AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
between
LEVEL 8 SYSTEMS, INC.
CICERO TECHNOLOGIES ACQUISITION, LLC
and
XXXXXXXX XXXX MAIL, INC.
Dated as of January 9, 2004
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AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
This Amended and Restated Asset Purchase Agreement (this "Agreement")
is entered into as of January 9, 2004 by and between Level 8 Systems, Inc., a
Delaware corporation, Cicero Technologies Acquisition, LLC, a Delaware limited
liability company, together hereinafter collectively referred to as ("Level
8"), and Xxxxxxxx Xxxx Mail, Inc., d/b/a "Ensured Mail", a Delaware corporation
(the "Company"). Certain capitalized terms used herein are defined in Article
XI and throughout this Agreement.
RECITALS
A. The Company desires to sell all of its assets (as defined below) to
Xxxxx 0 for consideration consisting of shares of Common Stock, par value $.001
per share, of Xxxxx 0 ("Xxxxx 0 Xxxxxx Xxxxx"), and Level 8 desires to acquire
all of the Company's assets through such exchange, each on the terms and
subject to the conditions contained herein (the "Asset Sale").
C. The Company has determined that the Asset Sale is in its best
interests and has approved this Agreement and the transactions contemplated
hereby.
D. Prior to the Closing (as defined in Section 1.5), the Board of
Directors of Level 8 will have determined that the Asset Sale is in the best
interest of Xxxxx 0, and the Board of Directors will have approved this
Agreement and the transactions contemplated hereby.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
TRANSFER OF COMPANY SHARES;
CONSIDERATION; CLOSING
1.1 Sale of Company Assets. The Company agrees to and shall convey,
transfer, assign and deliver to Level 8 at the Closing (as defined in Section
1.5) and Level 8 shall acquire and accept from the Company, on the terms and
subject to the conditions set forth in this Agreement, free and clear of all
claims and Liens, all of the Company's Assets (as defined in Section 11.1),
except for those assets of the Company set forth in Schedule 1.1 which are
excluded from this transaction (the "Excluded Assets").
1.2 Purchase Price. As consideration for the Company Assets, Level 8
shall issue duly authorized, validly issued, fully paid and nonassessable
shares of Level 8 Common Stock to the Company on the terms and subject to the
conditions set forth in this Agreement. The number of shares of Level 8 Common
Stock to be transferred to the Company in consideration for the Assets shall be
calculated as follows: (i) The price of the Level 8 Common Stock shall be equal
to the average closing price of the stock for the three (3) trading days
immediately preceding the closing Date (the "Trading Price"); (ii) The
aggregate purchase price for the Company Shares shall be Seven Hundred Fifty
Thousand Dollars ($750,000.00) worth of Level 8 Common Stock at the Trading
Price (the "Level 8 Consideration Shares").
1.3 Adjustment.
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(a) If between the date of this Agreement and the Closing Date (as
hereinafter defined), the outstanding Level 8 Common Stock shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination, exchange of shares or similar transaction, the number of Level 8
Consideration Shares shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split combination,
exchange of shares or similar transaction. Nothing stated in the immediately
preceding sentence shall be construed as providing the Company any preemptive or
anti-dilutive rights other than in the case of a stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction, and except in such case, there shall be no adjustment to
the Level 8 Consideration Shares in the event that Level 8 issues or agrees to
issue any shares of Level 8 Common Stock between the date hereof and the Closing
Date, whether for cash, through option grants, option or warrant exercises, in
transfers, or in other transactions.
1.4 Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Level 8 agrees to assume and become responsible
for certain liabilities of the Company in an amount not to exceed $50,000.00, as
more specifically set forth in Schedule 1.4 attached hereto and made a part
hereof (the "Assumed Liabilities"). Except as otherwise specifically set forth
in this Section and in Schedule 1.4, Level 8 shall not assume any of the
Company's liability or obligations of any of any nature
1.5 Time and Place of the Closing. Subject to and after the fulfillment
or waiver of the conditions set forth in Articles VI and VII of this Agreement,
the closing of the Asset Sale shall take place at the offices of Xxxxxx Xxxxxxxx
LLC, 00 Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxx Xxxx 00000, on a date selected by
Level 8 within five (5) business days following the fulfillment or waiver of
such conditions, or such other date, time and place as the parties may mutually
agree. Throughout this Agreement, such event is referred to as the "Closing" and
such date and time are referred to as the "Closing Date."
1.6 Procedure at the Closing. At the Closing, the parties agree that
the following shall occur:
(a) The Company shall have satisfied each of the conditions
set forth in Article VI and shall deliver to Level 8 the documents,
certificates, opinions, consents and letters required by Article VI
and any other documents and certificates reasonably requested by
Level 8.
(b) Level 8 shall have satisfied each of the conditions set
forth in Article VII and shall deliver to the Company the documents,
certificates, consents and letters required by Article VII and any
other documents and certificates reasonably requested by the Company.
(c) The Company shall execute, acknowledge, and deliver to
Level 8 general assignments and bills of sale, including real
property and Intellectual Property transfer documents, and such other
instruments of sale, transfer, conveyance and assignment as Level 8
and its counsel determine are necessary to vest in Level 8 good and
marketable title to all of the Assets (including all personal
property) free and clear of all liens, claims, restrictions and other
encumbrances.
(d) Level 8 shall issue to the Company the Level 8
Consideration Shares, registered in the name of the Company and shall
deliver such shares in the following manner: (i) Level 8 shall set
aside and hold in accordance with Section 9.3 stock certificates
representing $75,000 equivalent value of such shares of Level 8
Common Stock (the "Held Back Shares"), and (ii) Level 8 shall deliver
stock certificates representing the balance of the shares of Level 8
Consideration Shares issuable in accordance with Section 1.2 to the
Company. The shares of Level 8 Common Stock issuable pursuant to
Section 1.2, including the Held Back Shares, are referred to herein
as the "Level 8 Shares." The Level 8 Shares issued upon the
consummation of the Asset Sale in accordance with the terms hereof
(including any cash paid in lieu of fractional shares of Level 8
Common Stock) shall be payment in full for all Company Assets.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF LEVEL 8
2.1 As a material inducement to the Company to enter into this
Agreement and to consummate the transactions contemplated hereby, Level 8
represents and warrants to the Company that the statements contained in this
Section 2.1 are true, correct and complete as of the date hereof, and will be
true correct and complete as of the Closing Date (unless specifically made as of
another date), except as specified to the contrary in the corresponding
paragraph of the disclosure schedule prepared by Xxxxx 0 accompanying this
Agreement (the "Level 8 Disclosure Schedules"):
(a) Organization and Qualification. Level 8 is duly incorporated,
validly existing and in good standing under the laws of Delaware, with the
requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Except as set forth on
Schedule 2.1(a), Xxxxx 0 is duly qualified as a foreign corporation to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this
Agreement or any of the transactions contemplated hereby or thereby, (y) have or
result in a material adverse effect on the results of operations, assets, or
financial condition of Xxxxx 0, taken as a whole or (z) impair Level 8's ability
to perform fully on a timely basis its obligations under this Agreement (any of
(x), (y) or (z), being a "Material Adverse Effect"). Level 8 has made available
to the Company true and correct copies of Level 8's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and Level 8's Bylaws, as in effect on the date hereof (the
"Bylaws").
(b) Authorization; Enforcement. Level 8 has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of this Agreement
by Level 8 and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action by Level
8. This Agreement has been duly executed by Level 8 and when delivered in
accordance with the terms hereof will constitute the valid and binding
obligation of Level 8 enforceable against Level 8 in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except that rights to
indemnification and contribution may be limited by Federal or state securities
laws or public policy relating thereto.
(c) Capitalization. As of the date hereof, the authorized capital stock
of Level 8 is as set forth in Schedule 2.1(c). All of such outstanding shares of
capital stock have been, or upon issuance will be, validly authorized and
issued, fully paid and nonassessable. Except as specifically set forth in
Schedule 2.1 (c), no securities of Level 8 are entitled to preemptive or similar
rights, and no Person (as hereinafter defined) has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement. Except as specifically set
forth in Schedule 2.1 (c), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which Level 8 or any subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the Level 8
Consideration Shares will not obligate Level 8 to issue shares of Common Stock
or other securities to any Person (other than the Company) and will not result
in a right of any holder of Level 8 securities to adjust the exercise,
conversion, exchange or reset price under such securities.
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(d) Authorization and Validity; Issuance of Shares. The Level 8
Consideration Shares are and will at all times hereafter continue to be duly
authorized and reserved for issuance and, when issued and paid for in accordance
with this Agreement, will be validly issued, fully paid and non-assessable, free
and clear of all liens.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by Xxxxx 0 and the consummation by Level 8 of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of the Certificate of Incorporation, Bylaws or other
organizational documents of Xxxxx 0, (xx) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
(evidencing a Level 8 debt or otherwise) to which Level 8 is a party or by which
any property or asset of Level 8 is bound or affected, except where such
conflict or violation has not resulted or would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
Level 8 is subject (including Federal and state securities laws and regulations
and the rules and regulations of the principal market or exchange on which the
Common Stock is traded or listed), or by which any material property or asset of
Level 8 is bound, except where such conflict has not resulted or would not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect.
(f) Consents and Approvals. Level 8 is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by Xxxxx 0 of this
Agreement, other than (i) any filings, notices or registrations under applicable
Federal or state securities laws (together with the consents, waivers,
authorizations, orders, notices and filings referred to on Schedule 2.1(f), the
"Required Approvals"), except where failure to do so has not resulted or would
not reasonably result, individually, or in the aggregate, in a Material Adverse
Effect. "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
(g) Litigation; Proceedings. Except as specifically set forth on
Schedule 2.1(g) or in the SEC Documents (as hereinafter defined), there is no
action, suit, notice of violation, proceeding or investigation pending or, to
the knowledge of Xxxxx 0, threatened against or affecting Level 8 or any of its
subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability of any of this
Agreement or (ii) would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect. Neither Level 8 nor any subsidiary,
nor, to the knowledge of Level 8, any officer thereof, is or has been, nor, to
the knowledge of Level 8, any director thereof is or has been for the last three
years, the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and, to the knowledge of Level 8, there is not pending or
contemplated, any investigation by the Commission involving Level 8 or any
current or former director that was a director of Level 8 at any time during the
last three years or officer of Level 8. The Commission has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by Level 8 or any subsidiary under the Exchange Act or the Securities Act.
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(h) No Default or Violation. Level 8 (i) is not in default under or in
violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound and which is required to be included as an exhibit to any
SEC Document (as defined in Section 2.1(j)) or will be required to be included
as an exhibit to Level 8's next filing under either the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) is not in
violation of any order of any court, arbitrator or governmental body applicable
to it, (iii) is not in violation of any statute, rule or regulation of any
governmental authority to which it is subject, (iv) is not in default under or
in violation of its Certificate of Incorporation, Bylaws or other organizational
documents, respectively in the case of (i), (ii) and (iii), except where such
violations have not resulted or would not reasonably result, individually or in
the aggregate, in a Material Adverse Effect.
(i) Private Offering. Xxxxx 0 and all Persons acting on its behalf have
not made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under circumstances that
would require registration of the Level 8 Common Stock or the issuance of such
securities under the Securities Act. Subject to the accuracy and completeness of
the representations and warranties of the Company contained in Section 2.2, the
offer, sale and issuance by Xxxxx 0 to the Company of the Level 8 Consideration
Shares is exempt from the registration requirements of the Securities Act.
(j) SEC Documents; Financial Statements. The Common Stock of Level 8 is
registered pursuant to Section 12(g) of the Exchange Act. Since December 31,
2001, Level 8 has filed all reports, schedules, forms, statements and other
documents required to be filed by it, with the Commission, pursuant to Section
13, 14 or 15(d) of the Exchange Act (the foregoing materials and all exhibits
included therein and financial statements and schedules thereto and documents
(other than exhibits to such documents) incorporated by reference therein being
collectively referred to herein as the "SEC Documents"), on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Level 8 included in the SEC Documents
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of Level 8 and its consolidated subsidiaries as
of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(k) Material Changes. Since the date of the latest audited financial
statements included within the SEC Documents, except as specifically disclosed
in the SEC Documents, (i) there has been no event, occurrence or development
that has had or that could result in a Material Adverse Effect, (ii) Level 8 has
not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in Level 8's financial statements pursuant to GAAP or required to be disclosed
in filings made with the Commission, (iii) Level 8 has not altered its method of
accounting or the identity of its auditors, (iv) Level 8 has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) Level 8 has not issued any equity securities to
any officer, director or affiliate, except pursuant to existing Level 8 stock
option plans. Xxxxx 0 does not have pending before the Commission any request
for confidential treatment of information.
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(l) Patents and Trademarks. Level 8 and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have could have, or reasonably be expected to result in, a Material Adverse
Effect (collectively, the "Level 8 Intellectual Property Rights"). Neither Level
8 nor any subsidiary has received a written notice that the Intellectual
Property Rights used by Level 8 or any subsidiary violates or infringes upon the
rights of any Person which if determined adversely to Level 8 would,
individually or in the aggregate have a Material Adverse Effect. To the
knowledge of Xxxxx 0, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the Level 8
Intellectual Property Rights.
(m) Transactions With Affiliates and Employees. Except as set forth in
SEC Documents, none of the officers or directors of Level 8 and, to the
knowledge of Xxxxx 0, xxxx of the employees of Level 8 is presently a party to
any transaction with Level 8 or any subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of Level
8, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(n) Eligibility to Register Shares. Level 8 is eligible to register the
resale of its Common Stock under Form S-1 promulgated under the Securities Act.
(o) Registration Rights. Except as specifically set forth on Schedule
2.1 (o), Xxxxx 0 has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of Level 8
registered with the Commission or any other governmental authority.
(p) Broker's Fees. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement have been paid or
will be payable by Level 8 to any third party broker, financial advisor, finder,
investment banker, or bank. Level 8 shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(p) that may be due in connection
with the transactions contemplated by this Agreement.
(q) Disclosure. Except for information regarding the transaction
contemplated by this Agreement and the terms and conditions hereof and thereof,
Level 8 confirms that neither it nor any other Person acting on its behalf has
provided the Company or their agents or counsel with any information Level 8
believes constitutes material, non-public information. Level 8 understands and
confirms that the Company will rely on the foregoing representations in
effecting transactions in securities of Level 8. All disclosure provided to the
Company regarding Xxxxx 0, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
Level 8 are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
As a material inducement to Level 8 to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company makes the following
representations and warranties to Level 8:
3.1 Corporate Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to own or lease its properties and to
carry on its business as now being conducted. The Company is legally qualified
to do business as a foreign corporation in each of the jurisdictions in which it
is required to be so qualified, which represent all jurisdictions where the
nature of its properties and the conduct of its business require such
qualification except where the failure to be so qualified or in good standing,
as the case may be, would not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of any of this Agreement or any
of the transactions contemplated hereby or thereby, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company, taken as a whole or (z) impair the Company's ability
to perform fully on a timely basis its obligations under this Agreement (any of
(x), (y) or (z), being a "Material Adverse Effect"), and is in good standing in
each of the jurisdictions in which it is so qualified. The Company has fully
complied with all of the requirements of any statute governing the use and
registration of fictitious names, and has the legal right to use the names under
which it operates its businesses. There is no pending or, to the knowledge of
the Company, threatened proceeding for the dissolution, liquidation, insolvency
or rehabilitation of the Company.
3.2 Power and Authority. The Company was duly incorporated in the State
of Delaware and has the requisite competence and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The Board of Directors and the
shareholders of the Company have duly authorized the execution, delivery and
performance of this Agreement. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms and
conditions.
3.3 Enforceability. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against each of them in accordance with its terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.4 Capitalization. Schedule 3.4 sets forth, with respect to the
Company, as of the date hereof, (a) the number of authorized shares of each
class of its capital stock, (b) the number of issued and outstanding shares of
each class of its capital stock and (c) the number of shares of each class of
its capital stock which are held in treasury. All of the issued and outstanding
shares of capital stock of the Company (i) have been duly authorized and validly
issued and are fully paid and non-assessable, (ii) were issued in compliance
with all applicable state and federal securities laws and (iii) were not issued
in violation of any preemptive rights or rights of first refusal or similar
rights. Upon the Closing, the Company will have validly conveyed to Xxxxx 0,
good and marketable title to the Company Assets free and clear of all Liens, and
encumbrances.
3.5 [intentionally omitted]
3.6 No Violation. Except as set forth on Schedule 3.6, the execution
and delivery of this Agreement by the Company, the performance by the Company of
its obligations hereunder and the consummation by them of the transactions
contemplated by this Agreement will not (a) contravene any provision of the
Certificate of Incorporation or Bylaws or other organizational or governing
document of the Company, (b) violate or conflict with any law, statute,
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ordinance, rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against the Company, (c) conflict with, result
in any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right of payment under or the right to terminate, amend, modify,
abandon or accelerate, any Contract which is applicable to, binding upon or
enforceable against the Company, except where such conflict or violation has not
resulted or would not reasonably be expected to result, in a Material Adverse
Effect, (d) result in or require the creation or imposition of any Lien upon or
with respect to any of the properties or assets of the Company, (e) give to any
individual or entity a right or claim against the Company or (f) require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person,
except any applicable filings required under the HSR Act and any SEC and other
filings required to be made by Xxxxx 0, except where such conflict has not
resulted or would not reasonably be expected to result, in a Material Adverse
Effect.
3.7 Records of the Company. Attached hereto are true and complete
copies of the Certificates of Incorporation, Bylaws and other documents and
agreements of the Company, and such Certificates of Incorporation, Bylaws and
other documents and agreements reflect all amendments made through the date of
this Agreement. The minute books and other records of corporate actions for the
Company made available to Xxxxx 0 for review were correct and complete as of the
date of such review, no further entries have been made through the date of this
Agreement, such minute books and records contain the true signatures of the
persons purporting to have signed them, and such minute books and records
contain an accurate record of all material corporate actions of the stockholders
and directors (and any committees thereof) of the Company taken by written
consent or at a meeting or otherwise since incorporation or formation. All
corporate actions taken by the Company have been duly authorized or ratified.
All accounts, books, ledgers and official and other records of the Company have
been fully, properly and accurately kept and are complete, and there are no
inaccuracies or discrepancies of any kind contained therein. The stock ledgers
of the Company, as previously made available to Xxxxx 0, contain accurate and
complete records of all issuances, transfers and cancellations of shares of the
capital stock and partnership interests of the Company.
3.8 Subsidiaries. The Company does not, directly or indirectly, own any
outstanding voting securities of or other interests in, or control, any other
corporation, partnership, joint venture or other entity.
3.9 Financial Statements. The Company has delivered to Level 8 the
financial statements of the Company for the fiscal years ended December 31,
2000, December 31, 2001 and December 31, 2002 and the eleven months ended
November 30, 2003 (collectively, the "Financial Statements"), copies of which
are attached to Schedule 3.9 hereto. The individual balance sheet of the Company
dated as of November 30, 2003, included in the Financial Statements is referred
to herein as the "Current Balance Sheet." The Financial Statements fairly
present the financial position of the Company at each of the balance sheet dates
and the results of operations for the periods covered thereby, and have been
prepared in accordance with GAAP consistently applied throughout the periods
indicated, except, in the case of the Financial Statements for the eleven-month
period ended November 30, 2003, for normal year-end adjustments and the absence
of footnotes. The books and records of the Company fully and fairly reflect all
of its transactions, properties, assets and liabilities. There are no material,
special or non-recurring items of income or expense during the periods covered
by the Financial Statements, and the balance sheets included in the Financial
Statements do not reflect any writeup or revaluation increasing the book value
of any assets. Except as otherwise set forth in this Section 3.9, the Financial
Statements reflect all adjustments necessary for a fair presentation of the
financial information contained therein.
3.10 Changes Since the Current Balance Sheet Date. Except as
specifically set forth in Schedule 3.10, since the date of its Current Balance
Sheet included in the Financial Statements, the Company has not (a) issued,
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sold, pledged, disposed of, encumbered, or authorized the issuance, sale,
pledge, disposition, grant or encumbrance of any shares of its capital stock or
of any class or any partnership interests, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such capital
stock or partnership interests or any other ownership interest of the Company,
(b) declared, set aside, made, or paid any dividend or other distribution
payable in cash, stock, property or otherwise of or with respect to its capital
stock, partnership interests or other securities, or reclassified, combined,
split, subdivided or redeemed, purchased or otherwise acquired, directly or
indirectly, any of its capital stock, partnership interests or other securities;
(c) paid any bonus to or increased the rate of compensation of any of its
officers, partners or salaried employees or amended any other terms of
employment or engagement of such persons; (d) sold, leased or transferred any of
its properties or assets or acquired any properties or assets other than in the
ordinary course of business consistent with past practice; (e) made or obligated
itself to make capital expenditures out of the ordinary course of business
consistent with past practice; (f) made any payment in respect of its
liabilities other than in the ordinary course of business consistent with past
practice; (g) incurred any obligations or liabilities (including, without
limitation, any indebtedness for borrowed money, issuance of any debt
securities, or the assumption, guarantee, or endorsement of the obligations of
any Person) or entered into any transaction or series of transactions involving
in excess of $25,000 individually or $50,000 in the aggregate out of the
ordinary course of business, except for this Agreement and the transactions
contemplated hereby; (h) suffered any theft, damage, destruction or casualty
loss, whether or not covered by insurance, in excess of $25,000 individually or
$50,000 in the aggregate; (i) suffered any extraordinary losses (whether or not
covered by insurance); (j) waived, canceled, compromised or released any rights
having a value in excess of $25,000 individually or $50,000 in the aggregate;
(k) made or adopted any change in its accounting practice or policies; (1) made
any adjustment to its books and records other than in respect of the conduct of
its business activities in the ordinary course consistent with past practice;
(m) entered into any transaction with any stockholder of the Company or
Affiliate of any stockholder of the Company; (n) entered into any employment
agreement not terminable at will; (o) imposed any security interest or other
Lien on any of its assets other than in the ordinary course of business
consistent with past practice; (p) delayed paying any account payable beyond 45
days following the date on which it is due and payable except to the extent
being contested in good faith; (q) made or pledged any charitable contributions
in excess of $25,000 in the aggregate (none of which remain unpaid); (r)
acquired (including, without limitation, for cash or shares of stock or
partnership interests, by merger, consolidation, or acquisition of stock or
assets) any interest in any corporation, partnership or other business
organization or division thereof or any assets, or made any investment either by
purchase of stock or securities, contributions or property transfer of capital
other than as permitted or provided in this Agreement; (s) increased or
decreased prices charged to customers, except in the ordinary course of business
consistent with past practice; (t) entered into any other transaction or been
subject to any event which has or may reasonably be expected to have a Material
Adverse Effect on the Company; or (u) agreed to do or authorized any of the
foregoing.
3.11 Liabilities. The Company has no liabilities or obligations,
whether accrued, absolute, contingent or otherwise, except (a) to the extent
reflected on the Company's Current Balance Sheet and not heretofore paid or
discharged, (b) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Company's Current Balance
Sheet (none of which relates to breach of contract, breach of warranty, tort,
infringement or violation of law, or which arose out of any action, suit, claim,
governmental investigation or arbitration proceeding), and (c) liabilities
incurred in the ordinary course of business prior to the date of the Company's
Current Balance Sheet which, in accordance with GAAP consistently applied, were
not required to be recorded thereon and which, in the aggregate, are not
material (the liabilities and obligations referenced in (a), (b) and (c) above
are referred to as the "Designated Liabilites"). Schedule 3.11 lists all
indebtedness owed by the Company, to a bank or any other Person, including
without limitation, indebtedness for borrowed money (including principal and
accrued but unpaid interest) and capitalized equipment leases. Schedule 3.11
10
also lists each-deposit account by the Company with any bank, broker or other
depository institution, and the names of all persons authorized to withdraw
funds from each such account. All obligations and liabilities that must be
satisfied or released prior to Closing pursuant to Section 6.15 are so indicated
on Schedule 3.11.
3.12 Litigation. Schedule 3.12 sets forth each instance in which the
Company (i) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) to the Company's knowledge, is a party or is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Schedule 3.12 would reasonably be expected to, ,
result in any Material Adverse Effect upon the Company. There are no outstanding
orders, decrees or stipulations issued by any Governmental Authority in any
proceeding to which the Company is or was a party which have not been complied
with in full or which continue to impose any material obligations on the
Company.
3.13 Environmental Matters.
(a) The Company is and has at all times been in full
compliance with all Environmental Laws governing the Company's
business, operations, properties and assets, including, without
limitation: (i) all requirements relating to the Discharge and Handling
of Hazardous Substances; (ii) all requirements relating to notice,
record keeping and reporting; (iii) all requirements relating to
obtaining and maintaining Licenses (as defined herein) for the
ownership by the Company of its properties and assets, including,
without limitation, the Company Owned Properties (as defined in Section
3.14), and the operation of its businesses presently conducted; or (iv)
all applicable writs, orders, judgments, injunctions, governmental
communications, decrees, informational requests or demands issued
pursuant to, or arising under, any Environmental Laws.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation
(collectively "Notices"), claims, suits, actions, judgments, penalties,
fines, or administrative or judicial investigations of any nature or
proceedings (collectively "Proceedings") pending or threatened against
or involving the Company, its businesses, operations, properties or
assets or the Company Owned Properties, issued by any Governmental
Authority or third party with respect to any Environmental Laws or
Licenses issued to the Company thereunder in connection with, related
to or arising out of the ownership by the Company of its properties or
assets or the operation of its businesses or the use by the Company of
the Company Owned Properties, which have not been resolved to the
satisfaction of the issuing Governmental Authority or third party in a
manner that would not impose any obligation, burden or continuing
liability on Level 8 in the event that the transactions contemplated by
this Agreement are consummated.
(c) The Company has not at any time Handled or Discharged, nor
has it at any time allowed or arranged for any third party to, Handle or
Discharge, Hazardous Substances to, at or upon: (i) any location other
than a site lawfully permitted to receive such Hazardous Substances;
(ii) any parcel of real property owned or leased at any time by the
Company (including, without limitation, the Company Owned Properties
except in compliance with applicable Environmental Laws; or (iii) any
site which, pursuant to CERCLA or any similar state law (x) has been
placed on the National Priorities List or its state equivalent, or (y)
the Environmental Protection Agency or any relevant state agency has
notified the Company that it has proposed or is proposing to place on
the National Priorities List or its state equivalent. There has not
occurred, nor is there presently occurring, a Discharge, or threatened
Discharge of any Hazardous Substance on, into or beneath the surface of,
or adjacent to, any real property owned or leased at any time by the
Company.
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(d) Except as set forth on Schedule 3.13, (i) the Company does
not use, nor has used, any Aboveground Storage Tanks or Underground
Storage Tanks; (ii) there are not now nor have there ever been any
Underground Storage Tanks on any real property owned or leased at any
time by the Company; and (iii) there has been no Discharge from or
rupture of any Aboveground Storage Tanks or Underground Storage Tanks.
(e) Except as set forth on Schedule 3.13, there have been no
(i) environmental audits, assessments or occupational health studies
undertaken since the date that the Company was incorporated or formed by
the Company or its agents or representatives thereof or, to the
knowledge of the Company, undertaken by any Governmental Authority, or
any third party, relating to or affecting the Company or any real
property owned or leased at any time by the Company; (ii) ground, water,
soil, air or asbestos monitoring undertaken by the Company or its agents
or representatives thereof or undertaken by any Governmental Authority
or any third party, relating to or affecting the Company or any real
property owned or leased at any time by the Company; (iii) material
written communications between the Company and any Governmental
Authority arising under or related to Environmental Laws including but
not limited to, any notices of violation and notices of non-compliance;
and (iv) outstanding citations issued under OSHA, or similar state or
local statutes, laws, ordinances, codes, rules, regulations, orders,
rulings or decrees, relating to or affecting the Company or any real
property owned or leased at any time by the Company. The representations
and warranties in this Section 3.13 shall survive indefinitely as
provided in Section 9.2.
(f) For purposes of this Section 3.13, the following terms
shall have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order ruling, or decree governing Aboveground Storage Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, migrating or emitting, as any of such terms may
further be defined in any Environmental Law, into or through any medium
including, without limitation, ground water, surface water, land, soil
or air.
"Environmental Laws" means all federal state, regional or local
statutes, laws rules, regulations, codes, ordinances, orders, plans,
injunctions, decrees, rulings, licenses, and changes thereto, or
judicial or administrative interpretations thereof, or similar laws of
business, whether currently in existence or hereafter enacted, issued,
or promulgated, any of which govern, purport to govern, or relate to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, waste disposal, hazardous or toxic
substances, solid or hazardous waste, occupational, health and safety,
as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, orders, ordinances, plans, injunctions,
decrees, rulings, licenses, and changes thereto, or judicial or
administrative interpretations thereof, including, without limitation:
the Comprehensive Environmental Responses, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization
Act of 1986, 42 U.S.C. ss.9601, et seq. (herein, collectively,
"CERCLA"); the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid
Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq. (herein,
collectively, "RCRA"); the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. ss.1801, et seq.., (the "Hazardous Materials
Transportation Act"); the Clean Water Act, as amended, 33 U.S.C.
ss.1311, et seq. (the "Clean Water Act"); the Clean Air Act, as amended,
42 U.S.C. ss.7401 et seq. (the "Clean Air Act"); the Toxic Substances
Control Act, as amended, 15 U.S.C. ss.2601 et seq. (the "Toxic
Substances Control Act"); the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. ss.136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended 42
U.S.C. ss.11001, et seq. (Title III of XXXX) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.65
1, et seq. ("OSHA").
12
"Handle" means any manner of generating, accumulating,
storing, treating, disposing of, transporting, transferring, labeling,
handling, manufacturing or using, as any of such terms may further be
defined in any Environmental Law.
"Hazardous Substances" shall be construed broadly to include
any toxic or hazardous substance, material or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires investigation or remediation
under any Environmental laws or which are or become regulated, listed
or controlled by, under or pursuant to any Environmental Laws, or which
has been or shall be determined or interpreted at any time by any
Governmental Authority to be a hazardous or toxic substance regulated
under any other statute, law, regulation, order, code, rule, order, or
decree.
"Licenses" means all licenses, certificates, permits,
approvals, decrees and registrations.
"Underground Storage Tank" shall have the meaning ascribed to
such term in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule,
regulation, order, ruling or decree governing Underground Storage
Tanks.
3.14 Real Estate
(a) Schedule 3.14 contains the legal descriptions and the
street addresses of, and indicates the owner(s) of, any real property or
any leasehold or other interest therein (including without limitation
any option or other right or obligation to purchase any real property or
any interest therein) owned by the Company as of the date hereof (the
"Company Owned Properties"). There has been no real property (or any
interest therein) owned by the Company within the past five years that
is not owned as of the date of this Agreement. With respect to each such
parcel of Company Owned Properties: (i) the Company has good and
marketable title, free and clear of any covenants, conditions, easements
and exceptions other than the Permitted Exceptions (as defined in
Section 5.12), and of any Lien other than liens for real estate taxes
not yet due and payable; (ii) there are no pending or threatened
condemnation proceedings, suits or administrative actions relating to
the Company Owned Properties or other matters affecting adversely the
current use, occupancy or value thereof, (iii) the legal descriptions
for the Company Owned Properties contained in the deeds thereof describe
such parcels fully and adequately; (iv) the buildings and improvements
are located within the boundary lines of the described parcels of land
and to the Company's knowledge are not in violation of applicable
setback requirements, local comprehensive plan provisions zoning laws
and ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
nonconforming structure" classifications), building code requirements,
permits, licenses or other forms of approval, regulation or restrictions
by any Governmental Authority, and do not encroach on any easement which
may burden the land; the land does not serve anyadjoining property for
any purpose inconsistent with the use of the land; and the Company Owned
Properties are not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to
the use thereof have not been obtained; (v) all facilities have received
all material approvals of Governmental Authorities (including licenses
and permits) required in connection with the ownership or operation
13
thereof and have been operated and maintained in accordance with
applicable laws, ordinances, rules and regulations; (vi) there are no
Contracts granting to any party or parties the right of use or occupancy
of any portion of the Company Owned Properties, and there are no parties
(other than the Company) in possession of any of the Company Owned
Properties; (vii) there are no outstanding options or rights of first
refusal to purchase any of the Company Owned Properties or any portion
thereof or interest therein; (viii) all facilities located on the
Company Owned Properties are supplied with utilities and other services
necessary for their operation, all of which services are adequate in
accordance with all applicable laws, ordinances, rules and regulations,
and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the Company Owned Properties; (ix) the
Company Owned Properties abut on and have adequate direct vehicular
access to a public road and there is no pending or threatened
termination of such access; (x) all improvements, buildings, plumbing,
HVAC, electrical and other fixtures not used in the business conducted
by the Company and systems on the Company Owned Properties are in good
repair, and safe for occupancy; and (xi) there are no material Contracts
relating to management or similar matters which affect any of the
Company Owned Properties.
(b) Schedule 3.14 sets forth a list of all leases, licenses or
similar agreements to which Company is a party, which are for the use or
occupancy of real estate owned by a third party ("Leases") (copies of
which have previously been furnished to Level 8), in each case, setting
forth (i) the lessor and lessee thereof and the commencement, date, term
and renewal rights under each of the Leases, and (ii) the street address
or legal description of each property covered thereby (the "Leased
Premises"). The Leases are in full force and effect and have not been
amended, and no party thereto is in default or breach under any such
Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default
under any of such leases. With respect to each such Leased Premises: (i)
the Company has a valid leasehold interest in the Leased Premises, free
and clear of any Liens, covenants and easements or title defects of any
nature whatsoever; (ii) the portions of the buildings located on the
Leased Premises that are used in the business of the Company are each in
good repair and condition, normal wear and tear excepted, and are in the
aggregate sufficient to satisfy the Company's current and reasonably
anticipated normal business activities as conducted thereat; (iii) each
of the Leased Premises (a) has direct access to public roads or access
to public roads by means of a perpetual access easement, such access
being sufficient to satisfy the current and reasonably anticipated
normal transportation requirements of the business presently conducted
at such parcel; and (b) is served by all utilities in such quantity and
quality as are sufficient to satisfy the current normal business
activities conducted at such parcel; and (iv) the Company has not
received notice of (a) any condemnation proceeding with respect to any
portion of the Leased Premises or any access thereto, and no such
proceeding is contemplated by any Governmental Authority; or (b) any
special assessment which may affect any of the Leased Premises, and no
such special assessment is contemplated by any Governmental Authority.
3.15 Business; Good Title to and Condition of Assets; Inventory
(a) Upon the consummation of the transactions contemplated hereby,
Level 8 will have acquired and own all of the Company's assets and
operations and related rights and interests. The Company has good and
marketable title to all of its Assets free and clear of any Liens. For
purposes of this Agreement, the term "Assets" means all of the
properties and assets of any nature of the Company, as further set forth
in Section 11.1 hereof. Upon the Closing, the Company will have validly
conveyed to Xxxxx 0, good and marketable title to the Company Assets
free and clear of all Liens, and encumbrances.
14
(b) The Fixed Assets currently in use or necessary for the
business and operations of the Company are in good operating condition,
normal wear and tear excepted, and have been maintained substantially in
accordance with all applicable manufacturer's specifications and
warranties. For purposes of this Agreement, the term "Fixed Assets"
means all vehicles, machinery, equipment, tools, supplies, leasehold
improvements, furniture and fixtures, owned, used by or located on the
Company Owned Properties or Leased Premises of the Company or set forth
on the Current Balance Sheet or acquired by the Company since the date
of the Current Balance Sheet.
(c) As of the date of the Current Balance Sheet and on the
Closing Date, the value of the Company's inventory, was not and will not
be less than the amount set forth on the Current Balance Sheet. All of
such inventory is in good salable condition. No obsolescence will exist
on the Closing Date.
3.16 Compliance with Laws. Each of , the Company and its Affiliates is
and has been in compliance in all material respects with all laws, regulations
and orders applicable to it, its business and operations (as conducted by it now
and in the past), the Assets, the Company Owned Properties and the Leased
Premises and any other properties and assets (in each case owned or used by it
now or in the past). The Company has not been cited, fined or otherwise notified
of any asserted past or present failure to comply with any laws, regulations or
orders and no proceeding with respect to any such violation is pending or, to
the Company's knowledge, threatened. The Company is not subject to any Contract,
decree or injunction in which it is a party which restricts the continued
operation of any business or the expansion thereof to other geographical areas,
customers and suppliers or lines of business. To the knowledge of the Company,
neither the Company, nor any of its employees or agents, has made any payment of
funds in connection with its business which is prohibited by law, and no funds
have been set aside to be used in connection with its business for any payment
prohibited by law.
3.17 Labor and Employment Matters. The Company is not a party to or
bound by any collective bargaining agreement or any other agreement with a labor
union, and there has been no labor union during the 24 months prior to the date
hereof organizing any employees of the Company into one or more collective
bargaining units. Except as set forth in Schedule 3.17, there is not now, and
there has not been during the 24 months prior to the date hereof, any actual or
threatened labor dispute, strike or work stoppage which affects or which may
affect the business of the Company or which may interfere with its continued
operations. To its knowledge, the Company has not, and no employee, agent or
representative thereof has since January 1, 2000, committed any unfair labor
practice as defined in the National Labor Relations Act, as amended, and there
is no pending or, to the knowledge of the Company, threatened, charge or
complaint against the Company by or with the National Labor Relations Board or
any representative thereof. To the knowledge of the Company, no executive or key
employee or group of employees has any plans to terminate his, her or their
employment with the Company as a result of the transactions contemplated hereby
or otherwise. The Company has complied with applicable laws, rules and
regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act, and the Americans with Disabilities Act, as amended.
3.18 Employee Benefit Plans.
(a) Employee Benefit Plans. Schedule 3.18 contains a list
setting forth each employee benefit plan or
arrangement of the Company, including but not limited
to employee pension benefit plans, as defined in
15
Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
multiemployer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in
Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase
plans, hospitalization, disability and other
insurance plans, severance or termination pay plans
and policies, whether or not described in Section
3(3) of ERISA, in which employees, their spouses or
dependents, of the Company participate ("Employee
Benefit Plans") (true and accurate copies of which,
together with the most recent annual reports on Form
5500, actuarial reports, financial statements and
summary plan descriptions with respect thereto, were
furnished to Level 8).
(b) Compliance with Law. With respect to each Employee Benefit
Plan (i) each has been administered in all material respects in
compliance with its terms and with all applicable laws, including, but
not limited to, ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"); (ii) no actions, suits, claims or disputes are pending, or
threatened; (iii) no audits, inquiries, reviews, proceedings, claims, or
demands are pending with any governmental or regulatory agency; (iv)
there are no facts which could give rise to any material liability in
the event of any such investigation, claim, action, suit, audit, review,
or other proceeding; (v) all material reports, returns and similar
documents required to be filed with any governmental agency or
distributed to any plan participant have been duly or timely filed or
distributed; and (vi) no "prohibited transaction" has occurred within
the meaning of the applicable provisions of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee Benefit Plan
intended to qualify under Code Section 401(a) or 403(a), (i) the
Internal Revenue Service has issued a favorable determination letter,
true and correct copies of which have been furnished to Xxxxx 0, that
such plans are qualified and exempt from federal income taxes; (ii) no
such determination letter has been revoked nor has revocation been
threatened, nor has any amendment or other action or omission occurred
with respect to any such plan since the date of its most recent
determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its costs;
(iii) no such plan has been amended in a manner that would require
security to be provided in accordance with Section 401(a)(29) of the
Code; (iv) no reportable event (within the meaning of Section 4043 of
ERISA) has occurred, other than one for which the 30-day notice
requirement has been waived; (v) as of the Effective Date, the present
value of all liabilities that would be "benefit liabilities" under
Section 4001(a)(16) of ERISA if benefits described in Code Section 411
(d)(6)(B) were included will not exceed the then current fair market
value of the assets of such plan (determined using the actuarial
assumptions used for the most recent actuarial valuation for such plan);
(vi) all contributions to, and payments from and with respect to such
plans, which may have been required to be made in accordance with such
plans and, when applicable, Section 302 of ERISA or Section 412 of the
Code, have been timely made; and (vii) all .such contributions to the
plans and all payments under the plans (except those to be made from a
trust qualified under Section 401(a) of the Code) and all payments with
respect to the plans (including without limitation PBGC (as defined
below) and insurance premiums) for any period ending before the
Effective Date that are not yet, but will be, required to be made are
properly accrued and reflected on the Current Balance Sheet.
(d) Multiemployer Plans. Schedule 3.18 contains a list of each
multiemployer plan as described in Section 4001(a)(3) of ERISA for which
the Company or any of its ERISA Affiliates (as defined in paragraph (f)
of this Section 3.18) may have any liability or contingent liability
("MPPA Plan") with respect to each MPPA Plan: (i) all contributions
required to be made with respect to employees of the Company and its
ERISA Affiliates have been timely paid; (ii) the Company and each ERISA
Affiliate have not incurred and are not expected to incur, directly or
indirectly, any withdrawal liability under ERISA with respect to any
MPPA Plan (whether by reason of the transactions contemplated by the
Agreement or otherwise); (iii) Schedule 3.18 sets forth (A) the
16
potential withdrawal liability of the Company and its ERISA Affiliates
under ERISA to each MPPA Plan, (B) the date as of which such amount was
calculated, and (C) the method for determining the withdrawal liability;
and (iv) no MPPA Plan is (or is expected to be) insolvent or in
reorganization and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists or is expected to exist with respect to any such plan.
(e) Welfare Plans. (i) The Company is not obligated under any
employee welfare benefit plan as described in Section 3(1) of ERISA
("Welfare Plan") to provide medical or death benefits with respect to
any employee or former employee of the Company or their predecessors
after termination of employment; (ii) the Company has complied with
the notice and continuation coverage requirements of Section 4980B of
the Code and the regulations thereunder with respect to each Welfare
Plan that is, or was during any taxable year for which the statute of
limitations on the assessment of federal income taxes remains open, by
consent or otherwise, a group health plan within the meaning of
Section 5000(b)(1) of the Code; and (iii) there are no reserves,
assets, surplus or prepaid premiums under any Welfare Plan which is an
Employee Benefit Plan. The consummation of the transactions
contemplated by this Agreement will not entitle any individual to
severance pay and will not accelerate the time of payment or vesting,
or increase the amount of, compensation due to any individual.
(f) Controlled Group Liability. Neither the Company nor any
entity that would be aggregated with any Company under Code Section
414(b), (c), (m) or (o) (such entity being referred to as an "ERISA
Affiliate"): (i) has ever terminated or withdrawn from an employee
benefit plan under circumstances resulting (or expected to result) in
liability to the Pension Benefit Guaranty Corporation ("PBGC"), the
fund by which the employee benefit plan is funded, or any employee or
beneficiary for whose benefit the plan is or was maintained (other
than routine claims for benefits); (ii) has any assets subject to (or
expected to be subject to) a lien for unpaid contributions to any
employee benefit plan; (iii) has failed to pay premiums to the PBGC
when due; (iv) is subject to (or expected to be subject) an excise tax
under Code Section 4971; (v) has engaged in any transaction which
would give rise to liability under Section 4069 or Section 4212(c) of
ERISA; or (vi) has violated Code Section 4980B or Section 601 through
608 of ERISA.
(g) Other Liabilities. (i) None of the Employee Benefit
Plans obligates the Company to pay separation, severance, termination
or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of
control" (as such term is defined in Section 280G of the Code); (ii)
all required or discretionary (in accordance with historical
practices) payments, premiums, contributions, reimbursements, or
accruals for all periods ending prior to or as of the Effective Date
shall have been made or properly accrued on the Current Balance Sheet
or will be properly accrued on the books and records of the Company
as of the Effective Date; and (iii) none of the Employee Benefit
Plans has any unfunded liabilities which are not reflected on the
Current Balance Sheet or the books and records of the Company.
3.19 Tax Matters.
(a) The Company has timely filed all Tax Returns required to be
filed by it, and each of those Tax Returns was prepared in compliance
with all applicable laws and regulations and was, at the time of filing,
true, complete and accurate in all material respects. The Company has
furnished or made available to Xxxxx 0 true, correct and complete copies
of all income and sales Tax Returns filed by the Company for the
preceding three years.
17
(b) The Company has not requested any extension of time within
which to file any Tax Return, which return has not since been filed.
(c) The Company, within the time and in the manner prescribed
by law, has paid all Taxes that are currently due and payable by it
(whether or not shown on any Tax Return).
(d) The Company has timely withheld all Taxes required to have
been withheld by it and, within the time and in the manner required, has
paid over to the proper governmental authorities all amounts of Taxes so
withheld.
(e) No claim has ever been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to Taxes imposed by that jurisdiction.
(f) The Company is not subject to any federal, state or other
tax in any foreign country.
(g) No deficiency or proposed adjustment for any amount of
Taxes that has not been settled or resolved otherwise and paid in full
has been asserted or assessed by any taxing authority against the
Company. There is no action, suit, proceeding, audit, claim or other
dispute or claim for refund concerning any Tax liability of the Company
now in progress or pending or threatened against the Company with
respect to any Tax either (A) claimed or raised by any taxing authority
in writing or (B) as to which the Company or any officer or director (or
any employee responsible for Tax matters) has knowledge.
(h) Except as set forth on Schedule 3.19, with respect to each
taxable period of the Company ending on or before the Closing Date and
each Tax payable by the Company, either the statute of limitations for
the assessment or collection of the Tax has expired or the relevant
taxing authority has completed an audit of the Tax Return for that
period and that taxable period is not subject to further review by the
taxing authority, and no Tax for any such period shall be assessed
against the Company.
(i) [Intentionally Blank]
(j) The Company has not been, and will not be, subject to any
Taxes imposed pursuant to Section 1374 or 1375 of the Code (or any
corresponding provision of state, local or foreign law) for any period
on or before the closing.
(k) There is no Tax lien on any asset of the Company except for
statutory liens for current Taxes not yet due.
(1) The Company will not be required to include in income any
adjustment under Section 481 of the Code (or any corresponding provision
of state, local or foreign law) for any taxable period (or portion
thereof) beginning after the Effective Date as a result of a change in
method of accounting made or applied for on or before the Closing Date.
(m) The Company has not made any payments, and is not obligated
and will not become obligated to make any payments, that will be
nondeductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign law).
(n) The Company has not received a written ruling of a taxing
authority relating to Taxes or entered into a a written and legally
binding agreement with a taxing authority relating to Taxes, whether in
the form of a closing agreement or otherwise.
18
(o) The Company has not made an election or filed a consent
under Section 341(f) of the Code (or any corresponding provision of
state, local or foreign law) on or prior to the Effective Date.
(p) The Company has not executed any outstanding waiver or
comparable consent regarding the application of any statute of
limitations with respect to any Taxes or Tax Returns.
(q) No power of attorney currently in force has been granted by
the Company concerning any Taxes or Tax Returns.
(r) The Company has not been a member of an affiliated group
(as defined in Section 1504 of the Code) or filed or been included in a
combined, consolidated or unitary income Tax Return and does not have
any liability for the Taxes of any person under Treasury regulation
section 1.1502-6 (or any similar provision of any state, local or
foreign law), as a transferee or successor, by contract or otherwise.
(s) The Company is not a party to any agreement relating to
allocating or sharing of Taxes and has no current or potential
contractual obligation to indemnify any other person with respect to
Taxes.
(t) The Company is not and has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of
the Code (or any corresponding provision of state, local or foreign
law) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code, and no Tax is payable pursuant to Section 897 or 1445 of
the Code (or any corresponding provision of state, local or foreign
law) by reason of any of the transactions contemplated by this
Agreement.
(u) No sales or use tax, nonrecurring intangible tax,
documentary stamp tax or other excise tax (or comparable tax imposed by
any taxing authority ) will be payable as a result of any transaction
pursuant to this Agreement.
3.20 Insurance. Except as set forth in Schedule 3.20, the Company is
covered by valid, outstanding enforceable policies of insurance issued to it by
reputable insurers covering its properties, assets and businesses against risks
of the nature normally insured against by similar entities in the same or
similar lines of business, and in the Company's opinion, in coverage amounts
typically and reasonably carried by such entities (the "Insurance Policies").
Such Insurance Policies are in full force and effect, and all premiums due
thereon have been paid. Through the Effective Time, each of the Insurance
Policies will be in full force and effect. The Company has complied with the
material provisions of such Insurance Policies applicable to it. There are no
pending claims, including any claim for loss or damage to the properties, assets
or business of the Company, under any of the Insurance Policies for an amount in
excess of $25,000 individually or $50,000 in the aggregate. The Company has not
failed to give, in a timely manner, any notice required under any of the
Insurance policies to preserve its rights thereunder. All Insurance Policies of
the Company are set forth in Schedule 3.20.
3.21 Receivables, Charge-Backs. All of the Receivables are valid and
legally binding, represent bona fide transactions and arose in the ordinary
course of business of the Company. All of the Receivables are good and
collectible receivables, and will be collected in full in accordance with the
terms of such receivables (and in any event within six months following the
Closing), without set off or counterclaims, subject to the allowance for
doubtful accounts, if any, set forth on the Current Balance Sheet as reasonably
adjusted since the date of the Current Balance Sheet in the ordinary course of
business consistent with past practice. For purposes of this Agreement, the term
"Receivables" means all receivables of the Company, including, without
limitation, all manufacturer's warranty receivables and all trade account
receivables arising from the provision of services, sale of inventory, notes
receivable, warranty contracts and insurance proceeds receivable. The reserve
for Charge-Backs (as defined in Section 11.1) reflected in the Current Balance
Sheet is adequate and sufficient to fully cover all Charge-Backs arising out of
transactions occurring prior to the date of the Current Balance Sheet.
19
3.22 Licenses and Permits. The Company possesses all licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its business and operations, including with
respect to the operations of each of the Company Owned Properties and Leased
Premises, and Schedule 3.22 sets forth a true, complete and accurate list of all
such Permits. All such Permits are valid and in full force and effect, the
Company is in compliance with the respective requirements thereof, and no
proceeding is pending or, to the Company's knowledge, threatened to revoke or
amend any of them. None of such Permits is or will be impaired or in any way
affected by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
3.23 Adequacy of the Assets: Relationships with Customers and
Suppliers; Affiliated Transactions. The Assets, Company Owned Properties, and
Leased Premises constitute, in the aggregate, all of the assets and properties
necessary for the conduct of the businesses of the Company in the manner in
which and to the extent to which such business is currently being conducted. No
current supplier to the Company of items essential to the conduct of its
businesses has threatened to terminate its business relationship with the
Company for any reason. The Company has no direct or indirect interest in any
customer, supplier or competitor of any company or in any person from whom or to
whom any company leases real or personal property. No officer, director,
shareholder, or partner of the Company, nor any person related by blood or
marriage to any such person, nor any entity in which any such person owns any
beneficial interest, is a party to any Contract or transaction with the Company
or has any interest in any property used by the Company.
3.24 Intellectual Property. (i) To the Company's knowledge, the Company
owns and possesses or has the right to use pursuant to a valid and enforceable,
written license, sublicense, agreement, or permission all intellectual property
necessary or desirable for the operation of the businesses of the Company as
presently conducted and as presently proposed to be conducted (the "Intellectual
Property"). Each item of Intellectual Property owned or used by the Company
immediately prior to the Closing hereunder will be owned or available for use by
the Company on identical terms and conditions immediately subsequent to the
Closing hereunder. The Company has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or uses.
(ii) To the Company's knowledge, the Company has not
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of third parties,
and none of the officers or directors of the Company (and employees
with responsibility for Intellectual Property matters) has ever
received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from
using any Intellectual Property rights of any third party). To the
knowledge of the Company, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(iii) Schedule 3.24 identifies each patent or registration
that has been issued to the Company with respect to any of its
Intellectual Property, identifies each pending patent application or
application for registration which the Company has made with respect to
any of its Intellectual Property, and identifies each license,
sublicense, agreement, or other permission which the Company has
granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Company has delivered to
Level 8 correct and complete copies of all such patents, registrations,
20
applications, licenses, sublicenses, agreements, and permissions (as
amended to date) and have made available to Level 8 correct and
complete copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item. Schedule 3.24 also
identifies each unregistered trademark, service xxxx, trade name,
corporate name or Internet domain name, computer software item (other
than commercially available off-the-shelf software purchased or
licensed for less than a total cost of $1,000 in the aggregate) and
each material unregistered copyright used by the Company in connection
with any of its businesses. With respect to each item of Intellectual
Property required to be identified in Schedule 3.24 , to the knowledge
of the Company :
(A) The Company owns and possesses all right, title, and
interest in and to the item, free and clear of any Lien, license,
or other restriction or limitation regarding use or disclosure;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Company's knowledge, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item, and
there are no grounds for the same;
(D) The Company has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation,
or other conflict with respect to the item; and
(E) no loss or expiration of the item is, to the Company's
knowledge, threatened, pending, or reasonably foreseeable, except
for patents expiring at the end of their statutory terms (and not
as a result of any act or omission by the Company, including
without limitation, a failure by the Company to pay any required
maintenance fees).
(iv) Schedule 3.24 identifies each item of Intellectual
Property that any third party owns and that the Company uses pursuant
to license, sublicense, agreement, or permission. The Company has
delivered to Level 8 correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified
in Schedule 3.24, to the knowledge of the Company:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in
full force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following consummation of the
transactions contemplated hereby;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are
true and correct with respect to the underlying license;
21
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Company's knowledge, is threatened that challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property, and there are no grounds for the same; and
(H) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(v) To the Company's knowledge: (A) the Company has not in the
past nor will it interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its businesses
as presently conducted and as presently proposed to be conducted; (B)
there are no facts that indicate a likelihood of any of the foregoing;
and (C) no notices regarding any of the foregoing (including, without
limitation, any demands or offers to license any Intellectual Property
from any third party) have been received.
(vi) The Company has no knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that
any competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or process
of the Company or to limit the business of the Company as presently
conducted or as presently proposed to be conducted.
(vii) The Company has taken all necessary and desirable action
to maintain and protect all of the Intellectual Property of the Company
and will continue to maintain and protect all of the Intellectual
Property of the Company prior to Closing so as not to adversely affect
the validity or enforceability thereof. To the knowledge of the
Company, the owners of any of the Intellectual Property licensed to the
Company have taken all necessary and desirable action to maintain and
protect the Intellectual Property covered by such license.
(viii) The Company has complied with and is presently in
compliance with all foreign, federal, state, local, governmental
(including, but not limited to, the Federal Trade Commission and State
Attorneys General), administrative or regulatory laws, regulations,
guidelines and rules applicable to any Intellectual Property and the
Company shall take all steps necessary to ensure such compliance until
Closing.
3.25 Contracts. Attached hereto in Schedule 3.25 is a true, correct
and complete copy of each Contract to which the Company is a party or by which
it or its properties and assets are bound and which is material to its
businesses, assets, properties or prospects (the "Material Contracts"). Each
such copy of a Material Contract is a true, correct and complete copy of the
document it purports to represent, and reflects all amendments thereto made
through the date of this Agreement. The Company has not violated any of the
material terms or conditions of any Material Contract or any term or condition
which would permit termination or material modification of any Material
Contract, all of the covenants to be performed by any other party thereto, to
the knowledge of the Company, has been fully performed, and there are no claims
for breach or indemnification or notice of default or termination under any
Material Contract. To the Company's knowledge, no event has occurred which
constitutes, or after notice or the passage of time, or both, would constitute,
a default by the Company under any Material Contract, and no such event has
occurred which constitutes or would constitute a default by any other party.
The Company is not subject to any liability or payment resulting from
renegotiation of amounts paid under any Material Contract. As used in this
Section 3.25, Material Contracts shall include, without limitation, formal or
22
informal, written or oral, (a) loan agreements, indentures, mortgages, pledges,
hypothecations, deeds of trust, conditional sale or title retention agreements,
security agreements, equipment financing obligations or guaranties, or other
sources of contingent liability in respect of any indebtedness or obligations
to any other Person, or letters of intent or commitment letters with respect to
same, which individually or in the aggregate exceed $25,000 individually or
$50,000 in the aggregate; (b) contracts obligating the Company to provide
products or services for a period of one year or more, copies of which have
been supplied to Xxxxx 0 and which individually or in the aggregate exceed
$25,000 individually or $50,000 in the aggregate; (c) leases of real property;
(d) leases of personal property which individually or in the aggregate provide
for total payments in excess of $25,000 individually or $50,000 in the
aggregate; (e) distribution, sales agency or franchise or similar agreements,
or agreements providing for an independent contractor's services, or letters of
intent with respect to same; (f) employment agreements, management service
agreements, consulting agreements, collective bargaining agreements,
confidentially agreements, non-competition agreements, employee handbooks,
policy statements and any other agreements relating to any employee, officer,
partner or director of the Company; (g) licenses, assignments or transfers of
trademarks, trade names, service marks, patents, copyrights, trade secrets or
know how, or other agreements regarding proprietary rights or Intellectual
Property; (h) any contract relating to pending capital expenditures by the
Company; (i) contracts obligating the Company to purchase materials, vehicles,
parts, accessories, supplies, equipment, oil, advertising, media and media
related services of any kind, not cancelable without penalty on notice of
thirty (30) days or less; (j) any non-competition agreements restricting the
Company in any manner; and (k) other material Contracts or understandings,
irrespective of subject matter and whether or not in writing, and not otherwise
disclosed on the Schedules.
3.26 Accuracy of Information Furnished. No representation, statement or
information furnished by the Company and contained in this Agreement (including,
without limitation, the various Schedules attached hereto) or any agreement
executed in connection herewith or in any certificate delivered pursuant hereto
or thereto which has been or will be made or furnished to Level 8 or its
representatives by the Company, contains or shall contain any untrue statement
of a material fact or omits or shall omit any material fact necessary to make
the information contained therein not misleading. The Company has provided Level
8 with true, accurate and complete copies of all documents listed or described
in the various Schedules attached hereto.
3.27 No Commissions. The Company has not incurred any obligation for
any finder's or broker's or agent's fees or commissions or similar compensation
in connection with the transactions contemplated hereby.
3.28 [Intentionally Omitted]
3.29 Company Investigation. The Company has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the Asset
Sale and delivery to it of the Level 8 Consideration Shares hereunder and has
had full access to such other information concerning Level 8 as he or she has
requested. The Company has reviewed, or has had an opportunity to review, the
following documents: (i) Level 8's Articles of Incorporation and Bylaws; (ii)
the loan agreements, notes and related documents with Level 8's lenders; and
(iii) Level 8's most recent unaudited financial statements. The Company
acknowledges that (i) it has been advised that an investment in the Level 8
Shares involves a high degree of risk and is suitable only for persons of
adequate financial means who have no need for liquidity with respect to this
investment and who can afford the risk of a complete loss of their investment;
and (ii) the Level 8 Shares are subject to resale restrictions pursuant to Rule
144 under the Securities Act. The Company further acknowledges and agrees that
it will be required to consent to a reasonable lock-up period with respect to
the Level 8 Consideration Shares in connection with any future registration of
Level 8 Common Stock.
23
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 Conduct of Business by the Company Pending the Closing. The
Company hereby covenants and agrees that, between the date of this Agreement
and the Effective Time, the business of the Company shall be conducted only in,
and the Company shall not take any action except in, the ordinary course of
business consistent with past practice. The Company shall use its reasonable
best efforts to preserve intact the Company's business organizations, to keep
available the services of their current officers, employees and consultants,
and to preserve their present relationships with customers, suppliers and other
persons with which they have significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement, the
Company, between the date of this Agreement and the Effective Time, shall not
do or propose or agree to do, directly or indirectly, any of the following
without the prior written consent of Level 8:
(a) amend or otherwise change its Certificate of Incorporation
or Bylaws;
(b) issue, sell, pledge, dispose of, encumber, or, authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i)
any shares of its capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest, of it,
or (ii) any of its assets, tangible or intangible, except, in the case
of (ii), in the ordinary course of business consistent with past
practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock.
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock
or partnership interests;
(e) (i) acquire (including, without limitation, for cash or
shares of stock or partnership interests, by merger, consolidation or
acquisition of stock or assets) any interest in any corporation,
partnership or other business organization or division thereof or any
assets, or make any investment either by purchase of stock or
securities, contributions of capital or property transfer, or, except
in the ordinary course of business, consistent with past practice,
purchase any property or assets of any other Person, (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or
advances, or (iii) modify, terminate, or enter into any Contract other
than as provided herein or in the ordinary course of business,
consistent with past practice;
(f) increase the compensation payable or to become payable to
its officers or employees or partners, or, except as presently bound to
do, grant any severance or termination pay to, or enter into any
employment or severance agreement with, any trustee or any of its
directors, officers or other employees or partners, or establish,
adopt, enter into or amend or take any action to accelerate any rights
or benefits which any collective bargaining, bonus, profit sharing,
trust, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any trustees, directors, officers or employees or partners;
(g) take any action with respect to accounting policies or
procedures other than in the ordinary course of business and in a
manner consistent with past practice;
24
(h) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in its financial
statements, as appropriate, or liabilities incurred after the date
thereof in the ordinary course of business and consistent with past
practice;
(i) increase or decrease prices charged to its customers,
except in the ordinary course of business consistent with past practice,
or take any other action which would naturally tend to result in any
material increase in the loss of customers; materially increase or
decrease the average monthly inventory, other than in the ordinary
course of business and in a manner consistent with past practice;
(j) enter into any transaction with any principal stockholder
or Affiliate thereof, or
(k) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation
or warranty in Article III untrue or incorrect in any material respect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 [Intentionally Omitted]
5.3 Cooperation. Each of the parties agrees to cooperate with the
other in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by
this Agreement and to use their respective reasonable efforts to agree jointly
on a method or overcome any objections by any Governmental Authority to any
such transactions.
5.4 Approvals and Other Actions. Each of the parties hereto shall (a)
cooperate in the preparation and filing of, and take all appropriate actions in
connection with, the application to any third parties who must approve this
transaction for approval of the transactions contemplated hereby, and (b) use
its reasonable efforts to take, or cause to be taken, all appropriate actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated herein, including, without limitation, using its
reasonable efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of any Governmental Authority and
parties to Contracts with the Company as are necessary for the consummation of
the transactions contemplated hereby. Each of the parties shall make on a prompt
and timely basis all governmental or regulatory notifications and filings
required to be made by it for the consummation of the transactions contemplated
hereby. The parties also agree to use reasonable efforts to defend all lawsuits
or other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby and to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby.
5.5 HSR Act. If counsel for Xxxxx 0 and the Company determine that a
filing is required under applicable law, Xxxxx 0 and the Company shall make
promptly (unless they have already made) their respective filings, if any, and
thereafter make any other required submissions, under the HSR Act, with respect
25
to the transactions contemplated hereby, and shall, if requested by Xxxxx 0,
seek early termination of the applicable waiting period under the HSR Act. Level
8 shall be responsible for the filing fees to be paid in connection with the HSR
Act.
5.6 Access to Information. From the date hereof to the Effective Time,
the Company shall cause its directors, officers, employees, auditors, counsel
and agents to, (i) afford Xxxxx 0 and Level 8's officers, employees, auditors,
counsel and agents reasonable access at all reasonable times to its properties,
offices and other facilities, to its officers and employees and to all books and
records, (ii) furnish such persons with all financial, operating and other data
and information as may be reasonably requested and (iii) cooperate with Level 8
in providing all Company information required or requested by any suppliers of
the Company or Level 8 in order to obtain the timely approval or consent of such
supplier to the Asset Sale and the other transactions contemplated in this
Agreement. No information provided to or obtained by Level 8 shall affect any
representation or warranty in this Agreement.
5.6A Access to Information of Level 8. From the date hereof to the
Effective Time Level 8 shall, and shall cause its directors, officers,
employees, auditors, counsel and agents to, (i) afford the Company and its
officers, employees, auditors, counsel and agents reasonable access at all
reasonable times to its properties, offices and other facilities, to its
officers and employees and to all books and records, (ii) furnish such persons
with all financial, operating and other data and information as may be
reasonably requested and (iii) cooperate with Company in providing all Level 8
information required or requested by any suppliers of the Company or Level 8 in
order to obtain the timely approval or consent of such supplier to the Asset
Sale and the other transactions contemplated in this Agreement. No information
provided to or obtained by Company shall affect any representation or warranty
in this Agreement.
5.7 Notification of Certain Matters. Each of the parties to this
Agreement shall give prompt notice to the other parties of the occurrence or
non-occurrence of any event which would likely cause any representation or
warranty made by such party herein to be untrue or inaccurate or any covenant,
condition or agreement contained herein not to be complied with or satisfied
(provided, however, that, any such disclosure shall not in any way be deemed to
amend, modify or in any way affect the representations, warranties and covenants
made by any party in or pursuant to this Agreement).
5.8 [Intentionally Omitted]
5.10 [Intentionally Omitted]
5.11 [Intentionally Omitted]
5.12 [Intentionally Omitted]
5.13 [Intentionally Omitted]
5.14 [Intentionally Omitted]
5.15 [Intentionally Omitted]
5.16 [Intentionally Omitted ]
5.17 [Intentionally Omitted]
5.18 Confidentiality. The Company will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and, should the
transactions contemplated hereunder not be completed or upon a reasonable
request of Level 8 deliver promptly to Level 8 or destroy, at the request and
option of Level 8, all tangible embodiments (and all copies) of the Confidential
26
Information which are in his, her, or its possession. In the event that the
Company is requested or required pursuant to written or oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process to disclose any Confidential
Information, the Company will notify Level 8 promptly of the request or
requirement so that Level 8 may seek an appropriate protective order or waive
compliance with the provisions of this section 5.18. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Company or any of
Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, the
Company may disclose the Confidential Information to the tribunal; provided,
however, that the disclosing party shall use his, her, or its best efforts to
obtain, at the request of Level 8, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as Level 8 shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure unless such Confidential
Information is so available due to the actions of the Company.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF LEVEL 8
The obligations of Level 8 to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
by Level 8:
6.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date. The
Company shall have performed or complied with all of their obligations required
by this Agreement to be performed or complied with at or prior to the Closing
Date. The Company shall have delivered to Level 8 a certificate, dated as of the
Closing Date, certifying that such representations and warranties are true and
correct and that all such obligations have been performed and complied with.
6.2 No Material Adverse Changes. Between the date hereof and the
Closing Date, (a) there shall have been no Material Adverse Change to the
Company, (b) there shall have been no adverse federal, state or local
legislative or regulatory change affecting in any material respect the services,
products or business of the Company and (c) none of the Assets of the Company
shall have been damaged by fire, flood, casualty, act of God or the public enemy
or other cause (regardless of insurance coverage for such damage) which damages
may have a Material Adverse Effect thereon, and the Company shall have delivered
to Level 8 a certificate, dated as of the Closing Date, to that effect.
6.3 Corporate Certificate. The Company shall have delivered to Level 8
(i) a state-certified copy of the Company's certificate of incorporation and a
copy of the Company's bylaws, each as in effect immediately prior to the
Effective Time, (ii) copies of resolutions or consents adopted by the Board of
Directors and each stockholder of the Company authorizing the transactions
contemplated by this Agreement, and (iii) a certificate of good standing of the
Company issued by the state of its incorporation or formation and each other
state in which it is qualified to do business as of a date not more than 15 days
prior to the Closing Date, and all of such documents shall be certified as of
the Closing Date by the Secretary the Company as being true, correct and
complete.
6.4 Opinion of Counsel. Level 8 shall have received an opinion dated as
of the Closing Date from counsel for the Company in form and substance
acceptable to Xxxxx 0, including but not limited to, such matters as set forth
on Schedule 6.4.
27
6.5 Consents. The Company shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any material rights or obligations of the Company from any Person from whom such
consent or waiver is required under any Material Contract listed or required to
be listed in Schedule 3.25 or under the HSR Act or other law or regulation as of
a date not more than five days prior to the Closing, or who as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Contracts or instruments, either by the terms thereof or as a matter of
law. Level 8 shall have obtained any applicable license or other approvals
required under state laws and all other Governmental Authorities with respect to
the transactions contemplated hereby. The Company shall have received an
estoppel letter in form and substance satisfactory to Level 8 from each lessor
pursuant to each of the leases of the Leased Premises.
6.6 Securities Laws. Level 8 shall have received all necessary consents
and otherwise complied with any state Blue Sky or securities laws applicable to
the issuance of the Level 8 Shares in connection with the transactions
contemplated hereby.
6.7 [intentionally omitted]
6.8 Stock Powers. At the Closing, the Company shall have delivered to
Xxxxx 0, for use in connection with the Held Back Shares, one stock power
executed in blank, with signature guarantees for each certificate representing
Held Back Shares.
6.9 No Adverse Litigation. There shall not be pending any action or
proceeding by or before any court or other governmental body which shall seek to
restrain, prohibit, invalidate or collect damages arising out of the
transactions hereunder, and which, in the judgment of Xxxxx 0, makes it
inadvisable to proceed with the transactions contemplated hereby.
6.10 Lease Agreements for the Leased Premises. The lease agreements
pursuant to which the Company leases the Leased Premises are in form and
substance satisfactory to Level 8.
6.11 [intentionally omitted]
6.12 Board Approval. The transactions contemplated hereby shall have
been approved by the Board of Directors of Level 8.
6.13 Schedules. The Company shall have delivered to Level 8 each of the
Schedules to this Agreement, in form and substance satisfactory to Level 8.
6.14 [ Intentionally Omitted]
6.15 Liabilities. Prior to the Closing, the Company shall have obtained
full satisfactions or releases of all obligations and liabilities (i) due to or
on behalf of any Affiliate of the Company and (ii) which Schedule 3.11 indicates
will be satisfied or released prior to Closing.
6.16 [intentionally omitted]
6.17 Due Diligence. Level 8 shall have completed its due diligence
investigation, and the results thereof shall be satisfactory to Xxxxx 0, in its
sole discretion, and such investigation shall not have revealed that any of the
representations or warranties of the Company set forth herein are untrue or
incorrect in any respect or otherwise unsatisfactory to Level 8.
6.18 Lock-Up Agreement. If required by the underwriters in connection
with any future public offering of Level 8 Common Stock, the Company shall have
executed and delivered a lock-up agreement with respect to the Level 8
Consideration Shares providing for a reasonable lock-up period.
28
6.19 Liabilities. The Assumed Liabilities of the Company shall not be
in excess of an aggregate of $50,000.
6.20 Private Placement. The private placement of shares of common stock
of Level 8 to for the aggregate purchase price of at least $545,000 shall be
consummated at or before the Closing Date.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY
The obligations of the Company to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
by the Company.
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Level 8 contained in this
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. Level 8 shall have performed
and complied with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. Level 8 shall have
delivered to the Company a certificate, dated as of the Closing Date, and signed
by an executive officer, certifying that such representations and warranties are
true and correct and that all such obligations have been performed and complied
with.
7.2 Xxxxx 0 Xxxxxx. Xx the Closing, Level 8 shall have issued all of
the Level 8 Shares and shall have delivered to the parties to receive such
shares hereunder (a) certificates representing the Level 8 Shares issued to them
hereunder, other than the Held Back Shares, and (b) copies of certificates
representing the Held Back Shares.
7.3 No Order or Injunction. There shall not be issued and in effect by
or before any court or other governmental body an order or injunction
restraining or prohibiting the transactions contemplated hereby.
7.4 HSR Act Waiting Period. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
7.5 Corporate Certificate. Level 8 shall have delivered to the Company
(i) a state-certified copy of Level 8's certificate of incorporation and a copy
of Level 8's bylaws, each as in effect immediately prior to the Effective Time,
(ii) copies of resolutions or consents adopted by the Board of Directors of
Level 8 authorizing the transactions contemplated by this Agreement, and (iii) a
certificate of good standing of Level 8 issued by the state of its incorporation
or formation and each other state in which it is qualified to do business as of
a date not more than 15 days prior to the Closing Date, and all of such
documents shall be certified as of the Closing Date by the Secretary of Level 8
as being true, correct and complete.
7.6 Opinion of Counsel. The Company shall have received an opinion
dated as of the Closing Date from counsel for Level 8 in form and substance
acceptable to the Company, including but not limited to, such matters as set
forth on Schedule 7.6.
7.7 Consents. Level 8 shall have received consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any material
rights or obligations of Level 8 from any Person from whom such consent or
waiver is required under any Material Contract or under the HSR Act or other law
or regulation as of a date not more than five days prior to the Closing, or who
as a result of the transactions contemplated hereby, would have such rights to
terminate or modify such Contracts or instruments, either by the terms thereof
or as a matter of law. Level 8 shall have obtained any applicable license or
other approvals required under state laws and all other Governmental Authorities
with respect to the transactions contemplated hereby.
29
7.8 Board Approval. The transactions contemplated hereby shall have
been approved by the Board of Directors of the Company.
7.9 Schedules. Level 8 shall have delivered to the Company each of the
Schedules to this Agreement, in form and substance satisfactory to the Company.
7.10 Due Diligence. The Company shall have completed its due diligence
investigation, and the results thereof shall be satisfactory to the Company, in
its sole discretion, and such investigation shall not have revealed that any of
the representations or warranties of Level 8 set forth herein are untrue or
incorrect in any respect or otherwise unsatisfactory to the Company.
ARTICLE VIII
[INTENTIONALLY OMITTED]
ARTICLE IX
INDEMNIFICATION
9.1 (a) Agreement by Company for Indemnification. The Company agrees
to indemnify and hold Level 8 and its stockholders, directors, officers,
employees, attorneys, agents and Affiliates harmless from and against, and at
Level 8's election in its sole discretion Level 8 shall be entitled to recover
by set off (x) against the Held Back Shares in accordance with Section 9.3 and
(y) against any payments by Xxxxx 0 or any Affiliate thereof to any principal
stockholder or any Affiliate thereof pursuant to any Contract or otherwise, the
aggregate of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered by Level 8 arising out of, relating to, or
resulting, from (i) any breach of a representation or warranty made by the
Company in or pursuant to this Agreement, (ii) any breach of the covenants or
agreements made by the Company in or pursuant to this Agreement, (iii) any
inaccuracy in any certificate, instrument or other document delivered by the
Company as required by this Agreement, or (iv) any Excluded Liabilities which
Xxxxx 0 or any Affiliate of Level 8 may pay or be required to or otherwise pay,
(collectively, "Indemniflable Damages"). Without limiting the generality of the
foregoing, with respect to the measurement of Indemnifiable Damages, Level 8
shall have the right to be put in the same after-tax consolidated financial
position as it would have been in if the breach, inaccuracy or Excluded
Liability referenced in the foregoing clauses (i), (ii), (iii) and (iv) that
caused such Indemnifiable Damages had not occurred. Notwithstanding anything to
the contrary contained herein, Level 8 shall not be entitled to any
Indemnifiable Damages unless the aggregate of all such Indemnifiable Damages
exceeds $25,000 (the "Indemnification Threshold"), in which case Level 8 shall
be entitled to the full amount of Indemnifiable Damages. ]
(b) Agreement by Xxxxx 0 for Indemnification. Level 8 agrees to
indemnify and hold the Company and its stockholders, directors, officers,
employees, attorneys, agents and Affiliates harmless from and against, and at
the Company's election in its sole discretion the Company shall be entitled to
recover by set off against any payments by the Company or any Affiliate thereof
to Level 8 or any Affiliate thereof pursuant to any Contract or otherwise, the
aggregate of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and
30
expenses) incurred or suffered by Company arising out of, relating to, or
resulting, from (i) any breach of a representation or warranty made by Level 8
in or pursuant to this Agreement, (ii) any breach of the covenants or
agreements made by Level 8 in or pursuant to this Agreement, (iii) any
inaccuracy in any certificate, instrument or other document delivered by Xxxxx
0 as required by this Agreement, (collectively, "Indemniflable Damages").
Without limiting the generality of the foregoing, with respect to the
measurement of Indemnifiable Damages, the Company shall have the right to be
put in the same after-tax consolidated financial position as it would have been
in if the breach, inaccuracy or Excluded Liability referenced in the foregoing
clauses (i), (ii), (iii) and (iv) that caused such Indemnifiable Damages had
not occurred. Notwithstanding anything to the contrary contained herein, the
Company shall not be entitled to any Indemnifiable Damages unless the aggregate
of all such Indemnifiable Damages exceeds $25,000 (the "Indemnification
Threshold"), in which case the Company shall be entitled to the full amount of
Indemnifiable Damages.
9.2 Survival of Representations and Warranties. (a) Each of the
representations and warranties made by the Company and Level 8 in this Agreement
or pursuant hereto shall survive for a period of Two Years after the Closing
Date; provided, however, that the representations and warranties contained in
Sections 3.12, 3.13, 3.18 and 3.19 shall survive indefinitely. No claim for the
recovery of Indemnifiable Damages may be asserted by Xxxxx 0 or the Company
after such representations and warranties shall thus expire; provided, however,
that claims for Indemnifiable Damages first asserted within such period shall
not thereafter be barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right to
fully rely on the representations, warranties, covenants and agreements of the
other parties contained in this Agreement or in any other documents or papers
delivered in connection herewith. Each representation, warranty, covenant and
agreement of the parties contained in this Agreement is independent of each
other representation, warranty, covenant and agreement.
9.3 Security for the Indemnification Obligation. As security for the
indemnification obligations contained in this Article IX, at the Closing, Xxxxx
0 shall set aside and hold certificates representing the Held Back Shares issued
pursuant to this Agreement. Level 8 may set off against the Held Back Shares any
Indemnifiable Damages, subject, however, to the following terms and conditions:
(a) Level 8 shall give written notice to the holders of Held
Back Shares of any claim for Indemnifiable Damages or any other
damages hereunder, which notice shall set forth (i) the amount of
Indemnifable Damages or other loss, damage, cost or expense which
Level 8 claims to have sustained by reason thereof, (ii) the basis of
such claim, and (iii) a right of the Company to cure such claim;
(b) Such set off shall be effected on the later to occur of
the expiration of twenty (20) days from the date of such notice if
such claim has not been cured to the reasonable satisfaction of Level
8 or, if such claim is contested, the date the dispute is resolved,
and such set off shall be charged proportionally against the shares
set aside;
(c) The holders of Held Back Shares may, if the claim has not
been cured pursuant to 9.3(b) above, instruct Xxxxx 0 to sell some or
all of the Held Back Shares and the net proceeds thereof shall be
substituted for such Held Back Shares in any set off to be made by
Level 8 pursuant to any claim hereunder subject to continued
compliance with any applicable SEC and other regulations; and
(d) For purposes of any set off against the Held Back Shares
pursuant to this Article IX, the shares of Level 8 Common Stock not
sold as provided in clause (c) of this Section 9.3 shall be valued at
the Trading Price.
31
9.4 Voting of and Dividends on the Held Back Shares. Except with
respect to Held Back Shares sold pursuant to the foregoing Section 9.3(c) (and
in the case of such shares, until the same are transferred), all Held Back
Shares shall be deemed to be owned by the record holders thereof and the record
holders shall be entitled to vote the Held Back Shares; provided, however, that,
there shall also be deposited with Level 8 subject to the terms of this Article
IX, all shares of Level 8 Common Stock, other common or preferred stock of Level
8, cash or assets issued to or paid upon Held Back Shares as a result of any
stock or other dividend or distribution or stock split with respect to the Held
Back Shares. All stock or other distributions including cash issued or paid upon
Held Back Shares shall be delivered to the person or entity entitled to receive
such Held Back Shares together with the delivery of such Held Back Shares
pursuant to Section 9.5.
9.5 Delivery of Held Back Shares. Level 8 agrees to deliver to the
holders of the Held Back Shares, no later than 180 days after the Effective Date
any Held Back Shares (and distributions thereon) then held by Level 8 (or
proceeds from the sale of Held Back Shares) unless there then remains unresolved
any claim for Indemnifiable Damages or other damages hereunder as to which
notice has been given, in which event Level 8 shall retain such number of Held
Back Shares (and such amount of proceeds therefrom or distributions thereon) as
is sufficient to satisfy any such unresolved claim, as well as the attorney fees
and costs associated therewith, and shall release the remaining Held Back Shares
(and such remaining proceeds and distributions) to the holders thereof. Any Held
Back Shares (and proceeds from the sale of, or distributions on, Held Back
Shares) remaining on deposit after all such claims shall have been satisfied
shall be returned to the holders thereof promptly after the time of
satisfaction.
9.6 [Intentionally Omitted]
9.7 No Bar. If the Held Back Shares or off set payments under Contracts
or otherwise are insufficient to set off any claim for Indemnifiable Damages
made hereunder (or have been delivered to the holders prior to the making or
resolution of such claim), then Xxxxx 0 may take any action or exercise any
remedy available to it by appropriate legal proceedings to collect the
Indemnifiable Damages.
9.8 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude Level 8 from asserting any other right, or
seeking any other remedies against the Company.
ARTICLE X
SECURITIES LAW MATTERS
10.1 Disposition of Shares.
(a) The Company hereby acknowledges that the Level 8 Consideration
Shares constitute "restricted securities" as defined in Rule 144 under the
Securities Act.
(b) The Company hereby agrees that it will not sell, transfer or
otherwise dispose of any Level 8 Shares, except pursuant to (a) an exemption
from the registration requirements under the Securities Act, which does not
require the filing by Level 8 with the SEC of any registration statement,
offering circular or other document, in which case, each such Person shall first
supply to Level 8 an opinion of counsel (which counsel and opinions shall be
satisfactory to Level 8) that such exemption is available, or (b) an effective
registration statement filed by Level 8 with the SEC under the Securities Act.
10.2 Legends. The certificates representing the Level 8 Shares shall
bear the following legend:
32
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO,
OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Level 8 may, unless a registration statement is in effect covering
such shares, place stop transfer orders with its transfer agents with respect
to such certificates in accordance with federal securities laws.
ARTICLE XI
DEFINITIONS
11.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Accepted Liabilities" shall mean all Designated Liabilities (as defined in
Section 3.11) of the Company, other than those obligations, duties and
liabilities due to or on behalf of any principal stockholder or Affiliate of any
principal stockholder.
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act, as in effect on the date hereof.
"Assets" shall mean all right, title and interest in and to all of the assets of
the Company, including all of its (a) Company Owned Properties and Leased
Premises; (b) tangible personal property, (c) Intellectual Property, goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringement thereof, and
rights to protection of interests therein under the laws of all jurisdictions,
(d) leases, subleases and all rights thereunder, (e) agreements, Contracts (as
defined in this Section 11.1), confidentiality, non-competition and
non-solicitation agreements and all rights previously assigned to the Company
under any agreement, indentures, mortgages, instruments, liens, guaranties and
other similar arrangements and rights thereunder, (f) accounts, notes, and other
receivables, (g) all securities (including the capital stock of any
subsidiaries), (h) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of setoff, and rights of recoupment
(including any such item relating to the payment of taxes), (i) franchises,
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from government and governmental agencies, (j)
books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials, (k) cash, and (l) any rights to seats or access to events at
any local venues; provided however, that the Assets shall not include (i) the
corporate charter, qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minutebooks, stock transfer books,
blank stock certificates, and other documents relating to the organization,
maintenance and existence of the Company as a corporation, or (ii) any of the
rights of the Company under this Agreement (or under any side agreement between
the Company on the one hand and Level 8 on the other hand entered into on or
after the date of this Agreement).
"Chargebacks" shall mean (a) any amount which the Company may be required to pay
back to any party purchasing retail paper, warranties, insurance or the like
from the Company, or (b) any amount which may be set-off or otherwise deducted
from any mount due and owing to the Company by any party purchasing retail
paper, warranties, insurance or the like from the Company.
33
"Code" means the internal Revenue Code, of 1986, as amended.
"Confidential Information" means any information concerning the businesses and
affairs of Level 8 or the Company that is not already generally available to the
public.
"Contract" means any agreement, contract, lease, note, mortgage, indenture, loan
agreement, franchise agreement, covenant, employment agreement, confidentiality
agreement, non-competition agreement, non-solicitation agreement, license,
instrument, purchase and sales order, commitment, undertaking, obligation,
whether written or oral, express or implied.
"Effective Time" shall mean the time when the transactions contemplated herein
are consummated.
"Environmental Costs" shall mean any and all expenses, costs, damages,
liabilities, or obligations (including, without limitation, fees and expenses of
counsel) incurred by, under or pursuant to any Environmental Laws or related to
the Discharge, Handling, presence or clean up of Hazardous Substances arising as
a result of events occurring or facts or circumstances arising or existing on or
prior to the Closing Date (whether or not in the ordinary course of business).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Liabilities" shall mean (i) any obligations and liabilities of the
Company, absolute or contingent, known or unknown, other than Accepted
Liabilities, (ii) any liability or obligation of the Company arising under this
Agreement, (iii) any liability or obligation of the Company relating to any
default under any Accepted Liability to the extent such default existed prior to
the Closing, (iv) any liability or obligation of the Company with respect to, or
arising out, of any employee benefit plan, executive deferred compensation plan,
or any other plans or arrangements for the benefit of any employees or officers
of the Company, (v) any liability or obligation of the Company to any of the
principal stockholders or any Affiliate of any of the principal stockholders or
to any party claiming to have a right to acquire any shares of capital stock or
partnership interests or other securities convertible into or exchangeable for
any shares of capital stock or partnership interests of the Company and (vi) any
Environmental Costs or Litigation Costs.
"GAAP" means generally accepted accounting principles in effect in the United
States of America from time to time.
"Governmental Authority" means any nation or government, any federal, state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, but not limited to, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Litigation Costs" shall mean any and all expenses, costs, damages, liabilities,
or obligations (including, without limitation, fees and expenses of counsel)
incurred in connection with any action, suit, or other legal or administrative
proceeding or governmental investigation arising as a result of events occurring
or facts or circumstances arising or existing on or prior to the Closing Date
(whether or not in the ordinary course of business).
34
"Material Adverse Change (or Effect)" means a change (or effect), in the
condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, estate, trust, unincorporated
association, joint venture, Governmental Authority or other entity, of whatever
nature.
"SEC" means the Securities and Exchange Commission. "Securities Act" means the
Securities Act of 1933, as amended.
"Tax Return" means any report, return, information statement, payee statement or
other information required to be provided to any' federal, state, local or
foreign governmental authority, or otherwise retained, with respect to Taxes.
"Taxes" means any and all taxes, levies, imposts, duties, assessments, charges
and withholdings imposed or required to be collected by or paid over to any
federal, state, local, supra-national or foreign governmental authority or any
political subdivision thereof, including without limitation income, gross
receipts, ad valorem, value added, minimum tax, franchise, sales, use, excise,
license, real or personal property, unemployment, disability, stock transfer,
mortgage recording, estimated, withholding or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, and including any
interest, penalties, fines, assessments or additions to tax imposed in respect
of the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.
11.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise
requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this
Agreement and the transactions contemplated hereby shall be determined
in accordance with GAAP applied on a basis consistent with prior
periods, where applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the
neuter and feminine, where the context so permits.
(e) An obligation to use "best efforts" under this Agreement,
or those agreements or undertakings referred to herein, does not require
the Person subject to that obligation to take actions that would result
in a material and substantial adverse change in the overall benefits to
such Person under this Agreement.
(f) An obligation under this Agreement, or those agreements or
undertakings referred to herein, to "cooperate" with another party to
this Agreement does not require the Person subject to that obligation to
take actions that would result in a material expenditure of funds beyond
that otherwise contemplated by this Agreement, nor the incurrence of any
material liability, beyond that otherwise contemplated by this
Agreement.
35
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time.
(a) by mutual written consent of all of the parties hereto at
any time prior to the Closing; or
(b) by Xxxxx 0 upon delivery of written notice to the Company
in accordance with Section 13.1 of this Agreement in the event of a
material breach by the Company of any provisions of this Agreement; or
(c) by the Company upon delivery of written notice to Level 8
in accordance with Section 13.1 of this Agreement in the event of a
material breach by Xxxxx 0 of any provision of this Agreement; or
(d) by Xxxxx 0 or the Company upon delivery of written notice
to the other in accordance with Section 13.1 of this Agreement, if the
Closing shall not have occurred byJanuary 31, 2004; or
(e) by Xxxxx 0 or the Company upon its rejection of a Schedule
provided by the other party hereto.
12.2 Effect of Termination. Except for the provisions of Article IX
hereof, which shall survive any termination of this Agreement, in the event of
termination of this Agreement pursuant to Section 12.1, this Agreement shall
forthwith become void and of no further force and effect, and the parties shall
be released from any and all obligations hereunder; provided, however, that
nothing herein shall relieve any party from liability for the willful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
ARTICLES XIII
GENERAL PROVISIONS
13.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery, to the following addresses and telecopy numbers (or to
such other addresses or telecopy numbers which any party shall designate in
writing to the other parties):
(a) If to Level 8:
Xxxxx 0 Systems, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
With a copy to:
Xxxxxx Xxxxxxxx LLC
00 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. May, Jr., Esq.
36
(b) If to the Company:
Xxxxxxxx Xxxx Mail, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
With a copy to:
Xxxxxx Xxxxx, Esq.
000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxxx, XX 00000
13.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matters and supersedes all prior agreements and understanding (oral or
written) between or among the parties with respect to such subject matter. The
Schedules and Exhibits constitute a part hereof as though set forth in full
above.
13.3 Expenses. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby.
13.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts.
13.5 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by the Company without the prior written consent
of Level 8. Level 8 may assign all or any portion of its rights hereunder to one
or more of its direct or indirect, wholly owned subsidiaries.
13.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
37
13.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever, the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
13.8 Governing Law; Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Delaware applicable to contracts executed and to be wholly performed within such
State.
13.9 Jurisdiction. The parties to this Agreement agree that any suit,
action or proceeding arising out of, or with respect to, this Agreement or any
judgment entered by any court in respect thereof may be brought only in the
courts of the State of Delaware or the federal district courts located within
the State of Delaware, and the parties hereto hereby accept the exclusive
jurisdiction of those courts for the purpose of any suit, action or proceeding.
13.10 Arm's Length Negotiations. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions, and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advise of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
LEVEL 8 SYSTEMS, INC.
By:__________________________
Name:
Title:
CICERO TECHNOLOGIES ACQUISITION, LLC
By:___________________________
Name:
Title:
XXXXXXXX XXXX MAIL, INC.
By:__________________________
Name:
39
Exhibits
Exhibit No. Title
----------- -----
Schedule 1.4 Assumed Liabilities
Article II Schedules Xxxxx 0 Xxxxxxxxxx Xxxxxxxxx
Schedule 2.1(a) Organization and Qualification
Schedule 2.1(c) Capitalization
Schedule 2.1(f) Required Consents and Approvals
Schedule 2.1(g) Litigation; Proceedings
Schedule 2.1(o) Registration Rights
Schedule 3.4 Capitalization
Schedule 3.6 Required Consents
Schedule 3.9 Financial Statements
Schedule 3.10 Changes Since the Current Balance Sheet Date
Schedule 3.11 Indebtedness
Schedule 3.12 Litigation
Schedule 3.13 Aboveground and Underground Storage Tanks;
Environmental Matters
Schedule 3.14 Company Owned Properties; Leased Premises
Schedule 3.17 Labor and Employment Matters
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Taxes
Schedule 3.20 Insurance
Schedule 3.22 Licenses and Permits
Schedule 3.24 Intellectual Property
Schedule 3.25 Material Contracts
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