EXHIBIT 10.20
AGREEMENT AND PLAN OF MERGER
by and among
AENEID CORPORATION,
AENEID MERGER SUB, INC.,
INGENIUS TECHNOLOGIES, INC.,
and
XXXXX STOCK AND XXXX STOCK
Dated October 22, 1999
TABLE OF CONTENTS
Page
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AGREEMENT AND PLAN OF MERGER............................................. 1
ARTICLE I. DEFINITIONS................................................... 2
1.1 Defined Terms.
1.2 Other Defined Terms............................................ 8
1.3 Interpretation Provisions...................................... 8
ARTICLE II. MERGER....................................................... 9
2.1 Filings........................................................ 9
2.2 Merger......................................................... 9
2.3 Further Assurances............................................. 10
2.4 Prepayment..................................................... 10
ARTICLE III. CONVERSION OF SHARES........................................ 10
3.1 Conversion of Merger Sub Shares................................ 10
3.2 Conversion of InGenius Common Stock............................ 10
3.3 Indemnity Escrow Arrangements.................................. 11
3.4 Surrender of Certificates...................................... 11
3.5 Taking of Necessary Action; Further Action..................... 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF INGENIUS AND SELLERS....... 12
4.1 Organization of InGenius....................................... 12
4.2 Capitalization of InGenius..................................... 12
4.3 Ownership of Stock............................................. 13
4.4 Authorization.................................................. 13
4.5 Officers and Directors......................................... 14
4.6 Bank Accounts.................................................. 14
4.7 Subsidiaries................................................... 14
4.8 Absence of Certain Changes or Events........................... 14
4.9 Title to Assets................................................ 17
4.10 Sufficiency of Assets.......................................... 17
4.11 Fixtures and Equipment......................................... 17
4.12 Contracts...................................................... 17
4.13 No Conflict or Violation; Consents............................. 19
4.14 Permits........................................................ 19
4.15 Financial Statements; Books and Records........................ 20
4.16 Liabilities.................................................... 20
4.17 Litigation..................................................... 20
4.18 Labor Matters.................................................. 21
4.19 Employee Benefit Plans......................................... 22
4.20 Transactions with Related Parties.............................. 26
4.21 Compliance with Law............................................ 26
4.22 Intellectual Property.......................................... 26
4.23 Software....................................................... 27
4.24 Tax Matters.................................................... 29
4.25 Insurance...................................................... 30
4.26 Accounts Receivable............................................ 31
4.27 Payments....................................................... 31
4.28 Customers and Suppliers........................................ 31
4.29 Environmental Matters.......................................... 31
4.30 Brokers; Transaction Costs........................................ 33
4.31 No Other Agreements to Sell InGenius or the Assets................ 33
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF AENEID......................... 34
5.1 Organization of Aeneid............................................ 34
5.2 Authorization..................................................... 34
5.3 No Conflict or Violation; Consents................................ 34
5.4 Financial Statements.............................................. 34
5.5 No Brokers........................................................ 35
5.6 Litigation........................................................ 35
5.7 Financial Capability.............................................. 35
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................... 35
6.1 Organization of Merger Sub........................................ 35
6.2 Authorization..................................................... 35
6.3 Legal Proceedings................................................. 35
ARTICLE VII. ACTIONS PRIOR TO THE CLOSING................................... 36
7.1 Conduct of Business............................................... 36
7.2 Investigation by Aeneid........................................... 37
7.3 Notification of Certain Matters................................... 38
7.4 Restrictions on Certain Transactions.............................. 38
7.5 Approval of Shareholders.......................................... 39
7.6 Further Assurances................................................ 39
7.7 Satisfaction of Conditions........................................ 39
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF INGENIUS AND SELLERS............. 39
8.1 Representations, Warranties and Covenants......................... 39
8.2 Consents.......................................................... 40
8.3 No Court Orders................................................... 40
8.4 Closing Documents................................................. 40
8.5 Opinion of Counsel to Aeneid...................................... 40
8.6 Aeneid Material Adverse Change.................................... 40
8.7 Certificates...................................................... 40
ARTICLE IX. CONDITIONS TO OBLIGATIONS OF AENEID AND MERGER SUB.............. 40
9.1 Representations, Warranties and Covenants......................... 41
9.2 InGenius Shareholder Approval..................................... 41
9.3 Approvals......................................................... 41
9.4 No Actions or Court Orders........................................ 41
9.5 Opinion of Counsel................................................ 41
9.6 Employees......................................................... 41
9.7 Certificates...................................................... 41
9.8 Closing Documents................................................. 42
9.9 InGenius Material Adverse Change.................................. 42
9.10 Closing Balance Sheet............................................. 42
9.11 Due Diligence Review.............................................. 42
9.12 Cancellation of Options, Warrants, Convertible Securities, etc.... 42
ARTICLE X. CLOSING.......................................................... 42
10.1 Deliveries by Sellers and InGenius to Aeneid...................... 42
10.2 Deliveries by Aeneid.............................................. 43
ARTICLE XI. ACTIONS BY SELLERS, INGENIUS AND AENEID AFTER THE CLOSING....... 44
11.1 Books and Records; Tax Matters.................................... 44
11.2 Participation in Series D Financing............................... 44
11.3 Employment of the Stocks.......................................... 44
ARTICLE XII. INDEMNIFICATION.............................................. 45
12.1 Survival of Representations.................................... 45
12.2 Indemnification................................................ 45
12.3 No Right of Contribution....................................... 48
ARTICLE XIII. MISCELLANEOUS............................................... 48
13.1 Termination.................................................... 48
13.2 License Agreement.............................................. 49
13.3 Assignment; No Third-Party Beneficiaries....................... 49
13.4 Notice......................................................... 49
13.5 Choice of Law.................................................. 50
13.6 Entire Agreement; Amendments and Waivers....................... 51
13.7 Counterparts................................................... 51
13.8 Invalidity..................................................... 51
13.9 Expenses....................................................... 51
13.10 Approval of Sellers............................................ 51
13.11 Approval of Aeneid as Sole Shareholder of Merger Sub........... 51
13.12 Publicity...................................................... 52
13.13 Arbitration.................................................... 52
TABLE OF SCHEDULES
Schedule 1.1(a) Financial Statements
Schedule 4.1 Foreign Qualifications
Schedule 4.5 Officers and Directors of Company
Schedule 4.6 Bank Accounts, Safe Deposit Boxes and Authorized Persons
Schedule 4.8 Certain Changes or Events
Schedule 4.9 Title to Assets and Encumbrances
Schedule 4.11 Fixtures and Equipment
Schedule 4.12 Contracts
Schedule 4.13 Consents
Schedule 4.14 Permits
Schedule 4.16 Litigation
Schedule 4.19 Employee Plans
Schedule 4.20 Transactions with Related Parties
Schedule 4.22 Proprietary Rights
Schedule 4.23 Tax Matters
Schedule 4.24 Insurance Policies
Schedule 4.26 Inventory
Schedule 4.29 Five Largest Customers and Suppliers
TABLE OF EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Non-Compete Agreement
Exhibit C Indemnity Escrow Agreement
Exhibit D Employment Agreements
Exhibit E Form of VRS&H Legal Opinion
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into
as of October 22, 1999 by and among (i) Aeneid Corporation, a California
corporation ("Aeneid"), (ii) Aeneid Merger Sub, Inc., a Michigan corporation and
a wholly-owned subsidiary of Aeneid ("Merger Sub"), (iii) InGenius Technologies,
Inc., a Michigan corporation ("InGenius"), and (iv) Xxxxx Stock and Xxxx Stock,
each an individual and a shareholder of InGenius (together, "Sellers")
RECITALS
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A. Aeneid owns 100% of the issued and outstanding shares of capital
stock of Merger Sub.
X. Xxxxxxx collectively own an aggregate of 48,000 shares of common
stock of InGenius ("InGenius Common Stock").
C. The Boards of Directors of Merger Sub and InGenius deem it
advisable and in the best interests of their respective shareholders for Merger
Sub to merge with and into InGenius pursuant to this Agreement and the
Certificate of Merger (as defined).
D. In the Merger (as defined), InGenius will be the surviving
corporation, the shares of InGenius will be converted into the right to receive
cash in accordance with the terms hereof, and the shares of Merger Sub shall be
converted into shares of Surviving Corporation (as defined).
AGREEMENT
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NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have
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the following meanings:
"Aeneid Articles of Incorporation" means the Third Amended and
Restated Articles of Incorporation of Aeneid.
"Aeneid Material Adverse Effect" or "Aeneid Material Adverse Change"
means any effect or change which individually or when taken together with all
other such effects or changes has, or is reasonably likely to have, a material
adverse effect on the condition (financial or other), business, results of
operations, human resource or technology prospects, assets, liabilities or
operations of Aeneid.
"Affiliate" of a Person means any other Person which directly or
indirectly controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect 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.
"Ancillary Agreements" means the Non-Compete Agreements, Employment
Agreements, Indemnity Escrow Agreement, and other agreements, certificates and
documents required hereunder to consummate the Closing.
"Assets" means all of InGenius' right, title and interest in and to
the properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including all of InGenius' right, title and interest in the
following:
(a) all Contract Rights;
(b) all Fixtures and Equipment;
(c) all Inventory;
(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits;
(g) all return and other rights under or pursuant to
all warranties, representations and guarantees made by service providers,
suppliers and other third parties in connection with the Assets or services
furnished to InGenius;
(h) all cash, accounts receivable, deposits and prepaid
expenses; and
(i) all goodwill.
"Balance Sheet" means the balance sheet of InGenius as of the Balance
Sheet Date.
"Balance Sheet Date" means September 30, 1999.
"Books and Records" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business, (b) all books, records, lists, ledgers, financial data, files,
reports, product and design manuals, plans, drawings, technical manuals and
operating records of every kind relating to the Assets or the Business
(including records and lists of customers, distributors, suppliers and
personnel) and (c) all telephone and fax numbers used in the Business, in each
case whether maintained as hard copy or stored in computer memory and whether
owned by InGenius or its Affiliates.
"Business" means the business of InGenius as conducted on the date
hereof.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in the City of
San Francisco are authorized or required by law, regulation or executive order
to close.
"California GCL" means the General Corporation Law of the State of
California, as in effect from time to time.
"Certificate of Merger" means the Certificate of Merger substantially
in the form of Exhibit A attached hereto.
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"Closing" means the consummation of the transactions contemplated by
this Agreement on the Closing Date.
"Closing Balance Sheet" means the balance sheet of InGenius within
three days of the Closing Date.
"Closing Date" means the fifteenth day after the date hereof or such
other date as the parties shall mutually agree.
"Closing Place" means such location agreed upon by the parties or, in
the absence of such an agreement, the offices of Xxxxxx Xxxxxxxxx Xxxxxxx &
Xxxxxxx LLP in Grand Rapids, Michigan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consents" means any and all licenses, permits, franchises, approvals,
authorizations, consents or waivers from third parties (including governmental
authorities and parties to the Contracts) that are (i) required for the
consummation of the transactions contemplated by this Agreement or (ii)
necessary or desirable in order that InGenius can conduct the Business after the
Effective Time in the same manner as before the Effective Time.
"Contract Rights" means all rights and obligations under the
Contracts.
"Contracts" means all agreements, contracts, leases, purchase orders,
undertakings, covenants not to compete, employment agreements, confidentiality
agreements, licenses, instruments,
indentures, deeds of trust, obligations and commitments to which InGenius is a
party or by which InGenius or any Assets are bound are affected, whether written
or oral.
"Court Order" means any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Default" means (a) a breach of, violation of or default under any
Contract, (b) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of, violation of or default
under any Contract, or (c) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract.
"Effective Time" means the time when the Merger shall become
effective, which shall be 5:00 p.m., California time, on the Closing Date, or
such other date and time as the parties may agree in writing.
"Employees" means all persons employed by InGenius.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, conditional sales agreement, encumbrance or other similar
right of any third parties, whether voluntarily incurred or arising by operation
of law, and includes any agreement to give any of the foregoing in the future,
and any contingent sale or other title retention agreement or lease in the
nature thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Facilities" means the offices, facilities and administration
buildings, and all other real property and related facilities which are owned or
leased by InGenius.
"Financial Statements" means the unaudited balance sheets and related
statements of income for InGenius for the 12-month periods ended December 31,
1998 and 1997, and the unaudited balance sheet and related unaudited statements
of income for InGenius for the nine-month period ended on the Balance Sheet
Date, all of which are attached as Schedule 1.1(a).
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, office equipment, development tools and equipment, database tapes,
patterns, dies, computers and software (including any source or object codes
therefor or documentation relating thereto and computer aided design equipment
and software), and other tangible personal used in or necessary to the Business,
wherever located and including any such Fixtures and Equipment in the possession
of any of its respective suppliers or other vendors.
"Indemnity Escrow Amount" means $1,000,000 to be deposited into the
Escrow Account pursuant to Section 3.3.
"InGenius Common Stock" means the common stock, par value $1.00 per
share, of InGenius.
"InGenius Material Adverse Effect" or "InGenius Material Adverse
Change" means any effect or change which individually or when taken together
with all other such effects or changes has, or
is reasonably likely to have, a material adverse effect on the condition
(financial or otherwise), Business, results of operations, human resource or
technology prospects, assets, liabilities or operations of InGenius.
"InGenius Options" means options to purchase InGenius Common Stock
granted by InGenius prior to the Closing Date as described on Schedule 4.2.
"Inventory" means all of the merchandise owned and intended for resale
and all raw materials, work in process, finished goods, wrapping, supply and
packaging items and similar items, whether or not located on the premises, on
consignment to a third party, or in transit or storage.
"Letter of Intent" means the Letter of Intent dated September 20, 1999
between Aeneid and Xxxxx and Xxxx Stock.
"Liabilities" mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Merger" means the merger of Merger Sub into InGenius in accordance
with this Agreement and the Certificate of Merger.
"Michigan BCA" means the Michigan Business Corporation Act of the
State of Michigan, as in effect from time to time.
"Net Asset Value" means the difference between the total assets and
the total liabilities of InGenius.
"Non-Compete Agreement" means the Non-Competition Agreement to be
entered into between Aeneid and each of Xxxxx Stock and Xxxx Stock substantially
in the form of Exhibit B hereof.
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"Permits" mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary for the conduct
or operation of the Business or ownership of the Assets.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority.
"Proprietary Rights" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including xxxxx
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information), (f) other
proprietary rights, (g) copies and
tangible embodiments thereof (in whatever form or medium) and (h) licenses
granting any rights with respect to any of the foregoing used in or necessary
for the conduct of the Business.
"Regulations" means any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, principles of
law and orders of any foreign, federal, state or local government and any other
governmental department or agency, including Environmental Laws, energy, motor
vehicle safety, public utility, zoning, building and health codes, occupational
safety and health and laws respecting employment practices, employee
documentation, terms and conditions of employment and wages and hours.
"Related Party" means any Seller, any of the officers and directors of
InGenius, any Affiliate of InGenius or any Affiliate or immediate family member
of a Seller or the respective officers and directors of any such Affiliate, or
any Person in which any of InGenius, any Seller or any Affiliate of any such
Person or any immediate family member of a Seller has any direct or material
indirect interest.
"Representative" means any officer, director, principal, attorney,
agent, employee or other representative of any Person.
"Schedule" means the disclosure schedule of either InGenius or Aeneid.
"Shareholders" means the holders of InGenius' Common Stock immediately
before the Effective Time.
"Shareholder Representative" means Xxxxx Stock or any replacement
thereof selected in accordance with the Indemnity Escrow Agreement.
"Surviving Corporation" means InGenius after the Effective Time.
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Taxes" mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, imposed by the Internal Revenue Service or any taxing authority
(whether domestic or foreign, including any federal, state, county, local or
foreign government or any subdivision or taxing agency thereof (including a U.S.
possession)), including the Michigan Single Business Tax, whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"To the best knowledge" or "knowledge" of a party (or similar phrases)
means to the extent of matters which are actually known by such party
1.2 Other Defined Terms. The following terms shall have the
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meanings defined for such terms in the Sections set forth below:
Term Section
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Action 4.17
Aeneid Preamble
Aeneid's Closing Certificate 8.1
Agreement Preamble
Benefit Arrangement 4.19(a)
Damage Threshold 12.2(e)
Damages 12.2(a)
Employee Plans 4.19(a)
Environmental Conditions 4.29(a)
Environmental Laws 4.29(a)
ERISA Affiliate 4.19(a)
Hazardous Substance 4.30(a)
Escrow Account 3.4
Indemnity Escrow Amount 3.2
InGenius Preamble
InGenius Common Stock Recitals
InGenius' Closing Certificate 9.1
Initial Payment 3.2(a)
Merger Sub Preamble
Multiemployer Plan 4.20(a)
PBGC 4.20(a)
Pension Plan 4.19(a)
Release 4.29(a)
Sellers Preamble
Shareholders' Meeting 7.5
Surviving Corporation 2.2(a)
Welfare Plan 4.19(a)
1.3 Interpretation Provisions.
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(a) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The term "or" is disjunctive but
not necessarily exclusive. The terms "include" and "including" are not limiting
and mean "including without limitation."
(b) References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(e) The language used in this Agreement shall be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against either party.
(f) The schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of the Agreement.
ARTICLE II.
MERGER
2.1 Filings. Subject to the provisions hereof, on or
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immediately following the Closing Date, Aeneid, Merger Sub and InGenius shall
cause the Certificate of Merger to be filed with the Michigan Department of
Consumer and Industry Services--Corporations, Securities & Land Development
Bureau in accordance with the Michigan BCA.
2.2 Merger. At the Effective Time, subject to the terms and
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conditions set forth in this Agreement and the Certificate of Merger and in
accordance with the Michigan BCA:
(a) Merger Sub shall merge with and into InGenius, the
separate corporate existence of Merger Sub shall thereupon cease, and InGenius
shall continue as the surviving corporation ("Surviving Corporation") with all
of the rights, privileges, powers and franchises of InGenius and Merger Sub;
(b) the Articles of Incorporation and Bylaws of Merger
Sub as in effect immediately prior to the Effective Time shall continue as the
Articles of Incorporation and Bylaws of Surviving Corporation (subject always to
the rights of Surviving Corporation to amend its Articles of Incorporation after
the Effective Time in accordance with applicable law);
(c) the directors and officers of Merger Sub
immediately prior to the Effective Time shall serve as the directors and
officers of the Surviving Corporation, until their respective successors and
assigns are duly elected or appointed and qualified; and
(d) each share of InGenius Common Stock outstanding
immediately prior to the Effective Time shall be canceled and converted as
provided in Article III hereof.
2.3 Further Assurances. InGenius agrees that if, at any
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time after the Effective Time, Surviving Corporation shall consider or be
advised that any further deeds, assignments, or assurances are necessary or
desirable to vest, perfect, or confirm in Surviving Corporation title to any
property or rights of InGenius, Sellers shall execute and deliver all such
proper deeds, assignments, and assurances and do all other things necessary or
desirable to vest, perfect or confirm title to such property or rights in
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
in the name of InGenius or otherwise.
2.4 Prepayment. Upon the execution of this Agreement,
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Aeneid shall prepay to InGenius $200,000 (the "Prepayment") (which prepayment
shall be credited to the amounts payable under Section 3.2 hereof). Sellers
shall refund the Prepayment to Aeneid promptly upon written request of Aeneid in
the event that the Merger shall not have occurred by November 15, 1999 for any
reason other than the termination of this Agreement by Sellers pursuant to
Section 13.1(a)(iii) hereof.
ARTICLE III.
CONVERSION OF SHARES
3.1 Conversion of Merger Sub Shares. At the Effective Time,
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each issued and outstanding share of capital stock of Merger Sub shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and become one fully paid and non-assessable share of the
common stock of the Surviving Corporation.
3.2 Conversion of InGenius Common Stock. At the Effective
-----------------------------------
Time, each share of InGenius Common Stock issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and extinguished and
converted into the right to receive, subject to the terms hereof, an amount in
cash equal to the quotient of $2,193,978 divided by the total number of shares
of InGenius Common Stock issued and outstanding immediately prior to the
Effective Time. At the Closing, and immediately prior to the Effective Time,
InGenius shall pay to Xx. Xxxxx Xxxxx the Prepayment Amount, and Aeneid shall
pay to Xx. Xxxxx the sum of $6,022, together, in full satisfaction of the
convertible note of Aeneid held by Xx. Xxxxx. All other InGenius stock options
and convertible debt will be converted to shares of InGenius Common Stock at or
prior to the effective time.
3.3 Indemnity Escrow Arrangements. On the Closing Date, the
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Indemnity Escrow Amount ($1,000,000) shall be deducted from the cash payable to
Sellers (Xxxx Stock and Xxxxx Stock) pursuant to Section 3.2 of this Agreement
and deposited into an escrow account (the "Escrow Account") to secure the
indemnification obligations of the Sellers as set forth in Article XII. The
Escrow Account shall be subject to the terms of the Indemnity Escrow Agreement
by and among Aeneid, the Shareholder Representative, as representative of the
Sellers and Comerica Bank (or such other bank that shall be mutually acceptable
to InGenius and Aeneid), as escrow agent, substantially in the form of Exhibit C
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hereto.
3.4 Surrender of Certificates.
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(a) Surrender of Certificates. As soon as
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practicable after the Effective Time, each person holding a certificate or
certificates representing shares of InGenius Common Stock issued and outstanding
immediately prior to the Effective Time, shall surrender
such certificate(s) to Surviving Corporation. In the event that any such holder
no longer has in his or her possession any such certificate(s), such holder
shall, in lieu of surrendering such certificate(s), deliver to Surviving
Corporation an affidavit of that fact whereupon Aeneid may, in its sole
discretion, require the holder of such lost certificate(s) to deliver a bond in
such sum as Aeneid may reasonably direct as indemnity against any claim that may
be made against Aeneid or any of its Affiliates with respect to the certificate.
Thereupon, each such holder shall be entitled to receive in exchange therefor
cash consideration in the amount and in the manner described in Section 3.2 and
Surviving Corporation shall pay and Aeneid shall cause Surviving Corporation to
pay such amount promptly to the holder.
(b) Certificate Not Surrendered by Holders of Shares of
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InGenius Common Stock. Each certificate which immediately prior to the
---------------------
Effective Time evidenced shares of InGenius Common Stock shall, from and after
the Effective Time until such certificate is surrendered to Surviving
Corporation or its transfer agent, be cancelled and extinguished and shall only
evidence the right to receive the consideration per share described in Section
3.2(a). No interest shall be payable upon any cash consideration.
(c) No Transfers After the Effective Time. After the
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Effective Time, there shall be no transfers of any shares of InGenius Common
Stock on the stock transfer books of the Surviving Corporation. If, after the
Effective Time, certificates formerly representing shares of InGenius Common
Stock are presented to Surviving Corporation, they shall be canceled and
exchanged for the consideration per share provided for by Section 3.2(a).
3.5 Taking of Necessary Action; Further Action. Each of Aeneid,
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Merger Sub, InGenius and Sellers shall take all such reasonable lawful action as
may be necessary or appropriate in order to effect the Merger in accordance with
this Agreement as promptly as practicable.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF INGENIUS AND SELLERS
InGenius and each of the Sellers jointly and severally make the
following representations and warranties to Aeneid and Merger Sub, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct and all of which have been and will be relied
upon by Aeneid and Merger Sub in entering into this Agreement and consummating
the Merger.
4.1 Organization of InGenius. InGenius is a corporation duly
------------------------
organized, validly existing and in good standing under the laws of the State of
Michigan. InGenius has full corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets. InGenius is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
necessary under applicable law as a result of the conduct of the Business or the
ownership of its properties, except where the failure to be so qualified would
not have an InGenius Material Adverse Effect. Each jurisdiction in which
InGenius is qualified to do business as a foreign corporation is set forth in
Schedule 4.1.
4.2 Capitalization of InGenius.
--------------------------
(a) As of the date of this Agreement, there are 60,000
shares of InGenius Common Stock authorized under its Articles of Incorporation,
as amended, 53,915 of which are issued and outstanding. InGenius has no other
stock authorized, issued or outstanding.
(b) Except as set forth in Schedule 4.2, there are no
outstanding options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any shares of capital stock or other securities of
InGenius. Except for the aggregate of 6,000 shares of InGenius Common Stock
reserved for issuance upon the exercise of InGenius Options granted or available
for grant, no other shares of capital stock of InGenius are reserved for
issuance. Schedule 4.2 is a complete and accurate list of all such outstanding
options, warrants, convertible securities or other rights and the vesting
schedules and exercise prices with respect thereto. InGenius has no stock option
or other equity incentive plan, except for the options and convertible note
identified on Schedule 4.2.
(c) All outstanding shares of InGenius Common Stock are,
and any shares of InGenius Common Stock issued upon exercise of any InGenius
Option will be, validly issued, fully paid and non-assessable and not subject to
any preemptive rights created by statute, InGenius' Articles of Incorporation,
as amended, or Bylaws or any Contract. The shares of InGenius Common Stock and
InGenius Options have been or will be issued in compliance with all federal and
state corporate and securities laws.
(d) Except pursuant to this Agreement, there is outstanding
no vote, plan or pending proposal for any redemption of stock of InGenius or
merger or consolidation of InGenius with or into any other entity.
(e) The Company is not an "issuing public corporation"
within the meaning of Section 793(1) of the Michigan Business Corporation Act
(MBCA) (450.1793).
(f) The requirements of Section 780 of the MBCA do not
apply to the Merger, this Agreement, or any of the transactions contemplated
hereby, because the Company has fewer than 100 beneficial owners of its stock
within the meaning of Section 784(1) of the MBCA, and because the Board of
Directors of the Company has adopted a resolution approving the Merger, this
Agreement and the transactions contemplated hereby (see Section 782 of the
MBCA).
4.3 Ownership of Stock. On the Closing Date, each Seller will
------------------
own all of the shares of InGenius Common Stock issued in his name and set forth
opposite his name on Schedule 4.3 hereto, free and clear of any Encumbrances and
subject to no restriction with respect to the voting or transfer thereof.
4.4 Authorization.
-------------
(a) InGenius has all necessary power and authority to enter
into this Agreement, the Certificate of Merger and the Ancillary Agreements to
which it is a party
and has taken all action necessary to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement, the Certificate of Merger and the
Ancillary Agreements by InGenius, and the performance by InGenius of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of InGenius, subject to approval by the shareholders of InGenius. Upon
such approval of the requisite number of shares of InGenius Common Stock
entitled to vote thereon in accordance with the Michigan BCA and InGenius'
Articles of Incorporation, as amended, this Agreement will have been duly
executed and delivered by InGenius and will be a legal, valid and binding
obligation of InGenius, enforceable against InGenius in accordance with its
terms, except that enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors. The Certificate of Merger will have been, as
of the Effective Time, duly and validly executed by InGenius, and will be a
legal, valid and binding obligation of InGenius, enforceable against InGenius in
accordance with its terms, except that enforceability may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors.
(b) Each Seller has all necessary power and authority to enter
into this Agreement and any Ancillary Agreements to which it is a party and has
taken all action necessary to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. This
Agreement has been duly executed by each Seller and this Agreement is, and upon
execution and delivery, the Ancillary Agreements to which any Seller is a party,
will be, a legal, valid and binding obligation of such Person, enforceable
against such Person in accordance with its terms, except that enforceability may
be limited by the effect of bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors.
(c) The Sellers own such number of shares of Common Stock of
InGenius as are required to approve the Merger pursuant to InGenius's Articles
of Incorporation and Bylaws, each as amended, and the Michigan BCA.
4.5 Officers and Directors. Schedule 4.5 contains a list of all
----------------------
of the officers and directors of InGenius.
4.6 Bank Accounts. Schedule 4.6 contains a list of all InGenius'
-------------
bank accounts, safe deposit boxes, and related powers of attorney, and persons
authorized to draw thereon or have access thereto. InGenius has no outstanding
powers of attorney except as contemplated above.
4.7 Subsidiaries. InGenius does not own or hold any equity
------------
interest of any kind in any Person.
4.8 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 4.8, since the Balance Sheet Date there has not been any:
(a) InGenius Material Adverse Change;
(b) failure to operate the Business in the ordinary course or failure
to preserve for the Surviving Corporation the continued services of the
Employees and independent contractors and the goodwill of suppliers, customers
and others having business relations with InGenius or its Representatives;
(c) increase in the rate of compensation payable or to become payable
to any officer, Employee or Representative of InGenius, including the making of
any loan to, or the payment, grant or accrual of any bonus, incentive
compensation, service award or other similar benefit to, any such Person, or the
addition to, modification of, or contribution to any Employee Plan other than
the extension of coverage under such plan to others who became eligible after
the Balance Sheet Date;
(d) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or Assets to, or entering into
of any Contract with, any Related Party, except (i) reasonable directors' fees,
and (ii) compensation to Employees at the rates disclosed pursuant to Section
4.18(d);
(e) sale, assignment, license, transfer or encumbrance of any Assets
tangible or intangible, singly or in the aggregate, other than sales of products
and services and licenses in the ordinary course of business and consistent with
past practice;
(f) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for Contracts entered into, modified or terminated in
the ordinary course of business and consistent with past practice (except for
the conversion of outstanding options and convertible notes to common stock);
(g) actual or threatened termination of any material customer account
or group of accounts or actual or threatened material reduction in purchases or
royalties payable by any such customer or the occurrence of any event that is
likely to result in any such termination or reduction;
(h) disposition or lapsing of any of InGenius' Proprietary Rights, in
whole or in part or, any disclosure of any trade secret, process or know-how to
any Person not an Employee;
(i) material change in accounting methods or practices by InGenius;
(j) revaluation by InGenius of any of the Assets, including writing
off notes or accounts receivable other than for which adequate reserves have
been established;
(k) material damage, destruction or loss (whether or not covered by
insurance);
(l) declaration, setting aside or payment of dividends or
distributions in respect of any stock of InGenius or any redemption, purchase or
other acquisition of any of InGenius' equity securities;
(m) issuance or reservation for issuance by InGenius of any shares of
stock or other equity securities or obligations or securities convertible into
or exchangeable for shares of stock or other equity securities;
(n) commitment by InGenius or by any of its officers on its behalf to
issue or reserve for issuance, any shares of stock or other equity securities or
obligations or securities convertible into or exchangeable for shares of stock
or other equity securities;
(o) increase, decrease or reclassification of InGenius' capital
stock;
(p) amendment of InGenius' Articles of Incorporation or Bylaws;
(q) capital expenditure or execution of any lease or any incurring of
liability therefor by InGenius, involving payments in excess of $10,000 in the
aggregate;
(r) failure to pay any material obligation of InGenius;
(s) cancellation of any indebtedness or waiver of any rights of
substantial value to InGenius, except in the ordinary course of business and
consistent with past practice;
(t) indebtedness incurred by InGenius for borrowed money or any
commitment to borrow money entered into by InGenius, or any loans made or agreed
to be made by InGenius;
(u) liability incurred by InGenius except in the ordinary course of
business and consistent with past practice, or any increase or change in any
assumptions underlying or methods of calculating any bad debt, contingency or
other reserves;
(v) payment, discharge or satisfaction of any Liabilities of InGenius
other than the payment, discharge or satisfaction (i) in the ordinary course of
business and consistent with past practice of Liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date and (ii)
of other Liabilities of InGenius involving $10,000 or less in the aggregate;
(w) acquisition by InGenius of any equity interest in any other
Person; or
(x) agreement by InGenius to do any of the foregoing.
4.9 Title to Assets. InGenius has good and marketable fee simple
---------------
title to all of its material Assets except as set forth on Schedule 4.9. Except
as set forth on Schedule 4.9, none of the Assets are subject to any
Encumbrances.
4.10 Sufficiency of Assets. The Assets constitute all of the
---------------------
assets, rights and properties, tangible or intangible, real or personal, which
are used in or required for the operation of the Business as it is presently
conducted.
4.11 Fixtures and Equipment. Schedule 4.11 contains accurate
----------------------
lists and summary descriptions of all Fixtures and Equipment where the value of
an individual item exceeds $5,000 or where an aggregate of similar items exceeds
$10,000. All tangible assets and properties which are part of the Assets are in
good operating condition and repair, normal wear and tear excepted, and are
usable in the ordinary course of business.
4.12 Contracts.
---------
(a) Disclosure. Schedule 4.12 sets forth a complete and accurate
----------
list of all of InGenius' material Contracts in each of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) Manufacturing or joint development agreements;
(iii) License agreements or royalty agreements, whether
InGenius is the licensor or licensee thereunder;
(iv) Confidentiality and non-disclosure agreements (whether
InGenius is the beneficiary or the obligated party thereunder);
(v) Customer orders or sales contracts under which the
customer is to make a payment after the date hereof of $10,000 or more;
(vi) Original equipment manufacturer agreements or distributor
agreements;
(vii) Research agreements;
(viii) Output or requirement agreements;
(ix) Contracts involving future expenditures or Liabilities,
actual or potential, in excess of $10,000 after the date hereof or
otherwise material to the Business or the Assets;
(x) Contracts or commitments relating to commission
arrangements with others;
(xi) Employment contracts, consulting contracts and severance
agreements, including Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former
officers or directors of InGenius or (B) that will result in the payment
by, or the creation of any Liability to pay on behalf of Aeneid or InGenius
any severance, termination, "golden parachute," or other similar payments
to any present or former personnel following termination of employment or
otherwise as a result of the consummation of the transactions contemplated
by this Agreement;
(xii) Indemnification agreements;
(xiii) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether InGenius shall
be the borrower, lender or guarantor thereunder (excluding credit provided
by InGenius in the ordinary course of business to purchasers of its
products and obligations to pay vendors in the ordinary course of business
and consistent with past practice);
(xiv) Contracts containing covenants limiting the freedom of
InGenius or any officer, director, Employee or Affiliate of InGenius, to
engage in any line of business or compete with any Person that relates
directly or indirectly to the Business;
(xv) Any Contract with the federal, state or local government
or any agency or department thereof;
(xvi) Any Contract with a Related Party:
(xvii) Leases of real or personal property; and
(xviii) Any other material Contract.
True, correct and complete copies of all of the Contracts listed on Schedule
4.12, including all amendments and supplements thereto, have been made available
to Aeneid.
(b) Absence of Defaults. All of the Contracts are valid, binding and
-------------------
enforceable in accordance with their terms with no existing (or to the knowledge
of InGenius and Sellers, threatened) Default or dispute. InGenius has fulfilled,
or taken all action necessary to enable it to fulfill when due, all of its
material obligations under each of such Contracts. To the knowledge of InGenius
and Sellers, all parties to such Contracts have complied in all material
respects with the provisions thereof, no party is in Default thereunder and no
notice of any claim of Default has been given to InGenius or Sellers. InGenius
and Sellers have no reason to believe that the products and services called for
by any unfinished Contract cannot be supplied in accordance with the terms of
such Contract, including time specifications, and has no reason to believe that
any unfinished Contract will, upon performance
by InGenius, result in a loss to InGenius. Except as set forth on Schedule 4.13
(List of Consents), no consent of any third party is required for the assignment
of any Contract to Aeneid.
4.13 No Conflict or Violation; Consents. None of the execution,
----------------------------------
delivery or performance of this Agreement, the Certificate of Merger or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by InGenius or Sellers with any of the provisions hereof
or thereof, will (a) violate or conflict with any provision of its respective
governing documents, (b) violate, conflict with, or result in a breach of or
constitute a default (with or without notice or passage of time) under, or
result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
respective assets under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which
InGenius or any Seller is a party or by which InGenius or any Seller is bound or
to which any of its respective assets are subject, (c) violate any applicable
Regulation or Court Order or (d) impose any Encumbrance on any Assets or the
Business. Except for (i) the approval of the shareholders of InGenius as
required by the Michigan BCA, (ii) the filing of the Certificate of Merger and
(iii) those set forth on Schedule 4.13, no notices to, declaration, filing or
registration with, approvals or consents of, or assignments by, any Persons
(including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by InGenius or Sellers in
connection with the execution, delivery or performance of this Agreement and the
consummation of the Merger.
4.14 Permits. To the best knowledge of Sellers, Schedule 4.14
-------
sets forth a complete list of all Permits held by InGenius. InGenius has, and at
all times has had, all Permits required under any applicable Regulation in its
operation of the Business or in its ownership of the Assets, and owns or
possesses such Permits free and clear of all Encumbrances. InGenius is not in
default, nor has InGenius or any Seller received any notice of any claim of
default, with respect to any such Permit. Except as otherwise governed by law,
all such Permits are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees and except as set forth on
Schedule 4.14, will not be adversely affected by the completion of the
transactions contemplated by this Agreement, the Certificate of Merger or the
Ancillary Agreements.
4.15 Financial Statements; Books and Records. Except as set forth
---------------------------------------
on Schedule 4.15
(a) The Financial Statements are complete, are in accordance with the
Books and Records, fairly present the Assets, Liabilities and financial
condition and results of operations indicated thereby in all material respects.
(b) The Books and Records, in reasonable detail, accurately and
fairly reflect the activities of InGenius and the Business in all material
respects and have been provided to Aeneid for its inspection.
(c) InGenius has not engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in the normally maintained Books and
Records of InGenius.
(d) The stock records and minute books of InGenius heretofore made
available to Aeneid fully reflect all minutes of meetings, resolutions and other
material actions and proceedings of its shareholders and board of directors and
all committees thereof, all issuances, transfers and redemptions of InGenius'
capital stock and contain true, correct and complete copies of InGenius'
Articles of Incorporation, as amended, and Bylaws and all amendments thereto
through the date hereof.
4.16 Liabilities. Except as set forth on Schedule 4.16, InGenius
-----------
has no Liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities which are reflected and properly reserved against in the
Financial Statements, (ii) liabilities incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date, and
(iii) liabilities arising under the Contracts (other than obligations which are
required to be reflected on a balance sheet prepared in accordance with GAAP)
set forth on Schedule 4.12 and which have arisen or been incurred in the
ordinary course of business. For the purposes of this Section 4.16, Liabilities
shall not include Liabilities related to Proprietary Rights which are addressed
in Sections 4.22 and 4.23 hereof.
4.17 Litigation. Except as set forth on Schedule 4.17, there is
----------
no action, order, writ, injunction, judgment or decree outstanding or claim,
suit, litigation, proceeding, investigation or dispute (collectively, "Actions")
pending or, to the knowledge of InGenius and Sellers, threatened or anticipated
(i) against, relating to or affecting InGenius, any of the Assets or any of its
officers and directors as such, (ii) which seek to enjoin or obtain damages in
respect of the transactions contemplated hereby or by the Ancillary Agreements
or (iii) with respect to which there is a reasonable likelihood of a
determination which would prevent InGenius or Sellers from consummating the
transactions contemplated hereby and by the Ancillary Agreements. None of the
Actions, if adversely determined against Sellers, InGenius, its directors or
officers, or any other Person could reasonably be expected to result in a loss
to InGenius, individually or in the aggregate, in excess of $10,000. To the
knowledge of InGenius and Sellers, there is no basis for any Action, which if
adversely determined against Sellers, InGenius, its directors or officers, or
any other Person could reasonably be expected to result in a loss to InGenius,
individually or in the aggregate, in excess of $10,000. Except as specified in
Schedule 4.17, there are presently no outstanding judgments, decrees or orders
of any court or any governmental or administrative agency against or affecting
InGenius, it Business or any of the Assets. Schedule 4.17 contains a complete
and accurate description of all Actions to which InGenius has been a party or
which related to any of the Assets or InGenius' officers or directors as such,
or any such Actions which were settled prior to the institution of formal
proceedings, other than Actions brought by InGenius for collection of monies
owed in the ordinary course of business.
4.18 Labor Matters. Except as set forth on Schedule 4.18:
-------------
(a) InGenius is not a party to any labor agreement with
respect to its Employees (which term shall include any part-time workers for
purposes of this Section 4.18), with any labor organization, group or
association and has not experienced any attempt by organized labor or its
representatives to make InGenius conform to demands of organized labor relating
to its Employees or to enter into a binding agreement with organized labor that
would cover the Employees of InGenius. There is no unfair labor practice charge
or complaint against InGenius pending before the National Labor Relations Board
or any other governmental agency arising out of InGenius' activities, and
InGenius and Sellers have no knowledge of any facts or information which would
give rise thereto; there is no labor strike or labor disturbance pending or
threatened against InGenius nor is any grievance currently being asserted
against it; and InGenius has not experienced a work stoppage or other labor
difficulty. There are no material controversies pending or, to the best
knowledge of InGenius and Sellers, threatened between InGenius and any of its
Employees, and InGenius and Sellers are not aware of any facts which could
reasonably result in any such controversy.
(b) InGenius is in material compliance with all applicable
Regulations respecting employment practices, terms and conditions of employment,
wages and hours, equal employment opportunity, and the payment of social
security and similar taxes, and is not engaged in any unfair labor practice.
InGenius is not liable for any claims for past due wages or any penalties for
failure to comply with any of the foregoing.
(c) InGenius has not entered into any severance or similar
arrangement in respect of any present or former Employee that will result in any
obligation (absolute or contingent) of Aeneid or InGenius to make any payment to
any present or former Employee following termination of employment. Neither the
execution and delivery of this Agreement, the Certificate of Merger or the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby will result in the acceleration of the vesting of
exercisability of any InGenius Options or in the acceleration or vesting of any
other rights of any Person to benefits under any Employee Plans.
(d) Schedule 4.18(d) contains a complete and accurate list
of all current employees of InGenius, including their title, salary, years of
service with InGenius and the date and amount of their last salary increase.
4.19 Employee Benefit Plans.
----------------------
(a) Definitions. The following terms, when used in this
-----------
Section 4.19, shall have the following meanings. Any of these terms may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference.
(i) "Benefit Arrangement" means any employment,
consulting, severance or other similar contract, arrangement or policy and
each plan, arrangement (written or oral), program, agreement or commitment
providing for insurance coverage (including any self-insured arrangements),
workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits
(including any "voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or
for deferred compensation, profit-sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which
(A) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is
entered into, maintained, contributed to or required to be contributed to,
as the case may be, by InGenius or an ERISA Affiliate or under which
InGenius or any ERISA Affiliate may incur any liability, and (C) covers any
employee or former employee of InGenius or any ERISA Affiliate (with
respect to their relationship with such entities).
(ii) "Employee Plans" means all Benefit Arrangements,
Multiemployer Plans, Pension Plans and Welfare Plans.
(iii) "ERISA Affiliate" means any entity which is (or at
any relevant time was) a member of a "controlled group of corporations"
with or under "common control" with InGenius, as defined in Section 414(b)
or (c) of the Code.
(iv) "Multiemployer Plan" means any "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA, (A) which InGenius, or
any ERISA Affiliate maintains, administers, contributes to or is required
to contribute to, or, after September 25, 1980, maintained, administered,
contributed to or was required to contribute to, or under which InGenius or
any ERISA Affiliate may incur any liability and (B) which covers any
employee or former employee InGenius or any ERISA Affiliate (with respect
to their relationship with such entities).
(v) "PBGC" means the Pension Benefit Guaranty
Corporation.
(vi) "Pension Plan" means any "employee pension benefit
plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan)
(A) which InGenius or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the five years
prior to the Closing Date, maintained, administered, contributed to or was
required to contribute to, or under which InGenius or any ERISA Affiliate
may incur any liability and (B) which covers any employee or former
employee of InGenius or any ERISA Affiliate (with respect to their
relationship with such entities).
(vii) "Subsidiary" means (A) any corporation in an
unbroken chain of corporations beginning with InGenius, if each of the
corporations other than the last corporation in the unbroken chain then
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain; (B) any
partnership in which InGenius is a general partner; or (iii) any
partnership in which InGenius possesses a 50% or greater interest in the
total capital or total income of such partnership.
(viii) "Welfare Plan" means any "employee welfare benefit
plan" as defined in Section 3(1) of ERISA, (A) which InGenius or any ERISA
Affiliate maintains, administers, contributes to or is required to
contribute to, or under which InGenius or any ERISA Affiliate may incur any
liability and (B) which covers any employee or former employee of InGenius
or any ERISA Affiliate (with respect to their relationship with such
entities).
(b) Disclosure; Delivery of Copies of Relevant Documents
----------------------------------------------------
and Other Information. Schedule 4.19 contains a complete list of Employee
Plans which cover or have covered employees of InGenius or a Subsidiary (with
respect to their relationship with such entities). True and complete copies of
each of the following documents have been delivered by InGenius: (i) each
Welfare Plan and Pension Plan (and, if applicable, related trust agreements) and
all amendments thereto, all written interpretations thereof and written
descriptions thereof which have been distributed to the employees of InGenius or
its Subsidiaries and all annuity contracts or other funding instruments, (ii)
each Benefit Arrangement including written interpretations thereof and written
descriptions thereof which have been distributed to InGenius' employees
(including descriptions of the number and level of employees covered thereby)
and a complete description of any such Benefit Arrangement which is not in
writing, (iii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Pension Plan, (iv) for the three most
recent plan years, Annual Reports on Form 5500 Series required to be filed with
any governmental agency for each Pension Plan, (v) a description of complete
age, salary, service and related data as of the last day of the last plan year
for employees and former employees of InGenius and each Subsidiary, and (vi) a
description setting forth the amount of any Liability of InGenius as of the
Closing Date for payments more than 30 days past due with respect to each
Welfare Plan.
(c) Representations.
---------------
(i) Pension Plans. No Pension Plan is subject to the
-------------
minimum funding requirements of ERISA or the Code. Each Pension Plan, each
related trust agreement, annuity contract or other funding instrument is
qualified and tax-exempt under the provisions of Code Section 401(a) (or
403(a), as appropriate) and 501(a) and has been so qualified during the
period from its adoption to date.
(ii) Multiemployer Plans. Neither InGenius nor any
-------------------
ERISA Affiliate contributes to, or within the past six years has been
obligated to, contribute to any Multiemployer Plan.
(iii) Welfare Plans. None of InGenius, any ERISA
-------------
Affiliate or any Welfare Plan has any present or future obligation to make
any payment to or with respect to any present or former employee of
InGenius or any ERISA Affiliate pursuant to any retiree medical benefit
plan, or other retiree Welfare Plan, and no condition exists which would
prevent InGenius from amending or terminating any such benefit plan or
Welfare Plan.
(iv) Compliance with Law. Each Welfare Plan, Pension
-------------------
Plan and each related trust agreement, annuity contract or other funding
instrument is qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and has been so
qualified during the period from its adoption to date. Each Welfare Plan
which is a "group health plan," as defined in Section 607(1) of ERISA, has
been operated in compliance with provisions of Part 6 of Title I of ERISA
and Sections 162(k) and 4980B of the Code at all times.
(v) Benefit Arrangements. Each Benefit Arrangement
--------------------
which covers or has covered employees or former employees of InGenius or a
Subsidiary (with respect to their relationship with such entities) has been
maintained in material compliance with its terms and with the requirements
prescribed by any and all Regulations which are applicable to such Benefit
Arrangement, including the Code. Except as set forth in Schedule 4.19, and
except as provided by law, the employment of all persons presently employed
or retained by InGenius or a Subsidiary is terminable at will, at any time
and without advance notice.
(vi) Unrelated Business Taxable Income. No Employee
---------------------------------
Plan (or trust or other funding vehicle pursuant thereto) is subject to any
Tax under Code Section 511.
(vii) Deductibility of Payments. There is no Contract or
-------------------------
bonus plan, covering any employee or former employee of InGenius or a
Subsidiary (with respect to their relationship with such entities) that,
individually or collectively, provides for the payment by InGenius of any
amount (i) that is not deductible under Section 162(a)(1) or 404 of the
Code or (ii) that is an "excess parachute payment" pursuant to Section 280G
of the Code.
(viii) Fiduciary Duties and Prohibited Transactions.
--------------------------------------------
Neither InGenius nor any plan fiduciary of any Welfare Plan or Pension Plan
which covers or has covered employees or former employees of InGenius or
any ERISA Affiliate, has engaged in any transaction in violation of
Sections 404 or 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c)(1) of the Code, for which no exemption exists under Section
408 of ERISA or Section 4975(c)(2) or (d) of the Code.
(ix) No Amendments. Neither InGenius nor any ERISA
-------------
Affiliate has any announced plan or legally binding commitment to create
any additional Employee Plans or to amend or modify any existing Employee
Plan.
(x) Certain Contracts. None of the Employee Plans
-----------------
holds any interest in any annuity contract, guaranteed investment contract
or any other investment contract which is issued by an insurance company
which is the subject of bankruptcy, receivership or conservatorship
proceedings.
(xi) No Acceleration of Rights or Benefits. Neither the
-------------------------------------
execution and delivery of this Agreement, the Certificate of Merger or the
Ancillary
Agreements nor the consummation of the transactions contemplated hereby or
thereby will result in the acceleration or creation of any rights of any
person to benefits under any of the Employee Plans, including but not
limited to the acceleration of the exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the acceleration of
the accrual or vesting of any benefits under any Pension Plan or the
creation of rights under any severance, parachute or change of central
agreement.
(xii) No Other Material Liability. No event has
---------------------------
occurred in connection with which InGenius or any ERISA Affiliate or any
Employee Plan, directly or indirectly, could be subject to any material
liability (i) under any Regulation or governmental order relating to any
Employee Plans or (ii) pursuant to any obligation of InGenius or any
Subsidiary to indemnify any Person against liability incurred under, any
such Regulation or order as they relate to the Employee Plans.
4.20 Transactions with Related Parties. Except for compensation
---------------------------------
arrangements in the ordinary course of business, as disclosed on Schedule 4.20
or for amounts less than $10,000, no Related Party has (a) borrowed or loaned
money or other property to InGenius which has not been repaid or returned, (b)
any contractual or other claims, express or implied, of any kind whatsoever
against InGenius or (c) had any interest in any property used by InGenius.
4.21 Compliance with Law. InGenius has conducted the Business in
-------------------
material compliance with all applicable Regulations and Court Orders. Neither
InGenius nor any Seller has received any notice to the effect that, or has
otherwise been advised that, InGenius is not in compliance with any Regulations
or Court Orders, and InGenius and Sellers are not aware of any existing
circumstances that are likely to result in any material violation of any of the
foregoing.
4.22 Intellectual Property. General. Schedule 4.22 sets forth
--------------------- --------
with respect to the Proprietary Rights: (i) for each patent and patent
application, including xxxxx patents and utility models and applications
therefor, as applicable, the number, normal expiration date, title and priority
information for each country in which such patent has been issued, or, the
application number, date of filing, title and priority information for each
country, (ii) for each trademark, tradename or service xxxx, whether or not
registered, the date first used, the application serial number or registration
number, the class of goods covered, the nature of the goods or services, the
countries in which the names or xxxx is used and the expiration date for each
country in which a trademark has been registered, (iii) for each copyright for
which registration has been sought, whether or not registered, the date of
creation and first publication of the work, the number and date of registration
for each country in which a copyright application has been registered, (iv) for
each mask work, whether or not registered, the date of first commercial
exploitation and if registered, the registration number and date of registration
and (v) all such Proprietary Rights in the form of licenses. True and correct
copies of all Proprietary Rights (including all pending applications and
application related documents and materials) owned, controlled or used by or on
behalf of InGenius or in which InGenius has any interest whatsoever have been
provided or made available to Aeneid.
(b) Adequacy. To the best knowledge of the Sellers, and
--------
except as set forth in Schedule 4.22 (b), InGenius' Proprietary Rights are all
those necessary for
the normal conduct of the Business as presently conducted and as presently
contemplated, including the design, manufacture and sale of all products
currently under development, planned for development or in production.
(c) Royalties and Licenses. To the best knowledge of the
----------------------
Sellers, InGenius has no obligation to compensate any Person for the use of any
of its Proprietary Rights nor has InGenius granted to any Person any license,
option or other rights to use in any manner any of its Proprietary Rights,
whether requiring the payment of royalties or not, except as set forth in
Schedule 4.22.
(d) Ownership. To the best of Sellers' knowledge,
---------
InGenius owns or has a valid right to use its Proprietary Rights, and such
Proprietary Rights will not cease to be valid rights of InGenius by reason of
the execution, delivery and performance of this Agreement, the Certificate of
Merger or the Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby.
(e) Absence of Claims. Except as set forth in Schedule
-----------------
4.22, neither InGenius nor any Seller has received any notice of (A) alleged
invalidity with respect to any of InGenius' Proprietary Rights or (B) alleged
infringement of any rights of others due to any activity by InGenius. To the
knowledge of InGenius and Sellers, InGenius' use of its Proprietary Rights in
its past, current and planned products do not and would not infringe upon or
otherwise violate the valid rights of any third party anywhere in the world. No
other Person (i) has notified InGenius or Sellers that it is claiming any
ownership of or right to use any of InGenius' Proprietary Rights or (ii) to the
best knowledge of InGenius and Sellers, is infringing upon any such Proprietary
Rights in any way.
(f) Protection of Proprietary Rights. Schedule 4.22
--------------------------------
describes the steps InGenius has taken to protect its interest in its
Proprietary Rights.
4.23 Software. To the best of Sellers' knowledge, and except as
--------
set forth on Schedule 4.23:
(a) Schedule 4.23 sets forth a list of all computer
software used by InGenius in InGenius' products (the "Computer Software").
Except for Computer Software which is exclusively licensed to InGenius pursuant
to licenses identified in Schedule 4.23, InGenius exclusively owns all rights to
the Computer Software, and no royalties are required for the Surviving
Corporation to continue to exclusively own and use the Computer Software.
Licenses for Computer Software identified in Schedule 4.23 are fully
transferable to the Surviving Corporation at no additional cost to Parent,
Purchaser or the Surviving Corporation.
(b) Except for Computer Software licensed to InGenius
pursuant to licenses identified in Schedule 4.23, all of the Computer Software
was either written by a regular employee of InGenius or ownership has been
exclusively assigned to InGenius.
(c) InGenius has exclusive control over the source codes
for all of the
Computer Software, and no third party has copies of the source codes for any of
the Computer Software. All employees of InGenius, and all consultants, vendors,
customers and others having at any time had access to any of the source codes
for the Computer Software have signed confidentiality agreements which prevent
their use of or disclosure of such source codes other than for the business of
InGenius and its successors.
(d) None of the former or current members of management or
key personnel of InGenius, including all former and current employees, agents,
consultants and contractors who have contributed to or participated in the
conception and development of the Computer Software has threatened or asserted
in writing any claims against InGenius in connection with the involvement of
such persons in the conception and development of any of the Computer Software.
(e) No licenses or rights have been granted to distribute
the source code of, or to use source code to create Derivative Works (as
hereinafter defined) from the Computer Software. As used herein, "Derivative
Work" shall mean a work which is based upon one or more preexisting works, such
as a revision, enhancement, modification, abridgment, condensation, expansion or
any other form in which such preexisting works may be recast, transformed or
adapted, and which, if prepared without authorization of the owner of the
copyright in such preexisting work, would constitute a copyright infringement.
For purposes hereof, a Derivative Work shall also include any compilation that
incorporates such a preexisting work as well as translations from one human
language to another and from one type of code to another.
(f) The source codes for all Computer Software have been
placed in back-up files that are securely stored in a location other than the
Facility or Facilities where such Computer Software is used. All databases used
in the business of InGenius are periodically (at least once every month) backed-
up and such backed-up materials are moved to and securely stored at locations
other than the Facility or Facilities where such databases are stored. All
Computer Software that InGenius has marketed or currently markets to any of its
customers will, if the appropriate operating medium is provided, function in
accordance with the specifications therefor, as set forth in InGenius' written
materials describing the Computer Software.
(g) All software, other than the Computer Software,
installed on computers owned or leased by, or otherwise used by InGenius in its
business are covered by valid licenses from the software owner or publisher. No
unlicensed copy of software used by InGenius in its business has been deleted
from any such computer without replacement with a validly licensed copy.
4.24 Tax Matters.
-----------
(a) Filing of Tax Returns. InGenius has timely filed with
---------------------
the appropriate taxing authorities all Tax Returns in respect of Taxes required
to be filed. The Tax Returns filed are complete and accurate in all material
respects. Except as specified in Schedule 4.24, InGenius has not requested any
extension of time within which to file Tax Returns in respect of any Taxes.
InGenius has delivered to Aeneid complete and accurate copies of their
respective federal, state and local Tax Returns for the years ended December 31,
1998 and 1997.
(b) Payment of Taxes. All Taxes in respect of periods
----------------
beginning before the Closing Date have been timely paid or an adequate reserve
has been established therefor, as set forth in Schedule 4.24 or the Financial
Statements, and InGenius has no material Liability for Taxes in excess of the
amounts so paid or reserves so established. All Taxes that InGenius is required
by law to withhold or collect have been duly withheld or collected and have been
timely paid over to the appropriate governmental authorities to the extent due
and payable.
(c) Audits, Investigations or Claims. No deficiencies for
--------------------------------
Taxes of InGenius have been claimed, proposed or assessed by any taxing or other
governmental authority. Except as specified in Schedule 4.24, there are no
pending or, to the knowledge of InGenius and Sellers, threatened audits,
assessments or other Actions for or relating to any Liability in respect of
Taxes of InGenius, and there are no matters under discussion with any
governmental authorities with respect to Taxes that are likely to result in an
additional Liability for Taxes. Audits of federal, state and local Tax Returns
by the relevant taxing authorities have been completed for the periods set forth
on Schedule 4.24 and, except as set forth in such Schedule, neither InGenius nor
any Seller has been notified that any taxing authority intends to audit a Tax
Return for any other period. No extension of a statute of limitations relating
to Taxes is in effect with respect to InGenius.
(d) Lien. There are no Encumbrances for Taxes (other than
----
for current Taxes not yet due and payable) on the Assets.
(e) Tax Elections. All elections with respect to Taxes
-------------
affecting InGenius as of the date hereof are set forth on InGenius' latest Tax
Returns. InGenius (i) has not made nor will make a deemed dividend election
under Reg. (S) 1.1502-32(f)(2) or a consent dividend election under Section 565
of the Code; (ii) has not consented at any time under Section 341(f)(1) of the
Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of the Assets; (iii) has not agreed, nor is required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise; (iv) has not made an election, nor is required, to treat
any Asset as owned by another Person pursuant to the provisions of Section
168(f) of the Code or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code; and (v) has not made any
of the foregoing elections or is required to apply any of the foregoing rules
under any comparable state or local Tax provision.
(f) Prior Affiliated Groups. InGenius has never been a
-----------------------
member of an affiliated group of corporations within the meaning of Section 1504
of the Code.
(g) Tax Sharing Agreements. There are no Tax-sharing
----------------------
agreements or similar arrangements (including indemnity arrangements) with
respect to or involving InGenius, and, after the Closing Date, InGenius shall
not be bound by any such Tax-sharing agreements or similar arrangements (entered
into prior to the Closing) or have any Liability thereunder for amounts due in
respect of periods prior to or after the Closing Date.
(h) Partnerships. InGenius is not subject to any joint
------------
venture, partnership, or other arrangement or contract which is treated as a
partnership for federal income tax purposes. InGenius is not a successor to any
other Person by way of merger, reorganization or similar transaction.
(i) Foreign Person. For purposes of withholding under
--------------
Section 1445 of the Code, neither InGenius nor any Seller is a "foreign person"
as defined in Section 1445(f)(3) of the Code.
(j) No Withholding. The transaction contemplated herein is
--------------
not subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.25 Insurance. Schedule 4.25 contains a complete and accurate
---------
list of all policies or binders of insurance (showing as to each policy or
binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided and any pending
claims thereunder) of which InGenius is the owner, insured or beneficiary. All
of such policies are sufficient for (i) compliance with all material Regulations
and all of the Contracts, (ii) covering all reasonably foreseeable damage to and
liabilities or contingencies relating to InGenius' conduct of the Business and
(iii) providing replacement cost insurance coverage for all Fixtures and
Equipment and all leasehold improvements. InGenius is not in default under any
of such policies or binders, and it has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion.
There are no facts known to InGenius or Sellers upon which an insurer might be
justified in reducing or denying coverage or increasing premiums on existing
policies or binders. There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders are in full force and effect on
the date hereof and shall be kept in full force and effect by InGenius through
the Effective Time.
4.26 Accounts Receivable. The accounts and notes receivable
-------------------
reflected in the Balance Sheet, and all accounts receivable arising since the
Balance Sheet Date, represent bona fide claims against debtors for sales,
services performed or other charges arising on or before the date of recording
thereof, and all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, Contracts or customer requirements. To the knowledge of InGenius and
Sellers, all such receivables are fully collectible in the ordinary course of
business within three months except to the extent of an amount not in excess of
the reserve for doubtful accounts reflected on the Balance Sheet and additions
to such reserves as reflected on the Books and Records of InGenius.
4.27 Payments. Neither InGenius nor any of its Representatives
--------
acting on its behalf have, directly or indirectly, paid or delivered any fee,
commission or other sum of money or property, however characterized, to any
finder, agent, government official or other party, in the U.S. or any other
country which either InGenius or any Seller knows or has reason to believe to
have been illegal under any federal, state or local laws of the U.S. or any
other country having jurisdiction. Neither InGenius nor any of its
Representatives acting on its behalf, have accepted or received any unlawful
contributions, payments, gifts or expenditures. InGenius has not participated,
directly or indirectly, in any boycotts or other similar practices affecting any
of its actual or potential customers and has at all times done business in an
open and ethical manner.
4.28 Customers and Suppliers. Schedule 4.28 sets forth a complete
-----------------------
and accurate list of the names and addresses of (i) the five customers who
purchased from InGenius the greatest dollar volume of products during its last
fiscal year, showing the approximate total sales in dollars to each such
customer during such fiscal year; and (ii) suppliers with sales to InGenius
greater than $5,000 during the last fiscal year, showing the approximate total
purchases in dollars by InGenius from each such supplier during such fiscal
year. Since the Balance Sheet Date, there has been no adverse
change in any material respect in the business relationship of InGenius with any
customer or supplier named on Schedule 4.28. Neither InGenius nor any Seller has
received any written communication from any customer or supplier named on
Schedule 4.28 of any intention to return, terminate or materially reduce
purchases from or supplies to InGenius.
4.29 Environmental Matters.
---------------------
(a) Definitions. The following terms, when used in this
-----------
Section 4.29, shall have the following meanings:
(i) "InGenius" for purposes of this Section 4.29
--------
includes (A) all Affiliates of InGenius, (B) all partnerships, joint
ventures and other entities or organizations in which InGenius was at any
time or is a partner, joint venturer, member or participant and (C) all
predecessor or former corporations, partnerships, joint ventures,
organizations, businesses or other entities, whether in existence as of the
date hereof or at any time prior to the date hereof, the assets or
obligations of which have been acquired or assumed by InGenius or to which
InGenius has succeeded.
(ii) "Release" means and includes any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment or the
workplace of any Hazardous Substance, and otherwise as defined in any
Environmental Law.
(iii) "Hazardous Substance" means any pollutants,
-------------------
contaminants, chemicals, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical compound
or hazardous substance, material or waste, whether solid, liquid or gas,
including any quantity of asbestos in any form, urea formaldehyde, PCB's,
radon gas, crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products or derivatives, radioactive substance,
waste waters, sludges, slag and any other substance, material or waste that
is subject to regulation, control or remediation under any Environmental
Laws.
(iv) "Environmental Laws" mean all Regulations which
------------------
regulate or relate to the protection or clean-up of the environment, the
use, treatment, storage, transportation, generation, manufacture,
processing, distribution, handling or disposal of, or emission, discharge
or other release or threatened release of, Hazardous Substances or
otherwise dangerous substances, wastes, pollution or materials (whether
gas, liquid or solid), the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources, or the health and safety of persons or property, including
protection of the health and safety of employees. Environmental Laws
include the Federal Water Pollution Control Act, Resource Conservation &
Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act,
Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Hazardous Materials Transportation Act and all analogous or related
federal, state or local law.
(v) "Environmental Conditions" mean the introduction into the
------------------------
environment of any pollution, including any contaminant, irritant or
pollutant or other Hazardous Substance (whether or not such pollution
constituted at the time thereof a violation of any Environmental Law as a
result of any Release of any kind whatsoever of any Hazardous Substance) as
a result of which InGenius has or may become liable to any Person or by
reason of which any of the Assets may suffer or be subjected to any
Encumbrance.
(b) Notice of Violation. Neither InGenius nor any Seller has
-------------------
received any notice of alleged, actual or potential responsibility for, or any
inquiry or investigation regarding, (i) any Release or threatened Release by
InGenius of any Hazardous Substance at any location or (ii) an alleged violation
of or non-compliance by InGenius with the conditions of any Permit required
under any Environmental Law or the provisions of any Environmental Law. InGenius
and Sellers have not received any notice of any other claim, demand or Action by
any Person alleging any actual or threatened injury or damage to any Person,
property, natural resource or the environment arising from or relating to any
Release or threatened Release by InGenius of any Hazardous Substances.
(c) Environmental Conditions. To the knowledge of Sellers, there
------------------------
are no present or past Environmental Conditions in any way relating to InGenius,
the Business or the Assets.
(d) Notices, Warnings and Records. To the knowledge of Sellers,
-----------------------------
InGenius has given all notices and warnings, made all reports, and has kept and
maintained all records required by and in compliance with all Environmental
Laws.
4.30 Brokers; Transaction Costs. Neither InGenius nor any Seller has
--------------------------
entered into and will not enter into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of Aeneid or
InGenius to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby. Neither InGenius nor
Aeneid shall be liable for any costs or expenses pertaining to any finder's
fees, brokerage commission or similar payment incurred by or on behalf of
InGenius or any Seller as a result of the consummation of the transactions
contemplated hereby. It is expressly understood that neither Xxxxxx Group nor
Xxxxx Xxxxxx are brokers and neither are entitled to any fees or commissions in
connection with this Agreement or the Merger.
4.31 No Other Agreements to Sell InGenius or the Assets. Neither
--------------------------------------------------
InGenius nor any Seller has any legal obligation, absolute or contingent, to any
other Person to sell all or substantially all of the Assets or to sell any
capital stock of InGenius or to effect any merger, consolidation or other
reorganization of InGenius or to enter into any agreement with respect thereto.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF AENEID
Aeneid represents and warrants to InGenius and Sellers as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
5.1 Organization of Aeneid. Aeneid is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of California.
Aeneid has full corporate power and authority to conduct its business as
presently conducted by it and to own and lease its properties and assets. Aeneid
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of its properties owned or
leased or the nature of its activities make such qualification necessary, except
where the failure to be so qualified or in good standing would not have an
Aeneid Material Adverse Effect.
5.2 Authorization. Aeneid has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Aeneid and
is, and upon execution and delivery, the Ancillary Agreements will be, legal,
valid and binding obligations of Aeneid, enforceable against Aeneid in
accordance with their terms, except that enforceability may be limited by the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors.
5.3 No Conflict or Violation; Consents. None of the execution, delivery
----------------------------------
or performance of this Agreement or any Ancillary Agreement, the consummation of
the transactions contemplated hereby or thereby, nor compliance by Aeneid with
any of the provisions hereof or thereof, will (a) violate or conflict with any
provision of the Aeneid Articles of Incorporation or Bylaws of Aeneid, (b)
violate, conflict with, or result in a breach of or constitute a default (with
or without notice or passage of time) under, or result in the termination of, or
accelerate the performance required by, or result in a right to terminate,
accelerate, modify or cancel under, or require a notice under, or result in the
creation of any Encumbrance upon any of Aeneid's assets under, any material
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, security
interest or other arrangement to which Aeneid is a party or by which it is bound
or to which any of its assets are subject or (c) violate any Regulation or Court
Order.
5.4 Financial Statements. The balance sheet and income statements of
--------------------
Aeneid for the period ended August 30, 1999, fairly present the assets,
liabilities, financial condition and results of operations indicated thereby in
all material respects.
5.5 No Brokers. Neither Aeneid nor any of its officers, directors,
----------
employees, shareholders or Affiliates has employed or made any agreement with
any broker, finder or similar agent or any Person which will result in the
obligation of any Seller to pay any finder's fee, brokerage fees or commission
or similar payment in connection with the transactions contemplated hereby.
5.6 Litigation. There are no Actions pending, or to Aeneid's
----------
knowledge, threatened or anticipated against, related to or affecting Aeneid
seeking to delay, limit or enjoin the transactions contemplated by this
Agreement.
5.7 Financial Capability. Aeneid has access to immediately available
--------------------
funds sufficient to consummate the transactions contemplated by this Agreement.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to InGenius and Sellers as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
6.1 Organization of Merger Sub. Merger Sub is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Michigan. Merger Sub has not conducted any business. Aeneid owns all of the
outstanding capital stock of Merger Sub, free and clear of all liens, charges,
pledges and other encumbrances.
6.2 Authorization. Merger sub has all requisite corporate power and
-------------
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Certificate of Merger, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Merger Sub
and is, and upon execution and delivery, the Certificate of Merger will be, as
of the Effective Time, legal, valid and binding obligations of Merger Sub,
enforceable against Merger Sub in accordance with their terms, except that
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors.
6.3 Legal Proceedings. There are no Actions pending, or to Merger
-----------------
Sub's knowledge, threatened or anticipated against, related to or affecting
Merger Sub seeking to delay, limit or enjoin the transactions contemplated by
this Agreement.
ARTICLE VII.
ACTIONS PRIOR TO THE CLOSING
Aeneid, Merger Sub, InGenius and Sellers covenant as follows for the period
from the date hereof through the Effective Time:
7.1 Conduct of Business. Except as contemplated by this Agreement or
-------------------
as consented to by Aeneid in writing, from the date hereof through the Effective
Time, InGenius shall, and each Seller shall cause InGenius (i) to operate the
Business in the ordinary course of business and in accordance with past practice
and (ii) to not take any action inconsistent with this Agreement, the
Certificate of Merger, the Ancillary Agreements or the consummation of the
Merger. Without limiting the generality of the foregoing, from the date hereof
through the Effective Time, InGenius shall not and no Seller shall permit
InGenius to, except as specifically contemplated by this Agreement or as
consented to by Aeneid in writing:
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse (other than endorsements for deposit or collection in the ordinary
course of business), or otherwise become responsible for obligations of any
other Person;
(b) issue or commit to issue any shares of its capital stock or any
other securities or any securities convertible into shares of its capital stock
or any other
securities, including options and warrants therefor (other than shares of
InGenius Common Stock issued upon the exercise of InGenius Options);
(c) declare, pay or incur any obligation to pay any dividend on its
capital stock or declare, make or incur any obligation to make any distribution
or redemption with respect to capital stock;
(d) make any change to its Articles of Incorporation or Bylaws;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for sales of
products and services and standard customer non-exclusive licenses, in each case
in the ordinary course of business and consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or any
claims or rights held by it, except in the ordinary course of business and
consistent with past practice;
(g) make any payments using its corporate funds for any purpose other
than in the ordinary course of business.
(h) declare or pay any cash or stock dividend or make any
distribution to its shareholders.
(i) make any investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or otherwise,
or by the purchase of any property or assets of any other Person, except capital
expenditures in the ordinary course of business consistent with past practice;
(j) terminate any material Contract or make any change in any
material Contract;
(k) enter into or modify any employment Contract, (ii) pay or agree
to pay any compensation to or for any Employee, officer or director of InGenius
other than in the ordinary course of business and consistent with past practice,
(iii) pay or agree to pay any bonus, incentive compensation, service award or
other like benefit or (iv) enter into or modify any other Employee Plan, except
as contemplated hereby;
(l) enter into or modify any Contract with a Related Party;
(m) enter into any Contract unless the same is terminable by InGenius
on no more than 30 days' written notice without penalty or payment and is
entered into in the ordinary course of business consistent with past practice;
(n) make any change in any method of accounting or accounting
practice;
(o) fail to pursue the development and introduction of new products
and technology advances in connection with the Business on a basis consistent
with past practice;
(p) fail to use its commercially reasonable efforts to (i) retain the
Employees and any independent contractors providing services to InGenius, (ii)
maintain the Business so that such Employees and independent contractors will
remain available to InGenius and Aeneid on and after the Closing Date, (iii)
maintain existing relationships with suppliers and customers and others having
business dealings with InGenius and (iv) otherwise preserve the goodwill of the
Business so that such relationships and goodwill will be preserved on and after
the Closing Date; or
(q) do any other act which would cause any representation or warranty
of InGenius or any Seller in this Agreement to be or become untrue in any
material respect.
7.2 Investigation by Aeneid. From the date hereof through the
-----------------------
Effective Time, InGenius shall afford the Representatives of Aeneid and its
Affiliates complete access at all reasonable times upon reasonable notice to the
Business and the Assets and Liabilities for the purpose of inspecting the same,
and to InGenius' officers, Employees and Representatives, properties, Books and
Records and Contracts, and shall furnish Aeneid and its Representatives all
financial, operating and other data and information (including InGenius'
Proprietary Rights) as Aeneid or its Affiliates, through their respective
Representatives, may reasonably request. The provisions of the Confidentiality
Agreement will remain in effect pursuant to its terms notwithstanding the
execution of this letter (subject to Section 13.13 hereof). Notwithstanding the
foregoing, InGenius shall not be required to send its source code off of its
premises prior to the closing.
7.3 Notification of Certain Matters. Each party shall give prompt
-------------------------------
notice to the other of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect and (ii) any material failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that such disclosure shall not be
-------- -------
deemed to cure any breach of a representation, warranty, covenant or
agreement or to satisfy any condition. Sellers and InGenius shall promptly
notify Aeneid of any Default, the threat or commencement of any Action, or any
development that occurs before the Closing that could reasonably be expected to
result in an InGenius Material Adverse Effect, and Aeneid shall promptly notify
InGenius of any threat or commencement of any Action, or any development that
occurs before the Closing that could reasonably be expected to delay, limit or
enjoin the transactions contemplated by this Agreement.
7.4 Restrictions on Certain Transactions. In the Sellers nor any
------------------------------------
director, officer, shareholder or agent of InGenius will, directly or
indirectly, solicit, initiate, entertain or encourage any proposals, inquiries
or offers from any third party relating to any licensing transaction relating to
InGenius' technology or relating to any acquisition or purchase of all or (other
than in the ordinary course of business) a material amount of the assets of or
any interest in, InGenius or any merger, consolidation, dissolution or business
combination of InGenius, nor will InGenius or any of its directors, officers,
shareholders or agents participate in any discussions regarding, or furnish to
any person any information with respect to, any such transaction. If the Merger
is not consummated by
November 30, 1999, which date may be extended by mutual agreement of Aeneid and
InGenius, the No-Shop Fee (as defined in the Letter of Intent) will be either,
in Aeneid's sole discretion, (i) credited as a payment by Aeneid pursuant to the
License Agreement or (ii) converted into the greater of (a) 667 shares of
InGenius' common stock, subject to anti-dilution adjustment, or (b) the number
of shares of InGenius' common stock having a fair market value at such time
equal to the No-Shop Fee.
7.5 Approval of Shareholders. The Sellers shall vote all of the shares
------------------------
of InGenius Common Stock which they own or control in favor of the adoption of
this Agreement and the Merger under the Michigan BCA. InGenius shall, within
fifteen (15) days after the execution of this Agreement, obtain the approval of
the shareholders of InGenius in accordance with the Michigan BCA. InGenius'
board of directors shall recommend such approval to its shareholders.
7.6 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, the parties agree, in each case both before and after the
Effective Time, (i) to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, the Certificate of Merger and the Ancillary Agreements, (ii) to
execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder and thereunder, and (iii) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective best efforts (A) to obtain any necessary Consents
(provided, however, that no amendment or modification shall be made to any
-------- -------
Contract to obtain such Consent without Aeneid's consent), (B) to obtain all
necessary Permits, (C) to give all notices to, and make all registrations and
filings with third parties, including submissions of information requested by
governmental authorities, and (D) to fulfill all conditions to this Agreement.
7.7 Satisfaction of Conditions. Aeneid, Merger Sub and InGenius each
--------------------------
shall use its best efforts to satisfy the conditions set forth in Articles VIII
and IX hereof.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS OF INGENIUS AND SELLERS
The obligations of InGenius and Sellers to consummate the Merger and the
other transactions contemplated by this Agreement are subject, in the discretion
of InGenius and Sellers, to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Aeneid and Merger Sub contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Aeneid and Merger Sub shall have performed in all material respects all
agreements and covenants required hereby to be performed by them prior to or at
the Closing Date. There shall be delivered to Sellers a certificate (signed by a
Senior Vice President or more senior officer of Aeneid) to the foregoing effect
("Aeneid's Closing Certificate").
8.2 Consents. All consents, approvals and waivers from governmental
--------
authorities necessary for the valid consummation of the Merger shall have been
obtained, all approvals required under any Regulations to carry out the
transactions contemplated by this Agreement, the
Certificate of Merger and the Ancillary Agreements shall have been obtained and
the parties shall have complied with all Regulations applicable to the
transactions contemplated hereby and thereby.
8.3 No Court Orders. There shall not be any Regulation or Court Order
---------------
that makes the transactions contemplated hereby, by the Certificate of Merger or
by the Ancillary Agreements illegal or otherwise prohibited.
8.4 Closing Documents. Sellers shall have received from Aeneid and
-----------------
Merger Sub the documents and other items to be delivered by Aeneid and Merger
Sub pursuant to Section 10.2 of this Agreement.
8.5 Opinion of Counsel to Aeneid. Aeneid shall have delivered to
----------------------------
InGenius an opinion of Heller, Ehrman, White & XxXxxxxxx, counsel to Aeneid,
dated as of the Closing Date in form and substance reasonably acceptable to
InGenius.
8.6 Aeneid Material Adverse Change. There shall not have been any
------------------------------
Aeneid Material Adverse Change.
8.7 Certificates. Aeneid shall furnish InGenius with a certificate of
------------
Aeneid attaching a copy of (a) Aeneid's and Merger Sub's board resolutions
authorizing the transactions contemplated hereby, (b) the Articles of
Incorporation of Aeneid and of Merger Sub, as amended, certified by the
California Secretary of State and the Michigan Department of Corporations,
respectively, (c) the Bylaws of Aeneid, and (d) Aeneid's Stock Option Plan.
8.8 InGenius Shareholder Approval. This agreement, the Merger and the
-----------------------------
transactions contemplated hereby shall have been approved by the requisite
percentage of the shareholders of InGenius.
ARTICLE IX.
CONDITIONS TO OBLIGATIONS OF AENEID AND MERGER SUB
The obligations of Aeneid and Merger Sub to consummate the Merger and the
other transactions contemplated by this Agreement are subject, in the discretion
of Aeneid and Merger Sub, to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
9.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of each Seller and InGenius contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and each
Seller and InGenius shall have performed in all material respects all agreements
and covenants required hereby to be performed prior to or at the Closing Date.
There shall be delivered to Aeneid a certificate (signed by the President of
InGenius) to the foregoing effect ("InGenius' Closing Certificate").
9.2 InGenius Shareholder Approval. This agreement, the Merger and the
-----------------------------
transactions contemplated hereby shall have been approved by the requisite
percentage of the shareholders of InGenius.
9.3 Approvals. All Consents from governmental authorities and other
---------
parties necessary to the consummation of the transactions contemplated hereby
and by the Certificate of Merger and the Ancillary Agreements and for the
operation of the Business after the Closing (including all required third party
consents under the Contracts, as listed on Schedule 4.13) shall have been
obtained. Aeneid shall be satisfied that all approvals required under any
Regulations to carry out the transactions contemplated by this Agreement, the
Certificate of Merger and the Ancillary Agreements shall have been obtained and
that the parties shall have complied with all Regulations applicable to the
transactions contemplated hereby and thereby.
9.4 No Actions or Court Orders. No Action by any court, governmental
--------------------------
authority or other Person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby or by
the Certificate of Merger or the Ancillary Agreements and which could reasonably
be expected to damage Aeneid, the Assets or the Business materially if the
transactions contemplated hereby or thereby are consummated, including any
material adverse effect on the right or ability of Aeneid to own or operate
InGenius after the Closing.
9.5 Opinion of Counsel. Sellers and InGenius shall have delivered to
------------------
Aeneid an opinion of Varnum, Riddering, Xxxxxxx & Xxxxxxx, LLP (or such other
counsel approved by Aeneid), counsel to Sellers and InGenius, dated as of the
Closing Date, substantially in the form of Exhibit E hereto.
9.6 Employees. Xxxxx and Xxxx Stock shall sign offers of employment
---------
with Aeneid in the form attached as Exhibit D hereto.
9.7 Certificates. InGenius shall furnish Aeneid with a certificate
------------
from the Secretary of InGenius attaching a copy of (a) InGenius' board
resolutions authorizing the transactions contemplated hereby, (b) a document
evidencing that the requisite shareholder approval specified in Section 9.2 has
been obtained, (c) the Articles of Incorporation of InGenius, as amended,
certified by the Michigan Department of Consumer and Industry Services--
Corporations, Securities & Land Development Bureau and (d) the Bylaws of
InGenius.
9.8 Closing Documents. Aeneid shall have received from Sellers and
-----------------
InGenius the documents and other items described in Section 10.1 and such other
documents and items as Aeneid may reasonably require.
9.9 InGenius Material Adverse Change. There shall not have been any
--------------------------------
InGenius Material Adverse Change.
9.10 Closing Balance Sheet. InGenius shall furnish to Aeneid the
---------------------
Closing Balance Sheet which shall show a Net Asset Value of at least -$300,000
(negative $300,00). The Closing Balance Sheet shall be certified by the
President and Chief Financial Officer of InGenius.
9.11 Due Diligence Review. Aeneid shall have completed its due
--------------------
diligence of InGenius, including, without limitation, due diligence of InGenius'
Proprietary Rights, and Aeneid shall be satisfied, in its sole discretion, on
the basis of such review that Aeneid should proceed with the transactions
contemplated hereby. Such review shall have no effect whatsoever on the
liability of InGenius or any Seller to Aeneid under this Agreement or otherwise
for breach of any representations, warranties or covenants of InGenius and
Sellers hereunder.
9.12 Cancellation of Options, Warrants, Convertible Securities, etc.
--------------------------------------------------------------
Aeneid shall have received from InGenius documentation evidencing the
cancellation of all outstanding options, warrants, convertible securities or
rights of any kind to purchase or otherwise acquire shares of capital stock or
other securities of InGenius, including but not limited to evidence of the
repayement in accordance with Section 3.2 hereof or conversion of the
convertible note held by Xxxxx Xxxxx.
ARTICLE X.
CLOSING
On the Closing Date at the Closing Place:
10.1 Deliveries by Sellers and InGenius to Aeneid. Each Seller and
--------------------------------------------
InGenius shall deliver (or cause to be delivered) to Aeneid or Merger Sub, as
applicable:
(a) certificates representing the shares of InGenius Common Stock set
forth next to each Seller's name on the signature page hereof;
(b) the Ancillary Agreements to which it is a party;
(c) a certificate of corporate good standing issued by the Michigan
Department of Corporations for InGenius, dated not more than five days prior to
the Closing Date;
(d) InGenius' Closing Certificate referenced in Section 9.1, the
Secretary's certificate referenced in Section 9.7 and the Closing Balance Sheet
referenced in Section 9.10;
(e) the opinion of counsel to Sellers and InGenius described in
Section 9.5;
(f) the written resignations of all officers and directors of
InGenius;
(g) a Form W-9;
(h) evidence of the cancellation of all outstanding options,
warrants, convertible securities or rights of any kind to purchase or otherwise
acquire shares of capital stock or other securities of InGenius as referenced in
Section 9.12; and
(i) copies of all Consents.
10.2 Deliveries by Aeneid. Aeneid shall deliver to holders of InGenius
--------------------
Common Stock immediately prior to the Effective Time or InGenius, as applicable:
(a) that portion of the consideration payable pursuant to
Section 3.2 hereof for which Aeneid is notified that share certificates will
delivered at the Closing;
(b) Aeneid's Closing Certificate;
(c) the Ancillary Agreements to which Aeneid is a party;
(d) good standing certificates for Aeneid and Merger Sub;
(e) Aeneid's closing certificates referenced in Sections 8.1 and
8.7.
ARTICLE XI.
ACTIONS BY SELLERS, INGENIUS AND AENEID AFTER THE CLOSING
11.1 Books and Records; Tax Matters.
------------------------------
(a) Sellers, InGenius, Aeneid and Merger Sub agree that so long
as any books, records and files relating to the Business, Assets or operations
of InGenius, to the extent that they pertain to the operations of InGenius prior
to the Closing Date, remain in existence and available, each party (at its
expense) shall, upon prior notice, have the right to inspect and to make copies
of the same at any time during business hours for any proper purpose.
(b) Aeneid covenants and agrees that in the event it or InGenius
receives any notice or inquiry from the Internal Revenue Service with respect to
the characterization of any payments made under this Agreement, the Certificate
of Merger or any Ancillary Agreement, Aeneid will give prompt written notice to
Sellers concerning such notice or inquiry. Aeneid agrees to report the
consideration delivered under this Agreement in a manner consistent with the
terms hereof.
11.2 Participation in Series D Financing. Aeneid agrees that
-----------------------------------
InGenius' stockholders who at the time of purchase are accredited investors may
purchase up to $1,000,000 worth of Aeneid's Series D Preferred Stock at the most
recent sale price for the Series D Preferred Stock. This Series D Preferred
Stock will be allocated among the shareholders of InGenius in proportion to
their ownership percentage of InGenius Common Stock. The offer and sale of the
Series D Preferred Stock to InGenius' stockholders will be made only after
satisfaction, in the judgment of Aeneid and its counsel, of all applicable state
and federal securities laws.
11.3 Employment of the Stocks. Aeneid will offer at will employment to
------------------------
Xxxx and Xxxxx Stock at the level of Director or Vice President, under the
following terms:
(a) The Stocks will receive base compensation and benefits
consistent with current Directors and Vice Presidents of Aeneid, including
reimbursement of relocation expenses.
(b) The Stocks will each be granted options to purchase 500,000
shares of Aeneid's common stock (the "Aeneid Options"), pursuant to the terms
and conditions of Aeneid's 1999 Stock Plan, at an exercise price per share equal
to the fair market value of Aeneid's common stock on the date the Options are
granted which is agreed to be $0.80 per share. 250,000 of the Aeneid Options
shall be terminable by Aeneid to secure the indemnification obligations set
forth in Section 12.2. One-half of the Options will vest immediately and one
twenty-fourth of the original number of Options will vest each month thereafter;
provided, however, that, in the event that the optionee is terminated by Aeneid
without cause, such optionee's Options will vest immediately and will be
exercisable for three months thereafter. "Cause" shall be defined to mean:
(i) gross negligence or willful misconduct in the
performance of the employee's duties;
(ii) the employee's failure to substantially perform the
employee's duties with Aeneid (other than a failure resulting from the
employee's incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to the employee by the
board of directors of Aeneid;
(iii) fraud or other conduct against the material best
interests of Aeneid; or
(iv) a conviction of a felony.
ARTICLE XII.
INDEMNIFICATION
12.1 Survival of Representations. All statements contained in this
---------------------------
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of a party pursuant to this Agreement or in connection
with the transactions contemplated hereby shall be deemed to be representations
and warranties by such party hereunder. The representations and warranties of
Sellers contained herein shall survive the Closing Date for a period of (and
claims based upon or arising out of such representations and warranties may be
asserted at any time before the date which shall be) one (1) year after the
Closing Date. No investigation made by any of the parties hereto shall in any
way limit the representations and warranties of the parties. On the Closing Date
all representations and warranties contained in this Agreement and made by any
Seller and InGenius shall expire as to InGenius and thereafter will be deemed to
have been made exclusively by Sellers. The termination of the representations
and warranties provided herein shall not affect the rights of a party in respect
of any claim made by such party in a writing received by the other party prior
to the expiration of the applicable survival period provided herein.
12.2 Indemnification.
---------------
(a) General. The Sellers shall jointly and severally indemnify,
-------
save and hold harmless Aeneid and its Affiliates and its and their respective
Representatives from and against any and all costs, losses (including diminution
in value), Taxes, Liabilities,
obligations, damages, lawsuits, deficiencies, claims, demands, and expenses
(whether or not arising out of third-party claims), including interest,
penalties, costs of mitigation, losses in connection with any Environmental Law
(including any clean-up or remedial action), damages to the environment,
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing, in each case after taking into account any insurance
proceeds received by the indemnified Person and related tax benefits (herein,
"Damages"), incurred by Aeneid or its affiliates or by the Surviving Corporation
in connection with, arising out of, resulting from or incident to: (i) any
breach of any representation or warranty or the inaccuracy of any representation
or warranty, made by any Seller in this Agreement; and (ii) any breach of any
covenant or agreement made by any Seller in this Agreement. The indemnity
obligations of Sellers in this Section 12.2 be limited to the cash in the Escrow
Account and one-half (1/2) of the Aeneid Options issued to the Sellers pursuant
to Section 11.3.
The term "Damages" is not limited to matters asserted by third parties
against an indemnified Person, but includes Damages incurred or sustained by the
indemnified Person in the absence of third party claims. Payments by an
indemnified Person of amounts for which it is indemnified hereunder shall not be
a condition precedent to recovery.
(b) Procedure for Claims between Parties. If a claim for Damages
------------------------------------
is to be made by a party entitled to indemnification hereunder, the party
claiming such indemnification shall give written notice to the indemnifying
Person as soon as practicable after the indemnified Person becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 12.2. Any failure to submit any
such notice of claim to the indemnifying Person(s) shall not relieve such
Person(s) of any liability hereunder, except to the extent such Person(s) is
actually prejudiced by such failure. The indemnifying Person(s) shall be deemed
to have accepted the notice of claim and to have agreed to pay the Damages at
issue if such Person(s) does not send a notice of disagreement to the
indemnified Person within 30 calendar days after receiving the notice of claim.
In the case of a disputed claim, the parties shall use best efforts to resolve
the matter internally on an expeditious basis and in any event within 45
calendar days after the notice is received by the indemnifying Person(s).
(c) Defense of Third-Party Claims. If any lawsuit or enforcement
-----------------------------
action is filed against any indemnified Person, written notice thereof shall be
given to the indemnifying Person(s) as promptly as practicable (and in any event
within 15 calendar days after the service of the citation or summons). The
failure of any indemnified Person to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying Person(s) demonstrate they were actually prejudiced by such
failure. After such notice, if the indemnifying Person(s) shall acknowledge in
writing to the indemnified Person that the indemnifying Person(s) shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, then the indemnifying Person(s) shall be entitled, if its so
elects at its own cost, risk and expense, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
their own choice to handle and defend the same unless the named parties to such
action or proceeding include both an indemnifying Person and the indemnified
Person and the indemnified Person has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified Person
that are different from or additional to those available to the indemnifying
Person(s), in which event the indemnified Person shall be entitled, at the
indemnifying Person(s)'s cost, risk and expense, to separate counsel of its own
choosing, and (iii) to compromise or settle such claim, which compromise or
settlement shall be made only with the written consent of the
indemnified Person, such consent not to be unreasonably withheld. The
indemnified Person shall cooperate in all reasonable respects with the
indemnifying Person(s) and its attorneys in the investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom; provided, however,
-------- -------
that the indemnified Person may, at its own cost, participate in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The parties shall cooperate with each other in any
notifications to insurers. If the indemnifying Person fails to assume the
defense of such claim within 15 calendar days after receipt of the notice of
claim, the indemnified Person against which such claim has been asserted will
(upon delivering notice to such effect to the indemnifying Person) have the
right to undertake, at the indemnifying Person's cost, risk and expense, the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying Person; provided, however, that such claim shall
-------- -------
not be compromised or settled without the written consent of the indemnifying
Person, which consent shall not be unreasonably withheld. If the indemnified
Person assumes the defense of the claim, the indemnified Person will keep the
indemnifying Person reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying Person shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 12.2 and for any final judgment (subject to any right of appeal), and
the indemnifying Persons agree to indemnify and hold harmless an indemnified
Person from and against any Damages by reason of such settlement or judgment.
(d) Brokers and Finders. Pursuant to the provisions of this
-------------------
Section 12.2, Aeneid, on the one hand, and Sellers, on the other, shall
indemnify, hold harmless and defend the other from the payment of any and all
brokers' and finders' expenses, commissions, fees or other forms of compensation
which may be due or payable from or by the indemnifying Person, or may have been
earned by any third party acting on behalf of the indemnifying Person in
connection with the negotiation and execution hereof and the consummation of the
transactions contemplated hereby.
(e) Aeneid's Right of Offset. Anything in this Agreement to the
------------------------
contrary notwithstanding, Aeneid shall withhold and set off against the payments
made pursuant to Section 3.2 any amount as to which Sellers are obligated to pay
pursuant to any provision of this Section 12.2.
(f) Monetary Limits on Indemnification. Sellers shall not be
----------------------------------
obligated to indemnify for Damages unless and until the aggregate amount of
indemnification so asserted exceeds $100,000, and thereafter Aeneid shall be
entitled to indemnity for all additional Damages. The indemnification liability
of Sellers' shall be offset dollar for dollar by (i) any insurance proceeds
received by Aeneid or InGenius after the Closing in respect to any item of
indemnifiable Damages, and (ii) any other recovery made by Aeneid from any third
party on account of any indemnifiable damages involved.
12.3 No Right of Contribution. After the Closing, InGenius shall have
------------------------
no liability to indemnify Aeneid or any Seller on account of the breach of any
representation or warranty or the nonfulfillment of any covenant or agreement of
any Seller; and no Seller shall have any right of contribution against InGenius
(unless such claim for contribution relates to a Liability of InGenius existing
at or arising after the Closing Date and the existence of such Liability does
not breach any of Seller's representations and warranties contained herein).
ARTICLE XIII.
MISCELLANEOUS
13.1 Termination.
-----------
(a) This Agreement and the Certificate of Merger may also be
terminated and the Merger abandoned at any time prior to the Effective Time as
follows:
(i) By mutual written consent of Aeneid and InGenius and
Sellers;
(ii) By Aeneid if there is a material breach of any
representation or warranty set forth in Article IV or any covenant or
agreement to be complied with or performed by InGenius and any Seller
pursuant to the terms of this Agreement which is not cured within ten (10)
days of written notice of breach; or
(iii) By Sellers if there is a material breach of any
representation or warranty set forth in Article V or Article VI hereof or
of any covenant or agreement to be complied with or performed by Aeneid or
Merger Sub pursuant to the terms of this Agreement.
(b) In the event of termination of this Agreement:
(i) The provisions of the Confidentiality Agreement shall
continue in full force and effect; and
(ii) No party hereto shall have any liability to any
other party to this Agreement, except for any willful breach of, or knowing
misrepresentation made in, this Agreement occurring prior to the proper
termination of this Agreement.
13.2 License Agreement. If the Merger is not consummated, InGenius and
-----------------
Aeneid shall enter into a three year license agreement (the "License Agreement")
pursuant to which InGenius will grant Aeneid a license to use its software. The
License Agreement will contain terms acceptable to InGenius and Aeneid,
including a pricing and reward system at least as favorable to Aeneid as to
other licensees that InGenius has contracted with based on similar volume, terms
and conditions.
13.3 Assignment; No Third-Party Beneficiaries. Neither this Agreement
----------------------------------------
nor any of the rights or obligations hereunder may be assigned by InGenius or
any Seller without the prior written consent of Aeneid, or by Aeneid or Merger
Sub without the prior written consent of InGenius and Sellers. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such successors and assigns and the Persons
indemnified pursuant to Section 12.2 hereof, any legal or equitable rights
hereunder.
13.4 Notice. All notices, requests, demands and other communications
------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy; the day after it is sent, if sent
for next day delivery to a domestic address by recognized overnight delivery
service (e.g., Federal Express); and upon receipt, if sent by certified or
----
registered mail, return receipt requested, as follows:
If to Aeneid, Merger Sub, or, if after the Closing, to InGenius:
Aeneid Corporation
000 0/xx/ Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
With a copy to:
Xxxxxx Xxxxxx White and XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Peers
If to InGenius prior to Closing:
InGenius Technologies, Inc.
0000 Xxxxxx Xxxx, Xxxxx 0
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Stock
If to a Seller, to the address of such Seller as set forth on the
signature page hereto.
In case of each of the foregoing, with a copy to:
Varnum, Riddering, Xxxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxxxx Xxx., Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Xx., Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
13.5 Choice of Law. This Agreement shall be construed, interpreted and
-------------
the rights of the parties determined in accordance with the laws of the State of
California except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or
the subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
13.6 Entire Agreement; Amendments and Waivers. This Agreement,
----------------------------------------
together with all exhibits and schedules hereto, the Certificate of Merger, the
Ancillary Agreements, and the Confidentiality Agreement (which the parties agree
shall terminate on the Closing Date), constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
13.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
13.9 Expenses. Except as otherwise provided in this Agreement,
--------
Aeneid, Merger Sub, InGenius and Sellers will each be liable for their own
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, Sellers agree that they shall be jointly and
severally liable for all attorney's fees of InGenius in excess of $50,000
incurred prior to or on the Closing Date and related to the transactions
contemplated by this Agreement. Accordingly, within 30 calendar days after the
delivery to Sellers of invoices for any amounts due by InGenius in excess of
$50,000, Sellers shall reimburse InGenius for such invoiced amounts or directly
remit payment to the applicable vendor. Such payment obligation is independent
of the indemnification obligations contained herein.
13.10 Approval of Sellers. By their execution and delivery of this
-------------------
Agreement, the undersigned Sellers consent to, approve and adopt this Agreement,
the Certificate of Merger and the Merger and agree to take all other actions
necessary or required to consummate the transactions contemplated hereby and
thereby, including voting to approve this Agreement, the Certificate of Merger
and the Merger, and refraining from making any disposition of, or encumbering,
their respective shares of InGenius Common Stock prior to the Closing.
13.11 Approval of Aeneid as Sole Shareholder of Merger Sub. By its
----------------------------------------------------
execution and delivery of this Agreement, Aeneid as the sole shareholder of
Merger Sub, consents to, approves, and adopts this Agreement, the Certificate of
Merger and the Merger.
13.12 Publicity. Except as required by law or on advice of counsel, no
---------
party hereto shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior written
approval of the other parties, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after the date hereof.
Notwithstanding anything to the contrary in this Section, Aeneid may provide
copies of, and disclose the terms provisions of,
the letter of intent among Aeneid and Xxxxx and Xxxx Stock dated September 20,
1999, this Agreement and the Ancillary Agreements to its lawyers, accountants,
financial advisors, shareholders and potential investors and may describe such
terms and provisions in any disclosure schedule, private placement memorandum or
other document relating to the issuance of securities by Aeneid.
13.13 Arbitration. Any dispute, controversy, or claim ("Dispute")
-----------
between the parties of any kind or nature whatsoever, arising under or related
to this Agreement whether arising under contract, tort or otherwise, which is
not resolved by good faith negotiation shall be submitted to and settled by
binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association. Any arbitration award shall be binding and enforceable
against the parties hereto and judgment may be entered thereon in any court of
competent jurisdiction. The arbitration will take place in San Francisco,
California, unless the parties mutually agree otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
AENEID CORPORATION,
a California corporation
By: /s/ Xxxxxx Xxxxxxxxx
____________________________________
Name:
Its:
AENEID MERGER SUB, INC.,
a Michigan corporation
By: /s/ Illegible
____________________________________
Name:
Its:
INGENIUS TECHNOLOGIES, INC.,
a Michigan corporation
By: /s/ Xxxxx Stock
____________________________________
Name: Xxxxx Stock
Its: President and Chief Executive Officer
/s/ Xxxxx Stock
_______________________________________
XXXXX STOCK,
an individual
/s/ Xxxx Stock
_______________________________________
XXXX STOCK,
an individual
