Exhibit 10.39
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into as of this 30th day of July, 2002 by and among IMPROVENET, INC., a
Delaware corporation ("IMPV"), ETECHLOGIX, INC., an Arizona corporation
("ETECH"), ETECH ACQUISITION, INC., an Arizona corporation and a wholly owned
subsidiary of IMPV ("Merger Sub").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Arizona Revised Statutes (the "ARS"), IMPV, ETECH and
Merger Sub intend to enter into a business combination transaction whereby
the parties desire that IMPV acquire all of the outstanding capital stock
and equity interests of ETECH by means of a merger (the "Merger") of
Merger Sub with and into ETECH.
B. For federal income tax purposes, the parties intend that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). For accounting
purposes, the Merger is intended to be accounted for as a "purchase" under
United States generally accepted accounting principles ("GAAP").
C. The parties hereby set forth the terms, considerations and conditions
of the Merger.
NOW THEREFORE, in consideration of the promises, representations, mutual
covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger.
(a) At the Effective Time (as hereinafter defined) and subject to and
upon the terms and conditions of this Agreement, Merger Sub shall merge with and
into ETECH in accordance with the provisions of the ARS, the separate corporate
existence of Merger Sub shall cease and ETECH shall continue as the surviving
corporation (the "Surviving Corporation"). The "Effective Time" shall occur upon
the filing with the Arizona Corporation Commission of articles of merger (the
"Articles of Merger") substantially in the form of Exhibit A attached hereto and
executed in accordance with the applicable provisions of the ARS, or at such
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later time as may be agreed to by IMPV and ETECH and specified in the Articles
of Merger. Provided that this Agreement has not been terminated pursuant to
Article 10, the parties will cause the Articles of Merger to be filed with the
Arizona Corporation Commission at the Closing as described in Section 1.2
below).
(b) The Merger shall have the effects set forth in Title 10 Chapter 11
Article 1 of the ARS. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation. If, at any time after the
Effective Time, the Surviving Corporation considers or is advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties, or assets of either ETECH or Merger Sub, or otherwise to
carry out the intent and purposes of this Agreement, the officers and directors
of the Surviving Corporation will be authorized to execute and deliver, in the
name and on behalf of each of ETECH and Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of ETECH and Merger Sub, all such other actions and things as the Board
of Directors of the Surviving Corporation may determine to be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the intent and purposes of this Agreement.
1.2 Closing Procedures.
(a) Closing Date.
The closing of the Merger (the "Closing") shall take place (i) at
10:00 a.m. (Pacific Daylight Time) at the offices of IMPV, within two business
days following the date on which the last of the conditions set forth in Article
7 (other than the filing of the Articles of Merger and other than any such
conditions which by their terms are not capable of being satisfied until the
Closing Date (as hereinafter defined) or thereafter) is satisfied or, when
permissible, waived, or (ii) on such other date and at such other time or place
as is mutually agreed by the parties hereto. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."
(b) Closing Deliveries.
At Closing, IMPV and ETECH shall each deliver any undelivered items
of the items set forth in Section 8, and ETECH shall deliver the $250,000
balance of the New Capital (as defined below).
(c) Effective Time.
Upon (i) confirmation of receipt by IMPV of the $250,000 balance of
the New Capital, and (ii) IMPV's receipt of evidence reasonably satisfactory to
it that the total amount of the Buyback Price (as defined below) payable in
aggregate to all holders of Buyback Interests (as defined below) who tendered
their securities in the tender offer related to the Share Buyback (the "Buyback
Amount") is immediately available for payment by IMPV, IMPV shall cause the
Articles of Merger to be filed with the Arizona Corporation Commission.
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(d) Share Buyback.
Immediately after confirmation to IMPV by telephone or facsimile
that the Articles of Merger have been filed, the Buyback Price shall be
irrevocably paid into escrow for the exclusive benefit of the tendering holders
of Buyback Interests, and for the exclusive purpose of paying the Buyback Price
to such holders.
(e) Reconstitution of the Board of Directors.
Upon written confirmation to IMPV and ETECH that the Buyback
Amount has been received in escrow (the "Buyback Closing"), the letters of
resignation described in Section 2.1 shall become effective and the Board of
Directors shall be reconstituted as described in Section 2.1.
1.3 Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action
on the part of IMPV, Merger Sub, ETECH or the holders of any of their respective
securities:
(a) Each share of common stock of ETECH, no par value per share
("ETECH Common Stock"), outstanding immediately prior to the Effective Time
shall be automatically converted (subject to Sections 1.3(e), 1.4 and 1.5 below)
into the right to receive, and shall be exchangeable for 5,555.555556 shares
(the "Common Stock Exchange Ratio") of validly issued, fully paid and
non-assessable share(s) of the common stock of IMPV, $.001 par value per share
(the "IMPV Common Stock").
(b) Each unexpired option to purchase ETECH Common Stock that is
outstanding at the Effective Time, whether or not exercisable, shall
automatically and without any action on the part of the holder thereof be
converted into an exercisable option to purchase a number of shares of IMPV
Common Stock equal to the number of shares of ETECH Common Stock that could be
purchased under such option multiplied by 5,555.555556, at a price per share of
IMPV Common Stock equal to the per share exercise price of $0.05.
(c) Each share of Common Stock of Merger Sub (the "Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Following the Effective Time, each share
evidencing ownership of such shares of Merger Sub Common Stock shall evidence
ownership of such shares of capital stock of the Surviving Corporation.
(d) For purposes of this Agreement, "Merger Consideration" shall mean,
with respect to the conversion of the ETECH Common Stock, the Convertible Loans
and options to acquire ETECH Common Stock (collectively, the "ETECH Equity
Interests") into the right to receive IMPV Common Stock and options to acquire
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IMPV Common Stock, the number of shares of IMPV Common Stock or options to
acquire IMPV Common Stock into which the ETECH Equity Interests are converted
pursuant to Sections 1.3(a), (b) and (c) of this Agreement.
(e) Notwithstanding the provisions contained in Sections 1.3(a),
1.3(b), 1.3(c), 1.3(d) and 1.4 of this Agreement, the maximum aggregate number
(the "Cap") of shares of IMPV Common Stock that IMPV shall be obligated to issue
in exchange for or pursuant to the Merged Interests (as defined below) shall be
37,500,000. For purposes of this Agreement, the "Merged Interests" shall consist
of all shares of ETECH Common Stock outstanding as of immediately prior to the
Effective Time, and any option outstanding immediately prior to the Effective
Time, whether or not then convertible into or exercisable for shares of ETECH
Common Stock, any warrant, convertible note or security or any other class or
type of equity interest or right to acquire an equity interest in ETECH. If the
number of shares of IMPV Common Stock that IMPV would, but for this Section
1.3(e), be required to issue under this Agreement in exchange for or pursuant to
the Merged Interests exceeds the Cap, then the number of shares of IMPV Common
Stock that IMPV shall be required to issue to each holder of any Merged Interest
shall be reduced proportionately based upon the relative number of shares of
IMPV Common Stock to which each such holder would otherwise be entitled upon the
full exchange, conversion or exercise of all Merged Interests held by such
holder.
1.4 Exchange of Share Certificates; Fractional Shares.
(a) As soon as practicable after the Effective Time and upon the
surrender to IMPV of any certificate (a "Certificate") that immediately prior to
the Closing represented any shares of ETECH Common Stock, IMPV shall, subject to
Section 1.4(d) and Article 11 hereof, if such Certificate represented shares of
stock which were converted in the Merger into the right to receive the Merger
Consideration, distribute to the person in whose name such Certificate shall
have been issued, a certificate registered in the name of such person
representing the Merger Consideration payable in respect of such shares. Each
Certificate so surrendered shall forthwith be cancelled.
(b) If certificates for shares of IMPV Common Stock are to be issued
in a name other than that in which the Certificates surrendered in exchange
therefor are registered, it will be a condition of the issuance thereof that the
Certificates so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the persons requesting such exchange will have paid
to IMPV or any agent designated by it any transfer or other taxes required by
reason of the issuance of certificates for shares of IMPV Common Stock in any
name other than that of the registered holder of the Certificates surrendered,
or established to the satisfaction of IMPV or any agent designated by it that
such tax has been paid or is not payable.
(c) In the event that any Certificates have been lost, stolen or
destroyed, IMPV shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, certificates representing shares of IMPV Common Stock into which the
shares of ETECH Common Stock represented by such Certificates were converted
pursuant to Section 1.3; provided, however, that IMPV may, in its discretion and
as a condition precedent to the issuance of such certificates representing
shares of IMPV Common Stock, require the owner of such lost, stolen or destroyed
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Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against IMPV or the Surviving
Corporation or agent designated by IMPV with respect to the Certificates alleged
to have been lost, stolen or destroyed.
(d) At and after the Closing, there shall be no transfers on the stock
transfer books of the Surviving Corporation of shares of ETECH Common Stock.
Each share of IMPV Common Stock into which shares of ETECH Common Stock shall be
converted in the Merger shall be deemed to have been issued on the Closing Date.
(e) Notwithstanding any other provision of this Agreement, no
certificates or scrip for fractional shares of IMPV Common Stock shall be issued
in the Merger and no IMPV Common Stock dividend, stock split or interest shall
relate to any fractional security, and such fractional interests shall not
entitle the owner thereof to vote or to any other rights of a security holder.
In lieu of any such fractional shares, each holder of shares of ETECH Common
Stock and ETECH Preferred Stock who would otherwise have been entitled to
receive a fraction of a share of IMPV Common Stock upon surrender of
certificates for exchange pursuant to this Article shall be entitled to receive
from IMPV one share of IMPV Common Stock.
(f) As soon as practicable after the Closing, IMPV shall deliver
notice to each holder of an unexpired option to purchase ETECH Common Stock of
the conversion of such option.
1.5 Tax-Free Merger.
It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368 of the Code. The parties
hereto adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
Accordingly, both prior to and after the Closing Date, each party's books and
records shall be maintained and federal, state and local income tax returns and
schedules thereto shall be filed in a manner consistent with the Merger being
qualified as a tax-free merger under Section 368(a) of the Code (unless a court
of competent jurisdiction renders a determination (as defined in Section
1313(a)(1) of the Code) that the Merger does not qualify as such). Each party
shall provide to each other such information, reports, returns or schedules as
may be reasonably required to assist such party in accounting for reporting the
Merger being so qualified.
1.6 Taking Necessary Action.
If at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with all right, title and possession to all assets,
property, rights, privileges, powers and franchises of ETECH and Merger Sub, the
officers and directors of ETECH, IMPV and Merger Sub will take all such lawful
and necessary action, so long as such action is consistent with this Agreement.
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ARTICLE 2
ADDITIONAL TERMS
2.1 Board of Directors.
On the date hereof or as soon as practicable hereafter, five directors
of IMPV shall deliver to the Chairman of the IMPV Board of Directors letters of
resignation, to be effective at, and on condition of, the Buyback Closing. After
the effectiveness of such letters of resignation, the remaining director(s)
shall appoint Xxxxxxx X. Xxxxxx, Homey J. Farsi and Xxxxx Xxxxx (the "Appointed
Directors") to fill the vacancies left by such resignations. The Appointed
Directors shall be appointed to hold office until a successor is properly
elected and qualified. All existing officers of IMPV will resign their current
positions immediately after the effectiveness of such letters of resignation.
These resignations shall constitute Terminations without Cause as described in
the Change of Control Agreements held by Xxx Xxxxxx, Xxx Xxxxxx and Xxxx Xxxxxx.
Xxxxxxxxx payments to be made under the Change of Control Agreements are deemed
to be liabilities of IMPV for which IMPV shall make reasonable provision
pursuant to Section 5.12, are conditional upon the Effective Time and shall be
paid as soon as practicable after the Effective Time.
2.2 Share Buyback.
(a) Upon the execution of this Agreement IMPV shall take all necessary
and appropriate actions to initiate a share buyback (the "Share Buyback") for
the benefit of the IMPV stockholders who held their shares before the Effective
Time and all holders of any option, warrant, convertible note or security or any
other class or type of equity interest or right to acquire an equity interest in
IMPV (the "Prior IMPV Shareholders"). For purposes of this Agreement, the
"Buyback Interests" shall consist of all shares of IMPV Common Stock outstanding
as of the time of the Share Buyback, and any option outstanding as of the time
of the Share Buyback that is convertible into or exercisable for shares of IMPV
Common Stock at an exercise price equal to or less than $0.15 per share, any
unexpired warrant as of the time of the Share Buyback that is convertible into
or exercisable for shares of IMPV Common Stock at a strike price equal to or
less than $0.15 per share, any convertible note or security or any other class
or type of equity interest or right to acquire an equity interest in IMPV.
Simultaneously with the signing hereof, each of the ETECH stockholders, option
holders and any others to receive the Merger Consideration (the "New IMPV
Shareholders") shall deliver an agreement (a "Share Buyback Waiver") in the form
attached hereto as Exhibit B, agreeing not to participate in the Share Buyback.
Through the Share Buyback, IMPV will offer to purchase, for a twenty (20)
business day period, the shares of IMPV Common Stock of the Prior IMPV
Shareholders at a price per share of IMPV Common Stock equal to the number
represented by (X) IMPV's cash balance at the Closing including the New Capital
of $500,000 (as defined below), reduced by (i) the amount of cash required to
pay all liabilities as required pursuant to Section 5.12; (ii) $100,000 and
(iii) by the amount of any shortfall in the balance of IMPV's collectible
accounts receivable aged no more than 120 days, net of allowances for
uncollectible accounts (the "Collectible Accounts Receivable") at Closing below
$500,000, based on IMPV's estimate on the Buyback Pricing Date, divided by (Y)
the number of shares of IMPV Common Stock represented by the Buyback Interests
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(the "Buyback Price"). The Buyback Pricing Date shall be the closest practicable
date preceding the printing of the final tender offer statement to be used in
connection with the Share Buyback (the "Tender Offer Statement"). Simultaneously
with the signing hereof, holders of shares of IMPV Common Stock held by Alta
Partners, August Capital and ARCH, and each director of IMPV, shall agree to
tender their shares to IMPV in the Share Buyback.
(b) IMPV and ETECH shall use their reasonable best efforts to take any
action required to be taken under applicable state blue sky or securities laws
in connection with the Share Buyback pursuant hereto; provided, ETECH shall
provide IMPV its reasonable cooperation and assistance in providing information
respecting ETECH as IMPV shall reasonably require in order to assure that the
Share Buyback meets all requirements of applicable state and federal securities
laws and in order to permit IMPV to make such filings, or obtain such permits or
qualifications, as may be required in connection therewith, including
preparation of the Tender Offer Statement. IMPV and ETECH shall promptly furnish
to each other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with the
preceding sentences. The information provided and to be provided by IMPV and
ETECH, respectively, for use in the Share Buyback shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) Notwithstanding any provision to the contrary contained herein,
IMPV represents that, to the best of its knowledge, the total number of shares
of IMPV Common Stock represented by the Buyback Interests shall not exceed
18,004,374.
(d) Notwithstanding anything to the contrary contained herein, the
Buyback Closing is expressly conditioned upon the Closing of this Agreement, and
the Closing of this Agreement is expressly conditioned on the Buyback Closing.
2.3 New Capital. Deposit. Break-Up Fee.
ETECH shall secure total capital of $500,000 (the "New Capital"),
which will be funded to IMPV as follows:
(a) A deposit of $150,000 of the New Capital shall be provided by
ETECH upon execution of the Agreement; and an additional $100,000 deposit shall
be provided no later than August 15, 2002 (the "Deposit"). The Deposit shall not
be refundable unless the Agreement fails to close because (i) of a failure by
IMPV to satisfy any condition of the Closing in the Agreement applicable to it
(other than as a result of a breach of this Agreement by ETECH), (ii) IMPV has
received an Alternate Proposal (as defined in Section 5.6) and has elected to
accept it; or (iii) IMPV fails to receive a fairness opinion as set forth in
Section 7.1(k) or Section 7.1(m). If IMPV fails to close the Agreement because
it has elected to accept a superior proposal, in addition to refunding the
Deposit, it shall pay to ETECH a fee of $250,000 (the "Break-up Fee."). Should
ETECH be unable to provide the additional $100,000 deposit by August 15, 2002,
the initial deposit of $150,000 shall not be refunded.
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(b) Funding of $250,000 of the New Capital shall be made by ETECH upon
Closing of the Agreement as set forth in Section 1.2(b). Funding of this
$250,000 of New Capital is expressly conditioned upon the Closing of the
Agreement and the completion of all other steps necessary to complete the Share
Buyback. If this Agreement fails to close under circumstances described in
Clause (ii) of Section 2.3(a), then the sole remedy of ETECH shall be the return
of the Deposit and payment of the Break-up Fee.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ETECH
ETECH represents and warrants to IMPV as follows:
3.1 Organization, Capacity and Authority.
(a) ETECH has been duly organized and is validly existing and in good
standing under the laws of the State of Arizona and has the full corporate power
and authority to own its properties; to carry on its business as now being
conducted and to perform its obligation under all contracts by which it is
bound. ETECH is duly qualified and in good standing as a foreign corporation in
the states set forth on Schedule 3.1(a) hereto and is not required to qualify in
any other state as a foreign corporation, where any failure to do so would have
an adverse effect on the transaction contemplated hereby or on the business,
assets, results of operations, financial condition or prospects individually or
in the aggregate in excess of $100,000 (a "Material Adverse Effect") on ETECH.
(b) Each wholly or partially owned subsidiary (singularly "ETECH
Subsidiary" and collectively, the "ETECH Subsidiaries") of ETECH, is set forth
on Schedule 3.1(b) hereto. Each ETECH Subsidiary has been duly organized and is
validly existing and in good standing under the laws of its state of
organization as set forth in Schedule 3.1(b) and has the full corporate power
and authority to own its properties and to carry on its business as now being
conducted. Each ETECH Subsidiary is duly qualified as a foreign corporation in
the states set forth on Schedule 3.1(b) and is not required to qualify in any
other state as a foreign corporation, where the failure to do so would have a
Material Adverse Effect. Except as noted on Schedule 3.1(b), ETECH owns 100% of
the outstanding equity interest of each of the ETECH Subsidiaries.
(c) ETECH has delivered or made available to IMPV a true and correct
copy of the Articles of Incorporation and Bylaws of ETECH and similar governing
instruments of each of its subsidiaries, each as amended to date (collectively,
the "ETECH Charter Documents"), and each such instrument is in full force and
effect. ETECH is not in violation of any provision of the ETECH Charter
Documents. None of the ETECH Subsidiaries is in violation of its Articles or
Certificate of Incorporation or Bylaws or other similar governing instruments,
except for such violations as are not material to ETECH and its subsidiaries
taken as a whole. ETECH has delivered or made available to IMPV all proposed or
considered amendments to the ETECH Charter Documents.
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(d) ETECH has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement have been duly authorized
by the Board of Directors of ETECH, and all other necessary corporate action by
ETECH has occurred and no other corporate proceeding on the part of ETECH is
necessary to authorize this Agreement or the transactions contemplated hereby.
Prior to the Closing, ETECH shall have secured affirmative votes from the
requisite number of shareholders under the ARS approving the Merger.
(e) Except as set forth on Schedule 3.1(b), ETECH does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
3.2 No Conflict, Breach or Default.
The execution and delivery of this Agreement and the performance by
ETECH of the terms hereof do not (a) assuming the approval of this Agreement and
the transactions contemplated hereby by ETECH's stockholders, conflict with or
result in a violation of the Articles of Incorporation or Bylaws or other
organizational documents of ETECH or any ETECH Subsidiary, or (b) violate any
order, writ, judgment or decree to which ETECH or any ETECH Subsidiary is a
party or is subject, or (c) conflict with or result in a violation of, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of ETECH or any ETECH Subsidiary under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, lease, license, agreement or other instrument or obligation to
which ETECH or any ETECH Subsidiary is bound or by which ETECH or any ETECH
Subsidiary or any of their properties or assets may be bound, except, in the
case of this clause (c), where such conflict, violation, default, termination,
cancellation or acceleration would not individually or in the aggregate with
other defaults, have a Material Adverse Effect on ETECH.
3.3 Approvals and Consents.
Except for the filing of the Articles of Merger with the Arizona
Corporation Commission, and except for such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related laws) and except as
set forth on Schedule 3.3 hereto, no approval, authorization, consent,
exemption, registration, filing or other action by or filing with any court,
administrative agency or commission, taxing authority or other governmental
authority or instrumentality, foreign or domestic ("Governmental Entity(ies)")
is required to be obtained or made by ETECH in connection with the execution and
delivery by ETECH of this Agreement or the transactions contemplated herein.
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3.4 Valid Obligation.
This Agreement constitutes a legal, valid and binding obligation of
ETECH enforceable against ETECH in accordance with its terms, except that (a)
the enforceability of the same may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting enforcement of creditors'
rights generally, and (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
3.5 Capital Stock of ETECH.
The authorized capital stock of ETECH consists of 1,000,000 shares of
ETECH Common Stock, of which 5,400 shares are issued and outstanding. ETECH has
$150,000 of convertible promissory notes, which are convertible into 270 shares
of ETECH Common Stock (the "Convertible Loans"). ETECH has awarded options to
purchase 142 shares of ETECH Common Stock. All outstanding shares of ETECH
Common Stock have been duly and validly authorized and issued, and are fully-
paid and non-assessable, and there exist no preemptive rights of any present or
former stockholders of the ETECH Common Stock. All outstanding securities of
ETECH have been offered, sold, issued and delivered in compliance with
applicable federal and state securities laws and regulations. Except as set
forth on Schedule 3.5, ETECH has no other (i) outstanding securities convertible
into or exercisable for its capital stock and no other agreements of any nature
whatsoever whereby ETECH may, under any circumstances, be obligated to issue,
sell, repurchase or redeem additional shares of its capital stock, (ii) voting
agreements, trusts, proxies or other similar agreements with respect to voting
of its capital stock, or (iii) registration rights, right of first refusal,
preemptive rights, anti-dilution rights, co-sale, stockholders', buy-sell or
similar agreements relating to the sale or transfer of its capital stock.
3.6 ETECH Financial Statements.
(a) Schedule 3.6(a) hereto sets forth a listing of audited financial
statements of ETECH delivered to IMPV including details of all fixed assets for
the years ending December 31, 2000 and 2001 and unaudited interim financial
statements for the quarter ended March 31, 2002 (collectively, the "ETECH
Financial Statements"). The ETECH Financial Statements are true, accurate and
complete in all material respects and present fairly the financial position of
ETECH and all ETECH Subsidiaries as of the dates stated and the results of the
operations of ETECH and all ETECH Subsidiaries for the periods stated and have
been prepared in accordance with GAAP (except in the case of unaudited
statements for the absence of footnotes and normal year-end audit adjustments).
(b) Neither ETECH nor any ETECH Subsidiary have any liabilities or
obligations of a material nature (whether accrued, absolute, asserted,
unasserted, known, unknown, contingent or otherwise) except for those disclosed
in the most current ETECH Financial Statements provided to IMPV ("Current ETECH
Financial Statements") or in Schedule 3.6(b) hereto.
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3.7 Books and Records.
The books and records of ETECH and of each ETECH Subsidiary are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The books and records, financial and
otherwise, of ETECH and each ETECH Subsidiary accurately set out and disclose in
all material respects the financial position of ETECH and each ETECH Subsidiary,
and all transactions of ETECH and each ETECH Subsidiary have been accurately
recorded in all material respects in such books and records. The minute books of
ETECH and each ETECH Subsidiary contain accurate and complete records of all
meetings held of, and all material corporate actions taken by, its stockholders
or Board of Directors or any committee of its Board of Directors of ETECH or
such ETECH Subsidiaries.
3.8 Regulatory Filings.
ETECH and each ETECH Subsidiary has heretofore filed all reports,
forms, registration statements and schedules as required pursuant to any
applicable law. All such filings by ETECH and each ETECH Subsidiary complied as
of their respective dates in all material respects with the applicable
requirements of such laws and the rules and regulations adopted thereunder.
3.9 Absence of Certain Changes and Events.
Except as set forth in Schedule 3.9, since the date of the most
current ETECH Financial Statements delivered to IMPV, there has not been any
change in the affairs, prospects, condition (financial or otherwise, or arising
as a result of any legislative or regulatory change), operations, liabilities,
earnings or business of ETECH or any ETECH Subsidiary that has had or reasonably
could be expected to have individually or in the aggregate with other changes a
Material Adverse Effect on ETECH.
3.10 No Breach of Statute, Decree or Order.
Except as disclosed in Schedule 3.10, neither ETECH nor any ETECH
Subsidiary is in default under, or in violation in any material respect of, any
material applicable statute, law, ordinance, judgment, decree, order, rule or
regulation of any Governmental Entity, and the consummation of this Agreement
and the transactions contemplated hereby will not constitute or result in any
such default, breach or violation. Except as set forth in Schedule 3.10, there
is no known or suspected material action, investigation, review or proceeding by
any governmental body pending or threatened against ETECH or any ETECH
Subsidiary relating to the conduct of its business, and, to the best of ETECH's
knowledge, there is no basis for any such action or proceeding.
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3.11 Litigation.
Except as disclosed in Schedule 3.11, there is no suit, claim, action,
proceeding or governmental investigation now pending or, to the best knowledge
of ETECH, threatened, nor, to the best of ETECH's knowledge, is there any
condition or set of facts which will give rise to any litigation, against ETECH
or any Subsidiary before any court, administrative or regulatory body or any
governmental agency arising out of or relating to any aspect of the business, or
any part of the properties, of ETECH or any ETECH Subsidiary, or concerning the
transactions contemplated by this Agreement. Except as disclosed in Schedule
3.11, there are no decrees, injunctions or orders of any court or governmental
department or agency outstanding or, to the best knowledge of ETECH, threatened
against ETECH or any ETECH Subsidiary relating to any aspect of its business or
any part of its properties or that could prevent consummation of the
transactions contemplated by this Agreement.
3.12 Employee Benefit Plans; Employee Matters.
(a) Except for the plans and arrangements set forth on Schedule
3.12(a) (the "ETECH Plans"), neither ETECH nor any member of the ETECH
Controlled Group (as hereinafter defined) now maintains, has ever maintained or
contributed to, or has any plans or commitments for, any employee benefit plans
(as such term is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or any other retirement, pension,
stock option, stock appreciation right, profit sharing, incentive compensation,
deferred compensation, savings, thrift, vacation pay, severance pay, or other
employee compensation or benefit plan, agreement, practice, or arrangement,
whether written or unwritten, whether or not legally binding. For purposes of
this Agreement, "ETECH Controlled Group" means a controlled or affiliated group
within the meaning of Code section 414(b), (c), (m), or (o) of which ETECH is a
member. ETECH has made available to IMPV correct and complete copies of all
ETECH Plans (including a detailed written description of any ETECH Plan that is
unwritten, including a description of eligibility criteria, participation,
vesting, benefits, funding arrangements and assets and any other provisions
relating to ETECH) and, with respect to each ETECH Plan, a copy of each of the
following, as applicable: (i) the most recent favorable determination letter
issued by the Internal Revenue Service and, to the knowledge of ETECH, nothing
has occurred since the issuance of each letter that could reasonably be expected
to cause the loss of the tax qualified status of any of the ETECH Plans subject
to 401(a), (ii) materials submitted to the Internal Revenue Service in support
of a pending determination letter request, (iii) the most recent letter issued
by the Internal Revenue Service recognizing tax exemption, (iv) each insurance
contract, trust agreement, or other funding vehicle, (v) the three most recently
filed Forms 5500 plus all schedules and attachments (vi) the nondiscrimination
tests for the last three plan years, and (vii) each summary plan description or
other general explanation or communication distributed or otherwise provided to
employees with respect to each ETECH Plan that describes the terms of the ETECH
Plan.
(b) Each ETECH Plan has at all times been in compliance, in form and
in operation, in all material respects with all applicable requirements of law
and regulations, including without limitation, ERISA and the Code, and ETECH and
any member of the ETECH Controlled Group has performed all material obligations
required to be performed by it under, are not in any material respect in default
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under or violation of and have no knowledge of any material default or violation
by any other party to, any of the ETECH Plans. With respect to the ETECH Plans,
(i) any ETECH Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code which are currently effective, or has time remaining to apply under
applicable Treasury Regulations or Internal Revenue Service pronouncements for a
determination or opinion letter and to make any amendments necessary to obtain a
favorable determination or opinion letter; (ii) there has been no "prohibited
transaction," as that term is defined in Section 406 of ERISA or Section 4975 of
the Code; (iii) to the knowledge of ETECH, all contributions required to be made
by ETECH or any member of the ETECH Controlled Group have been paid or accrued;
(iv) all requisite governmental reports (which were true and correct as of the
date filed) have been prepared in good faith and properly and timely filed; and
(v) ETECH and any member of the ETECH Controlled Group has complied with the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA").
(c) There are no actions, suits, grievances, arbitrations or other
manner of dispute, or claims with respect to any ETECH Plan (except for routine
claims for benefits made in the ordinary course of plan administration for which
plan administrative procedures have not been exhausted) pending, threatened or
imminent against or with respect to any ETECH Plan, any plan sponsor, or any
fiduciary (as such term is defined in ERISA section 3(21)) of such ETECH Plan,
and ETECH has no knowledge of any facts that could give rise to any action,
suit, grievance, arbitration or other manner of dispute, or claim.
(d) Neither ETECH nor any member of the ETECH Controlled Group has any
liability for post-retirement welfare benefits except for the continuation
coverage required by Code section 4980B.
(e) Except as set forth on Schedule 3.12(e), the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any ETECH Plan or ETECH Employment Contract (as
hereinafter defined), trust or loan that will or may result in any payment
(whether of severance or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any former or current employee or director.
(f) No ETECH Plan provides retiree medical or retiree life insurance
benefits to any person and ETECH is not contractually or otherwise obligated
(whether or not in writing) to provide any person with life insurance or medical
benefits upon retirement or termination of employment, other than as required by
the provisions of Sections 601 through 608 of ERISA and Section 4980B of the
Code.
(g) Schedule 3.12(g) sets forth a true and complete list of each of
the following agreements, arrangements and commitments to which ETECH or any
ETECH Subsidiary is a party or by which it may be bound (the "ETECH Employment
Contracts"): (i) each employment, consulting, agency or commission agreement not
terminable without liability to ETECH or any ETECH Subsidiary upon 60 days' or
less prior notice to the employee, consultant or agent and involving
compensation or remuneration of more than $50,000 per
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annum; (ii) each labor union or collective bargaining agreement; (iii) each
agreement with any executive officer or other key employee of ETECH or any ETECH
Subsidiary the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving ETECH or any
ETECH Subsidiary of the nature contemplated by this Agreement; (iv) each
agreement with respect to any officer or other key employee of ETECH or any
ETECH Subsidiary providing any term of employment or compensation guarantee
extending for a period longer than one year; and (v) each equity incentive plan
and each other agreement or plan any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. True and complete copies of each ETECH
Employment Contract, amendments thereto and written interpretations thereof,
have been made available to IMPV.
(h) Except as set forth on Schedule 3.12(h), neither ETECH nor any
ETECH Subsidiary has any legally binding plan or commitment to enter into new or
modify existing ETECH Employment Contracts, nor does it have any intention to do
any of the foregoing.
(i) No work stoppage or labor strike against ETECH or any ETECH
Subsidiary is pending, threatened or reasonably anticipated. Neither ETECH nor
any ETECH Subsidiary knows of any activities or proceedings of any labor union
to organize any of its employees.
3.13 Permits and Licenses.
ETECH and each ETECH Subsidiary has such permits, licenses and
authorities as required by any Governmental Entity with jurisdiction over ETECH
or any ETECH Subsidiary with respect to its business as currently conducted and
to own or lease, operate and use its assets and properties, except where the
failure to have such permits, licenses or authorities has not had and could not
reasonably be expected to have a Material Adverse Effect on ETECH. Except as may
be expressly permitted by the terms of this Agreement or otherwise disclosed in
this Agreement or any schedule hereto, the business of ETECH and each ETECH
Subsidiary as presently conducted in any jurisdiction complies in all material
respects with all known and suspected applicable legal requirements of such
jurisdiction, all known and suspected requisite governmental approvals have been
duly obtained and are in full force and effect, and there is no basis for any
Governmental Entity to deny or rescind any approval for the conduct of the
business of ETECH or any ETECH Subsidiary.
3.14 Material Contracts.
Attached hereto as Schedule 3.14 is a list of all contracts of ETECH
and each ETECH Subsidiary (the "ETECH Material Contracts") (a) for an aggregate
payment by or to it of more than $10,000, (b) extending for a term beyond 12
months, (c) relating to the disposition or acquisition of any material asset or
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any interest in any business enterprise, (d) containing a guaranty of
liabilities or obligations of others, (e) containing any covenant limiting the
freedom of ETECH or any ETECH Subsidiary to engage in any line of business or
compete with any person or entity, or (f) for all policies of insurance in force
as of the date hereof. True and complete copies of all ETECH Material Contracts
have been delivered to IMPV. ETECH and each ETECH Subsidiary, as applicable, has
fulfilled, or taken all actions necessary to enable it to fulfill when due its
obligations under each of such contracts. To the best knowledge of ETECH, all
parties thereto have complied in all material respects with the provisions
thereof and no party is in breach or violation of, or in default under such
contracts.
3.15 Tax Matters.
The representations and warranties contained in this Section 3.15 are
made as to federal and Arizona income taxes, federal social security taxes,
federal and Arizona payroll and employee withholding taxes and Arizona sales,
use and franchise taxes, and are made to the best knowledge of ETECH as to all
other Taxes.
(a) Except as set forth in Schedule 3.15(a), all Returns required to
be filed by ETECH or any ETECH Subsidiary have been duly filed on a timely basis
and all Returns filed by or on behalf of ETECH or any ETECH Subsidiary
(including all attached statements and schedules) are true, complete and correct
in all respects. No claim has been made or threatened in writing by any
jurisdiction where ETECH or any Subsidiary does not file returns that ETECH or
any ETECH Subsidiary is or may be subject to Taxes in that jurisdiction. All
Taxes shown to be payable on such Returns or on subsequent assessments with
respect thereto have been paid in full on a timely basis, except to the extent
any nonpayment is reflected as a liability on the ETECH Financial Statements. No
other Taxes are payable by ETECH or any ETECH Subsidiary with respect to items
or periods covered by such Returns (whether or not shown on or reportable on
such Returns.
(b) ETECH and each ETECH Subsidiary has withheld and paid over all
Taxes required to have been withheld and paid over to those Governmental
Entities to which payment is required by law, and has complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(c) No Return filed by or on behalf of ETECH or any ETECH Subsidiary
contains any position that is or would be subject to penalties under section
6602 of the Code and the Regulations thereunder (and any corresponding provision
of state, local or foreign law).
(d) There are no liens on any of the assets of ETECH or any ETECH
Subsidiary with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that are being contested in good faith through appropriate
proceedings and for which appropriate reserves have been established.
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(e) Except as disclosed on Schedule 3.15(e), neither ETECH nor any
ETECH Subsidiary has been included in an affiliated group of corporations,
within the meaning of section 1504 of the Code or been a member of any combined
or unitary group.
(f) ETECH has furnished IMPV with true and complete copies of: (i) all
Returns of ETECH and each ETECH Subsidiary for all tax periods since December
31, 1999, and (ii) all tax audit reports, work papers in ETECH's possession or
control, statements of deficiencies or closing or other agreements received by
ETECH, any ETECH Subsidiary or on any of their behalf relating to Taxes.
(g) Neither ETECH nor any ETECH Subsidiary does business in, or
derives a material amount of income from, any state, local, territorial or
foreign taxing jurisdiction other than those for which Returns have been
furnished to ETECH.
(h) Except for items disclosed on Schedule 3.15(h) attached hereto:
(i) None of the Returns of ETECH or any ETECH Subsidiary has
ever been audited by a governmental or taxing authority and there are no audits,
inquiries, investigations or examinations relating to any such Returns pending
or, to the knowledge of ETECH, threatened in writing.
(ii) No deficiencies exist or have been asserted in writing
with respect to Taxes of ETECH or any Subsidiary and no written notice has been
received by ETECH or any ETECH Subsidiary with respect to the failure to file
any Return or pay any Taxes.
(iii) Neither ETECH nor any ETECH Subsidiary is a party to any
action or proceeding for assessment or collection of Taxes, nor has any such
action or proceeding been asserted or, to the knowledge of ETECH, threatened in
writing against ETECH, any ETECH Subsidiary or any of their respective assets.
(iv) No extension of time to file any Return (which has not
been filed) has been requested by or granted to ETECH or any ETECH Subsidiary.
No waiver or extension of any statute of limitations is in effect with respect
to Taxes or Returns of ETECH or any ETECH Subsidiary.
(v) Neither ETECH nor any ETECH Subsidiary is (or has ever
been) a party to any tax sharing agreement, tax indemnity agreement, tax
allocation agreement, or similar arrangement with any person other than ETECH
and any ETECH Subsidiary.
(vi) All liabilities for Taxes of ETECH or any ETECH Subsidiary
that have been deferred from a period prior to the Effective Time to a period
after the Effective Time are, to the extent required by GAAP, reflected in the
Current ETECH Financial Statements.
(vii) Neither ETECH nor any ETECH Subsidiary has ever been an
"S corporation" under the Code.
(viii) The aggregate liability of ETECH and the ETECH Subsidiaries
for unpaid Taxes for all periods ending on or before December 31, 2001
determined on a GAAP basis does not exceed the amount of the current liability
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accruals for Taxes (excluding reserves for deferred Taxes) on the ETECH
financial statements as of that date, and the aggregate liability of ETECH and
the ETECH Subsidiaries for unpaid Taxes for all periods ending on or before the
Effective Time determined on a GAAP basis will not exceed the amount of the
current liability accruals for Taxes (excluding reserves for deferred Taxes) as
such accruals will be reflected on the balance sheet of ETECH as of the
Effective Time.
(i) Subject to the items disclosed on Schedule 3.15(h) attached
hereto:
(i) Neither ETECH nor any ETECH Subsidiary is required to treat
any asset as owned by another person for federal income tax purposes or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code.
(ii) Neither ETECH nor any ETECH Subsidiary has entered into
any agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any amount subject to the
provisions of Section 280G or Section 4999 of the Code or any similar provision
of state, local or foreign tax law. For purposes of this representation, there
shall be disregarded any obligation entered into after the Effective Time.
(iii) Neither ETECH nor any ETECH Subsidiary has made an
election under Section 338 of the Code and no action has been taken that would
result in any income tax liability to ETECH or any ETECH Subsidiary as a result
of a deemed election within the meaning of Section 338 of the Code.
(iv) No consent under Section 341(f) of the Code has been filed
with respect to ETECH or any ETECH Subsidiary.
(v) Neither ETECH nor any ETECH Subsidiary has disposed of any
property that is currently or as of any date subsequent to December 31, 2001 was
being accounted for under the installment method.
(vi) Within the last four years, neither ETECH nor any ETECH
Subsidiary has agreed to make, or has made, any adjustment under Code Section
481 by reason of a change in accounting method or otherwise.
(vii) Neither ETECH nor any ETECH Subsidiary is a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(viii) Neither ETECH nor any ETECH Subsidiary has made or will
make a deemed dividend election under Treas. Reg. section 1.1502-32(f)(2) or a
consent dividend under Section 565 of the Code.
(ix) None of the assets or operations of ETECH or any ETECH
Subsidiary is subject to any joint venture, partnership or other arrangement or
contract that is treated as a partnership for federal income tax purposes.
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(x) Neither ETECH nor any ETECH Subsidiary has made any
elections comparable to those described in this section under any state, local
or foreign tax laws or is required to apply any rules comparable to those
described in this Section under any state, local or foreign tax laws.
(xi) The transactions contemplated hereby are not subject to
the tax withholding provisions of Section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code, or of any other provision of law.
(j) There are no transfer taxes (exclusive of income taxes) that will
become due and payable as a result of the Merger transaction under Arizona,
Delaware or federal law.
(k) "Taxes" as used in this Agreement means all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, imposed by any Governmental Entity or
taxing authority, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes, payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, value
added taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, severance taxes, production taxes,
transfer taxes, workers' compensation and other similar governmental charges,
and other obligations of the same or of a similar nature to any of the
foregoing.
(l) "Returns" as used in this Agreement means all returns,
declarations, reports, forms, claims for refund, estimates, information returns
and statements and other documentation, including amendments, required to be
maintained or filed with or supplied to any Governmental Entity in connection
with any Taxes.
3.16 Title to Properties.
Except as disclosed in Schedule 3.16, ETECH and each ETECH Subsidiary
has good and indefeasible title, free and clear of any mortgage, pledge, lien,
charge or other encumbrance, to all of its real and/or personal property and
other assets whether reflected on the Current ETECH Financial Statements or
otherwise, or acquired by it subsequent to the date thereof or used by it in the
ordinary course of its business, except for (a) liens or encumbrances on such
property or assets described in the Current ETECH Financial Statements, (b)
liens for current taxes not yet due and payable, (c) such imperfections of title
and encumbrances, if any, as are not material in character, amount or extent and
do not detract from the value or interfere with the present or presently
contemplated future use of the properties subject thereto or affected thereby,
and (d) acquisitions and dispositions in the ordinary course of business. ETECH
and each ETECH Subsidiary has valid leasehold interests in, and enjoys peaceable
and undisturbed possession under, all material leases under which it is
operating, and all of its premises which are leased, are in good condition and
repair (ordinary wear and tear excepted) and are suitable for the purposes for
which such premises are being utilized. Neither ETECH nor any ETECH Subsidiary
has received any notice of violation of any applicable zoning ordinance or other
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law, order, regulation or requirement relating to its operations or to its owned
or leased properties. ETECH shall furnish IMPV with true and correct copies of
all such leases.
3.17 Environmental Matters.
To the best knowledge of ETECH, ETECH and each ETECH Subsidiary has
duly complied with, and the operation of its business, equipment and other
assets and the facilities owned or leased by ETECH or any ETECH Subsidiary are
in compliance with the provisions of all applicable federal, state and local
environmental, health and safety laws, statutes, ordinances, rules, permits and
regulations of any Governmental Entities relating to (i) errors or omissions,
(ii) discharges to the atmosphere, soils, surface water or ground water, (iii)
solid or liquid waste disposal, (iv) the use, storage, generation, handling,
transport, discharge, release or disposal of toxic or hazardous substances or
waste, (v) the emission of non-ionizing electromagnetic radiation or (vi) other
environmental, health or safety matters, including without limitation, all
matters set forth in the Comprehensive Environmental Response, Compensation and
Liability Act, as amended; the Occupational Safety and Health Act; the Resource
Conservation Recovery Act of 1976; the Federal Water Pollution Control Act of
1970; the Safe Drinking Water Act of 1974; the Toxic Substances Control Act of
1976; and the Occupational Safety and the Clean Air Act, as amended
(collectively, "Environmental and Health Laws"). To the knowledge of ETECH or
any ETECH Subsidiary, there are no investigations, administrative proceedings,
judicial actions, orders, claims or notices that are pending, anticipated or
threatened against ETECH relating to violations of the Environmental and Health
Laws. The Company has not received a notice of, and does not know or have any
reason to suspect, facts which constitute a violation of any Environmental and
Health Laws which relate to the use, ownership or occupancy of any property or
facilities used by ETECH or any ETECH Subsidiary in connection with the
operation of its business or any activity of the business of ETECH or any ETECH
Subsidiary which would result in a material violation or threatened violation of
any Environmental and Health Laws.
3.18 Intellectual Property.
(a) ETECH owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, trade dress, business names, product
names, logos, slogans, domain names, technology, processes, schematics,
know-how, trade secrets, computer software programs or applications (in both
source code and object code form), design and program documentation, analysis,
data flow diagrams, website content and all other tangible or intangible
proprietary information or material ("Intellectual Property") used in the
business of ETECH as currently conducted, except to the extent that the failure
to have such rights has not and could not reasonably be expected to have a
Material Adverse Effect on ETECH.
(b) Schedule 3.18 (b) lists: (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered domain names and registered and unregistered copyrights that ETECH
considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
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right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which ETECH is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which ETECH is a party
and pursuant to which ETECH is authorized to use any third party patents,
trademarks or copyrights, including software ("ETECH Third Party Intellectual
Property Rights"), in each case which are incorporated in, are, or form a part
of any product or service of ETECH. ETECH has not transferred ownership of, or
granted any exclusive license with respect to, any Intellectual Property, that
would have a Material Adverse Effect on ETECH.
(c) To the knowledge of ETECH, there has not been and currently is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property or any trade secret of ETECH, or any ETECH Third Party
Intellectual Property Right, by any third party, including any employee or
former employee of ETECH. To the knowledge of ETECH, the operation of the
business of ETECH as such business is currently conducted, including ETECH's
design, development, marketing and sale of the products or services of ETECH
(including with respect to products currently under development) has not, does
not and will not infringe or misappropriate intellectual property of any third
party or constitute unfair competition or trade practices under the laws of any
jurisdiction. ETECH has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property, other
than indemnification provisions contained in purchase orders arising in the
ordinary course of business, or contained in license agreements relating to
Intellectual Property licensed to or by ETECH in the ordinary course of
business.
(d) ETECH is not, and will not be as a result of the execution and
delivery of this Agreement or the performance of ETECH's obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or ETECH Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks, registered
domain names and copyrights held by ETECH are valid and subsisting and all
necessary registration, maintenance and renewal fees, where currently required
or where currently due, have been made. ETECH (i) has not been sued in any suit,
action or proceeding which involves a claim of infringement of any patents,
trademarks, service marks, domain names, copyrights or violation of any trade
secret or other proprietary right of any third party and (ii) has not brought
any action, suit or proceeding for infringement of Intellectual Property or
breach of any license or agreement involving Intellectual Property against any
third party. To the knowledge of ETECH, the manufacture, marketing, licensing or
sale of the products and services of ETECH does not infringe any patent,
trademark, service xxxx, copyright, trade secret, domain name or other
proprietary right of any third party.
(f) ETECH has secured valid written assignments from all consultants
and employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that ETECH does not already own by
operation of law.
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3.19 Condition and Sufficiency of Assets.
All real property and equipment of ETECH and each ETECH Subsidiary are
structurally sound and in good operating condition and repair (ordinary wear and
tear excepted) and are adequate for the uses thereof. None of the real property
or equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repair that are not material. The real property and equipment
are sufficient for the continued conduct of the business of ETECH and each ETECH
Subsidiary.
3.20 Accuracy of Statements.
ETECH has disclosed to IMPV all facts required to be disclosed by this
Agreement and material to the liabilities, assets, business, conditions,
organization and operations (financial and otherwise) of ETECH and the ETECH
Subsidiaries. Neither this Agreement nor any exhibit or schedule hereto nor any
certificate, document, instrument or information furnished or to be furnished by
ETECH or any ETECH Subsidiary to IMPV in connection with this Agreement or any
of the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they are made, not misleading.
3.21 Brokers' and Finders' Fees.
ETECH has not incurred, and will not incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.22 Shareholder List and Disclosures to New ETECH Investors.
The ETECH shareholder list set forth on Schedule 3.22 hereto correctly
states with respect to each record holder of ETECH Common Stock: (a) the name of
such holder; (b) the address of the principal residence, or in the case of a
holder that is a business entity, the principal place of business, of such
holder; and (c) the number of shares of ETECH Common Stock, as the case may be,
held by such holder. Statements made by ETECH to investors providing any part of
the New Capital (the "New Investors"), and materials provided to such investors
by ETECH have not contained any untrue statement of a material fact or omitted
to state a material face required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The New Investors are all "accredited investors" within
the meaning of Rule 501(a) under the Securities Act, and, subject to ETECH's
reasonable reliance on representations made by the New Investors, the sale of
securities to the New Investors has been made in compliance with applicable
state and federal securities laws; ETECH has not made a general solicitation of
investors in connection with the sale of securities to the New Investors.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF IMPV
AND MERGER SUB
IMPV and Merger Sub hereby represent and warrant to ETECH as
follows:
4.1 Organization, Capacity and Authority.
(a) IMPV has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware and has the full corporate
power and authority to own its properties and to carry on its business as now
being conducted. IMPV is duly qualified and in good standing as a foreign
corporation in the states set forth on Schedule 4.1(a) hereto and is not
required to qualify in any other state as a foreign corporation where the
failure to do so would have a Material Adverse Effect on IMPV.
(b) Each wholly or partially owned subsidiary (singularly "IMPV
Subsidiary" and collectively, the "IMPV Subsidiaries") of IMPV, including Merger
Sub, is set forth on Schedule 4.1(b) hereto. Each IMPV Subsidiary has been duly
organized and is validly existing and in good standing under the laws of its
state of organization as set forth in Schedule 4.1(b) and has the full corporate
power and authority to own its properties and to carry on its business as now
being conducted. Each IMPV Subsidiary is duly qualified as a foreign corporation
in the states set forth on Schedule 4.1(b) and is not required to qualify in any
other state as a foreign corporation. Except as noted on Schedule 4.1(b), IMPV
owns 100% of the outstanding equity interest of each of the IMPV Subsidiaries.
(c) IMPV and Merger Sub have all corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement have been duly
authorized by the Boards of Directors of IMPV and Merger Sub and all other
necessary corporate action by IMPV and Merger Sub has occurred and no other
corporate proceeding on the part of IMPV or Merger Sub is necessary to authorize
this Agreement or the transactions contemplated hereby. Prior to the Closing,
IMPV shall have voted all of its shares of Merger Sub to approve the Merger.
4.2 No Conflict, Breach or Default.
The execution and delivery of this Agreement and the performance by
IMPV and Merger Sub of its terms do not (a) conflict with or result in a
violation of the certificate of incorporation or bylaws or other organizational
documents of IMPV or any IMPV Subsidiary, (b) violate any order, writ, judgment
or decree to which IMPV or any IMPV Subsidiary is a party or is subject, or (c)
conflict with or result in a violation of, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of IMPV or any IMPV Subsidiary under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture,
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deed of trust, lease, license, agreement or other instrument or obligation to
which IMPV or any IMPV Subsidiary is bound or by which IMPV or any IMPV
Subsidiary or any of their properties or assets may be bound, except in the case
of this clause (c), where such conflict, violation, default, termination,
cancellation or acceleration would not, individually or in the aggregate with
other defaults, have a Material Adverse Effect on IMPV.
4.3 Approvals and Consents.
Except for the filing of the Articles of Merger with the Corporation
Commission of the State of Arizona, and except for such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related
laws), and as set forth on Schedule 4.3 hereto, no approval, authorization,
consent, exemption, filing, registration or other action by or filing with any
Governmental Entity is required in connection with the execution and delivery by
IMPV and Merger Sub of this Agreement or the transactions contemplated herein or
therein.
4.4 Valid Obligation.
This Agreement constitutes a legal, valid and binding obligation of
IMPV and Merger Sub enforceable against each of them in accordance with its
terms, except that (a) the enforceability of the same may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
enforcement of creditors' rights generally, and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.5 Validly Issued Shares; Securities Act Exemption; Blue Sky.
(a) Upon issuance, all IMPV Common Stock to be issued to the
stockholders of ETECH in exchange for the ETECH Common Stock will be duly
authorized, validly issued, fully paid and nonassessable outstanding shares of
the capital stock of IMPV.
(b) Based upon the following assumptions:
(i) Schedule 3.22 correctly lists all of the holders of record
of the Merged Interests as of the date hereof;
(ii) the information set forth in Schedule 3.22 with respect to
each such holder is true, complete and correct;
(iii) all relevant representations and warranties received by
either ETECH or IMPV from any holder of ETECH Common Stock
pursuant to Section 7.1(j) of this Agreement are true,
correct and complete;
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(iv) the Closing occurs and any filings to be made after the
Closing are promptly made;
(v) the holders of Merged Interests are all accredited
investors or executive officers or directors of ETECH;
(vi) the issuance of the Merger Consideration qualifies for
exemption from registration under Rule 506 under the
Securities Act of 1933 as amended (the "Securities Act")
or, as to such officers and directors, Section 4(2) of the
Securities Act, and Section 44-1844(A)(1) or 44-1844(A)(6)
of the ARS
then, as of the Closing: (i) the issuance of the IMPV Common Stock to the ETECH
Stockholders pursuant to the terms of this Agreement will constitute a
transaction exempt from registration under the Securities Act; and (ii) IMPV
will have obtained, all necessary Blue Sky law permits and qualifications, or
will have available exemptions therefrom, for the issuance of the IMPV Common
Stock to the stockholders of ETECH pursuant to the terms of this Agreement.
4.6 Capital Stock of IMPV and Merger Sub.
The authorized capital stock of IMPV consists of 100,000,000 shares,
$.001 par value, of which, to the best knowledge of IMPV, 17,706,540 aggregate
shares of Common Stock, $.001 par value and convertible Preferred Stock, $.001
par value (each convertible into one share of Common Stock), are issued and
outstanding. Options to purchase 344,878 shares of Common Stock and warrants to
purchase 1,441,850 shares of Common Stock are outstanding. The authorized
capital stock of Merger Sub consists of 1000 shares of common stock, 100 of
which are issued and outstanding. All of the issued and outstanding shares of
Merger Sub are owned by IMPV. All the outstanding shares of IMPV Common Stock
and Merger Sub common stock are duly and validly authorized and issued,
fully-paid and non-assessable, and there exist no preemptive rights of any
present or former stockholders of the IMPV Common Stock. Except as set forth in
Schedule 4.6, IMPV has no other (i) outstanding securities convertible into or
exercisable for its capital stock and no other agreements of any nature
whatsoever whereby IMPV may, under any circumstances, be obligated to issue,
sell, repurchase or redeem shares of its capital stock (ii) voting agreements,
trusts, proxies or other similar agreements with respect to voting of its
capital stock, or (iii) registration rights, right of first refusal, co-sale,
preemptive rights, anti-dilution rights, stockholders', buy-sell or similar
agreements relating to the sale or transfer of its capital stock.
4.7 IMPV Financial Statements.
(a) Schedule 4.7(a) hereto sets forth a listing of financial
statements of IMPV delivered to ETECH, including details of all fixed assets,
other than the financial statements included in the IMPV Commission Filings as
provided in Section 4.21 (collectively, the "IMPV Financial Statements"). The
IMPV Financial Statements are true, accurate and complete in all material
respects and present fairly the financial position of IMPV and its Subsidiaries
as of the dates stated and the results of the operations of IMPV and its
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Subsidiaries for the periods stated and have been prepared in accordance with
GAAP, consistently applied with all adjustments as mandated by any agency or
other authority (except in the case of unaudited statements for the absence of
footnotes and normal year-end audit adjustments).
(b) Neither IMPV nor any IMPV Subsidiary have any liabilities or
obligations of a material nature (whether accrued, absolute, asserted,
unasserted, known, unknown, contingent or otherwise) except for those disclosed
in the most current IMPV Financial Statements ("Current IMPV Financial
Statements") or in Schedule 4.7(b) hereto.
4.8 Books and Records.
The books and records of IMPV and of each IMPV Subsidiary are complete
and correct and have been maintained in accordance with sound business practices
and the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") where required, including the maintenance of an
adequate system of internal controls. The books and records, financial and
otherwise, of IMPV and each IMPV Subsidiary accurately set out and disclose in
all material respects the financial position of IMPV and of each IMPV
Subsidiary, and all transactions of IMPV and of each IMPV Subsidiary have been
accurately recorded in all material respects in such books and records in
accordance with GAAP. The minute books of IMPV and of each IMPV Subsidiary
contain accurate and complete records of all meetings held of, and all material
corporate actions taken by, the stockholders, Board of Directors or any
committee of the Board of Directors of IMPV or such IMPV Subsidiaries.
4.9 Regulatory Filings.
IMPV and each IMPV Subsidiary has heretofore filed all reports,
registration statements and schedules as required pursuant to any applicable
law. All such filings by IMPV and each such IMPV Subsidiary complied as of their
respective dates in all material respects with the applicable requirements of
such laws and the rules and regulations adopted thereunder.
4.10 Absence of Certain Changes and Events.
Except as set forth in Schedule 4.10, since the date of the most
current IMPV Financial Statements delivered to ETECH, there has not been any
change in the affairs, prospects, condition (financial or otherwise, or arising
as a result of any legislative or regulatory change), operations, liabilities,
earnings or business of IMPV or any IMPV Subsidiary that has had or reasonably
could be expected to have, individually or in the aggregate with other changes,
a Material Adverse Effect on IMPV.
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4.11 No Breach of Statute, Decree or Order.
Except as disclosed in Schedule 4.11, neither IMPV nor any Subsidiary
is in default under, or in violation in any respect of, any material applicable
statute, law, ordinance, judgment, decree, order, rule or regulation of any
Governmental Entity, and the consummation of this Agreement and the transactions
contemplated hereby will not constitute or result in any such default, breach or
violation. Except as set forth in Schedule 4.11, there is no known or suspected
material action or proceeding by any Governmental Entity, pending or threatened
against IMPV or any IMPV Subsidiary relating to the conduct of its business.
4.12 Litigation.
Except as disclosed in Schedule 4.12, there is no suit, claim, action,
proceeding or governmental investigation now pending or, to the best knowledge
of IMPV, threatened, against IMPV or any Subsidiary before any court,
administrative or regulatory body or any governmental agency arising out of or
relating to any aspect of the business, or any part of the properties, of IMPV
or any IMPV Subsidiary, or concerning the transactions contemplated by this
Agreement. Except as disclosed in Schedule 4.12, there are no decrees,
injunctions or orders of any court or governmental department or agency
outstanding or, to the best knowledge of IMPV, threatened against IMPV or any
IMPV Subsidiary relating to any aspect of its business or any part of its
properties or that could prevent consummation of the transactions contemplated
by this Agreement.
4.13 Employee Benefit Plans; Employee Matters.
(a) Except for the plans and arrangements set forth on Schedule
4.13(a) (the "IMPV Plans"), neither IMPV nor any member of the IMPV Controlled
Group (as hereinafter defined) now maintains, has ever maintained or contributed
to, or has any plans or commitments for, any employee benefit plans (as such
term is defined in ERISA section 3(3)) or any other retirement, pension, stock
option, stock appreciation right, profit sharing, incentive compensation,
deferred compensation, savings, thrift, vacation pay, severance pay, or other
employee compensation or benefit plan, agreement, practice, or arrangement,
whether written or unwritten, whether or not legally binding. For purposes of
this Agreement, "IMPV Controlled Group" means a controlled or affiliated group
within the meaning of Code section 414(b), (c), (m), or (o) of which IMPV is a
member. IMPV has made available to ETECH correct and complete copies of all IMPV
Plans (including a detailed written description of any IMPV Plan that is
unwritten, including a description of eligibility criteria, participation,
vesting, benefits, funding arrangements and assets and any other provisions
relating to IMPV) and, with respect to each IMPV Plan, a copy of each of the
following, as applicable: (i) the most recent favorable determination letter
issued by the Internal Revenue Service and, to the knowledge of IMPV, nothing
has occurred since the issuance of each letter that could reasonably be expected
to cause the loss of the tax qualified status of any of the IMPV Plans subject
to 401(a), (ii) materials submitted to the Internal Revenue Service in support
of a pending determination letter request, (iii) the most recent letter issued
by the Internal Revenue Service recognizing tax exemption, (iv) each insurance
contract, trust agreement, or other funding vehicle, (v) the three most recently
filed Forms 5500 plus all schedules and attachments (vi) the nondiscrimination
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tests for the last three plan years, and (vii) each summary plan description or
other general explanation or communication distributed or otherwise provided to
employees with respect to each IMPV Plan that describes the terms of the IMPV
Plan.
(b) Each IMPV Plan has at all times been in compliance, in form and in
operation, in all material respects with all applicable requirements of law and
regulations, including without limitation, ERISA and the Code, and IMPV and any
member of the IMPV Controlled Group has performed all material obligations
required to be performed by it under, are not in any material respect in default
under or violation of and have no knowledge of any material default or violation
by any other party to, any of the IMPV Plans. With respect to the IMPV Plans,
(i) any IMPV Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code which are currently effective, or has time remaining to apply under
applicable Treasury Regulations or Internal Revenue Service pronouncements for a
determination or opinion letter and to make any amendments necessary to obtain a
favorable determination or opinion letter; (ii) there has been no "prohibited
transaction," as that term is defined in Section 406 of ERISA or Section 4975 of
the Code; (iii) to the knowledge of IMPV, all contributions required to be made
by IMPV or any member of the IMPV Controlled Group have been paid or accrued;
(iv) all requisite governmental reports (which were true and correct as of the
date filed) have been prepared in good faith and properly and timely filed; and
(v) IMPV and any member of the IMPV Controlled Group has complied with the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA").
(c) There are no actions, suits, grievances, arbitrations or other
manner of dispute, or claim with respect to any IMPV Plan (except for routine
claims for benefits made in the ordinary course of plan administration for which
plan administrative procedures have not been exhausted) pending, threatened or
imminent against or with respect to any IMPV Plan, any plan sponsor, or any
fiduciary (as such term is defined in ERISA section 3(21)) of such IMPV Plan,
and IMPV has no knowledge of any facts that could give rise to any action, suit,
grievance, arbitration or other manner of dispute, or claim.
(d) Neither IMPV nor any member of the IMPV Controlled Group has any
liability for post-retirement welfare benefits except for the continuation
coverage required by Code section 4980(b).
(e) Except as set forth on Schedule 4.13(e), the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any IMPV Plan or IMPV Employment Contract (as
hereinafter defined), trust or loan that will or may result in any payment
(whether of severance or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any former or current employee or director.
(f) No IMPV Plan provides retiree medical or retiree life insurance
benefits to any person and IMPV is not contractually or otherwise obligated
(whether or not in writing) to provide any person with life insurance or medical
benefits upon retirement or termination of employment, other than as required by
the provisions of Sections 601 through 608 of ERISA and Section 4980(b) of the
Code.
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(g) Schedule 4.13(g) sets forth a true and complete list of each of
the following agreements, arrangements and commitments to which IMPV or any
Subsidiary is a party or by which it may be bound (the "IMPV Employment
Contracts"): (i) each employment, consulting, agency or commission agreement not
terminable without liability to IMPV or any Subsidiary upon 60 days' or less
prior notice to the employee, consultant or agent and involving compensation or
remuneration of more than $50,000 per annum; (ii) each labor union or collective
bargaining agreement; (iii) each agreement with any executive officer or other
key employee of IMPV or any Subsidiary the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving IMPV or any Subsidiary of the nature contemplated by this Agreement;
(iv) each agreement with respect to any officer or other key employee of IMPV or
any Subsidiary providing any term of employment or compensation guarantee
extending for a period longer than one year; and (v) each equity incentive plan
and each other agreement or plan any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. True and complete copies of each IMPV Employment
Contract, amendments thereto and interpretations thereof, have been made
available to ETECH.
4.14 Permits and Licenses.
IMPV and each IMPV Subsidiary has such permits, licenses and
authorities as required by any Governmental Entity with jurisdiction over IMPV
or any IMPV Subsidiary with respect to its business as currently conducted and
to own or lease, operate and use its assets and properties except where the
failure to have such permits, licenses or authorities has not had and could not
reasonably be expected to have a Material Adverse Effect on IMPV. Except as may
be expressly permitted by the terms of this Agreement or otherwise disclosed in
this Agreement or any schedule hereto, the business of IMPV and each IMPV
Subsidiary as presently conducted in any jurisdiction complies in all material
respects with all known and suspected applicable legal requirements of such
jurisdiction, all known and suspected requisite governmental approvals have been
duly obtained and are in full force and effect, and there is no basis for any
Governmental Entity to deny or rescind any approval for the conduct of the
business of IMPV or any IMPV Subsidiary.
4.15 Material Contracts.
Attached hereto as Schedule 4.15 is a list of all contracts of IMPV
and each IMPV Subsidiary (the "IMPV Material Contracts") (a) for an aggregate
payment by or to it of more than $10,000, (b) extending for a term beyond 12
months, (c) relating to the disposition or acquisition of any material asset or
any interest in any business enterprise, (d) containing a guaranty of
liabilities or obligations of others, (e) containing any covenant limiting the
freedom of IMPV or any IMPV Subsidiary to engage in any line of business or
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compete with any person or entity, or (f) for all policies of insurance in force
as of the date hereof. True and complete copies of all IMPV Material Contracts
have been delivered to ETECH. IMPV and each IMPV Subsidiary, as applicable, has
fulfilled, or taken all actions necessary to enable it to fulfill when due its
obligations under each of such contracts. To the best knowledge of IMPV, all
parties thereto have complied in all material respects with the provisions
thereof and no party is in breach or violation of, or in default under such
contracts.
4.16 Tax Matters.
The representations and warranties contained in this Section 4.16 are
made as to federal and California income taxes, federal social security taxes,
federal and California payroll and employee withholding taxes, California sales
and use taxes, Delaware franchise taxes, and are made to the best knowledge of
IMPV as to all other Taxes.
(a) Except as set forth in Schedule 4.16(a), all Returns required to
be filed by IMPV or any IMPV Subsidiary have been duly filed on a timely basis
and all Returns filed by or on behalf of IMPV or any IMPV Subsidiary (including
all attached statements and schedules) are true, complete and correct in all
respects. No claim has been made or threatened in writing by any jurisdiction
where IMPV or any Subsidiary does not file returns that IMPV or any IMPV
Subsidiary is or may be subject to Taxes in that jurisdiction. All Taxes shown
to be payable on such Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, except to the extent any nonpayment is
reflected as a liability on the IMPV Financial Statements. No other Taxes are
payable by IMPV or any IMPV Subsidiary with respect to items or periods covered
by such Returns (whether or not shown on or reportable on such Returns).
(b) IMPV and each IMPV Subsidiary has withheld and paid over all Taxes
required to have been withheld and paid over to those Governmental Entities to
which payment is required by law, and has complied with all information
reporting and backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(c) No Return filed by or on behalf of IMPV or any IMPV Subsidiary
contains any position that is or would be subject to penalties under section
6602 of the Code and the Regulations thereunder (and any corresponding provision
of state, local or foreign law).
(d) There are no liens on any of the assets of IMPV or any IMPV
Subsidiary with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that are being contested in good faith through appropriate
proceedings and for which appropriate reserves have been established.
(e) Except as disclosed on Schedule 4.16(e), neither IMPV nor any IMPV
Subsidiary has been included in an affiliated group of corporations, within the
meaning of section 1504 of the Code or been a member of any combined or unitary
group.
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(f) IMPV has furnished ETECH with true and complete copies of: (i) all
Returns of IMPV and each Subsidiary for all tax periods since April 30, 1998,
and (ii) all tax audit reports, work papers in IMPV's possession or control,
statements of deficiencies or closing or other agreements received by IMPV, any
IMPV Subsidiary or on any of their behalf relating to Taxes.
(g) Neither IMPV nor any IMPV Subsidiary does business in, or derives
a material amount of income from, any state, local, territorial or foreign
taxing jurisdiction other than those for which Returns have been furnished to
ETECH.
(h) Except for items disclosed on Schedule 4.16(h) attached hereto:
(i) None of the Returns of IMPV or any IMPV Subsidiary has ever
been audited by a governmental or taxing authority and there are no audits,
inquiries, investigations or examinations relating to any such Returns pending
or, to the knowledge of IMPV, threatened in writing.
(ii) No deficiencies exist or have been asserted in writing
with respect to Taxes of IMPV or any Subsidiary and no written notice has been
received by IMPV or any IMPV Subsidiary with respect to the failure to file any
Return or pay any Taxes.
(iii) Neither IMPV nor any IMPV Subsidiary is a party to any
action or proceeding for assessment or collection of Taxes, nor has any such
action or proceeding been asserted or, to the knowledge of IMPV, threatened in
writing against IMPV, any IMPV Subsidiary or any of their respective assets.
(iv) No extension of time to file any Return (which has not
been filed) has been requested by or granted to IMPV or any IMPV Subsidiary. No
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of IMPV or any IMPV Subsidiary.
(v) Neither IMPV nor any IMPV Subsidiary is (or has ever been)
a party to any tax sharing agreement, tax indemnity agreement, tax allocation
agreement, or similar arrangement with any person other than IMPV and any IMPV
Subsidiary.
(vi) All liabilities for Taxes of IMPV or any IMPV Subsidiary
that have been deferred from a period prior to the Effective Time to a period
after the Effective Time are, to the extent required by GAAP, reflected in the
Current IMPV Financial Statements.
(vii) Neither IMPV nor any IMPV Subsidiary has ever been an "S
corporation" under the Code.
(viii) The aggregate liability of IMPV and the IMPV Subsidiaries
for unpaid Taxes for all periods ending on or before April 30, 2002 determined
on a GAAP basis does not exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) on the IMPV financial statements
as of that date, and the aggregate liability of IMPV and the IMPV Subsidiaries
for unpaid Taxes for all periods ending on or before the Effective Time
determined on a GAAP basis will not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) as such accruals will
be reflected on the balance sheet of IMPV as of the Effective Time.
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(i) Subject to the items disclosed on Schedule 4.16(h) attached hereto:
(i) Neither IMPV nor any IMPV Subsidiary is required to treat
any asset as owned by another person for federal income tax purposes or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code.
(ii) Neither IMPV nor any IMPV Subsidiary has entered into any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any amount subject to the
provisions of Section 280G or Section 4999 of the Code or any similar provision
of state, local or foreign tax law. For purposes of this representation, there
shall be disregarded any obligation entered into after Effective Time.
(iii) Neither IMPV nor any IMPV Subsidiary has made an election
under Section 338 of the Code and no action has been taken that would result in
any income tax liability to IMPV or any IMPV Subsidiary as a result of a deemed
election within the meaning of Section 338 of the Code.
(iv) No consent under Section 341(f) of the Code has been filed
with respect to IMPV or any IMPV Subsidiary.
(v) Neither IMPV nor any IMPV Subsidiary has disposed of any
property that is currently or as of any date subsequent to December 31, 2001 was
being accounted for under the installment method.
(vi) Within the last four years, neither IMPV nor any IMPV
Subsidiary has agreed to make, or has made, any adjustment under Code Section
481 by reason of a change in accounting method or otherwise.
(vii) Neither IMPV nor any IMPV Subsidiary is a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(viii) Neither IMPV nor any IMPV Subsidiary has made or will
make a deemed dividend election under Treas. Reg. section 1.1502-32(f)(2) or a
consent dividend under Section 565 of the Code.
(ix) None of the assets or operations of IMPV or any IMPV
Subsidiary is subject to any joint venture, partnership or other arrangement or
contract that is treated as a partnership for federal income tax purposes.
(x) Neither IMPV nor any IMPV Subsidiary has made any elections
comparable to those described in this section under any state, local or foreign
tax laws or is required to apply any rules comparable to those described in this
Section under any state, local or foreign tax laws.
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(xi) The transactions contemplated hereby are not subject to
the tax withholding provisions of Section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code, or of any other provision of law.
(j) There are no transfer taxes (exclusive of income taxes) that will
become due and payable as a result of the Merger transaction under California,
Delaware or federal law.
4.17 Title to Properties.
Except as disclosed in Schedule 4.17, IMPV and each IMPV Subsidiary
has good and indefeasible title, free and clear of any mortgage, pledge, lien,
charge or other encumbrance, to all of its real and/or personal property and
other assets whether reflected on the Current IMPV Financial Statements or
otherwise, or acquired by it subsequent to the date thereof or used by it in the
ordinary course of its business, except for (a) liens or encumbrances on such
property or assets described in the Current IMPV Financial Statements, (b) liens
for current taxes not yet due and payable, (c) such imperfections of title and
encumbrances, if any, as are not material in character, amount or extent and do
not detract from the value or interfere with the present or presently
contemplated future use of the properties subject thereto or affected thereby,
and (d) acquisitions and dispositions in the ordinary course of business. IMPV
and each IMPV Subsidiary has valid leaseholds in, and enjoys peaceable and
undisturbed possession under all material leases under which it is operating,
and all of its premises which are leased, are in good condition and repair
(ordinary wear and tear excepted) and are suitable for the purposes for which
such premises are being utilized. Neither IMPV nor any IMPV Subsidiary has
received any notice of violation of any applicable zoning ordinance or other
law, order, regulation or requirement relating to its operations or to its owned
or leased properties.
4.18 Environmental Matters.
To the best knowledge of IMPV, IMPV and each IMPV Subsidiary has duly
complied with, and the operation of its business, equipment and other assets and
the facilities owned or leased by IMPV or any Subsidiary are in compliance with
the provisions of all applicable federal, state and local environmental, health
and safety laws, statutes, ordinances, rules and regulations of any Governmental
Entity relating to (i) errors or omissions, (ii) discharges to the atmosphere,
soils, surface water or ground water, (iii) solid or liquid waste disposal, (iv)
the use, storage, generation, handling, transport, discharge, release or
disposal of toxic or hazardous substances or waste, (v) the emission of
non-ionizing electromagnetic radiation or (vi) Environmental and Health Laws. To
the knowledge of IMPV, there are no investigations, administrative proceedings,
judicial actions, orders, claims or notices that are pending, anticipated or
threatened against IMPV or any IMPV Subsidiary relating to violations of the
Environmental and Health Laws. IMPV has not received a notice of, and does not
know or have any reason to suspect, facts which constitute a violation of any
Environmental and Health Laws which relate to the use, ownership or occupancy of
any property or facilities used by IMPV or any IMPV Subsidiary in connection
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with the operation of its business or any activity of the business of IMPV or
any IMPV Subsidiary which would result in a material violation or threatened
violation of any Environmental or Health Laws.
4.19 Intellectual Property.
(a) IMPV owns, or is licensed or otherwise possesses legally
enforceable rights to use all Intellectual Property used in the business of IMPV
as currently conducted except to the extent that failure to have such rights has
not and could not reasonably be expected to have a Material Adverse Effect on
IMPV.
(b) Schedule 4.19(b) lists: (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered domain names and registered and unregistered copyrights, which IMPV
considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which IMPV is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
material licenses, sublicenses and other agreements as to which IMPV is a party
and pursuant to which IMPV is authorized to use any third party patents,
trademarks or copyrights, including software ("IMPV Third Party Intellectual
Property Rights"), in each case which are incorporated in, are, or form a part
of any product or service of IMPV.
(c) To the knowledge of IMPV, there has not been and currently is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property or any trade secret of IMPV, or any IMPV Third Party
Intellectual Property Right, by any third party, including any employee or
former employee of IMPV. To the knowledge of IMPV, the operation of the business
of IMPV as such business is currently conducted, including IMPV's design,
development, marketing and sale of the products or services of IMPV (including
with respect to products currently under development) has not, does not and will
not infringe or misappropriate intellectual property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction. IMPV has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property, other
than indemnification provisions contained in purchase orders arising in the
ordinary course of business, or contained in license agreements relating to
Intellectual Property licensed to or by IMPV in the ordinary course of business.
(d) IMPV is not, and will not be, as a result of the execution and
delivery of this Agreement or the performance of IMPV's obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or IMPV Third Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks, registered
domain names and copyrights held by IMPV are valid and subsisting and all
necessary registration, maintenance and renewal fees, where currently required
or where currently due, have been made. IMPV (i) has not been sued in any suit,
action or proceeding which involves a claim of infringement of any patents,
trademarks, service marks, domain names, copyrights or violation of any trade
secret or other proprietary right of any third party and (ii) has not brought
any action, suit or proceeding for infringement of Intellectual Property or
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breach of any license or agreement involving Intellectual Property against any
third party. To the knowledge of IMPV, the manufacture, marketing, licensing or
sale of the products and services of IMPV does not infringe any patent,
trademark, service xxxx, copyright, trade secret, domain name or other
proprietary right of any third party.
(f) IMPV has secured valid written assignments from all consultants
and employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that IMPV does not already own by
operation of law.
4.20 Condition and Sufficiency of Assets.
All real property and equipment of IMPV and each IMPV Subsidiary that
is reasonably required for efficient operation of its properties and operation
in the ordinary course of business is structurally sound and in good operating
condition and repair (ordinary wear and tear excepted) and are adequate for the
uses thereof. The real property and equipment are sufficient for the continued
conduct of the business of IMPV and each Subsidiary.
4.21 IMPV Reports and Financial Statements.
IMPV has made available to ETECH true and complete copies of all
reports, registration statements, definitive proxy statements and other
documents (in each case together with all amendments thereto) filed by IMPV with
the Securities and Exchange Commission (the "Commission") since October 1, 1999
(such reports, registration statements, definitive proxy statements and other
documents, together with any amendments thereto, are sometimes collectively
referred to as the "IMPV Commission Filings"). The IMPV Commission Filings
constitute all of the documents (other than preliminary material) that IMPV was
required to file with the Commission since such date. As of their respective
dates, each of the IMPV Commission Filings complied in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations under each such Act, and none of the IMPV Commission
Filings contained as of such date any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. When filed with the Commission, the financial statements
included in the IMPV Commission Filings complied as to form in all material
respects with the applicable rules and regulations of the Commission. IMPV has
complied with all of the rules, regulations and requirements for trading of
IMPV's common stock on the OTC Bulletin Board.
4.22 Accuracy of Statements.
IMPV has disclosed to ETECH all facts required to be disclosed by this
Agreement and material to the liabilities, assets, business, conditions,
organization and operations (financial and otherwise) of IMPV and the IMPV
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Subsidiaries. Neither this Agreement nor any exhibit or schedule hereto nor any
certificate, documents, instrument or information furnished or to be furnished
by IMPV or Merger Sub to ETECH in connection with this Agreement or any of the
transactions contemplated hereby, or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they are made, not misleading.
4.23 Brokers and Finders' Fees.
IMPV has not incurred, and will not incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar changes in connection with this Agreement or any
transaction contemplated hereby, except for fees associated with obtaining a
fairness opinion.
4.24 Employment Agreements.
Except as set forth on Schedule 4.24, neither IMPV, nor any IMPV
Subsidiary nor Merger Sub has any contractual obligation or commitment for
employment, compensation, benefits, loans, or extension of credit to any
director, officer, employee or agent of such entity.
4.25 New Technologies.
IMPV's new technologies, which provide telephony capabilities for
linking contractors and home improvement clients and provide on line credit card
payments by contractors, are operational.
4.26 Accounts Receivable.
The balance of IMPV's Collectible Accounts Receivable is set forth on
Schedule 4.26. In the event that the balance of Collectible Accounts Receivable
is less than $500,000 at the Closing, then the difference between the actual
balance of the Collectible Accounts Receivable and $500,000 shall be deducted
from the cash available for the Share Buyback as described in Article 2.2.
ARTICLE 5
COVENANTS OF ETECH AND IMPV
5.1 Access to Information.
ETECH shall provide IMPV, its counsel, accountants and other
representatives, and IMPV shall provide ETECH, its counsel, accountants and
other representatives, full access, from and after the date of this Agreement,
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to all of their respective properties, books, contracts, commitments and
records, and each shall furnish to the other during such period all such
information concerning its affairs as the other may reasonably request. In
addition, each shall make its officers, personnel and vendors available to
discuss with the designated representatives of the other the substance of all
documents, financial statements and other information provided by the party to
the other and such other matters as either party shall deem pertinent to the
transactions contemplated by this Agreement.
5.2 Conduct of Business.
Except as otherwise consented to in writing by the other, from the
effective date of execution of this Agreement until the Closing Date or the date
of termination of this Agreement, each of ETECH and IMPV shall:
(a) maintain and operate its properties in a manner consistent with
the efficient operation of its business and conduct its business only in the
ordinary course, provided that ETECH acknowledges that IMPV has been preparing
for the liquidation of its business or sale of its principal assets and has
reduced staff and operational flexibility significantly as a result. It shall
not be considered to be in the ordinary course of its business to make any
acquisition (i) of direct or indirect ownership or control of voting shares of
any other corporation, or (ii) of any interest in any partnership, joint
venture, association or similar organization, other than shares acquired in
satisfaction of a security interest or of a debt previously contracted or in a
fiduciary or custodial capacity. In this regard, IMPV shall make no expenditure
in excess of $10,000 without the prior written consent of ETECH and ETECH shall
make no expenditure in excess of $10,000 without the prior written consent of
IMPV. ETECH shall provide to IMPV such management, staffing, technical and
administrative support as reasonably necessary to enable IMPV to continue its
operations without payment by IMPV.
(b) punctually pay and discharge all Taxes, assessments and
governmental charges lawfully imposed upon it or any of its property, or upon
the income and profits thereof; provided, however, that nothing herein contained
shall require a party to pay or discharge any Tax assessment or governmental
charge so long as the validity thereof shall be contested in good faith and by
appropriate proceedings unless property essential to the conduct of its business
will be lost, forfeited or materially endangered.
(c) maintain its existence as a corporation in good standing under the
laws of its state of organization and comply in all material respects with all
laws, governmental regulations, rules and ordinances, and judicial orders,
judgments and decrees applicable to its business or its properties, except while
contesting the validity of any of the foregoing in good faith and by appropriate
proceedings.
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(d) notify the other of the commencement of any material litigation
against it or of the existence of any adverse business conditions threatening
its continued, normal business operations or of any agreement, consent or order
involving its operations.
(e) at all times maintain, preserve and keep its properties in good
repair, working order and condition in all material respects so that the
business carried on in connection therewith may be properly and advantageously
conducted.
(f) make every reasonable effort to fulfill its contractual
obligations and to maintain in effect its insurance as currently in effect.
(g) use its reasonable best efforts to preserve its business relations
with its present customers.
(h) use its reasonable best efforts to assure, to the extent within
its control, the satisfaction of the conditions to the effectiveness of the
transactions contemplated in this Agreement.
5.3 Negative Covenants.
Prior to the Closing Date or the termination of this Agreement,
neither ETECH nor IMPV shall, unless the other shall have otherwise consented in
writing and except as contemplated herein:
(a) amend its Articles or Certificate of Incorporation or Bylaws,
except to the extent necessary to effect the transactions contemplated by this
Agreement.
(b) issue, sell or otherwise dispose of any shares of its capital
stock or any of its securities convertible into or representing a right or
option to purchase any such shares or enter into other agreements to issue or
sell any shares of its capital stock or change the presently outstanding shares
of such stock into a greater or lesser number of shares either by way of a
recapitalization, reorganization, consolidation of shares or the like, or by way
of a merger or consolidation, other than the issuance by IMPV of its own common
stock upon the exercise of any warrants or outstanding stock options granted
under the respective company's stock option plan currently in effect, if any,
including amendments thereto and in the case of ETECH, the issuance of
securities of ETECH for the New Capital.
(c) other than the Share Buyback, purchase, redeem, retire or
otherwise acquire or sell, hypothecate, pledge or otherwise encumber, any shares
of its capital stock.
(d) declare, set aside, make or pay stock or cash dividends on any
share of its capital stock or make any other distribution of assets to the
holders of any shares of its capital stock.
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5.4 Continued Relationships.
ETECH shall preserve intact the business of ETECH and each ETECH
Subsidiary and IMPV shall preserve intact the business of IMPV and each IMPV
Subsidiary and keep available the services of their respective officers and
employees and maintain good relationships with suppliers, customers and others
having business relationships with any of the parties, and shall not cause any
change in the business, condition or results of operations which may have an
adverse effect on any the assets, business, condition or prospects of the
respective party.
5.5 Confidentiality.
(a) Except as contemplated by this Agreement, as required by law or
otherwise expressly consented to in writing by IMPV and ETECH, all information
or documents furnished hereunder by any party shall be kept strictly
confidential by the party or parties to whom furnished at all times prior to the
Closing Date, and in the event such transactions are not consummated, each shall
return to the other all documents furnished hereunder and copies thereof upon
request and shall continue to keep confidential all information furnished
hereunder and shall not thereafter use the same for its advantage.
Notwithstanding the foregoing, (i) IMPV or ETECH may, with the consent of the
other, which consent shall not be unreasonably withheld or delayed, issue or
make a press release, announcement or other disclosure regarding this Agreement
and the transactions contemplated hereby which it reasonably determines
necessary or desirable under applicable law, and (ii) IMPV may, at any time
after the date of this Agreement, file with the Commission a form 8-K pursuant
to the Exchange Act with respect to the transactions contemplated by this
Agreement, which Form 8-K may include, among other things, financial statements
and pro forma financial information with respect to ETECH, (iii) as soon as
reasonably practicable after the date of this Agreement, IMPV and ETECH agree to
cooperate in the making of a joint press release related to the transactions
contemplated hereby. Prior to the Closing Date or termination of this Agreement,
ETECH shall cooperate with IMPV and provide such information and documents as
may be required in connection with any such filings, and (iv) ETECH may disclose
information related to this Agreement and the transactions contemplated thereby
to selected third parties for the purpose of securing the New Capital, provided
ETECH obtains written assurances that any material nonpublic information shall
be kept in confidence and the recipients shall not trade IMPV stock while in
possession of material nonpublic information.
(b) If the Closing is not consummated, each party will hold, and each
party will cause its respective Subsidiaries to hold, in absolute confidence any
information obtained from another party except to the extent (i) such party is
required to disclose such information by law or regulation, (ii) disclosure of
such information is necessary in connection with the pursuit of a claim by such
party against another party, (iii) such information was known by such party
prior to such disclosure or was thereafter developed or obtained by such party
independent of such disclosure, or (iv) such information becomes generally
available to the public or is otherwise no longer confidential. Prior to any
disclosure of information pursuant to the exception in clause (i) or (ii) of the
preceding sentence, the party intending to disclose the same shall so notify the
party which provided the same in order that such party may seek a protective
order or other appropriate remedy should it choose to do so. Notwithstanding the
foregoing, IMPV or ETECH may, with the consent of the other, which consent shall
not be unreasonably withheld or delayed, issue or make a press release,
announcement or other disclosure regarding the termination of this Agreement and
the transactions contemplated hereby which it reasonably determines necessary or
desirable under applicable law.
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5.6 No Solicitation.
(a) ETECH, IMPV and those acting on behalf of either will not, and
ETECH and IMPV will use their reasonable best efforts to cause their officers,
employees, agents, and representatives (including any investment banker) to not,
directly or indirectly, solicit, encourage, or initiate any discussions with, or
negotiate or otherwise deal with, or provide any information to, any person or
entity other than the other and its officers, employees, and agents, concerning
any merger, other business combination, sale of substantial assets, or similar
transaction involving either or any sale of any of their capital stock or of the
capital stock or other securities or assets of either. Each will notify the
other as promptly as practicable (but in no case later than 48 hours) after
receipt of any inquiry, offer or proposal relating to any of the foregoing. None
of the foregoing shall prohibit (i) sale of IMPV Common Stock as contemplated
under this Agreement or (ii) providing information to others in a manner in
keeping with the ordinary conduct of the parties' business, or providing
information to Governmental Entities or (iii) ETECH providing information to
selected third parties for the purpose of securing the New Capital.
(b) Notwithstanding the first two sentences of Section 5.6(a), prior
to the Closing, IMPV may negotiate or otherwise engage in substantive
discussions with, and furnish nonpublic information to, any third party in
response to an unsolicited proposal by such third party to acquire in any manner
at least fifty percent of the IMPV's outstanding shares or fifty percent of the
assets of IMPV (an "Alternate Proposal") if a majority of the IMPV Board of
Directors determines in good faith that such Alternate Proposal could reasonably
result in a superior proposal to the transactions contemplated by this
Agreement. IMPV shall deliver notice in writing to ETECH of its acceptance of an
Alternate Proposal as soon as practicable thereafter, and in any event no later
than 24 hours thereafter.
5.7 Notification of Certain Matters.
Between the date hereof and the Closing Date, each party will give
prompt notice in writing to the other party of: (i) any information that
indicates that any of its representations or warranties contained herein was not
true and correct as of the date hereof or will not be true and correct at and as
of the Closing Date with the same force and effect as if made at and as of the
Closing Date (except for changes permitted or contemplated by this Agreement),
(ii) the occurrence of any event which will result, or has a reasonable prospect
of resulting, in the failure of any condition specified in Article 7 hereof to
be satisfied or (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or that such
transactions otherwise may violate the rights of or confer remedies upon such
third party. Without limiting the generality of the foregoing, IMPV shall
deliver notice in writing to ETECH of its knowledge of any circumstance that
will prevent the delivery of the fairness opinion described in Section 7.1(k) or
(m) as soon as practicable thereafter.
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5.8 Actions by Merger Sub.
In its capacity as the sole stockholder of Merger Sub, IMPV shall
cause Merger Sub to approve and adopt the Merger and to take all corporate
action necessary on its part to consummate the Merger and the transactions
contemplated hereby. Merger Sub shall not conduct any other business, and will
have no other assets or liabilities.
5.9 Directors' and Officers' Indemnification.
(a) The indemnification provisions of the organizing documents, bylaws
or any indemnification agreement of IMPV and the Surviving Corporation as in
effect immediately following the Effective Time shall not be amended, repealed
or otherwise modified after the Effective Time in any manner that would
adversely affect the indemnification rights thereunder, unless such modification
is required by law.
(b) After the Closing, IMPV will pay the deductible amount on the D&O
policy put in place with IMPV for the three-year period after the Closing of the
Agreement (the "Tail Policy") in the event any payment is made under such policy
on a covered claim against a former director of the IMPV Board who served as a
director before the Closing of the Agreement or person who served as an officer
of IMPV before the Closing (collectively, the "Former Officers and Directors").
(c) After the Closing, IMPV shall take no action to amend, cancel or
reduce the benefits under the Tail Policy.
(d) The Former Officers and Directors are intended third party
beneficiaries of this Section 5.9.
5.10 Continuation of Benefits.
ETECH agrees to assume obligations of IMPV after the Effective Time to
pay all post-termination benefits to employees under Code section 4980(b),
provided that all costs of such benefits (other than administration) shall be
borne by the employees as provided in the Code, and to pay all post-termination
benefits under severance agreements and Change of Control agreements. The
employees of IMPV prior to the Effective Time are intended to be third-party
beneficiaries of this Agreement.
5.11 Costs.
Each of the Parties shall pay its own cost of preparing the disclosure
materials for, and reviewing the contents of, the Tender Offer Statement.
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5.12 Existing Liabilities.
Except for the AT&T Liability, IMPV shall make reasonable provision
for the payment of all of its known existing liabilities prior to Closing.
5.13 AT&T Liability.
ETECH will negotiate a resolution of the IMPV liability to AT&T Corp.
(the "AT&T Liability") in the form of a written release or other binding
instrument reasonably satisfactory to IMPV to be delivered prior to Closing.
5.14 Disclosures to New Investors.
As of the date hereof, before any use or distribution of disclosure
materials to New Investors or potential New Investors, ETECH shall provide a
copy of such materials for IMPV's approval, which shall be at IMPV's reasonable
discretion. ETECH agrees that such materials shall include all substantive
information from the final Tender Offer Statement to be prepared in connection
with the Share Buyback, if the Tender Offer Statement has been prepared at the
time that ETECH desires to use or distribute the disclosure materials for
securing the New Capital as required in Section 2.3 of this Agreement. The
information provided by IMPV and ETECH, respectively, for disclosure to the New
Investors shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
5.15 Delivery of Updated Disclosure Schedules.
Prior to the Closing, ETECH and IMPV (together with Merger Sub) shall
each deliver to the other party Disclosure Schedules setting forth any facts
necessary to make their respective representations and warranties in this
Agreement true in all material respects on the Closing Date.
ARTICLE 6
TAX REPRESENTATIONS AND WARRANTIES
6.1 IMPV Representations and Warranties.
IMPV hereby represents and warrants to ETECH as follows:
(a) IMPV has no current plan or intention to reacquire any of its
capital stock issued in the Merger.
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(b) As of immediately before the Merger, IMPV will be in "control" of
Merger Sub within the meaning of Section 368(c) of the Code.
(c) Except under circumstances in which doing so would not cause the
Merger to fail to be treated as a reorganization under Section 368 of the Code,
IMPV has no current plan or intention to (a) liquidate ETECH; merge ETECH with
or into another corporation; sell or otherwise dispose of the capital stock of
ETECH except for transfers of capital stock to a corporation that is a member of
IMPV's "qualified group" as defined in Treas. Reg. section 1.368-1(d)(4)(ii); or
(b) cause ETECH to sell or otherwise dispose of any of its assets or of any of
the assets acquired from Merger Sub, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation controlled
by ETECH.
(d) The liabilities of Merger Sub assumed by ETECH and the liabilities
to which the transferred assets of Merger Sub are subject were incurred by
Merger Sub in the ordinary course of its business or solely for purposes of
implementing the Merger.
(e) Following the Merger, IMPV will cause ETECH to continue its
historic business or use a significant portion of its historic business assets
in a business.
(f) IMPV does not own, nor has it owned during the past five years,
any shares of the capital stock of ETECH.
(g) Neither IMPV nor Merger Sub is an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
(h) Neither IMPV nor Merger Sub is under the jurisdiction of a court
in a Title 11 case or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
6.2 ETECH Representations and Warranties.
ETECH hereby represents and warrants to IMPV as follows:
(a) Following the Merger, ETECH will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair market
value of its gross assets. For purposes of this representation, amounts paid by
ETECH to dissenters, amounts paid by ETECH to shareholders who receive cash or
other property, amounts used by ETECH to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by
ETECH will be included as assets of ETECH immediately prior to the Merger.
(b) In the Merger, shares of capital stock representing "control" of
ETECH within the meaning of Section 368(c) of the Code will be exchanged for
voting stock of IMPV. For purposes of this representation, shares of capital
stock of ETECH exchanged for cash or other property originating with IMPV shall
be treated as outstanding stock of ETECH on the date of the Merger.
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(c) ETECH has no current plan or intention, nor does it have any
obligation, to issue any shares of ETECH capital stock that would result in IMPV
losing "control" of ETECH within the meaning of Section 368(c) of the Code.
(d) ETECH does not own, nor has it owned during the past five years,
any shares of the capital stock of IMPV.
(e) On the date of the Merger, the fair market value of the assets of
ETECH will exceed the sum of its liabilities plus the amount of liabilities, if
any, to which the assets of ETECH are subject.
(f) ETECH is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(g) Agreements not to participate in the Share Buyback shall have been
received from any recipient of Merger Consideration who did not deliver such an
agreement at the signing of this Agreement.
(h) Neither ETECH nor any ETECH Subsidiary is under the jurisdiction
of a court in a Title 11 case or similar case within the meaning of Section
368(a)(3)(A) of the Code.
6.3 Joint Representations and Warranties.
Each of IMPV, Merger Sub and ETECH (each a "Party") hereby represents
and warrants to each other Party as follows:
(a) Each Party believes the fair market value of IMPV capital stock
and any other consideration received by each ETECH shareholder will be
approximately equal to the fair market value of the ETECH capital stock
surrendered in the exchange.
(b) Each Party, and the shareholders of ETECH will pay their
respective expenses, if any, incurred in connection with the Merger.
(c) There is no intercorporate indebtedness existing between IMPV and
ETECH or between Merger Sub and ETECH that was issued, acquired, or will be
settled at a discount.
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ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions to the Obligation of IMPV to Close.
The obligation of IMPV to consummate the transactions contemplated
hereby shall be subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
(a) each of the representations and warranties of ETECH contained in
this Agreement shall be true when made and, with such changes as indicated in
any Disclosure Schedule provided to IMPV prior to the Closing, shall be true in
all material respects on and as of the Closing Date; each of the covenants and
agreements of ETECH to be performed on or prior to the Closing Date shall have
been duly performed in all material respects; and IMPV shall have received at
the Closing a certificate to that effect dated as of the Closing Date and
executed by the Chief Executive Officer of ETECH;
(b) the final date for the acceptance of the tender offer made with
respect to the Share Buyback shall have occurred;
(c) (intentionally omitted);
(d) ETECH shall have obtained all requisite approval of its
stockholders to the consummation of the transactions contemplated by this
Agreement; IMPV shall have received a Share Buyback Waiver from any recipient of
Merger Consideration who did not deliver a Share Buyback Waiver at the signing
hereof;
(e) there shall not have been issued or be in effect any order of any
court, agency or other tribunal of competent jurisdiction which has the effect
of prohibiting or prohibits the performance of the Agreement and the
transactions contemplated thereby or imposes limitations on the ability of ETECH
to exercise and possess all of its rights, privileges, immunities and franchises
or to otherwise conduct its business (with limitations applicable only to all
similar entities engaged in similar business) as of the Closing Date;
(f) all proceedings, corporate or otherwise, to be taken in connection
with the transactions contemplated by this Agreement, including the approval by
ETECH's shareholders of the transactions contemplated by this Agreement, as
required, shall have occurred and all appropriate documents incident thereto as
IMPV may reasonably request shall have been delivered to it.
(g) no action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced against the parties hereto or any of the affiliates, associates,
officers or directors, or any of them, seeking to restrain, prevent or change
the transactions contemplated hereby, or questioning the validity or legality of
any such transactions contemplated hereby, or questioning the validity or
legality of any such transactions, or seeking damages in connection with any of
such transactions;
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(h) ETECH and each ETECH Subsidiary shall have received any requisite
approvals to this Agreement from all third parties having, under the terms of
its respective loan, lease and other agreements, the right to approve or reject
this Agreement or to cancel its agreement with ETECH on or before the Closing
Date; ETECH hereby represents that all such third parties will have been
disclosed to IMPV in writing on or before the Closing Date;
(i) ETECH shall execute and deliver or cause to be executed and
delivered to IMPV such documents as are required at the Closing, pursuant to
Article 8;
(j) IMPV shall have obtained such representations, warranties and
covenants from the holders of the Merged Interests as IMPV deems reasonably
necessary to assure that the issuance of IMPV Common Stock pursuant to this
Agreement is exempt from the registration requirements of the Securities Act and
of applicable Blue Sky laws and to permit IMPV to make such filings, or obtain
such permits or qualifications, as may be required in connection therewith under
the Securities Act or applicable Blue Sky laws;
(k) IMPV shall have received a fairness opinion, at IMPV's expense,
reasonably satisfactory to IMPV, to the effect that the transactions
contemplated by this Agreement are fair from a financial point of view to IMPV's
stockholders;
(l) ETECH shall have secured the New Capital as set forth in Section
2.3 of this Agreement.
(m) The Buyback Price shall be at least $0.14, or if a lesser amount,
IMPV shall have received a fairness opinion, at IMPV's expense, reasonably
satisfactory to IMPV, to the effect that the Buyback Price is fair from a
financial point of view to IMPV's stockholders;
(n) The debt related to the Convertible Loans shall have been
converted into shares of ETECH Common Stock; and
(o) IMPV shall have immediately available for payment the Buyback
Amount, less the $250,000 balance of the New Capital
7.2 Conditions to the Obligation of ETECH to Close.
The obligation of ETECH to consummate the transactions contemplated
hereby shall be subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
(a) each of the representations and warranties of IMPV and Merger Sub
contained in this Agreement shall be true when made and, with such changes as
indicated in any Disclosure Schedule provided to ETECH prior to the Closing
shall be true in all material respects on and as of the Closing Date; each of
the covenants and agreements of IMPV and Merger Sub to be performed on or prior
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to the Closing Date shall have been duly performed in all material respects; and
ETECH shall have received at the Closing a certificate to that effect dated as
of the Closing Date and executed by the Chairman of IMPV;
(b) Intentionally omitted.
(c) there shall not have been issued or be in effect any order of any
court, agency or other tribunal of competent jurisdiction which has the effect
of prohibiting or prohibits the performance of the Agreement and the
transactions contemplated thereby or imposes limitations on the ability of IMPV
to exercise and possess all of its rights, privileges, immunities and franchises
or to otherwise conduct its business (with limitations applicable only to all
similar entities engaged in similar business) as of the Closing Date;
(d) all proceedings, corporate or otherwise, to be taken in connection
with the transactions contemplated by this Agreement, including the approval by
the shareholder of Merger Sub, as required, of the transactions contemplated by
this Agreement, shall have occurred and all appropriate documents incident
thereto as ETECH may reasonably request shall have been delivered to it.
(e) no action, suit or proceeding before any Governmental Entity shall
have been commenced or threatened, and no investigation by any governmental or
regulatory authority shall have been commenced against the parties hereto or any
of the affiliates, associates, officers or directors, or any of them, seeking to
restrain, prevent or change the transactions contemplated hereby, or questioning
the validity or legality of any such transactions contemplated hereby, or
questioning the validity or legality of any such transactions, or seeking
damages in connection with any of such transactions;
(f) IMPV and each IMPV Subsidiary shall have received any requisite
approvals to this Agreement from all third parties having, under the terms of
any of its agreements, the right to approve or reject this Agreement or to
cancel its agreement with IMPV on or before the Closing; IMPV hereby represents
that all such third parties will have been disclosed to ETECH in writing as of
the Closing Date;
(g) IMPV shall have executed and delivered or caused to be executed
and delivered to ETECH such documents as are required at the Closing, pursuant
to Article 8; and
(h) IMPV shall have delivered an updated Schedule 4.26 for purposes of
the adjustment set forth in Section 2.2(a).
ARTICLE 8
CLOSING
8.1 Documents to be Delivered by IMPV.
At the Closing, IMPV will deliver the following to ETECH:
(a) Share Certificates. Certificates representing the shares of IMPV
Common Stock constituting the Merger Consideration;
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(b) Certified Resolutions. Certified resolutions of each of the Board
of Directors of IMPV and Merger Sub approving the execution, delivery and
performance of this Agreement and authorizing the consummation of the
transactions contemplated hereby;
(c) Officer's Certificate. A certificate, dated as of the Closing
Date, signed by the Chairman of IMPV, as required pursuant to Section 7.2;
(d) Good Standing Certificates. Governmental certificates showing that
IMPV and Merger Sub are duly incorporated, validly existing and in good standing
in their respective states of incorporation and qualified to do business as a
foreign corporation in each state listed in Schedule 4.1(a), certified as of a
date not more than ten (10) days before the Closing Date and similar
certificates of each material subsidiary;
(e) Stock Options. Notices of grant or equivalent documentation
approved by the Board of Directors of IMPV and issued to each holder of ETECH
Options, evidencing the issuance of the IMPV Options pursuant to the terms and
conditions set forth in Section 1.3(b) hereof;
(f) Statement of Liabilities. A statement showing the amount of IMPV's
liabilities to be paid in accordance with Section 5.12;
(g) Schedules. All schedules of IMPV required by this Agreement; and,
(h) Other Documents. Such additional certificates, instruments,
documents, information and materials as ETECH may reasonably request no later
than 48 hours prior to the Closing.
8.2 Documents to be Delivered by ETECH.
At the Closing, ETECH will deliver the following to IMPV:
(a) Share Certificates. Certificates representing the shares of the
outstanding ETECH Common Stock;
(b) Certified Resolutions. Certified resolutions of the Board of
Directors of ETECH approving the execution, delivery and performance of this
Agreement and authorizing the consummation of the transactions contemplated
hereby;
(c) Officer's Certificate. A certificate, dated as of the Closing
Date, signed by the President or Chief Executive Officer of ETECH as required
pursuant to Section 7.1;
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(d) Good Standing Certificates. Governmental certificates showing that
ETECH is duly organized, validly existing and in good standing in the State of
Arizona and qualified to do business as a foreign corporation in each state
listed in Schedule 3.1(a), certified as of a date not more than ten (10) days
before the Closing Date and similar certificates of each material subsidiary;
(e) Schedules. All schedules of ETECH required by this Agreement;
(f) Share Buyback Waiver. Share Buyback Waiver substantially in the
form attached as Exhibit B executed by each holder of ETECH Common Stock and any
other recipient of Merger Consideration; and,
(g) Other Documents. Such additional certificates, instruments,
documents, information and materials as IMPV may reasonably request no later
than 48 hours prior to the Closing.
8.3 Mutual Deliveries.
At the Closing, each of IMPV and ETECH, as applicable, shall execute
and deliver or cause to be executed and delivered:
(a) Articles of Merger substantially in the form attached as Exhibit
A.
ARTICLE 9
AMENDMENT AND WAIVER
9.1 Amendment and Modification.
This Agreement may only be amended or modified in a writing signed by
IMPV, Merger Sub and ETECH at any time prior to the Closing Date.
9.2 Waiver.
At any time prior to the Closing Date, the parties hereto may by
mutual agreement extend the time for the performance of any of the obligations
or other acts of any other party hereto. Any party may waive any inaccuracies in
the representations and warranties of any other party contained herein or in any
schedule or document delivered pursuant hereto and waive compliance by any other
party with any of the covenants, agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the parties
hereto.
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ARTICLE 10
TERMINATION
10.1 Termination by Parties.
This Agreement may be terminated prior to the Closing Date:
(a) At the option of IMPV, upon written notice to the other parties,
if in the good faith opinion of the Board of Directors of IMPV, ETECH has
breached any of the representations and warranties or other covenants of this
Agreement or any condition precedent set forth in Section 7.1 has failed to
occur and such breach or noncompliance has not been cured in all material
respects within 10 days after notice from IMPV to ETECH of such default, or (ii)
at the option of ETECH, upon written notice to the other parties, if in the good
faith opinion of the Board of Directors of ETECH, either IMPV or Merger Sub has
breached any of the representations and warranties or other covenants of this
Agreement or any condition precedent set forth in Section 7.2 has failed to
occur and such breach or noncompliance has not been cured in all material
requested within 10 days after notice from ETECH to IMPV of such default;
(b) by mutual agreement of IMPV and ETECH; and
(c) at the option of the respective Board of Directors of IMPV or
ETECH, if any litigation is instituted against ETECH or IMPV, the object of
which is to enjoin any party from proceeding with the transactions contemplated
under this Agreement or to seek damages against any party hereto or any officer,
director or agent of any party as a result of the transactions proposed under
this Agreement.
(d) by ETECH or IMPV if the Closing has not occurred by November 30,
2002.
10.2 Effect of Termination.
In the event this Agreement is terminated as provided in Section 10.1,
this Agreement shall be void and of no further force and effect, and, except as
set forth herein and Section 2.3 and 5.5 above, there shall be no further
liability on the part of IMPV or ETECH or any of their respective directors,
officers or stockholders as a result of this Agreement. Section 5.5 shall
survive any termination of this Agreement. Nothing in this Section 10.2 shall
relieve any party from liability for any willful or intentional breach of this
Agreement.
ARTICLE 11
INDEMNIFICATION AND DISPUTE RESOLUTION
11.1 Post-Closing Indemnification.
(a) Subject to the provisions of Section 11.2, from and after the
Closing, IMPV shall indemnify and hold harmless ETECH for, from and against any
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and all Losses (as defined below) arising out of, resulting from or in any way
related to (i) a breach of, or the failure to perform or satisfy any of, the
representations, warranties, covenants and agreements made by IMPV, any
subsidiary of IMPV or Merger Sub in this Agreement (as such representations and
warranties may be modified by schedules delivered at or before Closing) or in
any document or certificate delivered by IMPV at the Closing pursuant hereto.
(b) Subject to the provisions of Section 11.2, from and after the
Closing, ETECH shall indemnify and hold harmless IMPV for, from and against any
and all Losses arising out of, resulting from or in any way related to a breach
of, or the failure to perform or satisfy any of, the representations,
warranties, covenants and agreements made by ETECH in this Agreement (as such
representations and warranties may be modified by schedules delivered at or
before Closing) or in any document or certificate delivered by ETECH at the
Closing pursuant thereto.
(c) "Losses" means all losses, costs (including without limitation
attorney's fees), claims, liabilities, damages, lawsuits, demands and expenses
(whether or not arising out of third party claims) including, without
limitation, interest, penalties, costs of litigation and all amounts paid in the
investigation, defense or settlement of any of the foregoing.
11.2 Limitation On Liability.
(a) The representations, warranties, agreements, and indemnities of
IMPV, any IMPV Subsidiary, Merger Sub and ETECH set forth in this Agreement or
in connection with the transactions contemplated hereby shall survive the
Closing except as expressly provided in Section 11.2(b).
(b) No party shall have any liability under this Agreement to
indemnify (collectively the "Business Indemnities"), in each case unless the
indemnifying party receives notice in writing from the other of such claim under
said indemnity on or before the one-year anniversary of the Closing Date. The
foregoing limitations shall not apply to any breaches of or obligations to
comply with any of the other provisions of this Agreement, regardless of whether
such breach or obligation also constitutes a breach or obligation under any of
the provisions specifically listed in this Section 11.2(b).
(c) For purposes of this Section 11.2(c), a party making a claim for
indemnity under Section 11.1 is hereinafter referred to as an "Indemnified
Party" and the party against whom such claim is asserted is hereinafter referred
to as the "Indemnifying Party." All claims by any Indemnified Party under
Section 11.1 hereof shall be asserted and resolved in accordance with the
following provisions. If any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party is asserted against or sought to be
collected from such Indemnified Party by such third party, said Indemnified
Party shall with reasonable promptness notify in writing the Indemnifying Party
of such claim or demand stating with reasonable specificity the circumstances of
the Indemnified Party's claim for indemnification; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of the Indemnifying Party are actually
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prejudiced or to the extent that any applicable period set forth in Section
11.2(c) has expired without such notice being given. After receipt by the
Indemnifying Party of such notice, then upon reasonable notice from the
Indemnifying Party to the Indemnified Party, or upon the request of the
Indemnified Party, the Indemnifying Party shall defend, manage and conduct any
proceedings, negotiations or communications involving any claimant whose claim
is the subject of the Indemnified Party's notice to the Indemnifying Party as
set forth above, and shall take all actions necessary, including but not limited
to the posting of such bond or other security as may be required by any
Governmental Authority, so as to enable the claim to be defended against or
resolved without expense or other action by the Indemnified Party. Upon request
of the Indemnifying Party, the Indemnified Party shall, to the extent it may
legally do so and to the extent that it is compensated in advance by the
Indemnifying Party for any costs and expenses thereby incurred,
(i) take such action as the Indemnifying Party may reasonably
request in connection with such action,
(ii) allow the Indemnifying Party to dispute such action in the
name of the Indemnified Party and to conduct a defense to such action on behalf
of the Indemnified Party, and
(iii) render to the Indemnifying Party all such assistance as
the Indemnifying Party may reasonably request in connection with such dispute
and defense.
11.3 Dispute Resolution Procedure.
The parties agree to use the alternate dispute resolution procedure
set forth herein as the sole means of resolving all claims between the parties
arising from or under this Agreement (a "Party Claim"), except where equitable
remedies are the only means of effectively protecting the injured party.
Consequently, the parties will attempt in good faith to resolve any dispute
arising out of, or relating to the Agreement promptly and initially by senior
leadership of the parties in the following manner: In the event of a Party
Claim, a senior representative for each party shall meet within seven (7) days
of a written notification of such Party Claim at a location to be selected by
the parties to attempt a resolution. If no resolution of the Party Claim occurs
at this meeting, the two representatives shall, within seven (7) days of such
meeting, refer the matter to the next highest level of management for each
party, which individuals shall have the authority to settle the Party Claim. The
referring representatives shall promptly prepare and exchange memoranda stating
the issues in the Party Claim and each other's position on the merits,
summarizing the negotiations which have taken place and attaching relevant
documents. If the parties are unable to resolve the Party Claim within the
timeframe set forth above, and either or both are unwilling to continue
negotiations, the Party Claim shall be promptly referred to and settled by
mediation in accordance with the Commercial Mediation Rules of the American
Arbitration Association ("AAA"). In the event mediation is unsuccessful, and
either or both parties are unwilling to continue negotiations, the Party Claim
shall be settled by binding, non-appealable arbitration administered (i) in Los
Angeles, California if the Party Claim is made prior to the Closing or prior to
a termination under the provisions of Article 10 of this Agreement and (ii) in
Phoenix, Arizona if the Party Claim is made after the Closing or after a
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termination under Article 10 of this Agreement, in accordance with the American
Arbitration Association Rules and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. In the event
of a Party Claim, the prevailing party shall be entitled to recovery of its
reasonable attorneys' fees and costs. Notwithstanding anything to the contrary
contained in this section 11.3, injunctive relief may be sought from and
enforced by any court of competent jurisdiction.
ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement.
This Agreement, and the exhibits and schedules attached hereto, and
the agreements contemplated by this Agreement contain the entire agreement among
the parties and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof. There are nor written or oral agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to in this Agreement.
12.2 Expenses.
All legal and other costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses. Notwithstanding the foregoing, if this
Agreement is terminated by a party (the "Non-breaching Party") as a result of a
material breach by the other party (the "Breaching Party") of its covenants or
agreements contained herein or the representations and warranties made by it
herein, the Breaching Party shall reimburse the Non-breaching Party for all
reasonable out-of-pocket fees and expenses (including, without limitation, fees
and expenses of counsel and accountants) incurred in connection with the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby. Such payment shall be made by the Breaching Party within 5
business days of receipt of documentation from the Non-breaching Party in
reasonable detail supporting the amount of such costs and expenses. The remedies
set forth in this Section 12.2 shall be in addition to any other rights and
remedies allowed by law.
12.3 Attorneys' Fees.
Notwithstanding Section 12.2 above, in the event of any proceeding to
enforce this Agreement, the prevailing party shall be entitled to receive from
the losing party all reasonable costs and expenses, including the reasonable
fees of attorneys, accountants and other experts, incurred by the prevailing
party in investigating and prosecuting (or defending) such action at trial or
upon any appeal.
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12.4 Section Headings.
The section headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
12.5 Definition of "Knowledge."
The "knowledge" of any corporation or other entity not an individual
means, with respect to any matter, the actual knowledge of the executive
officers of such corporation or other entity after due inquiry of the employees
of such corporation or other entity having primary responsibility for such
matter.
12.6 Assignment.
This Agreement shall not be assigned by any party without the written
consent of the other parties and any attempted assignment without such written
consent shall be null and void and without legal effect.
12.7 Notices.
All notices hereunder shall be deemed given if in writing and
delivered personally or sent by telex, telegram, telefacsimile, registered mail
or certified mail (return receipt requested) to the parties at the addresses
below (or at such other addresses as shall be specified by like notice). Any
notice, however given, shall be effective five days after it is sent.
If to IMPV: ImproveNet, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
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With a copy (which shall not constitute notice) to:
Xxxxxxxx, Xxxxxx Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxx, Esq.
Fax: 000-000-0000
If to ETECH: eTechLogix, Inc.
0000 X. Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
Fax: 000-000-0000
12.8 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to conflict of law principles.
12.9 Equitable Remedies.
The parties acknowledge that the remedies at law may be inadequate to
protect against any default hereunder, and consent to the granting of injunctive
relief or other forms of equitable relief by a court of competent jurisdiction
or a similar judicial body, whether temporary, preliminary or final, whether or
not actual damages can be shown.
12.10 Number of Days.
In computing the number of days for purposes of this Agreement, all
days will be counted, including Saturdays, Sundays and holidays; provided,
however, that if the final day of any time period falls on a Saturday, Sunday or
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day that is a legal holiday in the State of Arizona, then the final day will be
deemed to be the next day that is not a Saturday, Sunday or day that is a legal
holiday in the State of Arizona.
12.11 Provisions Severable.
The provisions of this Agreement are independent of and severable from
each other, and no provision will be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others of
them may be invalid or unenforceable in whole or in part. Further, if a court of
competent jurisdiction determines that any provision of this Agreement is
invalid or unenforceable as written, the court may interpret, construe, rewrite
or revise such provision, to the fullest extent allowed by law, so as to make it
valid and enforceable, consistent with the intent of the parties hereto.
12.12 Construction.
The parties hereto hereby acknowledge and agree that each party has
participated in the drafting of this Agreement and that this Agreement has been,
to the extent it was felt necessary, reviewed by the respective legal counsel
for the parties hereto and that the rule of construction to the effect that any
ambiguities are to be resolved against the drafting party will not be applied to
the interpretation of this Agreement. No inference in favor of, or against, any
party will be drawn from the fact that one party has drafted any portion hereof.
12.13 Headings.
The headings contained in this Agreement are for convenience only and
will not affect the meaning or interpretation of this Agreement.
12.14 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which will be deemed to be an original as against any party whose signature
appears thereon, and all of which will together constitute one and the same
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instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bears the signatures of all of the
parties reflected hereon as the signatories. Any photocopy or telefacsimile of
this Agreement, with all signatures reproduced on one or more sets of signature
pages, will be considered for all purposes as if it were an executed counterpart
of this Agreement.
12.15 Recitals, Schedules and Exhibits.
The recitals, schedules and exhibits referred to in this Agreement
shall be construed with and are an integral part of this Agreement and are
incorporated herein by this reference.
The next page is the signature page.
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IN WITNESS WHEREOF, this Agreement and Plan or Merger has been
executed by each of the parties as of the day and year first above written.
IMPV:
IMPROVENET, INC.
By:__________________________________
Xxxxxx X. Xxxxxx
Chairman
MERGER SUB:
By:__________________________________
Xxxxxx X. Xxxxxx, President
ETECH:
ETECHLOGIX, INC.
By:__________________________________
Xxxxxxx X. Xxxxxx, CEO
By:__________________________________
Homey J. Farsi, President
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EXHIBIT AND SCHEDULE LIST
Exhibit A Form of Articles of Merger
Exhibit B Form of Share Buyback Waiver
Schedule 3.1(a) ETECH Jurisdictions of Qualification
Schedule 3.1(b) ETECH Interests in Other Business Entities
Schedule 3.3 ETECH Approvals and Consents
Schedule 3.5 ETECH Options, Warrants and Convertible Securities
Schedule 3.6(a) ETECH Financial Statements
Schedule 3.6(b) ETECH Additional Liabilities
Schedule 3.9 ETECH Adverse Changes and Events
Schedule 3.10 ETECH Defaults
Schedule 3.11 ETECH Litigation
Schedule 3.12(a) ETECH Plans
Schedule 3.12(e) ETECH Employee Payments Triggered by Merger
Schedule 3.12(g) ETECH Employee Contracts, Etc.
Schedule 3.12(h) ETECH Commitments for Employee Contracts
Schedule 3.14 ETECH Material Contracts and Insurance Policies
Schedule 3.15(a) ETECH Exceptions to Tax Returns
Schedule 3.15(e) ETECH Affiliated Groups
Schedule 3.15(h) ETECH Certain Tax Disclosures; Excess Parachute Payments
Schedule 3.16 ETECH Title Defects
Schedule 3.18(b) ETECH Intellectual Property
Schedule 3.22 ETECH Shareholder List
Schedule 4.1(a) IMPV Jurisdictions of Qualification
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Schedule 4.1(b) IMPV Interests in Other Business Organizations
Schedule 4.3 IMPV Approvals and Consents
Schedule 4.6 IMPV Options, Warrants and Convertibles
Schedule 4.7(a) IMPV Financial Statements
Schedule 4.7(b) IMPV Additional Liabilities
Schedule 4.10 IMPV Adverse Changes and Events
Schedule 4.11 IMPV Defaults
Schedule 4.12 IMPV Litigation
Schedule 4.13(a) IMPV Plans
Schedule 4.13(e) IMPV Employee Payments Triggered by Merger.
Schedule 4.13(g) IMPV Employee Contracts
Schedule 4.15 IMPV Material Contracts and Insurance Policies
Schedule 4.16(a) IMPV Exceptions to Tax Returns
Schedule 4.16(e) IMPV Affiliated Group
Schedule 4.16(h) IMPV Certain Tax Exceptions
Schedule 4.16(j) IMPV Certain Tax Elections, Etc.
Schedule 4.17 IMPV Title Defects
Schedule 4.19(b) IMPV Intellectual Property
Schedule 4.26 IMPV Accounts Receivable Aging
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TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER.........................................................1
1.1 The Merger..........................................................1
1.2 Closing Procedures..................................................2
1.3 Conversion of Securities............................................3
1.4 Exchange of Share Certificates; Fractional Shares...................4
1.5 Tax-Free Merger.....................................................5
1.6 Taking Necessary Action.............................................5
ARTICLE 2 ADDITIONAL TERMS...................................................5
2.1 Board of Directors..................................................5
2.2 Share Buyback.......................................................6
2.3 New Capital. Deposit. Break-Up Fee..................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ETECH............................8
3.1 Organization, Capacity and Authority................................8
3.2 No Conflict, Breach or Default......................................9
3.3 Approvals and Consents..............................................9
3.4 Valid Obligation...................................................10
3.5 Capital Stock of ETECH.............................................10
3.6 ETECH Financial Statements.........................................10
3.7 Books and Records..................................................11
3.8 Regulatory Filings.................................................10
3.9 Absence of Certain Changes and Events..............................11
3.10 No Breach of Statute, Decree or Order..............................11
3.11 Litigation.........................................................12
3.12 Employee Benefit Plans; Employee Matters...........................12
3.13 Permits and Licenses...............................................14
3.14 Material Contracts.................................................14
3.15 Tax Matters........................................................15
3.16 Title to Properties................................................16
3.17 Environmental Matters..............................................19
3.18 Intellectual Property..............................................19
3.19 Condition and Sufficiency of Assets................................21
3.20 Accuracy of Statements.............................................21
3.21 Brokers' and Finders' Fees.........................................21
3.22 Shareholder List and Disclosures to New ETECH Investors............21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF IMPV AND MERGER SUB.............22
4.1 Organization, Capacity and Authority...............................22
4.2 No Conflict, Breach or Default.....................................23
4.3 Approvals and Consents.............................................23
4.4 Valid Obligation...................................................23
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4.5 Validly Issued Shares; Securities Act Exemption; Blue Sky..........24
4.6 Capital Stock of IMPV and Merger Sub...............................24
4.7 IMPV Financial Statements..........................................24
4.8 Books and Records..................................................25
4.9 Regulatory Filings.................................................25
4.10 Absence of Certain Changes and Events..............................25
4.11 No Breach of Statute, Decree or Order..............................26
4.12 Litigation.........................................................26
4.13 Employee Benefit Plans; Employee Matters...........................26
4.14 Permits and Licenses...............................................28
4.15 Material Contracts.................................................28
4.16 Tax Matters........................................................29
4.17 Title to Properties................................................32
4.18 Environmental Matters..............................................32
4.19 Intellectual Property..............................................33
4.20 Condition and Sufficiency of Assets................................34
4.21 IMPV Reports and Financial Statements..............................34
4.22 Accuracy of Statements.............................................34
4.23 Brokers and Finders' Fees..........................................35
4.24 Employment Agreements..............................................35
4.25 New Technologies...................................................35
4.26 Accounts Receivable................................................35
ARTICLE 5 COVENANTS OF ETECH AND IMPV.......................................35
5.1 Access to Information..............................................35
5.2 Conduct of Business................................................36
5.3 Negative Covenants.................................................37
5.4 Continued Relationships............................................38
5.5 Confidentiality....................................................38
5.6 No Solicitation....................................................39
5.7 Notification of Certain Matters....................................39
5.8 Actions by Merger Sub..............................................40
5.9 Directors' and Officers' Indemnification...........................40
5.10 Continuation of Benefits...........................................40
5.11 Costs..............................................................40
5.12 Existing Liabilities...............................................41
5.13 AT&T Liability.....................................................41
5.14 Disclosures to New Investors.......................................41
5.15 Delivery of Updated Disclosure Schedules...........................41
ARTICLE 6 TAX REPRESENTATIONS AND WARRANTIES................................41
6.1 IMPV Representations and Warranties................................41
6.2 ETECH Representations and Warranties...............................42
6.3 Joint Representations and Warranties...............................43
ARTICLE 7 CONDITIONS PRECEDENT..............................................44
7.1 Conditions to the Obligation of IMPV to Close......................44
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7.2 Conditions to the Obligation of ETECH to Close.....................45
ARTICLE 8 CLOSING...........................................................46
8.1 Documents to be Delivered by IMPV..................................46
8.2 Documents to be Delivered by ETECH.................................47
8.3 Mutual Deliveries..................................................48
ARTICLE 9 AMENDMENT AND WAIVER..............................................48
9.1 Amendment and Modification.........................................48
9.2 Waiver.............................................................48
ARTICLE 10 TERMINATION......................................................49
10.1 Termination by Parties.............................................49
10.2 Effect of Termination..............................................49
ARTICLE 11 INDEMNIFICATION AND DISPUTE RESOLUTION...........................49
11.1 Post-Closing Indemnification.......................................49
11.2 Limitation On Liability............................................50
11.3 Dispute Resolution Procedure.......................................51
ARTICLE 12 MISCELLANEOUS....................................................52
12.1 Entire Agreement...................................................52
12.2 Expenses...........................................................52
12.3 Attorneys' Fees....................................................52
12.4 Section Headings...................................................53
12.5 Definition of "Knowledge.".........................................53
12.6 Assignment.........................................................53
12.7 Notices............................................................53
12.8 Governing Law......................................................54
12.9 Equitable Remedies.................................................54
12.10 Number of Days.....................................................54
12.11 Provisions Severable...............................................55
12.12 Construction.......................................................55
12.13 Headings...........................................................55
12.14 Counterparts.......................................................55
12.15 Recitals, Schedules and Exhibits...................................56
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