsidiaries. Schedule 5.5 sets forth with respect to each
direct or indirect Subsidiary of the Company (each, a "COMPANY
SUBSIDIARY"), the
jurisdiction in which it is incorporated or organized, the
jurisdictions, if
any, in which it is qualified to do business, the number of shares
of its
authorized capital stock, the number and class of shares thereof
duly issued and
outstanding, the names of all stockholders or other equity owners
and the number
of shares of stock owned by each stockholder or the amount of
equity owned by
each equity owner. Each Company Subsidiary is a duly organized and
validly
existing corporation or other entity in good standing under the
laws of the
jurisdiction of its incorporation or organization and is duly
qualified or
authorized to do business as a foreign corporation or entity and is
in good
standing under the laws of each jurisdiction in which the conduct
of its
business or the ownership of its properties requires such
qualification or
authorization, except where the failure to hold such foreign
qualifications or
authorizations has not had, and would not reasonably be expected to
have a
Company Material Adverse Effect. Each Company Subsidiary has all
requisite
corporate or entity power and authority to own its properties and
carry on its
business as presently conducted. The outstanding shares of capital
stock or
equity interests of each Company Subsidiary are validly issued,
fully paid and
non-assessable, and all such shares or other equity interests
represented as
being owned by the Company are owned by it free and clear of any
and all Liens
and are not subject to any option, right of first refusal, proxy,
voting trust
or agreement, or transfer restriction under any shareholder or
similar
agreement, except as set forth in Schedule 5.5. No shares of
capital stock are
held by any Company Subsidiary as treasury stock. There is no
existing option,
warrant, call, right or Contract to which any Company Subsidiary is
a party
requiring, and there are no convertible securities of any Company
Subsidiary
outstanding which upon conversion would require, the issuance of
any shares of
capital stock or other equity interests of any Company Subsidiary
or other
securities convertible into shares of capital stock or other equity
interests of
any Company Subsidiary. Other than the Company Subsidiaries,
neither the Company
nor any Company Subsidiary owns, directly or indirectly, any shares
of capital
stock or equity or ownership interests in, any other Person
(collectively,
"THIRD-PARTY INTERESTS"). Neither the Company nor any Company
Subsidiary have
any rights to, or are bound by any commitment or obligation to,
acquire by any
means, directly or indirectly, any Third-Party Interests or to make
any
investment in, or contribution or advance to, any Person.
5.6 Corporate Records.
(a) The Company has delivered to Parent true, correct and
complete
copies of the certificates of incorporation (each certified by the
Secretary of
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<PAGE>
State or other appropriate official of the applicable jurisdiction
of
organization) and by-laws (each certified by the secretary,
assistant secretary
or other appropriate officer) or comparable organizational
documents of the
Company and each of the Company Subsidiaries.
(b) The minute books of the Company and each Company Subsidiary
previously made available to Parent contain true, correct and
complete records
of all meetings and accurately reflect in all material respects all
other
corporate action of the stockholders and board of directors
(including
committees thereof) of the Company and the Company Subsidiaries.
The stock
certificate books and stock transfer ledgers of the Company and the
Company
Subsidiaries previously made available to Parent are true, correct
and complete.
All stock transfer taxes levied or payable with respect to all
transfers of
shares of the Company and the Company Subsidiaries prior to the
date hereof have
been paid and appropriate transfer tax stamps affixed.
5.7 Financial Statements. The Company has furnished to Parent a
true, correct and complete copy of (i) the unaudited consolidated
financial
statements of the Company and the Company Subsidiaries as of and
for the years
ending December 31, 2004 and December 31, 2005, each of which
includes a
statement of cash flows and statement of operations for such fiscal
year and a
balance sheet as at the last day thereof and (ii) the unaudited
consolidated
financial statement of the Company and the Company Subsidiaries as
of and for
the fiscal quarter ending September 30, 2006, which includes a
statement of cash
flows and statement of operations for such fiscal quarter and a
balance sheet as
of the last day thereof (collectively, the financial statements
referred to in
clauses (i) and (ii) above are the "FINANCIAL Statements"). The
Financial
Statements are in accordance with the books and records of the
Company and
present fairly in all material respects the financial condition and
results of
operations of the Company and the Company Subsidiaries, as at the
dates and for
the periods indicated, and have been prepared in accordance with
GAAP
consistently applied (except as may be indicated in the notes
thereto and except
that the unaudited Financial Statements are subject to normal,
customary
year-end and audit adjustments and are subject to those items that
may be
disclosed in notes to unaudited financial statements). The
unaudited
consolidated balance sheet of the Company and the Company
Subsidiaries as at
October 31, 2006 is referred to herein as the "BALANCE SHEET" and
October 31,
2006 is referred to herein as the "BALANCE SHEET DATE."
5.8 No Undisclosed Liabilities. Except as set forth on Schedule
5.8, neither the Company nor any Company Subsidiary has any
Indebtedness,
obligations or Liabilities of any kind required to be reflected in
or reserved
against or otherwise described in balance sheets under GAAP other
than those (i)
fully reflected in, reserved against or otherwise described in the
Balance Sheet
or (ii) incurred in the Ordinary Course of Business since the
Balance Sheet
Date. There are no known liabilities, whether or not contingent,
not reflected
on the Balance Sheet which are, or would reasonably be expected to
be, material
to the Company and the Company Subsidiaries, taken as a whole.
Since the Balance
Sheet Date, neither the Company nor any of the Company Subsidiaries
has failed
to promptly pay and discharge current liabilities except where
disputed in good
27
<PAGE>
faith by appropriate proceedings, and has not accelerated the
collection of any
accounts receivable.
5.9 Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on Schedule 5.9,
since the
Balance Sheet Date through the date hereof (i) the Company and the
Company
Subsidiaries have conducted their respective businesses only in the
Ordinary
Course of Business and (ii) there has not been any Company Material
Adverse
Effect. Without limiting the generality of the foregoing, since the
Balance
Sheet Date:
(a) there has not been any loss, with respect to the tangible
property and assets of the Company or any Company Subsidiary having
a
replacement cost of more than $50,000 for any single loss or
$100,000 for all
such losses;
(b) there has not been any declaration, setting aside or
payment
of any dividend or other distribution in respect of any shares of
capital stock
of the Company or any repurchase, redemption or other acquisition
by the Company
or any Company Subsidiary of any outstanding shares of capital
stock or other
securities of, or other ownership interest in, the Company or any
Company
Subsidiary;
(c) except as set forth on Schedule 5.9(c), neither the Company
nor any Company Subsidiary has awarded or paid any bonuses to
employees of the
Company or any Company Subsidiary with respect to the fiscal year
ended December
31, 2005, except to the extent previously disclosed to Parent in
writing, or
entered into any employment, deferred compensation, severance or
similar
agreement other than employment offer letters for at-will
employment (nor
amended any such agreement) or agreed to increase the compensation
payable or to
become payable by it to any of the Company's or any Company
Subsidiary's
directors, officers, employees, agents or representatives or agreed
to increase
the coverage or benefits available under any severance pay,
termination pay,
vacation pay, company awards, salary continuation for disability,
sick leave,
deferred compensation, bonus or other incentive compensation,
insurance, pension
or other employee benefit plan, payment or arrangement made to, for
or with such
directors, officers, employees, agents or representatives;
(d) there has not been any change by the Company or any Company
Subsidiary in Tax reporting or accounting principles, methods or
policies nor
has the Company or any Company Subsidiary made any adjustment to
its books and
records, or recharacterized any assets or liabilities, except as
may have been
required by GAAP (provided that such changes are disclosed on
Schedule 5.9(d));
(e) neither the Company nor any Company Subsidiary has failed
to
promptly pay and discharge current material liabilities except
where disputed in
good faith by appropriate proceedings;
(f) except as set forth on Schedule 5.9(f), neither the Company
nor any Company Subsidiary has made any loans, cash advances, or
capital
contributions to, or investments in, any Person or paid any fees or
expenses to
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<PAGE>
any stockholder of the Company or any director, officer, partner,
stockholder or
Affiliate of the Company or any Company Subsidiary;
(g) neither the Company nor any Company Subsidiary has
mortgaged,
pledged or been subjected to any Lien on any of its assets, or
acquired any
assets or sold, assigned, transferred, conveyed, leased or
otherwise disposed of
any material assets of the Company or any Company Subsidiary,
except for assets
acquired or sold, assigned, transferred, conveyed, leased or
otherwise disposed
of in the Ordinary Course of Business;
(h) neither the Company nor any Company Subsidiary has
discharged
or satisfied any Lien, or paid any obligation or liability (fixed
or contingent)
in excess of $50,000 individually or $100,000 in the aggregate,
except in the
Ordinary Course of Business;
(i) neither the Company nor any Company Subsidiary has canceled
or
compromised any debt or pending claim or amended, canceled,
terminated,
relinquished, waived or released any Material Contract or material
right except
in the Ordinary Course of Business;
(j) neither the Company nor any Company Subsidiary has made or
committed to make any capital expenditures or capital additions or
betterments
in excess of $50,000 individually or $100,000 in the aggregate;
(k) except as set forth on Schedule 5.9(k), neither the Company
nor any Company Subsidiary has issued, created, incurred, assumed
or guaranteed
any Indebtedness;
(l) the Company has not granted any license or sublicense of
any
rights under or with respect to any Intellectual Property, except
licenses
granted to customers in the Ordinary Course of Business;
(m) neither the Company nor any Company Subsidiary has received
notice of, instituted or settled any material Legal Proceeding;
and
(n) none of Company or any of the Company Subsidiaries has
agreed,
committed, arranged or entered into any understanding to do
anything set forth
in this Section 5.9.
5.10 Taxes. Except as set forth on Schedule 5.10:
(a) The Company and each of the Company Subsidiaries have (i)
duly
and timely filed all Tax Returns required to be filed by or on
behalf of it in
all jurisdictions in which such Tax Returns are required to be
filed (after
giving effect to any duly obtained extensions of time in which to
make such
filings), all such Tax Returns are true, complete and accurate in
all material
29
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respects, and the Company and th
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