EXHIBIT 16.1
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") is entered into this 9th day of
February, 2006, by and among NEOMEDIA TECHNOLOGIES, INC., a Delaware corporation
("Parent"), MOBOT ACQUISITION, INC., a Delaware corporation and a wholly-owned
subsidiary of the Parent ("Merger Sub"), and MOBOT, INC., a Delaware corporation
(the "Company" and together with Parent and Merger Sub, the "Parties" and each a
"Party").
RECITALS:
A. Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall merge with and into Merger Sub (the "Merger") with
Merger Sub surviving, in accordance with the Delaware General Corporation Law
(the "DGCL").
B. For the purposes hereof, references to the Company shall mean Mobot,
Inc. up to and including the Closing Date (as defined herein below) and
thereafter shall mean Merger Sub, which shall include the operations of the
Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises herein set forth
and certain other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties hereto agree as follows:
1. THE MERGER AND RELATED TRANSACTIONS.
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1.1. Merger. In accordance with the provisions of this Agreement, the DGCL
and other applicable law, on the Closing Date (as defined herein below), the
Company shall be merged with and into Merger Sub, which Merger Sub shall be the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware as a wholly-owned subsidiary of Parent. As of the Closing (as
defined herein below), separate existence of the Company shall cease. On the
Closing Date and by virtue of the Merger and without any action on the part of
the shareholders of the Company (the "Shareholders" and each, a Shareholder),
all of the then issued and outstanding shares of capital stock of the Company
(the "Company Shares") (other than Dissenting Shares, as defined herein below)
held by a Shareholder immediately prior to the Closing shall be automatically
converted into and represent the right to receive the Merger Consideration set
forth in Section 1.2 hereof.
1.2. Merger Consideration and Payment.
1.2.1. Merger Consideration. In consideration of the Merger, Parent
shall (a) issue an aggregate amount of cash (the "Cash Consideration") equal to
Three Million Five Hundred Thousand Dollars ($3,500,000) to be delivered to the
Shareholders in the denominations set forth opposite each Shareholder's name on
the Payment Schedule attached hereto as Exhibit A (the "Payment Schedule"); and
(b) issue newly-issued shares of common stock, $0.01 par value per share, of the
Parent (the "Parent Common Stock") to be delivered to the Shareholders in the
denominations set forth opposite each Shareholder's name on the Payment Schedule
(the "Parent Shares", and together with the Cash Consideration, the "Merger
Consideration") having a value equal to Six Million Five Hundred Thousand
Dollars ($6,500,000). The total number of Parent Shares to be issued to the
Shareholders shall be determined by dividing $6,500,000 by the volume-weighted
average price of the Parent Common Stock ("VWAP") during the ten (10) business
days immediately preceding and up to the date of this Agreement (the "Initial
VWAP"). The respective interest of each Shareholder in the Merger Consideration,
determined by reference to the amount of Cash Consideration and Parent Shares to
be delivered to such Shareholder as described on the Payment Schedule, is
referred to as such Shareholder's "Pro-Rata Share".
1.2.2. Manner of Payment. At the Closing (as defined herein below),
(a) Parent shall deliver a number of Parent Shares which shall be determined by
dividing $1,000,000 by the Initial VWAP (the "Escrow Parent Shares") into escrow
pursuant to the terms of Section 1.3 herein, and (b) Parent shall deliver the
Cash Consideration and the Parent Shares other than the Escrow Parent Shares
(the "Initial Parent Shares") to the Shareholders as provided in Section 1.2.3
herein. The Payment Schedule sets forth for each Shareholder the number of
Initial Parent Shares and amount of Cash Consideration to be delivered to such
Shareholder as provided in Section 1.2.3 and the number of Escrow Parent Shares
to be placed into escrow by the Parent on behalf of such Shareholder pursuant to
Section 1.3.
1.2.3. Surrender of Certificates; Delivery of Merger Consideration
to the Shareholders. At the Closing, each Shareholder shall (a) surrender the
certificate or certificates representing the Company Shares held by such
Shareholder ("Certificates") to Parent and (b) deliver (if not previously
delivered) a duly executed counterpart of a Letter of Transmittal in the form of
Exhibit B hereto (a "Letter of Transmittal"). Upon such surrender and delivery,
Parent shall deliver to such Shareholder such Shareholder's Pro Rata Share of
the Cash Consideration and the Initial Parent Shares as set forth in the Payment
Schedule. Until properly surrendered, each such Certificate shall be deemed for
all purposes to evidence only the right to receive the portion of the Merger
Consideration payable to the holder thereof in respect of the Company Shares
represented by such Certificate.
1.2.4. Parent Guarantee. Parent guarantees to the Shareholders the
value of Parent Shares through and until the date the Parent Shares are
effectively registered under the Securities Act of 1933, as amended (the
"Securities Act") with the U.S. Securities and Exchange Commission ("SEC"). If
the total value (the "Registration Value") of the Parent Shares at the date of
registration of the Parent Shares pursuant to Section 2.5 (as determined by the
VWAP during the ten (10) business days commencing five (5) business days prior
to the date of such registration, herein referred to as the "Guarantee VWAP") is
less than $6,500,000, then Parent will make up any difference (the "Shortfall")
in cash. However, in the event the total Cash Consideration paid to the
Shareholders at the Closing plus the cash payable to the Shareholders pursuant
to this Section 1.2.4 would exceed sixty percent (60%) of the total Merger
Consideration minus the value of the Escrow Parent Shares (as determined by the
Initial VWAP) (the "Threshold Amount"), then, at the sole election of the
Shareholder Agent, Parent shall be obligated to make up the amount by which the
Shortfall exceeds the
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Threshold Amount either in cash or in additional shares of Parent Common Stock
issued by Parent (valued for such purpose at the Guarantee VWAP), or in any
combination of the foregoing. In the event there is any Shortfall, Parent shall
pay the amount of the Shortfall in cash or, to the extent the Shareholder Agent
shall elect as provided above, in additional shares of Parent Common Stock
issued by Parent, to the Shareholders in proportionate amounts based upon each
such Shareholder's Pro Rata Share of the Parent Shares within ten (10) business
days from the date such SEC registration becomes effective. Amounts not paid
when due shall accrue interest at the rate of one percent (1%) per month until
paid. The agreements of Parent hereunder are for the benefit of the
Shareholders, and each of them acting singly, shall have the right to enforce
the obligations of Parent hereunder. Parent shall pay each Shareholder for such
Shareholder's reasonable attorney's fees and costs incurred in collection
efforts for any unpaid amounts due such Shareholder hereunder. Any additional
shares of Parent Common Stock issued by Parent under this Section 1.2.4 shall be
deemed to be part of the "Parent Shares" for purposes of Sections 2.5 and 4 of
this Agreement.
1.3. Escrow. At the Closing, Parent shall deliver the Escrow Parent Shares
to Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP, as escrow agent (the "Escrow
Agent") pursuant to the Escrow Agreement in the form attached hereto as Exhibit
C (the "Escrow Agreement"), to be held in escrow (the "Escrow Fund") for the
purpose of securing the indemnification obligations of the Company set forth in
this Agreement. The portion of the Escrow Parent Shares contributed on behalf of
each Shareholder shall be equal to such Shareholder's Pro Rata Share of the
aggregate Parent Shares. The Escrow Fund shall be held by the Escrow Agent under
the Escrow Agreement pursuant to the terms thereof. The Escrow Fund shall be
held as a trust fund and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor of any party, and shall be
held and disbursed solely for the purposes and in accordance with the terms of
the Escrow Agreement. The adoption of this Agreement and the approval of the
Merger by the Shareholders shall constitute approval of the Escrow Agreement and
of all of the arrangements relating thereto, including the placement of the
Escrow Parent Shares in escrow.
1.4. Termination of Options and Warrants. All options, warrants and other
rights to acquire shares of capital stock of the Company shall be cancelled and
terminate effective as of the Closing.
1.5. Dissenting Shares. The Company Shares held as of the Closing Date by
a Shareholder who has not voted such Company Shares in favor of the adoption of
this Agreement and with respect to which appraisal shall have been duly demanded
and perfected in accordance with the DGCL and not effectively withdrawn or
forfeited prior to the Closing Date ("Dissenting Shares") shall not be converted
into or represent the right to receive Merger Consideration, unless the
applicable Shareholder shall have forfeited such Shareholder's right to
appraisal under the DGCL or properly withdrawn such Shareholder's demand for
appraisal. If such Shareholder has so forfeited or withdrawn such Shareholder's
right to appraisal of Dissenting Shares, then (a) as of the occurrence of such
event, such Shareholder's Company Shares shall cease to be Dissenting Shares and
shall be converted into and represent the right to receive the Merger
Consideration payable in respect of such Company Shares pursuant to Section 1.2,
and (b) promptly following the occurrence of such event, Parent shall deliver to
such Shareholder the portion of the Cash Consideration and Initial Parent Shares
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to which such Shareholder is entitled pursuant to Section 1.2 and shall deliver
to the Escrow Agent the portion of the Escrow Parent Shares to be contributed by
Parent to the Escrow Fund on behalf of such Shareholder to be held by the Escrow
Agent under the Escrow Agreement. The Company shall give Parent (i) prompt
notice of any written demands for appraisal of any Company Shares, withdrawals
of such demands, and any other instruments that relate to such demands received
by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to any demands for appraisal of Company Shares or offer to settle
or settle any such demands.
1.6. Closing. The Parties shall file a Certificate of Merger (as defined
below) pursuant to the DGCL, cause the Merger to become effective and consummate
the other transactions contemplated by this Agreement (the "Closing") on
February 17, 2006, or such other date as may be mutually agreeable to the
Parties (the "Closing Date"). The Closing shall take place at the offices of
counsel to Parent, or at such other place as may be mutually agreed upon by
Parent and the Company.
1.7. Plan of Merger; Certificate of Merger. The Parties shall cause the
Company and Merger Sub to enter into a Plan of Merger on the date hereof, a copy
of which is attached hereto as Exhibit D (the "Plan of Merger"), and, at the
Closing, to execute the Certificate of Merger in the form attached hereof as
Exhibit E (the "Certificate of Merger"). The Certificate of Merger shall be
filed with the Secretary of State of Delaware on the Closing Date in accordance
with the DGCL.
1.8. Approval of Merger. On or before the execution of this Agreement, the
respective Boards of Directors of Parent, Merger Sub and the Company shall have
approved this Agreement the Plan of Merger, the Escrow Agreement and the
transactions contemplated hereby and thereby.
2. ADDITIONAL AGREEMENTS.
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2.1. Access and Inspection, Etc. The Company has allowed and shall allow
Parent and its authorized representatives reasonable access during normal
business hours and upon reasonable advance notice from and after the date hereof
and prior to the Closing Date to all of the properties, books, contracts,
commitments and records of the Company for the purpose of making such
investigations as Parent may reasonably request in connection with the
transactions contemplated hereby, and furnish Parent such information concerning
its affairs as Parent may reasonably request. The Company has caused and shall
cause the personnel of the Company to assist Parent in making such investigation
and shall use its best efforts to cause the counsel, accountants, and other
non-employee representatives of the Company to be reasonably available to Parent
for such purposes.
2.2. Confidential Treatment of Information. From and after the date
hereof, the Parties shall and shall cause their representatives to hold in
confidence this Agreement (including the Exhibits and Schedules hereto), all
matters relating hereto and all data and information obtained with respect to
the other Parties or their business, except such data or information as is
published or is a matter of public record, or as compelled by legal process. In
the event this Agreement is terminated pursuant to Section 10 hereof, each Party
shall promptly return to the other(s) any statements, documents, schedules,
exhibits or other written information obtained from them in connection with this
Agreement, and shall not retain any copies thereof.
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2.3. Public Announcements. After the date hereof and prior to the Closing
Date, none of the Parties shall make any press release, statement to employees
or other disclosure of this Agreement or the transactions contemplated hereby
without the prior written consent of the other Parties, except as may be
required by law. The Company shall not make any such disclosure unless Parent
shall have received prior notice of the contemplated disclosure and has had
adequate time and opportunity to comment on such disclosure, which shall be
satisfactory in form and content to Parent and its counsel.
2.4. Securities Law Compliance. The issuance of the Parent Shares to the
Shareholders hereunder shall not be registered under the Securities Act of 1933,
as amended, by reason of the exemption provided by Section 4(2) thereof, and
such shares may not be further transferred unless such transfer is registered
under applicable securities laws or, in the opinion of Parent's counsel, such
transfer complies with an exemption from such registration. All certificates
evidencing the Parent Shares to be issued to the Shareholders shall be legended
to reflect the foregoing restriction.
2.5. Registration of Parent Shares.
2.5.1. Parent agrees to (a) within ninety (90) days following the
effectiveness of its S-3 and S-4 registration statements filed with the SEC on
December 29, 2005 and January 20, 2006, respectively, file a registration
statement under the Securities Act that will include the Parent Shares
(including the Escrow Parent Shares and any additional shares issuable pursuant
to Section 1.2.4 herein) issued to the Shareholders pursuant to this Agreement
(such shares are also referred to herein as "Registrable Securities") and (b)
use its best efforts to cause to be registered under the Securities Act all
Registrable Securities as soon as practicable.
2.5.2. Subject to the terms and conditions of this Agreement, Parent
shall notify each holder of Registrable Securities in writing at least ten (10)
days prior to the filing of any registration statement under the Securities Act
for purposes of a public offering of securities of Parent (including, but not
limited to, registration statements relating to secondary offerings of
securities of Parent, but excluding any registration statement relating to any
employee benefit plan or with respect to any corporate reorganization or other
transaction under Rule 145 of the Securities Act) and will afford each such
holder an opportunity to include in such registration statement all or part of
such Registrable Securities held by such holder. Each holder of Registrable
Securities desiring to include in any such registration statement, all of part
of the Registrable Securities held by such holder shall, within ten (10) days
after the above-described notice from Parent, so notify Parent in writing. Such
notice shall state the intended method of disposition of the Registrable
Securities held by such holder. Parent shall use its best efforts to cause to be
registered under the Securities Act all of the Registrable Securities that each
such Shareholder has requested be registered. If a holder decides not to include
all of its Registrable Securities in a registration statement thereafter filed
by Parent, such holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by Parent with respect to offerings of
its securities, all upon the terms and conditions set forth herein.
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2.5.3. Whenever required under this Section 2.5 to use its best
efforts to effect the registration of any Registrable Securities, Parent shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective until the distribution of
such Registrable Securities is completed;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish to the Shareholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement;
(e) Provide a transfer agent for the Parent Shares;
(f) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC;
(g) Use its best efforts to secure listing of the Registrable
Securities on the OTC Bulletin Board or any other market or quotation system on
which shares of Parent Common Stock are then listed;
(h) Enter into such customary agreements and take such other actions
as sellers of Registrable Securities shall reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(i) Use every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of such registration statement or of any
order preventing or suspending the use of any preliminary prospectus and, if any
such order is issued, to obtain the lifting thereof at the earliest reasonable
time; and
(j) Keep the Shareholders and their counsel reasonably informed
about Parent's progress effecting such registration, including delivery to such
counsel of copies of all correspondence (electronic or otherwise) with the SEC
with respect to such registration.
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2.5.4. All expenses (excluding any underwriters' discounts and
commissions) incurred in connection with a registration pursuant to this Section
2.5, including, without limitation, any additional registration and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for Parent, and the fees and disbursements of one counsel for the
selling Shareholders, shall be borne by Parent.
2.5.5. In the event any Registrable Securities are included in a
registration statement under this Section 2.5, then to the extent permitted by
law, Parent will indemnify and hold harmless each Shareholder requesting or
joining in a registration, any underwriter (as defined in the Securities Act)
for it, and each person, if any, who controls such Shareholder or underwriter
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of any material fact contained in such
registration statement, including, without limitation, any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or arise out of any
violation by Parent of any rule or regulation promulgated under the Securities
Act applicable to Parent and relating to action or inaction required of Parent
in connection with any such registration; and will reimburse each such
Shareholder, such underwriter, or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action, provided, however,
that the indemnity agreement contained in this Section 2.5.5 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Parent (which consent
shall not be unreasonably withheld or delayed), nor shall Parent be liable in
any such case with respect to any such Shareholder, underwriter or controlling
person for any such loss, claim, damage, liability or action to the extent that
it arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Shareholder, underwriter or controlling person. The obligations of Parent
under this Section 2.5 shall survive the completion of any offering of
Registrable Securities in a registration statement.
2.6. Management Incentive Programs; Stock Option Plans.
2.6.1. Each executive of the Company who becomes employed in an
executive management position by the Surviving Corporation upon the consummation
of this Agreement shall be entitled to participate in any management incentive
programs or any other similar plan provided by either Parent or the Surviving
Corporation to its executives or employees generally, including but not limited
to any stock option plan, if and to the extent that the executive is eligible to
participate in accordance with the provisions of any plan as determined in the
sole discretion of Parent's or the Surviving Corporation's Board of Directors,
as the case may be.
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2.6.2. Each employee of the Company who becomes employed by the
Surviving Corporation upon the consummation of this Agreement shall be entitled
to participate in Parent's stock option plans or other similar plan provided by
Parent to its employees and the employees of its subsidiaries generally, if and
to the extent that the employee is eligible to participate in accordance with
the provisions of any plan as determined in the sole discretion of Parent's
Board of Directors.
2.7. Best Efforts. Subject to the terms and conditions provided in this
Agreement, each of the Parties shall use its best efforts in good faith to take
or cause to be taken as promptly as practicable all reasonable actions that are
within its power to cause to be fulfilled those conditions precedent to its
obligations or the obligations of the other Parties to consummate the
transactions contemplated by this Agreement that are dependent upon its actions.
2.8. Further Assurances. The Parties shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, the provisions of this Agreement, including,
without limitation, all instruments as may be necessary to consummate the
transactions contemplated by this Agreement.
2.9. Certain Tax Matters. The Parties intend that the Merger will be
treated as a tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986.
2.10. Release of Claims By Each Shareholder. Each Shareholder shall
confirm and agree in the Letter of Transmittal executed by such Shareholder
under Section 1.2.3 that neither such Shareholder nor such Shareholder's
successors, predecessors, assigns, agents, advisors, legal representatives,
partners or any persons acting by, through or under such Shareholder has any
claim against the Company or any of its successors, predecessors, assigns,
agents, advisors, officers, directors, employees, legal representatives,
partners or any persons acting by, through or under any of them, as of the
Closing, except that such confirmation and agreement shall not apply to claims
in connection with (a) this Agreement or any agreement or instrument entered
into in connection herewith, including without limitation the Escrow Agreement
and the option and other agreements referenced in Section 8.5, (b) the rights of
officers and directors to indemnification under the Company's charter or bylaws
or at common law and (c) any such person's employment with the Surviving
Corporation from and after the Closing.
2.11. No-Shop. From the date hereof until the termination of this
Agreement, neither the Company nor any Shareholder shall, directly or
indirectly, make, solicit, initiate or encourage submission of proposals or
offers from any persons (including any of their employees or officers) relating
to an Acquisition Proposal. As used herein, "Acquisition Proposal" means any
proposal or offer involving a liquidation, dissolution, recapitalization,
merger, consolidation or acquisition or purchase of all or substantially all of
the assets of, or equity interest in, the Company or other similar transaction
or business combination involving the Company. Each of the Company and each
Shareholder shall immediately cease and cause to be terminated all discussions
or negotiations with third parties with respect to any Acquisition Proposal, if
any, exiting on the date hereof.
2.12. Shareholder Approval. Following the execution of this Agreement, the
Company shall submit this Agreement and the Plan of Merger to its Shareholders
and seek to have its Shareholders adopt this Agreement and the Plan of Merger
and approve the Merger as promptly as practicable at a special meeting of
shareholders or pursuant to a written shareholder consent in accordance with the
applicable requirements of the DGCL.
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3. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY.
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To induce Parent and Merger Sub to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company represents and
warrants to and covenants with Parent and Merger Sub as follows:
3.1. Organization; Compliance. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is: (i) entitled to own or lease its properties and to
carry on its business as and in the places where such business is now conducted,
and (ii) duly licensed and qualified in all jurisdictions where the character of
the property owned by it or the nature of the business transacted by it makes
such license or qualification necessary, except where the failure to do so would
not result in a material adverse effect on the Company. Schedule 3.1 lists all
locations where the Company has an office or place of business and the nature of
the ownership interest in such property (fee, lease, or other).
3.2. Capitalization and Related Matters.
3.2.1. The Company has an authorized capital consisting of 10,000
shares of common stock, par value $0.01 per share, 1,834 of which are issued and
outstanding at the date hereof and 333.33 of which are issuable upon the
conversion of convertible debentures outstanding as of the date hereof. All
Company Shares are duly and validly issued, fully paid and nonassessable. No
Company Shares (i) were issued in violation of the preemptive rights of any
shareholder, or (ii) are held as treasury stock.
3.2.2. Except as described in Schedule 3.2, there are not
outstanding any securities convertible into capital stock of the Company nor any
rights to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, such capital stock or
securities convertible into such capital stock. The Company: (i) is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any of its capital stock; or (ii) has no liability for dividends or
other distributions declared or accrued, but unpaid, with respect to any capital
stock.
3.3. Subsidiaries. The Company owns (i) no shares of capital stock of any
other corporation, including any joint stock company, and (ii) no other
proprietary interest in any company, partnership, trust or other entity,
including any limited liability company.
3.4. Execution; No Inconsistent Agreements; Etc.
3.4.1. This Agreement is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy or similar laws affecting the enforcement of
creditors' rights generally, and the availability of equitable remedies. The
Company has the requisite right, power and authority to execute and deliver this
Agreement and the documents to be delivered by it in connection with the Closing
and to perform its obligations under this Agreement.
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3.4.2. Except as set forth in Schedule 3.4, the execution and
delivery of this Agreement by the Company does not, and the consummation of the
transactions contemplated hereby will not, constitute a breach or violation of
the charter or bylaws of the Company, or a default under any of the terms,
conditions or provisions of (or an act or omission that would give rise to any
right of termination, cancellation or acceleration under) any note, bond,
mortgage, lease, indenture, agreement or obligation to which the Company is a
party, pursuant to which the Company otherwise receives benefits, or to which
any of the properties of the Company is subject, or violate any judgment, order,
decree, statute or regulation applicable to the Company or any Shareholder or by
which any of them may be subject, in any such case in any manner that would have
a material adverse effect on the Company.
3.5. Corporate Records. The statutory records, including the stock
register and minute books of the Company, fully reflect all issuances, transfers
and redemptions of its capital stock, currently show and will correctly show the
total number of shares of its capital stock issued and outstanding on the date
hereof and on the Closing Date, the charter or other organizational documents
and all amendments thereto, the bylaws as amended and currently in force. To the
knowledge of the Company, the books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Parent, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
Shareholders, the Board of Directors, and committees of the Boards of Directors
of the Company, and no meeting of any such Shareholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.
3.6. Financial Statements.
3.6.1. The Company has delivered to Parent (i) the balance sheet of
the Company as of December 31, 2004, and the related statements of income,
shareholders' equity and cash flows of the Company for the fiscal year ended
that date and (ii) the balance sheet of the Company as of September 30, 2005
(such balance sheet is herein referred to as the "Balance Sheet") and the
related statements of income, shareholders' equity and cash flows of the Company
for the period ended that date. All the foregoing financial statements, and any
financial statements delivered pursuant to Section 3.6.3 below, are referred to
herein collectively as the "Company Financial Statements".
3.6.2. The Company Financial Statements have been (and in the case
of Company Financial Statements delivered pursuant to Section 3.6.3 below will
be) prepared in accordance with applicable Generally Accepted Accounting
Principals ("GAAP") throughout the periods involved, subject, in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes, applied on a consistent basis, and fairly
reflect (and in the case of Company Financial Statements delivered pursuant to
Section 3.6.3 below will reflect) in all material respects the financial
condition of the Company as at the dates thereof and the results of the
operations of the Company for the periods then ended, and are true and complete
and are consistent with the books and records of the Company.
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3.6.3. At Closing, the Company will furnish to Parent interim
financial statements of the Company for each month subsequent to the date of the
Balance Sheet.
3.7. Liabilities. The Company has no debt, liability or obligation of any
kind, whether accrued, absolute, contingent or otherwise, (a) existing as of the
date of the Balance Sheet, and required to be shown therein in accordance with
applicable GAAP, other than those reflected or reserved against on the Balance
Sheet, or (b) arising or occurring since the date of the Balance Sheet, except
for liabilities arising or occurring in the ordinary course of business, none of
which have had or will have (when viewed together with other matters occurring
during such period) a material adverse effect on the financial condition of the
Company.
3.8. Absence of Changes. Except as described in Schedule 3.8, from the
date of the Balance Sheet to the date of this Agreement:
(a) there has not been any adverse change in the business, assets,
liabilities, results of operations or financial condition of the Company or in
its relationships with suppliers, customers, employees, lessors or others, other
than changes in the ordinary course of business, none of which have had or will
have (when viewed together with other matters occurring during such period) a
material adverse effect on the business, properties or financial condition of
the Company; and
(b) there has not been any: (i) change in the Company's authorized or
issued capital stock, retirement, or other acquisition by the Company of any
shares of any such capital stock; (ii) a declaration or payment of any dividend
or other distribution or payment in respect of shares of capital stock, except
as set forth on Schedule 3.8; (iii) amendment to the Articles of Incorporation
or Bylaws of the Company; (iv) increase by the Company of any bonuses, salaries,
or other compensation to any shareholder, director, officer, or (except in the
ordinary course of business) employee or entry into any employment, severance,
or similar agreement with any director, officer, or employee; (v) adoption of,
or increase in the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of the Company; (vi) sale (other
than in the ordinary course of business), lease, or other disposition of any
asset or property of the Company or mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset or property of the Company; (vii)
cancellation or waiver of any claims or rights with a value to the Company in
excess of $10,000; (viii) material change in the accounting methods used by the
Company; or (ix) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.9. Title to Properties. The Company has good and marketable title to all
of its properties and assets, real and personal, including, but not limited to,
those reflected in the Balance Sheet (except as since sold or otherwise disposed
of in the ordinary course of business, or as expressly provided for in this
Agreement), free and clear of all encumbrances, liens or charges of any kind or
character except: (a) those securing liabilities of the Company incurred in the
ordinary course (with respect to which no default exists); (b) liens of real
estate and personal property taxes; and (c) imperfections of title and
encumbrances, if any, which, in the aggregate (i) are not substantial in amount;
(ii) do not detract from the value of the property subject thereto or impair the
operations of the Company; and (iii) do not have a material adverse effect on
the business, properties or assets of the Company.
11
3.10. Compliance With Law. The business and activities of the Company has
at all times been conducted in accordance with its Certificate of Incorporation
and Bylaws and any applicable law, regulation, ordinance, order, License (as
defined below), permit, rule, injunction or other restriction or ruling of any
court or administrative or governmental agency, ministry, or body, except where
the failure to do so would not result in a material adverse effect on the
Company.
3.11. Taxes. The Company has duly filed all federal, state and material
local tax returns and reports, and all returns and reports of all other
governmental units having jurisdiction with respect to taxes imposed on it or on
its income, properties, sales, franchises, operations or employee benefit plans
or trusts, all such returns were complete and accurate when filed, and all taxes
and assessments payable by the Company have been paid to the extent that such
taxes have become due. All taxes accrued or payable by the Company for all
periods through the date of the Balance Sheet have been accrued or paid in full,
whether or not due and payable and whether or not disputed. The Company has
withheld proper and accurate amounts from its employees for all periods in full
compliance with the tax withholding provisions of applicable federal, state and
local tax laws. There are no waivers or agreements by the Company for the
extension of time for the assessment of any taxes. There are not now any
examinations of the income tax returns of the Company pending, or any proposed
deficiencies or assessments against the Company of additional taxes of any kind.
3.12. Real Properties. The Company does not have an interest in any real
property, except for the Leases (as defined below).
3.13. Leases of Real Property. All leases pursuant to which the Company is
a lessee of any real property (the "Leases") are listed in Schedule 3.13 and are
valid and enforceable in accordance with their terms. There is not under any of
such Leases any material default or any claimed material default by the Company
or any event of default or event which with notice or lapse of time, or both,
would constitute a material default by the Company and in respect to which the
Company has not taken adequate steps to prevent a default on its part from
occurring. The copies of the Leases heretofore furnished to Parent are true,
correct and complete, and such Leases have not been modified in any respect
since the date they were so furnished, and are in full force and effect in
accordance with their terms. The Company is lawfully in possession of all real
properties of which they are a lessee (the "Leased Properties").
3.14. Contingencies. Except as disclosed on Schedule 3.14, there are no
actions, suits, claims or proceedings pending, or to the knowledge of the
Company threatened against, by or affecting, the Company in any court or before
any arbitrator or governmental agency that may have a material adverse effect on
the Company or which could materially and adversely affect the right or ability
of the Company to consummate the transactions contemplated hereby. To the
knowledge of the Company, there is no valid basis upon which any such action,
suit, claim, or proceeding may be commenced or asserted against the Company.
There are no unsatisfied judgments against the Company and no consent decrees or
similar agreements to which the Company is subject and which could have a
material adverse effect on the Company.
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3.15. Intellectual Property Rights. The Company has: (a) the right to use
the name Mobot, Inc. in connection with the Company's current products and
services, and to the knowledge of the Company the use of such name does not
conflict with or infringe upon the rights of any other person in the United
States, and (b) made all material filings and publications required to register
and perfect such right in the United States. The Company is not, and will not
be, subject to any liability, direct or indirect, for infringement damages,
royalties, or otherwise, by reason of (a) the use of the name "Mobot, Inc." in
the United States in connection with the Company's current products and services
or (b) the business operations of the Company, at any time prior to the Closing
Date. The Company has good and marketable title to its trade secrets, free and
clear of all encumbrances, liens, or charges of any kind or character.
3.16. Material Contracts. Schedule 3.16 contains a complete list of all
contracts of the Company which involve consideration in excess of the equivalent
of $10,000 or have a term of one (1) year or more (the "Material Contracts").
The Company has delivered to Parent a true, correct and complete copy of each of
the written contracts, and a summary of each oral contract, listed on Schedule
3.16. Except as disclosed in Schedule 3.16: (a) the Company has performed all
material obligations to be performed by it under all such contracts, and is not
in material default thereof, and (b) no condition exists or has occurred which
with the giving of notice or the lapse of time, or both, would constitute a
material default by the Company or accelerate the maturity of, or otherwise
modify, any such contract, and (c) all such contracts are in full force and
effect. No material default by any other party to any of such contracts is known
or claimed by the Company to exist.
3.17. Insurance. Schedule 3.17 contains a complete list of all policies of
insurance presently maintained by the Company all of which are, and will be
maintained through the Closing Date, in full force and effect; and all premiums
due thereon have been paid and the Company has not received any notice of
cancellation with respect thereto. The Company has heretofore delivered to
Parent or its representatives a true, correct and complete copy of each such
insurance policy.
3.18. Employment and Labor Matters. Schedule 3.18 sets forth the name,
position, employment date, and 2004 compensation (base and bonus) of each
employee of the Company who earned $25,000 or more in 2004 or is anticipated to
earn $25,000 or more in 2005. The Company is not a party to any collective
bargaining agreement (whether industry wide or on a company level) or agreement
of any kind with any union or labor organization. There has not been any attempt
by any union or other labor organization to organize the employees of the
Company at any time in the past five (5) years. Except as disclosed in Schedule
3.18, the Company is not a party to or bound by any employment contract,
consulting agreement, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement. The Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing.
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3.19. Employee Benefit Matters.
3.19.1. Except as disclosed in Schedule 3.19, the Company does not
provide, nor is it obligated to provide, directly or indirectly, any benefits
for employees other than salaries, sales commissions and bonuses, including, but
not limited to, any pension, profit sharing, stock option, retirement, bonus,
hospitalization, insurance, severance, vacation or other employee benefits
(including any housing or social fund contributions) under any practice,
agreement or understanding.
3.19.2. Each employee benefit plan maintained by or on behalf of the
Company or any other party (including any terminated pension plans) which covers
or covered any employees or former employees of the Company (collectively, the
"Employee Benefit Plans") is listed in Schedule 3.19. The Company has delivered
to Parent true and complete copies of all such plans and any related documents.
With respect to each such plan: (i) no litigation, administrative or other
proceeding or claim is pending, or to the knowledge of the Company, threatened
or anticipated involving such plan; (ii) there are no outstanding requests for
information by participants or beneficiaries of such plan; and (iii) such plan
has been administered in compliance in all material respects with all applicable
laws and regulations, except for any noncompliance that would not have a
material adverse effect on the Company.
3.19.3. The Company has timely made payment in full of all
contributions to all of the Employee Benefit Plans which the Company was
obligated to make prior to the date hereof; and there are no contributions
declared or payable by the Company to any Employee Benefit Plan which, as of the
date hereof, has not been paid in full.
3.20. Possession of Franchises, Licenses, Etc. The Company: (i) possess
all material franchises, certificates, licenses, permits and other
authorizations (collectively, the "Licenses") from governmental authorities,
political subdivisions or regulatory authorities that are necessary for the
ownership, maintenance and operation of its business in the manner presently
conducted and the absence of which would have a material adverse effect on the
Company; (ii) are not in violation of any provisions thereof in any material
respect; and (iii) have maintained and amended, as necessary, all Licenses and
duly completed all filings and notifications required by law to be made in
connection therewith, the failure of which to complete would have a material
adverse effect on the Company.
3.21. Environmental Matters. Except as disclosed in Schedule 3.21: (i) the
Company is not in violation, in any material respect, of any Environmental Law
(as defined below); (ii) the Company has received all permits and approvals with
respect to emissions into the environment and the proper collection, storage,
transport, distribution or disposal of Wastes (as defined below) and other
materials required for the operation of its business at present operating
levels; and (iii) the Company is not liable or responsible for any material
clean up, fines, liability or expense arising under any Environmental Law, as a
result of the disposal of Wastes or other materials in or on the property of the
Company (whether owned or leased), or in or on any other property, including
property no longer owned, leased or used by the Company. As used herein, (a)
"Environmental Laws" means, collectively, any federal, or applicable local
statute, law, ordinance, code, rule, regulation, order or decree (foreign or
domestic) regulating, relating to, or imposing liability or standards of conduct
concerning, Wastes, or the environment; and (b) "Wastes" means and includes any
hazardous, toxic or dangerous waste, liquid, substance or material (including
petroleum products and derivatives), the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
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3.22. Accounts Receivable. On the Closing Date, the Company will deliver
to Parent a complete and accurate list, as of a date not more than five (5)
business days prior to the Closing Date, of the accounts and notes receivable
due to the Company (including, without limitation, receivables from advances to
employees and the Shareholders), which includes an aging of all accounts and
notes receivable showing amounts due in thirty (30) day aging categories
(collectively, the "Accounts Receivable"). As of the Closing Date, the Accounts
Receivable: (i) will represent valid obligations arising from sales actually
made or services actually performed in the ordinary course of business; (ii)
will be collectible in the ordinary course of business net of any applicable
reserves shown on the Company's books and records (which reserves are adequate
and calculated consistently with past practice); and (iii) are not and will not
be subject to any counterclaim, defense or right of set-off, other than rebates
and returns in the ordinary course of business.
3.23. Agreements and Transactions with Related Parties. Except as
disclosed on Schedule 3.23, and except as disclosed in the Company Financial
Statements, the Company is not a party to any contract, agreement, lease or
transaction with, or any other commitment to, (i) any Shareholder, (ii) any
person related by blood, adoption or marriage to any Shareholder, (iii) any
director or officer of the Company, (iv) to the knowledge of the Company, any
corporation or other entity in which any of the foregoing parties has, directly
or indirectly, at least five percent (5%) beneficial interest in the capital
stock or other type of equity interest in such corporation or other entity, or
(v) to the knowledge of the Company, any partnership in which any such party is
a general partner or a limited partner having a five percent (5%) or more
interest therein (any or all of the foregoing being herein referred to as a
"Related Party" and, collectively, as the "Related Parties"). Without limiting
the generality of the foregoing, except as set forth in Schedule 3.23, and
except as disclosed in the Company Financial Statements no Related Party,
directly or indirectly, owns or controls any assets or properties which are used
in the business of the Company.
3.24. Business Practices. Except as disclosed on Schedule 3.24, the
Company has not, at any time, directly or indirectly, made any contributions or
payment, or provided any compensation or benefit of any kind, to any municipal,
county, state, federal or foreign governmental officer or official, or any other
person charged with similar public or quasi-public duties, or any candidate for
political office. The Company's books, accounts and records (including, without
limitation, customer files, product packaging and invoices) accurately describe
and reflect, in all material respects, the nature and amount of the Company's
products, purchases, sales and other transactions. Without limiting the
generality of the foregoing, the Company has not engaged, directly or
indirectly, in: (i) the practice known as "double-invoicing;" or (ii) the
incorrect or misleading labeling, marketing or sale of refurbished goods as new
goods or the sale of rebuilt goods as original manufactured equipment.
3.25. Condition and Sufficiency of Assets. The buildings and equipment
leased or owned by the Company are generally in good operating condition and
repair, and are adequate for the uses to which they are being put. The buildings
and equipment of the Company are sufficient for the continued conduct of the
Company's business after the Closing (assuming there are no material changes in
the nature and scope of the Company's business) in substantially the same manner
as conducted prior to the Closing.
15
3.26. Accounting System. The Company's accounting software is owned or
licensed by the Company, free and clear of all claims, liens and encumbrances,
and the transactions contemplated hereby will not result in a breach of any
license or other agreement with respect to the accounting software. The
Company's accounting software is in good working order and condition, free from
defects (latent and patent), has been maintained in accordance with the
manufacturer's recommended maintenance program, if any, and is suitable for
maintaining the books and records of the Company and all other purposes for
which it is intended.
3.27. Dividends and Other Distributions. Schedule 3.27 sets forth the
dates and amounts of all dividends and other distributions declared, paid or
payable by the Company to the Shareholders between the date of incorporation of
the Company and the date hereof, which Schedule 3.27 shall be updated as of the
Closing Date to set forth all dividends and other distributions through the
Closing Date.
3.28. Litigation. There is no suit, action or proceeding pending, and no
person has overtly-threatened in a writing delivered to the Company or the
Shareholders to commence any suit, action or proceeding, against or affecting
the Company that would, individually or in the aggregate, have a material
adverse effect on the Company, nor is there any judgment, decree, injunction, or
order of any governmental entity or arbitrator outstanding against, or, to the
knowledge of the Company, pending investigation by any governmental entity
involving, the Company that individually or in the aggregate would have a
material adverse effect on the Company.
3.29. Full Disclosure. No representation or warranty of the Company
contained in this Agreement, and none of the statements or information
concerning the Company contained in this Agreement and the Schedules, contains
or will contain as of the date hereof and as of the Closing Date any untrue
statement of a material fact nor will such representations, warranties,
covenants or statements taken as a whole omit 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.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
--------------------------------------------------------
To induce the Company to enter into this Agreement and to consummate the
transactions contemplated hereby, each of Parent and Merger Sub represent and
warrant to and covenants with the Company and the Shareholders as follows:
4.1. Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Parent and each of its subsidiaries is
entitled to own or lease its properties and to carry on its business as and in
the places where such business is now conducted, and Parent and each of its
subsidiaries is duly licensed and qualified in all jurisdictions where the
character of the property owned by it or the nature of the business transacted
by it makes such license or qualification necessary, except where such failure
would not result in a material adverse effect on Parent or its subsidiaries.
16
4.2. Capitalization and Related Matters.
4.2.1. Parent has authorized capital stock consisting of One Billion
(1,000,000,000) shares of common stock, par value $0.01 per share, of which
477,183,667 shares are issued and 468,649,354 are outstanding as of the date
hereof, and Twenty Five Million (25,000,000) shares of preferred stock, of which
zero (0) shares are issued and outstanding. Parent owns all of the outstanding
capital stock of Merger Sub. The Parent Shares are duly and validly authorized
and when issued in accordance with the terms of this Agreement will be validly
issued, fully paid and non-assessable, and will be issued to the Shareholders
free of all encumbrances, claims and liens whatsoever.
4.2.2. Except as disclosed in those documents filed by Parent with
the SEC (the "SEC Documents"), and except for employee stock options to purchase
shares of the Parent's Common Stock granted since the most recent quarterly
report among the SEC Documents, Parent does not have outstanding any securities
convertible into capital stock, nor any rights to subscribe for or to purchase,
or any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock or securities convertible into its
capital stock. Parent: (i) is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its capital
stock; or (ii) has no liability for dividends or other distributions declared or
accrued, but unpaid, with respect to any capital stock.
4.3. Execution; No Inconsistent Agreements; Etc.
4.3.1. The execution and delivery of this Agreement, the issuance of
the Parent Shares and the performance of the transactions contemplated hereby
have been duly and validly authorized and approved by Parent and Merger Sub and
this Agreement is a valid and binding agreement of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as such enforcement may be limited by bankruptcy or similar laws affecting the
enforcement of creditors' rights generally, and the availability of equitable
remedies. Parent has the requisite right, power and authority to execute and
deliver this Agreement and the documents to be delivered by it in connection
with the Closing, to issue the Parent Shares and to perform its obligations
under this Agreement.
4.3.2. The execution and delivery of this Agreement by Parent and
Merger Sub does not, and the issuance of the Parent Shares and consummation of
the transactions contemplated hereby will not, constitute a breach or violation
of the charter or Bylaws of Parent or Merger Sub, or a default under any of the
terms, conditions or provisions of (or an act or omission that would give rise
to any right of termination, cancellation or acceleration under) any material
note, bond, mortgage, lease, indenture, agreement or obligation to which Parent
or any of its subsidiaries is a party, pursuant to which any of them otherwise
receive benefits, or by which any of their properties may be bound.
17
4.4. Financial Statements. Parent has delivered to the Company the
consolidated audited balance sheets of Parent as of December 31, 2004, the
consolidated unaudited balance sheet as of September 30, 2005, the consolidated
audited statement of income for the two (2) fiscal years ended December 31,
2004, and the unaudited statement of income for the six (6) months ended
September 30, 2005 (collectively, the "Parent Financial Statements"). The Parent
Financial Statements have been prepared in accordance with GAAP, applied on a
consistent basis (except that the unaudited statements do not contain all the
disclosures required by GAAP), and fairly reflect in all material respects the
consolidated financial condition of Parent and its subsidiaries as at the dates
thereof and the consolidated results of Parent's operations for the periods then
ended, and are true and complete and are consistent with the books and records
of the Parent. Since September 30, 2005, or as disclosed in the SEC Documents or
press releases issued by Parent, there has been no material adverse change in
the assets or liabilities, in the business or condition, financial or otherwise,
of Parent, or in its results of operations.
4.5. Liabilities. Except as disclosed in the SEC Documents or press
releases issued by Parent, neither Parent nor any of its subsidiaries has any
material debt, liability or obligation of any kind, whether accrued, absolute,
contingent or otherwise, (i) existing as of December 31, 2004 and required to be
shown on the consolidated audited balance sheet of Parent as of such date in
accordance with applicable GAAP, other than those reflected or reserved against
on such balance sheet, including the notes thereto, or (ii) arising or occurring
since December 31, 2004, except for liabilities arising or occurring in the
ordinary course of business, none of which have had or will have (when viewed
together with other matters occurring during such period) a material adverse
effect on the financial condition of Parent and its subsidiaries taken as a
whole.
4.6. Compliance With Law. The business and activities of Parent at all
times been conducted in accordance with its Certificate of Incorporation and
Bylaws and any applicable law, regulation, ordinance, order, license, permit,
rule, injunction or other restriction or ruling of any court or administrative
or governmental agency, ministry, or body, except where the failure to do so
would not result in a material adverse effect on Parent.
4.7. Contingencies. Except as disclosed in the SEC Documents, Parent
Financial Statements and/or press releases issued by Parent, there are no
actions, suits, claims or proceedings pending or, to the knowledge of Parent's
management, threatened against, by or affecting Parent or any of its
subsidiaries in any court or before any arbitrator or governmental agency which
could have a material adverse effect on Parent or its subsidiaries or which
could materially and adversely affect the right or ability of Parent to
consummate the transactions contemplated hereby. To the knowledge of Parent,
there is no valid basis upon which any such action, suit, claim or proceeding
may be commenced or asserted against Parent or its subsidiaries. There are no
unsatisfied judgments against Parent and no consent decrees or similar
agreements to which Parent or its subsidiaries is subject and which could have a
material adverse effect on Parent or its subsidiaries or which could materially
and adversely affect the right or ability of Parent to consummate the
transactions contemplated hereby.
18
4.8. Business Practices. Except as disclosed in the SEC Documents, Parent
Financial Statements and/or press releases issued by Parent, Parent has not, at
any time, directly or indirectly, made any contributions or payment, or provided
any compensation or benefit of any kind, to any municipal, county, state,
federal or foreign governmental officer or official, or any other person charged
with similar public or quasi-public duties, or any candidate for political
office. Parent's books, accounts and records (including, without limitation,
customer files, product packaging and invoices) accurately describe and reflect,
in all material respects, the nature and amount of Parent's products, purchases,
sales and other transactions. Without limiting the generality of the foregoing,
Parent has not engaged, directly or indirectly, in: (a) the practice known as
"double-invoicing;" or (b) the incorrect or misleading labeling, marketing or
sale of refurbished goods as new goods or the sale of rebuilt goods as original
manufactured equipment.
4.9. Litigation. There is no suit, action or proceeding pending, and no
person has overtly-threatened in a writing delivered to Parent or any of its
subsidiaries to commence any suit, action or proceeding, against or affecting
Parent or any of its subsidiaries that would, individually or in the aggregate,
have a material adverse effect on Parent or any of its subsidiaries, nor is
there any judgment, decree, injunction, or order of any governmental entity or
arbitrator outstanding against, or, to the knowledge of Parent and its
subsidiaries, pending investigation by any governmental entity involving, Parent
or any of its subsidiaries that individually or in the aggregate would have a
material adverse effect on Parent or any of its subsidiaries.
4.10. Full Disclosure. No representation or warranty of Parent contained
in this Agreement, and none of the statements or information concerning Parent
contained in this Agreement and the Schedules, contains or will contain as of
the date hereof and as of the Closing Date any untrue statement of a material
fact nor will such representations, warranties, covenants or statements taken as
a whole omit 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.
5. CONDUCT OF BUSINESS OF THE COMPANY PENDING CLOSING.
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The Company covenants and agrees that between the date hereof and the
Closing Date:
5.1. Business in the Ordinary Course. Except as set forth in Schedule 5.1,
the business of the Company shall be conducted only in the ordinary course, and
consistent with past practices and trends. Without limiting the generality of
the foregoing (and without implication that any of the following matters are
outside of the ordinary course of business), and except as set forth in Schedule
5.1 or as otherwise approved in writing by Parent:
(a) the Company shall not enter into any contract, agreement or
other arrangement which would constitute a Material Contract, except for
contracts to sell or supply goods or services to customers in the ordinary
course of business at prices and on terms substantially consistent with the
prior operating practices of the Company or its business plans;
(b) except for sales of personal property or non-exclusive licenses
of technology in the ordinary course of its business, the Company shall not
sell, assign, transfer, mortgage, convey, encumber or otherwise dispose of, or
cause the sale, assignment, transfer, mortgage, conveyance, encumbrance or other
disposition of any of the assets or properties of the Company or any interest
therein;
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(c) the Company shall not acquire any material assets, except
expenditures made in the ordinary course of business as reasonably necessary to
enable the Company to conduct its normal business operations and to maintain its
normal inventory of goods and materials, at prices and on terms substantially
consistent with current market conditions and prior operating practices of the
Company or its business plans;
(d) the Company shall maintain in full force and effect all
insurance policies referred to in Section 3.17 hereof or other insurance
equivalent thereto;
(e) the books, records and accounts of the Company shall be
maintained in the usual, regular and ordinary course of business on a basis
consistent with prior practices and in accordance with GAAP;
(f) the Company shall use reasonable efforts to preserve its
business organization, to preserve the good will of its suppliers, customers and
others having business relations with the Company, and to retain the services of
key employees and agents of the Company;
(g) except as they may terminate in accordance with the terms of
this Agreement, the Company shall use reasonable efforts to keep in full force
and effect, and use reasonable efforts to avoid a default of any of its
obligations under, each of its Material Contracts;
(h) the Company shall duly comply in all material respects with all
laws applicable to it and to the conduct of its business, the violation of which
would have a material adverse effect on the Company;
(i) the Company shall not create, incur or assume any liability or
indebtedness, except in the ordinary course of business consistent with past
practices or trends;
(j) the Company shall not make or commit to make any capital
expenditures in excess of ten thousand dollars ($10,000) in the aggregate; and
(k) other than as contemplated in this Agreement, and except for the
payment of compensation to officers and employees of the Company, the Company
shall not apply any of its assets to the direct or indirect payment, discharge,
satisfaction or reduction of any amount payable directly or indirectly to or for
the benefit of the Shareholders or any Related Party.
5.2. No Material Changes. Except as set forth in Schedule 5.2, the Company
shall not, without the prior written consent of Parent which consent shall not
be unreasonably withheld, materially alter its organization, capitalization or
financial structure, practices or operations. Without limiting the generality of
the foregoing:
(a) no change shall be made in the Articles of Incorporation or
Bylaws of the Company;
(b) no change shall be made in the authorized or issued capital
stock of the Company, except for the issuance of shares of capital stock upon
the conversion of convertible securities or the exercise of options, warrants or
other rights to acquire capital stock outstanding as of the date of this
Agreement;
20
(c) the Company shall not issue or grant any right or option to
purchase or otherwise acquire any of its capital stock or other securities;
(d) no dividend or other distribution or payment shall be declared
or made with respect to any of the capital stock of the Company; and
(e) no change shall be made affecting the banking arrangements of
the Company.
5.3. Compensation. No increase shall be made in the compensation or
employee benefits payable or to become payable to any director, officer,
employee or agent of the Company, and no bonus or profit-sharing payment or
other arrangement (whether current or deferred) shall be made to or with any
such director, officer, employee or agent, except in the ordinary course of
business and consistent with prior practices.
5.4. Notification. Each Party shall promptly notify the other Parties in
writing of the occurrence, or threatened occurrence, of any event that would
constitute a breach or violation of this Agreement by any Party or that would
cause any representation or warranty made by the notifying Party in this
Agreement to be false or misleading in any respect. The Company shall have the
right to update the Schedules to this Agreement immediately prior to Closing;
provided, if such update discloses any breach of a representation, warranty,
covenant or obligation of the Company, Parent shall have the right to terminate
this Agreement pursuant to Section 10 hereof. If Parent would have the right to
terminate this Agreement pursuant to Section 10 hereof as a result of the
information so disclosed in such updated Schedules to this Agreement and it does
not exercise such right prior to the Closing, then such updated Schedules shall
constitute an amendment of the representation, warranty or statement to which it
relates for purposes of Section 9 of this Agreement.
6. CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
-----------------------------------------
The obligation of the Company and Parent to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing, of each of the following conditions; any or all of which may be waived
in whole or in part by the joint agreement of Parent and the Company:
6.1. Absence of Actions. No action or proceeding shall have been brought
or threatened before any court or administrative agency to prevent the
consummation or to seek damages in a material amount by reason of the
transactions contemplated hereby, and no governmental authority shall have
asserted that the within transactions (or any other pending transaction
involving Parent, any of its subsidiaries, the Shareholders or the Company when
considered in light of the effect of the within transactions) shall constitute a
violation of law or give rise to material liability on the part of the
Shareholders, the Company or Parent or its subsidiaries.
21
6.2. Consents. The Parties shall have received from any suppliers,
lessors, lenders, lien holders or governmental authorities, bodies or agencies
having jurisdiction over the transactions contemplated by this Agreement, or any
part hereof, such consents, authorizations and approvals as are necessary for
the consummation hereof, including, without limitation, the consents listed on
Schedule 6.2.
6.3. Shareholder Approval. The Shareholders shall have adopted this
Agreement and the Plan of Merger and shall have approved the Merger in
accordance with the applicable requirements of the DGCL.
6.4. Escrow Agreement. Parent, the Escrow Agent and the Shareholder Agent
(as defined below) shall have executed the Escrow Agreement.
7. CONDITIONS TO OBLIGATIONS OF PARENT.
------------------------------------
All obligations of Parent to consummate the transactions contemplated by
this Agreement are subject to the fulfillment and satisfaction of each and every
of the following conditions on or prior to the Closing, any or all of which may
be waived in whole or in part by Parent:
7.1. Representations and Warranties. The representations and warranties
contained in Section 3 of this Agreement and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf of the Company in
connection with the transactions contemplated by this Agreement shall be true,
correct and complete in all material respects (except for representations and
warranties which are by their terms qualified by materiality, which shall be
true, correct and complete in all respects) as of the date when made and shall
be deemed to be made again at and as of the Closing Date and shall be true,
correct and complete at and as of such time in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true, correct and complete in all respects).
7.2. Compliance with Agreements and Conditions. The Company shall have
performed and complied with all material agreements and conditions required by
this Agreement to be performed or complied with by the Company prior to or on
the Closing Date.
7.3. Absence of Material Adverse Changes. No material adverse change in
the business, assets, financial condition, or prospects of the Company shall
have occurred, no substantial part of the assets of the Company not
substantially covered by insurance shall have been destroyed due to fire or
other casualty, and no event shall have occurred which has had or will have a
material adverse effect on the business, assets, financial condition or
prospects of the Company.
7.4. Certificate of the Company. The Company shall have executed and
delivered to Parent a certificate, executed by an executive officer and dated
the Closing Date, certifying to the fulfillment and satisfaction of the
conditions specified in Sections 7.1 through 7.3 above.
7.5. Noncompetition, Noninterference and Confidentiality Agreement by
Certain Shareholders. Each of Xxxxxxx Xxxxx, Xxxxx Xxxxx, Xxxx Bees, Xxxxxx
Xxxxxxx, Xxxx Xxxx and Xxxx Xxxxxx (the "Key Employees") shall have executed and
delivered a Noncompetition, Noninterference and Confidentiality Agreement in
favor of the Parent in the form of Exhibit F attached hereto.
22
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
-----------------------------------------
All of the obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment and satisfaction
of each and every of the following conditions on or prior to the Closing, any or
all of which may be waived in whole or in part by the Company:
8.1. Representations and Warranties. The representations and warranties
contained in Section 4 of this Agreement and in any certificate, instrument,
schedule, agreement or other writing delivered by or on behalf of Parent or
Merger Sub in connection with the transactions contemplated by this Agreement
shall be true and correct in all material respects (except for representations
and warranties which are by their terms qualified by materiality, which shall be
true, correct and complete in all respects) when made and shall be deemed to be
made again at and as of the Closing Date and shall be true at and as of such
time in all material respects (except for representations and warranties which
are by their terms qualified by materiality, which shall be true, correct and
complete in all respects).
8.2. Compliance with Agreements and Conditions. Parent and Merger Sub
shall have performed and complied with all material agreements and conditions
required by this Agreement to be performed or complied with by Parent and/or
Merger Sub prior to or on the Closing Date.
8.3. Absence of Material Adverse Changes. No material adverse change in
the business, assets, financial condition, or prospects of Parent and its
subsidiaries, taken as a whole, shall have occurred, no substantial part of the
assets of Parent and its subsidiaries, taken as a whole, shall have been
destroyed due to fire or other casualty, no event shall have occurred which has
had, or will have a material adverse effect on the business, assets, financial
condition or prospects of Parent and its subsidiaries, taken as a whole.
8.4. Certificate of Parent. Parent shall have delivered to the Company a
certificate, executed by an executive officer and dated the Closing Date,
certifying to the fulfillment and satisfaction of the conditions specified in
Sections 8.1 through 8.3 above.
8.5. Agreement with Executives. The Surviving Corporation shall have
offered employment to the Key Employees on the terms described in the draft
offer letters delivered to such persons by Parent on behalf of the Surviving
Corporation prior to the date of this Agreement. Parent shall have granted
options to the Key Employees for the number of shares of Parent Common Stock
described in the draft offer letters delivered to such persons by Parent on
behalf of the Surviving Corporation prior to the date of this Agreement.
23
9. INDEMNITY.
----------
9.1. Indemnification by Shareholders. Subject to Section 9.5, the
Shareholders (hereinafter, collectively, called the "Shareholder Indemnitors")
shall, severally and not jointly, in proportion to their ownership interest
percentage of Company Shares as of the Closing Date as set forth in the Payment
Schedule, defend, indemnify and hold harmless Parent and Merger Sub and their
direct and indirect parent corporations, subsidiaries (including the Company
after Closing) and affiliates, their officers, directors, employees and agents
(hereinafter, collectively, called "Parent Indemnitees") against and in respect
of any and all loss, damage, liability, fine, penalty, cost and expense,
including reasonable attorneys' fees and amounts paid in settlement
(collectively, "Parent Losses"), suffered or incurred by any Parent Indemnitee
by reason of, or arising out of:
(a) any misrepresentation, breach of warranty or breach or
non-fulfillment of any agreement of the Company contained in this Agreement or
in any certificate, schedule, instrument or document delivered to Parent by or
on behalf of the Company pursuant to the provisions of this Agreement; and
(b) any liabilities of the Company of any nature whatsoever
(including tax liability, penalties and interest), whether accrued, absolute,
contingent or otherwise, (i) existing as of the date of the Balance Sheet, and
required to be shown therein in accordance with applicable GAAP, to the extent
not reflected or reserved against in full in the Balance Sheet; or (ii) arising
or occurring after the date of the Balance Sheet and before the Closing Date,
except for liabilities arising or occurring in the ordinary course of business,
none of which shall have (when viewed together with other matters occurring
during such period) a material adverse effect on the financial condition of the
Company.
All indemnification claims under this Section 9.1 will be satisfied from
the Escrow Fund in accordance with the Escrow Agreement, and the Company, its
officers, directors and Shareholders will have no liability with respect to
indemnification claims beyond the Escrow Fund or other than through the Escrow
Agreement.
9.2. Indemnification by Parent. Subject to Section 9.5, Parent and Merger
Sub (hereinafter called the "Parent Indemnitor") shall jointly and severally
defend, indemnify and hold harmless the Shareholders (hereinafter called
"Shareholder Indemnitees") against and in respect of any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees and amounts
paid in settlement (collectively, "Shareholder Losses"), suffered or incurred by
Shareholder Indemnitees by reason of or arising out of:
(a) any misrepresentation, breach of warranty or breach or
non-fulfillment of any material agreement of Parent contained in this Agreement
or in any other certificate, schedule, instrument or document delivered to the
Shareholders by or on behalf of Parent or Merger Sub pursuant to the provisions
of this Agreement; and
(b) any liabilities of the Company of any nature whatsoever
(including tax liability, penalties and interest), whether accrued, absolute,
contingent or otherwise, arising from Parent's ownership or operation of the
Company after Closing, except for liabilities that are or could be
(notwithstanding the limitations of Section 9.5.1) the subject of a valid claim
for indemnification by Parent or Merger Sub against the Shareholder Indemnitors
pursuant to Section 9.1. Parent Losses and Shareholder Losses are sometimes
collectively referred to as "Indemnifiable Losses".
24
9.3. Defense of Claims.
9.3.1. Each Party entitled to indemnification hereunder (an
"Indemnitee"): (a) shall provide the other Party or Parties (the "Indemnitor")
written notice of any claim or action by a third party arising after the Closing
Date for which an Indemnitor may be liable under the terms of this Agreement,
within ten (10) days after such claim or action arises and is known to
Indemnitee, which notice shall describe in reasonable detail (to the extent
known by the Indemnitee) the facts constituting the basis for such claim or
action and the amount of the claimed damages and (b) shall give the Indemnitor a
reasonable opportunity to participate in any proceedings and to settle or defend
any such claim or action. The expenses of all proceedings, contests or lawsuits
with respect to such claims or actions shall be borne by the Indemnitor. If the
Indemnitor wishes to assume the defense of such claim or action, the Indemnitor
shall give written notice to the Indemnitee within ten (10) days after notice
from the Indemnitee of such claim or action, and the Indemnitor shall thereafter
assume the defense of any such claim or liability, through counsel reasonably
satisfactory to the Indemnitee, provided that Indemnitee may participate in such
defense at their own expense, and the Indemnitor shall, in any event, have the
right to control the defense of the claim or action. 9.3.2. If the Indemnitor
shall not assume the defense of, or if after so assuming it shall fail to
defend, any such claim or action, the Indemnitee may defend against any such
claim or action in such manner as they may deem appropriate and the Indemnitees
may settle such claim or litigation on such terms as they may deem appropriate
but subject to the Indemnitor's approval, such approval not to be unreasonably
withheld; provided, however, that any such settlement shall be deemed approved
by the Indemnitor if the Indemnitor fails to object thereto, by written notice
to the Indemnitee, within fifteen (15) days after the Indemnitor's receipt of a
written summary of such settlement. Upon any such settlement, the Indemnitor
shall promptly reimburse the Indemnitee for the amount of all expenses, legal
and otherwise, incurred by the Indemnitee in connection with the defense and
settlement of such claim or action.
9.3.3. If a judgment is rendered against any Indemnitee in any
action covered by the indemnification hereunder, the Indemnitor shall
immediately upon such entry pay such judgment in full unless, at the expense and
direction of the Indemnitor, an appeal is taken under which the execution of the
judgment is stayed. If and when a final judgment is rendered in any such action,
the Indemnitor shall forthwith pay such judgment before any Indemnitee is
compelled to do so.
9.3.4. Notwithstanding anything contained herein to the contrary, in
any case in which indemnity is provided by the Shareholder Indemnitors, any
payment required be made by the Shareholder Indemnitors shall be effected solely
out of the Escrow Fund by the Parent and the Shareholder Agent (as defined
herein below) delivering a joint written notice to the Escrow Agent, or a court
of competent jurisdiction issuing a valid order, instructing the Escrow Agent to
release to the Parent such portion of the Escrow Fund as shall have a dollar
value equal to the amount so required to be paid. For purposes of this Section
9, the number of Escrow Parent Shares to be released from the Escrow Fund to
satisfy an indemnification obligation of the Shareholder Indemnitors shall be
determined by dividing the amount to be released from the Escrow Fund by the
Initial VWAP.
25
9.3.5. For purposes of this Section 9.3, references to the
Shareholder Indemnitors (except provisions relating to an obligation to make or
a right to receive any payments provided for in Section 9) shall be deemed to
refer to the Shareholder Agent in his capacity as such and not individually. The
Shareholder Agent shall have full power and authority on behalf of each
Shareholder Indemnitor to take any and all actions on behalf of, execute any and
all instruments on behalf of, and execute or waive any and all rights of, the
Shareholder Indemnitors under this Section 9. The Shareholder Agent shall have
no liability to the Parent, Merger Sub or any Shareholder Indemnitors for any
action taken or omitted on behalf of the Shareholder Indemnitors pursuant to
this Agreement.
9.4. Waiver. The failure of any Indemnitee to give any notice or to take
any action hereunder shall not be deemed a waiver of any of the rights of such
Indemnitee hereunder, except to the extent that Indemnitor is actually
prejudiced by such failure.
9.5. Limitations on Indemnification. Notwithstanding anything to the
contrary contained in this Agreement (other than the obligations of Parent under
Sections 1.2.4 and 2.5, as to which the limitations contained in this Section
9.5 shall not apply):
9.5.1. Time Limitation. No Party shall be responsible hereunder for
any Indemnifiable Loss unless the Indemnitee shall have provided such Party with
written notice containing a reasonable description of the claim, action or
circumstances giving rise to such Indemnifiable Loss within one (1) years after
the Closing Date (the "Indemnity Notice Period"), and all representations and
warranties shall expire at the expiration of the Indemnity Notice Period.
9.5.2. Caps on Losses. The aggregate liability of the Shareholders
after the Closing for Parent Losses shall not exceed the amount of the Escrow
Fund under the Escrow Agreement.
9.5.3. Basket. No Party shall have any liability hereunder for
Indemnifiable Losses after the Closing except to the extent that the aggregate
of all Indemnifiable Losses for which the Shareholder or Parent and Merger Sub
as a group, as applicable, are responsible under this Agreement exceeds
Twenty-Five Thousand Dollars ($25,000) (the "Basket"); provided that this
Section 9.5.3 shall not limit in any respect indemnity claims: (i) based upon
fraud or intentional breach or intentional misrepresentation; (ii) arising from
a breach by the Parent Indemnitor of any covenant contained in this Agreement;
(iii) arising from a breach by the Shareholders of any representation or
warranty contained in Section 3.2 hereof; or (iv) related to any tax or tax
liability of the Company for periods prior to the Closing Date.
9.6. Exclusive Remedy. Except with respect to claims based on fraud, after
the Closing, the rights of Parent and the Merger Sub under this Section 9 and
the Escrow Agreement shall be the exclusive remedy of Parent and the Merger Sub
with respect to claims resulting from or relating to, and no claim, action or
remedy shall be brought or maintained by Parent or Merger Sub against any
Shareholder or any other party and no recourse shall be brought or granted
against any of them by virtue of or based upon, any misrepresentation, breach of
warranty or breach or non-fulfillment of any agreement of the Company contained
in this Agreement or in any certificate, schedule, instrument or document
26
delivered to Parent by or on behalf of the Company pursuant to the provisions of
this Agreement, and from and after the date of the Closing, to the maximum
extent permitted by law, Parent and Merger Sub hereby waive any and all other
rights and remedies with respect to any matter relating to this Agreement or any
certificate, schedule, instrument or document delivered to Parent by or on
behalf of the Company pursuant to the provisions of this Agreement or arising in
connection herewith or therewith under any law, whether at common law or
otherwise. With respect to claims based on fraud (whether during or after the
Indemnity Notice Period), Parent and Merger Sub shall have, in addition to the
remedies set forth in this Section 9, such equitable remedies to which Parent
and Merger Sub may be otherwise entitled, including the right to apply to a
court of competent jurisdiction for rescission of the transactions contemplated
by this Agreement; provided that in no event shall the monetary liability of any
Shareholder exceed such Shareholder's Pro Rata Share of the Merger Consideration
actually received by such Shareholder.
9.7. Tax Treatment of Indemnification Payments. The Parties acknowledge
and agree that any indemnity payments made under this Section 9 are and shall be
treated as adjustments to the Merger Consideration for income tax purposes.
9.8. Disclaimer of Other Representations and Warranties. NONE OF THE
COMPANY, ITS REPRESENTATIVES OR THE SHAREHOLDERS HAVE MADE ANY REPRESENTATIONS
OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO THE
COMPANY OR THE BUSINESS OF THE COMPANY OR OTHERWISE IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN THOSE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY EXPRESSLY SET FORTH IN SECTION 3.
9.9. Disclosure Schedules. Certain information set forth in the Schedules
is included solely for informational purposes and may not be required to be
disclosed pursuant to this Agreement. The disclosure of any information shall
not be deemed to constitute an acknowledgment that such information is required
to be disclosed in connection with the representations and warranties made by
the Company in this Agreement or that such information is material, nor shall
such information be deemed to establish a standard of materiality, nor shall it
be deemed an admission of any liability of, or concession as to any defense
available to, the Company.
10. TERMINATION.
------------
10.1. Voluntary Termination. This Agreement may be terminated at any time
on or prior to the Closing:
(a) By mutual consent of Parent and the Company; or
(b) At the election of Parent if: (i) the Company has breached or
failed to perform or comply with any of its representations, warranties,
covenants or obligations under this Agreement; or (ii) any of the conditions
precedent set forth in Section 6 or 7 is not satisfied as and when required by
this Agreement.
(c) At the election of the Company if: (i) Parent or the Merger Sub
has breached or failed to perform or comply with any of its representations,
warranties, covenants or obligations under this Agreement; or (ii) any of the
conditions precedent set forth in Section 6 or 8 is not satisfied as and when
required by this Agreement.
27
(d) At the election of either party if the Shareholders have voted
on whether to adopt this Agreement and approve the Merger and such action was
not approved by the requisite shareholders vote under the DGCL.
(e) At the election of Parent if any update to the Schedules to this
Agreement made by the Company under Section 5.4 shall disclose any breach of a
representation, warranty, covenant or obligation of the Company.
10.2. Automatic Termination. This Agreement shall automatically terminate
without the need for further action on the part of any Party if for any reason
the Closing has not been consummated by February 22, 2006.
10.3. Manner and Effect of Termination. Written notice of any termination
("Termination Notice") pursuant to Section 10.1 shall be given by the Party
electing termination of this Agreement ("Terminating Party") to the other Party
or Parties (collectively, the "Terminated Party"), and such notice shall state
the reason for termination. In the event of a termination based on Section
10.1(b)(i) or 10.1(c)(i), the Party or Parties receiving Termination Notice
shall have a period equal to the shorter of (A) ten (10) days after receipt of
Termination Notice or (B) the period from the date of receipt of Termination
Notice until February 22, 2006 to cure the matters giving rise to such
termination to the reasonable satisfaction of the Terminating Party, and if the
matters giving rise to termination are not cured as required hereby, this
Agreement shall be terminated effective as of the earlier of (C) the close of
business on the tenth (10th) day following the Terminated Party's receipt of
Termination Notice or (D) February 22, 2006. Upon termination of this Agreement
prior to the consummation of the Closing and in accordance with the terms
hereof, this Agreement shall become void and of no effect, and none of the
Parties shall have any liability to the others, except that nothing contained
herein shall relieve any Party from: (a) its obligations under Sections 2.2 and
2.3; or (b) liability for its intentional breach of any representation, warranty
or covenant contained herein, or its intentional failure to comply with the
terms and conditions of this Agreement or to perform its obligations hereunder.
11. MISCELLANEOUS.
--------------
11.1. Notices.
11.1.1. All notices, requests, demands, or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given upon receipt if delivered in person, or upon the expiration of
one (1) day after the date sent, if sent by federal express (or similar
overnight courier service) to the Parties at the following addresses:
28
(i) If to Parent or Merger Sub: NeoMedia Technologies, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx #000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
With a copy to: Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx
Xxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxx.
Xxxxx 0000, Xxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(ii) If to the Company: Mobot, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxx, CEO
With a copy to: Van Xxxx, Xxxxxx & Xxxxxx, P.C.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
(iii) If to theShareholder Agent: Xx. Xxxx Xxxxxxx
00 Xxxxxxxxx Xxxxx ]
Xxxx Xxxxxxx, XX 00000
11.1.2. Notices may also be given in any other manner permitted by
law, effective upon actual receipt. Any Party may change the address to which
notices, requests, demands or other communications to such Party shall be
delivered or mailed by giving notice thereof to the other Parties hereto in the
manner provided herein.
11.2. Survival. Except as provided in the next sentence, the
representations, warranties, agreements and indemnifications of the Parties
contained in this Agreement or in any writing delivered pursuant to the
provisions of this Agreement shall survive any investigation heretofore or
hereafter made by the Parties and the consummation of the transactions
contemplated herein and shall continue in full force and effect after the
Closing, subject to the limitations of Section 9.5.
11.3. Counterparts; Interpretation. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument. This Agreement supersedes
all prior discussions and agreements between the Parties with respect to the
subject matter hereof, and this Agreement contains the sole and entire agreement
among the Parties with respect to the matters covered hereby. All Schedules
hereto shall be deemed a part of this Agreement. This Agreement shall not be
altered or amended except by an instrument in writing signed by or on behalf of
all of the Parties hereto. No ambiguity in any provision hereof shall be
construed against a Party by reason of the fact it was drafted by such Party or
its counsel. For purposes of this Agreement: "herein", "hereby", "hereunder",
"herewith", "hereafter" and "hereinafter" refer to this Agreement in its
entirety, and not to any particular section or paragraph. References to
"including" means including without limiting the generality of any description
preceding such term. Nothing expressed or implied in this Agreement is intended,
or shall be construed, to confer upon or give any person other than the Parties
hereto any rights or remedies under or by reason of this Agreement.
29
11.4. Governing Law; Arbitration. The validity and effect of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Florida, without regard to principles of conflicts of laws
thereof. Any dispute, controversy or question of interpretation arising under,
out of, in connection with or in relation to this Agreement or any amendments
hereof, or any breach or default hereunder, shall be submitted to binding
arbitration in Washington, D.C. pursuant to the Commercial Arbitration Rules of
the American Arbitration Association, and judgment on the award may be entered
in any court of competent jurisdiction, provided, however that either party may
seek preliminary injunctive or other equitable relief pending arbitration to
prevent irreparable harm. Each party submits to the nonexclusive jurisdiction of
state and federal courts in the State of Florida and the Commonwealth of
Massachusetts. Each party hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of any such action in the State of Florida or the Commonwealth of Massachusetts.
11.5. Successors and Assigns; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the Parties hereto and their respective
heirs, executors, legal representatives, and successors.
11.6. Partial Invalidity and Severability. All rights and restrictions
contained herein may be exercised and shall be applicable and binding only to
the extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any terms of this Agreement not essential to the commercial
purpose of this Agreement shall be held to be illegal, invalid or unenforceable
by a court of competent jurisdiction, it is the intention of the Parties that
the remaining terms hereof shall constitute their agreement with respect to the
subject matter hereof and all such remaining terms shall remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement shall be replaced by a valid provision
which will implement the commercial purpose of the illegal, invalid or
unenforceable provision.
11.7. Waiver. Any term or condition of this Agreement may be waived at any
time by the Party which is entitled to the benefit thereof, but only if such
waiver is evidenced by a writing signed by such Party. No failure on the part of
a Party hereto to exercise, and no delay in exercising, any right, power or
remedy created hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy by any such Party
preclude any other future exercise thereof or the exercise of any other right,
power or remedy. No waiver by any Party hereto to any breach of or default in
any term or condition of this Agreement shall constitute a waiver of or assent
to any succeeding breach of or default in the same or any other term or
condition hereof.
11.8. Headings. The headings as to contents of particular paragraphs of
this Agreement are inserted for convenience only and shall not be construed as a
part of this Agreement or as a limitation on the scope of any terms or
provisions of this Agreement.
30
11.9. Expenses. Except as otherwise expressly provided herein, all legal
and other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by Parent or the Company as each
Party incurs such expenses.
11.10. Gender. Where the context requires, the use of the singular form
herein shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all genders.
11.11. Acceptance by Fax. This Agreement shall be accepted, effective and
binding, for all purposes, when the Parties shall have signed and transmitted to
each other, by telecopier or otherwise, copies of the signature pages hereto.
11.12. Attorneys Fees. In the event of any arbitration or litigation
arising under the terms of this Agreement, the prevailing Party or Parties shall
be entitled to recover its or their reasonable attorneys fees and court costs
from the other Party or Parties.
11.13. Opportunity to Hire Counsel; Role of Xxxxxxxxxxx & Xxxxxxxx
Xxxxxxxxx Xxxxxx LLP. The Company acknowledges that it has been advised and has
been given an opportunity to hire counsel with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the law
firm of Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP has solely represented the
Parent and Merger Sub in connection with this Agreement and the transactions
contemplated hereby and no other person.
11.14. Time is of the Essence. It is understood and agreed among the
Parties hereto that time is of the essence in this Agreement and this applies to
all terms and conditions contained herein.
11.15. NO JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT.
11.16. Shareholder Agent. Upon and by the Shareholder's approval of this
Agreement and the Merger in accordance with the DGCL, and without the further
act of any Shareholder, each Shareholder shall be deemed to have appointed and
accepted Xxxx Xxxxxxx as such Shareholder's representative and true and lawful
attorney-in-fact and agent to act in such Shareholder's name, place and stead to
take any actions permitted to be taken or contemplated to be taken by the
Shareholder Agent under this Agreement, including without limitation the
payment, discharge or settlement of any action in connection with the
indemnification provisions set forth in Section 9 hereof, and to execute in the
name and on behalf of such Shareholder any agreement, certificate, instrument or
document to be delivered in connection with the indemnification provisions set
31
forth in Section 9 hereof by the Shareholders or otherwise, and to take any
actions which in the judgment of the Shareholder's Agent is considered necessary
or desirable in connection with the foregoing (in such capacity and not
individually, the "Shareholder Agent"). The Shareholder Agent may consult with
legal counsel, independent public accountants and other reputable experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts. The Shareholder Agent shall not have any duty to
actively ascertain or inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement. As to any matters not
expressly provided for in this Agreement, the Shareholder Agent shall not be
required to exercise any discretion or take any action, unless so authorized and
directed in writing by Shareholders who contributed a majority of the Escrow
Parent Shares to the escrow created under the Escrow Agreement (the "Majority
Company Shareholders"). If the Shareholder Agent shall resign, die, or become
unable to act or otherwise cease to serve as the Shareholder Agent, a successor
Shareholder Agent shall be appointed by the Majority Company Shareholders. Any
such successor Shareholder Agent shall have the same powers and duties as if
appointed as the original Shareholder Agent hereunder. By approval of this
Agreement and the Merger, each Shareholder agrees that Shareholder Agent shall
not have any liability resulting from any act or omission of Shareholder Agent
(whether direct or indirect, in contract, tort or otherwise) to any Shareholder
or to any person claiming through any Shareholder for or in connection with the
engagement of Shareholder Agent, this Agreement and the transactions
contemplated hereby (including, without limitation, any subsequent act or
failure to act), except in the event of gross negligence or willful misconduct
by Shareholder Agent as determined by a court of competent jurisdiction, and
each Shareholder agrees to indemnify the Shareholder Agent for, and hold him
harmless against, any loss, liability, claim or expense, including reasonable
attorney's fees, arising out of or in connection with his duties as Shareholder
Agent under this Agreement, including the costs and expenses of defending
himself against any such loss, liability, claim or expense in connection
herewith, unless such loss, liability, claim or expense shall have been
determined by a court of competent jurisdiction to be a result of the
Shareholder Agent's gross negligence or willful misconduct; provided, that, in
no event shall the liability of any Shareholder under this Section 11.16 exceed
such Shareholder's Pro Rata Share of the Merger Consideration. It is understood
and agreed that Shareholder Agent will act under this Agreement and the Escrow
Agreement as an independent contractor with duties solely to Shareholders.
Shareholder Agent shall be permitted (but shall not be required) to seek
direction on any issue from Shareholders, and shall be permitted to conclusively
rely on any direction it receives from the Majority Company Shareholders.
11.17. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof, including, without
limitation, in the letter of intent, dated July 26, 2005, entered into by and
between Parent and the Company which is hereby terminated; provided that the
confidentiality agreement between the Parties, dated March 28, 2005, shall
remain in effect in accordance with its terms.
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IN WITNESS WHEREOF, the Parties have executed this Agreement to be duly
executed by their duly authorized officers as of the day and year first above
written.
PARENT:
NEOMEDIA TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxx
-----------------
Title: CEO
---
MERGER SUB:
MOBOT ACQUISITION, INC.
By: /s/ Xxxxx X. Dodge
----------------------
Name: Xxxxx X. Dodge
--------------
Title:Secretary, Treasurer and Director
---------------------------------
THE COMPANY:
MOBOT, INC.
By:/s/ Xxxxxx X. Xxxxx
----------------------
Name: Xxxxxx X. Xxxxx
---------------
Title:CEO & President
---------------
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