AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
BY AND AMONG
PHONE.COM, INC.,
ATMOTION INC.
MERCEDES ACQUISITION CORP.
AND
DIXON R. DOLL, AS SHAREHOLDERS' AGENT
DECEMBER 21, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..............................................2
Section 1.1 The Merger.....................................2
Section 1.2 Closing........................................2
Section 1.3 Effective Time.................................2
Section 1.4 Effect of the Merger...........................3
Section 1.5 Articles of Incorporation; Bylaws..............3
Section 1.6 Directors; Officers............................3
Section 1.7 Effect on Capital Stock........................3
Section 1.8 Surrender of Certificates......................6
Section 1.9 No Further Ownership Rights in
Company Capital Stock........................8
Section 1.10 Lost, Stolen or Destroyed Certificates.........8
Section 1.11 Tax Consequences...............................9
Section 1.12 Taking of Necessary Action; Further Action.....9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........9
Section 2.1 Organization, Standing and Power..............10
Section 2.2 Capitalization; Title to the Shares...........10
Section 2.3 Authority.....................................11
Section 2.4 Financial Statements..........................12
Section 2.5 Absence of Certain Changes....................13
Section 2.6 Absence of Undisclosed Liabilities............14
Section 2.7 Litigation....................................14
Section 2.8 Restrictions on Business Activities...........14
Section 2.9 Governmental Authorization....................14
Section 2.10 Hart-Scott-Rodino.............................15
Section 2.11 Title to Property.............................15
Section 2.12 Intellectual Property.........................15
Section 2.13 Environmental Matters.........................17
Section 2.14 Taxes.........................................17
Section 2.15 Employee Benefit Plans........................18
Section 2.16 Certain Agreements Affected by the Merger.....20
Section 2.17 Employee Matters..............................21
Section 2.18 Interested Party Transactions.................21
Section 2.19 Insurance.....................................21
Section 2.20 Compliance With Laws..........................22
Section 2.21 Minute Books..................................22
Section 2.22 Complete Copies of Materials..................22
Section 2.23 Shareholder Agreement; Irrevocable Proxies....22
Section 2.24 Vote Required.................................22
Section 2.25 Brokers' and Finders' Fees....................22
Section 2.26 Board Approval................................22
Section 2.27 Customers and Suppliers.......................23
Section 2.28 Material Contracts............................23
Section 2.29 No Breach of Material Contracts...............24
Section 2.30 Third Party Consents..........................24
Section 2.31 Material Third Party Consents.................24
Section 2.32 Product Releases..............................24
Section 2.33 Year 2000.....................................24
Section 2.34 Tax Matters...................................25
Section 2.35 Balance Sheet.................................25
Section 2.36 Representations Complete......................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB.............................................25
Section 3.1 Organization, Standing and Power..............26
Section 3.2 Capital Structure.............................26
Section 3.3 Authority.....................................26
Section 3.4 SEC Documents; Financial Statements...........27
Section 3.5 Absence of Undisclosed Liabilities............27
Section 3.6 Broker's and Finders' Fees....................28
Section 3.7 Shareholder Approval..........................28
Section 3.8 Approval......................................28
Section 3.9 Tax Matters...................................28
Section 3.10 Absence of Certain Changes....................28
ARTICLE IV CONDUCT PRIOR TO THE CLOSING DATE......................29
Section 4.1 Conduct of Business of the Company............29
Section 4.2 Restriction on Conduct of Business of
the Company.................................29
Section 4.3 Solicitation..................................32
Section 4.4 Shareholder Approval..........................33
Section 4.5 Further Information...........................33
ARTICLE V ADDITIONAL AGREEMENTS..................................34
Section 5.1 Preparation of Permit Application, Hearing
Request, Hearing Notice and Information
Statement...................................34
Section 5.2 Access to Information.........................34
Section 5.3 Confidentiality...............................35
Section 5.4 Public Disclosure.............................35
Section 5.5 Consents; Cooperation.........................35
Section 5.6 Legal Requirements............................36
Section 5.7 Blue Sky Laws.................................36
Section 5.8 Employee Benefit Plans; Assumption of Options.36
Section 5.9 Form S-8......................................37
Section 5.10 Listing of Additional Shares..................37
Section 5.11 Employees.....................................37
Section 5.12 Expenses......................................38
Section 5.13 Warrants......................................38
Section 5.14 Reasonable Best Efforts and Further
Assurances..................................38
Section 5.15 Indemnification...............................38
Section 5.16 Termination of 401(k) Plan....................39
Section 5.17 Information Supplied..........................39
Section 5.18 Registration Statement........................39
ARTICLE VI CONDITIONS TO THE CLOSING..............................40
Section 6.1 Conditions to Obligations of Each Party
to Effect the Merger........................40
Section 6.2 Additional Conditions to Obligations of
the Company.................................41
Section 6.3 Additional Conditions to the Obligations
of Parent and Merger Sub....................42
Section 6.4 Frustration of Conditions.....................43
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER......................43
Section 7.1 Termination...................................43
Section 7.2 Effect of Termination.........................44
Section 7.3 Expenses and Termination Fees.................44
Section 7.4 Amendment.....................................44
Section 7.5 Extension; Waiver.............................44
ARTICLE VIII ESCROW AND INDEMNIFICATION.............................45
Section 8.1 Escrow Fund...................................45
Section 8.2 Indemnification...............................46
Section 8.3 Escrow Period.................................47
Section 8.4 Claims upon Escrow Fund.......................47
Section 8.5 Objections to Claims..........................48
Section 8.6 Resolution of Conflicts; Arbitration..........48
Section 8.7 Shareholders' Agent...........................49
Section 8.8 Actions of the Shareholders' Agent............50
Section 8.9 Third-Party Claims............................50
ARTICLE IX GENERAL PROVISIONS.....................................51
Section 9.1 Survival......................................51
Section 9.2 Notices.......................................51
Section 9.3 Interpretation................................52
Section 9.4 Counterparts..................................52
Section 9.5 Entire Agreement; Nonassignability;
Parties in Interest.........................53
Section 9.6 Severability..................................53
Section 9.7 Sole Remedy; Maximum Aggregate Liability......53
Section 9.8 Governing Law.................................53
Section 9.9 Rules of Construction.........................54
Section 9.10 Specific Performance..........................54
Section 9.11 Descriptive Headings..........................54
EXHIBITS
Exhibit A-1 - ........Form of Certificate of Merger
Exhibit A-2 - ........Form of Agreement of Merger
Exhibit B - ........Exchange Ratio
Exhibit C-1 - ........Form of Non-Affiliate Shareholder Agreement
Exhibit C-2 - ........Form of Affiliate Shareholder Agreement
Exhibit D - Form of Escrow Agreement
Exhibit F - ........Form of Company Legal Opinion
Exhibit G - ........Form of Parent Legal Opinion
Exhibit H - ........Form of Articles of Incorporation of the
Surviving Corporation
Exhibit I - ........Form of Bylaws of the Surviving Corporation
Exhibit J - ........Form of Offer Letter
SCHEDULES
Schedule 2.2(b) .........Capitalization
Schedule 2.12 .........Intellectual Property
Schedule 2.15 .........Employee Benefit Plans
Schedule 2.19 .........Insurance
Schedule 2.28 .........Material Contracts
Schedule 2.30 .........Third Party Consents
Schedule 2.31 .........Material Third Party Consents
Schedule 2.32 .........Product Releases
Schedule 5.8 .........Employee Benefit Plans; Assumption of Options
Schedule 5.11 .........Employees Required to Enter into Offer Letters
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Agreement"), dated as of December 21, 1999, by and among PHONE.COM,
INC., a Delaware corporation ("Parent"), MERCEDES ACQUISITION CORP., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), ATMOTION INC., a California corporation (the "Company") and DIXON R.
DOLL, as Shareholders' Agent (the "Shareholders' Agent").
RECITALS
WHEREAS, the Board of Directors of Parent has approved,
and deems it advisable and in the best interests of its stockholders to
consummate, the merger (the "Merger") of Merger Sub with and into the
Company, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company, having
carefully considered the long-term prospects and interests of the Company
and the shareholders, has approved the transactions contemplated hereby and
has resolved to recommend to its shareholders the approval and adoption of
this Agreement and the consummation of the transactions contemplated hereby
upon the terms and subject to the conditions set forth herein; and
WHEREAS, as a condition and inducement to Parent to enter
into this Agreement and incur the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent and
holders of at least a majority of the outstanding shares of Company Common
Stock (as defined in Section 1.7(a)) have entered into Shareholder
Agreements in the forms of Exhibit C-1 and C-2 attached hereto (the
"Shareholder Agreements"), and the Company has agreed to use its best
efforts to cause, within three (3) business days from the date hereof, the
holders of at least 60% of the outstanding shares of Company Preferred
Stock (as defined in Section 1.7(b)) to execute such Shareholder Agreements
pursuant to which, among other things, each such holder has agreed to vote
shares of Company Common Stock and/or Company Preferred Stock held by them
in favor of approval and adoption of this Agreement; and
WHEREAS, as a condition and inducement to Parent to enter
into this Agreement and incur the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, (i) Parent,
the Company and the Shareholders' Agent are entering into an
indemnification escrow agreement in the form of Exhibit D attached hereto
(the "Escrow Agreement"), pursuant to which certain shares of Parent Common
Stock issuable to the Company's shareholders are to be placed in an escrow
account to secure certain indemnification obligations of the Company to
Parent; (ii) the Company will use its best efforts to encourage the
employees identified on Schedule 5.11 to enter into offer letters with
Parent in the form of Exhibit J attached hereto (the "Offer Letters"); and
WHEREAS, the Boards of Directors of each of Parent,
Merger Sub and the Company, and the sole stockholder of Merger Sub have
approved this Agreement and the transactions contemplated hereby in
accordance with the provisions of the California General Corporation Law
("California Law") and the Delaware General Corporation Law ("Delaware
Law"); and
WHEREAS, it is intended that the Merger qualify as a
tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER
At the Effective Time (as defined in Section 1.3) and
subject to and upon the terms and conditions of this Agreement, Form of
Certificate of Merger attached hereto as Exhibit A-1 (the "Certificate of
Merger"), Form of the Agreement of Merger attached hereto as Exhibit A-2
(the "Agreement of Merger") and the applicable provisions of the Delaware
Law and California Law, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation and a wholly owned
subsidiary of Parent. The Company, as the surviving corporation after the
Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
Section 1.2 CLOSING
The closing of the Merger (the "Closing") shall take
place at 10:00 a.m., Palo Alto, California time, on a date to be specified
by the parties, which shall be no later than the third business day after
satisfaction or waiver of all of the conditions set forth in Article VI of
this Agreement (the "Closing Date"), at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 525 University Avenue, Suite 220, Palo Alto,
California 94301, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 1.3 EFFECTIVE TIME
Upon the terms and subject to the conditions set forth in
Article VI of this Agreement the parties hereto shall file the Agreement of
Merger together at the Closing with the related officers' certificates
required by section 1103 of California Law, with the Secretary of State of
the State of California, whereupon Merger Sub shall be merged with and into
the Company pursuant to sections 1100 et seq. of California Law.
Concurrently with the filing of the Agreement of Merger with the Secretary
of State of the State of California and upon the terms and subject to the
conditions set forth in Article VI of this Agreement, the parties hereto
shall file the Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the relevant provisions of Delaware
Law. The parties hereto shall make all other filings, recordings or
publications required by California Law and Delaware Law in connection with
the Merger. The Merger shall become effective at the time specified in the
Agreement of Merger or Certificate of Merger, as the case may be, which
specified time shall be a time on the Closing Date and shall be the same in
each of the Agreement of Merger and Certificate of Merger (the time at
which the Merger becomes effective being the "Effective Time").
Section 1.4 EFFECT OF THE MERGER
The Merger shall have the effects set forth in section
1107 of California Law and section 259 of Delaware Law.
Section 1.5 ARTICLES OF INCORPORATION; BYLAWS
(a) Immediately after the Effective Time of the Merger,
the articles of incorporation of the Surviving Corporation shall be as set
forth in Exhibit H to this Agreement, and such articles of incorporation
shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by law and such articles of incorporation of
the Surviving Corporation.
(b) Immediately after the Effective Time of the Merger,
the bylaws of Surviving Corporation shall be as set forth in Exhibit I to
this Agreement, and such bylaws shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by law and such bylaws of
the Surviving Corporation.
Section 1.6 DIRECTORS; OFFICERS
(a) The directors of Merger Sub at the Effective Time of
the Merger 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. In
furtherance thereof, the Company shall secure, effective at the Effective
Time of the Merger, such resignations of its incumbent directors as is
necessary to enable the designees of Parent to be elected or appointed to
the Board of Directors of the Company (the "Company Board"), and the
Company shall take all actions available to the Company to cause such
designees of Parent to be so elected or appointed at the Effective Time.
Concurrently, the Company shall, if requested by Parent, also take all
action necessary to cause persons designated by Parent to constitute each
committee of the Company Board.
(b) The officers of the Company at the Effective Time of
the Merger 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 provided,
however, that this would not cause any of such persons to be, or be deemed
to be an "affiliate" of Parent for purposes of Rule 145.
Section 1.7 EFFECT ON CAPITAL STOCK
By virtue of the Merger and without any action on the
part of Parent, Merger Sub, the Company or the holders of any of the
Company's securities:
(a) Conversion of Company Capital Stock. Notwithstanding
any provision of this Agreement to the contrary, the maximum number of
shares of common stock, $0.001 par value per share, of Parent (the "Parent
Common Stock") to be issued (including Parent Common Stock to be reserved
for issuance upon exercise of options ("Company Options") to purchase
shares of common stock, of the Company ("Company Common Stock") assumed by
Parent) in exchange for the acquisition by Parent of the Capital Stock (as
defined below) of the Company and the assumption of all unexpired and
unexercised outstanding options, warrants (other than Company Warrants (as
defined below)) and other rights (whether vested, unvested or contingent)
to acquire Company Capital Stock shall be equal to that number of shares
determined by dividing the Valuation (as defined below) by the average of
the closing bid prices for a share of Parent Common Stock as quoted on the
Nasdaq National Market for the ten (10) trading days immediately preceding
and ending on the trading day that is two (2) trading days prior to the
date of the Fairness Hearing (as defined below) (the "Parent Stock Price")
(the number of shares determined above being referred to herein as the
"Total Parent Shares"), reduced by the number of shares of Parent Common
Stock that would otherwise be issuable to the holders of any Dissenting
Shares (as defined below) pursuant to the applicable Exchange Ratio. The
term "Valuation" shall mean an aggregate of $286,000,000. Except for any
adjustment in respect of cash proceeds received by the Company from the
date hereof to the Closing pursuant to the exercise of currently
outstanding options to acquire Company Capital Stock. No adjustment shall
be made in the number of shares of Parent Common Stock issued in the
Merger, including as a result of any increase or decrease in the market
price of Parent Common Stock prior to the Effective Time not otherwise
required by the immediately preceding sentence; provided, however, that,
anything contained in this Agreement to the contrary notwithstanding,
Parent shall have no obligation to issue a number of shares of Parent
Common Stock which exceeds that number of shares of Parent Common Stock
which may be issued without requiring the approval of Parent stockholders
for such issuance pursuant to any securities law or rule, regulation or
policy of the National Association of Securities Dealers, the Nasdaq
National Market or any other securities exchange or market quotation system
on which Parent Common Stock is traded at the time of such issuance (the
"Issuable Share Number"); provided, further, that if the number of shares
of Parent Common Stock to be issued in the Merger exceeds the Issuable
Share Number, then Parent shall issue a number of shares of Parent Common
Stock in the Merger equal to the Issuable Share Number.
For purposes of this Agreement, "Company Capital Stock"
means, collectively, all Company Common Stock; all Series A, Series A-1,
Series B and Series B-1 Preferred Stock of the Company ("Company Preferred
Stock"); and all Company Warrants.
Subject to the terms and conditions of this Agreement,
the Certificate of Merger and the Agreement of Merger as of the Effective
Time, by virtue of the Merger and without any action on the part of the
holder of any shares of Company Common Stock or Company Preferred Stock:
(i) each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than
shares, if any, held by persons who have not voted such shares for
approval of the Merger and with respect to which such persons
shall have perfected dissenters' rights in accordance with
California Law ("Dissenting Shares")) shall be converted into and
exchanged for the right to receive such number of fully paid and
nonassessable shares of Parent Common Stock as shall be determined
in accordance with the Company's Articles of Incorporation as if
the Merger were deemed a complete liquidation of the Company (the
"Exchange Ratio" or the "Per Share Merger Consideration"). Each
share of Company Common Stock issued and outstanding immediately
prior to the Effective Time that is restricted or not fully vested
shall upon such conversion and exchange have the same restrictions
or vesting arrangements applicable to such shares prior to the
conversion.
(ii) each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than
shares, if any, which are Dissenting Shares) shall be converted
into and exchanged for the right to receive such number of fully
paid and nonassessable shares of Parent Common Stock as shall be
determined in accordance with the Company's Articles of
Incorporation as if the Merger were deemed a complete liquidation
of the Company.
(iii) the Company Stock Option Plan (the "Company
Stock Option Plan") and each Company Option granted thereunder and
outstanding immediately prior to the Effective Time shall be
assumed by Parent in accordance with Section 5.8 and thereafter
each such Company Option shall constitute the right to receive
options to purchase such number of shares of Parent Common Stock
as shall be determined in accordance with Exhibit B hereto.
(iv) the Company will use commercially reasonable best
efforts to ensure that security holders who hold such securities
shall take all necessary action such that each holder of an
outstanding warrant to purchase shares of Company Preferred Stock
(collectively, the "Company Warrants") shall have the right to
receive, in lieu of the shares of Company Preferred Stock
theretofore issuable upon exercise of such Company Warrant, the
aggregate number of shares of Parent Common Stock that the holder
of such Company Warrant would have been entitled to receive
pursuant to this Section 1.7(a) hereof had such holder exercised
the Company Warrant in full immediately prior to the Closing,
minus the number of shares of Parent Common Stock (or fraction of
a share of Parent Common Stock) equal to the aggregate exercise
price of such Company Warrant multiplied by the Exchange Ratio
determined in accordance with item (i) hereof. Any Company Warrant
which, nonetheless remains outstanding at the Effective Time shall
become exerciseable for Parent Common Stock in accordance with the
terms of such Company Warrant.
(b) Capital Stock of Merger Sub. Each share of common
stock, $.01 par value per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall evidence ownership of
such shares of capital stock of the Surviving Corporation.
(c) Adjustments to Exchange Ratio. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Capital Stock),
reorganization, recapitalization or other like change with respect to
Parent Common Stock or Company Capital Stock occurring after the date
hereof and prior to the Effective Time.
(d) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Capital Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to (x)
the product of (i) such fraction, multiplied by (ii) the Parent Stock
Price.
(e) Dissenters' Rights. Dissenting Shares shall mean any
shares of Company Common Stock or Company Preferred Stock outstanding
immediately prior to the Effective Time and held by a holder who has not
voted in favor of the Merger or consented thereto in writing, and who has
demanded appraisal for such shares of Company Common Stock or Company
Preferred Stock in accordance with section 1300 of California Law, if such
section 1300 provides for appraisal rights for such shares in the Merger.
(1) Subject to (2) below, notwithstanding any
provision of this Agreement to the contrary, Dissenting Shares
shall not be converted into or represent a right to receive the
Per Share Merger Consideration or cash in lieu of fractional
shares of Parent Common Stock pursuant to Section 1.7 hereof, but
the holder thereof shall be entitled to only such rights as are
granted by California Law.
(2) Notwithstanding the provisions of Section
1.7(a)(i) hereof, if any holder of shares of Company Common Stock
or Company Preferred Stock who demands appraisal of such holder's
shares of Company Common Stock or Company Preferred Stock under
California Law effectively withdraws or loses (through failure to
perfect or otherwise) his right to appraisal, then as of the
Effective Time or the occurrence of such event, whichever later
occurs, such holder's shares of Company Common Stock or Company
Preferred Stock shall automatically be converted into and
represent only the right to receive the Per Share Merger
Consideration and cash in lieu of fractional shares of Parent
Common Stock as provided in Section 1.7 hereof, without interest,
upon surrender of the certificate or certificates representing
such shares of Company Common Stock or Company Preferred Stock
(each such certificate, a "Company Certificate") pursuant to
Section 1.8 hereof.
(3) The Company shall give Parent (i) prompt notice of
any written demands for appraisal or payment of the fair value of
any shares of Company Common Stock or Company Preferred Stock,
withdrawals of such demands, and any other instruments served on
the Company pursuant to California Law received by the Company,
and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under California
Law. Except with the prior written consent of Parent, the Company
shall not voluntarily make any payment with respect to any demands
for appraisal, settle or offer to settle any such demands.
Section 1.8 SURRENDER OF CERTIFICATES
(a) Exchange Agent. U.S. Stock Transfer Corporation shall
act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly
after the Effective Time, Parent shall deliver to the Exchange Agent for
exchange and payment in accordance with this Article I, through such
reasonable procedures as Parent may adopt, (x) the shares of Parent Common
Stock issuable pursuant to Section 1.7(a) (provided that delivery of any
shares that are subject to vesting shall be in book entry form only until
such vesting restrictions have lapsed) in exchange for shares of Company
Capital Stock outstanding immediately prior to the Effective Time and (y)
cash in lieu of fractional shares pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective
Time, the Surviving Corporation shall cause to be mailed to each holder of
record of a Company Certificate, whose shares were converted into the right
to receive the Per Share Merger Consideration and cash in lieu of
fractional shares of Parent Common Stock pursuant to Section 1.7, (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Company Certificates shall pass, only
upon receipt of the Company Certificates by the Exchange Agent, and shall
be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Company Certificates in exchange for certificates (or book entries in the
case of shares that have not yet vested) representing shares of Parent
Common Stock and cash in lieu of fractional shares. Upon surrender of a
Company Certificate for cancellation to the Exchange Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Company Certificate shall be
entitled to receive in exchange therefor (i) a certificate (or a book entry
in the case of shares that have not yet vested in full) representing the
number of whole shares of Parent Common Stock (less the applicable
proportion of the Escrow Shares attributable to such holder) and (ii)
payment in lieu of fractional shares which such holder has the right to
receive pursuant to Section 1.7(d), and the Company Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Company Certificate that, prior to the Effective Time,
represented shares of Company Capital Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence (i) the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Capital Stock shall
have been so converted and (ii) the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section
1.7(d). As soon as practicable after the Effective Time, and subject to and
in accordance with the provisions of Article VIII hereof, Parent shall
cause to be distributed to the Escrow Agent (as defined in Article VIII
hereof) a certificate or certificates representing twelve and one-tenth
percent (12.1%) of the number of shares determined by dividing the
Valuation by the Parent Stock Price (the "Escrow Shares"), which shall be
registered in the name of the Escrow Agent as nominee for the holders of
Certificates cancelled pursuant to Section 1.7. The Escrow Shares shall be,
to the extent possible, vested shares not subject to any repurchase rights,
shall be beneficially owned by such holders and shall be held in escrow and
shall be available to compensate Parent for certain damages as provided in
Article VIII. The Escrow Shares shall be shown as issued and outstanding on
Parent's financial statement. To the extent not used for such purposes,
such shares shall be released, all as provided in Article VIII hereof.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Company Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Company
Certificate shall surrender such Company Certificate. Subject to applicable
law, following surrender of any such Company Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of any such dividends or other
distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 1.8(d)) with respect to
such shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares
of Parent Common Stock is to be issued in a name other than that in which
the Company Certificate surrendered in exchange therefor is registered, it
will be a condition of the issuance thereof that the Company Certificate so
surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to
Parent or any agent designated by it any transfer or other taxes required
by reason of the issuance of a certificate for shares of Parent Common
Stock in any name other than that of the registered holder of the Company
Certificate surrendered, or established to the satisfaction of Parent or
any agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.8, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to any person for any
amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section 1.8
shall also apply to Dissenting Shares that lose their status as such,
except that the obligations of Parent under this Section 1.8 shall commence
on the date of loss of such status and the holder of such shares shall be
entitled to receive in exchange for such shares the Per Share Merger
Consideration and cash in lieu of any fractional shares to which such
holder is entitled pursuant to Section 1.7 hereof.
Section 1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK
All shares of Parent Common Stock issued upon the
surrender for exchange of Company Certificates in accordance with the terms
hereof (including any cash paid in lieu of fractional shares) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving
Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Company Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
Section 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES
In the event any Company Certificates shall have been
lost, stolen or destroyed, the Exchange Agent shall issue and pay in
exchange for such lost, stolen or destroyed Company Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock and payment of cash in lieu of fractional shares as may
be required pursuant to Section 1.7; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Company Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the Company Certificates alleged to have
been lost, stolen or destroyed.
Section 1.11 TAX CONSEQUENCES
It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of
the Code. The shares of Parent Common Stock which constitute the aggregate
Per Share Merger Consideration are being delivered solely in exchange for
Company Capital Stock, Company Options, Company Warrants or warrants to
acquire Company Capital Stock, and no portion thereof is to be allocated
for tax purposes to any of the covenants or undertakings of any party
hereto.
Section 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION
(a) If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of Company, the officers and directors of Company are fully
authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
(b) The parties hereto recognize that the accelerated
timing imposed upon the preparation, negotiation and execution of this
Agreement may have inadvertently resulted in there being technical errors
in this Agreement, including the Exhibits and Schedule hereto. The parties
hereto agree to negotiate in good faith to resolve such issues promptly
upon discovery and notice thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
event, change, condition or effect which (i) is material to the condition
(financial or otherwise), properties, assets (including intangible assets),
prospects, liabilities, business, operations or results of operations of
such entity or group of entities, taken as a whole or (ii) would prevent or
materially alter or delay any of the transactions contemplated by this
Agreement or the Ancillary Agreements (as defined in Section 2.3). Any
reference to a "Material Adverse Effect" with respect to any entity or
group of entities means any event, change or effect that (x) is materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, business, operations or results of operations of such entity,
or (y) would prevent or materially alter or delay any of the transactions
contemplated by this Agreement except, for each of (x) and (y) above, to
the extent that no such event, change, condition or effect results from
changes in general economic conditions, or from changes affecting the
industry generally in which the party operates.
Any reference to a party's "knowledge" means (i) with
respect to any natural person, the actual knowledge, of such person, or
(ii) with respect to any corporation or entity, the actual knowledge of
such party's officers and directors provided that such persons shall have
made due and diligent inquiry of those employees of such party whom such
officers and directors reasonably believe would have actual knowledge of
the matters represented.
Except as disclosed in that section of the document of
even date herewith delivered by the Company to Parent prior to the
execution and delivery of this Agreement (the "Company Disclosure
Schedule") corresponding to the Section of this Agreement to which any of
the following representations or warranties pertain, the Company represents
and warrants to Parent as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER
The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The Company has the corporate power to own its properties and
to carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure
to be so qualified and in good standing would have a Material Adverse
Effect on the Company. The Company has delivered a true and correct copy of
the Articles of Incorporation (the "Company Articles") and Bylaws (the
"Company Bylaws") of the Company, each as amended to date, to Parent, and
as further described in Section 2.1 of the Company Disclosure Schedule
(which does not constitute an exception). The Company is not in violation
of any of the provisions of its articles of incorporation or, as described
in Section 2.1 of the Company Disclosure Schedule, its bylaws. The Company
does not directly or indirectly own any equity or similar interest in, or
any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
Section 2.2 CAPITALIZATION; TITLE TO THE SHARES
(a) Capitalization. As of December 19, 1999, the
authorized capital stock of the Company consists of (i) 50,000,000 shares
of Company Common Stock, of which 4,454,067 shares were issued and
outstanding, (ii) 8,829,365 shares of Company Preferred Stock, of which (w)
2,500,000 have been designated Series A Preferred Stock, 2,412,500 shares
of which are issued and outstanding as of the date hereof, (x) 357,143 have
been designated Series A-1 Preferred Stock, all of which are issued and
outstanding as of the date hereof, (y) 4,222,222 have been designated
Series B Preferred Stock, 3,358,044 shares of which are issued and
outstanding as of the date hereof and (z) 1,750,000 have been designated
Series B-1 Preferred Stock, 785,637 shares of which are issued and
outstanding as of the date hereof. As of the date hereof, (i) no shares of
Company Common Stock or Company Preferred Stock are issued and held in the
treasury of the Company, (ii) 45,000 shares of Series A Preferred Stock,
29,999 shares of Series B Preferred Stock and 17,818 shares of Series B-1
Preferred Stock are reserved for issuance pursuant to outstanding Company
Warrants, and (iii) except as described in Section 2.2(a) of the Company
Disclosure Schedule, 550,563 shares of Company Common Stock are reserved
for issuance pursuant to outstanding Company Options. All of the
outstanding shares of Company Capital Stock are, and all shares of Company
Capital Stock which may be issued pursuant to the exercise of outstanding
Company Options and Company Warrants will be, when issued in accordance
with the respective terms thereof, duly authorized, validly issued, fully
paid and non-assessable. The rights, preferences and privileges of the
Company Preferred Stock are as set forth in the Company Articles. Since the
date of the filing of the Company Articles, there have not occurred any
events that would cause any adjustment or readjustment in the applicable
conversion prices of such Company Preferred Stock. Each share of Company
Preferred Stock is convertible into one share of Company Common Stock..
Except as set forth above, and in Schedule 2.2(b), as of
the date hereof, (i) there are no shares of capital stock of the Company
authorized, issued or outstanding; (ii) there are no existing options,
warrants, calls, preemptive rights, indebtedness having general voting
rights or debt convertible into securities having such rights ("Voting
Debt") or subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital
stock of the Company obligating the Company to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or
Voting Debt of, or other equity interest in, the Company or securities
convertible into or exchangeable for such shares or equity interests, or
obligating the Company to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment and (iii) there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any Company Capital
Stock, or other capital stock of the Company or to provide funds to make
any investment (in the form of a loan, capital contribution or otherwise)
in any other entity.
There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to the voting
of the capital stock of the Company.
Following the Effective Time, no holder of Company
Options will have any right to receive shares of common stock of the
Surviving Corporation upon exercise of Company Options.
No Indebtedness of the Company contains any restriction
upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of
Indebtedness by the Company, or (iii) the ability of the Company to grant
any lien on its properties or assets. For purposes of this Agreement,
"Indebtedness" shall mean (i) all indebtedness for borrowed money or for
the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), (ii) any other indebtedness that
is evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all obligations in respect of
acceptances issued or created, (v) all liabilities secured by any lien on
any property and (vi) all guarantee obligations.
(b) Title to the Shares. Schedule 2.2(b) sets forth a
true, complete and correct list of each legal and beneficial owner of
Company securities and the number and class of such securities owned by
each such holder.
Section 2.3 AUTHORITY
The Company has the requisite power and authority to
enter into this Agreement and the other agreements to which the Company is
a party set forth in the exhibits hereto (the "Ancillary Agreements") and
to consummate the transactions contemplated thereby and hereby. The
execution and delivery of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the Company's
shareholders. This Agreement and each Ancillary Agreement to which the
Company is a party have been duly executed and delivered by the Company and
constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except to the extent
that enforceability may be limited by the effect, if any, of (i) any
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally, (ii) general
principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity, and (iii) the
enforceability of provisions requiring indemnification. The execution and
delivery of this Agreement or any Ancillary Agreement by the Company does
not, and the consummation of the transactions contemplated hereby and
thereby will not, conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (i) any provision of the articles of
incorporation or bylaws of the Company, as amended, or (ii) any Material
Contract (as defined in Section 2.28) or any material permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its properties or assets,
except as set forth in Section 2.3 of the Company Disclosure Schedule.
Except for (i) applicable requirements of the hearing (the "Fairness
Hearing") to be held pursuant to section 25142 of the California Corporate
Securities Law of 1968, as amended (the "CSL"), (ii) the filing and
recordation of the Agreement of Merger and the Certificate of Merger in
accordance with the requirements of California Law and Delaware Law,
respectively, and (iii) if required pursuant to the provisions of Section
5.18, the filing of a Registration Statement on Form S-4, no notice to,
filing with, and no permit, authorization, consent or approval of, any
arbitrator, court, nation, government, any state or other political
subdivision thereof and any entity exercising executive, legislative,
judicial regulatory or administrative functions of, or pertaining to,
government (a "Governmental Entity"), or any private third party is
necessary for the consummation by the Company of the transactions
contemplated by this Agreement.
Section 2.4 FINANCIAL STATEMENTS
The Company has previously provided Parent with its
audited balance sheet as of June 30, 1999 (the "June 30 Balance Sheet") and
its unaudited balance sheet as of November 30, 1999 (the "November 30
Balance Sheet"), and the related statements of results of operations and,
with respect to the audited financial statements, statements of cash flows
for the fiscal year and the period then ended, including, with respect to
the audited financial statements, the notes thereto (the "Financial
Statements"). The Financial Statements for the year ended June 30 have been
audited by Ernst & Young LLP, the Company's independent accountants. The
Financial Statements fairly present, in all material respects, in
accordance with United States generally accepted accounting principles
("U.S. GAAP") consistently applied, the financial position of the Company
as of such dates and its results of operations and cash flows for such
fiscal periods except, in the case of such unaudited statements, for normal
recurring year end adjustments which adjustments will not be material,
either individually or in the aggregate and footnotes.
Section 2.5 ABSENCE OF CERTAIN CHANGES
Except as and to the extent set forth in the Financial
Statements or in Section 2.5 of the Company Disclosure Schedule, from
November 30, 1999 (the "Balance Sheet Date") to the date of this Agreement
the Company has not:
(a) suffered any Material Adverse Effect;
(b) incurred any liabilities or obligations (absolute,
accrued, contingent or otherwise), except non-material items incurred in
the ordinary course of business and consistent with past practice, which
exceed $500,000 in the aggregate;
(c) paid discharged or satisfied any claims, liabilities
or obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected or
reserved against in the November 30 Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since
November 30, 1999;
(d) permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
liens, except for liens for current taxes not yet due or liens the
incurrence of which would not have a Material Adverse Effect on the
Company;
(e) cancelled any debts or waived any claims or rights of
substantial value;
(f) sold, transferred, or otherwise disposed of any of
its material properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary course of business and consistent with
past practice;
(g) granted any increase in the compensation or benefits
of any director, officer, employee or consultant of the Company (including
any such increase pursuant to any bonus, pension, profit sharing or other
plan or commitment) or any increase in the compensation or benefits payable
or to become payable to any director, officer, employee or consultant of
the Company, except in the case of employees other than officers of the
Company for such increases in compensation or benefits made in the ordinary
course of business and consistent with past practice;
(h) made any change in severance policy or practices;
(i) made any capital expenditure or acquired any
property, plant and equipment for a cost in excess of $120,000 per fiscal
quarter in the aggregate;
(j) declared, paid or set aside for payment any dividend
or other distribution in respect of its capital stock or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of
capital stock or other securities of the Company;
(k) made any change in any method of tax or financial
accounting or accounting practice or made or changed any election for
Federal, state, local or foreign tax purposes;
(l) made any tax election, settled or compromised any
Federal, state, local or foreign income tax liability, or waived or
extended the statute of limitations in respect of any such taxes;
(m) paid, loaned or advanced any amount to, or sold,
transferred or leased any material properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or
arrangement with, any of its officers, directors or shareholders or any
affiliate or associate of any of its officers, directors or shareholders
except for directors' fees, and compensation to officers at rates not
inconsistent with the Company's past practice; or
(n) agreed, whether in writing or otherwise, to take any
action described in this Section 2.5.
Section 2.6 ABSENCE OF UNDISCLOSED LIABILITIES
Except as and to the extent provided in the November 30
Balance Sheet, the Company did not have at November 30, 1999 any
liabilities (whether contingent or absolute, direct or indirect, known or
unknown to the Company or matured or unmatured or otherwise) that were not
fully reflected or fully reserved against in the November 30 Balance Sheet,
respectively, or incurred other than in the ordinary course.
Section 2.7 LITIGATION
There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of the
Company, threatened against the Company or any of its properties or any of
its officers or directors (in their capacities as such). There is no
judgment, decree or order against the Company or, to the knowledge of the
Company, any of its directors or officers (in their capacities as such),
that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that would reasonably be
expected to have a Material Adverse Effect on the Company. There is no
litigation that the Company has pending against other parties.
Section 2.8 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement, judgment, injunction, order or
decree binding upon the Company which has or could reasonably be expected
to have the effect of prohibiting or impairing any current business
practice of the Company, any acquisition of property by the Company or the
conduct of business by the Company as currently conducted.
Section 2.9 GOVERNMENTAL AUTHORIZATION
The Company has obtained each federal, state, county,
local or foreign governmental consent, license, permit, grant, or other
authorization of a Governmental Entity (i) pursuant to which the Company
currently operates or holds any interest in any of its properties or (ii)
that is required for the operation of the business of the Company or the
holding of any such interest ((i) and (ii) herein collectively called
"Company Authorizations"), and all of such Company Authorizations are in
full force and effect, except where the failure to obtain or have any such
Company Authorizations would not reasonably be expected to have a Material
Adverse Effect on the Company. Section 2.9 of the Company Disclosure
Schedule, which does not constitute an exception, provides disclosure
concerning certifications that may be required in the future.
Section 2.10 HART-SCOTT-RODINO
The Company does not (and will not prior to the Closing)
have "total assets" or "annual net sales" in excess of $10,000,000, as
those terms are defined in the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the regulations thereunder.
Section 2.11 TITLE TO PROPERTY
The Company has good and marketable title to all of its
properties, interests in properties and assets, real and personal,
reflected in the November 30 Balance Sheet or acquired after the Balance
Sheet Date (except properties, interests in properties and assets sold or
otherwise disposed of since the Balance Sheet Date in the ordinary course
of business), or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) liens for
current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or
interfere with the use or value of the properties subject thereto or
affected thereby, or otherwise materially impair business operations
involving such properties and (iii) liens securing debt which are reflected
on the November 30 Balance Sheet, including security interest disclosed on
Section 2.11 of the Company's Disclosure Schedule. The property and
equipment of the Company that are used in the operations of businesses are
in good operating condition and repair, subject to normal wear and tear.
All properties used in the operations of the Company are reflected in the
November 30 Balance Sheet to the extent U.S. GAAP requires the same to be
reflected.
Section 2.12 INTELLECTUAL PROPERTY
(a) To the best knowledge of the Company and except as
disclosed in Section 2.12 of the Company Disclosure Schedule, the Company
owns, or is licensed or otherwise possesses legally enforceable rights to
use, all patents, trademarks, trade names, service marks, Internet domain
names, copyrights, mask works, and any applications therefor, trade
secrets, know-how, technology, inventions, ideas, algorithms, processes,
computer software programs or applications (in source code and/or object
code form), net lists, schematics, and tangible or intangible proprietary
information or material ("Intellectual Property") that are used in or
necessary for the conduct of the business of the Company as currently
conducted. The Company has not, directly or indirectly (i) licensed any of
its Intellectual Property to any party, (ii) entered into any agreement
requiring the Company to license or otherwise provide future versions,
upgrades or enhancements of its Intellectual Property, or (iii) entered
into any exclusive agreements relating to its Intellectual Property with
any party.
(b) Section 2.12 of the Company Disclosure Schedule sets
forth a complete and accurate listing of: (i) all patents and patent
applications and all registered and unregistered trademarks, service marks,
and trade names, and registered Internet domain names, copyrights and mask
works, included in the Intellectual Property owned by the Company including
the jurisdictions in which each such Intellectual Property right subsists,
has been issued or registered or in which any application for such issuance
and registration has been filed, (ii) all material licenses, sublicenses
and other agreements as to which the Company is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii)
all material licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company is authorized to use
any third party patents, trademarks, service marks or copyrights, or
software ("Third Party Intellectual Property Rights") in connection with
the manufacture, sale, licensing or other distribution of any product of
the Company or the performance of any service by the Company, other than
commercially available, off-the-shelf software.
(c) To the Company's knowledge, and except as disclosed
in Section 2.12 of the Company Disclosure Schedule there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual
Property right of the Company, or any Intellectual Property right of any
third party to the extent licensed by or through the Company, by any third
party, including any employee or former employee of the Company. The
Company has not entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders, license agreements
or other agreements arising in the ordinary course of business.
(d) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the Ancillary Agreements or the
performance of its obligations under this Agreement or the Ancillary
Agreements, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights.
(e) All patents, and all registered trademarks, service
marks trade names, Internet domain names and copyrights, held by the
Company are valid and subsisting and there is no pending, or to the
Company's knowledge, threatened judicial or administrative proceeding
involving the validity, enforceability or scope thereof. The Company has
not received any opinion of counsel other than as disclosed in Section 2.12
to the Company Disclosure Schedule concerning the patentability,
registrability, validity, enforceability or scope of any of Intellectual
Property owned by or licensed to the Company or the infringement of any
Intellectual Property of any third party by the Company. The Company (i)
has not received notice of any claim of infringement of any Intellectual
Property right of any third party, (ii) has not been sued in any suit,
action or proceeding which involves a claim of infringement of any
Intellectual Property right of any third party, or (iii) has not brought
any action, suit or proceeding for infringement of Intellectual Property or
breach of any license or agreement involving Intellectual Property against
any third party. The manufacturing, marketing, licensing and sale of the
Company's products or the performance of services by the Company does not
infringe any patent, trademark, service mark, copyright, trade secret or
other proprietary right of any third party.
(f) The Company has secured valid written assignments
from all consultants and employees who contributed to the creation or
development of Intellectual Property of the rights to such contributions
that the Company does not already own by operation of law. The Intellectual
Property owned by the Company is free and clear of all liens and other
encumbrances, and the Company is listed in the records of the appropriate
United States, state, or foreign agency except as set forth in Section 2.12
of the Company Disclosure Schedule, as the sole owner of record for each
patent, trademark, service mark, trade name, Internet domain name,
copyright and mask work, and application therefor, listed in Schedule 2.12.
(g) The Company has taken reasonable measures consistent
with industry practice to protect and preserve the confidentiality of all
Intellectual Property not otherwise protected by patents, patent
applications or copyright ("Confidential Information"). All authorized use,
disclosure or appropriation of Confidential Information owned by the
Company ("Company Confidential Information") by or to a third party has
been pursuant to the terms of a written agreement between the Company, on
the one hand, and such third party, on the other hand, pursuant to which
the third party undertakes to protect and not disclose the Company
Confidential Information. All use, disclosure or appropriation of
Confidential Information not owned by the Company has been pursuant to the
terms of a written agreement between the Company and the owner of such
Confidential Information, or is otherwise lawful. **
Section 2.13 ENVIRONMENTAL MATTERS
(a) The following terms shall be defined as follows:
(1) "Environmental and Safety Laws" shall mean any
laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require
reporting with respect to, or list or define air, water,
groundwater, solid waste, hazardous or toxic substances,
materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other
persons, including the public.
(2) "Facilities" shall mean the offices of the
Company located at 303 Twin Dolphin Drive, Fourth Floor, Redwood
Shores, CA 94065.
(b) The Company represents and warrants that the
Company's uses of and activities in the Facilities and, to its knowledge,
the Facilities have at all times complied in all material respects with all
Environmental and Safety Laws.
Section 2.14 TAXES
(a) The Company has (i) properly completed and timely
filed (taking into account extensions granted without penalty and described
in Section 2.14 of the Company Disclosure Schedule) all Tax Returns (as
defined below) required to be filed by it on or before the Closing Date and
(ii) paid, or where payment is not yet due, has provided adequate accruals
in accordance with U.S. GAAP in the Financial Statements for all material
Taxes due with respect to any period ending on or before the Closing Date.
The Company has no material liability for unpaid Taxes accruing after the
date of its latest Financial Statements. There is (i) no material claim for
Taxes that is a lien against the property of the Company or is being
asserted against the Company other than liens for Taxes not yet due and
payable, (ii) no audit of any Tax Return of the Company being conducted by
a Tax Authority (as defined below), (iii) no extension of the statute of
limitations on the assessment of any Taxes granted by the Company and
currently in effect, and (iv) except as disclosed in Section 2.14 of the
Company Disclosure Schedule, no agreement, contract or arrangement to which
the Company is a party that may result in the payment of any amount that
would not be deductible by reason of Section 280G or Section 404 of the
Code (or comparable provisions under foreign or state Tax laws). The
Company has not filed nor will it file any consent to have the provisions
of paragraph 341(f)(2) of the Code (or comparable provisions of any foreign
or state Tax laws) apply to the Company. The Company is not a party to any
Tax sharing or Tax allocation agreement nor does the Company have any
liability or potential liability to another party under any such agreement.
The Company has never been a member of a consolidated, combined or unitary
group of which the Company was not the ultimate parent corporation. The
Company has never been a "United States real property holding corporation"
within the meaning of Section 897 of the Code.
(b) For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental entity (a
"Tax Authority") responsible for the imposition of any such tax (domestic
or foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period, and (iii)
any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of being a transferee of or successor to any person or
as a result of any express or implied obligation to indemnify any other
person. As used herein, "Tax Return" shall mean any return, statement,
report or form (including, without limitation, estimated tax returns and
reports, withholding tax returns and reports and information reports and
returns) required to be filed with respect to Taxes.
Section 2.15 EMPLOYEE BENEFIT PLANS
(a) Section 2.15 of the Company Disclosure Schedule
lists, with respect to the Company and any trade or business (whether or
not incorporated) which is treated as a single employer with the Company
(an "ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or
(o) of the Code, (i) all material employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (ii) each loan to a non-officer employee in excess of
$10,000, loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code
Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other
fringe or employee benefit plans, programs or arrangements that apply to
senior management of the Company and that do not generally apply to all
employees, and (v) any current or former employment or executive
compensation or severance agreements, written or otherwise, as to which
unsatisfied obligations of the Company of greater than $10,000 remain for
the benefit of, or relating to, any present or former employee, consultant
or director of the Company (together, the "Company Employee Plans").
(b) The Company has furnished or made available to Parent
a copy of each of the Company Employee Plans and related material plan
documents (including trust documents, insurance policies or contracts,
employee booklets, summary plan descriptions and other authorizing
documents, and any material employee communications relating thereto) and
has, with respect to each Company Employee Plan which is subject to ERISA
reporting requirements, provided copies of the Form 5500 reports filed for
the last three plan years. Any Company Employee Plan intended to be
qualified under Section 401(a) of the Code has either obtained from the IRS
(as defined below) a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the
Tax Reform Act of 1986, or has applied to the IRS for such a determination
letter prior to the expiration of the requisite period under applicable
Treasury Regulations or IRS pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a
favorable determination or has been established under a standardized
prototype plan for which an IRS opinion letter has been obtained by the
plan sponsor and is valid as to the adopting employer. The Company has also
furnished or made available to Parent the most recent IRS determination,
notification, advisory, or opinion letter issued with respect to each such
Company Employee Plan, and, to the Company's knowledge, nothing has
occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any Company
Employee Plan subject to Code Section 401(a).
(c) None of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person,
except as required by applicable law. There has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA and Section
4975 of the Code, with respect to any Company Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect
on the Company. Each Company Employee Plan has been administered in
accordance with its terms and in compliance with the requirements
prescribed by any and all statutes, rules and regulations (including ERISA
and the Code), except as would not have, in the aggregate, a Material
Adverse Effect on the Company, and the Company and each ERISA Affiliate
have performed all obligations required to be performed by them under, are
not in any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to, any
of the Company Employee Plans. Neither the Company nor any ERISA Affiliate
is subject to any material liability or penalty under Sections 4976 through
4980 of the Code or Title I of ERISA with respect to any of the Company
Employee Plans. All material contributions required to be made by the
Company or any ERISA Affiliate to any Company Employee Plan have been made
on or before their due dates and a reasonable amount has been accrued for
contributions to each Company Employee Plan for the current plan years.
With respect to each Company Employee Plan, no "reportable event" within
the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the
regulations to Section 4043 of ERISA) nor any event described in Section
4062, 4063 or 4041 or ERISA has occurred. Each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Closing Date in
accordance with its terms, without material liability to Parent (other than
ordinary administrative expenses typically incurred in a termination
event). With respect to each Company Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA
or an employee welfare benefit plan within the meaning of Section 3(1) of
ERISA, the Company has prepared in good faith and timely filed all
requisite material governmental reports (which, to the Company's knowledge,
were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all material notices and reports to
employees required to be filed, distributed or posted with respect to each
such Company Employee Plan. No suit, administrative proceeding, action or
other litigation has been brought, or to the best knowledge of the Company
is threatened, against or with respect to any such Company Employee Plan,
including any audit or inquiry by the Internal Revenue Service (the "IRS")
or United States Department of Labor other than requests for payments in
the ordinary course or requests for qualified domestic relations orders.
(d) With respect to each Company Employee Plan, the
Company has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the regulations (including proposed regulations)
thereunder, except to the extent that such failure to comply would not in
the aggregate has a Material Adverse Effect on the Company (ii) the
applicable requirements of the Family Medical and Leave Act of 1993 and the
regulations thereunder, except to the extent that such failure to comply
would not, in the aggregate, have a Material Adverse Effect on the Company
and (iii) the applicable requirements of the Health Insurance Portability
and Accountability Act of 1996 and the regulations (including proposed
regulations) thereunder, except to the extent that such failure to comply
would not, in the aggregate, have a Material Adverse Effect on the Company.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of the Company or any ERISA Affiliate to severance
benefits or any other payment, except as expressly provided in this
Agreement, or (ii) except as disclosed on Schedule 2.15, and in Section
2.15 of the Company Disclosure Schedule accelerate the time of payment or
vesting of Company Options, or increase the amount of compensation due any
such employee or service provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by the Company or
any ERISA Affiliate relating to, or change in participation or coverage
under, any Company Employee Plan which would materially increase the
expense of maintaining such Plan above the level of expense incurred with
respect to that Plan for the most recent fiscal year included in the
Financial Statements.
(g) The Company does not currently maintain, sponsor,
participate in or contribute to, nor has it ever maintained, established,
sponsored, participated in, or contributed to, any pension plan (within the
meaning of Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B
of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(h) Neither the Company nor any ERISA Affiliate is a
party to, or has made any contribution to or otherwise incurred any
obligation to contribute to, any "multiemployer plan" as defined in Section
3(37) of ERISA.
Section 2.16 CERTAIN AGREEMENTS AFFECTED BY THE MERGER
Neither the execution and delivery of this Agreement or
the Ancillary Agreements nor the consummation of the transaction
contemplated hereby or thereby will, except as disclosed in Section 2.16 of
the Company Disclosure Schedule, (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any director or employee of the
Company, (ii) materially increase any benefits otherwise payable by the
Company or (iii) result in the acceleration of the time of payment or
vesting of any such benefits except as set forth in Section 2.16 of the
Company Disclosure Schedule. No payment which will or may be made by the
Company to any employee will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
Section 2.17 EMPLOYEE MATTERS
The Company is in compliance in all material respects
with all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages,
hours and occupational safety and health and employment practices, and is
not engaged in any unfair labor practice. The Company has in all material
respects withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to employees; and is
not liable for any material arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing. The Company is not liable
for any material payment to any trust or other fund or to any governmental
or administrative authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees
(other than routine payments to be made in the normal course of business
and consistent with past practice). There are no pending claims against the
Company under any workers compensation plan or policy or for long term
disability. There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company, on the one hand, and any of its
respective employees, on the other hand, which controversies have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any agency, court or tribunal, foreign
or domestic. The Company is not a party to any collective bargaining
agreement or other labor union contract nor does the Company know of any
activities or proceedings of any labor union or organize any such
employees. To the Company's knowledge, no employees of the Company are in
violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any restrictive covenant to a
former employer relating to the right of any such employee to be employed
by the Company because of the nature of the business conduced by the
Company or to the use of trade secrets or proprietary information of
others. No key employees or officers of the Company have given notice to
the Company, nor is the Company otherwise aware, that any such key employee
or officer intends to terminate his or her employment with the Company.
Section 2.18 INTERESTED PARTY TRANSACTIONS
The Company is not indebted to any director, officer,
employee or agent of the Company (except for amounts due as normal salaries
and bonuses and in reimbursement of ordinary expenses), and except as set
forth in Section 2.18 to the Company Disclosure Schedule, no such person is
indebted to the Company.
Section 2.19 INSURANCE
The Company has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of the Company. Schedule 2.19 contains a
complete list of the policies and contracts of insurance maintained by the
Company. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable to
date under all such policies and bonds have been paid and the Company is
otherwise in compliance in all material respects with the terms of such
policies and bonds. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
Section 2.20 COMPLIANCE WITH LAWS
The Company has complied with, is not in violation of,
and has not received any notices of violation with respect to, any federal,
state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business,
except for such violations or failures to comply as could not be reasonably
expected to have a Material Adverse Effect on the Company.
Section 2.21 MINUTE BOOKS
The minute books of the Company made available to Parent
contain a complete and accurate summary in all material respects of all
meetings of directors and shareholders or actions by written consent since
the time of incorporation of the Company through three business days before
the date of this Agreement, and reflect all transactions referred to in
such minutes accurately in all material respects.
Section 2.22 COMPLETE COPIES OF MATERIALS
The Company has delivered or made available true and
complete copies of each document which has been requested by Parent or its
counsel in connection with their legal and accounting review of the
Company.
Section 2.23 SHAREHOLDER AGREEMENT; IRREVOCABLE PROXIES
Holders of more than a majority of the outstanding shares
of Company Common Stock have agreed in writing to vote for approval of the
Merger pursuant to irrevocable proxies attached to the Shareholder's
Agreement as an exhibit.
Section 2.24 VOTE REQUIRED
The affirmative vote of the holders of at least a
majority of the outstanding shares of Company Common Stock and 60% of the
outstanding shares of the Company Preferred Stock all series voting
together on an as-if converted basis is the only vote of the holders of any
of the Company's capital stock necessary to approve this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby.
Section 2.25 BROKERS' AND FINDERS' FEES
Except as disclosed in Section 2.25 of the Company
Disclosure Schedule, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
Section 2.26 BOARD APPROVAL
The Company Board has unanimously (i) approved this
Agreement, the Ancillary Agreements and the Merger, (ii) determined that
the transactions contemplated herein and therein are advisable and in the
best interests of the shareholders of the Company and on terms that are
fair to such shareholders and (iii) recommended that the shareholders of
the Company approve the Merger.
Section 2.27 CUSTOMERS AND SUPPLIERS
No customer which individually accounted for more than 1%
of the Company's gross revenues during the 12-month period preceding the
date hereof, and no supplier of the Company, has canceled or otherwise
terminated, or made any written threat to the Company to cancel or
otherwise terminate its relationship with the Company, or has decreased
materially its services or supplies to the Company in the case of any such
supplier, or its usage of the services or products of the Company in the
case of such customer, and to the Company's knowledge, no such supplier or
customer intends to cancel or otherwise terminate its relationship with the
Company or to decrease materially its services or supplies to the Company
or its usage of the services or products of the Company, as the case may
be. The Company has not breached, so as to provide a benefit to the Company
that was not intended by the parties, any agreement with, or engaged in any
fraudulent conduct with respect to, any customer or supplier of the
Company.
Section 2.28 MATERIAL CONTRACTS
Except for the contracts and agreements described on
Schedule 2.28, and in Section 2.28 of the Company Disclosure Schedule
(collectively, the "Material Contracts"), the Company is not a party to or
bound by any material contract, including without limitation:
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(b) any continuing contract for the purchase of
materials, supplies, equipment or services involving in the case of any
such contact more than $20,000 over the life of the contract;
(c) any contract that expires or may be renewed at the
option of any person other than the Company so as to expire more than one
year after the date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with U.S.
GAAP;
(e) any contract for capital expenditures in excess of
$20,000 in the aggregate;
(f) any contract limiting the freedom of the Company to
engage in any line of business or to compete with any other person as that
term is defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or, other than those entered into in the ordinary course
of business, any confidentiality, secrecy or non-disclosure contract;
(g) any material contract pursuant to which the Company
is a lessor of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property;
(h) any contract with any affiliate of the Company; or
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to,
the obligations, liabilities (whether accrued, absolute, contingent or
otherwise) or indebtedness of any other person.
Section 2.29 NO BREACH OF MATERIAL CONTRACTS
All Material Contracts are in written form. The Company
has in all material respects performed the obligations required to be
performed by it and is entitled to all benefits under, and to its
knowledge, is not alleged to be in default in respect of any Material
Contract. Each of the Material Contracts is in full force and effect, and
there exists no default or event of default or event, occurrence, condition
or act, with respect to the Company or, to the knowledge of the Company,
with respect to the other contracting party, which, with the giving of
notice, the lapse of time or the happening of any other event or
conditions, would reasonably be expected to become a default or event of
default under any Material Contract. True, correct and complete copies of
all Material Contracts have been delivered to the Parent.
Section 2.30 THIRD PARTY CONSENTS
Schedule 2.30 lists all contracts, that require a
novation or consent to assignment, as the case may be, prior to the Closing
Date so that Parent shall be made a party in place of the Company or as
assignee.
Section 2.31 MATERIAL THIRD PARTY CONSENTS
Schedule 2.31 includes every contract which, if no
novation occurs to make Parent a party thereto or if no consent to
assignment is obtained, would have a Material Adverse Effect on Parent's
ability to operate the business of the Company in the same manner as the
business was operated by the Company prior to the Closing Date.
Section 2.32 PRODUCT RELEASES
The Company has provided Parent a Schedule of Product
Releases, which Schedule is attached as Schedule 2.32. The Company has a
good faith reasonable belief that it can achieve the release of products on
the schedule described in Schedule 2.32 and is not currently aware of any
change in its circumstances or other fact that has occurred that would
cause it to believe that it will be unable to meet such release schedule.
Section 2.33 YEAR 2000
None of the products and services sold, licensed,
rendered, or otherwise provided by the Company in the conduct of their
respective businesses will malfunction, will cease to function, will
generate materially incorrect data or will produce materially incorrect
results and such products will not cause any of the above with respect to
the property or business of third parties using such products or services
when processing, providing or receiving (i) date-related data from, into
and between the Twentieth (20th) and Twenty-First (21st) centuries, or (ii)
date-related data in connection with any valid date in the Twentieth (20th)
and Twenty-First (21st) centuries, causing a Material Adverse Effect on the
Company; provided, however, that to the extent this representation relates
to such functionality derived from supplies received from the Company's
suppliers, the Company merely represents and warrants that the Company has
used best efforts to obtain supplies that provide such functionality in all
material respects and to obtain representations from the suppliers thereof
to such effect. The Company has not made any representations or warranties
specifically relating to the ability of any product or service sold,
licensed, rendered, or otherwise provided by the Company in the conduct of
their respective businesses to operate without malfunction, to operate
without ceasing to function, to generate correct data or to produce correct
results when processing, providing or receiving (i) date-related data from,
into and between the Twentieth (20th) and Twenty-First (21st) centuries,
and (ii) date-related data in connection with any valid date in the
Twentieth (20th) and Twenty-First (21st) centuries.
Section 2.34 TAX MATTERS
As of the date hereof, neither the Company nor, to the
Company's knowledge, any of its affiliates has taken or agreed to take any
action, nor does the Company have knowledge of any fact or circumstance,
that would prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
Section 2.35 BALANCE SHEET
As of the Closing Date, the assets of the Company which
would be required to be reflected on a balance sheet prepared as of the
Closing Date in accordance with U.S. GAAP on a consolidated basis shall not
be less than $2,000,000.
Section 2.36 REPRESENTATIONS COMPLETE
None of the representations or warranties made by the
Company herein or in any Schedule hereto, including the Company Disclosure
Schedule, or certificate furnished by the Company pursuant this Agreement,
when all such documents are read together in their entirety, contains or
will contain at the Closing Date any untrue statement of a material fact,
or omits or will omit at the Closing Date to state any material fact
necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in a document of even date herewith
and delivered by Parent to the Company prior to the execution and delivery
of this Agreement and referring to the representations and warranties in
this Agreement (the "Parent Disclosure Schedule"), Parent represents and
warrants to the Company as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER
Parent is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization.
Parent has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a
Material Adverse Effect on Parent. Parent is not in violation of any of the
provisions of its Certificate of Incorporation or By-Laws (or equivalent
organizational documents).
Section 3.2 CAPITAL STRUCTURE
As of the date hereof, the authorized capital stock of
Parent consists of 250,000,000 shares of Common Stock, $0.001 par value per
share (as increased from 100,000,000 on December 17, 1999 by a vote of the
Parent stockholders and action by the Parent Board with an amendment to the
Certificate of Incorporation to be filed in the State of Delaware after the
date hereof), and 5,000,000 shares of Preferred Stock, $0.001 par value per
share, of which there were issued and outstanding as of the close of
business on September 30, 1999, 62,583,964 shares of Common Stock and no
shares of Preferred Stock. The shares of Parent Common Stock to be issued
pursuant to the Merger, when so issued, will be duly authorized, validly
issued, fully paid, and non-assessable.
Section 3.3 AUTHORITY
Parent has all requisite corporate power and authority to
enter into this Agreement and the Ancillary Agreements and to consummate
the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of Parent.
This Agreement and each Ancillary Agreement has been duly executed and
delivered by Parent and constitutes the valid and binding obligation of
Parent enforceable against Parent in accordance with its terms except to
the extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding at law or in equity. The execution and delivery of this
Agreement and the Ancillary Agreements do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under
(i) any provision of the Certificate of Incorporation or By-laws of Parent
or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order or decree applicable to Parent or the properties or assets of either
of them. Except for (i) the requirements of the Fairness Hearing, (ii) the
filing and recordation of an Agreement of Merger, in accordance with the
requirements of California Law, and the filing of a Certificate of Merger,
in accordance with the requirements of Delaware Law, and (iii) if required
pursuant to the provisions of Section 5.18, the filing of a Registration
Statement on Form S-4, neither the execution, delivery or performance of
this Agreement by Parent and Merger Sub, the consummation by Parent and
Merger Sub of the transactions contemplated hereby, nor compliance by
Parent with any of the provisions hereof will (i) require any notice to,
filing with, or permit, authorization, consent or approval of, any
Governmental Entity or any private third party, (ii) conflict with or
result in any breach of any provision of the charter or by-laws of Parent
or Merger Sub, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration or result in
the creation of any lien) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, agreement or
other instrument or obligation to which Parent or Merger Sub is a party or
by which any of them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, treaty, rule or
regulation applicable to Parent, Merger Sub or any of their properties or
assets except, in the case of clauses (i), (iii) and (iv), where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings, or where such violations, breaches or defaults would
not, individually or in the aggregate, materially impair the ability of
Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
Section 3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS
Parent has timely filed and made available to the Company
each required statement, report, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act
of 1933, as amended (the "Securities Act"), definitive proxy statement, and
other filings filed with the Securities and Exchange Commission (the "SEC")
by Parent since July 31, 1998, and prior to the Effective Time, Parent will
have furnished the Company with true and complete copies of any additional
documents filed with the SEC by Parent prior to the Effective Time
(collectively, the "Parent SEC Documents"). In addition, Parent has made
available to the Company all exhibits to the Parent SEC Documents filed
prior to the date hereof, and will promptly make available to the Company
all exhibits to any additional Parent SEC Documents filed prior to the
Effective Time. As of their respective filing dates, the Parent SEC
Documents complied (or will comply) in all material respects with the
requirements of the Exchange Act and the Securities Act, and none of the
Parent SEC Documents contained (or will contain) any untrue statement of a
material fact or omitted (or will omit) to state a material fact required
to be stated therein or necessary to make the statements made therein, in
light of the circumstances in which they were made, not misleading, except
to the extent corrected by a subsequently filed Parent SEC Document. The
financial statements of Parent, including the notes and schedules thereto,
included in the Parent SEC Documents (the "Parent Financial Statements")
were complete and correct in all material respects as of their respective
dates, complied as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with U.S. GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be
indicated in the notes thereto or, in the case of unaudited statements
included in Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q of
the SEC). The Parent Financial Statements fairly present the consolidated
financial condition and operating results of Parent at the dates and during
the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments which were not and
are not expected to be, individually or in the aggregate, material in
amount).
Section 3.5 ABSENCE OF UNDISCLOSED LIABILITIES
Parent has no material obligations or liabilities of any
nature (matured or unmatured, fixed, or contingent or otherwise) other than
(i) those set forth or adequately provided for in the Balance Sheet
included in Parent's Quarterly Report on Form 10-Q for the period ended at
the most recent quarter end prior to the date of this Agreement (the
"Parent Balance Sheet"), (ii) those incurred in the ordinary course of
business and not required to be set forth in the Parent Balance Sheet under
U.S. GAAP and (iii) those incurred in the ordinary course of business since
the date of Parent Balance Sheet and consistent with past practice.
Section 3.6 BROKER'S AND FINDERS' FEES
Parent has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
Section 3.7 SHAREHOLDER APPROVAL
Approval of the stockholders of Parent is not required
for this Agreement, the Ancillary Agreements or the Merger.
Section 3.8 APPROVAL
The Board of Directors of Parent has approved this
Agreement and the Ancillary Agreements and the transactions contemplated
hereby and thereby.
Section 3.9 TAX MATTERS
As of the date hereof, neither Parent nor, to Parent's
knowledge, any of its affiliates has taken or agreed to take any action,
nor does Parent have knowledge of any fact or circumstance that would
prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
Section 3.10 ABSENCE OF CERTAIN CHANGES
Since the date of the Parent's Registration Statement on
Form S-1 filed on October 28, 1999 as amended by Parent's Registration
Statements on Form S-1/A filed on November 4, 1999 and November 12, 1999
for the period ended at the most recent quarter and prior to the date of
this Agreement, there has not been a Material Adverse Effect with respect
to Parent. Without limiting the foregoing, except as disclosed in Parent
SEC Documents filed by Parent through the date hereof or as contemplated by
this Agreement, (i) Parent has conducted its business in the ordinary
course of business and (ii) there has not been:
(a) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock
of Parent of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, Parent;
(b) any amendment of any provision of the Certificate of
Incorporation or By-Laws of, or of any material term of any outstanding
security issued by, Parent;
(c) any incurrence, assumption or guarantee by Parent of
any indebtedness for borrowed money other than borrowings under existing
short term credit facilities not in excess of $10,000,000 in the aggregate;
(d) any material change in any method of accounting or
accounting practice by Parent except for any such change required by reason
of a change in U.S. GAAP;
(e) issuance of Parent Common Stock other than pursuant
to options outstanding as of the date of Parent's S-1 and the issuance of
options after such date in the ordinary course of business (and the
issuance of securities pursuant thereto);
(f) any authorization of, or commitment or agreement to
take any of, the foregoing actions except as otherwise permitted by this
Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING DATE
Section 4.1 CONDUCT OF BUSINESS OF THE COMPANY
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, the Company shall (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Parent),
carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and as proposed to be
conducted. The Company agrees to pay debts and Taxes when due subject to
good faith disputes over such debts or Taxes, to pay or perform other
obligations when due subject to good faith disputes over whether payment or
performance is owing, and to use all reasonable efforts consistent with
past practice and policies to preserve its present business organizations,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, to the
end that its goodwill and ongoing businesses shall not be substantially
impaired at the Effective Time. The Company shall promptly notify Parent of
any event or occurrence not in the ordinary course of its business, and of
any event which could have a Material Adverse Effect on the Company.
Section 4.2 RESTRICTION ON CONDUCT OF BUSINESS OF THE COMPANY
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, except as set forth in the Company Disclosure Schedule or
except as expressly contemplated by this Agreement, the Company shall not
do or cause any of the following, without the prior written consent of
Parent:
(a) Charter Documents. Cause any amendments to the
Company Articles or the Company Bylaws or form any subsidiaries;
(b) Dividends; Changes in Capital Stock. Declare or pay
any dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or repurchase or otherwise acquire, directly
or indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination
of service to it;
(c) Stock Option Plans, Etc. Accelerate, amend or change
the period of exercisability or vesting of options or other rights granted
under its stock plans or authorize cash payments in exchange for any
options or other rights granted under any of such plans except as provided
under agreements existing as of the date hereof and previously disclosed to
Parent prior to the date hereof;
(d) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify or waive any of the
terms of any of its material contracts other than in the ordinary course of
business consistent with past practice (provided that the Company may
borrow up to four million dollars on equipment lease or loan transactions
on commercially reasonable terms providing for pre-payment without penalty
and may enter into Beta test agreements after discussion with Parent);
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire,
or other agreements or commitments of any character obligating it to issue
any such shares or other convertible securities, other than the issuance of
shares of its Common Stock pursuant to the exercise of stock options,
warrants or other rights therefor outstanding as of the date of this
Agreement and other than the issuance of Company Stock options to new hires
in the ordinary course of business consistent with past practice following
discussion with Parent;
(f) Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than pursuant to
non-exclusive license arrangements in the ordinary course of business
consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of the Company's
products or technology;
(h) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets which are material,
individually or in the aggregate, to its business, taken as a whole except
in the ordinary course of business consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed
money, guarantee any such indebtedness, issue or sell any debt securities
or guarantee any debt securities of others except in the ordinary course of
business consistent with past practice;
(j) Leases. Enter into any operating lease requiring
payments in excess of $25,000 annually (drawdowns on any existing lines of
credit are permissible hereunder, and provided that the Company may borrow
up to four million dollars on equipment lease or loan transactions on
commercially reasonable terms without providing for pre-payment penalty
after discussion with Parent);
(k) Payment of Obligations. Pay, discharge or satisfy in
an amount in excess of $25,000 in any one case or $100,000 in the
aggregate, any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise) arising other than in the ordinary
course of business other than the payment, discharge or satisfaction of
liabilities reflected or reserved against in the Financial Statements
(provided that the Company may borrow up to four million dollars on
equipment lease or loan transactions on commercially reasonable terms
without providing for pre-payment penalty after discussion with Parent);
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements in excess of $50,000 individually
or in excess of $100,000 in the aggregate (provided that payments for any
capital matters that are pursuant to an existing schedule of payments
disclosed to Parent prior to the date hereof are permissible (provided that
the Company may borrow up to four million dollars on equipment lease or
loan transactions on commercially reasonable terms providing for
pre-payment without penalty after discussion with Parent and may also
purchase equipment for any customer designated system);
(m) Insurance. Materially reduce the amount of any
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right
of substantial value;
(o) Employee Benefit Plans; New Hires; Pay Increases.
Adopt or amend any employee benefit or stock purchase or option plan, pay
any special bonus or special remuneration to any employee or director or
increase the salaries or wage rates of its employees other than in the
normal course of business and consistent with past practice when hiring new
employees, providing additional grants to current employees, and adding
additional shares to the Company's option plan, all following discussion
with Parent; provided, however, that the Company may pay mid-year bonuses
to employees pursuant to arrangements established with certain employees in
their offer letters disclosed to Parent prior to the date hereof;
(p) Severance Arrangements. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other
employee except payments made pursuant to standard written agreements
outstanding on the date hereof and heretofore furnished to Parent;
(q) Initiating Lawsuits. Commence legal action other than
(i) for the routine collection of bills, (ii) in such cases where the
Company in good faith determines that failure to commence suit would result
in the material impairment of a valuable aspect of its business, provided
that it consults with Parent prior to the commencement of such a suit, or
(iii) for a breach of this Agreement;
(r) Acquisitions. Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets, in each such case which
are material, individually or in the aggregate, to the Company's business,
taken as a whole;
(s) Taxes. Make or change any material election in
respect of Taxes, adopt or change any accounting method in respect of
Taxes, file any material Tax Return other than those for which extensions
have been received as set forth in the Company Disclosure Schedule or any
amendment to a material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(t) Accounting Policies and Procedures. Make any change
to its accounting methods, principles, policies, procedures or practices,
except as may be required by U.S. GAAP, Regulation S-X promulgated by the
SEC or applicable statutory accounting principles;
(u) Year 2000 Compliance. Fail to continue in all
material respects the Company's Year 2000 assessment and compliance
activities, as described to Parent by the Company; or
(v) Other. Agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through (u) above.
Section 4.3 SOLICITATION
Until the earlier of the Effective Time or the
termination of this Agreement, the Company and the officers, directors,
employees or other agents of the Company will not, directly or indirectly,
take any action to solicit, initiate or encourage any Takeover Proposal.
Upon execution of this Agreement, the Company will immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company will promptly
notify Parent after receipt of any Takeover Proposal or any notice that any
person is considering making a Takeover Proposal or any request for
nonpublic information relating to the Company or for access to the
properties, books or records of the Company by any person that has advised
the Company that it may be considering making, or that has made, a Takeover
Proposal and will keep Parent timely informed of the status and details of
any such Takeover Proposal notice, request or any correspondence or
communications related thereto and shall provide Parent with a true and
complete copy of such Takeover Proposal notice or request or correspondence
or communications related thereto, if it is in writing, or a written
summary thereof, if it is not in writing. The Company will promptly provide
to Parent any non-public information concerning the Company provided to any
other party which was not previously provided to Parent. Neither the
Company Board nor any committee thereof shall (i) withdraw or modify, or
(ii) approve or recommend or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal; provided, however, that nothing contained in this Agreement shall
prohibit the Company Board from (A) furnishing information to, or engaging
in discussions or negotiations with any person or entity in response to an
unsolicited bona fide written Takeover Proposal; or (B) recommending such
an unsolicited bona fide written Takeover Proposal to the shareholders of
the Company, if (i) the Company Board concludes that such Takeover Proposal
would constitute a Superior Proposal, and (ii) the Company Board determines
in good faith that the failure to take such action would result in a breach
by the Company's Board of its fiduciary duties to the Company's
shareholders, and (iii) prior to furnishing such information to such person
or entity, the Company provides written notice to Parent that the Company
is furnishing information to, or entering into discussions or negotiations
with, such person or entity.
For purposes of this Agreement, "Takeover Proposal" means
any offer or proposal for, or any indication of interest in, a merger or
other business combination involving the Company or the acquisition of 20%
or more of the outstanding shares of capital stock of the Company, or a
significant portion of the assets of, the Company, other than the
transactions contemplated by this Agreement.
For purposes of this Agreement ("Superior Proposal")
means (i) a bona fide Takeover Proposal made by a third party that the
Company Board determines in its good faith judgment to be more favorable to
the Company's shareholders than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment of
the Company's Board is reasonably capable of being obtained by such third
party. For so long a both Parent and Company are using their reasonable
best efforts to ensure satisfaction of all closing conditions,
notwithstanding a determination by the Company's Board that such
transaction is in the best interests of the Company, a proposed sale of
Preferred Stock to current or new investors shall not be considered a
Superior Proposal.
Notwithstanding anything to the contrary contained in
this agreement, the Company shall be permitted to continue discussions with
one or more of its existing investors and one new institutional investor
with respect to the specific purpose of effecting a preferred stock
financing of the Company; provided, however, that any such new
institutional investor shall not be an entity which could reasonably be
regarded as a competitor of Phone.com; provided, further, that the Company
may not complete such preferred stock financing for so long as Parent is
using its reasonable best efforts to ensure satisfaction of all closing
conditions.
Section 4.4 SHAREHOLDER APPROVAL
The Company shall take all action necessary, in
accordance with California Law and the Company Articles and the Company
Bylaws, to cause its shareholders to consider and act upon this Agreement
and the Merger as soon as practicable; provided, however, that the Company
Board may withhold, withdraw, amend, or modify any recommendation made in
favor of the Merger if a Superior Proposal is made to the Company and not
withdrawn.
Nothing contained in Section 4.3 or 4.4 shall prohibit
the Company from complying with any applicable law, rule, or regulation.
Section 4.5 FURTHER INFORMATION
As soon as such information becomes available, and in any
event not later than thirty days after the end of each fiscal month, the
Company shall provide to Parent an unaudited balance sheet as of the end of
such month and the related statements of results of operations and
statements of cash flows for such period together with a list of the ages
and amounts of all accounts and notes due and uncollected as of the end of
such month.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 PREPARATION OF PERMIT APPLICATION, HEARING REQUEST,
HEARING NOTICE AND INFORMATION STATEMENT
As promptly as practicable after the date hereof, Parent
shall prepare, with the reasonable cooperation of the Company, and file
with the Commissioner (as defined in Section 5.17) the documents required
by the CSL including, but not limited to, any required Permit Application
(as defined in Section 5.17), request for a hearing ("Hearing Request") or
notice of a hearing ("Hearing Notice") pursuant to Sections 25121 and 25142
of the CSL (collectively, the "Notice Materials"), in connection with the
Merger and the issuance of Parent Common Stock, in order to perfect the
exemption from registration provided by Section 3(a)(10) of the Securities
Act. Each of Parent and the Company shall use reasonable efforts to have
the Permit Application, Hearing Request, and Hearing Notice declared
effective under the CSL as promptly as practicable after such filing. In
addition, Parent and the Company will prepare, and the Company will
distribute, an information statement or proxy statement (the "Information
Statement") along with the Notice Materials, as may be required by
California Law, at the earliest practicable date to submit this Agreement,
the Merger, and the transactions contemplated hereby, to the Company's
shareholders. Each of the Parent and the Company will promptly provide all
information relating to their respective business and operations necessary
for inclusion in the Notice Materials to satisfy all requirements of
applicable state and federal securities laws. Each of Parent and the
Company shall be solely responsible for any statement, information, or
omission, in the Notice Materials relating to its affiliates based upon the
written information furnished by it or its representatives.
Section 5.2 ACCESS TO INFORMATION
(a) The Company shall afford Parent and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of the
Company's properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and personnel of
the Company as Parent may reasonably request; provided, however, that the
Company will not provide or afford access to information that was agreed in
the Confidentiality Agreement (as defined below) would not be disclosed.
The Company agrees to provide to Parent and its accountants, counsel and
other representatives copies of internal financial statements promptly upon
request.
(b) Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Parent and the Company shall
confer on a regular and frequent basis with one or more representatives of
the other party to report operational matters of materiality and the
general status of ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the transactions contemplated
hereby.
Section 5.3 CONFIDENTIALITY
The parties acknowledge that Parent and the Company have
previously executed a non-disclosure agreement dated December 14, 1999 (the
"Confidentiality Agreement") which Confidentiality Agreement shall continue
in full force and effect in accordance with its terms. In addition, the
parties agree that the terms and conditions of the transactions
contemplated hereby, and information exchanged in connection with the
execution hereof and the consummation of the transactions contemplated
hereby shall be subject to the Confidentiality Agreement.
Section 5.4 PUBLIC DISCLOSURE
Unless otherwise permitted by this Agreement, Parent and
the Company shall consult with each other before issuing any press release
or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement or the Ancillary Agreements and the
transactions contemplated hereby and thereby, and neither shall issue any
such press release or make any such statement or disclosure without the
prior approval of the other (which approval shall not be unreasonably
withheld), except as may be required by law or by obligations pursuant to
any listing agreement with any national securities exchange or with the
National Association of Securities Dealers.
Section 5.5 CONSENTS; COOPERATION
(a) Each of Parent and the Company shall promptly apply
for or otherwise seek, and use its reasonable best efforts to obtain, all
consents and approvals required to be obtained by it for the consummation
of the transactions contemplated hereby. The Company shall use reasonable
best efforts to obtain all necessary consents, waivers and approvals under
any of its material contracts for the assignment thereof or otherwise.
(b) Each of Parent and the Company shall use all
reasonable best efforts to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to the transactions
contemplated by this Agreement under the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other Federal, state or foreign statutes, rules,
regulations, orders or decrees that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, "Antitrust Laws"). In connection
therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Parent and the Company shall cooperate and use all commercially reasonable
efforts vigorously to contest and resist any such action or proceeding and
to have vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent
(each an "Order"), that is in effect and that prohibits, prevents, or
restricts consummation of the transactions contemplated hereby or any such
other transactions, unless by mutual agreement Parent and the Company
decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither Parent nor the Company shall
have any obligation to litigate or contest any administrative or judicial
action or proceeding or any Order beyond the date of a ruling preliminarily
enjoining the Merger issued by a court of competent jurisdiction. Each of
Parent and the Company shall use reasonable best efforts to take such
action as may be required to cause the expiration of the notice periods
under the HSR Act or other Antitrust Laws with respect to such transactions
as promptly as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement, (i) Parent shall not be required to divest any of its
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation that could reasonably be expected to have
a Material Adverse Effect on Parent and (ii) the Company shall not be
required to divest any of its businesses, product lines or assets, or to
take or agree to take any other action or agree to any limitation that
could reasonably be expected to have a Material Adverse Effect on the
Company.
Section 5.6 LEGAL REQUIREMENTS
Each of Parent and the Company will, and will cause their
respective subsidiaries to, take all reasonable actions necessary to comply
in all material respects promptly with all legal requirements which may be
imposed on them with respect to the consummation of the transactions
contemplated by this Agreement and will take all reasonable actions
necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made by them in connection with the
taking of any action contemplated by this Agreement.
Section 5.7 BLUE SKY LAWS
Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with
the Merger. The Company shall use its reasonable best efforts to assist
Parent as may be necessary to comply with the securities and blue sky laws
of all jurisdictions which are applicable in connection with the issuance
of Parent Common Stock in connection with the Merger.
Section 5.8 EMPLOYEE BENEFIT PLANS; ASSUMPTION OF OPTIONS
(a) At the Effective Time, the Company Stock Option Plan,
and each outstanding option to purchase shares of Company Common Stock
under the Company Stock Option Plan, whether vested or unvested, will be
assumed by Parent. Schedule 5.8 hereto sets forth a true and complete list
as of the date hereof of all holders of outstanding options under the
Company Stock Option Plan including the number of shares of Company Common
Stock subject to each such option, the exercise or vesting schedule, the
exercise price per share and the term of each such option. On the Closing
Date, the Company shall deliver to Parent an updated Schedule 5.8 hereto
current as of such date. Each such option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plan and the applicable
stock option agreement immediately prior to the Effective Time, except that
(i) such option will be exercisable for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such option immediately
prior to the Effective Time multiplied by the Exchange Ratio and rounded
down to the nearest whole number of shares of Parent Common Stock, and (ii)
the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at which such option was exercisable immediately prior to the Effective
Time by the Exchange Ratio rounded up to the nearest whole cent. Consistent
with the terms of the Company Stock Option Plan and the documents governing
the outstanding options under such Plans, the transactions contemplated
hereby will not terminate any of the outstanding options under the Company
Stock Option Plan or accelerate the exercisability or vesting of such
options or the shares of Parent Common Stock which will be subject to those
options upon the Parent's assumption of the options hereunder. As soon as
practicable after the Effective Time, Parent will issue to each person who,
immediately prior to the Effective Time was a holder of an outstanding
option under the Company Stock Option Plan a document in form and substance
satisfactory to the Company evidencing the foregoing assumption of such
option by Parent.
(b) Assignment of Repurchase Options. All outstanding
rights of the Company which it may hold immediately prior to the Effective
Time to repurchase unvested shares of Company Capital Stock (the
"Repurchase Options") shall be assigned to Parent automatically in the
Merger and shall thereafter be exercisable by Parent upon the same terms
and conditions in effect immediately prior to the Effective Time, except
that the shares purchasable pursuant to the Repurchase Options and the
purchase price per share shall be adjusted to reflect the Exchange Ratio.
Section 5.9 FORM S-8
Parent shall file a registration statement on Form S-8
(or any successor or other appropriate forms that Parent is eligible to
use) under the Securities Act with respect to the shares of Parent Common
Stock subject to Company Options as soon as practicable but, in any event,
within thirty (30) business days following the Closing Date.
Section 5.10 LISTING OF ADDITIONAL SHARES
Prior to the Effective Time, Parent shall cause the
shares of Parent Common Stock issuable to the shareholders of the Company
pursuant to Sections 1.7 and 5.8, including shares of Parent Common Stock
issuable upon exercise of Company Options, to be authorized for listing on
the NASDAQ National Market.
Section 5.11 EMPLOYEES
Set forth on Schedule 5.11 is a list of employees of the
Company to whom Parent will make an offer of employment pursuant to an
Offer Letter, substantially in the form of Exhibit J hereto.
Section 5.12 EXPENSES
Except as otherwise provided by this Agreement, whether
or not the transactions contemplated hereunder are consummated, all costs
and expenses incurred in connection with this Agreement and the Ancillary
Agreements, and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expense; provided, however, that the
Company may incur, and Parent shall be responsible after Closing for, any
reasonable documented out-of-pocket expenses not in excess of $1,500,000,
for fees and expenses of legal counsel, financial advisors and accountants.
Such fees and expenses in excess of $1,500,000, if any, shall remain an
obligation of the Company's shareholders and such obligation shall, if not
promptly reimbursed by the Company shareholders at Parent's request,
constitute Damages (as defined in Section 8.2) recoverable under the Escrow
Agreement and such Damages shall not be subject to the Indemnity Threshold
(as defined in Section 8.2).
Section 5.13 WARRANTS
The Company shall use its reasonable best efforts to
ensure that all outstanding warrants to purchase Company Capital Stock,
including all Company Warrants, are exercised prior to Closing.
Section 5.14 REASONABLE BEST EFFORTS AND FURTHER ASSURANCES
Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Parent, Merger Sub and the Company agree to
use reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable
(subject to any applicable laws) to consummate and make effective the
Merger as promptly as practicable including, but not limited to (i) the
prompt preparation by Parent, with cooperation from the Company, and filing
with the Commissioner of Parent's Permit Application (as defined in Section
5.17) and the preparation and filing of all other forms, registrations and
notices required to be filed to consummate the Merger and the taking of
such actions as are necessary to obtain any requisite approvals, consents,
orders, exemptions or waivers by any third party or Governmental Entity,
and (ii) the satisfaction of the other parties' conditions to Closing.
Section 5.15 INDEMNIFICATION
The provisions of this Section 5.15 are intended to be
for the benefit of, and will be enforceable by, each director and officer
of the Company entitled to indemnification from the Company. Parent will
not permit the Company to merge or consolidate with any other entity,
dissolve, or otherwise cease its corporate existence unless Parent makes
adequate provisions for the assumption of the obligations imposed by this
Section 5.15. Any amendment, repeal, or modification of the provisions with
respect to indemnification that are set forth in the Company Articles and
the Company Bylaws shall not in any manner affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time
were directors or officers of the Company. From and after the Effective
Time, Parent will, for a period of six years after the Closing, to the
fullest extent permitted by law, cause the Company to fulfill and honor in
all respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its directors and officers and any
indemnification provisions under the Company's Articles of Incorporation or
Bylaws as in effect immediately prior to the Effective Time.
Section 5.16 TERMINATION OF 401(K) PLAN
If required by Parent in writing, the Company shall,
immediately prior to and contingent upon the Closing Date, have terminated
the Company 401(k) Plan (the "Plan") and no further contributions shall be
made to the Plan. The Company shall provide to Parent (i) executed
resolutions by the Company Board authorizing the termination and (ii) an
executed amendment to the Plan , which in the Parent's reasonable judgment
is sufficient to assure compliance with all applicable requirements of the
Code and regulations thereunder.
Section 5.17 INFORMATION SUPPLIED
(a) None of the information supplied in writing by the
Company for inclusion or incorporation by reference in (i) the application
for a permit to issue securities to be filed with the Commissioner of
Corporations of the State of California (the "Commissioner") pursuant to
Section 25121 of the CSL, in connection with the issuance of shares of
Parent Common Stock pursuant to the transactions contemplated hereby,
including the disclosure documents relating thereto (the "Permit
Application") will, at the time the Permit Application is filed with the
Commissioner and at the time the Fairness Hearing is held, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and (ii) the information provided to Company shareholders in
connection with obtaining shareholder approval of the Merger (the
"Information Statement") will, at the time it is mailed to the shareholders
and at all times during which shareholder consents are solicited in
connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Permit
Application will comply in all material respects with the provisions of the
CSL, and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made
therein based on information supplied by Parent or Merger Sub in writing
for inclusion or incorporation by reference therein.
(b) None of the information supplied in writing by Parent
for inclusion or incorporation by reference in (i) the Permit Application
will, at the time the Permit Application is filed with the Commissioner and
at the time the Fairness Hearing is held, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein not misleading and (ii)
the Information Statement will, at the time it is mailed to the Company
shareholders and at all times that shareholder consents are being solicited
in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Permit
Application will comply in all material respects with the provisions of the
CSL and the rules and regulations thereunder, except that no representation
is made by Parent with respect to statements made therein based on
information supplied by the Company in writing for inclusion or
incorporation by reference in the Permit Application or the Information
Statement.
Section 5.18 REGISTRATION STATEMENT
If, following the Fairness Hearing, a permit is not
issued pursuant to the Permit Application and if required by applicable
securities laws for the issuance of Parent Common Stock to holders of
Company Capital Stock in the Merger in accordance with the terms and
provisions of this Agreement, Parent and the Company shall cooperate
either, at Parent's option, (i) to register the issuance of shares of
Parent Common Stock by means of the preparation and filing with the SEC of
a Registration Statement on Form S-4 or any other appropriate form to
effect registration of such issuance and use best efforts to have such
Registration Statement declared effective as soon as practicable after such
filing or (ii) to qualify the issuance of Parent Common Stock under any
available exemption from registration legally available for such issuance
and then promptly to register such shares for resale on any available
registration statement.
ARTICLE VI
CONDITIONS TO THE CLOSING
Section 6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER
The respective obligations of each party to this
Agreement to consummate and effect the Merger and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be
waived, in writing, by agreement of all the parties hereto:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the
shareholders of the Company under California Law and any agreements or
arrangements that may result in the payment of any amount that would not be
deductible by reason of Section 280G of the Code shall have been approved
by such number of shareholders of the Company as is required by the terms
of Section 280G(b)(5)(B) and shall be obtained in a manner which satisfies
all applicable requirements of such Code Section 280(G)(b)(5)(B) and the
proposed Treasury Regulations thereunder, including (without limitation)
Q-7 of Section 1.280G-1 of such proposed regulations.
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered or enforced, which makes the
consummation of the Merger illegal. In the event an injunction or other
order shall have been issued, each party agrees to use its reasonable
efforts to have such injunction or other order lifted.
(c) Governmental Approval. Parent, the Company and their
respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers and consents, if any, necessary for
consummation of, or in connection with, the several transactions
contemplated hereby.
(d) Escrow Agreement. Parent, the Company, Escrow Agent,
and the Shareholders' Agent shall have entered into an Escrow Agreement
substantially in the form attached hereto as Exhibit D.
(e) Permit to Issue Securities; Registration Statement.
Either (i) the Commissioner shall have issued the CSL Permit and the
qualification thereunder shall not be the subject of any stop order or
proceedings seeking a stop order and if not so issued or if issued and
subject to a stop order then, in the alternative either (i) Parent's
Registration Statement on Form S-4 shall have been declared effective by
the SEC and the issuance of Parent Common Stock in the Merger shall not be
the subject of any stop order or proceedings seeking a stop order or (ii)
the issuance of Parent Common Stock pursuant to the Merger shall, in the
opinion of Parent, be exempt from registration (and Parent affirms its
obligations to register such shares pursuant to Section 5.18).
(f) Listing of Additional Shares. Parent shall have
fulfilled its obligations pursuant to Section 5.10 hereof.
Section 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations to consummate and effect the Merger and
the transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any
of which may be waived, in writing, by the Company:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Parent Disclosure Schedule, (i) the representations and
warranties of Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
or Material Adverse Effect which representations and warranties as so
qualified shall be true in all respects) on and as of the Effective Time as
though such representations and warranties were made on and as of such time
(except for such representations and warranties which speak as of a
particular time which representations and warranties need be true and
correct only as of such time) and (iii) Parent and Merger Sub shall each
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Effective Time.
(b) Legal Opinion. The Company shall have received a
legal opinion from Parent's legal counsel, in substantially the form of
Exhibit G.
(c) No Material Adverse Changes. There shall not have
occurred any material adverse change in the properties and assets
(including intangible assets) of Parent, taken as a whole; provided,
however, that for purposes of determining whether there shall have been any
such material adverse change, any adverse change that results from or
relates to the taking of any action, or the failure to act, as required by
this Agreement shall be disregarded.
(d) Certificate of Parent. The Company shall have
received from Parent an officer's certificate certifying to the fulfillment
of the conditions specified in Section 6.2(a) and 6.2(c).
Section 6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT
AND MERGER SUB
The obligations of Parent and Merger Sub to consummate
and effect the Merger and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of
the following conditions, any of which may be waived, in writing, by Parent
or Merger Sub:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Company Disclosure Schedule, (i) the representations and
warranties of the Company in this Agreement shall be true and correct in
all material respects (except for such representations and warranties that
are qualified by their terms by a reference to materiality or Material
Adverse Effect which representations and warranties as so qualified shall
be true in all respects) on and as of the Closing Date as though such
representations and warranties were made on and as of such date (except for
such representations and warranties which speak as of a particular time
which representations and warranties need be true and correct only as of
such time) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, (i) any inaccuracy that
does not have a material adverse effect on the Company shall be
disregarded, (ii) any inaccuracy that results from or relates to the taking
of any action, or the failure to act, as required by this Agreement shall
be disregarded) and (iii) the Company shall in all material respects have
performed and complied with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it as of the
Effective Time.
(b) Certificate of the Company. Parent shall have
received a certificate of the Company executed by an officer certifying
fulfillment of the conditions set forth in Sections 6.3(a), 6.3(e) and
6.3(f) hereof.
(c) Third Party Consents.
(1) Parent shall have been furnished with evidence
reasonably satisfactory of the consent or approval of those
persons whose consent or approval shall be required in connection
with the transactions contemplated hereby under the contracts of
the Company set forth on Schedule 2.31 hereto, except where
failure to receive such consents or approvals would not have a
Material Adverse Effect.
(2) All of the consents and approvals set forth on
Section 6.3(c) of the Company Disclosure Schedule shall have been
obtained.
(d) Legal Opinion. Parent shall have received a legal
opinion from the Company's legal counsel, in substantially the form of
Exhibit F.
(e) No Material Adverse Changes. There shall not have
occurred any material adverse change in the properties and assets
(including intangible assets) of the Company, taken as a whole; provided,
however, that for purposes of determining whether there shall have been any
such material adverse change, any adverse change that results from or
relates to the taking of any action, or the failure to act, as required by
this Agreement shall be disregarded.
(f) Resignation of Directors. The directors of the
Company in office immediately prior to the Effective Time shall have
resigned as directors of the Company effective as of the Effective Time,
and Parent shall have received letters of resignation from such persons.
(g) Offer Letters. The employees of the Company set forth
on Schedule 5.11 shall have accepted employment with Parent and shall have
entered into Offer Letters in form and substance as set forth in Exhibit J.
(h) Dissenting Shares. Holders of Company Capital Stock
representing 95% of the aggregate number of shares of Company Common Stock
on an, as-converted basis (excluding shares issuable upon the exercise of
Company Options and Warrants) shall have executed a written consent to
approval and adoption of the Merger Agreement and approval of the Merger or
waived their rights under Section 1300 of California Law.
Section 6.4 FRUSTRATION OF CONDITIONS
Neither Parent or the Company may rely on the failure of
any condition set forth in this Article VI to be satisfied if such failure
was caused by such party's failure to comply with or perform any of its
covenants or obligations set forth in this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION
At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger to
the shareholders of the Company, this Agreement may be terminated:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if the Closing shall
not have occurred on or before June 30, 2000; provided, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available
to any party whose action or failure to act has been the cause or resulted
in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;
(c) by Parent, if the Company shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within ten (10) business days of receipt by the
Company of written notice of such breach;
(d) by Parent, if (i) the Company's Board shall have
withdrawn or modified its recommendation of this Agreement in a manner
adverse to Parent; (ii) the Company Board shall approve or recommend any
Superior Proposal; (iii) the Company shall enter into any letter of intent
(binding or otherwise), arrangement or agreement pursuant to which the
Company accepts any Superior Proposal; or (iv) the Company or the Company
Board shall have resolved to do any of the foregoing;
(e) by the Company, if Parent or Merger Sub shall breach
any representation, warranty, obligation or agreement hereunder and such
breach shall not have been cured within ten (10) business days following
receipt by Parent of written notice of such breach; and
(f) by Parent, Merger Sub or the Company if (i) any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
nonappealable or (ii) if any required approval of the shareholders of the
Company shall not have been obtained.
Section 7.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided
in Section 7.1, this Agreement shall forthwith become void, and except as
provided in Section 7.3 below, there shall be no liability or obligation on
the part of Parent, Merger Sub or the Company or their respective officers,
directors, stockholders, shareholders or affiliates, except to the extent
that such termination results from the willful breach by a party hereto of
any of its representations, warranties or covenants set forth in this
Agreement; provided that the provisions of Section 5.3 (Confidentiality),
Section 7.3 (Expenses and Termination Fees), this Section 7.2 and Article
IX shall remain in full force and effect and survive any termination of
this Agreement.
Section 7.3 EXPENSES AND TERMINATION FEES
(a) Subject to Section 7.3(b), whether or not the Merger
is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense.
(b) In the event that this Agreement shall be terminated
pursuant to Section 7.1(c) (and the breach giving rise to Parent's right to
terminate is willful and material) or 7.1(d), then, as Parent's and Merger
Sub's sole and exclusive remedy, the Company shall promptly pay to Parent
an amount equal to $12,000,000.
Section 7.4 AMENDMENT
The parties hereto may cause this Agreement to be amended
at any time by execution of an instrument in writing signed on behalf of
each of the parties hereto; provided that an amendment made subsequent to
adoption of the Agreement by the shareholders of the Company shall not (i)
alter or change the amount or kind of consideration to be received on
conversion of the Company Capital Stock, (ii) alter or change any term of
the Articles of Incorporation of the Surviving Corporation to be effected
by the Merger, or (iii) alter or change any of the terms and conditions of
the Agreement if such alteration or change would materially adversely
affect the holders of Company Capital Stock.
Section 7.5 EXTENSION; WAIVER
At any time prior to the Effective Time any party hereto
may, to the extent legally allowed, (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
Section 8.1 ESCROW FUND
Within five (5) business days after the Effective Time,
the Escrow Shares shall be registered in the name of, and be deposited
with, State Street Bank and Trust Company of California, N.A. (its
successor in interest or other institution selected by Parent with the
reasonable consent of the Company) as escrow agent (the "Escrow Agent"),
such deposit (together with interest and other income thereon) to
constitute the escrow fund (the "Escrow Fund") and to be governed by the
terms set forth herein and in the Escrow Agreement attached hereto as
Exhibit D. The Escrow Fund shall consist of two component parts, as
follows: ten percent (10%) of the Total Parent Shares (the "10% Fund")
shall be available solely to compensate Parent pursuant to the
indemnification obligations of the Company for Damages (as defined below),
and two and one-tenth percent (2.1%) of the Total Parent Shares (the "2.1%
Fund", subject to reduction, as set forth below, the "Option Acceleration
Cap") shall be available solely to compensate Parent in an amount equal to
the value (the "Accelerated Vesting Value") of Company Options that may
accelerate, or of shares over which the repurchase right in favor of the
Company has lapsed on an accelerated basis, as a result of an "Involuntary
Termination" (as defined in the Company Stock Option Agreements, Company
Stock Purchase Agreements, or any amendments thereto) with respect to any
such holder of Company Options or such shares following the Closing Date,
which amount shall be determined by multiplying the number of shares of
Company Common Stock with respect to which such acceleration occurs by the
Parent Stock Price. Compensation to Parent for Accelerated Vesting Value
from the 2.1% Fund shall not be limited in any manner by any of the
limitations with respect to indemnification set forth in Section 8.2 ;
provided, however, that the 2.1% Fund is Parent's exclusive remedy for any
Accelerated Vesting Value. The Option Acceleration Cap shall be reduced by
one-twelfth of the shares of Parent Common Stock originally deposited into
the Escrow Fund and constituting the 2.1% Fund on each monthly anniversary
of the Effective Time. Parent may not receive any shares of Parent Common
Stock from the 2.1% Fund unless and until one or more Officer's
Certificates (as defined in Section 8.4 below) identifying a claim for
compensation of Accelerated Vesting Value have been delivered to the Escrow
Agent as provided in Section 8.4 below and such amount is determined
pursuant to this Article VIII to be payable, in which case, Parent shall
receive shares equal in value to the Accelerated Vesting Value for which
such claim is made pursuant to such Officer's Certificate. Shares of Parent
Common Stock to be paid from the 2.1% Fund in respect of Parent claims for
Accelerated Vesting Value shall be valued at the Parent Stock Price. There
shall not be any multiple recovery for any Accelerated Vesting Value.
Shares released each month from the 2.1% Fund as a result of the reduction
in the Option Acceleration Cap, if not immediately distributed from the
Escrow Fund, shall not be subject to any claims, assessments, recourse, or
other possible diminution under this Agreement, including but not limited
to, Escrow Agent fees or expenses, payments for claims, settlements, or
judgements, and the like.
Section 8.2 INDEMNIFICATION
(a) Subject to the limitations set forth in this Article
VIII, the shareholders of the Company will indemnify and hold harmless
Parent and its officers, directors, agents and employees, and each person,
if any, who controls or may control Parent within the meaning of the
Securities Act (hereinafter referred to individually as an "Indemnified
Person" and collectively as "Indemnified Persons") from and against any and
all losses, costs, damages, liabilities and expenses arising from claims,
demands, actions, causes of action, including, without limitation,
reasonable legal fees, (collectively, "Damages") arising out of any
misrepresentation or breach of, or default in connection with, any of the
representations, warranties, covenants and agreements given or made by the
Company in this Agreement, the Disclosure Schedules or any exhibit or
schedule to this Agreement . The 10% Fund allocated for indemnification
obligations shall be the security for this indemnity obligation subject to
the limitations in this Agreement.
(b) Parent and the Company each acknowledge that such
Damages, if any, would relate to unresolved contingencies existing at the
Effective Time, which if resolved at the Effective Time would have led to a
reduction in the total number of shares of Parent Common Stock Parent would
have agreed to issue in connection with the Merger. The right to obtain
indemnification from, and only from, the 10% Fund, pursuant to the
indemnification provisions of this Section 8.2 and the Escrow Agreement
shall be Parent's exclusive remedy for any breach by the Company hereof or
Damages described in Section 8.2(a); provided, however, that there shall be
no indemnification for any breach of any representation, warranty or
covenant if the Merger does not become effective; provided, further, that
the foregoing shall not limit liability for breach of this Agreement in
accordance with Section 7.2 hereof.
(c) Parent may not receive any shares of Parent Common
Stock from the 10% Fund unless and until one or more Officer's Certificates
(as defined in Section 8.4 below) identifying Damages the aggregate amount
of which exceeds $250,000 (the "Indemnity Threshold") have been delivered
to the Escrow Agent as provided in Section 8.4 below and such amount is
determined pursuant to this Article VIII to be payable, in which case,
Parent shall receive shares equal in value at the Parent Stock Price to the
full amount of Damages. In determining the amount of any Damage
attributable to a breach, any materiality standard contained in a
representation, warranty or covenant of the Company shall be disregarded.
(d) Prior to asserting any claim for indemnification
under this Agreement, the party seeking such indemnification must first
seek reimbursement for any and all Damages from any applicable insurance
coverage. The parties agree that any indemnification provided by this
Agreement is not to be deemed insurance (whether primary, excess, or
otherwise) for purposes of seeking reimbursement from the applicable
insurance coverage.
(e) The parties agree that there shall not be any
multiple recovery for any Damage.
(f) In calculating the amount of any indemnifiable
Damages there shall be deducted any actual tax benefit realized or to be
realized by Indemnified Person.
(g) Notwithstanding any other provision of this
Agreement, the Company and the Shareholders shall not be subject to any
indemnification obligation hereunder in connection with the breach of a
representation or warranty of the Company if the Shareholders' Agent can
show by clear and convincing evidence that Parent had actual knowledge of
such breach at or before the time of execution of this Agreement.
Section 8.3 ESCROW PERIOD
The escrow period (the "Escrow Period") shall terminate
at 11:59 p.m. Pacific Standard Time on the one-year anniversary of the
Closing Date; provided, however, that a portion of the Escrow Fund, which
is necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate (as defined below) theretofore delivered to the Escrow Agent
prior to termination of the Escrow Period with respect to facts and
circumstances existing prior to expiration of the Escrow Period, shall
remain in the Escrow Fund until such claims have been resolved. Parent
shall deliver to the Escrow Agent a certificate specifying the Closing
Date.
Section 8.4 CLAIMS UPON ESCROW FUND
(a) Upon receipt by the Escrow Agent on or before the
last day of the Escrow Period of a certificate signed by any officer of
Parent (an "Officer's Certificate"):
(1) stating that Damages exist in an aggregate amount
greater than the Indemnity Threshold for claims against the 10%
Fund; or
(2) stating a claim for reimbursement of Accelerated
Vesting Value; and
(3) specifying in reasonable detail (i) in the case of
a claim for Damages, the individual items included in the amount
of Damages in such claim, the date each such item was paid,
properly accrued or arose and the nature of the misrepresentation,
breach of warranty or claim to which such item is related or (ii)
in the case of a claim for reimbursement of Accelerated Vesting
Value, the name of the employee whose vesting acceleration has
given rise to such claim for Accelerated Vesting Value and the
amount of such Accelerated Vesting Value for which the claim is
being made, the Escrow Agent shall set aside such Parent Common
Stock or other assets held in the 10% Fund or the 2.1% Fund, as
applicable, having a value (at the Parent Stock Price) equal to
such Damages or such Accelerated Vesting Value, as the case may
be.
(b) Notwithstanding the provisions of Section 8.1 to the
contrary, from the date of delivery to the Escrow Agent of an Officer's
Certificate identifying a claim for Accelerated Vesting Value pursuant to
(b) above, until such claim has been resolved pursuant to this Article
VIII, the number of shares of Parent Common Stock sufficient to satisfy
such claim shall be reserved in the 2.1% Fund, shall not be released from
the Option Acceleration Cap and shall not be distributed in reduction of
the Option Acceleration Cap.
(c) Upon the earliest of: (i) receipt of written
authorization from Shareholders' Agent or from Shareholders' Agent jointly
with Parent to make such delivery, (ii) receipt of written notice of a
final decision in arbitration of the claim, or (iii) in the event the claim
set forth in the Officer's Certificate is uncontested by the Shareholders'
Agent as of the close of business on the next business day following the
forty-fifth (45th) day following receipt by the Escrow Agent of the
Officer's Certificate; on the next business day the Escrow Agent shall
deliver Parent Common Stock or other assets from the 10% Fund or the 2.1%
Fund, as applicable to Parent.
(d) For the purpose of compensating Parent for its
Damages or as compensation for Accelerated Vesting Value pursuant to this
Agreement, the Parent Common Stock in the Escrow Fund shall be valued at
the Parent Stock Price.
Section 8.5 OBJECTIONS TO CLAIMS
At the time of delivery of any Officer's Certificate to
the Escrow Agent, a duplicate copy of such Officer's Certificate shall be
delivered to the Shareholders' Agent and for a period of forty-five (45)
days after such delivery to the Escrow Agent of such Officer's Certificate,
the Escrow Agent shall make no delivery of Parent Common Stock pursuant to
Section 8.4 hereof unless the Escrow Agent shall have received written
authorization from the Shareholders' Agent to make such delivery. After the
expiration of such forty-five (45) day period, the Escrow Agent shall make
delivery of Parent Common Stock then in the Escrow Fund in accordance with
Section 8.4 hereof, provided that no such payment or delivery may be made
if the Shareholders' Agent shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to Parent prior to the expiration of such
forty-five (45) day period.
Section 8.6 RESOLUTION OF CONFLICTS; ARBITRATION
(a) In case the Shareholders' Agent shall so object in
writing to any claim or claims by Parent made in any Officer's Certificate,
Parent shall have forty-five (45) days after receipt by the Escrow Agent of
an objection by the Shareholders' Agent to respond in a written statement
to the objection of the Shareholders' Agent. If after such forty-five (45)
day period there remains a dispute as to any claims, the Shareholders'
Agent and Parent shall attempt in good faith for sixty (60) days to agree
upon the rights of the respective parties with respect to each of such
claims. If the Shareholders' Agent and Parent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties
and shall be furnished to the Escrow Agent. The Escrow Agent shall be
entitled to rely on any such memorandum and shall distribute the Parent
Common Stock from the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders' Agent may, by written
notice to the other, demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event
the matter shall be settled by arbitration conducted by three arbitrators.
Within fifteen (15) days after such written notice is sent, Parent and the
Shareholders' Agent shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators as to the validity and amount of any claim in such
Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in this Section 8.6 hereof,
the Escrow Agent shall be entitled to act in accordance with such decision
and make or withhold payments out of the Escrow Fund in accordance
therewith.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall
be held in Santa Clara or San Mateo County, California under the commercial
rules then in effect of the American Arbitration Association. Parent, on
the one hand, and the Company shareholders, on the other hand, shall each
bear its/their own expenses (including, attorneys' fees and expenses)
incurred in connection with any such arbitration. The Company shareholders'
expenses and reasonable attorney's fees will be paid by the Shareholders'
Agent from the Escrow Fund, as provided in 8.7(c) below. In the event the
arbitrator or arbitrators find in favor of Parent as to the claim in
dispute, all fees, costs, and the reasonable expenses of legal counsel
incurred by Parent will be charged against the Escrow Fund in addition to
the amount of the disputed claim. The fees and expenses of each arbitrator
and the administrative fee of the American Arbitration Association shall be
allocated by the arbitrator or arbitrators, as the case may be (or, if not
so allocated, shall be borne equally by Parent, on the one hand, and the
Company shareholders, out of the Escrow Fund on the other hand).
Section 8.7 SHAREHOLDERS' AGENT
(a) Dixon R. Doll shall be constituted and appointed as
Shareholders' Agent for and on behalf of the shareholders of the Company to
give and receive notices and communications, to authorize delivery to
Parent of the Parent Common Stock from the Escrow Fund in satisfaction of
claims by Parent, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
the Shareholders' Agent for the accomplishment of the foregoing. Such
agency may be changed by the holders of a majority in interest of the
Escrow Fund from time to time upon not less than ten (10) days' prior
written notice to all of the Company Shareholders and to Parent. No bond
shall be required of the Shareholders' Agent, and the Shareholders' Agent
shall receive no compensation for his services. Notices or communications
to or from the Shareholders' Agent shall constitute notice to or from each
of the Company shareholders.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good
faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of
such good faith. The Company shareholders shall severally indemnify the
Shareholders' Agent and hold him harmless against any loss, liability or
expense incurred without gross negligence or bad faith on the part of the
Shareholders' Agent and arising out of or in connection with the acceptance
or administration of his duties hereunder.
(c) The Shareholders' Agent will serve without
compensation but will be reimbursed from the Escrow Fund for all out of
pocket expenses reasonably incurred, including expenses for lawyers and
accountants employed on behalf of the Security Holders' interests in the
Escrow Fund. Shareholders' Agent may cause the Escrow Agent, at his
request, to exchange shares of Parent Common Stock held, with Parent, for
cash for each reimbursement. Parent will deliver such cash at a per share
price equal to the price of such shares at the close of market on the next
trading day preceding such exchange. In no event will the Shareholders'
Agent be entitled to incur expenses reimbursable by the Escrow Fund in
excess of $500,000 without the approval of Company shareholders holding a
majority of the shares of the Escrow Fund.
Section 8.8 ACTIONS OF THE SHAREHOLDERS' AGENT
A decision, act, consent or instruction of the
Shareholders' Agent shall constitute a decision of all the Company
shareholders and shall be final, binding and conclusive upon each and every
Company shareholder, and the Escrow Agent and Parent may rely upon any
decision, act, consent or instruction of the Shareholders' Agent as being
the decision, act, consent or instruction of each and every such Company
shareholder. The Escrow Agent and Parent are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Agent.
Section 8.9 THIRD-PARTY CLAIMS
In the event Parent becomes aware of a third-party claim
which Parent believes may result in a demand against the Escrow Fund,
Parent shall promptly notify the Shareholders' Agent of such claim, and the
Shareholders' Agent and the Company shareholders shall be entitled, at
their expense, to participate in any defense of such claim. Parent shall
have the right in its sole discretion to settle any such claim; provided,
however, that Parent may not effect the settlement of any such claim
without the consent of the Shareholders' Agent, which consent shall not be
unreasonably withheld. In the event that the Shareholders' Agent has
consented to any such settlement, the Shareholders' Agent shall have no
power or authority to object under Section 8.5 or any other provision of
this Article VIII to any claim by Parent against the Escrow Fund for
indemnity in the amount of such settlement.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 SURVIVAL
The representations and warranties of the Company
contained herein shall survive until the first anniversary of the Closing
Date, and the agreements set forth in this Agreement shall terminate at the
Effective Time except to the extent certain agreements set forth herein by
their terms call for action after the Effective Time.
Section 9.2 NOTICES
All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail
(return receipt requested) to the parties at the following address (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent, to:
Phone.com, Inc.
800 Chesapeake Drive
Redwood City, CA 94063
Attention: Chief Executive Officer
Facsimile No.: (650) 817-1693
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue - Suite 220
Palo Alto, CA 94301
Attention: Kenton J. King
Facsimile No.: (650) 470-4570
(b) if to the Company, to:
AtMotion Inc.
303 Twin Dolphin Drive - 4th Floor
Redwood Shores, CA 94065
Attention: Chief Executive Officer
Facsimile No.: (650) 628-4430
with a copy to (not notice):
Wilson Sonsini Goodrich & Rosati P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attention: John B. Goodrich
Facsimile No.: (650) 493-6811
(c) if to the Shareholders' Agent, to:
Dixon R. Doll
Doll Capital Management Inc.
Building 3 - Suite 225
3000 Sand Hill Road
Menlo Park, CA 94025
Facsimile No.: (650) 854-9159
with a copy (not notice) to:
c/o Wilson Sonsini Goodrich & Rosati P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attention: John B. Goodrich
Facsimile No.: (650) 493-6811
Section 9.3 INTERPRETATION
When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the
party to whom such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to December
21, 1999. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 9.4 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 9.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST
This Agreement, the Ancillary Agreements and the
documents and instruments and other agreements specifically referred to
herein or therein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent
Disclosure Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except for the Confidentiality
Agreement, which shall continue in full force and effect, and shall survive
any termination of this Agreement or the Closing, in accordance with its
terms (b) except as specifically stated in a particular section of the
transaction documents referred to above, are not intended to confer upon
any other person any rights or remedies hereunder, (c) except by operation
of the Merger, shall not be assigned by operation of law or otherwise
except as otherwise specifically provided and (d) shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
Section 9.6 SEVERABILITY
In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
Section 9.7 SOLE REMEDY; MAXIMUM AGGREGATE LIABILITY
Other than rights to equitable relief provided under the
Confidentiality Agreement to the extent available, Parent's, Merger Sub's,
and any and all Indemnified Person's, sole remedy for any and all matters
arising out of, related to, or in connection with this Agreement, the other
agreements, certificates, and documents delivered pursuant to this
Agreement, or the transactions contemplated hereby, shall be limited to (i)
the indemnification rights set forth in Section 8 (subject to the
limitations contained therein), pursuant to which the only recourse for
such indemnification is from the Escrow Fund, or (ii) in the case of
termination of this Agreement, the effects set forth in Section 7.2.
Parent, Merger Sub, and any and all Indemnified Person's, shall have no
remedy against any Company Shareholder or any member of the Company's
Board, except for fraud with intent, in which case only the person
perpetrating such fraud shall be personally liable.
Section 9.8 GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of California without reference to
such state's principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located
within the State of California, in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein, agrees
that process may be served upon them in any manner authorized by the laws
of the State of California for such persons and waives and covenants not to
assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
Section 9.9 RULES OF CONSTRUCTION
The parties hereto agree that they have been represented
by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement
or other document will be construed against the party drafting such
agreement or document.
Section 9.10 SPECIFIC PERFORMANCE
The parties hereto agree that if any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached, irreparable damage would occur, no adequate
remedy at law would exist and damages would be difficult to determine, and
that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 9.11 DESCRIPTIVE HEADINGS
The descriptive headings herein are inserted for
convenience only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company, Parent, Merger Sub, and
Shareholders' Agent have caused this Agreement to be executed and delivered
by their respective officers thereunto duly authorized, all as of the date
first written above.
ATMOTION INC.
By: /s/ George Sollman
--------------------------------
Name: George Sollman
Title: President/CEO
By: /s/ Alan Cremers
--------------------------------
Name: Alan Cremers
Title: VP Finance/CFO
PHONE.COM, INC.
By: /s/ Alain Rossman
---------------------------------
Name: Alain Rossman
Title: CEO/Chairman
MERCEDES ACQUISITION CORP.
By: /s/ Kennen D. Hagen
---------------------------------
Name: Kennen D. Hagen
Title: VP/Secretary
/s/ Dixon R. Doll
-------------------------------------
As Shareholders' Agent
Name: Dixon R. Doll
Title:
EXHIBIT A-1
FORM OF CERTIFICATE OF MERGER
MERGING
MERCEDES ACQUISITION CORP.
WITH AND INTO
ATMOTION INC.
------------------------------------------------------------------------------
Pursuant to Section 252 of the General Corporation Law of the State of
Delaware
------------------------------------------------------------------------------
AtMotion Inc., a California corporation (the "Company"), and
Mercedes Acquisition ------- Corp., a Delaware corporation ("Merger Sub") and
wholly owned subsidiary of Phone.com, Inc., a ---------- Delaware corporation
("Parent"), DO HEREBY CERTIFY AS FOLLOWS: ------
FIRST: That Merger Sub was incorporated on December 17,
1999, pursuant to the Delaware General Corporation Law ("DGCL"), and that
the Company was incorporated on November 14, 1997, pursuant to the
California General Corporation Law ("California Law").
SECOND: That an Agreement and Plan of Merger and
Reorganization, dated as of December 21, 1999 (the "Reorganization
Agreement"), by and among Parent, the Company, Merger Sub and Dixon R.
Doll, as Shareholders' Agent, setting forth the terms and conditions of the
merger of Merger Sub with and into the Company (the "Merger"), has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Section 252 of the DGCL and
Section 1103 of California Law, respectively.
THIRD: That the name of the surviving corporation (the
"Surviving Corporation") shall be AtMotion Inc., a wholly owned subsidiary of
Parent.
FOURTH: That the Articles of Incorporation set forth in
Exhibit H of the Reorganization Agreement shall be the Articles of Incorporation
of the Surviving Corporation unless and until thereafter amended.
FIFTH: That an executed copy of the Reorganization Agreement
is on file at the principal place of business of the Surviving Corporation at
the following address:
303 Twin Dolphin Drive - 4th Floor
Redwood Shores, CA 94065
----------------------------------
SIXTH: That a copy of the Reorganization Agreement will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of any constituent corporation.
SEVENTH: That the Surviving Corporation may be served with
process in the State of Delaware in any proceeding for enforcement of any
obligation of any constituent corporation of the State of Delaware, as well as
for enforcement of any obligation arising from the Merger, and that the
Surviving Corporation irrevocably appoints the Secretary of State of the State
of Delaware (the "Secretary of State") as its agent to accept service of process
in any such suit or other proceeding.
EIGHTH: That the Secretary of State may mail a copy of any
service of process received by the Secretary of State as the Surviving
Corporation's agent to accept service of process to the following address:
800 Chesapeake Drive
Redwood City, CA 94063
-----------------------------------
NINTH: That the Merger shall become effective upon the filing
of this Certificate of Merger with the Secretary of State.
IN WITNESS WHEREOF, each of Merger Sub and the Company has
caused this Certificate of Merger to be executed in its corporate name this
______ day of December, 1999.
ATMOTION Inc.
By:
Name:
Title:
Mercedes Acquisition Corp.
By:
Name:
Title:
EXHIBIT A-2
FORM OF AGREEMENT OF MERGER
OF
MERCEDES ACQUISITION CORP.
AND
ATMOTION INC.
This Agreement of Merger, dated as of the __ day of December,
1999 (the "Merger Agreement"), by and among Phone.com, Inc., a Delaware
corporation ("Parent"), AtMotion Inc., a California corporation (the "Company"),
Mercedes Acquisition Corp., a Delaware corporation and wholly owned subsidiary
of Parent ("Merger Sub") and Dixon R. Doll as agent ("Shareholders' Agent") of
the former shareholders of Company.
RECITALS
A. The Company was incorporated in the State of
California on November 24, 1997 and on the date hereof has outstanding
[4,419,067] shares of common stock, with no par value per share, (the
"Company Common Stock"), [2,712,500] shares of Series A Preferred Stock
(the "Company Series A Preferred Stock"), [347,143] shares of Series A-1
Preferred Stock (the "Company Series A-1 Preferred Stock"), [3,358,044]
shares of Series B Preferred Stock (the "Company Series B Preferred Stock")
and [785,637] shares of Series B-1 Preferred Stock (the "Company Series B-1
Preferred Stock"). The Company Series A Preferred Stock, the Company Series
A-1 Preferred Stock, the Company Series B Preferred Stock and the Company
Series B-1 Preferred Stock are hereinafter collectively referred to as the
"Company Preferred Stock," and, together with the shares of the Company
Common Stock, as the "Company Capital Stock."
B. Parent, Merger Sub, the Company and Shareholders'
Agent have entered into an Agreement and Plan of Merger and Reorganization
(the "Reorganization Agreement") providing for certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby. This Merger Agreement and the Reorganization Agreement
are intended to be construed together to effectuate their purpose.
C. The Boards of Directors of the Company, Parent and
Merger Sub deem it advisable and in their collective best interests and in
the best interests of the holders of the Company Capital Stock, that the
Company be acquired by Parent through a merger of Merger Sub with and into
the Company (the "Merger").
D. The Boards of Directors of Parent, Merger Sub and the
Company and the holders of Company Capital Stock have approved the Merger.
AGREEMENTS
The parties hereto hereby agree as follows:
1. Merger Sub shall be merged with and into the Company,
and the Company shall survive as a wholly owned subsidiary of Parent (the
"Surviving Corporation").
2. The Merger shall become effective at such time (the
"Effective Time") as this Merger Agreement and the officers' certificate of
the Company are filed with the Secretary of State of the State of
California pursuant to Section 1103 of the Corporations Code of the State
of California ("California Law").
3. At the Effective Time of the Merger (i) all of the
Company Capital Stock that is owned directly or indirectly by the Company,
Merger Sub or Parent or any other subsidiary of Parent shall be cancelled,
and no securities of Parent or other consideration shall be delivered in
exchange therefor, (ii) each of the issued and outstanding shares of
Company Common Stock (other than shares of Company Common Stock, if any,
held by persons who have not voted such Company Capital Stock for approval
of the Merger and with respect to which such persons shall become entitled
to exercise dissenters' rights in accordance with California Law, referred
to hereinafter as "Dissenting Shares") shall be converted automatically
into and exchanged for of a share of the common stock, $.001 par value per
share, of Parent (the "Parent Common Stock"); (ii) each of the issued and
outstanding shares of Company Preferred Stock shall be converted into the
right to receive the fraction of a share of Parent Common Stock that the
holder of such share of Company Preferred Stock would have been entitled to
receive had such holder converted such share of Preferred Stock into
Company Common Stock pursuant to the terms of such Company Preferred Stock
prior to the Effective Time of the Merger; provided, however, that, in no
event, shall more than __________ shares of Parent Common Stock be issued
in exchange for Company Capital Stock as a result of the Merger (including
shares of Parent Common Stock reserved for issuance upon exercise of
options to purchase shares of Company Common Stock assumed by Parent).
4. Any Dissenting Shares shall not be converted into
Parent Common Stock but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the law of the State of California. If, after
the Effective Time, any Dissenting Shares shall lose their status as
Dissenting Shares, then, as of the occurrence of the event which causes the
loss of such status, such shares shall be converted into Parent Common
Stock in accordance with Sections 3 of this Merger Agreement.
5. Notwithstanding any other term or provision hereof no
fractional shares of Parent Common Stock shall be issued, but in lieu
thereof each holder of Company Capital Stock who would otherwise, but for
rounding as provided herein, be entitled to receive a fraction of a share
of Parent Common Stock shall receive from Parent an amount of cash equal to
the per share market value of Parent Common Stock (deemed to be $ )
multiplied by the fraction of a share of Parent Common Stock to which such
holder would otherwise be entitled. The fractional share interests of each
holder of Company Capital Stock shall be aggregated, so that no holder of
Company Capital Stock shall receive cash in an amount greater than the
value of one full share of Parent Common Stock.
6. The conversion of the Company Capital Stock into
Parent Common Stock as provided by this Merger Agreement shall occur
automatically at the Effective Time of the Merger without action by the
holders thereof. Each holder of Company Capital Stock shall thereupon be
entitled to receive shares of Parent Common Stock in accordance with the
Reorganization Agreement.
7. At the Effective Time of the Merger, the separate
existence of the Merger Sub shall cease, and the Company shall continue as
a wholly owned subsidiary of Parent, without other transfer.
8. This Merger is intended as a plan of reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
9. (a) The Articles of Incorporation set forth in Exhibit H of
the Reorganization Agreement shall be the Articles of Incorporation of the
Surviving Corporation unless and until thereafter amended.
(b) The Bylaws set forth in Exhibit I of the Reorganization
Agreement shall be the Bylaws of the Surviving Corporation unless and until
amended or repealed as provided by applicable law, the Articles of Incorporation
of the Surviving Corporation and such Bylaws.
(c) The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation. The officers
of the Company immediately prior to the Effective Time shall be the officers of
the Surviving Corporation.
10. (a) Notwithstanding the approval of this Merger Agreement
by the holders of Company Capital Stock, this Merger Agreement shall terminate
forthwith in the event that the Reorganization Agreement shall be terminated as
therein provided.
(b) In the event of the termination of this Merger Agreement
as provided above, this Merger Agreement shall forthwith become void and there
shall be no liability on the part of the Company, Merger Sub or Parent or their
respective officers or directors, except as otherwise provided in the
Reorganization Agreement.
(c) This Merger Agreement may be signed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
(e) This Merger Agreement may be amended by the parties hereto
any time before or after approval hereof by the holders of Company Capital
Stock, but, after such approval, no amendments shall be made which by law
require the further approval of such holders of Company Capital Stock without
obtaining such approval. This Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Merger
Agreement as of the date first written above.
PHONE.COM, INC.
By:
[Name]
[Title]
By:
[Name]
Secretary
MERCEDES ACQUISITION CORP.
By:
[Name]
[Title]
By:
[Name]
Secretary
ATMOTION INC.
By:
[Name]
[Title]
By:
[Name]
Secretary
EXHIBIT B
EXCHANGE RATIO
At the Effective Time, each Company Option outstanding
immediately prior to the Effective Time shall be converted and exchanged
for options to purchase such number of shares of Parent Common Stock as
shall be equal to the product of (a) the number of shares of Company Common
Stock that were issuable upon exercise of such Company Option immediately
prior to the Effective Time and (b) the Exchange Ratio, such product to be
rounded down to the nearest whole number of shares of Parent Common Stock.
The per share exercise price of each Company Option shall equal the
quotient obtained by dividing (a) the per share exercise price of the
Company Option at which such option was exercisable immediately prior to
the Effective Time by (b) the Exchange Ratio, rounded up to the nearest
whole cent.
EXHIBIT C-1
FORM OF NON-AFFILIATE SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is entered
into as of the ___ day of December, 1999 between Phone.com, Inc., a
Delaware corporation ("Parent"), and the undersigned holder (the "Security
Holder") of shares of capital stock or warrants to acquire shares of
Preferred Stock ("Company Warrants") of AtMotion Inc., a California
corporation (the "Company"). Capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in the Reorganization
Agreement (as defined below).
RECITALS
A. The Company, Parent, Mercedes Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub")
and an agent (the "Shareholders' Agent") of the former shareholders and
holders of Company Warrants of the Company have entered into an Agreement
and Plan of Merger and Reorganization, dated as of December 21, 1999 (the
"Reorganization Agreement"), pursuant to which Merger Sub will be merged
with and into the Company (the "Merger").
B. Upon the consummation of the Merger and in connection
therewith, the Security Holder will become the owner of shares of common stock
of Parent (the "Parent Shares").
C. The parties to the Reorganization Agreement intended
to adopt a plan of reorganization within the meaning of section 368 of the
Internal Revenue Code of 1986, as amended (the "Code") and intend to cause
the Merger to qualify as a "reorganization" under the provisions of section
368(a) of the Code.
D. Pursuant to the Reorganization Agreement an Escrow
Agreement attached thereto as Exhibit D (the "Escrow Agreement") shall be
entered into between the Parent, an escrow agent and the Shareholders' Agent;
E. The Security Holder understands and acknowledges that
the Company, Parent and their respective shareholders, as well as legal
counsel to the Company and Parent, are entitled to rely on (x) the truth
and accuracy of the Security Holder's representations contained herein and
(y) the Security Holder's performance of the obligations set forth herein.
NOW, THEREFORE, in consideration of the promises and the
mutual agreements, provisions and covenants set forth in the Reorganization
Agreement and in this Agreement, it is hereby agreed as follows:
1. Share Ownership and Agreement to Retain Shares.
1.1 Transfer and Encumbrance.
(a) The Security Holder is the beneficial owner of that
number of shares of Company Common Stock and Company Preferred Stock
("Shares") and/or the number of Company Warrants set forth on the signature
page hereto and, except as otherwise set forth on the signature page
hereto, has held such Shares and/or Company Warrants at all times since the
date set forth on such signature page. These Shares and/or Company Warrants
constitute the Security Holder's entire interest in the outstanding capital
stock of the Company. No other person or entity not a signatory to this
Agreement has a beneficial interest in or a right to acquire such Shares or
any portion of such Shares (except, with respect to shareholders which are
partnerships, partners or spouses of such Security Holders). The Shares are
and will be at all times up until the Expiration Date (as defined below)
free and clear of any liens, claims, options, charges or other
encumbrances. The Security Holder's principal residence or place of
business is set forth on the signature page hereto.
(b) The Security Holder agrees not to transfer (except as
may be specifically required by court order or by operation of law), sell,
exchange, pledge or otherwise dispose of or encumber the Shares or any New
Shares (as defined below), or to make any offer or agreement relating
thereto, at any time prior to the Expiration Date. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) the Effective Time
of the Merger (as defined in Section 1.3 of the Reorganization Agreement)
or (ii) the termination of the Reorganization Agreement pursuant to
Sections 7.1(a), 7.1(b), 7.1(e) or 7.1(f) thereof.
1.2 New Shares. The Security Holder agrees that any
shares of capital stock of the Company that Security Holder purchases or
with respect to which the Security Holder otherwise acquires beneficial
ownership after the date of this Agreement and prior to the Expiration Date
("New Shares") shall be subject to the terms and conditions of this
Agreement to the same extent as if they constituted Shares.
2. Agreement to Exercise Company Warrants. If the
Security Holder holds any Company Warrants, then the Security Holder agrees
to exercise such Company Warrants, in full, for shares of Company Preferred
Stock in accordance with the terms of such Company Warrants. Such newly
acquired shares of Company Preferred Stock shall be New Shares in
accordance with Section 1.2 hereof prior to the Effective Time.
3. Agreement to Vote Shares. Until the Expiration Date,
the Security Holder shall vote Shares: (i) in favor of approval of the
Reorganization Agreement and the Merger; and (ii) against approval of any
proposal made in opposition to or in competition with consummation of the
Merger and against any merger, consolidation, sale of assets,
reorganization, recapitalization or similar transaction, with any party
other than Parent and its affiliates, and against any liquidation or
winding up of the Company (each of the foregoing is hereinafter referred to
as an "Opposing Proposal").
4. Irrevocable Proxy. Concurrently with the execution of
this Agreement, the Security Holder agrees to deliver to Parent an
irrevocable proxy in the form attached hereto as Annex I (the "Proxy"),
with respect to Shares, which Proxy shall remain in effect until the
Expiration Date.
5. Representations, Warranties and Covenants of Security
Holder. The Security Holder hereby represents, warrants and covenants to
Parent as follows:
(a) The Security Holder understands that pursuant to the
Reorganization Agreement, Parent, an escrow agent and the Shareholders'
Agent shall enter into the Escrow Agreement and that the Security Holder
shall be bound by the provisions of the Escrow Agreement in the form
attached as an exhibit to the Reorganization Agreement and Article VIII of
the Reorganization Agreement ("Article VIII"); and as such, the Security
Holder agrees to appoint a shareholders' agent prior to the closing and
further agrees to be bound by the terms of the Escrow Agreement and Article
VIII.
(b) If the Security Holder is an employee of the Company,
the Security Holder agrees that for a period of one year after the date
hereof Security Holder will not encourage or solicit any employee of the
Company to terminate such employee's employment with the Company (or Parent
after consummation of the Merger) for any reason or to accept employment
with any other company. As part of this restriction, the Security Holder
will not provide any input to any third party regarding any such person
during the period in question.
(c) Until the Expiration Date, the Security Holder will
not, and will not permit any entity under the Security Holder's control to:
(i) solicit proxies or become a "participant" in a "solicitation" (as such
term is defined in Regulation 14A under the Exchange Act) with respect to
an Opposing Proposal or otherwise encourage or assist any party in taking
or planning any action that would compete with, restrain or otherwise serve
to interfere with or inhibit the timely consummation of the Merger in
accordance with the terms of the Reorganization Agreement; (ii) initiate a
shareholders' vote or action by consent of shareholders of the Company with
respect to an Opposing Proposal; or (iii) become a member of a "group" (as
such term is used in Section 13(d) of the Exchange Act) with respect to any
voting securities of the Company that takes any action in support of an
Opposing Proposal. Nothing in this Agreement binds the Security Holder for
any actions taken as a member of the Company's Board of Directors for which
the Security Holder will have no liability whatsoever to Parent or Merger
Sub or any of their agents.
6. Additional Documents. The Security Holder hereby
covenants and agrees to execute and deliver any additional documents
necessary or desirable, in the reasonable opinion of Parent, to carry out
the purpose and intent of this Agreement, including, but not limited to,
executing one or more additional proxies in respect of any New Shares.
7. Consent and Waiver. The Security Holder hereby gives
any consents or waivers that are reasonably required for the consummation
of the Merger under the terms of any agreement to which the Security Holder
is a party or pursuant to any rights the Security Holder may have.
8. Confidentiality. The Security Holder agrees (i) to
hold any information regarding this Agreement and the Merger in strict
confidence, and (ii) not to divulge any such information to any third
person, until such time as the Merger has been publicly disclosed by
Parent.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, then the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
9.2 Binding Effect and Assignment. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns,
but, except as otherwise specifically provided herein, neither this
Agreement nor any of the rights, interests or obligations of the parties
hereto may be assigned by either of the parties without the prior written
consent of the other. This Agreement is intended to bind the Security
Holder as a shareholder of the Company or a holder of Company Warrants only
with respect to the specific matters set forth herein.
9.3 Amendment and Modification. This Agreement may not be
modified, amended, altered or supplemented except by the execution and
delivery of a written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Parent will be irreparably harmed and that there
will be no adequate remedy at law for a violation of any of the covenants
or agreements of the Security Holder set forth herein. Therefore, it is
agreed that, in addition to any other remedies that may be available to
Parent upon any such violation, Parent shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or by
any other means available to Parent at law or in equity and the Security
Holder hereby waives any and all defenses which could exist in its favor in
connection with such enforcement and waives any requirement for the
security or posting of any bond in connection with such enforcement.
9.5 Notices. All notices, requests, demands or other
communications that are required or may be given pursuant to the terms of
this Agreement shall be in writing and shall be deemed to have been duly
given if delivered by hand or mailed by registered or certified mail,
postage prepaid, or sent via facsimile (with confirmation of receipt) to
the parties at the following address (or at such other address for a party
as shall be specified by like notice):
(a) If to the Security Holder, at the address set forth below
the Security Holder's signature at the end hereof.
(b) If to Parent or the Company:
Phone.com, Inc.
800 Chesapeake Drive
Redwood City, CA 94063
Attention: Chief Executive Officer
Facsimile No.: (650) 817-1693
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue - Suite 220
Palo Alto, CA 94301
Attention: Kenton J. King
Facsimile No.: (650) 470-4570
9.6 Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
California.
9.7 Entire Agreement. This Agreement and the Proxy
attached hereto contain the entire understanding of the parties in respect
of the subject matter hereof, and supersede all prior negotiations and
understandings between the parties with respect to such subject matter.
9.8 Counterpart. This Agreement may be executed in
several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
9.9 Effect of Headings. The section headings herein are
for convenience only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the date first above written.
PHONE.COM, INC. SECURITY HOLDER
By: ______________________ __________________________
(Signature)
Name:_____________________
Title:_____________________ ___________________________
(Print Name)
___________________________
(Title, if an entity)
___________________________
(Print Address)
___________________________
(Print Address)
___________________________
(Print Telephone Number)
Total number of shares of Company Capital Stock and Company Warrants owned
on the date hereof:
Common Stock: ___________________________
Series A Preferred Stock: ___________________________
Series A-1 Preferred Stock ___________________________
Series B Preferred Stock: ___________________________
Series B-1 Preferred Stock ___________________________
Company Warrants ___________________________
State of Residence: ___________________________
ANNEX I
IRREVOCABLE PROXY
The undersigned shareholder of AtMotion Inc., a California
corporation (the "Company"), hereby irrevocably appoints Kennen Hagen and
Gautam Anand, and each of them individually, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution
and resubstitution, to the full extent of the undersigned's right, with
respect to the shares of capital stock of the Company beneficially owned by
the undersigned, which number of shares are listed on this Proxy (the
"Shares"), and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof, until the Expiration Date (as
defined in the Non-Affiliate Shareholder Agreement dated as of the date
hereof (the "Non-Affiliate Shareholder Agreement") between Phone.com and
the undersigned shareholder of the Company. Upon the execution hereof, all
prior proxies given by the undersigned with respect to the Shares and any
and all other shares or securities issued or issuable in respect thereof on
or after the date hereof are hereby revoked and no subsequent proxies will
be given.
This proxy (the "Proxy") is irrevocable, is granted pursuant to
the Non-Affiliate Shareholder Agreement and is granted in consideration of
Phone.com entering into the Agreement and Plan of Merger and
Reorganization, dated as of December 21, 1999 (the "Reorganization
Agreement"), among Phone.com, Inc. ("Phone.com"), a Delaware corporation,
Mercedes Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Phone.com, the Company and an agent of the shareholders and
holders of Company Warrants (as defined in the Reorganization Agreement) of
the Company. The attorneys and proxies named above are empowered to
exercise all voting rights (including, without limitation, the power to
execute and deliver written consents with respect to the Shares) of the
undersigned at any time prior to termination of the Reorganization
Agreement at every annual, special or adjourned meeting of the shareholders
of the Company and in every written consent in lieu of such meeting, in
favor of approval of the Reorganization Agreement and the Merger (as
defined in the Reorganization Agreement) and any matter that could
reasonably be expected to facilitate the Merger, and against any merger,
consolidation, sale of assets, reorganization or recapitalization of the
Company with any party other than Phone.com and its affiliates, and against
any liquidation or winding up of the Company, and may not exercise this
proxy on any other matter. The undersigned Shareholder may vote the Shares
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon
the successors and assigns of the undersigned.
This Proxy is coupled with an interest and is irrevocable.
Dated: _________, 1999 Signature of Shareholder:
Print Name of Shareholder:
Shares beneficially owned:
Shares of Common Stock
Shares of Series A Preferred Stock:
Shares of Series A-1 Preferred Stock:
Shares of Series B Preferred Stock:
Shares of Series B-1 Preferred Stock:
EXHIBIT C-2
FORM OF AFFILIATE SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is entered
into as of the ___ day of December, 1999 between Phone.com, Inc., a
Delaware corporation ("Parent"), and the undersigned holder (the "Security
Holder") of shares of capital stock or warrants to acquire shares of
Preferred Stock ("Company Warrants") of AtMotion Inc., a California
corporation (the "Company"). Capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in the Reorganization
Agreement (as defined below).
RECITALS
A. The Company, Parent, Mercedes Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub")
and an agent (the "Shareholders' Agent") of the former shareholders and
holders of Company Warrants of the Company have entered into an Agreement
and Plan of Merger and Reorganization, dated as of December 21, 1999 (the
"Reorganization Agreement"), pursuant to which Merger Sub will be merged
with and into the Company (the "Merger").
B. Upon the consummation of the Merger and in connection
therewith, the Security Holder will become the owner of shares of common
stock of Parent (the "Parent Shares").
C. The parties to the Reorganization Agreement intended to
adopt a plan of reorganization within the meaning of section 368 of the
Internal Revenue Code of 1986, as amended (the "Code") and intend to cause
the Merger to qualify as a "reorganization" under the provisions of section
368(a) of the Code.
D. Pursuant to the Reorganization Agreement an Escrow
Agreement attached thereto as Exhibit D (the "Escrow Agreement") shall be
entered into between the Parent, an escrow agent and the Shareholders'
Agent;
E. The Security Holder understands and acknowledges that the
Company, Parent and their respective shareholders, as well as legal counsel
to the Company and Parent, are entitled to rely on (x) the truth and
accuracy of the Security Holder's representations contained herein and (y)
the Security Holder's performance of the obligations set forth herein.
NOW, THEREFORE, in consideration of the promises and the
mutual agreements, provisions and covenants set forth in the Reorganization
Agreement and in this Agreement, it is hereby agreed as follows:
1. Share Ownership and Agreement to Retain Shares.
1.1 Transfer and Encumbrance.
(a) The Security Holder is the beneficial owner of that
number of shares of Company Common Stock and Company Preferred Stock
("Shares") and/or the number of Company Warrants set forth on the signature
page hereto and, except as otherwise set forth on the signature page
hereto, has held such Shares and/or Company Warrants at all times since the
date set forth on such signature page. These Shares and/or Company Warrants
constitute the Security Holder's entire interest in the outstanding capital
stock of the Company. No other person or entity not a signatory to this
Agreement has a beneficial interest in or a right to acquire such Shares or
any portion of such Shares (except, with respect to shareholders which are
partnerships, partners or spouses of such Security Holders). The Shares are
and will be at all times up until the Expiration Date (as defined below)
free and clear of any liens, claims, options, charges or other
encumbrances. The Security Holder's principal residence or place of
business is set forth on the signature page hereto.
(b) The Security Holder agrees not to transfer (except
as may be specifically required by court order or by operation of law),
sell, exchange, pledge or otherwise dispose of or encumber the Shares or
any New Shares (as defined below), or to make any offer or agreement
relating thereto, at any time prior to the Expiration Date. As used herein,
the term "Expiration Date" shall mean the earlier to occur of (i) the
Effective Time of the Merger (as defined in Section 1.3 of the
Reorganization Agreement) or (ii) the termination of the Reorganization
Agreement pursuant to Sections 7.1(a), 7.1(b), 7.1(e) or 7.1(f) thereof.
1.2 New Shares. The Security Holder agrees that any shares
of capital stock of the Company that Security Holder purchases or with
respect to which the Security Holder otherwise acquires beneficial
ownership after the date of this Agreement and prior to the Expiration Date
("New Shares") shall be subject to the terms and conditions of this
Agreement to the same extent as if they constituted Shares.
2. Agreement to Exercise Company Warrants. If the Security
Holder holds any Company Warrants, then the Security Holder agrees to
exercise such Company Warrants, in full, for shares of Company Preferred
Stock in accordance with the terms of such Company Warrants. Such newly
acquired shares of Company Preferred Stock shall be New Shares in
accordance with Section 1.2 hereof prior to the Effective Time.
3. Agreement to Vote Shares. Until the Expiration Date, the
Security Holder shall vote Shares: (i) in favor of approval of the
Reorganization Agreement and the Merger; and (ii) against approval of any
proposal made in opposition to or in competition with consummation of the
Merger and against any merger, consolidation, sale of assets,
reorganization, recapitalization or similar transaction, with any party
other than Parent and its affiliates, and against any liquidation or
winding up of the Company (each of the foregoing is hereinafter referred to
as an "Opposing Proposal").
4. Irrevocable Proxy. Concurrently with the execution of
this Agreement, the Security Holder agrees to deliver to Parent an
irrevocable proxy in the form attached hereto as Annex I (the "Proxy"),
with respect to Shares, which Proxy shall remain in effect until the
Expiration Date.
5. Representations, Warranties and Covenants of Security
Holder. The Security Holder hereby represents, warrants and covenants to
Parent as follows:
(a) The Security Holder understands that pursuant to the
Reorganization Agreement, Parent, an escrow agent and the Shareholders'
Agent shall enter into the Escrow Agreement and that the Security Holder
shall be bound by the provisions of the Escrow Agreement in the form
attached as an exhibit to the Reorganization Agreement and Article VIII of
the Reorganization Agreement ("Article VIII"); and as such, the Security
Holder agrees to appoint a shareholders' agent prior to the closing and
further agrees to be bound by the terms of the Escrow Agreement and Article
VIII.
(b) If the Security Holder is an employee of the
Company, the Security Holder agrees that for a period of one year after the
date hereof Security Holder will not encourage or solicit any employee of
the Company to terminate such employee's employment with the Company (or
Parent after consummation of the Merger) for any reason or to accept
employment with any other company. As part of this restriction, the
Security Holder will not provide any input to any third party regarding any
such person during the period in question.
(c) Until the Expiration Date, the Security Holder will
not, and will not permit any entity under the Security Holder's control to:
(i) solicit proxies or become a "participant" in a "solicitation" (as such
term is defined in Regulation 14A under the Exchange Act) with respect to
an Opposing Proposal or otherwise encourage or assist any party in taking
or planning any action that would compete with, restrain or otherwise serve
to interfere with or inhibit the timely consummation of the Merger in
accordance with the terms of the Reorganization Agreement; (ii) initiate a
shareholders' vote or action by consent of shareholders of the Company with
respect to an Opposing Proposal; or (iii) become a member of a "group" (as
such term is used in Section 13(d) of the Exchange Act) with respect to any
voting securities of the Company that takes any action in support of an
Opposing Proposal. Nothing in this Agreement binds the Security Holder for
any actions taken as a member of the Company's Board of Directors for which
the Security Holder will have no liability whatsoever to Parent or Merger
Sub or any of their agents.
6. Additional Covenants of Security Holder and Parent
Regarding Security Holder's Status as an Affiliate of the Company.
(a) The Security Holder has been deemed by Parent to be
an "affiliate" of the Company, as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145") of the rules
and regulations of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act").
(b) As an affiliate of the Company under the Act, the
Security Holder's ability to sell, assign or transfer any Parent Shares
received by the Security Holder in exchange for any Shares or other company
securities pursuant to the transactions contemplated by the Reorganization
Agreement may be restricted unless such transaction is registered under the
Act or an exemption from such registration is available. The Security
Holder understands that such exemptions are limited and the undersigned has
obtained the advice of counsel as to the nature and conditions of such
exemptions, including instruction with respect to the applicability to the
sale of such Common Stock of Rule 144 ("Rule 144") and Rule 145(d)
promulgated under the Act.
(c) The Security Holder hereby acknowledges and agrees
that Parent is under no obligation to register the sale, transfer or other
disposition of Parent Shares by the Security Holder or on behalf of the
Security Holder under the Act or, except as provided below, to take any
other action necessary in order to make compliance with an exemption from
such registration available.
(d) The Security Holder hereby represents and covenants
to Parent that the Security Holder will not sell, assign or transfer any
Parent Shares received by the undersigned in exchange for securities of the
Company pursuant to the transactions contemplated by the reorganization
Agreement except (i) pursuant to an effective registration statement under
the Act, (ii) by a transaction in conformity with the volume and other
limitations of Rule 145 or Rule 144 under the Act, to the extent
applicable, or any other applicable rules promulgated by the Commission or
(iii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent, or as described in a "no-action" or
interpretive letter from the Staff of the Commission, is not required to be
registered under the Act.
(e) In the event of a sale of Parent Shares pursuant to
Rule 145, or, if applicable, Rule 144, the Security Holder will supply
Parent with evidence of compliance with such Rule, in the form of customary
seller's and broker's Rule 145 or, if applicable, Rule 144, representation
letters or as Parent may otherwise reasonably request. The Security Holder
understands that Parent may instruct its transfer agent to withhold the
transfer of any Parent Shares disposed of by the Security Holder in a
manner inconsistent with this Agreement.
(f) The Security Holder also understands that there will
be placed on the certificates for the Parent Shares issued to the Security
Holder, or any substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED AS OF [ ] BETWEEN THE REGISTERED HOLDER HEREOF AND
PHONE.COM, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF PHONE.COM, INC.
(g) For so long as and to the extent necessary to permit
the undersigned to sell the Common Stock pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Act, Parent shall use its reasonable
best efforts to file, on a timely basis, all reports and data required to
be filed with the Commission by them pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act").
(h) It is understood and agreed that the legend set
forth above shall be removed by delivery of substitute certificates without
such legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop
orders referred to above will be removed if (i) one year shall have elapsed
from the date the Security Holder acquired Parent Shares received in
connection with the transactions contemplated by the Reorganization
Agreement and the provisions of Rule 145(d)(2) are then available to the
Security Holder, (ii) two years shall have elapsed from the date the
undersigned acquired the Parent Shares received in connection with the
transactions contemplated by the Reorganization Agreement and the
provisions of Rule 145(d)(3) are then applicable to the Security Holder,
(iii) Parent has received either an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Parent or a "no action" letter
obtained from the staff of the Commission, to the effect that the Parent
Shares subject thereto may be transferred free of the restrictions imposed
by Rule 144 or 145 under the Act, or (iv) in the event of a sale of Parent
Shares received by the Security Holder in connection with the transactions
contemplated by the Reorganization Agreement which has been registered
under the Act.
7. Additional Documents. The Security Holder hereby
covenants and agrees to execute and deliver any additional documents
necessary or desirable, in the reasonable opinion of Parent, to carry out
the purpose and intent of this Agreement, including, but not limited to,
executing one or more additional proxies in respect of any New Shares.
8. Consent and Waiver. The Security Holder hereby gives any
consents or waivers that are reasonably required for the consummation of
the Merger under the terms of any agreement to which the Security Holder is
a party or pursuant to any rights the Security Holder may have.
9. Confidentiality. The Security Holder agrees (i) to hold
any information regarding this Agreement and the Merger in strict
confidence, and (ii) not to divulge any such information to any third
person, until such time as the Merger has been publicly disclosed by
Parent.
10. Miscellaneous.
10.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, then the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
10.2 Binding Effect and Assignment. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns,
but, except as otherwise specifically provided herein, neither this
Agreement nor any of the rights, interests or obligations of the parties
hereto may be assigned by either of the parties without the prior written
consent of the other. This Agreement is intended to bind the Security
Holder as a shareholder of the Company or a holder of Company Warrants only
with respect to the specific matters set forth herein.
10.3 Amendment and Modification. This Agreement may not be
modified, amended, altered or supplemented except by the execution and
delivery of a written agreement executed by the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Parent will be irreparably harmed and that there
will be no adequate remedy at law for a violation of any of the covenants
or agreements of the Security Holder set forth herein. Therefore, it is
agreed that, in addition to any other remedies that may be available to
Parent upon any such violation, Parent shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or by
any other means available to Parent at law or in equity and the Security
Holder hereby waives any and all defenses which could exist in its favor in
connection with such enforcement and waives any requirement for the
security or posting of any bond in connection with such enforcement.
10.5 Notices. All notices, requests, demands or other
communications that are required or may be given pursuant to the terms of
this Agreement shall be in writing and shall be deemed to have been duly
given if delivered by hand or mailed by registered or certified mail,
postage prepaid, or sent via facsimile (with confirmation of receipt) to
the parties at the following address (or at such other address for a party
as shall be specified by like notice):
(a) If to the Security Holder, at the address set forth
below the Security Holder's signature at the end hereof.
(b) If to Parent or the Company:
Phone.com, Inc.
800 Chesapeake Drive
Redwood City, CA 94063
Attention: Chief Executive Officer
Fax: (650) 817-1693
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue - Suite 220
Palo Alto, CA 94301
Attention: Kenton J. King
Fax: (650) 470-4570
10.6 Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
California.
10.7 Entire Agreement. This Agreement and the Proxy attached
hereto contain the entire understanding of the parties in respect of the
subject matter hereof, and supersede all prior negotiations and
understandings between the parties with respect to such subject matter.
10.8 Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
10.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the date first above written.
PHONE.COM, INC. SECURITY HOLDER
By:______________________ ______________________________
(Signature)
Name:____________________
Title:_____________________ ______________________________
(Print Name)
______________________________
(Title, if an entity)
______________________________
(Print Address)
______________________________
(Print Address)
______________________________
(Print Telephone Number)
Total number of shares of Company Capital Stock and Company Warrants owned
on the date hereof:
Common Stock: ___________________________
Series A Preferred Stock: ___________________________
Series A-1 Preferred Stock ___________________________
Series B Preferred Stock: ___________________________
Series B-1 Preferred Stock ___________________________
Company Warrants ___________________________
State of Residence: ___________________________
ANNEX I
IRREVOCABLE PROXY
The undersigned shareholder of AtMotion Inc., a California
corporation (the "Company"), hereby irrevocably appoints Kennen Hagen and
Gautam Anand, and each of them individually, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution
and resubstitution, to the full extent of the undersigned's right, with
respect to the shares of capital stock of the Company beneficially owned by
the undersigned, which number of shares are listed on this Proxy (the
"Shares"), and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof, until the Expiration Date (as
defined in the Affiliate Shareholder Agreement dated as of the date hereof
(the "Affiliate Shareholder Agreement") between Phone.com and the
undersigned shareholder of the Company. Upon the execution hereof, all
prior proxies given by the undersigned with respect to the Shares and any
and all other shares or securities issued or issuable in respect thereof on
or after the date hereof are hereby revoked and no subsequent proxies will
be given.
This proxy (the "Proxy") is irrevocable, is granted pursuant to
the Affiliate Shareholder Agreement and is granted in consideration of
Phone.com entering into the Agreement and Plan of Merger and
Reorganization, dated as of December 21, 1999 (the "Reorganization
Agreement"), among Phone.com, Inc. ("Phone.com"), a Delaware corporation,
Mercedes Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Phone.com, the Company and an agent of the shareholders and
holders of Company Warrants (as defined in the Reorganization Agreement) of
the Company. The attorneys and proxies named above are empowered to
exercise all voting rights (including, without limitation, the power to
execute and deliver written consents with respect to the Shares) of the
undersigned at any time prior to termination of the Reorganization
Agreement at every annual, special or adjourned meeting of the shareholders
of the Company and in every written consent in lieu of such meeting, in
favor of approval of the Reorganization Agreement and the Merger (as
defined in the Reorganization Agreement) and any matter that could
reasonably be expected to facilitate the Merger, and against any merger,
consolidation, sale of assets, reorganization or recapitalization of the
Company with any party other than Phone.com and its affiliates, and against
any liquidation or winding up of the Company, and may not exercise this
proxy on any other matter. The undersigned Shareholder may vote the Shares
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon
the successors and assigns of the undersigned.
This Proxy is coupled with an interest and is irrevocable.
Dated: _________, 1999 Signature of Shareholder:
Print Name of Shareholder:
Shares beneficially owned:
Shares of Common Stock
Shares of Series A Preferred Stock:
Shares of Series A-1 Preferred Stock:
Shares of Series B Preferred Stock:
Shares of Series B-1 Preferred Stock:
EXHIBIT D
FORM OF ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made as of
this _____ day of December, 1999, by and among State Street Bank and Trust
Company of California, N.A. ("Escrow Agent"), Phone.com, Inc., a Delaware
corporation ("Parent"), and Dixon R. Doll as agent ("Shareholders' Agent")
of the former shareholders and holders of Company Warrants (individually, a
"Security Holder" and collectively the "Security Holders") of AtMotion
Inc., a California corporation ("the Company"). Terms not otherwise defined
herein shall have the meaning set forth in the Reorganization Agreement (as
defined below).
WITNESSETH
WHEREAS, Parent and the Company have entered into an
Agreement and Plan of Merger and Reorganization (the "Reorganization
Agreement"), dated as of December 21, 1999, providing for the merger of
Mercedes Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent, with and into the Company (the "Merger"); and
WHEREAS, as a result of the Merger, the Security Holders
will have the Company Capital Stock held by them converted into the right
to receive shares of Parent Common Stock ("Shares"); and
WHEREAS, pursuant to Article VIII of the Reorganization
Agreement, a copy of which is attached hereto as Annex A ("Article VIII"),
an escrow fund (the "Escrow Fund") consisting of two component parts, the
10% Fund and the 2.1% Fund, will be established to ensure payment to Parent
of certain indemnification obligations of the Company; and
WHEREAS, the 10% Fund will be used to compensate Parent
for certain Damages (as defined in Article VIII) arising out of any
misrepresentation, breach or default in connection with any of the
representations, warranties, covenants and agreements given or made by the
Company in the Reorganization Agreement, the Company Disclosure Schedule
(as modified and updated by the Supplement) or any exhibit or schedule to
the Reorganization Agreement; and
WHEREAS, THE 2.1% Fund will be used to compensate Parent
for Accelerated Vesting Value (as defined in Article VIII); and
WHEREAS, the Shareholders' Agent has been constituted as
agent for and on behalf of the Security Holders to undertake certain
obligations specified in Article VIII; and
WHEREAS, Article VIII provides for the deposit by Parent
of shares of Parent Common Stock into the Escrow Fund to be held by the
Escrow Agent; and
WHEREAS, the parties hereto desire to set forth further
terms and conditions in addition to those set forth in Article VIII
relating to the operation and administration of the Escrow Fund.
NOW, THEREFORE, the parties hereto, in consideration of
the mutual covenants contained herein, and intending to be legally bound,
hereby agree as follows:
1. Escrow and Escrow Shares. Pursuant to Article VIII,
Parent shall deposit in escrow with the Escrow Agent, as escrow agent,
within five (5) business days of the Effective Time, a certificate or
certificates representing the Escrow Shares. __________ of the Escrow
Shares shall be allocated to the 10% Fund and __________ of the Escrow
Shares shall be allocated to the 2.1% Fund. All of the Escrow Shares shall
be registered in the name of the Escrow Agent as nominee for the Security
Holders who are the beneficial owners of such Shares. The Escrow Shares
shall be held and distributed by the Escrow Agent in accordance with the
terms and conditions of Article VIII and this Agreement. The number of
Escrow Shares allocable to the 10% Fund beneficially owned by each Security
Holder, the number of Escrow Shares allocable to the 2.1% Fund beneficially
owned by each Security Holder, the percentage interest of each Security
Holder in the 10% Fund, the percentage interest of each Security Holder in
the 2.1% Fund, the address of each Security Holder and the taxpayer
identification of each Security Holder are set forth in Annex B attached
hereto.
2. Rights and Obligations of the Parties. The Escrow
Agent shall be entitled to such rights and shall perform such duties of the
escrow agent as set forth herein and in Article VIII (collectively, the
"Duties"), in accordance with the terms and conditions of this Agreement
and Article VIII. Each of Parent, the Company and the Shareholders' Agent
shall be entitled to their respective rights and shall perform their
respective duties and obligations as set forth herein and in Article VIII,
in accordance with the terms hereof and thereof. In the event that the
terms of this Agreement conflict in any way with the provisions of Article
VIII, Article VIII shall control.
3. Escrow Period. The Escrow Period shall terminate at
11:59 p.m. Pacific Standard Time on the first anniversary of the Closing
Date, as set forth in a certificate delivered to the Escrow Agent pursuant
to Section 8.3 of the Reorganization Agreement.
4. Duties of Escrow Agent. In addition to the Duties set
forth in Article VIII, the Duties of the Escrow Agent shall include the
following:
(a) The Escrow Agent shall hold and safeguard the Escrow
Shares during the Escrow Period, shall treat such Escrow Fund as a trust
fund in accordance with the terms of this Agreement and Article VIII and
not as the property of Parent, and shall hold and dispose of the Escrow
Shares only in accordance with the terms hereof.
(b) The Escrow Shares shall be voted by the Escrow Agent
in accordance with the instructions received by the Escrow Agent from the
beneficial owners of such Shares. In the absence of such instructions, the
Escrow Agent shall be under no obligation to vote such Shares. The Escrow
Agent need not forward proxy information, annual or other reports or other
information received from Parent with respect to the Escrow Shares
(c) Upon each monthly anniversary of the Effective Date,
the Escrow Agent (i) shall deposit one-twelfth of the Escrow Shares
originally deposited in the Escrow Fund as the 2.1% Fund with the transfer
agent of the Parent Common Stock and (ii) shall direct such transfer agent
to transfer such Shares to the Security Holders who are the beneficial
owners thereof, at their addresses set forth in Annex B hereto, until the
2.1% Fund is exhausted. Each Security Holder shall receive that number of
the Escrow Shares constituting part of the 2.1% Fund so transferred
equivalent to such Security Holder's percentage interest in the 2.1% Fund
as set forth in Annex B hereto. If the value of Escrow Shares to be
distributed to any Security Holder pursuant to this Section 4(c) hereof is
not evenly divisible by the Parent Stock Price, the Escrow Agent shall
round down the number of Shares to be distributed to such Security Holder
to the next highest number of Shares and shall direct the transfer agent to
distribute that number of Shares to such Security Holder. In lieu of the
additional fractional Share interest to which such Security Holder is
entitled, Parent shall furnish the Escrow Agent cash equal to the value of
such fractional Share interest and the Escrow Agent shall pay such cash to
such Security Holder. Parent (i) shall be deemed to have purchased such
fractional Share interests with respect to which it has furnished funds to
the Escrow Agent, (ii) shall become the beneficial owner of such fractional
Share interests and (iii) shall be entitled to have returned to it, upon
termination of the Escrow Period and after all Security Holders have
received the distributions to which they are entitled pursuant to this
Agreement, all Escrow Shares and other property remaining in the Escrow
Fund as distributions in respect of the aggregate value of such fractional
Share interests.
(d) Promptly following termination of the Escrow Period
as set forth in Section 3 hereof, if necessary, the Escrow Agent (i) shall
deposit with the Parent's stock transfer agent the number of Escrow Shares
and other property in the Escrow Fund which is in excess of the amount of
such Escrow Shares or other property (as set forth in a certificate of
Parent) which is determined to be sufficient (as set forth in a certificate
of Parent) to satisfy any unsatisfied claims specified in any Officer's
Certificate or Certificates delivered to the Escrow Agent prior to
termination of the Escrow Period with respect to facts and circumstances
existing prior to expiration of the Escrow Period and giving rise to a
claim for Damages, to pay expenses as provided in Section 11(b) hereof of
Shareholders' Agent plus, in the event such claims are then in the process
of arbitration, a number of Escrow Shares at their Parent Stock Price
reasonably sufficient to reimburse the costs and reasonable attorney fees
of Parent in such arbitration and to reimburse the out of pocket costs and
reasonable attorneys fees to be incurred therein by Shareholders' Agent and
(ii) shall direct such transfer agent to transfer such Escrow Shares and
other property to the Security Holders who are the beneficial owners
thereof at their addresses set forth in Annex B hereto. The Escrow Shares
which remain in the Escrow Fund following the termination of the Escrow
Period in order to satisfy any unsatisfied claims for Damages, shall be
retained by the Escrow Agent until resolution of all claims for Damages
made by Parent in accordance with Section 8.4(b) of the Reorganization
Agreement. As soon as practicable after all claims for Damages have been
finally resolved (as set forth in a certificate of Parent) the Escrow Agent
shall cause such transfer agent to deliver to the Security Holders at their
addresses set forth in Annex B hereto all of the Escrow Shares and other
property remaining in the Escrow Fund to which they are entitled. Each
Security Holder shall receive that number of Escrow Shares equivalent to
such Security Holder's percentage interest in the 10% Fund or the 2.1%
Fund, as applicable, as set forth in Annex B hereto.
(e) Pursuant to Section 8.4(d) of the Reorganization
Agreement, for the purpose of compensating Parent for its Damages pursuant
to this Agreement, Shares in the Escrow Fund delivered to Parent shall be
valued at the Parent Stock Price. Parent shall set forth the Parent Stock
Price in a certificate delivered to the Escrow Agent. If the value to be
distributed to Parent to compensate Parent for Damages is not evenly
divisible by the Parent Stock Price, the Escrow Agent shall round up the
number of Shares to be distributed to the next highest number of Shares and
shall cause the transfer agent of the Escrow Shares to distribute that
number of Shares to Parent. In lieu of the excess fractional interest
distributed, Parent shall furnish to the Escrow Agent cash equal to such
fractional interest times the Parent Stock Price and such cash shall be
added to the Escrow Fund and shall be invested in accordance with Section
14 hereof. If, after termination of the Escrow Period, the value of
remaining Shares to be distributed to any Security Holder pursuant to this
Agreement is not evenly divisible by the Parent Stock Price, the Escrow
Agent shall round down the number of Shares to be distributed to such
Security Holder to the next highest number of Shares and shall cause the
Transfer Agent to distribute that number of Shares to such Security Holder.
In lieu of the additional fractional Share interest to which such Security
Holder is entitled, Parent shall furnish the Escrow Agent cash equal to the
value of such fractional Share interest and the Escrow Agent shall pay such
cash to such Security Holder. Parent (i) shall be deemed to have purchased
such fractional Share interests with respect to which it has furnished
funds to the Escrow Agent, (ii) shall become the beneficial owner of such
fractional Share interests and (iii) shall be entitled to have returned to
it, upon termination of the Escrow Period and after all Security Holders
have received the distributions to which they are entitled pursuant to this
Agreement, all Escrow Shares and other property remaining in the Escrow
Fund as distributions in respect of the aggregate value of such fractional
Share interests.
5. Distributions. Any cash dividends, dividends payable
in securities or other distributions of any kind shall be added to the
Escrow Fund and become a part thereof. The Escrow Agent shall invest the
foregoing distributions in accordance with Section 14 hereof.
6. Exculpatory Provisions.
(a) The Escrow Agent shall be obligated only for the
performance of such Duties as are specifically set forth herein and in
Article VIII and may rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have
been signed or presented by the proper party or parties. The Escrow Agent
shall not be liable for forgeries or false presentations. The Escrow Agent
shall not be liable for any act done or omitted hereunder as escrow agent
except for negligence or willful misconduct. The Escrow Agent shall, in no
case or event, be liable for any representations or warranties of the
Company or Parent or for punitive, incidental or consequential damages. Any
act done or omitted pursuant to the advice or opinion of counsel shall be
conclusive evidence of the good faith of the Escrow Agent.
(b) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law or
arbitrations as provided in Section 8.6 of the Reorganization Agreement,
and is hereby expressly authorized to comply with and obey orders,
judgments or decrees of any court or rulings of any arbitrators. In case
the Escrow Agent obeys or complies with any such order, judgment or decree
of any court or such ruling of any arbitrator, the Escrow Agent shall not
be liable to any of the parties hereto or to any other person by reason of
such compliance, notwithstanding any such order, judgment, decree or
arbitrator's ruling being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
(c) The Escrow Agent shall not be liable in any respect
on account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for thereunder.
(d) The Escrow Agent shall not be liable for the
outlawing of any rights under any statute of limitations with respect to
the Agreement or any documents deposited with the Escrow Agent.
7. Alteration of Duties. The Duties may be altered,
amended, modified or revoked only by a writing signed by all of the parties
hereto.
8. Resignation and Removal of the Escrow Agent. The
Escrow Agent may resign as Escrow Agent at any time with or without cause
by giving at least thirty (30) days' prior written notice to each of Parent
and the Shareholders' Agent, such resignation to be effective thirty (30)
days following the date such notice is given. In addition, Parent and the
Shareholders' Agent may jointly remove the Escrow Agent as escrow agent at
any time with or without cause, by an instrument (which may be executed in
counterparts) given to the Escrow Agent, which instrument shall designate
the effective date of such removal. In the event of any such resignation or
removal, a successor escrow agent which shall be a bank or trust company
organized under the laws of the United States of America or of the State of
California having (or if such bank or trust company is a subsidiary of a
bank holding company, its bank holding company has) a combined capital and
surplus of not less than $50,000,000, shall be appointed by the
Shareholders' Agent with the approval of Parent, which approval shall not
be unreasonably withheld. Any such successor escrow agent shall deliver to
Parent and the Shareholders' Agent a written instrument accepting such
appointment, and thereupon it shall succeed to all the rights and duties of
the escrow agent hereunder and shall be entitled to receive the Escrow
Fund.
9. Further Instruments. If the Escrow Agent reasonably
requires other or further instruments in connection with performance of the
Duties, the necessary parties hereto shall join in furnishing such
instruments.
10. Disputes. It is understood and agreed that should any
dispute arise with respect to the delivery and/or ownership or right of
possession of the securities held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed to act in accordance with, and in reliance
upon, the terms hereof and of Article VIII.
11. Escrow Fees and Expenses.
(a) Parent shall pay the Escrow Agent such fees as are
established by the Fee Schedule attached hereto as Annex C.
(b) All reasonable out-of-pocket fees and expenses
incurred by the Shareholders' Agent shall be paid out of the Escrow Fund in
preference to all other distributions from such Escrow Fund; provided,
however, that under no circumstances will the Shareholders' Agent have
personal liability for any such fees and expenses. Upon the request from
time to time of Shareholders' Agent, Parent will provide cash to the Escrow
Fund to satisfy such costs in exchange for Escrow Shares valued at the
Parent Stock Price.
12. Indemnification. In consideration of the Escrow
Agent's acceptance of this appointment, Parent and the Shareholders' Agent,
on behalf of the Security Holders and not individually, jointly and
severally, agree to indemnify and hold the Escrow Agent harmless as to any
liability incurred by it to any person, firm or corporation by reason of
its having accepted such appointment or in carrying out the terms hereof
and of Article VIII, and to reimburse the Escrow Agent for all its costs
and expenses, including, among other things, counsel fees and expenses,
reasonably incurred by reason of any matter as to which an indemnity is
paid; provided, however, that no indemnity need be paid in case of the
Escrow Agent's negligence, willful misconduct or breach of this Agreement.
13. General.
(a) Any notice given hereunder shall be in writing and
shall be deemed effective upon the earlier of personal delivery or the
third day after mailing by certified or registered mail, postage prepaid,
or sent via facsimile (with confirmation of receipt) to the parties at the
following address (or at such other address for a party as shall be
specified by like notice):
To Parent:
Phone.com, Inc.
800 Chesapeake Drive
Redwood City, CA 94063
Attention: Chief Executive Officer
Facsimile No.: (650) 817-1693
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue - Suite 220
Palo Alto, CA 94301
Attention: Kenton J. King
Facsimile No.: (650) 470-4570
To Shareholders' Agent:
Dixon R. Doll
Doll Capital Management Inc.
Building 3, Suite 225
3000 Sand Hill Road
Menlo Park, CA 94025
Attention: Chief Executive Officer
Facsimile No.: (650) 854-9159
With a copy to:
c/o Wilson Sonsini Goodrich & Rosati P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attention: John B. Goodrich
Facsimile No.: (650) 493-6811
To the Escrow Agent:
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street - 12th Floor
Los Angeles, CA 90071
Attention: Corporate Trust Department
(Phone.com, Inc./AtMotion Inc. 2000 Escrow)
Telephone No.: (213) 362-7338
Facsimile No.: (213) 362-7357
Any notice addressed to the Escrow Agent shall be effective only upon
receipt. When any Officer's Certificate, objection thereto or other notice
or document of any kind is required to be delivered to the Escrow Agent and
any other person, the Escrow Agent may assume without inquiry that such
Officer's Certificate, objection or other notice or document was received
by such other person on the date on which it was received by the Escrow
Agent.
(b) The Officer's Certificate as defined in Article VIII
may be signed by the President, any Vice President or the Chief Financial
Officer of Parent.
(c) The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
(d) This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original
copy hereof, but all of which together shall constitute one agreement.
(e) No party may, without the prior express written
consent of each other party, assign this Agreement in whole or in part.
This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts
made and to be performed entirely within the State of California. The
parties to this Escrow Agreement hereby agree to submit to personal
jurisdiction in the State of California.
14. Investment of Escrow Cash. The Escrow Agent shall
invest cash dividends or other cash it may receive with respect to the
Escrow Shares in the Federated U.S. Treasury Cash Reserve, which is a money
market mutual fund registered under the Investment Company Act of 1940, the
principal of which is invested solely in obligations issued or guaranteed
by the United States Government. All interest or any other income earned
with respect to such investment shall be retained by the Escrow Agent as
part of the 10% Fund or the 2.1% Fund, as applicable, until distributed in
accordance with other provisions of this Agreement. For tax reporting
purposes, all such income shall be allocated to the Security Holders in
accordance with their pro rata percentage interests in the 10% Fund or the
2.1% Fund, as applicable, set forth in Annex B.
15. Tax Reporting Matters. Parent and each of the
Security Holders will provide the Escrow Agent with certified tax
identification numbers for each of Parent and the Security Holders by
furnishing appropriate forms W-9 (or Forms W-8, in the case of non-U.S.
persons) and other forms and documents that the Escrow Agent may reasonably
request (collectively, "Tax Reporting Documentation") to the Escrow Agent
within 30 days after the date hereof. The parties hereto understand that,
if such Tax Reporting Documentation is not so certified to the Escrow
Agent, the Escrow Agent may be required by the Code, as it may be amended
from time to time, to withhold a portion of the Escrow Shares or any
interest or other income earned on the investment of monies or other
property held by the Escrow Agent pursuant to this Agreement. The Escrow
Agent need not make any distribution of all or any portion of the Escrow
Fund to any person until such person has furnished to the Escrow Agent such
Tax Reporting Documentation as the Escrow Agent may reasonably require.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date first above written.
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A.
as Escrow Agent
By______________________________________
Name:
Title:
PHONE.COM, INC.
By_____________________________________
Name:
Title:
SHAREHOLDERS' AGENT
________________________________________
EXHIBIT H
FIFTH
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ATMOTION INC.
FIRST: The name of the Corporation is AtMotion Inc. (hereinafter, the
"Corporation").
SECOND: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California (the "CGCL") other than the banking business, the
trust company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
THIRD: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred (100) shares of Common Stock, having a
par value of one hundredth of a dollar ($0.01).
FOURTH: The Corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the CGCL through Bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the CGCL, subject only to the applicable limitations set forth in Section 204
of the CGCL with respect to actions for breach of duty to the Corporation and
its shareholders.
FIFTH: The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
EXHIBIT I
BYLAWS
OF
ATMOTION, INC.
a California corporation
ARTICLE I
OFFICES
1.1. PRINCIPAL OFFICES. The board of directors shall fix the
location of the principal and executive offices of the corporation at any
place within or outside the State of California. The board of directors is
hereby granted full power and authority to change the location of the
principal executive office of the corporation from one location to another.
If the principal executive office is located outside the State of
California, and the corporation has one (1) or more business offices in the
State of California, the board of directors shall likewise fix and
designate a principal business office in the State of California.
1.2. OTHER OFFICES. The board of directors may at any time
establish branch or subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1. PLACE OF MEETINGS. Meetings of shareholders shall be held
at any place within or outside the State of California designated by the
board of directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation
or at any place consented to in writing by all persons entitled to vote at
such meeting, given before or after the meeting and filed with the
secretary of the corporation.
2.2. ANNUAL MEETINGS OF SHAREHOLDERS. The annual meeting of
shareholders shall be held each year on a date and at a time designated by
the board of directors. At each annual meeting, directors shall be elected
and any other proper business may be transacted.
2.3. SPECIAL MEETINGS. A special meeting of the shareholders
may be called at any time, subject to the provisions of Sections 4 and 5 of
this Article II, by the board of directors, the chairman of the board, the
president or the holders of shares entitled to cast not less than ten
percent (10%) of the votes at the meeting or such additional persons as
provided in the articles of incorporation or in these Bylaws.
If a special meeting is called by anyone other than the board
of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by other written
communication to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request forthwith shall cause notice to be given to the shareholders
entitled to vote, in accordance with the provisions of Sections 4 and 5 of
this Article II, that a meeting will be held at the time requested by the
person or persons calling the meeting so long as that time is not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after the
receipt of the request, then the person or persons requesting the meeting
may give the notice. Nothing contained in this paragraph of this Section 3
shall be construed as limiting, fixing or affecting the time when a meeting
of shareholders called by action of the board of directors may be held.
2.4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings
of sharehold ers shall be sent or otherwise given in accordance with
Section 2.5 of these Bylaws not less than ten (10) (or, if sent by
third-class mail pursuant to Section 2.5 of these Bylaws, not less than
thirty (30)) nor more than sixty (60) days before the date of the meeting
to each shareholder entitled to vote thereat. Such notice shall state the
place, day and hour of the meeting and (i) in the case of a special
meeting, the general nature of the business to be transacted, and no other
business may be transacted, or (ii) in the case of the annual meeting,
those matters which the board of directors, at the time of the mailing of
the notice, intends to present for action by the shareholders, but subject
to the provisions of the next paragraph of this Section 2.4, any proper
matter may be presented at the meeting for such action. The notice of any
meeting at which directors are to be elected shall include the names of
nominees intended at the time of the notice to be presented by the board of
directors for election.
If action is proposed to be taken at any shareholders' meeting for
approval of (i) a contract or transaction between the corporation and one
or more of its directors, or between the corporation and any corporation,
firm or association in which one or more of its directors has a material
financial interest, pursuant to Section 310 of the California Corporations
Code (the "CCC"), (ii) an amendment to the articles of incorporation,
pursuant to Section 902 of the CCC, (iii) a reorganization of the
corporation, pursuant to Section 1201 of the CCC, (iv) a voluntary
dissolution of the corporation, pursuant to Section 1900 of the CCC or (v)
a distribution in dissolution other than in accordance with the rights of
outstanding preferred shares pursuant to Section 2007 of the CCC, such
approval, other than unanimous approval by those entitled to vote, shall be
valid only if the general nature of the proposal so approved was stated in
the notice of meeting or in any written waiver of notice.
2.5. MANNER OF GIVING NOTICE. Notice of any meeting of
shareholders shall be given in writing either personally or by first-class
mail, or, if the corporation has outstanding shares held of record by five
hundred (500) or more persons (determined as provided in Section 605 of the
CCC) on the record date for the shareholders' meeting, notice may be sent
by third-class mail, or other means of written communication, addressed to
the shareholder at the address of such shareholder appearing on the books
of the corporation or given by the shareholder to the corporation for the
purpose of notice; or, if no such address appears or is given, at the place
where the principal executive office of the corporation is located or by
publication at least once in a newspaper of general circulation in the
county in which the principal executive office is located. Such notice
shall be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication.
If any notice (or any report referenced in Article VI of these
Bylaws) addressed to a shareholder at the address of such shareholder
appearing on the books of the corporation is returned to the corporation by
the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice or report to the shareholder
at such address, all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available for the
shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the
date of the giving of such notice or report to all other shareholders.
An affidavit of the mailing or other means of giving any notice
in accordance of the provisions of this Section 2.5, executed by the
secretary, assistant secretary or any transfer agent of the corporation
giving such notice, shall be prima facie evidence of the giving of the
notice or report.
2.6. QUORUM. Unless otherwise provided in the articles of
incorporation, the presence in person or by proxy of the holders of a
majority of the shares entitled to vote shall constitute a quorum at a
meeting of the shareholders. Except as provided in the immediately
succeeding sentence, if a quorum is present, the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or voting by classes
is required by the CCC or the articles of incorporation. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, if any action taken
(other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum. In the absence of a quorum, any meeting of
sharehold ers may be adjourned from time to time by the vote of a majority
of the shares represented either in person or by proxy, but no other
business may be transacted, except as provided in the immediately preceding
sentence.
2.7. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders'
meeting, whether annual or special, and whether or not a quorum is present,
may be adjourned from time to time by the vote of the majority of the
shares represented at such meeting, either in person or by proxy. When any
shareholders' meeting, whether annual or special, is adjourned to another
time or place, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from
the date set for the original meeting. At the adjourned meeting the
corporation may transact any business which might have been transacted at
the original meeting. Notice of any such adjourned meeting, if required,
shall be given to each shareholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Sections 2.4 and
2.5.
2.8. VOTING. The shareholders entitled to vote at any meeting
of shareholders shall be determined in accordance with the provisions of
Section 2.11, subject to the provisions of Chapter 7 of the CCC. Elections
for directors and voting on any other matter at a shareholders' meeting
need not be by ballot unless a shareholder demands election by ballot at
the meeting and before the voting begins. Except as provided in the last
paragraph of this Section 2.8, or as may be otherwise provided in the
articles of incorpora tion, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote of the
shareholders.
Any shareholder entitled to vote on any matter may vote part of
the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, other than elections to office,
but, if the shareholder fails to specify the number of shares such
shareholder is voting affirmatively, it will be conclusively presumed that
the shareholder's approving vote is with respect to all shares such
shareholder is entitled to vote.
At a shareholders' meeting involving the election of directors,
no shareholder shall be entitled to cumulate votes (i.e., cast for any
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among
any or all of the candidates as the shareholder thinks fit) for any
candidate or candidates unless such candidate or candidates names have been
placed in nomination prior to the voting and the shareholder has given
notice at such meeting prior to the voting of the shareholder's intention
to cumulate the shareholder's votes. If any one shareholder has given such
notice, all shareholders may cumulate their votes for candidates in
nomination. The candidates receiving the highest number of affirmative
votes of the shares entitled to be voted for them, up to the number of
directors to be elected, shall be elected; votes against a candidate and
votes withheld shall have no legal effect.
2.9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of the shareholders, whether annual or special,
however called and noticed, and wherever held, are as valid as though they
had been taken at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote, not present in
person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. Neither the
business to be transacted at nor the purpose of any meeting of the
shareholders need be specified in any written waiver of notice, consent to
the holding of the meeting or approval of the minutes thereof, unless
otherwise provided for in the articles of incorporation or these Bylaws,
except as provided in the second paragraph of Section 2.4 of these Bylaws.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Attendance of a person at a meeting constitutes a waiver of
notice of and presence at such meeting, except when the person objects, at
the beginning of the meeting, to the transaction of any business because
the meeting is not lawfully called or convened; provided, that attendance
at a meeting shall not constitute a waiver of any right to object to the
consideration of matters required by the CCC to be included in the notice
of such meeting but not so included, if such objection is expressly made at
the meeting.
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number
of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and
voted. Directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of
directors; provided, however, that the shareholders may elect a director at
any time to fill any vacancy not filled by the directors and not created by
the removal of such director, by written consent of the holders of a
majority of the outstanding shares entitled to vote for the election of
directors.
All such consents shall be filed with the secretary of the
corporation and shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders,
or a transferee of the shares, or a personal representative of the
shareholder, or their respective proxy holders, may revoke the consent by a
writing received by the secretary of the corporation before written
consents of the number of shares required to authorize the proposed action
have been filed with the secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing, the secretary shall give prompt notice to those
shareholders entitled to vote who have not consented in writing of the
taking of any corporate action approved by shareholders without a meeting
by less than unanimous written consent. Such notice shall be given in
accordance with Section 5 of this Article II. In the case of approval of
(i) contracts or transactions between the corporation and one or more of
its directors, or between the corpora tion and any corporation, firm or
association in which one or more of its directors has a material financial
interest, pursuant to Section 310 of the CCC, (ii) indemnification of
agents of the corporation, pursuant to Section 317 of the CCC, (iii) a
reorganization of the corporation, pursuant to Section 1201 of the CCC or
(iv) a distribution in dissolution other than in accordance with the rights
of outstanding preferred shares, pursuant to Section 2007 of the CCC, such
notice shall be given at least ten (10) days before the consummation of the
action authorized by such approval, unless the consents of all shareholders
entitled to vote have been solicited in writing.
2.11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. In order that the corporation may determine the shareholders
entitled to notice of any meeting or to vote, the board of directors may
fix, in advance, a record date, which shall not be more than sixty (60)
days nor less than ten (10) days prior to the date of such meeting nor more
than sixty (60) days before any other action. Shareholders at the close of
business on the record date are entitled to notice and to vote,
notwithstand ing any transfer of any shares on the books of the corporation
after the record date, except as otherwise provided in the CCC, the
articles of incorporation or by agreement.
A determination of shareholders of record entitled to notice of
or to vote at a meeting of shareholders shall apply to any adjournment of
the meeting unless the board of directors fixes a new record date for the
adjourned meeting, but the board of directors shall fix a new record date
if the meeting is adjourned for more than forty-five (45) days from the
date set for the original meeting.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at the close
of business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business day
next preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no
prior action by the board of directors has been taken, shall be the day on
which the first written consent is given.
(c) The record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when
prior action by the board of directors has been taken, shall be at the
close of business on the day on which the board adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in
Section 7.1 of these Bylaws.
2.12. PROXIES. Every person entitled to vote shares shall have
the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed to be signed if the shareholder's name
or other authorization is placed on the proxy (whether by manual signature,
typewriting, telegraphic or electronic transmission or otherwise) by the
shareholder or the shareholder's attorney in fact. A validly executed proxy
which does not state that it is irrevocable shall continue in full force
and effect until revoked by the person executing it prior to the vote
pursuant thereto, except as otherwise provided in this Section 2.12. Such
revocation may be effected by a writing delivered to the corporation
stating that the proxy is revoked or by a subsequent proxy executed by the
person executing the prior proxy and presented to the meeting, or as to any
meeting by attendance at such meeting and voting in person by the person
executing the proxy. The dates contained on the forms of proxy
presumptively determine the order of execution, regardless of the postmark
dates on the envelopes in which they are mailed. A proxy is not revoked by
the death or incapacity of the maker unless before the vote is counted,
written notice of such death or incapacity is received by the corporation.
No proxy shall be valid after the expiration of eleven (11) months from the
date thereof unless otherwise provided in the proxy. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by
the provisions of Sections 705(e) and 705(f) of the CCC.
2.13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders the board of directors may appoint inspectors of election to
act at the meeting and any adjournment thereof. If such inspectors are not
so appointed, or if any persons so appointed fail to appear or refuse to
act, the chairman of the meeting of shareholders may, and on the request of
any shareholder or a shareholder's proxy shall, appoint inspectors of
election (or persons to replace those who fail to appear or refuse to act)
at the meeting. The number of inspectors shall be either one (1) or three
(3). If appointed at a meeting on the request of one (1) or more
shareholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one (1) or three (3) inspectors are to be
appointed. If there are three (3) inspectors of election, the decision, act
or certificate of a majority is effective in all respects as the decision,
act or certificate of all.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and
effect of proxies, receive votes, ballots or consents, hear and determine
all challenges and questions in any way arising in connection with the
right to vote, count and tabulate all votes or consents, determine when the
polls shall close, determine the result and do such acts as may be proper
to conduct the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1. POWERS. Subject to the provisions of the CCC and any
limitations in the articles of incorporation and these Bylaws relating to
action required to be approved by the shareholders or by the outstanding
shares, or by a less than majority vote of a class or series of preferred
shares (if so provided in accordance with Section 402.5 of the CCC), the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of
directors. The board may delegate the management of the day-to-day
operation of the business of the corporation to a management company or
other person provided that the business and affairs of the corporation
shall be managed and all corporate powers shall be exercised under the
ultimate direction of the board of directors.
3.2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors of the corporation shall be not less than two (2) nor
more than seven (7), with the exact number of directors to be fixed, within
the limits specified, by a resolution amending such exact number, duly
adopted by the board or by the shareholders. Such maximum or minimum number
of directors, or a fixed board to a variable board or vice-versa, may be
changed only by a duly adopted amendment to the articles of incorpora tion
or to these Bylaws by the affirmative vote or written consent of the
holders of a majority of the outstanding shares entitled to vote (including
separate class votes, if so required by the CCC or the articles of
incorpora tion); provided, however, that a Bylaw or amendment to the
articles of incorporation reducing the fixed number or the minimum number
of directors to a number less than five cannot be adopted if the votes cast
against its adoption at a meeting or the shares not consenting in the case
of action by written consent are equal to more than 16-2/3% of the
outstanding shares entitled to vote thereon.
No reduction of the authorized number of directors shall have
the effect of removing any director before that director's term of office
expires.
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall
be elected at each annual meeting of shareholders to hold office until the
next annual meeting. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified, except in the
case of the death, resignation or removal of such director.
3.4. VACANCIES AND RESIGNATION. A vacancy or vacancies in the
board of directors shall be deemed to exist in the case of the death,
resignation, or removal of any director, or if the authorized number of
directors is increased (by the board of directors or shareholders), or if
the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or
convicted of a felony, or if the shareholders fail, at any meeting of
shareholders at which any director or directors are elected, to elect the
full authorized number of directors to be elected at that meeting.
Unless otherwise provided in the articles of incorporation,
vacancies on the board of directors, except for a vacancy created by the
removal of a director, may be filled by approval of the board or, if the
number of directors then in office is less than a quorum, by (i) the
unanimous written consent of the directors then in office, (ii) the
affirmative vote of a majority of the directors then in office at a meeting
held pursuant to notice or waivers of notice complying with Section 307 of
the CCC or (iii) a sole remaining director. Unless the articles of
incorporation or a Bylaw adopted by the shareholders provide that the board
of directors may fill vacancies occurring in the board of directors by
reason of the removal of directors, such vacancies may be filled only by
approval of the shareholders.
The shareholders may elect a director at any time to fill any
vacancy not filled by the directors. Any such election by written consent
other than to fill a vacancy created by removal requires the consent of a
majority of the outstanding shares entitled to vote thereon. A director may
not be elected by written consent to fill a vacancy created by removal
except by unanimous written consent of all shares entitled to vote for the
election of directors.
Any director may resign effective upon giving written notice to
the chairman of the board, the president, the secretary or the board of
directors, unless the notice specifies a later time for the effectiveness
of such resignation. If the resignation of a director is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
3.5. REMOVAL. Any or all of the directors may be removed from
office without cause if the removal is approved by the outstanding shares,
subject to the following: (i) no director may be removed (unless the entire
board is removed) when the votes cast against removal, or not consenting in
writing to the removal, would be sufficient to elect the director if voted
cumulatively at an election at which the same total number of votes were
cast (or, if the action is taken by written consent, all shares entitled to
vote were voted) and the entire number of directors authorized at the time
of the director's most recent election were then being elected; (ii) when
by the provisions of the articles of incorporation the holders of the
shares of any class or series, voting as a class or series, are entitled to
elect one or more directors, any director so elected may be removed only by
the applicable vote of the holders of the shares of that class or series;
and (iii) any reduction of the authorized number of directors or amendment
reducing the number of classes of directors does not remove any director
prior to the expiration of the director's term of office.
3.6. PLACE OF MEETINGS AND TELEPHONIC, ETC. MEETING. Regular
meetings of the board of directors may be held at any place within or
outside the State of California that has been designated from time to time
by resolution of the board of directors. In the absence of such
designation, regular meetings shall be held at the principal executive
office of the corporation. Special meetings of the board of directors shall
be held at any place within or outside the State of California that has
been designated in the notice of the meeting or, if not stated in the
notice or if there is no notice, at the principal executive office of the
corporation.
Members of the board of directors may participate in a meeting
through the use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear
one another. Participation in a meeting pursuant to this paragraph of
Section 3.6 constitutes presence in person at such meeting.
3.7. REGULAR MEETINGS. Regular meetings of the board of
directors may be held without notice if the time and place of the meetings
are fixed by the board of directors or these Bylaws.
3.8. SPECIAL MEETINGS; NOTICE. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the
chairman of the board or the president or any vice president or the
secretary or any two directors. Special meetings of the board of directors
shall be held upon four (4) days' notice by mail or forty-eight (48) hours'
notice delivered personally or by telephone, including a voice messaging
system or other system or technology designed to record and communicate
messages, telegraph, facsimile, electronic mail or other electronic means.
3.9. WAIVER OF NOTICE. Notice of a meeting need not be given to
a director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting,
or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to that director. These waivers, consents
and approvals shall be filed with the corporate records or made a part of
the minutes of the meeting. A notice, or waiver of notice, need not specify
the purpose of any regular or special meeting of the board of directors.
3.10. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the board of directors for the transaction of
business, except to adjourn as provided by Section 3.11 of these Bylaws. An
act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present is the act of the board of
directors, subject to the provisions of Section 310 of the CCC (approval of
contracts in which a director has a direct or indirect material financial
interest) and Section 317(e) of the CCC (indemnification of agents of the
corporation). A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any
action taken is approved by at least a majority of the required quorum for
that meeting.
3.11. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and
place. If the meeting is adjourned for more than twenty- four (24) hours,
notice of an adjournment to another time or place shall be given prior to
the time of the adjourned meeting to the directors who were not present at
the time of adjournment.
3.12. ACTION WITHOUT A MEETING. An action required or permitted
to be taken by the board may be taken without a meeting, if all members of
the board shall individually or collectively consent in writing to that
action. The written consent or consents shall be filed with the minutes of
the proceedings of the board of directors. The action by written consent
shall have the same force and effect as a unanimous vote of the directors.
3.13. FEES AND COMPENSATION OF DIRECTORS. Directors and members
of committees may receive such compensation, if any, for their services and
such reimbursement of expenses as may be fixed or determined by resolution
of the board of directors. This Section 3.13 shall not be construed to
preclude any director from serving the corporation in any other capacity as
an officer, agent, employee or otherwise and receiving compensation for
those services.
3.14. COMMITTEES. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate one
or more committees, each consisting of two or more directors, to serve at
the pleasure of the board of directors. The board of directors may
designate one or more directors as alternate members of any committee, who
may replace any absent member at any meeting of the committee. The
appointment of members or alternate members of a committee requires the
vote of a majority of the authorized number of directors. Any such
committee, to the extent provided in the resolution of the board of
directors, shall have the authority of the board of directors, except with
respect to:
(i) the approval of any action which, under the CCC, also
requires shareholders' approval or the approval of the
outstanding shares;
(ii) the filling of vacancies on the board of directors or on
any committee;
(iii) the fixing of compensation of the directors for serving
on the board or on any committee;
(iv) the amendment or repeal of these Bylaws or the adoption
of new Bylaws;
(v) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable
or repealable;
(vi) a distribution, except at a rate, in a periodic amount or
within a price range set forth in the articles of
incorporation or determined by the board of directors;
and
(vii) the appointment of other committees of the board of
directors or the members thereof.
Meetings and actions of committees shall be governed by, and
held and taken in accordance with, the provisions of Article III of these
Bylaws, with such changes in the context of these Bylaws as is necessary to
substitute the committee and its members for the board of directors and its
members; provided, however, that the time of regular meetings of committees
may be determined either by resolution of the board of directors or by
resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of
special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee.
The board of directors may adopt rules for the government of any committee
not inconsistent with the provisions of these Bylaws.
3.15. APPROVAL OF LOANS TO OFFICERS. If these Bylaws have been
approved by the corporation's shareholders in accordance with the CCC, the
corporation may, upon the approval of the Board of Directors alone, make
loans of money or property to, or guarantee the obligations of, any officer
of the corporation or of its parent, if any, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or
guarantees; provided, that (i) the Board of Directors determines that such
a loan or guaranty or plan may reasonably be expected to benefit the
corporation, (ii) the corporation has outstanding shares held of record by
100 or more persons (determined as provided in Section 605 of the CCC) on
the date of the approval by the Board of Directors and (iii) the approval
of the Board of Directors is by a vote sufficient without counting the vote
of any interested director or directors. Notwithstanding the foregoing, the
corpora tion shall have the power to make loans permitted by the CCC.
ARTICLE IV
OFFICERS
4.1. OFFICERS. The corporation shall have a chairman of the
board or a president or both, a secretary, a chief financial officer and
such other officers with such titles and duties as shall be determined by
the board of directors and as may be necessary to enable it to sign
instruments and share certificates. The president, or if there is no
president the chairman of the board, is the general manager and chief
executive officer of the corporation, unless otherwise provided in the
articles of incorporation or these Bylaws. Any number of offices may be
held by the same person unless the articles of incorporation or these
Bylaws provide otherwise. The board of directors may appoint, or may
empower the chairman of the board or the president to appoint, such other
officers as the business of the corporation may require, each of whom shall
hold office for such period, have such authority and perform such duties as
are provided in these Bylaws or as the board of directors may from time to
time determine.
4.2. ELECTION OF OFFICERS. Except as otherwise provided by the
articles of incorporation or these Bylaws, officers shall be chosen by the
board of directors and serve at the pleasure of the board of directors,
subject to the rights, if any, of an officer under contract of employment.
4.3. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, all
officers serve at the pleasure of the board of directors and any officer
may be removed, either with or without cause, by the board of directors at
any regular or special meeting of the board of directors or, except in case
of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors. Any
officer may resign at any time upon written notice to the corporation
without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party. Any such resignation shall take
effect at the date of the receipt of that notice or at any later time
specified in that notice, and, unless otherwise specified in that notice,
the acceptance of the resignation shall not be necessary to make it
effective.
4.4. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these Bylaws for regular appointments to
such offices.
4.5. CHAIRMAN OF THE BOARD. The chairman of the board of
directors, if such an officer be elected, shall, if present, preside at
meetings of the board of directors and exercise and perform such other
powers and duties as may be from time to time assigned by the board of
directors or prescribed by these Bylaws. If there is no president, the
chairman of the board of directors shall in addition be the chief executive
officer of the corporation and shall have the powers and duties prescribed
in Section 4.6 of these Bylaws.
4.6. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the board of directors to the chairman of the board, if
there be such an officer, the president shall be the chief executive
officer of the corporation, and shall, subject to the control of the board
of directors, have general supervision, direction and control of the
business and the officers of the corporation. The president shall preside
at all meetings of shareholders and, in the absence or nonexistence of the
chairman of the board, at all meetings of the board of directors. He shall
have the general powers and duties of management usually vested in the
office of president of a corporation, and shall have such other powers and
duties as may be prescribed by the board of directors or these Bylaws.
4.7. VICE PRESIDENTS. In the absence or disability of the
president (or chairman of the board, if there is no office of president),
the vice presidents, if any, in order of their rank as fixed by the board
of directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president, and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the board of directors or these Bylaws, the president or
the chairman of the board, if there is no president.
4.8. SECRETARY. The secretary shall keep or cause to be kept,
at the principal executive office of the corporation or such other place as
the board of directors may order, a book of minutes of all meetings and
actions of directors, committees of directors and shareholders, with the
time and place of each meeting, whether regular or special, and, if
special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present
or represented at shareholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a share register, or a duplicate
share register, showing the names of all shareholders and their addresses,
the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation
of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors required by
these Bylaws or by the CCC to be given, and shall keep the seal of the
corporation, if one be adopted, in safe custody, and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or by these Bylaws.
4.9. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions
of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and
shares. The books of account shall be open at all reasonable time to
inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. The chief
financial officer shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president (or
chairman of the board, if there is no president) and directors, whenever
they request it, an account of all of his or her transactions as chief
financial officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be
prescribed by the board of directors or these Bylaws.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
5.1. INDEMNIFICATION OF DIRECTORS. The corporation shall, to
the maximum extent and in the manner permitted by the CCC, indemnify each
of its directors against expenses (as defined in Section 317(a) of the
CCC), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding (as defined in
Section 317(a) of the CCC), arising by reason of the fact that such person
is or was a director of the corporation. For purposes of this Article V, a
"director" of the corporation includes any person (i) who is or was a
director of the corporation, (ii) who is or was serving at the request of
the corporation as a director of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
5.2. INDEMNIFICATION OF OTHERS. The corporation shall have the
power, to the extent and in the manner permitted by the CCC, to indemnify
each of its employees, officers and agents (other than directors) against
expenses (as defined in Section 317(a) of the CCC), judgments, fines,
settlements and other amounts actually and reasonably incurred in
connection with any proceeding (as defined in Section 317(a) of the CCC),
arising by reason of the fact that such person is or was an employee,
officer or agent of the corporation. For purposes of this Article V, an
"employee" or "officer" or "agent" of the corporation (other than a
director) includes any person (i) who is or was an employee, officer or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee, officer or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or (iii)
who was an employee, officer, or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
5.3. PAYMENT OF EXPENSES IN ADVANCE. Expenses and attorneys'
fees incurred in defending any civil or criminal action or proceeding for
which indemnification is required pursuant to Section 5.1, or if otherwise
approved by the board of directors, shall be paid by the corporation in
advance of the final disposition of such action or proceeding upon receipt
of an undertaking by or on behalf of the indemnified party to repay such
amount if it shall ultimately be determined that the indemnified party is
not entitled to be indemnified as authorized in this Article V.
5.4. INDEMNITY NOT EXCLUSIVE. The indemnification provided by
this Article V shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any Bylaw, agreement,
vote of shareholders or directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. The rights to indemnity hereunder shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
5.5. INSURANCE INDEMNIFICATION. The corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation against any
liability asserted against or incurred by such person in such capacity or
arising out of that person's status as such, whether or not the corporation
would have the power to indemnify that person against such liability under
the provisions of this Article V.
5.6. CONFLICTS. No indemnification or advance shall be made
under this Article V, except where such indemnification or advance is
mandated by law or the order, judgment or decree of any court of competent
jurisdiction, in any circumstances where it appears:
(i) that it would be inconsistent with a provision of the
articles of incorporation, these Bylaws, a resolution of
the shareholders or an agreement in effect at the time of
the accrual of the alleged cause of action asserted in
the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise
limits indemnification; or
(ii) that it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
5.7. RIGHT TO BRING SUIT. If a claim under this Article V is
not paid in full by the corporation within 90 days after a written claim
has been received by the corporation (either because the claim is denied or
because no determination is made), the claimant may at any time thereafter
bring suit against the corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. The corporation
shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible
under the CCC for the corporation to indemnify the claimant for the claim.
Neither the failure of the corporation (including its board of directors,
independent legal counsel or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the
claimant is permissible in the circum stances because he or she has met the
applicable standard of conduct, if any, nor an actual determination by the
corporation (including its board of directors, independent legal counsel or
its shareholders) that the claimant has not met the applicable standard of
conduct, shall be a defense to such action or create a presumption for the
purposes of such action that the claimant has not met the applicable
standard of conduct.
5.8. INDEMNITY AGREEMENTS. The board of directors is authorized
to enter into a contract with any director, officer, employee or agent of
the corporation, or any person who is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
including employee benefit plans, or any person who was a director,
officer, employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of
such predecessor corporation, providing for indemnification rights
equivalent to or, if the board of directors so determines and to the extent
permitted by applicable law, greater than, those provided for in this
Article V.
5.9. AMENDMENT, REPEAL OR MODIFICATION. Any amendment, repeal or
modification of any provision of this Article V shall not adversely affect
any right or protection of a director, officer, employee or agent of the
corporation existing at the time of such amendment, repeal or modification.
ARTICLE VI
RECORDS AND REPORTS
6.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep either at its principal executive office or at the
office of its transfer agent or registrar (if either be appointed) a record
of its shareholders listing the names and addresses of all shareholders and
the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding voting shares
of the corporation or who hold at least one percent (1%) of such voting
shares and have filed a Schedule 14A with the United States Securities and
Exchange Commission, shall have an absolute right to do either or both of
the following: (i) inspect and copy the record of shareholders' names,
addresses and shareholdings during usual business hours upon five (5) days'
prior written demand upon the corporation or (ii) obtain from the transfer
agent of the corporation, upon written demand and upon the tender of such
transfer agent's usual charges for such list (the amount of which charges
shall be stated to the shareholder by the transfer agent upon request), a
list of the shareholders' names and addresses, who are entitled to vote for
the election of directors, and their shareholdings, as of the most recent
record date for which it has been compiled or as of a date specified by the
shareholder subsequent to the date of demand. The list shall be made
available on or before the later of five (5) business days after the demand
is received or the date specified therein as the date as of which the list
is to be compiled.
The record of shareholders shall also be open to inspection and
copying by a shareholder or holder of a voting trust certificate at any
time during usual business hours upon written demand on the corporation,
for a purpose reasonably related to the holder's interests as a shareholder
or holder of a voting trust certificate.
Any inspection and copying under this Section 6.1 may be made
in person or by an agent or attorney of the shareholder or holder of a
voting trust certificate making the demand.
6.2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation
shall keep at its principal executive office or, if its principal executive
office is not in the State of California, at its principal business office
in California, the original or a copy of these Bylaws as amended to date,
which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then it shall, upon the written
request of any shareholder, furnish to such shareholder a copy of these
Bylaws as amended to date.
6.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders
and the board of directors, and committees of the board of directors, shall
be kept at such place or places as are designated by the board of directors
or, in absence of such designation, at the principal executive office of
the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand on the corporation of any shareholder or
holder of a voting trust certificate at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests
as a shareholder or as the holder of a voting trust certificate. Such
inspection by a shareholder or holder of a voting trust certificate may be
made in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts. Such rights of inspection
shall extend to the records of each subsidiary corporation of the
corporation.
6. 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect and copy all books,
records and documents of every kind and to inspect the physical properties
of the corporation and each of its subsidiary corporations, domestic or
foreign. Such inspection by a director may be made in person or by an agent
or attorney and the right of inspection includes the right to copy and make
extracts.
6.5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER. The board of
directors shall cause an annual report to be sent to the shareholders not
later than one hundred twenty (120) days after the close of the fiscal year
adopted by the corporation. Such report shall be sent to the shareholders
at least fifteen (15) (or, if sent by third-class mail, thirty-five (35))
days prior to the annual meeting of shareholders to be held during the next
fiscal year and in the manner specified in Section 2.5 of these Bylaws for
giving notice to shareholders of the corporation.
The annual report shall contain a balance sheet as of the end
of the fiscal year and an income statement and statement of changes in
financial position for the fiscal year, accompanied by any report thereon
of independent accountants or, if there is no such report, the certificate
of an authorized officer of the corporation that the statements were
prepared without audit from the books and records of the corporation.
The foregoing requirement of an annual report shall be waived
so long as the shares of the corporation are held by fewer than one hundred
(100) holders of record.
6.6. FINANCIAL STATEMENTS. If no annual report for the fiscal
year has been sent to shareholders, then the corporation shall, upon the
written request of any shareholder made more than one hundred twenty (120)
days after the close of such fiscal year, deliver or mail to the person
making the request, within thirty (30) days thereafter, a copy of the
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year.
A shareholder or shareholders holding at least five percent
(5%) of the outstanding shares of any class of stock of the corporation may
make a written request to the corporation for an income statement of the
corporation for the three-month, six-month or nine-month period of the
current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of that
period. The statements shall be delivered or mailed to the person making
the request within thirty (30) days thereafter. A copy of the statements
shall be kept on file in the principal office of the corporation for twelve
(12) months and it shall be exhibited at all reasonable times to any
shareholder demanding an examination of the statements or a copy shall be
mailed to the shareholder. If the corporation has not sent to the
shareholders its annual report for the last fiscal year, the statements
referred to in the second paragraph of Section 6.5 shall likewise be
delivered or mailed to the shareholder or shareholders within thirty (30)
days after the request.
The quarterly income statements and balance sheets referred to
in this Section 6.6 shall be accompanied by the report thereon, if any, of
any independent accountants engaged by the corporation or the certificate
of an authorized officer of the corporation that the financial statements
were prepared without audit from the books and records of the corporation.
6.7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the board of directors or
the president or a vice president, is authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of
this corporation. The authority herein granted may be exercised either by
such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by such person having the authority.
ARTICLE VII
GENERAL MATTERS
7.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than with
respect to notice or voting at a shareholders meeting or action by
shareholders by written consent without a meeting), the board of directors
may fix, in advance, a record date, which shall not be more than sixty (60)
days prior to any such action. Only shareholders of record at the close of
business on the record date are entitled to receive the dividend,
distribution or allotment of rights, or to exercise the rights, as the case
may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the
articles of incorporation, the CCC or by agreement.
If the board of directors does not so fix a record date, then
the record date for determining shareholders for any such purpose shall be
at the close of business on the date on which the board of directors adopts
the resolution relating thereto or the sixtieth (60th) day prior to the
date of that action, whichever is later.
7.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS. From time to
time, the board of directors shall determine by resolution which person or
persons may sign or endorse all checks, drafts, other orders for payment of
money, notes or other evidences of indebtedness that are issued in the name
of or payable to the corporation, and only the persons so authorized shall
sign or endorse those instruments.
7.3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED. The
board of directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or
within the agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the corporation by any contract or
arrangement or to pledge its credit or to render it liable for any purpose
or for any amount.
7.4. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of the corporation shall be issued to each shareholder when any of
such shares are fully paid. The board of directors may authorize the
issuance of certificates for shares partly paid provided that these
certificates shall state the total amount of the consideration to be paid
for them and the amount actually paid. All certificates shall be signed in
the name of the corporation by the chairman of the board or the president
or a vice president and by the chief financial officer or an assistant
treasurer or the secretary or an assistance secretary, certifying the
number of shares and the class or series of shares owned by the
shareholder. Any or all of the signatures on the certificate may be by
facsimile.
In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed on a certificate has ceased to
be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if that
person were an officer, transfer agent or registrar at the date of issue.
7.5. LOST CERTIFICATES. Except as provided in this Section 7.5,
no new certificates for shares shall be issued to replace a previously
issued certificate unless the latter is surrendered to the corporation or
its transfer agent or registrar and cancelled at the same time. The board
of directors may, in case any share certificate or certificate for any
other security is lost, stolen or destroyed (as evidenced by a written
affidavit or affirmation of such fact), authorize the issuance of
replacement certificates on such terms and conditions as the board of
directors may require; the board of directors may require indemnification
of the corporation secured by a bond or other adequate security sufficient
to protect the corporation against any claim that may be made against it,
including any expense or liability, on account of the alleged loss, theft
or destruction of the certificate or the issuance of the replacement
certificate.
7. 6. CONSTRUCTION; DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
in the CCC shall govern the construction of these Bylaws. Without limiting
the generality of this provision, the singular number includes the plural,
the plural number includes the singular, and the term "person" includes
both a corporation and a natural person.
ARTICLE VIII
AMENDMENTS
8.1. AMENDMENT BY SHAREHOLDERS. New Bylaws may be adopted, or
these Bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the articles of incorporation set forth the number of
authorized directors, then the authorized number of directors may be
changed only by an amendment of the articles of incorporation.
8.2 AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 8.1 of these Bylaws, Bylaws, other than
a Bylaw or an amendment of a Bylaw changing the authorized number of
directors (except to fix the authorized number of directors pursuant to a
Bylaws providing for a variable number of directors), may be adopted,
amended or repealed by the board of directors.
8.3. RECORD OF AMENDMENTS. Whenever an amendment or new Bylaw
is adopted, it shall be copied in the book of minutes with the original
Bylaws. If any Bylaw is repealed, the fact of repeal, with the date of the
meeting at which the repeal was enacted or written consent was filed, shall
be stated in said book.
ARTICLE IX
INTERPRETATION
Reference in these Bylaws to any provision of the CCC shall be
deemed to include all amendments thereof.
EXHIBIT J
[Date]
[Name]
[Address]
[City, State, Zip]
Dear [Name]:
I am delighted to make you this offer to join Phone.com, Inc. Each person at
Phone.com will help shape our values and direction; each person will add his or
her unique strengths and perspectives.
The offer is for you to join us in a management position as Director of [ ],
Carrier Applications Group, reporting to Andy Laursen. Your monthly salary and
bonus will remain the same with the bonus component based upon your performance
in achieving defined objectives in your new position. As an employee, you are
also eligible to receive our standard employee benefits.
You should be aware that your employment with Phone.com is for no specified
period and constitutes "at will" employment. As a result, you are free to resign
at any time, for any reason or for no reason. Similarly, Phone.com is free to
conclude its employment relationship with you at any time, with or without
cause.
You are invited to attend Day One Orientation during which you will learn more
about Phone.com's business, culture and benefits. Orientation will be held from
9:00AM to 11:00AM in our offices at 600 Chesapeake Drive in the training room.
For purposes of Federal Immigration Law, you will be required to provide to the
Company documentary evidence of your identity and eligibility for employment in
the United States. Such documentation must be provided to us within three (3)
business days of your date of hire, or our employment relationship with you may
be terminated.
As a condition to your employment and concurrently with this offer letter, you
will also be required to sign a Confidential Information and Invention
Assignment Agreement, a form of which is attached hereto as Exhibit A, in which
you will be asked to protect the company's confidential information and to
assign to the company any inventions produced in the course of your work.
Please review these terms to make sure they are consistent with your
understanding. If so, please sign this offer letter and return to me no later
than [ ].
Your acceptance of this offer represents a unique opportunity for Phone.com both
to grow and to succeed. I want to thank you for the commitment you have made to
our common vision and look forward to working with you.
Accepted by:
- -------------------- -------------------------
Alan Black [Name]
CFO
EXHIBIT A TO EXHIBIT J
PHONE.COM, INC.
FORM OF CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my becoming employed (or my employment being
continued) by or retained as a consultant (or my consulting relationship being
continued) by Phone.com, Inc. a Delaware corporation or any of its current or
future subsidiaries, affiliates, successors or assigns (collectively, the
"Company"), and in consideration of my employment or consulting relationship
with the Company and my receipt of the compensation now and hereafter paid to me
by the Company, I agree to the following:
1. EMPLOYMENT OR CONSULTING RELATIONSHIP. I understand and acknowledge
that this Confidential Information and Invention Assignment Agreement (this
"Agreement") does not alter, amend or expand upon any rights I may have to
continue in the employ of, or in a consulting relationship with, or the duration
of my employment or consulting relationship with, the Company under any existing
agreements between the Company and me or under applicable law. Any employment or
consulting relationship between the Company and me, whether commenced prior to
or upon the date of this Agreement, shall be referred to herein as the
"Relationship."
2. AT-WILL RELATIONSHIP. I understand and acknowledge that my
Relationship with the Company is and shall continue to be at-will, as defined
under applicable law, meaning that either I or the Company may terminate the
Relationship at any time for any reason or no reason, without further obligation
or liability.
3. CONFIDENTIAL INFORMATION.
(a) COMPANY INFORMATION. I agree at all times during the term
of my Relationship with the Company and thereafter, to hold in strictest
confidence, and not to use, except for the benefit of the Company, or to
disclose to any person, firm, corporation or other entity without written
authorization of the Board of Directors of the Company, any Confidential
Information of the Company which I obtain or create. I further agree not to make
copies of such Confidential Information except as authorized by the Company. I
understand that "Confidential Information" means any Company proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, suppliers, customer
lists and customers (including, but not limited to, customers of the Company on
whom I called or with whom I became acquainted during the Relationship), prices
and costs, markets, software, developments, inventions, laboratory notebooks,
processes, formulas, technology, designs, drawings, engineering, hardware
configuration information, marketing, licenses, finances, budgets or other
business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment or created by me during the period of the Relationship, whether or not
during working hours. I understand that "Confidential Information" includes, but
is not limited to, information pertaining to any aspects of the Company's
business which is either information not known by actual or potential
competitors of the Company or is proprietary information of the Company or its
customers or suppliers, whether of a technical nature or otherwise. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly and widely known and made generally available
through no wrongful act of mine or of others who were under confidentiality
obligations as to the item or items involved.
(b) FORMER EMPLOYER INFORMATION. I represent that my
performance of all terms of this Agreement as an employee or consultant of the
Company has not breached and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by me in confidence or trust
prior or subsequent to the commencement of my Relationship with the Company, and
I will not disclose to the Company, or induce the Company to use, any
inventions, confidential or proprietary information or material belonging to any
previous employer or any other party.
(c) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive confidential or proprietary information
from third parties subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
4. INVENTIONS.
(a) INVENTIONS RETAINED AND LICENSED. I have attached hereto,
as Exhibit A, a list describing with particularity all inventions, original
works of authorship, developments, improvements, and trade secrets which were
made by me prior to the commencement of the Relationship (collectively referred
to as "Prior Inventions"), which belong solely to me or belong to me jointly
with another, which relate in any way to any of the Company's proposed
businesses, products or research and development, and which are not assigned to
the Company hereunder; or, if no such list is attached, I represent that there
are no such Prior Inventions. If, in the course of my Relationship with the
Company, I incorporate into a Company product, process or machine a Prior
Invention owned by me or in which I have an interest, the Company is hereby
granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual,
worldwide license (with the right to sublicense) to make, have made, copy,
modify, make derivative works of, use, sell and otherwise distribute such Prior
Invention as part of or in connection with such product, process or machine.
(b) ASSIGNMENT OF INVENTIONS. I agree that I will promptly
make full written disclosure to the Company, will hold in trust for the sole
right and benefit of the Company, and hereby assign to the Company, or its
designee, all my right, title and interest throughout the world in and to any
and all inventions, original works of authorship, developments, concepts,
know-how, improvements or trade secrets, whether or not patentable or
registrable under copyright or similar laws, which I may solely or jointly
conceive or develop or reduce to practice, or cause to be conceived or developed
or reduced to practice, during the period of time in which I am employed by or a
consultant of the Company and which relate to the proposed businesses, products,
or research and development of the Company (collectively referred to as
"Inventions"), except as provided in Section 4(e) below. I further acknowledge
that all Inventions, original works of authorship, developments, concepts,
know-how, improvements or trade secrets which are made by me (solely or jointly
with others) within the scope of and during the period of my Relationship with
the Company are "works made for hire" (to the greatest extent permitted by
applicable law) and are compensated by my salary (if I am an employee) or by
such amounts paid to me under any applicable consulting agreement or consulting
arrangements (if I am a consultant), unless regulated otherwise by the mandatory
law of the state of California.
(c) MAINTENANCE OF RECORDS. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my Relationship with the Company. The
records may be in the form of notes, sketches, drawings, flow charts, electronic
data or recordings, laboratory notebooks, and any other format. The records will
be available to and remain the sole property of the Company at all times. I
agree not to remove such records from the Company's place of business except as
expressly permitted by Company policy which may, from time to time, be revised
at the sole election of the Company for the purpose of furthering the Company's
business.
(d) PATENT AND COPYRIGHT RIGHTS. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents,
trademarks, mask work rights, moral rights, or other intellectual property
rights relating thereto in any and all countries, including the disclosure to
the Company of all pertinent information and data with respect thereto, the
execution of all applications, specifications, oaths, assignments, recordations,
and all other instruments which the Company shall deem necessary in order to
apply for, obtain, maintain and transfer such rights and in order to assign and
convey to the Company, its successors, assigns and nominees the sole and
exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement until the expiration of the
last such intellectual property right to expire in any country of the world. If
the Company is unable because of my mental or physical incapacity or
unavailability or for any other reason to secure my signature to apply for or to
pursue any application for any United States or foreign patents or copyright
registrations covering Inventions or original works of authorship assigned to
the Company as above, then I hereby irrevocably designate and appoint the
Company and its duly authorized officers and agents as my agent and attorney in
fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
application for, prosecution, issuance, maintenance or transfer of letters
patent or copyright registrations thereon with the same legal force and effect
as if originally executed by me. I hereby waive and irrevocably quitclaim to the
Company any and all claims, of any nature whatsoever, which I now or hereafter
have for infringement of any and all proprietary rights assigned to the Company.
(e) EXCEPTION TO ASSIGNMENTS. I understand that the provisions
of this Agreement requiring assignment of Inventions to the Company do not apply
to any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet such provisions and
are not otherwise disclosed on Exhibit A.
5. RETURNING COMPANY DOCUMENTS. I agree that, at the time of
termination of my Relationship with the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any and
all devices, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, laboratory notebooks, materials,
flow charts, equipment, other documents or property, or reproductions of any
aforementioned items developed by me pursuant to the Relationship or otherwise
belonging to the Company, its successors or assigns. I further agree that to any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. In the
event of the termination of the Relationship, I agree to sign and deliver the
"Termination Certification" attached hereto as Exhibit C.
6. NON-COMPETITION AGREEMENT. I agree that during my employment with
the Company and for eighteen (18) months thereafter, I will not as an
individual, proprietor, partner, stockholder, officer, employee, director,
consultant, joint venturer, investor, lender, or in any other capacity
whatsoever (except as the passive holder of not more than one percent of the
total outstanding stock of a publicly-held company), engage anywhere in the
world in the business of developing, producing, marketing or selling products or
services competitive with any kind or type of products or services which were
developed or were being (or were planned to be) developed, produced, marketed or
sold by the Company while I had a Relationship with the Company. If any
restriction set forth in this Section 6 is found by any court to be
unenforceable because it extends for too long a period of time, or over too
great a range of activities, or over too broad a geographic area, the
restriction shall be interpreted to extend only over the maximum period of time,
range of activities or geographic area which the court finds to be enforceable.
I acknowledge that the restrictions contained in this Section 6 are appropriate
for the protection of the business and goodwill of the Company and are
considered by me to be reasonable for such purpose.
7. NOTIFICATION TO OTHER PARTIES.
(a) EMPLOYEES. In the event that I leave the employ of the
Company, I hereby consent to notification by the Company to my new employer
about my rights and obligations under this Agreement.
(b) CONSULTANTS. I hereby grant consent to notification by the
Company to any other parties besides the Company with whom I maintain a
consulting relationship, including parties with whom such relationship commences
after the effective date of this Agreement, about my rights and obligations
under this Agreement.
8. SOLICITATION OF EMPLOYEES, CONSULTANTS AND OTHER PARTIES. I agree
that during the term of my Relationship with the Company, and for a period of
eighteen (18) months immediately following the termination of my Relationship
with the Company for any reason, whether with or without cause, I shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees or consultants to terminate their relationship with the
Company, or take away such employees or consultants, or attempt to solicit,
induce, recruit, encourage or take away employees or consultants of the Company,
either for myself or for any other person or entity. Further, for a period of
eighteen (18) months following termination of my Relationship with the Company
for any reason, with or without cause, I shall not solicit any licensor to or
customer of the Company or licensee of the Company's products, in each case,
that are known to me, with respect to any business, products or services that
are competitive to the products or services offered by the Company or under
development as of the date of termination of my Relationship with the Company.
9. REPRESENTATIONS AND COVENANTS.
(a) FACILITATION OF AGREEMENT. I agree to execute promptly any
proper oath or verify any proper document required to carry out the terms of
this Agreement upon the Company's written request to do so.
(b) CONFLICTS. I represent that my performance of all the
terms of this Agreement will not breach any agreement to keep in confidence
proprietary information acquired by me in confidence or in trust prior to
commencement of my Relationship with the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict with any
of the provisions of this Agreement.
(c) VOLUNTARY EXECUTION. I certify and acknowledge that I have
carefully read all of the provisions of this Agreement and that I understand and
will fully and faithfully comply with such provisions.
10. GENERAL PROVISIONS.
(a) GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(b) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the Company and me relating to the subject
matter herein and merges all prior discussions between us. No modification or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, obligations, rights or compensation
will not affect the validity or scope of this Agreement.
(c) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed void by law, then the remaining provisions will continue in
full force and effect.
(d) SUCCESSORS AND ASSIGNS. This Agreement will be binding
upon my heirs, executors, administrators and other legal representatives and
will be for the benefit of the Company, its successors, and its assigns.
(e) SURVIVAL. The provisions of this Agreement shall survive
the termination of the Relationship and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
(f) ADVICE OF COUNSEL. I ACKNOWLEDGE THAT, IN EXECUTING THIS
AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL
COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF
THE DRAFTING OR PREPARATION HEREOF.
The parties have executed this Agreement on the respective dates set
forth below:
COMPANY: EMPLOYEE:
PHONE.COM, Inc. an Individual:
Signature Signature
By:
Printed Name
Title:
Date: Date:
-----------------------------
Address: 800 Chesapeake Drive Address:
Redwood City, CA 94063
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
EXCLUDED FROM SECTION 4
Identifying Number
Title Date or Brief Description
___ No inventions or improvements
___ Additional Sheets Attached
Signature of Employee/Consultant:_________________________________
Print Name of Employee/Consultant:________________________________
Date:_____________________________________________________________
EXHIBIT B
Section 2870 of the California Labor Code is as follows:
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice
of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
EXHIBIT C
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, laboratory
notebooks, flow charts, materials, equipment, other documents or property, or
copies or reproductions of any aforementioned items belonging to Phone.com,
Inc., its subsidiaries, affiliates, successors or assigns (together the
"Company").
I further certify that I have complied with all the terms of the
Company's Confidential Information and Invention Assignment Agreement (the
"Agreement") signed by me, including the reporting of any inventions and
original works of authorship (as defined therein), conceived or made by me
(solely or jointly with others) covered by that agreement.
I further agree that, in compliance with the Confidential Information
and Invention Assignment Agreement, I will preserve as confidential all trade
secrets, confidential knowledge, data or other proprietary information relating
to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for eighteen (18) months from the date of this
Certificate, I will not as an individual, proprietor, partner, stockholder,
officer, employee, director, consultant, joint venturer, investor, lender, or in
any other capacity whatsoever (except as the passive holder of not more than one
percent of the total outstanding stock of a publicly-held company), engage
anywhere in the world in the business of developing, producing, marketing or
selling products or services competitive with any kind or type of products or
services which were developed or were being (or were planned to be) developed,
produced, marketed or sold by the Company while I had a Relationship (as defined
in the Agreement) with the Company.
I further agree that for eighteen (18) months from the date of this
Certificate, I shall not either directly or indirectly solicit, induce, recruit
or encourage any of the Company's employees or consultants to terminate their
relationship with the Company, or take away such employees or consultants, or
attempt to solicit, induce, recruit, encourage or take away employees or
consultants of the Company, either for myself or for any other person or entity.
Further, for a period of eighteen (18) months from the date of this Certificate,
I shall not solicit any licensor to or customer of the Company or licensee of
the Company's products, in each case, that are known to me, with respect to any
business, products or services that are competitive to the products or services
offered by the Company or under development as of the date of termination of my
Relationship with the Company.
Date:____
(Employee's Signature)
(Type/Print Employee's Name)