AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of
December 31, 2007, by and among Mandalay Media, Inc., a Delaware corporation
(“Parent”), Twistbox Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent (“Merger Sub”), Twistbox Entertainment, Inc.,
a Delaware corporation (the “Company”), and Adi McAbian and Spark Capital, L.P.
(“Spark Capital”) as representatives of the stockholders of the Company
(collectively, the “Stockholder Representatives” and individually, a
“Stockholder Representative”).
RECITALS
A. Parent,
Merger Sub and the Company intend to enter into a business combination
transaction by means of a merger (the “Merger”) of Merger Sub with and into the
Company in accordance with this Agreement and the General Corporation Law of
the
State of Delaware (the “DGCL”), with the Company to be the surviving corporation
of the Merger, through an exchange of all the issued and outstanding shares
of
capital stock of the Company for shares of common stock of Parent.
B. Pursuant
to the Merger, each outstanding share of Company common stock, $0.001 par value
per share (the “Company Common Stock”), on a fully converted basis, assuming
conversion on a one-for-one basis of all issued and outstanding shares of the
Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”) and
Series B Convertible Preferred Stock (“Series B Preferred Stock”), each $0.01
par value per share (the “Company Preferred Stock”, and together with the
Company Common Stock, the “Company Capital Stock”), shall be converted into the
right to receive the Merger Consideration (as defined in Section
1.5,
upon
the terms and subject to the conditions set forth herein.
C. The
Board
of Directors of the Company has unanimously (i) determined that the Merger
is
fair to, and in the best interests of, the Company and its stockholders (the
“Stockholders”), (ii) approved this Agreement, the Merger, and the other
transactions contemplated by this Agreement and (iii) determined to recommend
that the Stockholders adopt and approve this Agreement, and the other
transactions contemplated by this Agreement, and approve the
Merger.
D. The
respective Boards of Directors of Parent and Merger Sub have approved this
Agreement, the Merger, and the other transactions contemplated by this
Agreement.
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as
follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger.
At the
Effective Time (as defined in Section
1.2)
and
subject to and upon the terms and conditions of this Agreement and the
applicable
provisions of the DGCL, Merger Sub shall be merged with and into Company, the
separate corporate existence of Merger Sub shall cease and Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the “Surviving
Corporation.”
1.2 Effective
Time; Closing.
Subject
to the conditions of this Agreement, the parties hereto shall cause the Merger
to be consummated by filing with the Secretary of State of the State of Delaware
a properly executed Certificate of Merger (the “Certificate of Merger”) in such
form as may be agreed by the parties hereto and as required by the relevant
provisions of the DGCL (the time of such filing with the Secretary of State
of
the State of Delaware or such later time as may be agreed in writing by Company
and Parent and specified in the Certificate of Merger, being the “Effective
Time”) as soon as practicable on or after the Closing Date (as herein defined).
The term “Agreement” as used herein refers to this Agreement and Plan of Merger,
as the same may be amended from time to time, and all schedules hereto
(including the Company Schedule, as defined in the preamble to Article II
hereof). Unless this Agreement shall have been terminated pursuant to
Section
7.1,
the
closing of the Merger (the “Closing”) shall take place at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Xxxxx Xxxxx”), counsel to Parent,
at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at a time and date to be
specified by the parties, which shall be no later than the second business
day
after the satisfaction or waiver of the conditions set forth in Article VI,
or
at such other time, date and location as the parties hereto agree in writing
(the “Closing Date”). Closing signatures may be transmitted by
facsimile.
1.3 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in this Agreement,
in the Certificate of Merger and the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all of the property, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation; except as otherwise may
be
assumed by Parent at Closing pursuant to Section 6.1(b).
1.4 Certificate
of Incorporation; Bylaws.
i)
At the
Effective Time, the Certificate of Incorporation of the Merger Sub shall be
the
Certificate of Incorporation of the Surviving Corporation; provided,
however,
that,
notwithstanding the foregoing, Article FIRST of the Certificate of Incorporation
of the Surviving Corporation shall be amended to read as follows: “The name of
the corporation is Twistbox Entertainment, Inc. (the “Corporation”).”
(b) Also
at
the Effective Time, the Bylaws of the Merger Sub, shall be the Bylaws of the
Surviving
Corporation.
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1.5 Effect
on Capital Stock.
Subject
to the terms and conditions of this Agreement, at the Effective Time, by virtue
of the Merger and this Agreement and without
any action on the part of any party, the following shall occur:
(a) Conversion
of Company Capital Stock.
Subject
to Section
1.6,
at the
Effective Time, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares to be canceled
pursuant to Section
1.5(d))
shall
be converted automatically into and become exchangeable for shares of common
stock of Parent, $0.0001 par value per share (“Parent Common Stock”) (the
“Merger Consideration”), to be issued to the Stockholders in such amounts as set
forth on Schedule 1.5(a) (such Schedule to be amended at or prior to Closing
to
reflect vesting of additional Company Options (as defined in Section
1.5(e),
after
the date hereof and prior to Closing) and the issuance of any shares of Company
Common Stock, whether by exercise of Company Options (as defined in Section
1.5(e)
or
otherwise, after the date hereof and prior to Closing) in accordance with the
exchange ratios (the “Exchange Ratios”) set forth in Schedule
1.5(a)).
Immediately prior to the Effective Time each share of Series A Preferred Stock
of the Company and each share of Series B Preferred Stock of the Company issued
and outstanding shall, in accordance with Company’s Certificate of
Incorporation, be converted into shares of Company’s Common Stock. All shares of
Company Preferred Stock, when so converted, shall no longer be outstanding
and
shall automatically be canceled and each holder of a certificate or certificates
representing any such share of Company Preferred Stock shall cease to have
any
rights with respect thereto. At the Effective Time, each share of Company
Preferred Stock converted into Company Common Stock shall be converted
automatically into and become exchangeable for shares of Parent Common Stock
in
accordance with this Section
1.5(a).
(b) As
of the
Effective Time, all shares of Company Capital Stock shall no longer be
outstanding and shall automatically be deemed canceled and shall cease to exist,
and each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive shares of
the
applicable Merger Consideration as set forth on Schedule
1.5(a).
(c) Certificates
for Shares.
The
certificates representing the shares of Parent Common Stock issuable with
respect to certificates for shares of Company Capital Stock (“Certificates”)
shall be issued to the holders of the shares of Company Capital Stock upon
surrender of the Certificates representing such shares in the manner provided
in
Section
1.6
(or in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and indemnity, if required) in the manner provided in Section
1.8).
(d) Cancellation
of Treasury and Parent-Owned Stock.
Each
share of Company Capital Stock held by the Company or owned by Merger Sub,
Parent or any
direct or indirect wholly-owned subsidiary of the Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion or payment in respect thereof.
(e) Stock
Options.
At
the Effective Time, each
outstanding option (a “Company Option”) to purchase shares of Company Common
Stock issued pursuant to the Company’s 2006 Stock Incentive Plan (the “Stock
Plan”), which is vested at the Effective Time, shall be assumed by Parent, on
the same terms and conditions as were applicable under the Stock Plan
immediately prior to the Effective Time, except that:
(i) the
number of shares of Parent Common Stock subject to each Company Option shall
be
determined by multiplying the number of shares of Company Common Stock that
were
subject to such Company Option immediately prior to the Effective Time by the
Option Conversion Ratio (as defined below), and rounding the resulting number
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 each Company Option shall be determined by dividing the per share
exercise price of Company Common Stock subject to such Company Option, as in
effect immediately prior to the Effective Time, by the Option Conversion Ratio;
provided, however, that the exercise price and the number of shares of Parent
Common Stock subject to each Company Option shall be determined in a manner
consistent with the requirements of Section 409A of the Code to the extent
applicable; and provided, further, that in the case of any Company Option to
which Section 422 of the Code applies, the option price, the number of shares
subject to such Company Option and the terms and conditions of exercise of
such
Company Option shall be determined in accordance with the foregoing, subject
to
such adjustments as are necessary in order to satisfy the requirements of
Section 424(a) of the Code. Any restriction on the exercise of any Company
Option assumed by Parent shall continue in full force and effect and the term,
exercisability and other provisions of such Company Option shall otherwise
remain unchanged as a result of the assumption of such Company Option; provided,
however, the Company Options that are accelerated at the Effective Time as
a
result of the Merger, as set forth in Schedule
2.3(a),
shall
be immediately exercisable after the Effective Time. Any Company Option that
has
not fully vested at the Effective Time will not be assumed by Parent and shall
be terminated prior to the Effective Time. The “Option
Conversion Ratio”
shall
be equal to .74599 (subject to adjustment at or prior to Closing to reflect
vesting of additional Company Options and the issuance of any shares of Company
Common Stock, whether by exercise of Company Options or otherwise, after the
date hereof and prior to Closing). Notwithstanding anything to the contrary
set
forth herein or on Schedule 1.5(a), the Merger Consideration shall consist
of an
aggregate of 12,500,000 shares of Parent Common Stock which will include the
conversion of all shares of Company Capital Stock and the reservation of all
shares of Parent Common Stock required for assumption of the Company Options
that have vested at the Effective Time.
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Parent
shall reserve for issuance a sufficient number of shares of Parent Common Stock
for delivery upon exercise of the Company Options assumed by Parent, which,
as
of the date hereof, are as set forth on Schedule 1.5(a) (such Schedule to be
amended at or prior to Closing to reflect the issuance of any shares of Company
Common Stock, whether by exercise of Company Options or otherwise, after the
date hereof and prior to Closing). Within sixty days following the Effective
Time, Parent shall file a registration statement on Form S-8 (or any successor
form) with respect to the shares of Parent Common Stock subject to such Company
Option held by persons who become employees or consultants of the Surviving
Company and shall use its reasonable best efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so
long
as such Company Options remain outstanding.
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(f) Warrants.
All
warrants to purchase shares of Company Common Stock (the “Company Warrants”)
then outstanding shall be exercised or terminated in accordance with
Section
5.10.
(g) Capital
Stock of Merger Sub.
Each
share of common stock, par value $.001 per share, of Merger Sub (the “Merger Sub
Common Stock”) issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of common stock, par value $.001
per
share, of the Surviving Corporation. Each certificate evidencing ownership
of
shares of Merger Sub Common Stock shall evidence ownership of such shares of
common stock of the Surviving Corporation.
(h) Adjustments
to Exchange Ratios.
Each of
the Exchange Ratios and the Option Conversion Ratio shall be equitably adjusted
to reflect appropriately the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Capital Stock), extraordinary cash
dividends, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Parent Common Stock
or
Company Capital Stock occurring on or after the date hereof and prior to the
Effective Time; provided, however, that no such adjustment shall be made with
respect to any dividend or redemption permitted by Section
4.1.
(i) Fractional
Shares.
No
fraction of a share of Parent Common Stock will be issued by virtue of the
Merger, and 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
that otherwise would be received by such holder) shall, upon compliance with
Section
1.6,
receive from Parent, in lieu of such fractional share, one (1) share of Parent
Common Stock.
1.6 Exchange
Procedure.
i) Surrender
of Certificates.
After
the Effective Time, stock certificates (each, a "Certificate," and collectively,
the "Certificates") representing shares of Company Capital Stock will be
conclusively deemed to represent the right of the registered holder thereof
to
receive the portion of the Merger Consideration that such registered holder
is
entitled to receive pursuant to Section
1.5
hereof
upon surrender, in accordance with the provisions of this Section
1.6,
of all
Certificates registered in the name of such registered holder.
(i) Exchange
of Certificates.
As
promptly as practicable before or after the Effective Time, Parent (or its
designee or exchange agent) will send to each Stockholder a letter of
transmittal, in substantially the form attached hereto as Exhibit
A,
for use
in exchanging all Certificates registered in the name of such Stockholder for
the Merger Consideration to which such Stockholder may be entitled as determined
in accordance with the provisions of this Agreement. Upon surrender by a
Stockholder of all Certificates (or lost certificate affidavits) registered
in
the name of such Stockholder to Parent (or its designee), together with a duly
executed letter of transmittal, such Stockholder will be entitled to receive,
in
exchange for all of such Certificates, the portion of the Merger Consideration
to which such Stockholder may be entitled (as determined in accordance with
the
provisions of this Agreement), and such Certificates will be canceled. It is
intended that such letter of transmittal will contain provisions requiring
each
executing Stockholder thereof to, among other things, (a) acknowledge and agree
to be bound by the terms of this Agreement, including this Section
1.6,
(b)
make certain representations and warranties with respect to such executing
Stockholder and the shares of Company Capital Stock owned or held by such
executing Stockholder, (c) waive all appraisal or dissenters rights and (d)
deliver original Certificates (or an affidavit of loss and indemnity) together
with blank stock powers and other instruments of transfer, in each case in
a
form reasonably satisfactory to Parent and as a condition precedent to Parent’s
obligation to issue shares of Parent Common Stock to such Stockholder.
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(b) Transfer
of Ownership.
Shares
of Parent Common Stock issued pursuant to the Merger shall be deemed to have
been issued at the Effective Time. If any certificate representing shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificate surrendered is registered, it shall be a condition of such exchange
that the person requesting such exchange shall deliver to Parent (or its
designee or exchange agent) all documents necessary to evidence and effect
such
transfer and shall pay to Parent (or its designee or exchange agent) any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of Parent Common Stock in a name other than that of the
registered holder of the certificate surrendered, or establish to the
satisfaction of Parent (or its designee or exchange agent) that such tax has
been paid or is not applicable.
(c) Termination
of Rights; Abandoned Property.
After
the Effective Time, holders of Company Capital Stock will cease to be, and
will
have no rights as, Stockholders, other than (i) in the case of shares other
than
Dissenting Shares, the rights to receive the Merger Consideration, as provided
in this Agreement, and (ii) in the case of Dissenting Shares, the rights
afforded to the holders thereof under Section 262 of the DGCL. Until surrendered
for cancellation in accordance with the provisions of this Section
1.6,
each
Certificate representing shares of Company Capital Stock shall, from and after
the Effective Time, represent (i) in the case of shares other than Dissenting
Shares, the right of the applicable Stockholder to receive the Merger
Consideration and (ii) in the case of Dissenting Shares, the rights afforded
to
the holders thereof under the applicable provisions of the DGCL. Neither Parent
nor the Company nor any other person will be liable to any holder or former
holder of shares of Company Capital Stock for any shares, or any dividends
or
other distributions with respect thereto, properly delivered to a public
official pursuant to applicable abandoned property, escheat, or similar
laws.
(d) Distributions
with Respect to Unsurrendered Certificates.
No
dividend or other distribution declared with respect to Parent Common Stock
with
a record date after the Effective Time shall
be
paid to holders of unsurrendered Certificates until such holders surrender
such
Certificates
or
comply with Section
1.8
hereof.
Upon the surrender of such Certificates in accordance with Section
1.7
and upon
compliance with all of the provisions of Section
1.6
or
Section
1.8
hereof,
as applicable, and all of the provisions of Section
1.7,
there
shall be paid to such holders, promptly after such surrender, the amount of
dividends or other distributions declared with respect to Parent Common Stock
with a record date after the Effective Time, and the amount of any portion
of
the Merger Consideration to which such holders may be entitled pursuant to
this
Agreement, and, in each case, not previously paid solely because of the failure
to surrender such Certificates for exchange.
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1.7 No
Further Ownership Rights in Company Capital Stock.
All
shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to have been issued 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 that were outstanding immediately prior to the Effective Time.
If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in
this Article I.
1.8 Lost,
Stolen or Destroyed Certificates.
In the
event that any Certificates shall have been lost, stolen or destroyed, Parent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, the certificates
representing the shares of Parent Common Stock that the shares of Company
Capital Stock formerly represented by such Certificates were converted into
and
any dividends or distributions payable pursuant to Section
1.6(d);
provided, however, that, as a condition precedent to the issuance of such
certificates representing shares of Parent Common Stock, the owner of such
lost,
stolen or destroyed Certificates shall indemnify Parent against any claim that
may be made against Parent or the Surviving Corporation with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.9 Taking
of Necessary Action; Further Action.
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 the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary
action.
1.10 Rule
145.
All
shares of Parent Common Stock issued pursuant to this Agreement to “affiliates”
of the Company listed on Schedule 1.10 (the “Company Affiliates”) will be
subject to
certain resale restrictions under Rule 145 promulgated under the Securities
Act
of 1933, as amended (the “Securities Act”) and all certificates representing
such shares shall bear an appropriate restrictive legend. The Company will
provide Parent with such information and documents as Parent reasonably requests
for purposes of reviewing such list. The Company will use its best efforts
to
deliver or cause to be delivered to Parent prior to the Effective Time from
each
Company Affiliate an executed affiliate agreement in substantially the form
attached hereto as Exhibit
B
(the “Company Affiliate Agreement”), each of which will be in full force and
effect as of the Effective Time.
1.11 Stockholder
Matters.
By his,
her or its execution or approval of this Agreement, each such Stockholder that
executes or votes in favor of the adoption of this Agreement hereby approves
and
adopts this Agreement and authorizes the Company, its directors and officers
to
take all actions necessary for the consummation of the Merger and the other
transactions contemplated hereby pursuant to the terms of this Agreement and
its
exhibits. Such execution shall be deemed to be action taken by the irrevocable
written consent of stockholders under the DGCL.
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1.12 Representatives
(a) Stockholders’
Representatives.
(i)
In
order to administer efficiently (A) the implementation of the Agreement on
behalf of the Stockholders and (B) the settlement of any dispute with respect
to
the Agreement, the Company and the Stockholders, by virtue of the adoption
of
this Agreement and the approval of the Merger by the Stockholders (regardless
of
whether or not such Stockholder votes in favor of the adoption of the Agreement
and the approval of the Merger, whether at a meeting or by written consent
in
lieu thereof) hereby designate Adi McAbian and Spark Capital as the Stockholder
Representatives.
(ii)
From
and after the Effective Time, the Company and the Stockholders hereby authorize
the Stockholder Representatives (A) to take all action necessary in connection
with the implementation of this Agreement on behalf of the Stockholders or
the
settlement of any dispute, (B) to give and receive all notices required to
be
given under the Agreement and (C) to take any and all additional action as
is
contemplated to be taken by or on behalf of the Stockholders by the terms of
this Agreement.
(iii)
In
the event that the Stockholder Representatives are unable to agree on any
decision or action to be taken by or on behalf of the Stockholders and if the
Stockholder Representatives cannot resolve any such disagreements within two
days, the Stockholder Representatives shall immediately submit the matter for
resolution to a jointly selected Stockholder (“Independent Stockholder”) who
shall decide such matter as soon as possible. All decisions and actions taken
by
the Independent Stockholder shall be binding upon all of the Stockholders,
and
no Company Stockholder shall have the right to object, dissent, protest or
otherwise contest the same.
(iv)
In
the event that one of the Stockholder Representatives dies, becomes legally
incapacitated or resigns from such position, another individual designated
by
the Stockholders, who shall be identified to Parent as soon as practicable
thereafter, shall fill such vacancy and shall be deemed to be the Stockholder
Representative for all purposes of this Agreement; provided, however, that
no
change in the Stockholder Representative shall be effective until Parent is
given written notice of such change by the Stockholders.
(iv)
All
decisions and actions by the Stockholder Representatives as provided in this
Section
1.12
shall be
binding upon all of the Stockholders, and no Company Stockholder shall have
the
right to object, dissent, protest or otherwise contest the same.
(vi)
By
virtue of the adoption of this Agreement and the approval of the Merger by
the
Stockholders, the Company and each Stockholder (regardless of whether or not
such Stockholder votes in favor of the adoption of the Agreement and the
approval of the Merger, whether at a meeting or by written consent in lieu
thereof) agrees that:
(A) Parent
shall be able to rely conclusively on the instructions and decisions of the
Stockholder Representatives as to any actions required or permitted to be taken
by the Stockholders or the Stockholder Representatives hereunder and no party
hereunder shall have any cause of action against Parent for any action taken
by
Parent in reliance upon the instructions or decisions of the
Representatives;
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(B) all
actions, decisions and instructions of the Stockholder Representatives shall
be
conclusive and binding upon all of the Stockholders and no such Stockholder
shall have any cause of action against the Stockholder Representatives for
any
action taken, decision made or instruction given by the Stockholder
Representatives under this Agreement, except for fraud or willful breach of
this
Agreement by the Stockholder Representatives; and
(C) the
provisions of this Section
1.12
are
independent and severable, shall constitute an irrevocable power of attorney,
coupled with an interest and surviving death, granted by Company and the
Stockholders to the Stockholder Representatives and shall be binding upon the
executors, heirs, legal representatives and successors of each
Stockholder.
(D) in
taking
any action hereunder, the Stockholder Representatives shall be protected in
relying upon any notice, paper or other document reasonably believed by it
to be
genuine, or upon any evidence reasonably deemed by it, in its good faith
judgment, to be sufficient; provided, however, that the Stockholder
Representatives shall not waive (1) any rights of the Stockholders if such
waiver would have the effect of disproportionately and adversely affecting
Stockholders which held shares of a particular series of Company capital stock
as compared to Stockholders which held other series of Company capital stock,
without the prior consent of the Stockholders which held at least two-thirds
of
the adversely affected series on an as-converted to common stock basis; and
(2)
any rights with respect to any individual Company Stockholder(s)’ interest(s) if
such waiver would have the effect of disproportionately and adversely affecting
such individual Company Stockholder(s) as compared to the interests of the
other
Stockholders, without the prior consent of the affected Company Stockholder(s).
The Stockholder Representatives shall not be liable to Parent or the
Stockholders for any act performed or omitted to be performed by it in the
good
faith exercise of its duties and shall be liable only in the case of bad faith
or willful misconduct or gross negligence. The Stockholder Representatives
may
consult with counsel in connection with its duties hereunder and shall be fully
protected in any act taken, suffered or permitted by it in good faith in
accordance with the advice of counsel. The Stockholder Representatives shall
not
be responsible for determining or verifying the authority of any person acting
or purporting to act on behalf of any party to this Agreement. The Stockholder
Representatives may be replaced at any time by affirmative vote or written
consent of a majority of the Stockholders.
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(E) the
Stockholder Representatives shall be entitled to retain accountants, legal
counsel and other experts and to incur such expenses (including litigation
expenses) as the Stockholder Representatives deem necessary or appropriate
in
connection with their performance of the Stockholder Representatives’ duties
under this Agreement, and all such fees and expenses (including reasonable
attorneys’ fees and expenses) incurred by the Stockholder Representatives shall
be borne by the Stockholders severally.
(F) the
Stockholders (including the Stockholder Representatives in their capacity as
a
Stockholder) hereby agree severally to indemnify the Stockholder Representatives
(in their capacity as such) in accordance with their respective ownership
interest in the Company, and to hold the Stockholder Representatives (in their
capacity as such), together with their heirs, personal representatives,
successors and assigns (each an “Indemnified Person”) harmless from any and all
claims, liabilities, losses, damages, penalties, actions, judgments, suits,
costs, expenses of whatever kind which may at any time be imposed upon, incurred
by or asserted against any Indemnified Person in any way relating to or arising
out of the Stockholder Representatives’ actions or refraining from any action
pursuant to this Agreement or in connection herewith in such capacity; provided,
however, that no Stockholder shall be liable for the payment of any portion
of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Stockholder Representatives, as
determined by a final judgment from a court of competent jurisdiction. The
agreements in this paragraph shall survive indefinitely, including following
any
termination of the other provisions of this Agreement.
1.13 Notice
to Holders of Derivative Securities.
As
promptly as practicable after the execution of this Agreement, the Company,
after consultation with Parent, shall give the holders of derivative securities
of the Company any required notices pursuant to the terms thereof.
1.14 Shares
Subject to Appraisal Rights.
i)
Notwithstanding any provisions of this Agreement to the contrary, Dissenting
Shares (as hereinafter defined) shall not be converted into a right to receive
Parent Common Stock and the holders thereof shall be entitled only to such
rights as are granted by the DGCL. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to the DGCL shall receive payment
therefor from the Surviving Corporation in accordance with the DGCL, provided,
however, that (i) if any Stockholder who asserts appraisal rights in connection
with the Merger (a “Dissenter”) shall have failed to establish his entitlement
to such rights as provided in the DGCL, or (ii) if any such Dissenter shall
have
effectively withdrawn his demand for payment for such shares or waived or lost
his right to payment for his shares under the appraisal rights process under
the
DGCL, the shares of Company Capital Stock held by such Dissenter shall be
treated as if they had been converted, as of the Effective Time, into a right
to
receive Parent Common Stock and as provided in Section
1.5.
The
Company shall give Parent prompt notice of any demands for payment received
by
the Company from a person asserting appraisal rights, and Parent shall have
the
right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands.
10
(b) As
used
herein, “Dissenting Shares” means any shares of Company Capital Stock held by
Stockholders who are entitled to appraisal rights under the DGCL, and who have
properly exercised, perfected and not subsequently withdrawn or lost or waived
their rights to demand payment with respect to their shares in accordance with
the DGCL.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to Parent and Merger Sub,
as follows:
2.1 Organization
and Qualification.
i)
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its assets and properties and
to
carry on its business as it is now being or currently planned by the Company
to
be conducted. The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders (“Approvals”) necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being or currently planned by the Company to be conducted, except where the
failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company.
Complete and correct copies of the certificate of incorporation and by-laws
(or
other comparable governing instruments with different names) (collectively
referred to herein as “Charter Documents”) of the Company, as amended and
currently in effect, have been heretofore delivered to Parent or Parent’s
counsel. The Company is not in violation of any of the provisions of its Charter
Documents.
(b) The
Company is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities
makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that could not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
the Company. Each jurisdiction in which the Company is so qualified or licensed
is listed in Schedule 2.1.
(c) The
minute books of the Company contain true, complete and accurate records of
all
meetings and consents in lieu of meetings of its Board of Directors (and any
committees thereof), similar governing bodies and stockholders (“Corporate
Records”) since July 1, 2006. Copies of such Corporate Records of the Company
have been heretofore made available to Parent or Parent’s counsel.
11
(d) The
stock
transfer, warrant and option transfer and ownership records of the Company
contain true, complete and accurate records of the securities
ownership as of the date of such records and the transfers involving the capital
stock and other securities of the Company since
July 1,
2006.
Copies of such records of the Company have been heretofore made available to
Parent
or Parent’s
counsel.
2.2 Subsidiaries.
i)
The
Company has no subsidiaries other than those listed on Schedule 2.2 (each,
a
“Subsidiary” and, collectively, the “Subsidiaries”). Except for the
Subsidiaries, the Company does not own, directly or indirectly, any ownership,
equity, profits or voting interest in any Person or have any agreement or
commitment to purchase any such interest, and has not agreed and is not
obligated to make nor is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan,
commitment or undertaking of any nature, as of the date hereof or as may
hereafter be in effect under which it may become obligated to make, any future
investment in or capital contribution to any other entity.
(b) Each
Subsidiary that is a corporation is duly incorporated, validly existing and
in
good standing under the laws of its jurisdiction of incorporation
(as listed on Schedule 2.2) and has the requisite corporate power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being or currently planned by the Company to be conducted. Each
Subsidiary that is a limited liability company is duly organized or formed,
validly existing and in good standing under the laws of its jurisdiction of
organization or formation (as listed on Schedule 2.2) and has the requisite
power and authority to own, lease and operate its assets and properties and
to
carry on its business as it is now being or currently planned by the Company
to
be conducted. Each Subsidiary that is a limited partnership is duly organized
or
formed, validly existing and in good standing under the laws of its jurisdiction
of organization or formation (as listed on Schedule 2.2) and has the requisite
power and authority to own, lease and operate its assets and properties and
to
carry on its business as it is now being or currently planned by the Company
to
be conducted. Each Subsidiary is in possession of all Approvals necessary to
own, lease and operate the properties it purports to own, operate or lease
and
to carry on its business as it is now being or currently planned by the Company
to be conducted, except where the failure to have such Approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or such Subsidiary. Complete and correct copies
of
the Charter Documents of each Subsidiary, as amended and currently in effect,
have been heretofore delivered to Parent
or Parent’s
counsel. No Subsidiary is in violation of any of the provisions of its Charter
Documents.
(c) Each
Subsidiary is duly qualified or licensed to do business as a foreign corporation
or foreign limited liability company and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated
by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and
in
good standing that could not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on the Company or such
Subsidiary.
12
2.3 Capitalization.
i)
The
authorized capital stock of the Company consists of 20,000,000 shares of Common
Stock, $0.001 par value per share, of which there are 7,785,716 shares issued
and outstanding, and 5,204,255 shares of Preferred Stock, $0.01 par value per
share. Of the authorized Preferred Stock: 2,500,000 shares have been designated
Series A Preferred Stock, of which 825,075 shares are issued and outstanding;
2,267,574 shares have been designated Series B Preferred Stock, all of which
shares are issued and outstanding and 436,680 shares have been designated Series
B-1 Preferred Stock, all of which shares are issued and outstanding. No other
shares of Company Preferred Stock are issued or outstanding. At Closing, all
shares of Company Preferred Stock shall have been converted to shares of Company
Common Stock pursuant to the Company’s Charter Documents and the DGCL. No shares
of capital stock are held in the Company’s treasury. All outstanding shares of
Company Common Stock and Company Preferred Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Charter Documents of Company or any agreement or
document to which the Company is a party or by which it is bound, and were
issued in compliance with all applicable federal and state securities laws.
As
of the date hereof, the Company had reserved an aggregate of 3,700,000 shares
of
Common Stock, net of exercises, for issuance to employees, consultants and
non-employee directors pursuant to the Company’s Stock Plan, under which options
were outstanding for an aggregate of 3,350,122 shares. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and non-assessable.
Schedule 2.3(a) hereto lists each holder of Company Common Stock and Company
Preferred Stock, each outstanding Company Option and Company Warrants to acquire
shares of Company Common Stock or Company Preferred Stock, as applicable, the
name of the holder of such option or warrant, the number of shares subject
to
such option or warrant, the exercise price of such option or warrant, the number
of shares as to which such option or warrant will have vested at such date,
the
vesting schedule and termination date of such option or warrant and whether
the
exercisability of such option or warrant will be accelerated in any way by
the
transactions contemplated by this Agreement or for any other reason, indicating
the extent of acceleration, if any. The Company has delivered to Parent or
Parent’s Counsel true and accurate copies of the forms of documents used for the
issuance of Company Options and Company Warrants.
(b) Except
as
contemplated by this Agreement and except as set forth in Section
2.3(a)
hereof,
there are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Company is
a
party or by which it is bound obligating the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares
of
capital stock, partnership interests or similar ownership interests of the
Company or obligating the Company to grant, extend, accelerate the vesting
of or
enter into any such subscription, option, warrant, equity security, call, right,
commitment or agreement.
(c) Except
as
contemplated by this Agreement and except as set forth on Schedule 2.3(c)
hereto, there are no registration rights, and there is no voting trust, proxy,
rights plan, anti-takeover plan or other agreement or understanding to which
the
Company is a party or by which the Company is bound with respect to any equity
security
of any class of the Company.
13
(d) The
capital structure of each Subsidiary is set forth in Schedule 2.3(d) hereto.
Except
as set forth in Schedule 2.3(d), the Company owns all of the outstanding equity
securities of each Subsidiary, free and clear of all Liens, either directly
or
indirectly through one or more other Subsidiaries. There are no outstanding
options, warrants or other rights to purchase securities of any
Subsidiary.
2.4 Authority
Relative to this Agreement.
The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby (including the Merger). The execution and
delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby (including the Merger) have been duly and
validly authorized by all necessary corporate action on the part of the Company
(including the approval by its Board of Directors and Stockholders), and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
pursuant to the DGCL and the terms and conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes the legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may
be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
2.5 No
Conflict; Required Filings and Consents.
i)
The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company shall not, (i) conflict with or
violate the Company’s or any Subsidiary’s Charter Documents, (ii) conflict with
or violate any Legal Requirements (as defined in Section 9.2(b)), (iii) except
as set forth in Schedule 2.5, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or materially impair the Company’s rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or pursuant to, any Company Contracts or (iv) except as set forth in
Schedule 2.5, result in the triggering, acceleration or increase of any payment
to any Person pursuant to any Company Contract, including any “change in
control” or similar provision of any Company Contract, except, with respect to
clauses (ii), (iii) or (iv), for any such conflicts, violations, breaches,
defaults, triggerings, accelerations, increases or other occurrences that would
not, individually and in the aggregate, have a Material Adverse Effect on the
Company.
(b) The
execution and delivery of this Agreement by the Company does not, and the
performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign governmental entity (a “Governmental Entity”), except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act
or
Blue Sky Laws, and the rules and regulations thereunder, and appropriate
documents received from or filed with the relevant authorities of other
jurisdictions in which the Company is licensed or qualified to do business
and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not, individually
or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
the
Company or, after the Closing, the Parent, or prevent consummation of the Merger
or otherwise prevent the parties hereto from performing their obligations under
this Agreement.
14
2.6 Compliance.
The
Company and its Subsidiaries have complied with and are not in violation of
any
Legal Requirements with respect to the conduct of their businesses, or the
ownership or operation of its business, except for failures to comply or
violations which, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect on the Company or any
Subsidiary. The Company and its Subsidiaries are not in default or violation
of
any term, condition or provision of any applicable Charter Documents. Except
as
set forth in Schedule 2.6, no written notice of non-compliance with any Legal
Requirements has been received by the Company or any of its Subsidiaries (and
the Company has no knowledge of any such notice delivered to any other Person).
The Company and its Subsidiaries are not in violation of any term of any Company
Contract, except for failures to comply or violations which, individually or
in
the aggregate, have not had and are not reasonably likely to have a Material
Adverse Effect on the Company or any of its Subsidiaries.
2.7 Financial
Statements.
i) Since
July 1, 2006, the books of account, minute books, stock certificate books and
stock transfer ledgers and other similar books and records
of the Company and its Subsidiaries have been maintained in accordance with
good
business practice, are complete and correct in all material respects and there
have been no material transactions that are required to be set forth therein
and
which are not so set forth.
(b) Significant
deficiencies in the financial reporting of the Company and its Subsidiaries
which are reasonably likely to materially and adversely affect the ability
to
record, process, summarize and report financial information, and any fraud
whether or not material that involves management or other employees who have
a
significant role in financial reporting, have been adequately and promptly
disclosed to the independent accountants and management of the Company as
required by applicable Legal Requirements.
2.8 No
Undisclosed Liabilities.
Except
as set forth in Schedule 2.8 hereto, to the knowledge of the Company, the
Company and its Subsidiaries have no liabilities (absolute, accrued, contingent
or otherwise) of a nature required to be disclosed in the Company’s financial
statements which are, individually or in the aggregate, material to the
business, results of operations or financial condition of the Company, except:
(i) liabilities provided for in or otherwise disclosed in the Company’s
financial statements and (ii) such liabilities arising in the ordinary course
of
the Company’s and its Subsidiaries’ business since December 31, 2006.
2.9 Absence
of Certain Changes or Events.
Except
as set forth in Schedule 2.9 hereto or as otherwise provided in this Agreement,
since December 31, 2006, there has not been: (i) any Material Adverse Effect
on
the Company or any of its Subsidiaries, (ii) any declaration, setting aside
or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of the Company’s stock, or any purchase, redemption
or other acquisition by the Company or any of its Subsidiaries of any of the
Company’s or any of its Subsidiaries’ capital stock or any other securities of
the Company or any of its Subsidiaries’ or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of the Company’s or any of its
Subsidiaries’ capital stock, (iv) any granting by the Company or any of its
Subsidiaries’ of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by the Company or any of its
Subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by the Company or any
of
its Subsidiaries of any increase in severance or termination pay or any entry
by
Company or any of its Subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving the Company or any of its
Subsidiaries of the nature contemplated hereby, (v) entry by the Company or
any
of its Subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property (as defined in
Section
2.21
hereof)
other than licenses in the ordinary course of business consistent with past
practice or any amendment or consent with respect to any licensing agreement
filed or required to be filed by the Company or any of its Subsidiaries with
respect to any Governmental Entity, (vi) any material change by the Company
or
any of its Subsidiaries in its accounting methods, principles or practices,
(vii) any change in the auditors of the Company or any of its Subsidiaries,
(viii) any issuance of capital stock of the Company or any of its Subsidiaries,
(ix) any revaluation by the Company or any of its Subsidiaries of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets
of
the Company or any of its Subsidiaries other than in the ordinary course of
business, or (x) any agreement, whether written or oral, to do any of the
foregoing.
15
2.10 Litigation.
Except
as disclosed in Schedule 2.10 hereto, there are no claims, suits, actions or
proceedings pending or, to the knowledge of the Company, threatened against
the
Company or any of its Subsidiaries before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated by
this
Agreement or which could reasonably be expected, either singularly or in the
aggregate with all such claims, actions or proceedings, to have a Material
Adverse Effect on the Company or any of its Subsidiaries or have a Material
Adverse Effect on the ability of the parties hereto to consummate the
Merger.
2.11 Employee
Benefit Plans and Compensation.
i) Definitions.
With
the exception of the definition of “Affiliate” set forth in Section
2.11(a)
below
(which definition shall apply only to this Section
2.11(a)),
for
purposes of this Agreement, the following terms shall have the following
respective meanings:
“Affiliate”
shall mean any other person or entity under common control with the Company
or
any of its Subsidiaries within the meaning of Section
414(b),
(c),
(m) or (o) of the Code and the regulations issued thereunder.
“Company
Employee Plan” shall mean any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, funded or unfunded,
including without limitation, each “employee benefit plan,” within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company, any of its Subsidiaries or any
Affiliate for the benefit of any Employee, or with respect to which the Company,
any of its Subsidiaries or any Affiliate has or may have any liability or
obligation and any International Employee Plan.
16
“COBRA”
shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
“DOL”
shall mean the United States Department of Labor.
“Employee”
shall mean any current, former or rehired employee, consultant, officer or
director of the Company, any of its Subsidiaries or any Affiliate.
“Employee
Agreement” shall mean each management, employment, severance, consulting,
relocation, repatriation, expatriation, visa, work permit or similar agreement,
or contract (including, without limitation, any agreement providing for
acceleration of Company Options, or any other agreement providing for
compensation or benefits) between the Company, any of its Subsidiaries or any
Affiliate and any executive officer of the Company.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“FMLA”
shall mean the Family Medical Leave Act of 1993, as amended.
“HIPAA”
shall mean the Health Insurance Portability and Accountability Act of 1996,
as
amended.
“International
Employee Plan” shall mean each Company Employee Plan or Employee Agreement that
has been adopted or maintained by the Company, any of its Subsidiaries or any
Affiliate, whether formally or informally or with respect to which the Company,
any of its Subsidiaries or any Affiliate will or may have any liability with
respect to Employees who perform services outside the United
States.
“IRS”
shall mean the United States Internal Revenue Service.
“PBGC”
shall mean the United States Pension Benefit Guaranty
Corporation.
“Pension
Plan” shall mean each Company Employee Plan that is an “employee pension benefit
plan,” within the meaning of Section 3(2) of ERISA.
(b) Schedule
2.11(b) hereto sets forth a complete and accurate list of each Company Employee
Plan and each Employee Agreement. Neither the Company nor any of its
Subsidiaries has made any plan or commitment to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any
such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing,
or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any
of
the foregoing. Schedule 2.11(b) hereto sets forth a table setting forth the
name, position and salary of each employee of the Company and each Subsidiary
whose annual compensation (in cash or otherwise) exceeded in 2007 (or, in 2008,
is expected to exceed) $150,000.
17
(c) Documents.
The
Company has provided to Parent: (i) correct and complete copies of all documents
embodying each Company Employee Plan and each Employee Agreement including,
without limitation, all amendments thereto and written interpretations thereof
and all related trust documents; (ii) the three (3) most recent annual reports
(Form Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Company
Employee Plan; (iii) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (iv) the most
recent summary plan description together with the summaries of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (v) all material written agreements and contracts relating to
each Company Employee Plan, including, without limitation, administrative
service agreements and group insurance contracts; (vi) all communications
material to any Employee or Employees relating to any Company Employee Plan
and
any proposed Company Employee Plan, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
liability to the Company or any of its Subsidiaries; (vii) all correspondence
to
or from any governmental agency relating to any Company Employee Plan; (viii)
all COBRA forms and related notices; (ix) all policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Company Employee Plan;
(x)
all discrimination tests for each Company Employee Plan for the three (3) most
recent plan years; (xi) all registration statements, annual reports (Form 11-K
and all attachments thereto) and prospectuses prepared in connection with each
Company Employee Plan; and (xii) the most recent IRS determination or opinion
letter issued with respect to each Company Employee Plan.
(d) Employee
Plan Compliance.
The
Company and each of its Subsidiaries has performed all obligations required
to
be performed by it under, is not in default or violation of, and the Company
has
no knowledge of any default or violation by any other party to, any Company
Employee Plan, and each Company Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code and any trust intended to qualify under Section
501(a) of the Code has obtained a favorable determination letter (or opinion
letter, if applicable) as to its qualified status under the Code. No “prohibited
transaction,” within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company Employee Plan. There are no actions, suits or claims
pending or, to the knowledge of the Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Parent, the
Company, any of its Subsidiaries or any Affiliate (other than ordinary
administration expenses). There are no audits, inquiries or proceedings pending
or, to the knowledge of the Company, threatened by the IRS, DOL, or any other
Governmental Entity with respect to any Company Employee Plan. Neither the
Company, nor any of its Subsidiaries nor any Affiliate is subject to any penalty
or tax with respect to any Company Employee Plan under Section 402(i) of ERISA
or Sections 4975 through 4980 of the Code. The Company and each of its
Subsidiaries has made all contributions and other payments required by and
due
under the terms of each Company Employee Plan.
18
(e) No
Pension Plan.
Neither
the Company, any of its Subsidiaries nor any Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
that is subject to Title IV of ERISA or Section 412 of the Code.
(f) No
Self-Insured Plan.
Neither
the Company, any of its Subsidiaries nor any Affiliate has ever maintained,
established sponsored, participated in or contributed to any self-insured plan
that provides benefits to employees (including, without limitation, any such
plan pursuant to which a stop-loss policy or contract applies).
(g) Collectively
Bargained, Multiemployer and Multiple-Employer Plan.
At no
time has the Company, any of its Subsidiaries or any Affiliate contributed
to or
been obligated to contribute to any Multiemployer Plan. Neither the Company,
any
of its Subsidiaries, nor any Affiliate has at any time ever maintained,
established, sponsored, participated in or contributed to any multiple employer
plan or to any plan described in Section 413 of the Code.
(h) No
Post-Employment Obligations.
No
Company Employee Plan or Employment Arrangement provides, or reflects or
represents any liability to provide, retiree life insurance, retiree health
or
other retiree employee welfare benefits to any person for any reason, except
as
may be required by COBRA or other applicable statute, and neither the Company
nor any of its Subsidiaries has ever represented, promised or contracted
(whether in oral or written form) to any Employee (either individually or to
Employees as a group) or any other person that such Employee(s) or other person
would be provided with retiree life insurance, retiree health or other retiree
employee welfare benefits, except to the extent required by
statute.
(i) COBRA;
FMLA; HIPAA.
The
Company, each Subsidiary and each Affiliate has, prior to the Effective Time,
complied with COBRA, FMLA, HIPAA, the Women’s Health and Cancer Rights Act of
1998, the Newborns’ and Mothers’ Health Protection Act of 1996, and any similar
provisions of state law applicable to its Employees. Neither the Company nor
any
of its Subsidiaries has unsatisfied obligations to any Employees or qualified
beneficiaries pursuant to COBRA, HIPAA or any state law governing health care
coverage or extension.
(j) Effect
of Transaction.
Except
as disclosed in Schedule 2.11(j) hereto, the execution of this Agreement and
the
consummation of the transactions contemplated hereby will not (either alone
or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will
or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits or be deemed a “parachute payment” under Section
280G of the Code with respect to any Employee.
19
(k) Employment
Matters.
The
Company and each of its Subsidiaries: (i) is in compliance with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment,
termination of employment, employee safety and wages and hours, and in each
case, with respect to Employees; (ii) has withheld and reported all amounts
required by law or by agreement to be withheld and reported with respect to
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages, severance pay or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to
any
trust or other fund governed by or maintained by or on behalf of any
governmental 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 actions, suits, claims or administrative matters
pending, threatened or reasonably anticipated against the Company, any of its
Subsidiaries, or any of its Employees relating to any Employee, Employee
Agreement or Company Employee Plan. There are no pending or threatened or
reasonably anticipated claims or actions against Company, any of its
Subsidiaries, any Company trustee or any trustee of any Subsidiary under any
worker’s compensation policy. To the Company’s knowledge, no employee of the
Company or any of its Subsidiaries has violated any employment contract,
nondisclosure agreement, non-competition or non-solicitation agreement by which
such employee is bound due to such employee being employed by the Company or
any
of its Subsidiaries, and disclosing to the Company or each of its Subsidiaries,
or using trade secrets or proprietary information of any other person or entity.
The services provided by each of the Company’s, each Subsidiary’s and their
Affiliates’ Employees is terminable at the will of the Company and its
Affiliates, except for such jurisdictions that do not recognize at will
employment, and any such termination would result in no liability to the
Company, any of its Subsidiaries or any Affiliate.
(l) No
Interference or Conflict.
To the
knowledge of the Company, no stockholder, director, officer, Employee or
consultant of the Company or any of its Subsidiaries is obligated under any
contract or agreement, subject to any judgment, decree, or order of any court
or
administrative agency that would interfere with such person’s efforts to promote
the interests of the Company or any of its Subsidiaries or that would interfere
with the Company’s or any of its Subsidiaries’ business. Neither the execution
nor delivery of this Agreement, nor the carrying on of the Company’s or any of
its Subsidiaries’ business as presently conducted or proposed to be conducted
nor any activity of such officers, directors, Employees or consultants in
connection with the carrying on of the Company’s business or any of its
Subsidiaries’ businesses as presently conducted or currently proposed to be
conducted will, to the knowledge of the Company, conflict with or result in
a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract or agreement under which any of such officers, directors,
Employees, or consultants is now bound.
(m) International
Employee Plan.
Neither
the Company, any of its Subsidiaries, nor any Affiliate currently or has it
ever
had the obligation to maintain, establish, sponsor, participate in, be bound
by
or contribute to any International Employee Plan.
2.12 Labor
Matters.
Neither
the Company, nor any of its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any of its Subsidiaries, nor does the Company know of any activities
or proceedings of any labor union to organize any such employees.
20
2.13 Restrictions
on Business Activities.
Except
as disclosed in Schedule 2.13 hereto, to the Company’s knowledge, there is no
agreement, commitment, judgment, injunction, order or decree binding upon the
Company, any of its Subsidiaries, its assets or to which the Company or any
of
its Subsidiaries is a party which has or could reasonably be expected to have
the effect of prohibiting or materially impairing any business practice of
the
Company or any of its Subsidiaries, any acquisition of property by the Company
and any of its Subsidiaries, or the conduct of business by Company or any of
its
Subsidiaries as currently conducted other than such effects, individually or
in
the aggregate, which have not had and could not reasonably be expected to have
a
Material Adverse Effect on the Company
or any
of its Subsidiaries.
2.14 Title
to Properties; Absence of Liens and Encumbrances.
i) Real
Property Owned or Leased by the Company.
Schedule 2.14(a) hereto lists each parcel of real property currently leased,
subleased or licensed by the Company or any of its Subsidiaries.
(b) Owned
Real Property.
Set
forth in Schedule 2.14(b) hereto is a complete list of all real property and
interests in real property owned in fee simple by the Company or any of its
Subsidiaries (the “Owned Real Property”). The Company and the Subsidiaries of
the Company have good, valid and marketable fee simple title to the Owned Real
Property.
(c) Leases.
True,
correct and complete copies of all leases, subleases or licenses for each parcel
of real property currently leased, subleased or licensed by the Company or
any
of its Subsidiaries (the “Leased Real Property”), together with any assignments,
guaranties or amendments thereto (collectively, the “Lease Documents”) have been
delivered or made available to Parent. Except as would not, individually or
in
the aggregate, reasonably be expected to have a Material Adverse Effect on
the
Company, all such current leases, subleases and licenses are in full force
and
effect, are valid and effective in accordance with their respective terms,
and
there is not, under any of such leases, any existing default or event of default
(or event which, with notice or lapse of time, or both, would constitute a
default) by the Company or any of its Subsidiaries or, to the Company’s
knowledge, by the other party to such lease, sublease or
license.
(d) Liens.
Except
as disclosed in Schedule 2.14(a) or Schedule 2.14(b) hereto, the Company and
each of its Subsidiaries owns or has valid leasehold fee interests in all of
their respective properties and assets (other than assets disposed of in the
ordinary course of business since December 31, 2006), free and clear of all
encumbrances except for defects in title, easements, encroachments, restrictive
covenants and similar encumbrances or impediments that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect
on
the Company. Except as set forth on Schedule 2.14(a) hereto, neither the Company
nor any of its Subsidiaries is a party to or obligated under any option, right
of first refusal or other contractual right to sell, dispose of or lease any
of
the Real Property or any portion thereof or interest therein to any Person
(other than pursuant to this Agreement). Neither the Company nor any of the
Subsidiaries is a party to any agreement or option to purchase any real property
or interest therein other than options for renewal of Leased Real Property
for
the benefit of the Company or its applicable Subsidiary.
21
(e) Entire
Interest.
Except
as set forth in Schedule 2.14(e) hereto, neither the Company nor any of its
Subsidiaries has leased or otherwise granted to any Person (other than pursuant
to this Agreement) any right to occupy or possess or otherwise encumber any
portion of the Real Property other than in the ordinary course of business.
Except as set forth in Schedule 2.14(e) hereto, neither the Company nor any
of
its Subsidiaries has vacated or abandoned any portion of the Real Property
or
given notice to any third party of their intent to do the same.
(f) Condemnation.
Except
as set forth on Schedule 2.14(f) hereto, neither the Company nor any applicable
Subsidiary of the Company has received written notice of an expropriation or
condemnation proceeding pending, threatened or proposed against the Real
Property.
2.15 Accounts
Receivable.
The
accounts receivable of the Company and each of its Subsidiaries as set forth
on
the Interim Balance Sheet or arising since the date thereof are, to the extent
not paid in full by the account debtor prior to the date hereof, (i) valid
and
genuine and have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of business consistent with past practice, (ii) not subject to valid defenses,
set-offs or counterclaims, and (iii) collectible within 90 days after billing
at
the full recorded amount thereof less, in the case of accounts receivable
appearing on the consolidated balance sheet of the Company and its Subsidiaries
as of August 31, 2007 (the “Interim Balance Sheet”), the recorded allowance for
collection losses on the Interim Balance Sheet. The allowance for collection
losses on the Interim Balance Sheet has been determined in accordance with
GAAP
consistent with past practice. The accounts receivable existing as of the
Closing Date will be collectible within 90 days after billing at the full
recorded amount thereof net of the reserves shown on the accounting records
of
the Company and each of its Subsidiaries as of the Closing Date (which reserves
shall be adequate and shall not represent a greater percentage of the accounts
receivable as of the Closing Date than the reserves reflected in the Interim
Balance Sheet represented of the accounts receivable reflected
therein).
2.16 Condition
of Tangible Assets.
All
buildings, plants, leasehold improvements, structures, facilities, equipment
and
other items of tangible property and assets which are owned, leased or used
by
the Company or any of its Subsidiaries are structurally sound, are in good
operating condition and repair (subject to normal wear and tear given the use
and age of such assets), are usable in the regular and ordinary course of
business and conform in all material respects to
all
laws and authorizations relating to their construction, use and operation.
No
Person other than the Company, the Subsidiaries of the Company and holders
of
Permitted Liens, but solely to the extent of such Permitted Liens, owns, or
has
any interest in, any equipment or other tangible assets or properties owned,
leased or used by the Company or any of its Subsidiaries.
2.17 Suppliers
and Customers.
Schedule 2.17 sets forth with respect to each of the Company and its
Subsidiaries a complete list of all suppliers and customers that otherwise
is or
may be material to the businesses, operations, assets, condition (financial
or
otherwise) or prospects of the Company or any of its Subsidiaries. The
relationships of each of the Company and its Subsidiaries with each such
supplier and customer are good commercial working relationships. No such
supplier or customer has canceled or otherwise terminated, or threatened to
cancel or otherwise terminate, its relationship with the Company or any of
its
Subsidiaries. None of Seller, the Company or the Subsidiaries of the Company
has
received notice that any such supplier or customer may cancel or otherwise
materially and adversely modify its relationship with the Company or any
Subsidiaries of the Company or limit its services, supplies or materials to
the
Company or any Subsidiaries of the Company, either as a result of the Merger
or
otherwise.
22
2.18 Taxes.
i) Definition
of Taxes.
For the
purposes of this Agreement, “Tax” or “Taxes” refers to any and all federal,
state, local and foreign taxes, including, without limitation, gross receipts,
income, profits, sales, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, assessments, governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts and any
obligations under any agreements or arrangements with any other person with
respect to any such amounts and including any liability of a predecessor entity
for any such amounts.
(b) Tax
Returns and Audits.
Except
as set forth in Schedule 2.18 hereto:
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(i)
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The
Company, and the Subsidiary, as applicable, has timely filed all
federal,
state, local and foreign returns, estimates, information statements
and
reports relating to Taxes (“Returns”) required to be filed by the Company
and each of its Subsidiaries with any Tax authority prior to the
date
hereof, except such Returns which are not material to Company. To
the
Company’s knowledge, all such Returns are true, correct and complete in
all material respects. The Company and each of its Subsidiaries has
paid
all Taxes shown to be due on such
Returns.
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(ii)
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All
Taxes that the Company and its Subsidiaries are required by law to
withhold or collect have been duly withheld or collected, and have
been
timely paid over to the proper governmental authorities to the extent
due
and payable.
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(iii)
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The
Company and its Subsidiaries have not been delinquent in the payment
of
any material Tax nor is there any material Tax deficiency outstanding,
proposed or assessed against the Company or any of its Subsidiaries,
nor
has the Company or any of its Subsidiaries executed any unexpired
waiver
of any
statute of limitations on or extending the period for the assessment
or
collection of any Tax.
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(iv)
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To
the Company’s knowledge, no audit or other examination of any Return of
the Company or any of its Subsidiaries by any Tax authority is presently
in progress. The Company and each of its Subsidiaries has not been
notified of any request for such an audit or other
examination.
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(v)
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No
adjustment relating to any Returns filed by the Company or any of
its
Subsidiaries have been proposed in writing, formally or informally,
by
any
Tax authority to the Company, any of its Subsidiaries or any
representative thereof.
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23
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(vi)
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The
Company and each of its Subsidiaries has no liability for any material
unpaid Taxes which have not been accrued for or reserved on the Company’s
balance sheets included in the Audited Financial Statements or the
Unaudited Financial Statements, whether asserted or unasserted, contingent
or otherwise, which is material to the Company and each of its
Subsidiaries, other than any liability for unpaid Taxes that may
have
accrued since the end of the most recent fiscal year in connection
with
the operation of the business of the Company and each of its Subsidiaries
in the ordinary course of business.
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2.19 Environmental
Matters.
i)
Except
as disclosed in Schedule 2.19 hereto and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect: (i) the Company and each of its Subsidiaries has complied with
all applicable Environmental Laws; (ii) the properties currently operated by
the
Company and each its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) have not been contaminated with any Hazardous
Substances by any action of the Company or any of its Subsidiaries; (iii) the
properties formerly owned by the Company and each of its Subsidiaries were
not
contaminated with Hazardous Substances during the period of ownership or
operation by the Company and each of the Subsidiaries or, to the Company’s
knowledge, during any prior period; (iv) the Company and each of its
Subsidiaries is not subject to liability for any Hazardous Substance disposal
or
contamination on any third party property; (v) the Company and each of its
Subsidiaries has not been associated with any release of any Hazardous
Substance; (vi) the Company and each of its Subsidiaries has not received any
notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of or liable under any
Environmental Law; and (vii) the Company and each of its Subsidiaries are not
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances.
(b) As
used
in this Agreement, the term “Environmental Law” means any federal, state, local
or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (i) the protection, investigation
or restoration of the environment, health and safety, or natural resources;
(ii)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (iii) noise, odor, wetlands, pollution, contamination
or
any injury or threat of injury to persons or property.
(c) As
used
in this Agreement, the term “Hazardous Substance” means any substance that is:
(i) listed, classified or regulated pursuant to any Environmental Law; (ii)
any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon;
or
(iii) any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law. The Company and each
of
its Subsidiaries, and, to the knowledge of the Company, each other Person that
operates the Properties and the Leased Real Property, has obtained
all permits, licenses, franchises, authorities, consents and approvals, and
has
made all material filings and maintained all material data, documentation and
records necessary for owning and operating the Properties and the Leased Real
Property under Applicable Environmental Law, and all such permits, licenses,
franchises, authorities, consents, approvals and filings remain in full force
and effect.
24
(d) There
are
no pending or, to the knowledge of the Company, threatened claims, demands,
actions, administrative proceedings, lawsuits or
inquiries relating to (i) the Properties and the Leased Real Property under
Environmental Law, or (ii) the restoration, remediation or reclamation of any
Properties or Leased Real Property, except as set forth on Schedule
2.19.
(e) Except
as
set forth on Schedule 2.19, there are no environmental investigations, studies
or audits with respect to any of the Properties or Leased
Real Property owned or commissioned by, or in the possession of, the Company
or
any of its Subsidiaries.
2.20 Brokers;
Third Party Expenses.
Except
as set forth in Schedule 2.20 hereto, neither the Company nor any of its
Subsidiaries have incurred, nor will they incur, directly or indirectly, any
liability for brokerage, finders’ fees, agent’s commissions or any similar
charges in connection with this Agreement or any transactions contemplated
hereby. Except pursuant to Sections
1.7 and 1.13,
no
shares of common stock, options, warrants or other securities of Company, any
of
its Subsidiaries or Parent are payable to any third party by the Company as
a
result of the Merger.
2.21 Intellectual
Property.
For the
purposes of this Agreement, the following terms have the following
definitions:
“Intellectual
Property” shall mean any or all of the following and all worldwide common law
and statutory rights in, arising out of, or associated therewith: (i) patents
and applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof (“Patents”); (ii)
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology, technical data
and
customer lists, and all documentation relating to any of the foregoing; (iii)
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (iv) software and software
programs; (v) domain names, uniform resource locators and other names and
locators associated with the Internet; (vi) industrial designs and any
registrations and applications therefor; (vii) trade names, logos, common law
trademarks and service marks, trademark and service xxxx registrations and
applications therefor (collectively, “Trademarks”); (viii) all databases and
data collections and all rights therein; (ix) all moral and economic rights
of
authors and inventors, however denominated, and (x) any similar or equivalent
rights to any of the foregoing (as
applicable).
“Company
Intellectual Property” shall mean any Intellectual Property that is owned by, or
exclusively licensed to, Company and each of its Subsidiaries, including
software and software
programs developed by or exclusively licensed to the Company and to each its
Subsidiaries (specifically excluding any off the shelf or shrink-wrap
software).
25
“Registered
Intellectual Property” means all Intellectual Property that is the subject of an
application, certificate, filing, registration or other document
issued, filed with, or recorded by any private, state, government or other
legal
authority.
“Company
Registered Intellectual Property” means all of the Registered Intellectual
Property owned by, or filed in the name of, Company or any of its
Subsidiaries.
“Company
Products” means all current versions of products or service offerings of Company
or any of its Subsidiaries.
(a) Except
as
disclosed on Schedule 2.21 hereto, no Company Intellectual Property or Company
Product is subject to any material proceeding or outstanding decree, order,
judgment, contract, license, agreement or stipulation restricting in any manner
the use, transfer or licensing thereof by the Company or any of its
Subsidiaries, or which may affect the validity, use or enforceability of such
Company Intellectual Property or Company Product, which in any such case could
reasonably be expected to have a Material Adverse Effect on the Company or
any
of its Subsidiaries.
(b) Except
as
disclosed on Schedule 2.21 hereto, the Company and its Subsidiaries own and
have
good and exclusive title to each material item of Company Intellectual Property
owned by it free and clear of any liens and encumbrances (excluding
non-exclusive licenses and related restrictions granted by it in the ordinary
course of business); and the Company and its Subsidiaries are the exclusive
owners of all material registered Trademarks used in connection with the
operation or conduct of the business of the Company including the sale of any
products or the provision of any services by the Company or any of its
Subsidiaries.
(c) The
operation of the business of the Company and each of its Subsidiaries as such
business currently is conducted, including (i) the design, development,
manufacture, distribution, reproduction, marketing or sale of the Company
Products and (ii) the Company’s or any of the Subsidiaries’ use of any product,
device or process has not and does not infringe or misappropriate the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
2.22 Agreements,
Contracts and Commitments.
i)
Schedule
2.22 hereto sets forth a complete and accurate list of all Material Company
Contracts (as hereinafter defined) to which the Company or any of its
Subsidiaries is a party or is subject, or by which any of their respective
assets are bound. For purposes of this Agreement, (i) the term “Company
Contracts” shall mean all contracts, agreements, leases, mortgages, indentures,
notes, bonds, licenses, permits, franchises, purchase orders, sales orders,
and
other understandings, commitments and obligations of any kind, whether written
or oral, to which the Company or any of its Subsidiaries is a party or by or
to
which any of the properties or assets of Company or any of its Subsidiaries
may
be bound, subject or affected (including without limitation notes or other
instruments payable to the Company or any of its Subsidiaries), and (ii) the
term “Material Company Contracts” shall mean (x) each Company Contract and (y)
each Company Contract that otherwise is or may be material to the businesses,
operations, assets, condition (financial or otherwise) or prospects of the
Company or any of its Subsidiaries and (z) without limitation of subclause
(x)
or subclause (y), each of the following Company Contracts, the relevant terms
of
which remain executory:
26
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(1)
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any
mortgage, indenture, note, installment obligation or other instrument,
agreement or arrangement for or relating to any borrowing of money
by or
from the Company or any of its Subsidiaries, or any officer, director
or
Stockholder (“Insider”) of the Company
or
any of its Subsidiaries;
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(2)
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any
guaranty, direct or indirect, by the Company, any of its Subsidiaries
or
any Insider of the Company of any obligation for borrowings, or otherwise,
excluding endorsements made for collection in the ordinary course
of
business and guarantees by Subsidiaries of Company
obligations;
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(3)
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any
Company Contract of employment;
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(4)
|
any
Company Contract made other than in the ordinary course of business
or (x)
providing for the grant of any preferential rights to
purchase or lease any asset of the Company or any of its Subsidiaries
or
(y) providing for any right (exclusive or non-exclusive) to sell
or
distribute, or otherwise relating to the sale or distribution of,
any
product or service of the Company or any of its
Subsidiaries;
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(5)
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any
obligation to register any shares of the capital stock or other securities
of the Company or any of its Subsidiaries with any Governmental
Entity;
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(6)
|
any
obligation to make payments, contingent or otherwise, arising out
of the
prior acquisition of the business, assets or stock of
other Persons;
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(7)
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any
collective bargaining agreement with any labor
union;
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(8)
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any
lease or similar arrangement for the use by the Company or any of
its
Subsidiaries of personal property (other than leases of vehicles,
office
equipment or operating equipment where the annual lease payments
are less
than $100,000 in the aggregate);
and
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(9)
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any
Company Contract to which any Insider of the Company or any of its
Subsidiaries is a
party.
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(b) Each
Company Contract was entered into at arms’ length and in the ordinary course, is
in full force and effect and is valid and binding upon and
enforceable against each of the parties thereto. True, correct and complete
copies of all Material Company Contracts (or written summaries in the case
of
oral Material Company Contracts) have been heretofore made available to Parent
or Parent’s counsel.
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(c) Except
as
set forth in Schedule 2.22, neither the Company, any of its Subsidiaries, nor,
to the best of the Company’s knowledge, any other party thereto is in breach of
or in default under, and no event has occurred which with notice or lapse of
time or both would become a breach of or default under, any Material Company
Contract. No party to any Company Contract has given any written notice of
any
claim of any breach, default or event, which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect on the Company or any
of
its Subsidiaries. Each Material Company Contract to which the Company or any
of
its Subsidiaries is a party or by which it is bound that has not expired by
its
terms is in full force and effect.
(d) None
of
the rights of the Company or any of its Subsidiaries under any Material Company
Contract will be terminated or impaired in any material respect by the
consummation of the Merger, and all such rights contained in such Material
Company Contract will be enforceable by the Company or any of the Subsidiaries
of the Company after the Merger without the consent or agreement of any other
Person and without payment of any kind. The Company Schedule sets forth an
accurate and complete list of all Material Contracts that require the consent
of
any third party to the Merger, a consent to assignment in connection with the
Merger or that are otherwise subject to termination, cancellation, imposition
of
additional obligations or loss of rights in connection with the Merger.
2.23 Insurance.
i)
Schedule
2.23(a) sets forth each insurance policy (including fire, theft, casualty,
general liability, workers compensation, business interruption, environmental,
product liability and automobile insurance policies and bond and surety
arrangements) to which the Company or any of its Subsidiaries is a party (the
“Insurance Policies”). The Insurance Policies are in full force and effect,
maintained with reputable companies against loss relating to the business,
operations and properties and such other risks as companies engaged in similar
business as the Company would, in accordance with good business practice,
customarily insure. All premiums due and payable under the Insurance Policies
have been paid on a timely basis and the Company and any of its Subsidiaries
are
in compliance in all material respects with all other terms thereof. True,
complete and correct copies of the Insurance Policies have been made available
to Parent.
(b) There
are
no material claims pending as to which coverage has been questioned, denied
or
disputed. All material claims thereunder have been filed in a due and timely
fashion and the Company or any of its Subsidiaries have not been refused
insurance for which they have applied or had any policy of insurance terminated
(other than at its request), nor has the Company or any of its Subsidiaries
received notice from any insurance carrier that: (i) such insurance will be
canceled or that coverage thereunder will be reduced or eliminated; or (ii)
premium costs with respect to such insurance will be increased, other than
premium increases in the ordinary course of business applicable on their terms
to all holders of similar policies.
2.24 Governmental
Actions/Filings.
Except
as set forth in Schedule 2.24, the Company and each of its Subsidiaries has
been
granted and holds, and has made, all Governmental Actions/Filings (including,
without limitation, the Governmental Actions/Filings required for the
manufacture and sale of all products manufactured and sold by it) necessary
to
the conduct by the Company and each of its Subsidiaries of their businesses
(as
presently conducted and as presently proposed to be conducted) or used or held
for use by the Company or each of its Subsidiaries, and true, complete and
correct copies of which have heretofore been made available to Parent. Each
such
Governmental Action/Filing is in full force and effect and will not expire
prior
to December 31, 2008 (except to the extent such expiration is not reasonably
expected to have a Material Adverse Effect), and the Company and each of its
Subsidiaries is in substantial compliance with all of its obligations with
respect thereto. No event has occurred and is continuing which requires or
permits, or after notice or lapse of time or both would require or permit,
and
consummation of the transactions contemplated by this Agreement or any ancillary
documents will not require or permit (with or without notice or lapse of time,
or both), any modification or termination of any such Governmental
Actions/Filings except such events which, either individually or in the
aggregate, would not have a Material Adverse Effect upon the Company or any
of
its Subsidiaries. No Governmental Action/Filing is necessary to be obtained,
secured or made by the Company or any of its Subsidiaries to enable them to
continue to conduct their businesses and operations and use its properties
after
the Closing in a manner which is consistent with current practice. For purposes
of this Agreement, the term “Governmental Action/Filing” shall mean any
franchise, license, certificate of compliance, authorization, consent, order,
permit, approval, consent or other action of, or any filing, registration or
qualification with, any federal, state, municipal, foreign or other
governmental, administrative or judicial body, agency or authority.
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2.25 Interested
Party Transactions.
Except
as set forth in the Schedule 2.25 hereto or in the Audited Financial Statements
or the Unaudited Financial Statements, no employee, officer, director or
Stockholder or any of its Subsidiaries, or a member of his or her immediate
family is indebted to the Company or any of its Subsidiaries, nor is the Company
or any of its Subsidiaries indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company or any of its Subsidiaries, and (iii) for other employee benefits
made generally available to all employees. Except as set forth in Schedule
2.25,
to the Company’s knowledge, none of such individuals has any direct or indirect
ownership interest in any Person with whom the Company or any of its
Subsidiaries is affiliated or with whom the Company or any of its Subsidiaries
has a contractual relationship, or in any Person that competes with the Company
or any of its Subsidiaries, except that each employee, Stockholder, officer
or
director of Company or any of its Subsidiaries, and members of their respective
immediate families may own less than 1% of the outstanding stock in publicly
traded companies that may compete with Company or any of its Subsidiaries.
Except as set forth in Schedule 2.25, to the knowledge of the Company, no
officer, director or Stockholder or any member of their immediate families
is,
directly or indirectly, interested in any Material Company Contract with the
Company or any of its Subsidiaries (other than such contracts as relate to
any
such Person’s ownership of capital stock or other securities of the Company or
any of its Subsidiaries or such Person’s employment with the
Company).
2.26 Bank
Accounts.
Schedule 2.26 sets forth the name of each bank, safe deposit company or other
financial institution in which the Company or any of its Subsidiaries has an
account, lock box or safe deposit box and the names of all persons authorized
to
draw thereon or have access thereto.
29
2.27 Powers
of Attorney.
Except
as set forth in the Schedule 2.27, there are no outstanding powers of attorney
executed by or on behalf of the Company or any of its Subsidiaries in favor
of
any Person.
2.28 Representations
and Warranties Complete.
The
representations and warranties of the Company included in this Agreement and
any
list, statement, document or information set forth in, or attached to, any
Schedule provided pursuant to this Agreement or delivered hereunder, are true
and complete in all material respects and do not contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, under
the
circumstance under which they were made.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT
Parent
represents and warrants to the Company, as follows:
3.1 Organization
and Qualification.
i)
Parent
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry
on
its business as it is now being or currently planned by Parent to be conducted.
Parent is in possession of all Approvals necessary to own, lease and operate
the
properties it purports to own, operate or lease and to carry on its business
as
it is now being or currently planned by Parent to be conducted, except where
the
failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent. Complete
and
correct copies of the Charter Documents of Parent, as amended and currently
in
effect, have been heretofore delivered to the Company. Parent is not in
violation of any of the provisions of the Parent’s Charter
Documents.
(b) Parent
is
duly qualified or licensed to do business as a foreign corporation and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not, individually or
in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
(c) Merger
Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being or currently planned by Parent to be
conducted. Complete and correct copies of the Charter Documents of Merger Sub,
as amended and currently in effect, are attached hereto as Exhibit
C
and
Exhibit
D.
Merger
Sub is not in violation of any of the provisions of the Merger Sub’s Charter
Documents.
3.2 Subsidiaries.
Except
for Merger Sub, which is a wholly-owned subsidiary of Parent, Parent has no
Subsidiaries and does not own, directly or indirectly, any ownership, equity,
profits or voting interest in any Person or has any agreement or commitment
to
purchase any such interest, and Parent has not agreed and is not obligated
to
make nor is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance
policy, benefit plan, commitment or undertaking of any nature, as of the date
hereof or as may hereafter be in effect under which it may become obligated
to
make, any future investment in or capital contribution to any other
entity.
30
3.3 Capitalization.
i)
As of
the date of this Agreement, (i) the authorized capital stock of Parent consists
of 100,000,000 shares of Parent Common Stock, par value $0.0001 per share and
1,000,000 shares of preferred stock, par value $0.0001 per share (“Parent
Preferred Stock”), of which 21,947,283 shares of Parent Common Stock and 100,000
shares of Parent Preferred Stock (all of which shares of Parent Preferred Stock
are designated as Series A Convertible Preferred Stock), are issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
(ii)
1,600,000 shares of Parent Common Stock are reserved for issuance upon the
exercise of outstanding options to purchase Parent Common Stock granted to
employees of Parent or other parties (“Parent Stock Options”); and (iii)
6,390,000 shares of Parent Common Stock are reserved for issuance upon the
exercise of outstanding warrants to purchase Parent Common Stock (“Parent
Warrants”). All shares of Parent Common Stock and Parent Preferred Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified
in
the instrument pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. All outstanding shares of Parent
Common Stock and all outstanding Parent Stock Options and Parent Warrants have
been issued and granted in compliance with (x) all applicable securities laws
and (in all material respects) other applicable laws and regulations, and (y)
all requirements set forth in any applicable Parent Contracts (as defined in
Section
3.14).
(b) The
shares of Parent Common Stock to be issued by Parent in connection with the
Merger, upon issuance in accordance with the terms of this
Agreement, will be duly authorized and validly issued and such shares of Parent
Common Stock will be fully paid and nonassessable.
(c) Except
as
contemplated by this Agreement or the Parent SEC Reports (as defined in
Section
3.7),
there
are no registration rights, and there is no voting trust, proxy,
rights plan, anti-takeover plan or other agreements or understandings to which
the Parent is a party or by which the Parent is bound with respect to any equity
security of any class of the Parent.
3.4 Authority
Relative to this Agreement.
Each of
Parent and Merger Sub has full corporate power and authority to: (i) execute,
deliver and perform this Agreement,
and each ancillary document which Parent or Merger Sub has executed or delivered
or is to execute or deliver pursuant to this Agreement, and (ii) carry out
Parent’s and Merger Sub’s obligations
hereunder and thereunder and, to consummate the transactions contemplated hereby
(including the Merger). The execution and delivery of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
(including the Merger) have been duly and validly authorized by all necessary
corporate action on the part of Parent and Merger Sub (including the approval
by
its Board of Directors), and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery thereof by the other parties hereto,
constitutes the legal and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally and by general
principles of equity.
31
3.5 No
Conflict; Required Filings and Consents.
i) The
execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub shall
not: (i) conflict with or violate Parent’s or Merger Sub’s Charter Documents,
(ii) conflict with or violate any Legal Requirements, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time
or both would become a default) under, or materially impair Parent’s rights or
alter the rights or obligations of any third party under, or give to others
any
rights of termination, amendment, acceleration or cancellation of, or result
in
the creation of a lien or encumbrance on any of the properties or assets of
Parent pursuant to, any Parent Contracts, except, with respect to clauses (ii)
or (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually and in the aggregate, have a Material
Adverse Effect on Parent.
(b) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of their respective obligations hereunder will not, require
any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if any,
of
the Securities Act, the Securities Exchange Act of 1934, as amended (“Exchange
Act”), state securities laws (“Blue Sky Laws”), and the rules and regulations
thereunder, and appropriate documents with the relevant authorities of other
jurisdictions in which Parent is qualified to do business, (ii) the
qualification of Parent as a foreign corporation in those jurisdictions in
which
the business of the Company makes such qualification necessary, and (iii) where
the failure to obtain such consents, approvals, authorizations or permits,
or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, or prevent
consummation of the Merger or otherwise prevent the parties hereto from
performing their obligations under this Agreement.
3.6 Compliance.
Parent
has complied with, is not in violation of, any Legal Requirements with respect
to the conduct of its business, or the ownership or operation
of its business, except for failures to comply or violations which, individually
or in the aggregate, have not had and are not reasonably likely to have a
Material Adverse Effect on Parent. The business and activities of Parent have
not been and are not being conducted in violation of any Legal Requirements.
Parent is not in default or violation of any term, condition or provision of
its
Charter Documents. No written notice of non-compliance with any Legal
Requirements has been received by Parent.
3.7 SEC
Filings; Financial Statements.
i)
Parent
has made available to the Company and the Stockholders a correct and complete
copy of each report filed by Parent with the Securities and Exchange Commission
(the “SEC”) (the “Parent SEC Reports”), on or since February 8, 2005, which are
all the forms, reports and documents required to be filed by Parent with the
SEC
since such date. As of their respective dates the Parent SEC Reports: (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Reports, and (ii) did not at the time they were filed (and if amended or
superseded by a filing prior to the date of this Agreement then on the date
of
such filing and as so amended or superseded) contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent set forth
in
the preceding sentence, Parent makes no representation or warranty whatsoever
concerning the Parent SEC Reports as of any time other than the time they were
filed.
To the
knowledge of Parent, Plan Sponsor (as defined in the Parent SEC Reports) has
complied, and will continue to comply, with all of its obligations under the
Plan (as defined in the Parent SEC Reports).
32
(b) Each
set
of financial statements (including, in each case, any related notes thereto)
contained in Parent SEC Reports complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, do not contain footnotes as permitted by Form
10-QSB of the Exchange Act) and each fairly presents in all material respects
the financial position of Parent at the respective dates thereof and the results
of its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were, are subject to normal adjustments
which were not expected to have a Material Adverse Effect on Parent taken as
a
whole.
3.8 No
Undisclosed Liabilities.
Parent
has no liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
financial statements included in Parent SEC Reports which are, individually
or
in the aggregate, material to the business, results of operations or financial
condition of Parent, except (i) liabilities provided for in or otherwise
disclosed in Parent SEC Reports filed prior to the date hereof, and (ii)
liabilities incurred since December 31, 2006 in the ordinary course of business,
none of which would have a Material Adverse Effect on Parent. Merger Sub has
no
assets or properties of any kind, does not now conduct and has never conducted
any business, and has and will have at the Closing no obligations or liabilities
of any nature whatsoever except such obligations and liabilities as are imposed
under this Agreement.
3.9 Absence
of Certain Changes or Events.
Except
as set forth in Parent SEC Reports filed prior to the date of this Agreement,
and except as contemplated by this Agreement, since December 31, 2006, there
has
not been: (i) any Material Adverse Effect on Parent, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether
in
cash, stock or property) in respect of, any of Parent’s capital stock, or any
purchase, redemption or other acquisition by Parent of any of Parent’s capital
stock or any other securities of Parent or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of Parent’s capital stock, (iv) any
granting by Parent of any increase in compensation or fringe benefits, except
for normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by Parent of any bonus, except
for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Parent of any increase in severance or termination pay or
any
entry by Parent into any currently effective employment, severance, termination
or indemnification agreement or any agreement the benefits of which are
contingent or the terms of which are materially altered upon the occurrence
of a
transaction involving Parent of the nature contemplated hereby, (v) entry by
Parent into any licensing or other agreement with regard to the acquisition
or
disposition of any Intellectual Property other than licenses in the ordinary
course of business consistent with past practice or any amendment or consent
with respect to any licensing agreement filed or required to be filed by Parent
with respect to any Governmental Entity, (vi) any material change by Parent
in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, (vii) any change in the auditors of Parent, (viii)
any issuance of capital stock of Parent, or (ix) any revaluation by Parent
of
any of its assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any sale
of
assets of Parent other than in the ordinary course of business.
33
3.10 Litigation.
There
are no claims, suits, actions or proceedings pending or to Parent’s knowledge,
threatened against Parent, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
singularly or in the aggregate with all such claims, actions or proceedings,
to
have a Material Adverse Effect on Parent or have a Material Adverse Effect
on
the ability of the parties hereto to consummate the Merger.
3.11 Taxes.
i)
Parent
has timely filed all Returns required to be filed by Parent with any Tax
authority prior to the date hereof, except such Returns which are not material
to Parent. All such Returns are true, correct and complete in
all material respects. Parent has paid all Taxes shown to be due on such
Returns.
(b) All
Taxes
that Parent is required by law to withhold or collect have been duly withheld
or
collected, and have been timely paid over to the proper
governmental authorities to the extent due and payable.
(c) Parent
has not been delinquent in the payment of any material Tax nor is there any
material Tax deficiency outstanding, proposed or assessed against
Parent, nor has Parent executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of
any
Tax.
(d) No
audit
or other examination of any Return of Parent by any Tax authority is presently
in progress, nor has Parent been notified of any request
for such an audit or other examination.
(e) No
adjustment relating to any Returns filed by Parent has been proposed in writing,
formally or informally, by any Tax authority to Parent or
any representative thereof.
(f) Parent
has no liability for any material unpaid Taxes which have not been accrued
for
or reserved on Parent’s balance sheets included in the audited financial
statements for the most recent fiscal year ended, whether asserted or
unasserted, contingent or otherwise, which is material to Parent, other than
any
liability for unpaid Taxes that may have accrued since the end of the most
recent fiscal year in connection with the operation of the business of Parent
in
the ordinary course of business, none of which is material to the business,
results of operations or financial condition of Parent.
34
3.12 Environmental
Matters.
Except
for such matters that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect: (i) Parent has, to the knowledge
of
Parent, complied with all applicable Environmental Laws; (ii) Parent has not
received any notice, demand, letter, claim or request for information alleging
that Parent may be in violation of or liable under any Environmental Law; and
(iii) Parent is not subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or subject to any indemnity or other
agreement with any third party relating to liability under any Environmental
Law.
3.13 Brokers.
Parent
has not incurred, nor will it incur, directly or indirectly, any liability
for
brokerage or finders’ fees or agent’s commissions or
any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.14 Agreements,
Contracts and Commitments.
i)
Except
as set forth in the Parent SEC Reports filed prior to the date
of this Agreement, there are no contracts, agreements, leases, mortgages,
indentures, notes, bonds, liens, license, permit, franchise, purchase orders,
sales orders or other understandings, commitments or obligations (including
without limitation outstanding offers or proposals) of any kind, whether written
or oral, to which Parent is a party or by or to which any of the properties
or
assets of Parent may be bound, subject or affected, which either (i) creates
or
imposes a liability greater than $25,000, or (ii) may not be cancelled by Parent
on less than 30 days’ or less prior notice (“Parent Contracts”). All Parent
Contracts are set forth in the Parent SEC Reports.
(b) Each
Parent Contract was entered into at arms’ length and in the ordinary course, is
in full force and effect and is valid and binding upon and
enforceable against each of the parties thereto. True, correct and complete
copies of all Parent Contracts (or written summaries in the case of oral Parent
Contracts) and of all outstanding offers or proposals of Parent have been
heretofore delivered to the Company.
(c) Neither
Parent nor, to the knowledge of Parent, any other party thereto is in breach
of
or in default under, and no event has occurred which with notice or lapse of
time or both would become a breach of or default under, any Parent Contract,
and
no party to any Parent Contract has given any written notice of any claim of
any
such breach, default or event, which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect on Parent. Each agreement,
contract or commitment to which Parent is a party or by which it is bound that
has not expired by its terms is in full force
and effect, except where such failure to be in full force and effect is not
reasonably likely to have a Material Adverse Effect on Parent.
3.15 Interested
Party Transactions.
Except
as set forth in the Parent SEC Reports filed prior to the date of this
Agreement, no employee, officer, director or stockholder of Parent or a member
of his or her immediate family is indebted to Parent nor is Parent indebted
(or
committed to make loans or extend or guarantee credit) to any of them, other
than reimbursement for reasonable expenses incurred on behalf of Parent. To
Parent’s knowledge, none of such individuals has any direct or indirect
ownership interest in any Person with whom Parent is affiliated or with whom
Parent has a material contractual relationship, or any Person that competes
with
Parent, except that each employee, stockholder, officer or director of Parent
and members of their respective immediate families may own less than 5% of
the
outstanding stock in publicly traded companies that may compete with Parent.
To
Parent’s knowledge, no officer, director or stockholder or any member of their
immediate families is, directly or indirectly, interested in any material
contract with Parent (other than such contracts as relate to any such individual
ownership of capital stock or other securities of Parent).
35
3.16 Bulletin
Board Trading Status.
Parent
shall be in compliance with all material requirements for, and its common stock
shall be quoted on, the Electronic Over-the-Counter Bulletin Board system on
the
date immediately prior to the Closing Date, such that Parent Common Stock may
continue to be so quoted without interruption following the Closing
Date.
3.17 Stockholder
Claims.
There
are no existing or pending claims against Parent by any current or former
stockholder of Parent, and to Parent’s knowledge, no facts or circumstances
reasonably likely to result in any such claims.
3.18 Operations
of Merger Sub.
Merger
Sub is a direct, wholly owned subsidiary of Parent, was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only
as
contemplated by this Agreement.
3.19 Representations
and Warranties Complete.
The
representations and warranties of Parent included in this Agreement and any
list, statement, document or information set forth in, or attached to, any
Schedule provided pursuant to this Agreement or delivered hereunder, are true
and complete in all material respects and do not contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, under
the
circumstance under which they were made.
3.20 Survival
of Representations and Warranties.
The
representations and warranties of Parent set forth in this Agreement shall
not
survive the Closing.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business by Company and Parent.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to its terms or the Closing, each
of
the Company, Parent and Merger Sub shall, except to the extent that the other
party shall otherwise consent in writing, carry on its business in the usual,
regular and ordinary course consistent with past practices, in substantially
the
same manner as heretofore conducted and in compliance with all applicable laws
and regulations (except where noncompliance would not have a Material Adverse
Effect), pay its debts and taxes when due subject to good faith disputes over
such debts or taxes, pay or perform other material obligations when due, and
use
its commercially reasonable efforts consistent with past practices and policies
to (i) preserve substantially intact its present business organization, (ii)
keep available the services of its present officers and employees and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others with which it has significant business dealings. In
addition, except as required or permitted by the terms of this Agreement or
set
forth in Schedule 4.1 hereto, without the prior written consent of the other
party, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Closing, each of the Company, Parent and Merger Sub shall not do any of the
following:
36
(a) Waive
any
stock repurchase rights, accelerate, amend or (except as specifically provided
for herein) change the period of exercisability of options
or restricted stock, or reprice options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans;
(b) Grant
any
severance or termination pay to any officer or employee except pursuant to
applicable law, written agreements outstanding, or policies
existing on the date hereof and as previously or concurrently disclosed in
writing or made available to the other party, or adopt any new severance plan,
or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof.
(c) Transfer
or license to any person or otherwise extend, amend or modify any material
rights to any Intellectual Property of the Company or Parent,
as applicable, or enter into grants to transfer or license to any person future
patent rights, other than in the ordinary course of business consistent with
past practices provided that in no event shall the Company or Parent license
on
an exclusive basis or sell any Intellectual Property of the Company, or Parent
as applicable;
(d) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(e) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
of the Company and Parent, as applicable, including repurchases
of unvested shares at cost in connection with the termination of the
relationship with any employee or consultant pursuant to stock option or
purchase agreements in effect on the date hereof;
(f) Issue,
deliver, sell, authorize, pledge or otherwise encumber, or agree to any of
the
foregoing with respect to, any shares of capital stock or
any securities convertible into or exchangeable for shares of capital stock,
or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into or exchangeable for shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible or exchangeable
securities;
(g) Amend
its
Charter Documents unless required to do so hereunder;
(h) Acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a 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 which are material, individually or in the aggregate, to the business
of
Parent or the Company as applicable, or enter into any joint ventures, strategic
partnerships or alliances or other arrangements that provide for exclusivity
of
territory or otherwise restrict such party’s ability to compete or to offer or
sell any products or services;
37
(i) Sell,
lease, license, encumber or otherwise dispose of any properties or assets,
except (A) sales of services and licenses of software in
the ordinary course of business consistent with past practice, (B) sales of
inventory in the ordinary
course of business consistent with past practice, (C) and the sale, lease or
disposition (other than through licensing) of property or assets that are not
material, individually or in the aggregate, to the business of such
party;
(j) Incur
any
indebtedness for borrowed money in excess of $25,000 in the aggregate or
guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of Parent or the Company, as applicable, enter into any “keep well”
or other agreement to maintain any financial statement condition or enter into
any arrangement having the economic effect of any of the foregoing;
(k) Except
as
contemplated by this Agreement, adopt or amend any employee benefit plan, policy
or arrangement, any employee stock purchase or employee stock option plan,
or
enter into any employment contract or collective bargaining agreement (other
than offer letters and letter agreements entered into in the ordinary course
of
business consistent with past practice with employees who are terminable “at
will”), pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees
or
consultants, except in the ordinary course of business consistent with past
practices;
(l) Pay,
discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), or litigation
(whether or not commenced prior to the date of this Agreement) other than the
payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practices or in accordance with their terms,
or
liabilities recognized or disclosed in the Unaudited Financial Statements or
in
the most recent financial statements included in the Parent SEC Reports filed
prior to the date of this Agreement, as applicable, or incurred since the date
of such financial statements, or waive the benefits of, agree to modify in
any
manner, terminate, release any person from or knowingly fail to enforce any
confidentiality or similar agreement to which the Company is a party or of
which
the Company is a beneficiary or to which Parent is a party or of which Parent
is
a beneficiary, as applicable;
(m) Except
in
the ordinary course of business consistent with past practices, modify, amend
or
terminate any Material Company Contract or Parent
Contract, as applicable, or waive, delay the exercise of, release or assign
any
material rights or claims thereunder;
(n) Except
as
required by GAAP, revalue any of its assets or make any change in accounting
methods, principles or practices;
38
(o) Except
in
the ordinary course of business consistent with past practices, incur or enter
into any agreement, contract or commitment requiring
such party to pay in excess of $100,000 in any 12 month period;
(p) Make
or
rescind any Tax elections that, individually or in the aggregate, could be
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of such party, settle or compromise any material income tax
liability or, except as required by applicable law, materially change any method
of accounting for Tax purposes or prepare or file any Return in a manner
inconsistent with past practice;
(q) Form,
establish or acquire any subsidiary except as contemplated by this
Agreement;
(r) Permit
any Person to exercise any of its discretionary rights under any plan to provide
for the automatic acceleration of any outstanding options,
the termination of any outstanding repurchase rights or the termination of
any
cancellation rights issued pursuant to such plans;
(s) Make
capital expenditures except in accordance with prudent business and operational
practices consistent with prior practice;
(t) Make
or
omit to take any action which would be reasonably anticipated to have a Material
Adverse Effect;
(u) Enter
into any transaction with or distribute or advance any assets or property to
any
of its officers, directors, partners, stockholders
or other affiliates (other than payment of salary and benefits in the ordinary
course of business consistent with past practice); or
(v) Agree
in
writing or otherwise agree, commit or resolve to take any of the actions
described in Sections
4.1 (a) through (u)
above.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Directors
and Officers of the Company and the Subsidiaries After Merger.
Parent
and the Company shall take all necessary action so that the persons
listed on Schedule 5.1 are elected to the positions of officers and directors
of
the Company, as set forth therein, to serve in such positions effective
immediately after the Closing.
5.2 Other
Actions.
i)
At least
five (5) days prior to Closing, Parent shall prepare a draft Current Report
on
Form 8-K announcing the Closing, together with, or incorporating by reference,
the financial statements prepared by the Company and its accountant, and such
other information that may be required to be disclosed with respect to the
Merger in any report or form to be filed with the SEC (“Merger Form 8-K”), which
shall be in a form reasonably acceptable to the Company and in a format
acceptable for XXXXX filing. Prior to Closing, Parent and the Company shall
prepare the press release announcing the consummation of the Merger hereunder
(“Press Release”). Simultaneously with the Closing, Parent shall file the Merger
Form 8-K with the SEC and distribute the Press Release.
39
(b) The
Company and Parent shall further cooperate with each other and use their
respective reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the Merger
and the other transactions contemplated hereby as soon as practicable, including
preparing and filing as soon as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as soon as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party (including the
respective independent accountants of the Company and Parent) and/or any
Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated hereby. Subject to applicable laws relating to the
exchange of information and the preservation of any applicable attorney-client
privilege, work-product doctrine, self-audit privilege or other similar
privilege, each of the Company and Parent shall have the right to review and
comment on in advance, and to the extent practicable each will consult the
other
on, all the information relating to such party that appears in any filing made
with, or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Merger and the other transactions contemplated
hereby. In exercising the foregoing right, each of the Company and Parent shall
act reasonably and as promptly as practicable.
5.3 Required
Information.
In
connection with the preparation of the Merger Form 8-K and Press Release, and
for such other reasonable purposes, the Company and
Parent each shall, upon request by the other, furnish the other with all
information concerning themselves, their respective directors, officers
and stockholders
(including the directors of Parent and the Company to be elected effective
as of
the Closing pursuant to Section
5.1
hereof) and such other matters as may be reasonably necessary or advisable
in
connection with the Merger, or any other statement, filing, notice or
application made by or on behalf of the Company and Parent to any third party
and/or any Governmental Entity in connection with the Merger and the other
transactions contemplated hereby. Each party warrants and represents to the
other party that all such information shall be true and correct in all material
respects and will not contain any untrue statement of a material fact or omit
to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
5.4 Confidentiality;
Access to Information.
i) Confidentiality.
Any
confidentiality agreement previously executed by
the parties shall be superseded in its entirety by the provisions of this
Agreement. Each party agrees to maintain in confidence any non-public
information received from the other party, and to use such non-public
information only for purposes of consummating the transactions contemplated
by
this Agreement. Such confidentiality obligations will not apply to (i)
information which was known to the one party or their respective agents prior
to
receipt from the other party; (ii) information which is or becomes generally
known; (iii) information acquired by a party or their respective agents from
a
third party who was not bound to an obligation of confidentiality; and (iv)
disclosure required by law. In the event this Agreement is terminated as
provided in Article VIII hereof, each party (i) will return or cause to be
returned to the other all documents and other material obtained from the other
in connection with the Merger contemplated hereby, and (ii) will use its
reasonable best efforts to delete from its computer systems all documents and
other material obtained from the other in connection with the Merger
contemplated hereby.
40
(b) Access
to Information.
(1)
Company
will afford Parent and its financial advisors, accountants, counsel and other
representatives reasonable access during normal business hours, upon reasonable
notice, to the properties, books, records and personnel of the Company during
the period
prior to the Closing to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of the Company, as Parent may reasonably request.
No
information or knowledge obtained by Parent in any investigation pursuant to
this Section
5.4
will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Merger.
Parent
will afford the Company and its financial advisors, underwriters, accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Parent during the period prior to the Closing to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of Parent, as the Company may
reasonably request. No information or knowledge obtained by the Company in
any
investigation pursuant to this Section
5.4
will
affect or be deemed to modify any representation or warranty contained herein
or
the conditions to the obligations of the parties to consummate the
Merger.
Notwithstanding
anything to the contrary contained herein, each party (“Subject Party”) hereby
agrees that by proceeding with the Closing,
it shall be conclusively deemed to have waived for all purposes hereunder any
inaccuracy of representation or breach of warranty by another party which is
actually known by the Subject Party prior to the Closing.
5.5 Public
Disclosure.
From
the date of this Agreement until Closing or termination, the parties shall
cooperate in good faith to jointly prepare all press
releases and public announcements pertaining to this Agreement and the
transactions governed by it, and no party shall issue or otherwise make any
public announcement or communication pertaining to this Agreement or the
transaction without the prior consent of Parent
(in the case of the Company and the Stockholders) or the Company (in the case
of
Parent), except as required by any legal requirement or by the rules and
regulations of, or pursuant to any agreement of a stock exchange or trading
system. Each party will not unreasonably withhold approval from the others
with
respect to any press release or public announcement. Notwithstanding the
foregoing, the parties hereto agree that promptly as practicable after the
execution of this Agreement, Parent will file with the SEC a Current Report
on
Form 8-K pursuant to the Exchange Act to report the execution of this Agreement,
with respect to which Parent shall consult with the Company.
5.6 Reasonable
Efforts.
Upon
the terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using commercially reasonable efforts
to accomplish the following: (i) the taking of all reasonable acts necessary
to
cause the conditions precedent set forth in Article VI to be satisfied, (ii)
the
obtaining of all necessary actions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all consents,
approvals or waivers from third parties required as a result of the transactions
contemplated in this Agreement, including without limitation the consents
referred to in Schedule 2.5 of the Company Schedule, (iv) the defending of
any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated
by,
and to fully carry out the purposes of, this Agreement. In connection with
and
without limiting the foregoing, Parent and its Board of Directors and the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use its
commercially reasonable efforts to enable the Merger and the other transactions
contemplated by this Agreement to be consummated as promptly as practicable
on
the terms contemplated by this Agreement. Notwithstanding anything herein to
the
contrary, nothing in this Agreement shall be deemed to require Parent or the
Company to agree to any divestiture by itself or any of its affiliates of shares
of capital stock or of any business, assets or property, or the imposition
of
any material limitation on the ability of any of them to conduct their business
or to own or exercise control of such assets, properties and stock.
41
5.7 No
Securities Transactions.
Neither
the Company nor any Stockholder or any of their affiliates, directly or
indirectly, shall engage in any transactions
involving the securities of Parent prior to the time of the making of a public
announcement of the transactions contemplated by this Agreement. The Company
shall use its best efforts to require each of its officers, directors,
employees, agents and representatives to comply with the foregoing
requirement.
5.8 Disclosure
of Certain Matters.
Each of
Parent and the Company will provide the other with prompt written notice of
any
event, development or condition that (i) would cause any of such party’s
representations and warranties to become untrue or misleading or which may
affect its ability to consummate the transactions contemplated by this
Agreement, (ii) had it existed or been known on the date hereof would have
been
required to be disclosed under this Agreement, (iii) gives such party any reason
to believe that any of the conditions set forth in Article VI will not be
satisfied, or (iv) is of a nature that is or may be materially adverse to the
operations, prospects or condition (financial or otherwise) of Parent or the
Company. The Company shall have the obligation to supplement or amend the
Company Schedules (the “Disclosure Schedules”) being delivered concurrently with
the execution of this Agreement and annexed hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of
this
Agreement, would have been required to be set forth or described in the
Disclosure Schedules. The obligations of the Company to amend or supplement
the
Disclosure Schedules being delivered herewith shall terminate on the Closing
Date. Notwithstanding any such amendment or supplementation, for purposes of
Sections
6.2(a), 6.3(a), 7.1(d) and 7.1(e),
the
representations and warranties of the Company shall be made with reference
to
the Disclosure Schedules as they exist at the time of execution of this
Agreement, subject to such anticipated changes as are set forth in Schedule
4.1
or otherwise expressly contemplated by this Agreement or which are set forth
in
the Disclosure Schedules as they exist on the date of this
Agreement.
42
5.9 No
Solicitation.
i)
The
Company will not, and will cause its Affiliates, employees, agents and
representatives not to, directly or indirectly, solicit or enter into
discussions or transactions with, or encourage, or provide any information
to,
any corporation, partnership or other entity or group (other than Parent and
its
designees) concerning any merger, sale of ownership interests and/or assets
of
the Company, recapitalization or similar transaction.
(b)
The
Company shall promptly advise Parent of the nature of any written offer,
proposal or indication of interest that is submitted to the Company and the
identity of the Person making such written offer, proposal or indication of
interest.
5.10 Warrants.
On or
before the Closing, the Company shall ensure that the warrant (“Company
Warrant”) to purchase shares of Company Common Stock will either be exercised in
full or terminated on or before the Effective Time.
5.11 Conversion
of Preferred Stock.
The
Company shall solicit the consent of the holders of Company Preferred Stock
to
mandatorily convert all of the Company Preferred Stock into shares of Company
Common Stock effective immediately prior to the Effective Time in accordance
with the Charter Documents of the Company and the DGCL.
5.12 Board
Observer Rights.
Prior
to the Effective Time, Spark Capital shall designate one representative to
serve
as an observer (the “Observer”). The Observer shall be entitled to attend all
meetings of Parent’s Board of Directors in a nonvoting, observer capacity, and
to receive copies of all notices, minutes, consents and other materials that
Parent provides to its directors; provided, however, that the Observer shall
agree in writing to be bound by the same duties of confidentiality, good faith
and loyalty as if such Observer were a director of Parent, with respect to
all
information provided to him in such materials and in the course of his
attendance at any meeting of Parent’s Board of Directors. Notwithstanding the
foregoing, Parent reserves the right to withhold any information and exclude
such Observer from any meeting of the Board of Directors, or any portion
thereof, if access to such information or attendance at such meeting could
adversely affect the attorney-client privilege, or to protect confidential
information or avoid a potential conflict of interest. The Observer shall not
be
entitled to vote on any matter as to which action of the Board of Directors
is
to be taken. The right of Spark Capital to designate an Observer set forth
in
this Section 5.12 shall cease and be of no force or effect at such time as
Spark
Capital or any of its affiliates owns less than 50% of the shares of Parent
Common Stock issued to Spark Capital or its affiliates at Closing.
5.13 Financial
Statements.
(a)
Prior to the Effective Time, the Company shall provide to Parent a correct
and
complete copy of the audited consolidated financial statements (including any
related notes thereto) of the Company and its Subsidiaries for the fiscal years
ended March 31, 2006 and March 31, 2007 (the “Audited Financial Statements”).
The Audited Financial Statements shall be prepared in accordance with United
States generally accepted accounting principles (“GAAP”) applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and each shall fairly presents in all material respects the financial
position of the Company and its Subsidiaries at the respective dates thereof
and
the results of its operations and cash flows for the periods
indicated.
43
(b)
Prior
to the Effective Time, the Company shall provide to Parent a correct and
complete copy of the unaudited consolidated financial statements (including,
in
each case, any related notes thereto) of the Company and its Subsidiaries for
the quarterly period ended September 30, 2007 (the “Unaudited Financial
Statements”). The Unaudited Financial Statements shall comply as to form in all
material respects, and shall be prepared in accordance with GAAP applied on
a
consistent basis throughout the periods involved (except as may be indicated
in
the notes thereto), and shall fairly present in all material respects the
financial position of the Company and its Subsidiaries at the date thereof
and
the results of its operations and cash flows for the period indicated, except
that such statements shall not contain notes and are subject to normal
adjustments that are not expected to have a Material Adverse Effect on the
Company.
5.14 Releases.
If the
Merger is consummated, then, effective as of the Effective Time, each of the
Stockholders, for himself or itself and his or its heirs, legatees, successors,
and assigns, hereby fully and irrevocably releases, remises, and discharges
the
Surviving Corporation and its officers, directors, employees, agents,
representatives, successors, and assigns and the officers, directors, employees,
agents and representatives of the Company from any and all damages, losses,
claims, demands, actions, causes of action, suits, litigations, arbitrations,
liabilities, costs, and expenses, including court costs and the reasonable
fees
and expenses of legal counsel (“Damages”), regardless of whether known, unknown,
or unknowable, and regardless of whether absolute, contingent, or otherwise,
and
regardless of whether at law, in equity, or otherwise, without limitation,
whether now existing or arising in the future, in each case to the extent based
on actions, omissions, and/or events occurring at or before the Effective Time;
provided, however, in no way shall this release prevent any officer or director
of the Company from seeking indemnification and/or contribution from the Company
in accordance with the Company’s Charter Documents and the DGCL for any Damages
sought by third parties in connection with the performance of any such officers’
or directors’ duties owed to the Company on or before the Effective Time,
whether such Damages are now existing or arise in the future after the Effective
Time. Furthermore, each of such releasing persons hereby irrevocably agrees
not
to xxx, or to commence, maintain, or aid in the prosecution of any litigation,
arbitration, or other action or proceeding against or adverse to any of such
released persons, or otherwise to seek any recourse against any of such released
persons, in respect of any matter hereby released or purported or attempted
to
be released.
ARTICLE
VI
CONDITIONS
TO THE TRANSACTION
6.1 Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of each party to this Agreement to effect the Merger
shall
be subject to the satisfaction at or prior to the Closing Date of the following
conditions:
44
(a) Readiness
of the Merger Form 8-K.
The
Merger Form 8-K shall be in a form reasonably acceptable to each party and
in a format acceptable for XXXXX filing, and Parent shall have filed the Merger
Form 8-K with the SEC at Closing.
(b) Existing
Debt.
$16,500,000 of the Company’s existing debt to ValueAct SmallCap Master Fund,
L.P. (“ValueAct”), plus accrued interest (the “Existing Debt”) shall have
remained with the Company, provided that at least 50% of the Existing Debt
shall
have been assumed by Parent, and customary cross-default covenants with respect
to the Existing Debt shall have been agreed upon by Parent, the Company and
ValueAct.
(c) Lease
On or
before the Closing, the lease for the corporate headquarters of the Company
with
Berkshire Holdings Inc. shall have been amended on terms and conditions
acceptable to Berkshire Holdings Inc., the Company and Parent.
(d) Key
Employee and Founder Employment Agreements.
On or
before the Closing, the key employees and the Founders of the Company listed
on
Schedule 6.1(d) shall have amended their existing employment agreements with
the
Company on terms and conditions acceptable to such persons, the Company and
Parent.
(e) Stock
Price.
If on
or before the Closing, the stock price of Parent Common Stock is less than
$2.75
per share this Agreement may be terminated by either the Company or Parent
in
accordance with Section
7.1(f),
unless
the Company and the Parent mutually agree to adjust the share allocations set
forth on Schedule 1.5(a).
6.2 Additional
Conditions to Obligations of Company.
The
obligations of the Company to consummate and effect the Merger shall be subject
to the satisfaction at
or prior to the Closing Date of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Representations
and Warranties.
Each
representation and warranty of Parent contained in this Agreement that is
qualified as to materiality shall
have been true and correct (i) as of the date of this Agreement and (ii) subject
to the provisions of the last sentence of Section
5.8,
on and as of the Closing Date with the same force and effect as if made on
the
Closing Date. Each representation and warranty of Parent contained in this
Agreement that is not qualified as to materiality shall have been true and
correct (iii) in all material respects as of the date of this Agreement and
(iv)
in all material respects on and as of the Closing Date with the same force
and
effect as if made on the Closing Date (except for those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time, which need only be true and correct in
all
material respects as of such date or with respect to such period). The Company
shall have received a certificate with respect to the foregoing signed on behalf
of Parent by an authorized officer of Parent (“Parent Closing
Certificate”).
(b) Agreements
and Covenants.
Parent
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date, except
to the extent that any failure to perform or comply (other than a willful
failure to perform or comply or failure to perform or comply with an agreement
or covenant reasonably within the control of Parent) does not, or will not,
constitute a Material Adverse Effect with respect to Parent, and the Parent
Closing Certificate shall include a provision to such effect.
45
(c) No
Litigation.
No
order shall have been entered to (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) affect materially and adversely or otherwise
encumber the title of the shares of Parent Common Stock to be issued by Parent
in connection with the Merger and no order, judgment, decree, stipulation or
injunction to any such effect shall be in effect.
(d) Consents.
Parent
shall have obtained all consents, waivers and approvals required to be obtained
by Parent in connection with the consummation
of the transactions contemplated hereby, other than consents, waivers and
approvals the absence of which, either alone or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Parent and the
Parent Closing Certificate shall include a provision to such
effect.
(e) Due
Diligence.
Company
shall have completed a due diligence investigation of Parent’s majority
stockholders, officers, directors, business, assets and liabilities, the scope
and results of which shall be satisfactory to the Company at its sole
discretion.
(f) Material
Adverse Effect.
No
Material Adverse Effect with respect to Parent shall have occurred since the
date of this Agreement.
(g) Opinion
of Counsel.
The
Company shall have received from Xxxxx Xxxxx, counsel to Parent, an opinion
of
counsel in substantially the form of
Exhibit
E
annexed hereto.
(h) Other
Deliveries.
At or
prior to Closing, Parent shall have delivered to the Company (i) copies of
resolutions and actions taken by Parent’s board of directors in connection with
the approval of this Agreement and the transactions contemplated hereunder,
and
(ii) such other documents or certificates as shall reasonably be required by
the
Company and its counsel in order to consummate the transactions contemplated
hereunder.
(i) Appointments.
Xxx
Xxxxx shall have been appointed to the Board of Directors of Parent and as
Chief
Executive Officer of the Company, and a representative of the Stockholders,
reasonably acceptable to Parent and identified in writing to Parent at least
three days prior to Closing, shall have been appointed to the Board of Directors
of Parent.
6.3 Additional
Conditions to the Obligations of Parent.
The
obligations of Parent to consummate and effect the Merger shall be subject
to
the satisfaction at
or prior to the Closing Date of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations
and Warranties.
Each
representation and warranty of the Company contained in this Agreement that
is
qualified as to materiality shall have been true and correct (i) as of the
date
of this Agreement and (ii) subject to the provisions of the last sentence of
Section
5.8,
on and
as of the Closing Date with the same force and effect as if made on the Closing
Date. Each representation and warranty of the Company contained in this
Agreement that is not qualified as to materiality shall have been true and
correct (i) in all material respects as of the date of this Agreement and (ii)
in all material respects on and as of the Closing Date with the same force
and
effect as if made on the Closing Date (except for those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time, which need only be true and correct in
all
material respects as of such date or with respect to such period). The Parent
shall have received a certificate with respect to the foregoing signed on behalf
of the Company by an authorized officer of Company (“Company Closing
Certificate”).
46
(b) Agreements
and Covenants.
The
Company shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by them at or prior to the Closing Date except to the extent that any
failure to perform or comply (other than a willful failure to perform or comply
or failure to perform or comply with an agreement or covenant reasonably within
the control of Company) does not, or will not, constitute a Material Adverse
Effect on the Company, and the Company Closing Certificate shall include a
provision to such effect.
(c) No
Litigation.
No
action, suit or proceeding shall be pending or threatened before any
Governmental Entity which is reasonably likely to (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement
to be rescinded following consummation or (iii) affect materially and adversely
the right of Parent to own, operate or control any of the assets and operations
of the Surviving Corporation following the Merger and no order, judgment,
decree, stipulation or injunction to any such effect shall be in
effect.
(d) Consents.
The
Company shall have obtained all consents, waivers, permits and approvals
required to be obtained by the Company in connection with
the consummation of the transactions contemplated hereby, other than consents,
waivers and approvals the absence of which, either alone or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Company and the Company Closing Certificate shall include a provision to such
effect.
(e) Due
Diligence.
Parent
shall have completed a due diligence investigation of the Company’s business,
assets and liabilities, the scope and results of which shall be satisfactory
to
the Parent in its sole discretion.
(f) Material
Adverse Effect.
No
Material Adverse Effect with respect to the Company shall have occurred since
the date of this Agreement.
(g) Opinion
of Counsel.
Parent
shall have received from Loeb & Loeb LLP, counsel to the Company, an opinion
of counsel in
substantially the form of Exhibit
F
annexed hereto.
(h) Company
Affiliate Agreements.
Parent
shall have received from each person who is identified on Schedule 1.10 hereto
as an “affiliate” of the Company an Company Affiliate Agreement and each such
agreement shall be in full force and effect.
47
(i) Company
Warrants.
All Company Warrants shall have been properly exercised or terminated and the
exercise price for each Company Warrant that has been exercised shall have
been
received by the Company in full in cash or by check. At or prior to Closing,
the
Company shall have delivered to Parent a certificate signed by an authorized
officer of the Company confirming that, except for Company Options, all
outstanding Company Warrants, and other derivative securities entitling any
person to acquire any interest in the Company have been exercised or
cancelled.
(j) Financial
Statements.
The Company shall have delivered to Parent all information, including audited
financial statements for the two years ended March 2006 and March 2007,
necessary for Parent to comply with its reporting obligations under the Exchange
Act, including, but not limited to, all information necessary to file the Merger
Form 8-K with the SEC.
(k) Other
Deliveries.
At or
prior to Closing, the Company shall have delivered to Parent: (i) copies of
resolutions and actions taken by the Company’s
board of directors and Stockholders in connection with the approval of this
Agreement and the transactions contemplated hereunder, and (ii) such other
documents and certificates as shall reasonably be required by Parent and its
counsel in order to consummate the transactions contemplated
hereunder.
(l) Resignations.
On or
before the Closing, those persons listed in Schedule 6.3(l) shall have resigned
from their positions and offices with the Company, and those persons mutually
agreed upon between Parent and the Company prior to Closing, with respect to
the
Subsidiaries, shall have resigned from their positions and offices with the
Subsidiaries.
(m) Indebtedness. Other
than indebtedness to ValueAct, the Company shall have no indebtedness for
borrowed money and the
Company shall have delivered to Parent a certificate signed by an authorized
officer of the Company confirming such fact.
(n) Dissenting
Shares. No
Stockholders shall be a Dissenter and no shares of Company Capital Stock shall
be deemed Dissenting Shares.
(o) Termination
of Shareholders Agreement.
The
Company shall terminate or cause to be terminated: (i) Amendment to the Second
Amended and Restated Shareholders Agreement, dated as of July 30, 2007, by
and
among the Company, the holders of Series B Preferred Stock, the holders of
Series A Preferred Stock, the holders of Company Common Stock, and ValueAct
and
(ii) Second Amended and Restated Shareholders Agreement, dated as of May 15,
2006, by and among The WAAT Corp., a California corporation (“WAAT”), the
holders of Series B Preferred Stock, the holders of Series A Preferred Stock,
and the holders of Company Common Stock.
(p) Termination
of Investor Rights Agreement.
The
Company shall terminate or cause to be terminated the Amended and Restated
Investors’ Rights Agreement, dated as of July 30, 2007, by and among the
Company, the holders of Series B Preferred Stock and ValueAct.
48
(q) Termination
of Registration Rights Agreement.
The
Company shall terminate or cause to be terminated the Registration Rights
Agreement, dated as of May 16, 2006, by and among WATT and the holders of Series
A Preferred Stock.
(r) Conversion
of Preferred Stock.
All
outstanding shares of Preferred Stock shall have been converted into shares
of
Company Common Stock in accordance with the Charter Documents of the Company
and
the DGCL.
(s) Reimbursement
of Expenses.
The
Company shall have paid the outstanding fees and expenses, including legal
fees
and expenses, incurred by the Stockholder Representatives, in connection with
the preparation, execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby up to a maximum amount of
$15,000.
(t) Amendment
to Stock Plan.
The
Company shall have amended the Stock Plan to clarify that at the Effective
Time
of the Merger (i) all vested shares of Company Common Stock underlying the
Company Options shall be assumed by Parent on the same terms and conditions
as
are applicable under the Stock Plan and any agreements, instruments or
resolutions governing each such Company Option immediately prior to the
Effective Time and (ii) all unvested shares of Company Common Stock underlying
the Company Options shall be terminated.
ARTICLE
VII
TERMINATION
7.1 Termination.
This
Agreement may be terminated at any time prior to the Closing:
(a) by
mutual
written agreement of Parent and the Company at any time;
(b) by
either
Parent or the Company if a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(c) by
either
Parent or the Company if the Closing shall not have occurred on or before
February 13, 2008, unless extended by the written consent of Parent and the
Company; provided, however, that the right to terminate this Agreement under
this Section
7.1(c)
shall
not be available to any party whose failure to fulfill any obligation under
this
Agreement has been the cause of, or resulted in, the failure of the Closing
to
occur on or prior to such date.
(d) by
the
Company, upon a material breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement,
or if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Article VI would not be
satisfied as of the time of such breach or as of the time such representation
or
warranty shall have become untrue, provided, that if such breach by Parent
is
curable by Parent prior to the Closing Date, then the Company may not terminate
this Agreement under this Section
7.1(d)
for thirty (30) days after delivery of written notice from the Company to Parent
of such breach, provided Parent continues to exercise commercially reasonable
efforts to cure such breach (it being understood that the Company may not
terminate this Agreement pursuant to this Section
7.1(d)
if it shall have materially breached this Agreement or if such breach by Parent
is cured during such thirty (30)-day period);
49
(e) by
Parent, upon a material breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement,
or if any representation or warranty of the Company shall have become untrue,
in
either case such that the conditions set forth in Article VI would not be
satisfied as of the time of such breach or as of the time such representation
or
warranty shall have become untrue, provided, that if such breach is curable
by
the Company prior to the Closing Date, then Parent may not terminate this
Agreement under this Section
7.1(e)
for thirty (30) days after delivery of written notice from Parent to the Company
of such breach, provided the Company continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Parent may
not
terminate this Agreement pursuant to this Section
7.1(e)
if it shall have materially breached this Agreement or if such breach by the
Company is cured during such thirty (30)-day period).
(f) by
either
Parent or the Company if the stock price of Parent Common Stock is less than
$2.75 per share, unless the Company and the Parent mutually agree to adjust
the
share allocations set forth on Schedule 1.5(a).
7.2 Notice
of Termination; Effect of Termination.
Any
termination of this Agreement under Section
7.1
above
will be effective immediately upon (or, if the termination
is pursuant to Section
7.1(d)
or Section
7.1(e)
and the proviso therein is applicable, thirty (30) days after) the delivery
of
written notice of the terminating party to the other parties hereto. In the
event of the termination of this Agreement as provided in Section
7.1,
this Agreement shall be of no further force or effect and the Merger shall
be
abandoned, except for and subject to the following: (i) Sections
5.4, 7.2 and 7.3
and Article VIII (General Provisions) shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any breach of this Agreement.
7.3 Fees
and Expenses.
All
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 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 sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
|
if
to Parent, to:
|
|||||
| Mandalay Media, Inc. | |||||
|
0000
Xxxxxx xx xxx Xxxxx, Xxxxx 0000
|
|||||
|
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
|||||
|
Attention:
Xxxxx Xxxxxxxxx
|
|||||
|
Telephone:
(000)
000-0000
|
|||||
| Facsimile: | |||||
50
|
with
a copy to:
|
||||||
|
Xxxxxxx
X. Xxxx, Esq.
|
||||||
|
Mintz
Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx, P.C.
|
||||||
|
000
Xxxxx Xxxxxx
|
||||||
|
Xxx
Xxxx, Xxx Xxxx 00000
|
||||||
|
Telephone:
(000) 000-0000
|
||||||
|
Facsimile:
(000) 000-0000
|
||||||
|
|
||||||
|
if
to the Company or Stockholder Representatives, to:
|
||||||
|
|
||||||
|
Twistbox
Entertainment, Inc.
|
||||||
|
00000
Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
|
||||||
|
Xxxxxxx
Xxxx, Xxxxxxxxxx 00000
|
||||||
|
Attention:
Xxx Xxxxx
|
||||||
|
Telephone:
|
||||||
|
Facsimile:
|
||||||
|
with
a copy to:
|
||||||
|
Loeb
& Loeb LLP
|
||||||
|
00000
Xxxxx Xxxxxx Xxxx., Xxxxx 0000
|
||||||
|
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
||||||
|
Attention:
Xxxxxxxx Xxxxxx, Esq.
|
||||||
|
Telephone:
(000) 000-0000
|
||||||
|
Facsimile:
(000) 000-0000
|
||||||
8.2 Interpretation.
When a
reference is made in this Agreement to an Exhibit or Schedule, such reference
shall be to an Exhibit or Schedule to this Agreement
unless otherwise indicated. When a reference is made in this Agreement to
Sections or subsections, such reference shall be to a Section or subsection
of
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 headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to “the business
of” an entity, such reference shall be deemed to include the business of all
direct and indirect Subsidiaries of such entity. Reference to the Subsidiaries
of an entity shall be deemed to include all direct and indirect Subsidiaries
of
such entity. For purposes of this Agreement:
(a) the
term
“Material Adverse Effect” when used in connection with an entity means any
change, event, violation, inaccuracy, circumstance or effect,
individually or when aggregated with other changes, events, violations,
inaccuracies, circumstances or effects, that is materially adverse to the
business, assets (including intangible assets), revenues, financial condition
or
results of operations of such entity, it being understood that none of the
following alone or in combination shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (i) changes in general national or
regional economic conditions, (ii) changes
that are generally applicable to the industry or markets in which Parent and
Company and its Subsidiaries operate and not affecting Parent, Company or its
Subsidiaries in any materially more adverse manner or degree therefrom, or
(iii)
any SEC rulemaking requiring enhanced disclosure of reverse merger transactions
with a public shell;
51
(b) the
term
“Legal Requirements” means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise
put
into effect by or under the authority of any Governmental Entity and all
requirements set forth in applicable;
(c) the
term
“Person” shall mean any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental
Entity;
(d) the
term
“knowledge” (including any derivation thereof such as “known” or “knowing”)
shall mean the actual knowledge of the officers and directors of the Company
and
its Subsidiaries or the Parent, as applicable, or any facts or circumstances
that would be known after due inquiry by a Person holding a comparable office
or
job with comparable experience or responsibility of any of the foregoing
persons;
(e) the
term
“Lien” means any mortgage, pledge, security interest, encumbrance, lien,
restriction or charge of any kind (including, without limitation,
any conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest);
(f) the
term
“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect
common control with, such Person. For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise;
(g) the
term
“Business Day” means a day other than a Saturday, Sunday or other day on which
banks located in New York City are authorized or required by law to
close;
(h) the
term
“Permitted Liens” means (i) liens for current real or personal property
taxes not yet due and payable and with respect to which the Company maintains
adequate reserves, (ii) workers’ carriers’ and mechanics’ or other like
liens incurred in the ordinary course of business with respect to which payment
is not due and that do not impair the conduct of the business of the Company
or
any of its Subsidiaries or the present or proposed use of the affected property,
and (iii) liens that are immaterial in character, amount, and extent and
which do not detract from the value or interfere with the present or proposed
use of the properties they affect; and
52
(i) all
monetary amounts set forth herein are referenced in United States dollars,
unless otherwise noted.
8.3 Counterparts;
Facsimile Signatures.
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 party, it being understood that
all parties need not sign the same counterpart. Delivery by facsimile to counsel
for the other party of a counterpart executed by a party shall be deemed to
meet
the requirements of the previous sentence.
8.4 Entire
Agreement; Third Party Beneficiaries.
This
Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Schedules
hereto (i) 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; and (ii) are not intended to confer upon any other person any rights
or
remedies hereunder (except as specifically provided in this
Agreement).
8.5 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.
8.6 Other
Remedies; Specific Performance.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or
by
law or equity upon such party, and the exercise by a party of any one
remedy will
not preclude the exercise of any other remedy. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement
and
to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the law of
the
State of Delaware regardless of the law that might
otherwise govern under applicable principles of conflicts of law
thereof.
53
8.8 Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation 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.
8.9 Assignment.
No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of
the other parties. Subject to the first sentence of this Section
8.9,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
8.10 Amendment.
This
Agreement may be amended by the parties hereto at any time by execution of
an
instrument in writing signed on behalf of each of the parties.
8.11 Extension;
Waiver.
At any
time prior to the Closing, 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. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
8.12 Survival
of Representations and Warranties.
The
representations and warranties in this Agreement shall terminate at the Closing;
provided, however, this Section 8.12 shall in no way limit any covenant or
agreement of the parties which by its terms contemplates performance after
the
Closing.
[THE
REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
54
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed
as of the date first written above.
| MANDALAY MEDIA, INC. | ||
| |
|
|
| By: | /s/ Xxx Xxxx | |
|
Xxx Xxxx |
||
| Chief Operating Officer | ||
| TWISTBOX ACQUISITION, INC. | ||
| |
|
|
| By: | /s/ Xxx Xxxx | |
|
Xxx Xxxx |
||
| Chief Operating Officer | ||
| TWISTBOX ENTERTAINMENT, INC. | ||
| |
|
|
| By: | /s/ Xxx Xxxxx | |
|
Xxx Xxxxx |
||
| Chief Executive Officer | ||
| STOCKHOLDER REPRESENTATIVE | ||
| |
|
|
| By: | /s/ Adi McAbian | |
|
Adi McAbian |
||
| |
|
|
| By: | /s/ Spark Capital, L.P. | |
|
Spark Capital, L.P. |
||
INDEX
OF
EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT
A
--
Letter of Transmittal
EXHIBIT
B -- Company Affiliate Agreement
EXHIBIT
C
--
Merger Sub Certificate of Incorporation
EXHIBIT
D
--
Merger Sub Bylaws
EXHIBIT
E
-- Xxxxx
Xxxxx Legal Opinion
EXHIBIT
F
- Loeb
& Loeb Legal Opinion
SCHEDULES
1 AND 2
COMPANY
DISCLOSURE SCHEDULE
(Information
Furnished Separately)
|
Schedule
1.5(a)
|
—
|
Conversion
of Company Capital Stock
|
|
Schedule
1.10
|
—
|
Company
Affiliates
|
|
Schedule
2.1
|
—
|
Organization
and Qualification
|
|
Schedule
2.2
|
—
|
Subsidiaries
|
|
Schedule
2.3
|
—
|
Capitalization
|
|
Schedule
2.5
|
—
|
No
Conflict
|
|
Schedule
2.6
|
—
|
Non-Compliance
with Legal Requirements
|
|
Schedule
2.7
|
—
|
Financial
Statements
|
|
Schedule
2.8
|
—
|
No
Undisclosed Liabilities
|
|
Schedule
2.9
|
—
|
Absence
of Certain Changes or Events
|
|
Schedule
2.10
|
—
|
Litigation
|
|
Schedule
2.11
|
—
|
Employee
Benefit Plans
|
|
Schedule
2.13
|
—
|
Restrictions
on Business Activities
|
|
Schedule
2.14
|
—
|
Title
to Property
|
| Schedule 2.17 | — | Suppliers and Customers |
|
Schedule
2.18
|
—
|
Taxes
|
|
Schedule
2.19
|
—
|
Environmental
Matters
|
|
Schedule
2.20
|
—
|
Brokers;
Third Party Expenses
|
|
Schedule
2.21
|
—
|
Intellectual
Property
|
|
Schedule
2.22
|
—
|
Agreements,
Contacts and Commitments
|
|
Schedule
2.23
|
—
|
Insurance
|
| Schedule 2.24 | — | Governmental Filings |
|
Schedule
2.25
|
—
|
Interested
Party Transactions
|
|
Schedule
2.26
|
—
|
Bank
Accounts
|
|
Schedule
2.27
|
—
|
Powers
of Attorney
|
