EXHIBIT 10.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IVOICE, INC.
XXXXXX PHARMACEUTICALS, LTD. (F/K/A IVOICE ACQUISITION CORP.).,
XXXXXX PHARMACEUTICALS LTD.,
XXXXXX X. XXXXXX, XX.,
XXXX X. XXXXX
AND EACH OF THE OTHER SHAREHOLDERS NAMED HEREIN
Dated as of January 6, 2006
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER...................................................................2
SECTION 1.01. The Merger...................................................................2
SECTION 1.02. Effective Time...............................................................2
SECTION 1.03. Effect of the Merger.........................................................2
SECTION 1.04. Certificate of Incorporation; By-laws........................................2
SECTION 1.05. Directors and Officers.......................................................2
SECTION 1.06. Conversion of Shares.........................................................2
SECTION 1.07. Delivery by Shareholders of the Shares at Closing............................2
SECTION 1.08. No Further Ownership Rights in Company Common Stock..........................2
SECTION 1.09. Taking of Necessary Action; Further Action...................................2
SECTION 1.10. Material Adverse Effect......................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY...........2
SECTION 2.01. Organization and Qualification; Subsidiaries.................................2
SECTION 2.02. Certificate of Incorporation and By-laws.....................................2
SECTION 2.03. Capitalization...............................................................2
SECTION 2.04. Authority Relative to This Agreement.........................................2
SECTION 2.05. Material Contracts; No Conflict; Required Filings and Consents...............2
SECTION 2.06. Compliance; Permits..........................................................2
SECTION 2.07. Financial Statements.........................................................2
SECTION 2.08. Absence of Certain Changes or Events; Company Actions........................2
SECTION 2.09. No Undisclosed Liabilities...................................................2
SECTION 2.10. Absence of Litigation........................................................2
SECTION 2.11. Employee Benefit Plans; Employment Agreements................................2
SECTION 2.12. Employment and Labor Matters.................................................2
SECTION 2.13. Restrictions on Business Activities..........................................2
SECTION 2.14. Title to Property............................................................2
SECTION 2.15. Taxes........................................................................2
SECTION 2.16. Environmental Matters........................................................2
SECTION 2.17. Brokers......................................................................2
SECTION 2.18. Intellectual Property........................................................2
SECTION 2.19. Certain Business Practices...................................................2
SECTION 2.20. No Bankruptcy................................................................2
SECTION 2.21. Title to Properties; Absence of Encumbrances.................................2
SECTION 2.22. Real and Personal Property...................................................2
SECTION 2.23. Transactions with Affiliates; Management Relationships.......................2
SECTION 2.24. Insurance....................................................................2
SECTION 2.25. Books and Records............................................................2
SECTION 2.26. Accounts Receivable..........................................................2
SECTION 2.27. Customers and Suppliers......................................................2
SECTION 2.28. Employee Conflicts...........................................................2
SECTION 2.29. Bank Accounts................................................................2
SECTION 2.30. No Required Disclosure.......................................................2
SECTION 2.31. Internal Controls............................................................2
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TABLE OF CONTENTS
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(continued)
SECTION 2.32. Inventory....................................................................2
SECTION 2.33. Product Liability............................................................2
SECTION 2.34. True and Complete............................................................2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................2
SECTION 3.01. Organization and Qualification; Subsidiaries.................................2
SECTION 3.02. Authority Relative to This Agreement.........................................2
SECTION 3.03. No Conflict..................................................................2
SECTION 3.04. Authorization and Validity; Issuance of Shares...............................2
SECTION 3.05. Absence of Litigation........................................................2
SECTION 3.06. Ownership of Merger Sub......................................................2
SECTION 3.07. Ownership of Shares..........................................................2
ARTICLE IV SHAREHOLDER REPRESENTATIVE...................................................2
SECTION 4.01. Appointment..................................................................2
SECTION 4.02. Authorization................................................................2
ARTICLE V ADDITIONAL AGREEMENTS........................................................2
SECTION 5.01. Public Announcements.........................................................2
SECTION 5.02. Conveyance Taxes.............................................................2
SECTION 5.03. Takeover Statutes............................................................2
SECTION 5.04. Common Stock and Securities Matters..........................................2
ARTICLE VI CONDITIONS TO THE MERGER.....................................................2
SECTION 6.01. Conditions to Obligation of Each Party to Effect the Merger..................2
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger Sub................2
SECTION 6.03. Additional Conditions to Obligation of the Company...........................2
ARTICLE VII INDEMNIFICATION..............................................................2
SECTION 7.01. Survival of Representations and Warranties...................................2
SECTION 7.02. Indemnification by the Shareholders and the Company..........................2
SECTION 7.03. Indemnification by Parent and Merger Sub.....................................2
SECTION 7.04. Procedure of Indemnification.................................................2
ARTICLE VIII GENERAL PROVISIONS...........................................................2
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements..................2
SECTION 8.02. Notices......................................................................2
SECTION 8.03. Certain Definitions..........................................................2
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TABLE OF CONTENTS
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(continued)
SECTION 8.04. Amendment....................................................................2
SECTION 8.05. Waiver.......................................................................2
SECTION 8.06. Headings.....................................................................2
SECTION 8.07. Severability.................................................................2
SECTION 8.08. Entire Agreement.............................................................2
SECTION 8.09. Assignment...................................................................2
SECTION 8.10. Parties in Interest..........................................................2
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative........................2
SECTION 8.12. Governing Law; Jurisdiction..................................................2
SECTION 8.13. Counterparts.................................................................2
SECTION 8.14. WAIVER OF JURY TRIAL.........................................................2
SECTION 8.15. Performance of Obligations...................................................2
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TABLE OF CONTENTS
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(continued)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 6, 2006
(this "Agreement"), among iVoice, Inc., a New Jersey corporation ("Parent"),
Xxxxxx Pharmaceuticals, Ltd. (f/k/a iVoice Acquisition Corp.), a New Jersey
corporation and a direct, wholly owned subsidiary of Parent ("Merger Sub"),
Xxxxxx Pharmaceuticals Ltd., a New York corporation (the "Company"), Xxxxxx X.
Xxxxxx, Xx., a natural person residing at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, 00000 ("Xxxxxx"), Xxxx X. Xxxxx, a natural person residing at 0000 Xxxxx
Xxxxxxxxxx Xxxxxx, Xxxxxxxxx 000, Xxxxxxxx, Xxxxxxx, 00000 ("Xxxxx", and
together with Xxxxxx, the "Major Shareholders"), Xxxxxxx X. Xxxxxx, a natural
person residing at 0 Xxxxxxx Xxxx, Xxxxx Xxxxxxxxx, Xxx Xxxxxx, 00000, Xxxx
Xxxxxxxx, a natural person residing at 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
00000, Xxxx X. Xxxxxxxx, a natural person residing at 0000 Xxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx, 00000, and Xxxxxxx Xxxxxxxxx, a natural person residing
at 00 Xxxx 00xx Xxxxxx, Xxxxxx 0, Xxx Xxxx, Xxx Xxxx, 00000 (Xxxxxxx X. Xxxxxx,
Xxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx and Xxxxx are each
individually referred to herein as "Shareholder" and collectively as the
"Shareholders").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests of
their respective stockholders, and consistent with and in furtherance of their
respective business strategies and goals, and the Shareholders and Parent, as
the sole stockholder of Merger Sub, have determined it to be in their respective
interests for (i) the Company to merge with and into the Merger Sub upon the
terms and subject to the conditions set forth herein (the "Merger"), (ii) Parent
to purchase three hundred twenty five (325) shares of Series B Preferred Stock,
no par value (the "Series B Preferred Stock"), of the Merger Sub for an
aggregate of Three Hundred Twenty Five Thousand Dollars ($325,000) and for
Parent to purchase a Convertible Debenture of the Surviving Corporation in the
form attached hereto as Exhibit A (the "Debenture") with a principal amount of
Three Hundred Sixty Thousand Dollars ($360,000), in each case, immediately prior
to the Merger, (iii) the Shares (as defined herein) to be converted into Series
A Preferred Stock (as defined herein) in the Merger, (iv) the Major Shareholders
to execute and deliver to the Surviving Corporation each of the Employment
Agreements and all of the Shareholders to execute and deliver the Shareholders'
Agreement (as each is defined herein, and collectively, with the Debenture, this
Agreement, the Registration Rights Agreement, the Administrative Services
Agreement, the Security Agreement, the Escrow Agreement, the Administrative
Services Debenture, the Shareholders' Agreement (the "Transaction Documents")
and (v) the Shareholders, Parent, Merger Sub and the Company consummate each of
the other transaction described herein, as applicable;
WHEREAS, in furtherance of such combination, the Boards of
Directors of Parent, Merger Sub and the Company and the Shareholders and Parent
have each approved the merger (the "Merger") of the Company with and into the
Merger Sub in accordance with the applicable provisions of the New Jersey
Business Corporations Act (the "BCA") and the Business Corporation Law of the
State of New York (the "BCL") and upon the terms and subject to the conditions
set forth herein; and
WHEREAS, pursuant to the Merger, each outstanding share (a
"Share") of the Company's common stock, par value $0.01 per share (the "Company
Common Stock"), shall be converted into the right to receive one share of Series
A Preferred Stock of the Surviving Corporation, no par value per share (the
"Series A Preferred Stock"), per share, deliverable to the holders thereof, upon
the terms and subject to the conditions set forth herein (the "Merger
Consideration");
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Merger Sub, the Shareholders and the Company hereby agree
as follows:
ARTICLE I
THE MERGER
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SECTION 1.01. The Merger. (a) At the Effective Time (as
defined in Section 1.02), and subject to and upon the terms and conditions of
this Agreement, and the BCA and BCL, the Company shall be merged with and into
Merger Sub, the separate corporate existence of the Company shall cease and
Merger Sub shall continue as the surviving corporation under the name "Xxxxxx
Pharmaceuticals, Inc.". Merger Sub as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."
SECTION 1.02. Effective Time. Concurrently with the execution
of this Agreement, a closing (the "Closing") shall be held at the offices of
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx, 00000, unless another time or place is agreed to in writing by the parties
hereto, for the purpose of confirming the satisfaction or waiver, as the case
may be, of the conditions set forth in Article VI. At the Closing, the parties
hereto shall cause the Merger to be consummated by filing certificates of merger
as contemplated by the BCA and BCL (the "Certificates of Merger"), together with
any required related certificates, with the Secretary of State of the State of
New York and the Secretary of State of the State of New Jersey, in such form as
is required by, and executed in accordance with, the relevant provisions of the
BCA and BCL, as applicable. The Merger shall become effective as of the date and
at the time of such filing, or at such later date and time as may be agreed to
by each of the parties hereto in writing (which will be as soon as reasonably
practicable), specified in the Certificate of Merger filed with the Secretary of
State of the State of New Jersey (the "Closing Date" and the "Effective Time,"
respectively).
SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of the BCA and BCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
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SECTION 1.04. Certificate of Incorporation; By-laws.
(a) Certificate of Incorporation. Subject to the provisions of
Section 5.05(a) at the Effective Time the Certificate of Incorporation
(including the Certificates of Designation for the Series A Preferred Stock and
the Series B Preferred Stock) in the form attached as Exhibit B hereto, shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by the BCA and such Certificate of Incorporation; provided,
however, that the parties hereto hereby agree to use their commercially
reasonable efforts to promptly amend the Certificate of Incorporation of the
Surviving Corporation to provide for two classes of Common Stock, consisting of
Class A Common Stock and Class B Common Stock, with 10,000,000,000 authorized
shares of Class A Common Stock and 50,000 authorized shares of Class B Common
Stock.
(b) By-laws. Subject to the provisions of Section 5.05(a), at
the Effective Time the By-laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by the BCA, the Certificate of Incorporation of
the Surviving Corporation and such By-laws.
SECTION 1.05. Directors and Officers. The initial directors of
the Surviving Corporation, immediately effective upon the Merger, shall be
Xxxxxx Xxxxxxx, Xxxxx Xxxxx and Xxxxx, each to hold office in accordance with
the Certificate of Incorporation and By-laws of the Surviving Corporation, until
their respective successors are duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Certificate
of Incorporation, the Certificate of Designation for the Series A Preferred
Stock and Bylaws of the Surviving Corporation. The officers of the Company
immediately prior to the Effective Time shall be Xxxxx as Chief Executive
Officer and Xxxxxx as President, the initial officers of the Surviving
Corporation, until their respective successors are duly appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Employment Agreement between Xxxxxx and the Surviving Corporation, to be dated
as of the Effective Date and in the form attached as Exhibit C to this Agreement
(the "Xxxxxx Employment Agreement") or the Employment Agreement between Xxxxx
and the Surviving Corporation, to be dated as of the Effective Date and in the
form attached as Exhibit D to this Agreement (the "Xxxxx Employment Agreement"
and together with the Xxxxxx Employment Agreement, the "Employment Agreements"),
as applicable, the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
SECTION 1.06. Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holder of any of the securities specified below:
(a) Each Share issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one share of Series
A Preferred Stock, deliverable to the holder thereof upon surrender of the
certificate representing such Share in accordance with Section 1.07 hereof. From
and after the Effective Time, the holders of certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares except as otherwise provided for
herein or by applicable law.
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No other shares of Series A Preferred Stock shall be issued or outstanding as of
the Effective Time.
(b) Each issued and outstanding share of Common Stock of
Merger Sub, no par value per share (the "Merger Sub Common Stock"), shall, at
the Effective Time, constitute one validly issued, fully paid and non-assessable
share of common stock, no par value, of the Surviving Corporation (the
"Surviving Company Common Stock"). Immediately prior to the Effective Time,
Parent will hold 100% of the Merger Sub Common Stock. No other shares of
Surviving Company Common Stock shall be issued in connection with the Merger.
(c) Each issued and outstanding share of Series B Preferred
Stock of Merger Sub of Merger Sub, no par value per share (the "Merger Sub
Series B Preferred Stock"), shall, at the Effective Time, constitute one validly
issued, fully paid and non-assessable share of common stock, no par value, of
the Surviving Corporation (the "Surviving Company Series B Preferred Stock").
Immediately prior to the Effective Time, Parent will hold 100% of the Merger Sub
Series B Preferred Stock. No other shares of Surviving Company Series B
Preferred Stock shall be issued in connection with the Merger, although other
shares of Surviving Company Series B Preferred Stock shall be issued pursuant to
this Agreement and such further issuances are hereby irrevocably consented to by
Parent and each Shareholder, which consent need not be effected by any future
act by Parent or such Shareholders.
SECTION 1.07. Delivery by Shareholders of the Shares at
Closing.
(a) On the Closing Date, the Shareholders (in the numbers set
out below) will surrender certificates representing all of their respective
Shares to the Surviving Corporation. Such Shares represent all of the issued and
outstanding shares of capital stock of the Company. The Shares are allocated
among the Shareholders in the following fashion:
Name No. of Shares
Xxxxxx X. Xxxxxx, Xx. 381,568
Xxxx Xxxxx 104,850
Xxxxxxx X. Xxxxxx 1,000
Xxxx Xxxxxxxx 1,000
Xxxx Xxxxxxxx 11,082
Xxxxxxx Xxxxxxxxx 500
Immediately following the Effective Time, upon receipt of the
certificates representing the Shares, the Surviving Corporation shall issue to
the holders of such surrendered certificates new certificates of the Surviving
Corporation evidencing an equivalent number of shares of Series A Preferred
Stock.
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SECTION 1.08. No Further Ownership Rights in Company Common
Stock. The 500,000 shares of Series A Preferred Stock to be delivered in the
aggregate upon the surrender for exchange of Shares in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares, and there shall be no further registration of
transfers on the records of the Surviving Corporation of Shares which were
outstanding immediately prior to the Effective Time.
SECTION 1.09. Taking of Necessary Action; Further Action. Each
of Parent, Merger Sub and the Company will take all such reasonable and lawful
actions in connection with the Closing as may be necessary or appropriate in
order to effectuate the Merger and the other transactions contemplated by this
Agreement in accordance with this Agreement as promptly as possible, upon the
terms and subject to the conditions hereof. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
SECTION 1.10. Material Adverse Effect.
(a) When used in connection with the Company or Merger Sub, as
the case may be, the term "Material Adverse Effect" means any change, effect or
circumstance that is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), financial condition, prospects
or results of operations, taken as a whole, of the Company or Parent, as the
case may be.
(b) The failure of a representation or warranty to be true and
correct, either individually or together with the failure of other
representations or warranties to be true and correct, or the failure to perform
an obligation, agreement or covenant shall be deemed to have a Material Adverse
Effect if (x) the business, assets (including intangible assets), financial
condition, or results of operations, of the Company or Merger Sub, as the case
may be, are or are reasonably likely to be materially worse than if such
representation or warranty had been true and correct or such obligation,
agreement or covenant had been performed, (y) in the case of the Company, such
representation or warranty materially misstates the capitalization of the
Company or the capitalization of its subsidiaries taken as a whole or (z) the
failure of such representation or warranty to be true and correct or the failure
to perform such obligation, agreement or covenant materially and adversely
affects the ability of the Company or Merger Sub, as the case may be, to
consummate the transactions substantially as contemplated by this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY
The Company and the Major Shareholders hereby represent and
warrant to Parent and Merger Sub, on a joint and several basis, as follows:
SECTION 2.01. Organization and Qualification; Subsidiaries.
The Company is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
corporate or other power and authority necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted or is proposed to be conducted. The Company is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary. The Company does not have any
subsidiaries. The Company does not own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
SECTION 2.02. Certificate of Incorporation and By-laws. The
Company has heretofore made available to Parent and Merger Sub complete and
correct copies of its Certificate of Incorporation and By-laws, each as amended
to date (the "Company Charter Documents"). All such Company Charter Documents
are in full force and effect. The Company is not in violation of any provision
of any Company Charter Document.
SECTION 2.03. Capitalization. The authorized capital stock of
the Company consists of 2,000,000 shares of Company Common Stock. As of the date
hereof and the Closing Date, (i) 500,000 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, and (ii) no shares of Company Common Stock were held in treasury.
Except for the 500,000 shares held by the Shareholders as listed in Section
1.07(a) of this Agreement, no other shares of capital stock of the Company, or
rights to acquire such shares, are outstanding as of the Effective Time. There
are no options, warrants or other rights, agreements, arrangements or
commitments of any character binding on the Company relating to the issued or
unissued capital stock of, or other equity interests in, the Company or
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in, the Company. There are no obligations, contingent or
otherwise, of the Company to repurchase, redeem or otherwise acquire any shares
of Company Common Stock. There are no obligations, contingent or otherwise, of
the Company to make any investment (in the form of a loan, capital contribution
or otherwise) in any other entity. All of the outstanding shares of the capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, and all such shares, or other equity interests, are owned by the
Shareholders as listed in Section 1.07(a) of this Agreement, free and clear of
all security interests, liens, claims, pledges, agreements, charges or other
encumbrances of any nature whatsoever ("Liens"), including, without limitation,
any limitations in the Company's voting rights.
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SECTION 2.04. Authority Relative to this Agreement. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated, including the
approval of the Merger and the adoption of this Agreement by the Company's
shareholders in accordance with the BCA and BCL and the filing and recording of
appropriate merger documents consistent with this Agreement as required by the
BCA and BCL). As of the date hereof, the Board of Directors of the Company has
declared that it is advisable and in the best interests of the Company's
shareholders for the Company to enter into this Agreement and to consummate the
Merger upon the terms and subject to the conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent, Merger Sub and
the Shareholders of this Agreement, constitutes a legal, valid and binding
obligation of the Company and Shareholders.
SECTION 2.05. Material Contracts; No Conflict; Required
Filings and Consents.
(a) Section 2.05 of the Company Disclosure Schedule sets forth
a complete and accurate list of each contract to which the Company is a party,
or by which the Company or any of its assets are bound, of the type described
below (collectively, "Material Contracts"), and the Company has delivered to
Parent or made available to Parent for its review true and complete copies of
or, if such contracts are oral, complete and accurate descriptions of the terms
of: (i) each contract that involves the performance of services or the delivery
of goods or materials by Company of an amount or value in excess of Five
Thousand Dollars ($5,000); (ii) each contract that involves the performance of
services or the delivery of goods or materials to Company of an amount or value
in excess of Five Thousand Dollars ($5,000); (iii) each contract that was not
entered into in the ordinary course of business and that involves expenditures
or receipts of Company in excess of Five Thousand Dollars ($5,000); (iv) each
licensing agreement (whether as licensor or licensee) or other contract relating
to any Intellectual Property (as defined herein) owned, licensed or used by
Company of an amount or value in excess of Five Thousand Dollars ($5,000); (v)
each lease of real property; (vi) each contract relating to the lending or
borrowing of money, including loan agreements, guarantees of obligations of
affiliates and other persons, performance bonds, letters of credit, and similar
instruments or arrangements, and any security agreement, factoring agreement or
other agreement pursuant to which any Lien is created as security for the
obligations with respect to any such borrowed money; (vii) each contract with
any supplier, distributor, sales representative, dealer or OEM of an amount or
value in excess of Five Thousand Dollars ($5,000); (viii) each contract with or
for the benefit of any current or former officer or director, holder of any
security, employee or consultant of the Company under which the Company has any
obligations as of the date hereof and that (A) involves the making of any
payments of an amount in excess of Five Thousand Dollars ($5,000), (B) contains
non-competition provisions imposing restrictions on the Company or a senior
executive officer or key employee of the Company, or (C) involves any severance
or termination payments or other similar obligation; (ix) any contract with any
labor union or association representing any employee of the Company; (x) any
contract relating to the acquisition by the Company of any operating business or
the capital stock of any other Person; (xi) any contract requiring the payment
to any Person of a brokerage or sale commission or a finder's or referral
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fee; (xii) any lease, sublease or other agreement under which the Company is
lessor or lessee of any equipment or other tangible property; (xiii) any
contract with a change of control provision or otherwise requiring any consent,
approval, waiver or other action by any person in connection with the Merger;
(xiv) any contract between or among the Company and any Shareholder or any
affiliate of any Shareholder and (xv) all other contracts, agreements,
commitments or other understandings or arrangements to which the Company is a
party or by which it or any of its properties or assets are bound or affected.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not
(i) conflict with or violate the Company's Charter Documents, (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
the Company or by which any of its properties is bound or affected or (iii)
result in any breach of, or constitute a default (or an event that with notice
or lapse of time or both would become a default) or impair the Company's rights
or alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on (including a right to purchase) any
of the properties or assets of the Company pursuant to any Material Contract.
(c) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any United States or foreign governmental or regulatory
authority (each, a "Governmental Authority") on the part of the Company or any
Shareholder.
SECTION 2.06. Compliance; Permits.
(a) The Company is not, nor has it at any time been in
conflict with, or in default or violation of, (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or by which any of its
properties is bound or affected or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or any of its
respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The Company holds all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
Governmental Authorities which are material to the operation of the business of
the Company, as it is now being conducted (collectively, the "Company Permits").
The Company is in compliance with the terms of the Company Permits.
SECTION 2.07. Financial Statements. Attached as Section 2.07
of the Company Disclosure Schedule are (i) the unaudited consolidated balance
sheet of the Company as of November 30, 2005 (the "Balance Sheet"), (ii) the
unaudited consolidated balance sheets of the Company as of December 31, 2004 and
(iii) and the related consolidated statements of profit and loss from inception
through (July 24, 2004) through December 31, 2004, as compiled by the Company's
independent public accountants (collectively, the "Financial Statements"). Each
of the Financial Statements (including, in each case, the related notes thereto)
was prepared in
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accordance with the books and records of the Company and in accordance with
accounting principles generally accepted in the United States ("GAAP") applied
on a consistent basis throughout the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presents in all material
respects the consolidated financial position of the Company as at the respective
dates thereof and the consolidated results of its operations for the periods
indicated consistent with the books and records of the Company, except that
Financial Statements are subject to normal and recurring year-end adjustments
which will not be material in amount and such Financial Statements may not
contain all notes required by GAAP.
SECTION 2.08. Absence of Certain Changes or Events; Company
Actions.
(a) Since the date of the Balance Sheet, the Company has
conducted its business in the ordinary course consistent with past practice and
there has not been: (i) any change, effect or circumstance constituting,
individually or in the aggregate, a Material Adverse Effect; (ii) any damage to,
destruction or loss of any material assets of the Company (whether or not
covered by insurance); (iii) any revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
software or inventory or writing off notes or accounts receivable, other than,
in each case, in the ordinary course of business; (iv) any transaction,
commitment, contract or agreement entered into by the Company, or any
relinquishment by the Company of any contract or other right, in any case having
a value of or involving aggregate payments or value in excess of $5,000 other
than in the ordinary course of business; or (v) any material adverse change in
any customer, supplier, licensee or licensor relationship, including any
cancellation, termination or adverse modification or, to the knowledge of the
Company, threatened cancellation, termination or adverse modification of any
such relationship. Furthermore, since the date of the Balance Sheet, the Company
has not: (i) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities or rights convertible,
exchangeable or exercisable into any capital stock or other equity securities;
(ii) borrowed any amount or incurred or become subject to any material
liabilities, except current liabilities incurred in the ordinary course of
business consistent with past practice; (iii) discharged or satisfied any
material lien or paid any material obligation or liability, other than current
liabilities paid in the ordinary course of business; (iv) declared, set aside or
made any payment or distribution of cash (including tax distributions) or other
property to any of its respective stockholders with respect to such
stockholder's capital stock or otherwise or purchased, redeemed or otherwise
acquired any shares of its capital stock or other equity securities (including
any warrants, options or other rights to acquire its capital stock or other
equity securities); (v) mortgaged or pledged any of its properties or assets or
subjected them to any Lien; (vi) sold, assigned, transferred, leased, licensed
or otherwise encumbered any of its tangible assets, except in the ordinary
course of business consistent with past practice, or canceled any material debts
or claims; (vii) sold, assigned, transferred, leased, exclusively licensed or
otherwise encumbered any Intellectual Property, disclosed any proprietary trade
secrets or other confidential information to any Person, or abandoned or
permitted to lapse any Intellectual Property; (viii) (A) entered into employment
agreements with any employee (other than an agreement terminable without any
fiscal liability) or made or granted any bonus or any wage or salary increase to
any employee or group of employees other than in the ordinary course of business
consistent with past practice, or (B) made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan or
arrangement; (ix) made capital
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expenditures or commitments therefore other than in the ordinary course of
business and in accordance with the Company's existing capital budget; (x) made
any loans or advances to, guarantees for the benefit of, or any investments in,
any Person other than in the ordinary course of business consistent with past
practice; (xi) made any charitable contributions or pledges or made any
political contributions; (xii) other than in the ordinary course of business,
entered into any agreement or arrangement prohibiting or restricting it from
freely engaging or otherwise restricting the conduct of its business consistent
with past practice; (xiii) amended its certificate of incorporation, bylaws or
similar organizational documents; or (xiv) agreed, whether orally or in writing,
to do any of the foregoing.
SECTION 2.09. No Undisclosed Liabilities. The Company has no
liabilities (absolute, accrued, contingent or otherwise), whether or not
required to be disclosed in financial statements, including the notes thereto,
prepared in accordance with GAAP, except liabilities (i) provided for in the
Balance Sheet, (ii) incurred since the date of the Balance Sheet in the ordinary
course of business and consistent with past practice and that would not
reasonably be expected to have a Company Material Adverse Effect, (iii)
contractual and service obligations arising in the ordinary course of business
(other than obligations arising out of a material default or alleged material
default), (iv) set forth in Section 2.09 of the Company Disclosure Schedule or
(v) not required to be disclosed in financial statements, including the notes
thereto, prepared in accordance with GAAP, that are immaterial in amount.
SECTION 2.10. Absence of Litigation. There are no claims,
actions, suits, proceedings or investigations ("Proceedings") pending or, to the
best knowledge of the Company, threatened against the Company or any properties
or rights of the Company before any court, arbitrator or administrative body or
Governmental Authority.
SECTION 2.11. Employee Benefit Plans; Employment Agreements.
(a) The Company does not have, and has never had, any (i)
"Pension Plans" (as defined in Section 3(2) of the United States Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) employee
welfare benefit plans (as defined in Section 3(1) of ERISA), or (iii) any other
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee benefit
plans, policies, programs, agreements or arrangements (including those which
contain change of control or pending change of control or similar provisions),
written or otherwise, for the benefit of, or relating to, any former or current
employee, officer, director or consultant (or any of their beneficiaries) of the
Company or any other agreement under which the Company could incur liability
under Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA
(hereinafter, "COBRA"), Title IV of ERISA or Section 412 of the Code (together,
for the purposes of this Section 2.11, the "Company Employee Plans").
SECTION 2.12. Employment and Labor Matters.
(a) No employee or former employee of the Company is owed any
wages, benefits or other compensation for past services (other than wages,
benefits and compensation accrued in the ordinary course of business during the
current pay period and accrued vacation).
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(b) There are no labor disputes, including, without
limitation, charges of unfair labor practices within the meaning of the National
Labor Relations Act, pending or, to the knowledge of the Company, threatened
against the Company . The Company has never engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. The Company
has never been a party to, bound by, or entered into the process of negotiating
any collective bargaining agreement or union contract. No organizing activities
are presently being made or, to the knowledge of the Company, are anticipated by
or on behalf of any labor union with respect to any employees of the Company.
There are no strikes, slowdowns, work stoppages, picketing or lockouts pending
or, to the knowledge of the Company, threatened, by or with respect to any
employees of the Company, and there has never been any such strikes, slowdowns,
work stoppages, picketing or lockouts. The Company is in material compliance
with all applicable laws relating to employment and employment practices,
workers' compensation, terms and conditions of employment, worker safety, wages
and hours and the Worker Adjustment and Retraining Notification Act. There has
never been any harassment, discrimination, retaliatory act or similar claim
against any officer, director or employee of the Company at any time.
SECTION 2.13. Restrictions on Business Activities.
(a) There is no agreement, judgment, injunction, order or
decree binding upon the Company which has or could reasonably be expected to
have the effect of prohibiting or impairing the conduct of business by the
Company as currently conducted by the Company.
(b) Section 2.13 of the Company Disclosure Schedule sets forth
a list of each sales agent or consultant of the Company or other person or
entity with distribution rights to any product of the Company, together with a
description of: (a) the products which such person or entity has a right to
distribute, (b) the territory in which the person or entity has distribution
rights, (c) the commissions or other fees which may be earned by or paid to such
person or entity in respect of each product in which such person or entity has a
distribution right, and (d) whether such distribution rights are exclusive or
nonexclusive.
SECTION 2.14. Title to Property. Except as set forth in
Section 2.15 of the Company Disclosure Schedule, the Company has good title to
or have valid leasehold interests in or valid rights under contract to use all
of the real properties and other assets, individually or in the aggregate,
material to the conduct of the business of the Company, taken as a whole, free
and clear of all liens, charges and encumbrances, except liens for taxes not yet
due and payable and such liens or other imperfections of title, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby or which would not, individually or in the
aggregate, have a Material Adverse Effect; and all leases pursuant to which the
Company leases from others any real or personal property, are in good standing,
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default), on the
part of the Company or, to the best knowledge of the Company, any third party,
except where the lack of such good standing, validity and effectiveness or the
existence of such default or event of default would not, individually or in the
aggregate, have a Material Adverse Effect.
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SECTION 2.15. Taxes.
(a) The Company has timely filed, or caused to be timely
filed, all Tax Returns (as hereinafter defined) required to be filed by it. All
such Tax Returns were true, correct and complete in all respects, the Company
has paid, collected or withheld, or caused to be paid, collected or withheld,
all amounts of Taxes (as hereinafter defined) required to be paid, collected or
withheld by it (whether or not shown as payable on such Tax Returns), other then
Taxes being contested in good faith and for which adequate reserves have been
established on the Balance Sheet. There are no claims or assessments pending
against the Company for any alleged deficiency in any Tax, there are no pending
or threatened audits or investigations for or relating to any liability in
respect of any Taxes, and the Company has not been notified of any proposed Tax
claims or assessments against the Company.
(b) For purposes of this Agreement, the term "Tax" shall mean
any United States or non-United States federal, national, state, provincial,
local or other jurisdictional income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, alternative or add-on minimum,
ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge imposed by any Governmental Authority,
together with any interest or penalty imposed thereon. The term "Tax Return"
shall mean a report, return or other information (including any attached
schedules or any amendments to such report, return or other information)
required to be supplied to or filed with a Governmental Authority with respect
to any Tax, including an information return, claim for refund, amended return or
declaration or estimated Tax.
(c) The Company has not executed any waivers or extensions of
any applicable statute of limitation to asses any Taxes. There are no
outstanding requests by the Company for any extension of time within which to
file any Tax Return or within which to pay any amounts of Taxes shown to be due
on any Tax Returns. To the best knowledge of the Company, there are no liens for
amounts of Taxes on the assets of the Company except for statutory liens for
current Taxes not yet due and payable. The Company is neither liable for Taxes
of any other person, nor is currently under any contractual obligation to
indemnify any person with respect to Taxes (except for customary agreements to
indemnify lessors, lenders or security holders pursuant to agreements disclosed
elsewhere in the Company Disclosure Schedule), nor is a party to any tax sharing
agreement or any other agreement providing for payments by the Company with
respect to Taxes. Except as set forth in Section 2.15 of the Company Disclosure
Schedule, there are no outstanding powers of attorney enabling any party to
represent the Company with respect to tax matters.
SECTION 2.16. Environmental Matters.
(a) The operations and properties of the Company are in
compliance with all Environmental Laws (as hereinafter defined), which
compliance includes the possession by the Company of all permits and
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof.
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(b) There are no Environmental Claims (as hereinafter
defined), pending or, to the best knowledge of the Company, threatened against
the Company or against any person or entity whose liability for any
Environmental Claim the Company has expressly retained or assumed.
(c) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Materials of Environmental Concern (as
hereinafter defined), that are reasonably likely to form the basis of any
Environmental Claim against the Company or against any person or entity whose
liability for any Environmental Claim the Company has expressly retained or
assumed, except for such Environmental Claims that would not, individually or in
the aggregate, have a Material Adverse Effect.
(d) To the best knowledge of the Company, (i) there are no
off-site locations where the Company has stored, disposed or arranged for the
disposal of Materials of Environmental Concern which have been listed on the
United States National Priority List (the "National Priorities List") or any
state Superfund site list, and the Company has not been notified or become aware
that any of them may be potentially responsible party at any such location, and
(ii) there are no underground storage tanks located on property owned or leased
by the Company, (iii) there is no material containing friable asbestos contained
in or forming part of any building, building component, structure or office
space owned, leased or operated by the Company and (iv) there are no
polychlorinated biphenyls ("PCBs") or PCB-containing items contained in or
forming part of any building, building component, structure or office space
owned, leased or operated by the Company.
(e) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, allegation,
accusation, action, cause of action, investigation or written notice by
any person or entity alleging potential liability (including potential
liability for investigatory costs, cleanup costs, response costs
incurred by any Governmental Authority or other person, natural
resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any
location, whether or not owned or operated by the Company.
(ii) "Environmental Laws" means all United States and
non-United States federal, national, state, provincial, local or other
jurisdictional laws, regulations, codes and ordinances relating to
pollution or protection of human health and the environment (including
ambient air, surface water, ground water, land surface or sub-surface
strata), including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Materials of Environmental Concern, including, but not
limited to, the United States Comprehensive Environmental Response
Compensation and Liability Act 42 U.S.C. ss. 9601 et seq., the United
States Resource Conservation and Recovery Act 42 U.S.C. ss. 6901 et
seq., the United States Toxic Substances Control Act 15 U.S.C. ss. 2601
et seq., the United States Occupational Safety and Health Act 29 U.S.C.
ss. 000 xx xxx., xxx Xxxxxx Xxxxxx Clean Air Act 42 U.S.C. ss. 7401 et
seq., the United States Clean Water Act 33
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U.S.C. ss. 1251 et seq., Proposition 65, as codified in the California
Health and Safety Code ss. 25249.5 et seq., and any other analogous
state laws, each as amended or supplemented, and any applicable
transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances and
hazardous wastes, medical waste, toxic substances, petroleum and
petroleum products, asbestos-containing materials, polychlorinated
biphenyls, and any other chemicals, pollutants or substances regulated
under any Environmental Law.
SECTION 2.17. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of the Shareholders.
SECTION 2.18. Intellectual Property.
(a) The "Intellectual Property" means all intellectual
property owned, used or licensed (as licensor or licensee) by Company, or that
has been used in the business of Company, or in any product, service, technology
or process currently or formerly offered by Company, or currently under
development by Company, including:
(i) all domestic and foreign copyright interests in any
original work of authorship, whether registered or unregistered,
including but not limited to all copyright registrations or foreign
equivalent, all applications for registration or foreign equivalent,
all moral rights, all common-law rights, and all rights to register and
obtain renewals and extensions of copyright registrations, together
with all other copyright interests accruing by reason of international
copyright convention ("Copyrights");
(ii) all domestic and foreign patents (including certificates
of invention and other patent equivalents), provisional applications,
patent applications and patents issuing therefrom as well as any
division, continuation or continuation in part, reissue, extension,
reexamination, certification, revival or renewal of any patent, all
Inventions (as hereinafter defined) and subject matter related to such
patents, in any and all forms ("Patents");
(iii) all domestic and foreign trademarks, trade dress,
service marks, trade names, icons, logos, slogans, and any other
indicia of source or sponsorship of goods and services, designs and
logotypes related to the above, in any and all forms, all trademark
registrations and applications for registration related to such
trademarks (including, but not limited to intent to use applications),
and all goodwill related to the foregoing ("Trademarks");
(iv) all domain name registrations ("Domain Names")
(v) any formula, design, device or compilation, or other
information which is used or held for use by a business, which gives
the holder thereof an advantage or opportunity for advantage over
competitors which do not have or use the same, and
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which is not generally known by the public ("Trade Secrets"),
including, but not limited to, formulas, algorithms, market surveys,
market research studies, information contained on drawings and other
documents, and information relating to research, development or
testing;
(vi) novel devices, processes, compositions of matter,
methods, techniques, observations, discoveries, apparatuses, machines,
designs, expressions, theories and ideas, whether or not patentable
("Inventions");
(vii) scientific, engineering, mechanical, electrical,
financial, marketing or practical knowledge or experience useful in the
operation of Company ("Know How");
(viii) (A) any and all computer programs and/or software
programs (including all source code, object code, firmware, programming
tools and/or documentation), (B) machine readable databases and
compilations, including any and all data and collections of data, and
(C) all content contained on Internet site(s) ("Software");
(ix) all documentation and media constituting, describing or
relating to the above, including memoranda, manuals, technical
specifications and other records wherever created throughout the world;
and
(x) the right to xxx for past, present, or future infringement
and to collect and retain all damages and profits related to the
foregoing.
(b) Section 2.18(b) of the Company Disclosure Schedule lists (i) all
issued Patents, and all pending applications for Patents, owned by the Company;
(ii) all registered Trademarks, and all pending applications for Trademarks,
owned by the Company; (iii) all registered Copyrights, and all pending
applications for Copyrights, owned by the Company; and (iv) all Domain Names
owned by the Company.
(c) Section 2.18(c) of the Company Disclosure Schedule lists all
licenses, sublicenses, agreements or instruments involving the Intellectual
Property of the Company including (i) licenses by the Company to any person of
any Intellectual Property; and (ii) all licenses by any other person to the
Company of any Intellectual Property (except with respect to generally available
"off-the-shelf" software) (each a "License"). Each License identified in Section
2.18(c) of the Company Disclosure Schedule is a valid and binding agreement
enforceable in accordance with its terms. With respect to each License, there is
no material default (or event that with the giving of notice or passage of time
would constitute a material default) by the Company, or to the knowledge of the
Company, the other party thereto. There are no pending and, to the knowledge of
the Company, no threatened claims with respect to any License. Except as
identified on Section 2.18(c) of the Company Disclosure Schedule, no License
contains an indemnity by the Company in favor of a third party with respect to
the Intellectual Property.
(d) The Company has good and valid title to, or otherwise possesses the
rights to use, all Intellectual Property necessary to permit the Company to
conduct the business and operations of the Company from and after the Closing
Date, in the same manner as it is being conducted as of the date hereof, and to
the knowledge of Company, as currently contemplated to
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be conducted by the Company. Neither the consummation of the transactions
contemplated by this Agreement nor the Company's performance hereunder will
result in the diminution, license, transfer, termination or forfeiture of the
Company's rights in the Intellectual Property or Licenses. Except for
Intellectual Property owned by third parties, no person or entity other than the
Company has any right or interest of any kind or nature in or with respect to
the Intellectual Property, or any portion thereof, or any rights to sell,
license, lease, transfer or use or otherwise exploit the Intellectual Property
or any portion thereof. All officers, employees and contractors of the Company
who have created Intellectual Property, have executed an agreement under which
all rights, title and ownership in and to such Intellectual Property have been
assigned to the Company.
(e) Except as disclosed in Section 2.18(e) of the Company Disclosure
Schedule, the Company has not been alleged to have, nor to the knowledge of the
Company, has Company infringed upon, misappropriated or misused any Intellectual
Property or other proprietary information of another person or entity. There are
no pending and, to the knowledge of the Company, threatened claims or claim, and
no action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (collectively, "Proceedings") contesting or
challenging the Intellectual Property, or the Company's or any of its
subsidiaries' use of the Intellectual Property owned by another person or
entity. To the knowledge of the Company, no third party including any current or
former employee or contractor of Company, is infringing upon, misappropriating,
or otherwise violating Company's rights to the Intellectual Property.
(f) Patents:
(i) All of the issued Patents and pending applications for
Patents of Company, if any, are currently in compliance with all legal
requirements (including payment of filing, examination, and maintenance
fees), and are not subject to any maintenance fees or taxes or actions
falling due within ninety (90) days after the Effective Time.
(ii) No Patent of Company has been or is now involved in any
infringement, interference, reissue or reexamination Proceeding and, to
the knowledge of Company, no such action is threatened with respect to
any of the Patents of Company.
(iii) No product manufactured or sold by Company, nor any
Patent of Company is alleged to infringe any patent or product of any
person, and to the knowledge of Company, no Patent of, or product
manufactured or sold by, Company is infringed.
(iv) All products sold under the Patents have been marked with
the proper patent notice.
(g) Trademarks:
(i) All registered Trademarks, and pending applications for
Trademarks with the United States Patent and Trademark Office ("PTO")
or any other country's trademark office, of Company are currently in
compliance with all legal requirements (including the filing of
affidavits of use and renewal applications as applicable), and are not
subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Effective Time.
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(ii) No Trademark of the Company has been or is now involved
in any opposition, infringement, dilution, unfair competition or
cancellation Proceeding and, to the knowledge of the Company, no such
action is threatened with respect to any of the Trademarks of the
Company.
(iii) No Trademark of the Company is alleged to infringe any
trade name, trademark or service xxxx of any other person or entity,
and to the knowledge of the Company, no Trademark of the Company is
infringed.
(iv) All products displaying a Trademark of the Company or any
of its subsidiaries which has been registered with the PTO, bear the
proper federal registration notice.
(h) Copyrights:
(i) All registered Copyrights and pending applications for
Copyrights of the Company are currently in compliance with all legal
requirements, and are not subject to any maintenance fees or taxes or
actions falling due within ninety (90) days after the Effective Time.
(ii) No Copyright of the Company has been or is now the
subject of any invalidation or infringement Proceeding and, to the
knowledge of the Company, no such action is threatened with respect to
any Copyright of the Company.
(iii) No Copyright of the Company is alleged to infringe any
copyright of any other person or entity, and to the knowledge of the
Company, no Copyright of the Company is infringed.
(iv) All works encompassed by the Copyrights of the Company
have been marked with the proper copyright notice.
(i) Domain Names:
(i) All registered Domain Names of the Company are currently
in compliance with all legal requirements and are not subject to any
maintenance fees or taxes or action falling due within ninety (90) days
after the Effective Time.
(ii) No Domain Name of the Company has been or is now the
subject of any dispute resolution or infringement Proceeding and, to
the knowledge of the Company, no such action is threatened with respect
to any Domain Name of the Company.
(iii) No Domain Name of the Company or any of its subsidiaries
is alleged to infringe the trademark or domain name of any other person
or entity, and to the knowledge of the Company, no Domain Name of the
Company is infringed.
(j) Section 2.18(j) of the Company Disclosure Schedule lists all
products of the Company (alphabetically by product with the aggregate sales
receipts for each product for each calendar year beginning in 2004) distributed
or sold by the Company, listed by category. Section
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2.18(j) of the Company Disclosure Schedule also sets forth, for each product,
the following: (i) a list of all contracts (including all development
agreements, Licenses, manufacturer's representative agreements, distribution or
other agreements) relating to the products; (ii) as to any contracts under which
compliance or performance continues to be required, the advances paid or
payable, and the royalties or other sums payable, to any person or entity with
respect to such product and (iii) a list of persons or entity's with
distribution rights to such product together with a description of: (A) the
territory in which the person or entity has distribution rights; and (B) whether
such distribution rights are exclusive or nonexclusive.
(k) The Company have taken commercially reasonable steps to protect the
proprietary nature of the Intellectual Property and to maintain in confidence
all Trade Secrets and confidential Intellectual Property and information owned
or used by the Company. Except as set forth in Section 2.18(k) of the Company
Disclosure Schedule, to the knowledge of the Company, no Trade Secret or other
confidential Intellectual Property or information of the Company has been
disclosed or authorized to be disclosed to any person, including any employee,
agent, contractor, or other entity, other than pursuant to a non-disclosure
agreement or other conditional obligation that protects the Company's
proprietary interests in and to such Trade Secrets or confidential Intellectual
Property or information.
(l) Section 2.18(l) of the Company Disclosure Schedule contains a true
and complete list of all of the Software included, embedded or incorporated in
or developed for inclusion in the Company's products or websites, or used in the
delivery of the Company's services (the "Company Software"). The Company owns
full and unencumbered right and good, valid and marketable title or has valid
licenses to such Company Software, and the Company Software owned by the Company
is free and clear of all Liens. The Company has not incorporated any third party
Intellectual Property into the Company Software not identified in Section
2.18(l) of the Company Disclosure Schedule. Except as identified in Section
2.18(l) of the Company Disclosure Schedule), no open source or public library
software, including any version of any software licensed pursuant to any GNU
public license, is, in whole or in part, embodied or incorporated in the Company
Software.
(m) The Company employs commercially reasonable measures to ensure that
the Company Software contain no "viruses." For the purposes of this Agreement,
"virus" means any computer code intentionally designed to disrupt, disable or
harm in any manner the operation of any software or hardware. To the knowledge
of the Company, none of the Company Software Programs contains any worm, bomb,
backdoor, clock, timer or other disabling device, code, design or routine which
causes the software to be erased, inoperable, impaired in performance or
otherwise incapable of being used, either automatically or upon command by any
person.
(n) The Company's Intellectual Property (including, to the knowledge of
the Company, the Intellectual Property of third parties' licensed to the
Company), is free and clear of any and all Liens.
(o) Section 2.18(o) of the Company Disclosure Schedule sets forth all
agreements by which the Company is obligated to make to third parties any
payments related to the Company Intellectual Property. The Company is not bound
by an agreement by which it owes
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any present or future royalties or other payments to third parties in respect of
Intellectual Property in excess of $10,000.
(p) The Company has implemented industry "best practices" to ensure the
physical and electronic protection of its websites and information assets from
unauthorized disclosure, use or modification. Other than as set forth in Section
2.18(p) of the Company Disclosure Schedule, there has been no breach of security
involving any Company or its subsidiaries websites or information assets. All
data which has been collected, stored, maintained or otherwise used by the
Company have been collected, stored, maintained and used in accordance with all
applicable U.S. and foreign laws, rules, regulations, guidelines and industry
standards. The Company have not received, and to the knowledge of the Company,
will not be receiving, any oral or written notice of noncompliance with
applicable data protection laws, rules, regulations, guidelines or industry
standards.
(q) Except as disclosed in Section 2.18(q) of the Company Disclosure
Schedule, all products of the Company, and all Company Software, conform to the
descriptions of, and perform in accordance with, any warranties, representations
or descriptions regarding the products or the Company Software made by the
Company, including any warranties, representations or descriptions contained in
any applicable License or documentation, and the Company have not received any
notice that any product of the Company, or any Company Software, does not so
perform or conform.
SECTION 2.19. Certain Business Practices. The Company has not (i) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
payments related to a political activity or (ii) made any unlawful payment to
any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
SECTION 2.20. No Bankruptcy. No order has been made or petition
presented for the winding up, insolvency, liquidation or bankruptcy of the
Company, nor is there any reasonable basis for any such order or unsatisfied
judgment or court order against the Company.
SECTION 2.21. Title to Properties; Absence of Encumbrances. The Company
has good and valid title to or, in the case of leased property, valid and
subsisting leasehold interests in, all of its properties and assets of whatever
kind (whether real or personal) used or held for use in its business, including,
without limitation, all properties and assets that are shown on the Balance
Sheet (except for assets sold in the ordinary course of business since the date
of such Balance Sheet), which represent all such property and assets that are
used in the conduct of its businesses as presently conducted, in each case free
and clear of any and all Liens, except (i) for those securing Taxes, assessments
and other governmental charges or levies not yet due and payable (excluding any
imposed pursuant to any of the provisions of ERISA), and (ii) such imperfections
in title, liens and easements as do not materially detract from or interfere
with the use of the properties subject thereto or affected thereby or otherwise
impair business operations involving such properties (encumbrances in clauses
(i) and (ii) being "Permitted Encumbrances"). All assets, properties and rights
relating to the Company's business are held by, and all agreements, obligations
and transactions relating to the Company's business have been entered into,
incurred and conducted by, the Company rather than any affiliate, and the
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Company does not use any other assets, properties or rights in the conduct of
its business as presently conducted. No person, including without limitation any
Shareholder, has any option, right of first refusal, right of first offer,
preemptive right or any other right of any nature to acquire any material assets
of the Company. The tangible assets of the Company are free from material
defects, have been maintained in accordance with normal industry practice, are
in good operating condition and repair (subject to normal wear and tear) and are
suitable for the purpose for which they are presently used.
SECTION 2.22. Real and Personal Property. Section 2.22 of the Company
Disclosure Schedule contains a complete and correct list of all real property
(including buildings and structures) leased or subleased by the Company and all
interests therein (including a street address). The Company does not own and has
never owned any real property. All material work required to be done by the
Company under law or any contract or arrangement to which the Company is subject
or a party as landlord or tenant has been duly performed. No condemnation or
other proceeding is pending or, to the knowledge of the Company, threatened
which would affect the use of any such property by the Company. The Company
enjoys peaceful and undisturbed possession under all real property leases under
which it is operating in accordance with the terms of such leases, and all rents
and additional rents due to date from the Company under such leases have been
paid in full. Section 2.22 of the Company Disclosure Schedule also contains a
complete and correct list of all equipment, machinery, computers, furniture,
leasehold improvements, vehicles and other personal property owned by the
Company with an original cost in excess of $1000 individually. Except as set
forth in Section 2.22 of the Company Disclosure Schedule, none of the Company's
personal property is held under any lease, security agreement, conditional sales
contract or other title retention or security arrangement.
SECTION 2.23. Transactions with Affiliates; Management Relationships.
(a) Other than as set forth in Section 2.23 of the Company Disclosure
Schedule, the Company has not, directly or indirectly, engaged in any
transactions or financial or commercial arrangements (i) with any Shareholder of
the Company or (ii) (except for employment arrangements with its employees) with
any officer or director or with any of their respective affiliates or relatives
(each a "Related Party"). The Company has no obligation to or claim against any
Related Party, and no Related Party has any obligation to or claim against the
Company, except for obligations of the Company pursuant to (A) employment
arrangements with its employees, (B) the Company's certificate of incorporation,
(C) the Company's by-laws, and (D) applicable law. Section 2.23 of the Company
Disclosure Schedule describes the nature and extent of any products, services or
benefits provided to the Company by any Related Party without a corresponding
charge equal to the fair market value of such products, services or benefits.
(b) No executive officer or director of the Company owns any interest
in any property or assets of the Company (except as a stockholder of the
Company) and, to the knowledge of the Company, no executive officer of the
Company owns any interest in (i) any current competitor, customer or supplier of
the Company or (ii) any person that is currently a party to any material
contract or agreement with the Company, other than holdings of less than 1% of a
class of a company's publicly traded securities.
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SECTION 2.24. Insurance. Section 2.24 of the Company Disclosure
Schedule lists all insurance policies owned or held by the Company on the date
hereof. All such policies are in full force and effect, all premiums with
respect thereto have been paid to the extent due, no notice of cancellation or
termination has been received with respect to any such policy and no claim is
currently pending under any such policy involving an amount in excess of $5,000.
SECTION 2.25. Books and Records.
(a) The books and records of each of the Company are complete and
correct in all material respects and have been maintained in accordance with
sound business practices.
(b) The minute books of the Company, which have been previously
provided to Parent, contain complete and accurate records of all meetings in all
material respects and accurately reflect in all material respects all other
corporate action of the stockholders and board of directors of the Company
through the date of this Agreement.
SECTION 2.26. Accounts Receivable. All accounts receivable of the
Company, whether reflected in the Balance Sheet or otherwise, represent sales
actually made in the ordinary course of business, have been reflected properly
in their books and records and represent valid obligations to the Company.
SECTION 2.27. Customers and Suppliers. Section 2.27 of the Company
Disclosure Schedule sets forth (a) the ten largest customers of the Company, and
(b) the ten largest suppliers of the Company, in each case on the basis of cost
of goods or services purchased, for the eleven months ended November 30, 2005
(collectively, the "Customers and Suppliers"). The Company knows of no plan or
intention of any of the Customers or Suppliers to terminate, cancel or otherwise
adversely modify in any material respect its relationship with the Company or to
decrease materially or limit any of its products or services to the Company or
its usage or purchase of any of the services or products of the Company. The
Company does not offer or use any current customer incentive programs, whether
written or oral and whether or not deemed or considered to be legally
enforceable, which involve the payment of rebates or issuance of credits by the
Company or the sharing of marketing expenses by the Company.
SECTION 2.28. Employee Conflicts. To the knowledge of the Company, no
employee of the Company is in violation of any term of any employment contract,
inventions disclosure agreement, confidentiality agreement, non-competition
agreement or restrictive covenant to or with a former employer relating to the
right of any such employee to be employed by the Company because of the nature
of the business conducted or presently proposed to be conducted by the Company
or relating to the use of trade secrets or proprietary information of others.
SECTION 2.29. Bank Accounts. Schedule 2.29 of the Company Disclosure
Schedule sets forth a complete and correct list of each bank in which the
Company has an account or safe deposit or lockbox, the account or box number, as
the case may be, and the name of every person authorized to draw thereon or
having access thereto.
SECTION 2.30. No Required Disclosure. The Company is not required to
disclose the existence of this Agreement or any other Transaction Document, the
terms hereof or
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thereof, or the transactions contemplated hereby or thereby, to any person
(other than to its directors, officers and, to the extent required by applicable
Law, any Shareholder).
SECTION 2.31. Internal Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
SECTION 2.32. Inventory. The Company's inventory as set forth in the
Balance Sheet has been valued in accordance with GAAP consistently applied and
consists of items of quality useable and saleable in the normal course of the
Company's business except for items of obsolete materials and materials of below
standard quality, all of which have been written down to realizable market value
or for which adequate reserves have been provided in the Balance Sheet.
SECTION 2.33. Product Liability. Except as set forth on Section 2.33 of
the Company Disclosure Schedule, the Company has no liability that relates to,
or that arises out of, products manufactured, shipped or sold by or on behalf of
the Company on or prior to the Closing Date (including claims of negligence,
personal injury, product damage, product liability, product warranties,
promotional obligations, strict liability, product recall, safety or regulatory
compliance, infringement of intellectual property or any other similar or
related claims, whether such liability, obligation or commitment relates to or
arises out of accidents, injuries or losses occurring on or prior to or after
the Closing Date).
SECTION 2.34. True and Complete. No representation or warranty made by
the Company or any Shareholder in this Agreement, nor any statement, certificate
or Exhibit furnished by or on behalf of the Company or the Shareholders pursuant
to this Agreement, nor any document or certificate delivered to Parent or Merger
Sub pursuant to this Agreement, or in connection with the transactions
contemplated hereby, contains or shall contain any untrue statement of a
material fact, or omits or shall omit to state a material fact necessary to make
the statements contained therein not misleading. Neither the Company nor any
Shareholder has failed to disclose to Parent or Merger Sub any pending
developments or circumstances of which it is aware which are reasonably likely
to have a material adverse effect on the business or the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company as follows:
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SECTION 3.01. Organization and Qualification; Subsidiaries. Each of
Parent and Merger Sub is an entity duly organized and validly existing under the
laws of the jurisdiction of its incorporation and has the requisite corporate or
other power and authority necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized and existing or to
have such power or authority could not reasonably be expected to have a Material
Adverse Effect. Each of Parent and its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that could not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.02. Capitalization. The authorized capital stock of Merger
Sub consists of one million two hundred thousand (1,200,000) shares of capital
stock, of which two hundred (200) shares are classified as Merger Sub Common
Stock, five hundred thousand (500,000) shares are classified as Series A
Preferred stock, no par value per share ("Merger Sub Series A Preferred Stock"),
and one thousand (1,000) shares are classified as Merger Sub Series B Preferred
Stock. As of the date hereof and the Closing Date, (i) one hundred (100) shares
of Company Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Merger Sub Series A
Preferred Stock were issued and outstanding, and (iii) three hundred twenty five
(325) shares of Merger Sub Series B Preferred Stock were issued and outstanding.
Except for (x) the one hundred (100) shares of Merger Sub Common Stock, (y)
three hundred twenty five (325) shares of Merger Sub Series B Preferred Stock
held by Parent and (z) the Debenture issued to Parent in the aggregate principal
amount of Three Hundred Sixty Thousand ($360,000), no other shares of capital
stock of Merger Sub, or rights to acquire such shares, are issued or outstanding
as of the Closing. Except for the Debentures and the Merger Sub Series B
Preferred Stock, and the shares of Merger Sub Common Stock issuable upon the
conversion of such Merger Sub Series B Preferred Stock and the Debenture, an
Administrative Services Debenture in the principal amount of One Hundred
Thousand Dollars ($100,000) to be issued to Parent by the Surviving Corporation
as of the Effective Time (the "Administrative Services Debenture"), and the
other commitments specified in this Agreement or any Transaction Document, there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character binding on the Merger Sub relating to the issued or
unissued capital stock of, or other equity interests in, Merger Sub or
obligating Merger Sub to issue or sell any shares of capital stock of, or other
equity interests in Merger Sub. There are no obligations, contingent or
otherwise, of Merger Sub to repurchase, redeem or otherwise acquire any shares
of Merger Sub Common Stock. All of the outstanding shares of the capital stock
of Merger Sub are duly authorized, validly issued, fully paid and nonassessable,
and all such shares, or other equity interests, are owned by Parent, free and
clear of all Liens, including, without limitation, any limitations in the
Company's voting rights.
SECTION 3.03. Authority Relative to This Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, as applicable, and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Merger Sub, and no other corporate proceedings on the part of
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Parent or Merger Sub are necessary to authorize this Agreement or to consummate
the transactions so contemplated. The Board of Directors of Parent has
determined that it is advisable and in the best interests of Parent's
stockholders for Parent to enter into this Agreement, and for Parent to
consummate the Merger upon the terms and subject to the conditions of this
Agreement. The Board of Directors of Merger Sub has determined that it is
advisable and in the best interests of Merger Sub's sole stockholder, Parent,
for Merger Sub to enter into this Agreement, and for Merger Sub to consummate
the Merger upon the terms and subject to the conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub, and, assuming due authorization, execution and delivery by the Company,
constitutes the legal, valid and binding obligation of Parent and Merger Sub.
SECTION 3.04. No Conflict. The execution and delivery of this Agreement
by Parent and Merger Sub do not, and the performance of this Agreement by Parent
and Merger Sub will not, (i) violate Parent or Merger Sub's certificate of
incorporation or by-laws (or equivalent organizational documents) (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Parent, Merger Sub or any of their subsidiaries or by which any of their
respective properties is bound or affected or (iii) result in any breach of, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) or impair Parent, Merger Sub's or any of their
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
(including a right to purchase) any of the properties or assets of Parent,
Merger Sub or any of their subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent, Merger Sub or any of their
subsidiaries is a party or by which Parent, Merger Sub or any of their
subsidiaries or any of their respective properties is bound or affected, except,
in the case of clause (ii) or (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that would, individually or in the
aggregate, have a Material Adverse Effect on either Parent or Merger Sub.
SECTION 3.05. Authorization and Validity; Issuance of Shares. The
shares of Series A Preferred Stock to be issued in exchange for the Shares at
the Effective Time in connection with the Merger will be validly issued, fully
paid and non-assessable, free and clear of all liens, encumbrances and rights of
first refusal, other than liens and encumbrances created by the Shareholders
will not be subject to any preemptive or similar rights.
SECTION 3.06. Absence of Litigation. There are no claims, actions,
suits, proceedings or investigations pending or, to the best knowledge of Parent
or Merger Sub, threatened against Parent, Merger Sub or any of their
subsidiaries, or any properties or rights of Parent, Merger Sub or any of their
subsidiaries, before any court, arbitrator or administrative body or
Governmental Authority, that would, individually or in the aggregate, have a
material adverse effect on the ability of Parent and Merger Sub to consummate
the transactions contemplated by this Agreement. Neither Parent nor Merger Sub
is subject to any Order of any Governmental or Regulatory Authority that would,
individually or in the aggregate have a material adverse effect on the ability
of Parent and Merger Sub to consummate the transactions contemplated by this
Agreement.
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SECTION 3.07. Ownership of Merger Sub. Merger Sub is a direct, wholly
owned subsidiary of Parent.
SECTION 3.08. Ownership of Shares. As of the date hereof, neither
Parent nor Merger Sub owns, beneficially or of record, any Shares.
SECTION 3.09. Other Agreements. Except for this Agreement, the
Transaction Documents and as otherwise set forth on Schedule 3.09 to the Merger
Sub Disclosure Schedule, since its incorporation, Merger Sub has neither engaged
in any substantial business nor entered into any material agreements, except for
this Agreement, the other Transaction Documents, and documents ancillary to or
contemplated by the transactions described herein and therein.
ARTICLE IV
SHAREHOLDER REPRESENTATIVE
SECTION 4.01. Appointment. In order to administer the transactions
contemplated by this Agreement and the Escrow Agreement, including, without
limitation, the indemnification obligations of the Shareholders under Article
VII, the Shareholders hereby designate and appoint Xxxxxx as their
representative for this Agreement and the Escrow Agreement and as
attorney-in-fact and agent for and on behalf of each Shareholder (in such
capacity, the "Shareholder Representative"). Said power of attorney shall be
coupled with an interest and shall be irrevocable.
SECTION 4.02. Authorization. Each Shareholder hereby authorizes the
Shareholder Representative to represent each Shareholder, and their successors,
with respect to all matters arising under this Agreement or any other
Transaction Documents, including, without limitation, (i) to take all action
necessary in connection with the indemnification obligations of the Shareholders
under Article VII, including, the defense or settlement of any claims and the
making of payments with respect thereto, (ii) to give and receive all notices
required to be given under this Agreement or any other Transaction Document and
(iii) to take any and all additional action as is contemplated to be taken by or
on behalf of the Shareholders by the Shareholder Representative pursuant to this
Agreement.
SECTION 4.03. Replacement. In the event that Xxxxxx dies, becomes
unable to perform his responsibilities as Shareholder Representative or resigns
from such position, Xxxxx shall automatically become the Shareholder
Representative. In the event that, following his appointment as Shareholder
Representative, Xxxxx dies, becomes unable to perform his responsibilities as
Shareholder Representative or resigns from such position, the Shareholders
having an aggregate of 50% ownership interest in the Company immediately prior
to the Merger (or the respective successors in interest to the Shareholders)
shall select another representative to fill such vacancy and such substituted
Shareholder Representative shall be deemed to be the Shareholder Representative
for all purposes of this Agreement and the Escrow Agreement. Upon any change in
the Shareholder Representative, the Shareholders shall provide written notice to
Parent, Merger Sub and Surviving Corporation shall indicate the identity of the
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substitute Shareholder Representative, who shall have agreed to the terms of
this Section as if he or she were a party hereto.
SECTION 4.04. Powers. All decisions and actions by the Shareholder
Representative, including, without limitation, any agreement between the
Shareholder Representatives and the Parent, Merger Sub or Surviving Corporation
relating to the indemnification obligations of the Shareholders under Section
VII, including, the defense or settlement of any claims and the making of
payments with respect hereto, shall be binding upon all the Shareholders as if
they had taken such action themselves, and no Shareholder shall have the right
to object, dissent, protest or otherwise contest the same. The Shareholder
Representative shall incur no liability to the Shareholders with respect to any
action taken or suffered by the Shareholder Representative in reliance upon any
notice, direction, instruction, consent, statement or other documents believed
by him or her to be genuinely and duly authorized, nor for any other action or
inaction with respect to the indemnification obligations of the Shareholder
under Article VII, including the defense or settlement of any claims and the
making of payments with respect thereto, except to the extent resulting from the
Shareholder Representative's own willful misconduct or negligence. The
Shareholder Representative may, in all questions arising under this Agreement or
any Transaction Document rely on the advice of counsel, and for anything done,
omitted or suffered in good faith by the Shareholder Representative shall not be
liable to the Shareholders.
SECTION 4.05. Reliance. Parent, Merger Sub and the Surviving
Corporation are hereby authorized to rely conclusively on the actions,
instructions and decisions of the Shareholder Representative with respect to
this Agreement and the Escrow Agreement, including, without limitation, the
indemnification obligations of the Shareholders under Article VII, including the
defense or settlement of any claims or the making of payments by the Shareholder
Representative hereunder, and no party hereunder shall have any cause of action
against Parent, Merger Sub or the Surviving Corporation to the extent such
parties have relied upon the actions, instructions or decisions of the
Shareholder Representative. If the Shareholder Representative undertakes any
action hereunder in his capacity as a Shareholder Representative, the
Shareholder Representative shall be deemed to make a representation to each of
the Company, Parent, Merger Sub, and the Surviving Corporation that the
Shareholder Representative is authorized hereunder to undertake such action. The
Shareholder Representative agrees to indemnify and hold harmless each of the
Company, Parent, the Surviving Corporation and Merger Sub for any Damages
suffered by such party as a result of the reliance by such party on the actions
of the Shareholder Representative hereunder. For the avoidance of doubt, it is
hereby acknowledged that the indemnity obligation under this Section is not
subject to the limitations set forth in Section 7.02.
SECTION 4.06. Expenses. The Shareholders acknowledge and agree that the
Shareholder Representative may incur costs and expenses on behalf of the
Shareholders in his capacity as Shareholder Representative, including costs and
fees for services of professionals provided to the Shareholder Representative
acting in such capacity. Each of the Shareholders agrees to pay the Shareholder
Representative, promptly upon demand by the Shareholder Representative
therefore, a percentage of any expenses equal to such Shareholder's ownership
interest in the Company immediately prior to the Closing.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Public Announcements. The initial press release regarding
the Merger shall be a joint press release mutually agreed upon, and thereafter
Parent and the Shareholders will consult with one another before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby, including the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable Law or by obligations pursuant to any
listing agreement with the NASD Over-the-Counter Bulletin Board, as determined
in good faith by such party.
SECTION 5.02. Conveyance Taxes. Parent, Merger Sub, the Company and the
Surviving Corporation shall each cooperate with the others in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time, and the Surviving
Corporation shall be responsible for the payment of all such taxes and fees.
SECTION 5.03. Takeover Statutes. If any limitations on business
combinations contained in any restrictive provision of any "fair price,"
"moratorium," "control share acquisition," "interested stockholder" or other
similar anti-takeover statute or regulation (a "Takeover Statute") is or may
become applicable to the Merger or the other transactions contemplated by this
Agreement, the Company and the board of directors of the Company shall grant all
approvals and use their reasonable best efforts to take all actions as are
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such Takeover Statute on such transactions.
SECTION 5.04. Additional Purchases of Securities by Parent.
(a) Parent agrees with and covenants to the Shareholders that,
following the Effective Time, it will purchase from the Surviving Corporation,
(i) an additional Debenture in the principal amount of at least Two Hundred
Twenty Five Thousand Dollars ($225,000) on or before April 30, 2006, (ii) an
additional two hundred twenty five (225) shares of Series B Preferred Stock at a
cost of Two Hundred Twenty Five Thousand Dollars ($225,000) on or before April
30, 2006.
(b) Parent further agrees with and covenants to the Shareholders that
if the Surviving Corporation generates sales (including invoices given in good
faith) of at least One Million Dollars ($1,000,000) in the period beginning on
January 1, 2006 and ending on the close of business on September 30, 2006, then
upon ten (10) days' written notice from the Shareholder Representative, Parent
will purchase from the Surviving Corporation, in addition to the securities
described in Section 5.04(a), (i) an additional Debenture in the principal
amount of at least Two
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Hundred Thousand Dollars ($200,000) on or before December 31, 2006 at a purchase
price equal to such principal amount, and (ii) an additional two hundred (200)
shares of Series B Preferred Stock at a cost of Two Hundred Thousand Dollars
($200,000) on or before December 31, 2006.
(c) Each party hereto agrees that notwithstanding anything else in this
Agreement, the provisions of this Section 5.04 shall survive the Merger.
SECTION 5.05. Securities Matters.
(a) Each Shareholder acknowledges and agrees that "stop transfer"
instructions shall be placed against the shares of Series A Preferred Stock
issued in accordance with Section 1.07 on the transfer books of the Buyer's
stock transfer agent until such time as the shares of Series A Preferred Stock
and such shares are available for resale in accordance with all applicable law
and the terms of the Shareholders' Agreement and that the certificates
evidencing the shares of Series A Preferred Stock and such shares shall bear the
following legend:
THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES
LAWS AND NEITHER THE SHARES NOR ANY INTEREST THEREIN MAY BE
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND IN
THE ABSENCE OF REGISTRATION OR AN EXEMPTION FROM REGISTRATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE TRANSFER OF
THE SHARES IS ALSO SUBJECT TO THE RESTRICTIONS SET FORTH IN
THAT CERTAIN SHAREHOLDERS' AGREEMENT DATED JANUARY 6, 2006
BETWEEN THE COMPANY AND THE REGISTERED OWNER OF THE SHARES.
(b) Parent acknowledges and agrees that the Debenture, the
Administrative Services Debenture, and certificates evidencing the shares of
Series B Preferred Stock or Common Stock shall bear the following legend:
THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES
LAWS AND NEITHER THE SHARES NOR ANY INTEREST THEREIN MAY BE
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND THE
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RULES AND REGULATIONS THEREUNDER AND IN THE ABSENCE OF
REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER ANY
APPLICABLE STATE SECURITIES LAWS.
SECTION 5.06. Insurability of Xxxxxx. Xxxxxx hereby represents and
warranties that he is in good physical health, and shall qualify to underwritten
at a standard rate for a "key man" life insurance policy to be purchased by the
Surviving Corporation, naming the Surviving Corporation as the beneficiary.
Xxxxxx hereby agrees to use commercially reasonable efforts to assist the
Company in applying for such a policy.
SECTION 5.07. Non-Disclosure of Confidential Information and
Non-Solicitation.
(a) Each Shareholder acknowledges that such Shareholder has been
informed that it is the policy of the Company, and will be a policy of the
Surviving Corporation, to maintain as secret and confidential all information
(i) relating to the products, processes, designs and/or
systems used by the Company, the Surviving Corporation and their
respective Affiliates; and
(ii) relating to the customers and employees of the Company,
the Surviving Corporation and their respective affiliates (all such
information hereafter referred to as "confidential information"), and
the Executive further acknowledges that such confidential information
is of great value to the Company.
(b) The parties recognize that, by reason of their interests and, as
applicable, employment with the Company, each Shareholder has acquired
confidential information as aforesaid. The parties confirm that it is reasonably
necessary to protect the Surviving Corporation's goodwill, and accordingly each
Shareholder does agree that such Shareholder will not directly or indirectly
(except where authorized by the Board of Directors of the Surviving Corporation
for the benefit of the Surviving Corporation):
(i) At any time prior to the third (3rd) anniversary of this
Agreement, divulge to any persons, firms or corporations, other than
the Surviving Corporation (hereinafter referred to collectively as
"third parties"), or use or allow or cause or authorize any third
parties to use, any such confidential information, except in
furtherance of the business of the Surviving Corporation;
(ii) At any time prior to the third (3rd) anniversary of this
Agreement, solicit or cause or authorize directly or indirectly to be
solicited, for or on behalf of such Shareholder or third parties, any
business from persons, firms, corporations or other entities who were
at any time prior to the third (3rd) anniversary of this Agreement,
customers of the Surviving Corporation or its affiliates, except in
furtherance of the business of the Surviving Corporation and further
except in the case of a product or service not in competition with a
product or service of the Surviving Corporation;
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(iii) At any time prior to the third (3rd) anniversary of this
Agreement, accept or cause or authorize directly or indirectly to be
accepted, for or on behalf of such Shareholder or third parties, any
business from any such customers of the Company, the Surviving
Corporation or their respective affiliates, except in furtherance of
the business of the Surviving Corporation and further except in the
case of a product or service not in competition with a product or
service of the Surviving Corporation;
(iv) At any time prior to the third (3rd) anniversary of this
Agreement, solicit or cause or authorize directly or indirectly to be
solicited for employment, for or on behalf of such Shareholder or third
parties, any persons (excluding any individuals residing in the same
immediate primary residence as such Shareholder, and/or such
Shareholder's immediate family) who were at any time prior to the third
(3rd) anniversary of this Agreement, employees of the Company, the
Surviving Corporation or their respective affiliates; and
(v) At any time prior to the third (3rd) anniversary of this
Agreement, employ or cause or authorize directly or indirectly to be
employed, for or on behalf of such Shareholder or third parties, any
such employees of the Company or its affiliates.
(c) Each Shareholder agrees that, upon the consummation of the Merger,
such Shareholder shall forthwith deliver up to the Surviving Corporation any and
all records, drawings, notebooks, keys and other documents and material, and
copies thereof in his or her possession or under his control which is the
property of the Company or which relate to any confidential information or any
discoveries of the Company.
(d) Each Shareholder agrees that any breach or threatened breach by
such Shareholder of any provision of this Section 5.07 shall entitle the
Surviving Corporation, in addition to any other legal remedies available to it,
to enjoin such breach or threatened breach through any court of competent
jurisdiction. The parties understand and intend that each restriction agreed to
by a Shareholder herein above shall be construed as separable and divisible from
every other restriction, and that the unenforceability, in whole or in part, of
any restriction will not affect the enforceability of the remaining
restrictions, and that one or more or all of such restrictions may be enforced
in whole or in part as the circumstances warrant.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Governmental Actions. There shall not have been instituted, pending
or threatened any action or proceeding (or any investigation or other inquiry
that is reasonably likely to result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, United
States or non-United States, that is reasonably likely to result in an order,
nor
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shall there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, or any
other legal restraint (i) preventing or seeking to prevent consummation of the
Merger or (ii) as a condition to the obligations of Parent and Merger Sub,
prohibiting or seeking to prohibit, or limiting or seeking to limit, Parent from
exercising all material rights and privileges pertaining to its equity ownership
in the Surviving Corporation or any investor in Parent from owning and
exercising all material rights and privileges pertaining to its ownership of its
interest therein or the ownership in Parent, or compelling or seeking to compel
Parent to dispose of or hold separate all or any material portion of the
business or assets of Parent (including the Surviving Corporation), as a result
of the Merger or the transactions contemplated by this Agreement;
(b) Employment Agreements. (i) Xxxxxx shall have executed the Xxxxxx
Employment Agreement and delivered it to the Merger Sub, to be held by the
Merger Sub and released to the Surviving Corporation subject only to the
effectiveness of the Merger; and (ii) Xxxxx shall have executed the Xxxxx
Employment Agreement and delivered it to the Merger Sub, to be held by the
Merger Sub and released to the Surviving Corporation subject only to the
effectiveness of the Merger;
(c) Shareholders' Agreement. (i) Each Shareholder and the Merger Sub
shall have entered into a Shareholders' Agreement substantially in the form
attached hereto as Exhibit E (the "Shareholders' Agreement"); and
(d) Illegality. No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) at and as of the
Effective Time, with the same force and effect as if made at and as of the
Effective Time, except for (i) changes contemplated by this Agreement, or (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date), and
Parent and Merger Sub shall have received a certificate of the Company to such
effect signed by the Chief Executive Officer of the Company;
(b) Agreements and Covenants. The Company shall in all material
respects have performed or complied with the agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the Chief Executive Officer of the Company;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by the Company for the
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authorization, execution and delivery of this Agreement and the consummation by
it of the transactions contemplated hereby shall have been obtained and made by
the Company, including any consents required pursuant to each of the customer
and supplier contracts listed on Schedule 6.02(c) hereto, except where the
failure to receive such consents, waivers, approvals, authorizations or orders
would not, individually or in the aggregate with all other such failures, have a
Material Adverse Effect on the Company or Parent; provided, however, that the
failure to obtain any consent required pursuant to any contract listed on
Schedule 6.02(c) hereto shall be deemed by the parties hereto to constitute such
a Material Adverse Effect;
(d) Secretary's Certificate. Parent and Merger Sub shall have received
a Secretary's Certificate of the Company in form and substance reasonably
satisfactory to Parent and Merger Sub certifying, among other things, the
Company's organizational documents and resolutions of its board of directors
relating to the approval of this Agreement and the transactions contemplated
hereby; and
(e) Shareholders shall have delivered certificates for the Shares for
surrender to the Company for cancellation in accordance with Section 1.07 of
this Agreement upon the consummation of the Merger.
SECTION 6.03. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and correct
in all respects (without for this purpose giving effect to qualifications of
materiality contained in such representations and warranties) at and as of the
Effective Time, with the same force and effect as if made at and as of the
Effective Time, except for (i) changes contemplated by this Agreement and (ii)
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date), and
the Company and Shareholders shall have received a certificate to such effect
signed by the Chief Executive Officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall in all
material respects have performed or complied with the agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company and Shareholders shall have received a
certificate of Parent and Merger Sub to such effect signed by the Chief
Executive Officer or President of Merger Sub;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Parent or Merger Sub for the authorization, execution and delivery of
this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent or Merger Sub, except where
the failure to receive such consents, waivers, approvals, authorizations or
orders would not, individually or in the aggregate with all other such failures,
have a Material Adverse Effect on the Merger Sub or Parent;
(d) Sale of Series B Preferred Stock and Debentures. At or prior to the
Closing, Parent shall purchase from the Merger Sub (i) three hundred twenty five
(325) shares of Series B
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Preferred Stock of the Merger Sub for an aggregate of Three Hundred Twenty Five
Thousand Dollars ($325,000) and (ii) a Debenture in a principal amount of Three
Hundred Sixty Thousand Dollars ($360,000) at par, which shall automatically
convert into an obligation of the Surviving Corporation at the Effective Time;
and
(e) Secretary's Certificate. The Company and Shareholders shall have
received a Secretary's Certificate of the Merger Sub in form and substance
reasonably satisfactory to the Company certifying, among other things, the
Merger Sub's organizational documents and resolutions of its board of directors
relating to the approval of this Agreement and the transactions contemplated
hereby.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the parties herein contained shall survive the
Closing for a period of three (3) years, except in the case of representations
contained Section 2.15, which shall survive until the expiration of the
applicable statute of limitations, notwithstanding any investigation at any time
made by or on behalf of the other party. Any claims for indemnification in
accordance with this Article VII with respect to any representation or warranty
must be made (and will be null and void unless made) on or before such date
(except in the case of representations contained in Section 2.03 and 2.15, which
must be made within six (6) months following the expiration of the applicable
statute of limitations).
SECTION 7.02. Indemnification by the Shareholders and the Company.
(a) General. The Major Shareholders and the Company, jointly and
severally, hereby agree to indemnify and hold the Parent and the Merger Sub and
their respective successors, assigns, officers, directors, stockholders,
affiliates, employees, representatives and other agents harmless from and
against any and all claims, liabilities, taxes, losses, damages or injuries,
together with costs and expenses, including reasonable legal fees ("Damages"),
arising out of or resulting from (i) any breach, misrepresentation or material
omission of the representations and warranties made by any Shareholders or the
Company in this Agreement or in any Schedule or Exhibit hereto or other
documents delivered in connection herewith, (ii) any breach in any material
respect by any Shareholder or the Company, unless waived in writing by Parent,
of any covenant or agreement contained in or arising out of this Agreement, or
any other agreement delivered in connection herewith on the Closing Date, and
(iii) any and all sales, use, value added, stamp, transfer or other similar
taxes arising from the transactions contemplated herein, (iv) any and all
liabilities of the Company arising, existing or accruing prior to the Closing
Date (including liability for Taxes), except those liabilities for which
adequate financial reserves have been reflected in the Financial Statements.
Each Shareholder and the Company, jointly and severally, hereby agrees to
indemnify and hold the Parent and the Merger Sub and its successors, assigns,
officers, directors, stockholders, affiliates, employees, representatives and
other agents harmless from and against any and all Damages, arising out of or
resulting from (i) any breach, misrepresentation or material omission of the
representations and warranties made
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by any Shareholder or the Company in this Agreement or other documents delivered
by any Shareholder or the Company in connection herewith and (ii) any breach in
any material respect by any Shareholder or the Company, unless waived in writing
by the Buyer, of any covenant or agreement of any Shareholder or the Company
contained in or arising out of this Agreement, or any other agreement delivered
by any Shareholder or the Company in connection herewith on the Closing Date.
(b) Limitation. Notwithstanding anything to the contrary herein, (x)
the aggregate liability of the Major Shareholders for Damages under this Article
VI shall not exceed One Million Five Hundred Thousand Dollars ($1,500,000) and
the liability of each Major Shareholder shall be joint and several; provided,
however, that there shall be no limitation of the aggregate liability of the
Major Shareholders for Damages relating to Taxes. Nothing in this Agreement
including this Section 7.02(b) shall limit or restrict the Parent or Merger
Sub's right to maintain or recover any amounts in connection with any action or
claim based upon fraudulent misrepresentation or deceit.
SECTION 7.03. Indemnification by Parent and Merger Sub.
(a) General. Parent and Merger Sub, jointly and severally, hereby agree
to indemnify and hold the Shareholders and the Company and their respective
successors, assigns, officers, directors, stockholders, affiliates, employees,
representatives and other agents harmless from and against any and all Damages,
arising out of or resulting from (i) any breach, misrepresentation or material
omission of the representations and warranties made by Parent or Merger Sub in
this Agreement or other documents delivered by Parent or Merger Sub in
connection herewith and (ii) any breach in any material respect by Parent or
Merger Sub, unless waived in writing by the Shareholder Representative, of any
covenant or agreement of Parent or Merger Sub contained in or arising out of
this Agreement (including, without limitation, the obligations of the Parent to
the Surviving Company pursuant to Section 5.04), or any other agreement
delivered by Parent or Merger Sub in connection herewith on the Closing Date.
(b) Limitation. Notwithstanding anything to the contrary herein, (x)
the aggregate liability of the Parent and Merger Sub for Damages under this
Article VII shall not exceed One Million Five Hundred Thousand Dollars
($1,500,000) and the liability of Parent and Merger Sub shall be joint and
several. Nothing in this Agreement including this Section 7.03(b) shall limit or
restrict the Shareholders' or Company's right to maintain or recover any amounts
in connection with any action or claim based upon fraudulent misrepresentation
or deceit.
SECTION 7.04. Procedure of Indemnification.
(a) Claim Notice. Any party claiming a right to indemnification
hereunder (the "Indemnified Party") shall give the other party from whom
indemnification is sought (the "Indemnifying Party") prompt written notice (a
"Claim Notice") of any claim, demand, action, suit, proceeding or discovery of
fact upon which the Indemnified Party intends to base a claim for
indemnification under this Article
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VII, which shall contain (x) a description (specifying in detail the facts and
circumstances with respect to such claim) and the amount (the "Claimed Amount")
of any Damages incurred or reasonably expected to be incurred by the Indemnified
Party, (y) a statement that the Indemnified Party is entitled to indemnification
under this Article VII for such Claimed Amount, and (z) a demand for payment;
provided, however, that no failure to give such Claim Notice shall excuse any
Indemnifying Party from any obligation hereunder except to the extent the
Indemnifying Party is materially prejudiced by such failure.
(b) Assistance. The Indemnified Party shall make available to the
Indemnifying Party and its counsel and accountants, all books and records of the
Indemnified Party relating to such action, suit or proceeding and the parties
agree to render to each other such assistance as may reasonably be requested in
order to insure the proper and adequate defense of any such action, suit or
proceeding.
(c) Assumption of Defense. Regarding claims asserted under this Section
7.04 and involving third party claims, within 20 days after delivery of the
Claim Notice, the Indemnifying Party may, upon written notice thereof to the
Indemnified Party, assume control of the defense of such suit or proceeding with
counsel reasonably satisfactory to the Indemnified Party; provided, however,
that the Indemnifying Party shall not be entitled to control and the Indemnified
Party shall be entitled to have sole control over any claim to the extent such
claim seeks an order, injunction or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or prospects of
the Indemnified Party or relates to Taxes reflected or to be reflected in a Tax
Return of the Indemnified Party, provided that the Indemnified Party shall
provide written notice to the Indemnifying Party of its election to assume
control over the defense of such claim pursuant to this Section 7.04. If the
Indemnifying Party does not so assume control of such defense within said 20 day
period, the Indemnified Party shall control such defense. The party not
controlling such defense (the "Non-controlling Party") shall be entitled to
participate therein at its own expense; provided that if the Indemnifying Party
assumes control of such defense and the Indemnified Party reasonably concludes
that the Indemnifying Party and the Indemnified Party have conflicting interests
or different defenses available with respect to such suit or proceeding, the
Indemnified Party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable fees and expenses of counsel to the Indemnified
Party being considered "Damages" for purposes of this Agreement. Except in a
case of such conflict, the party controlling such defense (the "Controlling
Party") shall keep the Non-controlling Party advised of the status of such suit
or proceeding and the defense thereof and shall consider in good faith
recommendations made by the Non-controlling Party with respect thereto. The
Non-controlling Party shall furnish the Controlling Party with such information
as it may have with respect to such suit or proceeding (including copies of any
summons, complaint or other pleading which may have been served on such party
and any written claim, demand, invoice, billing or other document evidencing or
asserting the same) and shall otherwise cooperate with and assist the
Controlling Party in the defense of such suit or proceeding. The Indemnified
Party shall not agree to any settlement of or consent to the entry of any
judgment arising from any suit or proceeding without the consent of the
Indemnifying Party which consent shall not be unreasonably withheld or delayed.
The Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld or
delayed; provided that the consent of the Indemnified Party shall not be
required if the Indemnifying Party agrees in writing to pay any amounts payable
pursuant to such settlement or judgment and such settlement or judgment
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includes a complete release of the Indemnified Party from further liability and
has no other adverse effect on the Indemnified Party.
(d) Indemnity Response. Within 20 days after delivery of a Claim
Notice, the Indemnifying Party shall deliver to the Indemnified Party a written
response (the "Response") in which the Indemnifying Party shall: (x) agree that
the Indemnified Party is entitled to receive promptly all of the Claimed Amount,
by check or by wire transfer), (y) agree that the Indemnified Party is entitled
to receive part, but not all, of the Claimed Amount (the "Agreed Amount") (in
which case the Response shall be accompanied by a payment by the Indemnifying
Party to the Indemnified Party of the Agreed Amount, by check or by wire
transfer), or (z) dispute that the Indemnified Party is entitled to receive any
of the Claimed Amount. If the Indemnifying Party in the Response disputes its
liability for all or part of the Claimed Amount, the Response (if one has been
provided) shall set forth in detail the basis for the objection.
(e) Minimum Threshold For Indemnification. Notwithstanding any
provision to the contrary contained in this Agreement:
(i) no party shall be obligated to indemnify any
other party for any Damages pursuant to this Article VII unless the
total of all Damages payable by such party shall equal, in the
aggregate, Five Thousand Dollars ($5,000); provided, however, if such
Damages do, in the aggregate, exceed Five Thousand Dollars ($5,000),
then the Indemnifying Party shall be liable for the full amount of such
Damages including such Five Thousand Dollars ($5,000); and
(ii) any amounts which any party hereto may be
obligated to pay another party hereto shall be reduced by an amount
equal to any insurance actually received by the Indemnified Party with
respect to such Damages.
(f) Subrogation. In the event that the Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Article VII, the
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the claim to which such
indemnification relates.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and
Agreements.
(a) The representations, warranties and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers or directors, whether prior
to or after the execution of this Agreement.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule shall be deemed disclosed with respect to each other
section therein as to which such disclosure is relevant provided that such
relevance is reasonably apparent. Disclosure of any matter in the Company
Disclosure Schedule shall not be deemed an admission
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that such matter is material. No statement contained in any certificate or
schedule required to be furnished by any party hereto pursuant to the provisions
of this Agreement, including the Company Disclosure Schedule shall contain any
untrue statement of material fact.
SECTION 8.02. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally, against written receipt thereof,
or by overnight courier to the parties at the following addresses or sent by
electronic transmission, with confirmation received, to the telecopy numbers
specified below (or at such other address or telecopy number for a party as
shall be specified by like notice):
(a) If to Parent, Merger Sub or Surviving Company:
iVoice, Inc.
000 Xxxxxxx 00
Xxxxxxx, Xxx Xxxxxx
00000
Attn: Xxxxx Xxxxxxx
Telecopy: (000) 000-0000
Confirm: (000) 000-0000
With a copy to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
Confirm: (000) 000-0000
(b) If to the Company:
Xxxxxx Pharmaceuticals Ltd.
000 Xxxx 00xx Xxxxxx - Xxxxx 0X
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Xx.
Telecopy: (000) 000-0000
Confirm: (000) 000-0000
With a copy to:
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopy: 000-000-0000
Confirm: 000-000-0000
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(c) If to the Shareholders, then to the address listed on the
applicable Shareholder's counterpart signature page.
SECTION 8.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "dollars" or "$" means United States dollars;
(e) "knowledge" or "best knowledge" means, with respect to any matter
in question, that the Responsible Officers of the Company or Parent or Merger
Sub, as the case may be, have or at any time had actual knowledge of such
matters. "Responsible Officers" for purposes of this definition means the Chief
Executive Officer, the President, any Executive or Senior Vice President or
Corporate Vice President, the Chief Financial Officer or the General Counsel of
any such person;
(f) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, other entity
or group (as defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by at any time prior to the Effective Time. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. Any party hereto may with respect to any other
party hereto (a) extend the time for the performance of any of the obligations
or other acts, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any of the agreements or conditions
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contained herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
SECTION 8.06. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. Severability.
(a) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon a determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 8.08. Entire Agreement. This Agreement, together with the other
Transaction Documents, constitutes the entire agreement and supersedes all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matters hereof and thereof, except as
otherwise expressly provided herein.
SECTION 8.09. Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that all or any of the rights of Parent
and/or Merger Sub hereunder may be assigned to any wholly-owned, direct or
indirect, subsidiary of Parent, provided that no such assignment shall relieve
the assigning party of its obligations hereunder.
SECTION 8.10. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Article VII (which is intended to be for the benefit of the indemnified
persons identified therein and may be enforced by such indemnified persons).
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York applicable to contracts
executed and fully performed within the State of New York.
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(b) Each of the parties hereto submits to the exclusive jurisdiction of
the state and federal courts of the United States located in the State of New
York with respect to any claim or cause of action arising out of this Agreement
or the transactions contemplated hereby.
(c) Each of the parties to this Agreement (i) consents to submit itself
to the personal jurisdiction of such court in the event that any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii)
agrees that it will not bring any action in relation to this Agreement, the
Merger or any of the other transactions contemplated by this Agreement in any
court other than such court in the State of New York.
SECTION 8.13. Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.15. Performance of Obligations. Unless otherwise previously
performed, Parent shall cause Merger Sub to perform all of its obligations set
forth in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Shareholders have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
IVOICE, INC.
By _____________________________
Name:
Title:
XXXXXX PHARMACEUTICALS, LTD.
(f/k/a iVoice Acquisition Corp.)
By _____________________________
Name:
Title:
XXXXXX PHARMACEUTICALS LTD.
By _____________________________
Name:
Title:
________________________________
XXXXXX X. XXXXXX, XX.
Address:
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax:
________________________________
XXXX X. XXXXX
Address:
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Fax:
-41-
________________________________
XXXXXXX X. XXXXXX
Address:
0 Xxxxxxx Xxxx
Xxxxx Xxxxxxxxx
Xxx Xxxxxx 00000
Fax:
________________________________
XXXX XXXXXXXX
Address:
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax:
________________________________
XXXX X. XXXXXXXX
Address:
0000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx
Xxxxxxxxxx 00000
Fax:
________________________________
XXXXXXX XXXXXXXXX
Address:
00 Xxxx 00xx Xxxxxx
Xxxxxx 0
Xxx Xxxx, Xxx Xxxx 00000
Fax:
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