AGREEMENT AND PLAN OF MERGER
Exhibit
2.1
THIS
AGREEMENT AND PLAN OF MERGER dated as of December 29, 2006 (this “Agreement”),
by
and among Millennium Cell Inc., a Delaware corporation (“Parent”),
M.C.E. Venture L.L.C., a Delaware limited liability company and wholly-owned
subsidiary of the Parent (“Merger
Sub”),
and
Gecko Energy Technologies, Inc., a Delaware corporation (“Target”),
Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxx (each, a “Selling
Stockholder”
and
together, the “Selling
Stockholders”).
RECITALS
WHEREAS,
Target is engaged in the business of designing, manufacturing and developing
planar fuel cells and has a non-exclusive license to various patents and
know-how in the field of fuel cells;
WHEREAS,
on February 15, 2006, Parent and Target entered into a Joint Development
Agreement (the “JDA”)
whereby Parent and Target agreed to, among other things, jointly develop planar
fuel cell products and systems;
WHEREAS,
in connection with the JDA, on February 15, 2006, Parent and Target entered
into
a Stock Purchase Agreement (the “SPA”)
pursuant to which Parent agreed to purchase from Target, and Target agreed
to
sell to Parent, shares of Target’s common stock, no par value per share
(“Target
Common Stock”);
WHEREAS,
as of the date hereof, Parent beneficially owns 10,675 shares of Target Common
Stock, representing approximately 34.8% of the outstanding shares of Target
Common Stock, all of which Parent acquired pursuant to the SPA;
WHEREAS,
as of the date hereof, the Selling Stockholders collectively own an aggregate
of
20,000 shares of Target Common Stock, representing approximately 65.2% of the
outstanding shares of Target Common Stock;
WHEREAS,
the respective Boards of Directors of Parent and Target deem it advisable and
in
the best interests of their respective stockholders for Parent to acquire Target
by means of a merger of Target with and into Merger Sub (the “Merger”);
WHEREAS,
the parties intend that the Merger will qualify, for federal income tax
purposes, as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “Code”);
and
WHEREAS,
Parent, Target and each Selling Stockholder desire to make certain
representations, warranties and agreements in connection with the
Merger.
NOW,
THEREFORE, in consideration of the mutual covenants, representations,
warranties, conditions and agreements hereinafter set forth and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE
I
THE
MERGER
Section
1.1 The
Merger.
In
accordance with the provisions of this Agreement, the Delaware General
Corporation Law (the “DGCL”)
and
the Delaware Limited Liability Act (“DLLCA”),
at
the Effective Time (as defined below), Target shall be merged with and into
Merger Sub, the separate existence of Target shall thereupon cease, and the
name
of Merger Sub, as the surviving entity in the Merger (“Surviving
Entity”),
shall
be “Gecko Energy Technologies, LLC.”
Section
1.2 Effective
Time.
Subject
to the delivery at the Closing (as defined in Section 6.1) of the documents
referenced in Section 6.2 hereof, Merger Sub shall execute and file a
Certificate of Merger, substantially in the form attached hereto as Exhibit
1.2
(the
“Certificate
of Merger”),
with
the Secretary of State of the State of Delaware. The effective time of the
Merger (the “Effective
Time”)
shall
be the time at which the Certificate of Merger is filed with the Secretary
of
State of the State of Delaware or such later time as is specified in the
Certificate of Merger, which shall not be later than 11:59 p.m., Eastern
Standard Time, on the date hereof.
Section
1.3 Effect
of the Merger.
As of
the Effective Time, the Merger shall have the effects specified in the DGCL
and
the DLLCA.
Section
1.4 Certificate
of Formation.
The
Certificate of Formation of Merger Sub in effect at the time of the Merger
shall
be the Certificate of Formation of the Surviving Entity; provided,
however,
that
effective as of the Effective Time and by virtue of the filing of the
Certificate of Merger, the Certificate of Formation of Merger Sub shall be
amended to provide that the name of Surviving Entity shall be “Gecko Energy
Technologies, LLC.”
Section
1.5 Limited
Liability Company Agreement.
The
limited liability company agreement of Merger Sub in effect at the time of
the
Merger shall be the limited liability company agreement of the Surviving Entity
until altered, amended or repealed, provided,
however,
that as
of the Effective Time, such limited liability company agreement shall be amended
to provide that the name of the Surviving Entity is “Gecko Energy Technologies,
LLC.”
Section
1.6 Officers.
The
officers of the Surviving Entity at the Effective Time shall be the following
individuals:
Xxxxxx
X.
Xxxxxx President
and Chief Executive Officer
Xxxxxx
X.
Xxxxx Secretary,
Treasurer and Chief Operating Officer
who
shall
serve, in each case, until their successors shall have been appointed. If at
the
Effective Time a vacancy shall exist in any of the above listed offices of
the
Surviving Entity, such vacancy may thereafter be filled in the manner provided
by the limited liability company agreement of the Surviving Entity.
Section
1.7 Conversion
of Shares of Target Common Stock.
The
manner and basis of converting and exchanging the shares of Target Common Stock
in the Merger shall be as follows:
(a) Shares
of Target Common Stock Owned by Parent.
Each
share of Target Common Stock issued and outstanding immediately prior to the
Effective Time and beneficially owned by Parent shall, by virtue of the Merger
and without any action on the part of Parent or Target, at and after the
Effective Time, be cancelled, retired and no longer issued and outstanding
and
no cash, securities or other property shall be issued to Parent in exchange
therefor.
(b) Shares
of Target Common Stock Owned by Selling Stockholders.
Each
share of Target Common Stock that is issued and outstanding immediately prior
to
the Effective Time and beneficially owned by a Selling Stockholder shall, by
virtue of the Merger and without any action on the part of Parent, Target or
such Selling Stockholder, at and after the Effective Time, be converted into
the
right to receive 100 shares of common stock of Parent, par value $0.001 per
share (“Parent
Common Stock”).
The
shares of Parent Common Stock issuable to the Selling Stockholders pursuant
to
this Section
1.7(b)
are
referred to herein as the “Merger
Consideration.”
(c) Membership
Interests of Merger Sub.
All
membership interests of Merger Sub issued and outstanding at the Effective
Time
shall continue to be membership interests of the Surviving Entity so that at
and
after the Effective Time the Surviving Entity shall continue to be a
wholly-owned subsidiary of Parent.
Section
1.8 Merger
Consideration.
At the
Closing, each Selling Stockholder shall surrender to Parent all certificates
representing shares of Target Common Stock beneficially owned by such Selling
Stockholder (together with the documents referenced in Section
6.2(c)
hereof)
and, upon such surrender Parent shall execute and deliver to its transfer agent
written irrevocable instructions, substantially in the form attached as
Exhibit
1.8
hereto
(the “Transfer
Agent Instructions”),
to
issue to such Selling Stockholder a certificate representing the number of
shares of Parent Common Stock which such Selling Stockholder is entitled to
receive pursuant to Section
1.7(b)
hereof,
which certificates shall be endorsed with the restrictive legends described
in
Section
2.8
hereof.
Section
1.9 Stock
Transfers; Lost, Stolen or Destroyed Certificates.
At or
after the Effective Time, there shall be no transfers on the stock transfer
books of Target of the shares of Target Common Stock that were outstanding
immediately prior to the Effective Time. In the event that any certificate
representing shares of Target Common Stock beneficially owned by a Selling
Stockholder prior to the Effective Time shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Selling
Stockholder claiming such stock certificate to be lost, stolen or destroyed
and
the posting by such Selling Stockholder of a bond in an amount and upon terms
as
may be required by Parent as indemnity against any claim that may be made
against it with respect to such stock certificate, Parent will issue to such
Selling Stockholder a certificate representing the number of shares of Parent
Common Stock which such Selling Stockholder is entitled to receive pursuant
to
Section 1.7(b) hereof.
Section
1.10 Tax
Characterization.
The
parties agree to treat the Merger for all federal, state and local income tax
purposes as a tax-free reorganization within the meaning of Section 368(a)(1)(A)
of the Code. No party shall take any position (whether in audits, tax returns
or
otherwise) that is inconsistent with such characterization unless required
to do
so by any applicable tax authority.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLING STOCKHOLDERS
AS
TO THEIR SHARES OF TARGET COMMON STOCK
AND
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
To
induce
Parent and Merger Sub to enter into this Agreement, each of the Selling
Stockholders severally represents and warrants (a Selling Stockholder not having
any liability for a breach of any representation or warranty under this Article
II by the other Selling Stockholder) that:
Section
2.1 Ownership
of Shares of Target Common Stock; Power and Authority.
Each
respective Selling Stockholder is the legal and beneficial owner of the number
of shares of Target Common Stock as follows: Xxxxxx X. Xxxxxx - 10,000; Xxxxxx
X. Xxxxx - 10,000. Such shares of Target Common Stock are held by such Selling
Stockholder free and clear of all liens, encumbrances and adverse claims (other
than restrictions imposed by the Stockholders Agreement dated as of February
15,
2006 by and among Target, Parent and each Selling Stockholder (the “Stockholders
Agreement”)
and by
applicable securities laws) and have been duly and validly issued and are fully
paid, nonassessable and not subject to call. Each Selling Stockholder has full
power and authority to enter into this Agreement and perform his obligations
pursuant hereto.
Section
2.2 No
Conflicts.
The
execution, delivery and performance of this Agreement by such Selling
Stockholder do not and will not (a) conflict with, violate or constitute a
material breach of any agreement, instrument or other contract by which such
Selling Stockholder is bound or any judgment, order, decree, law, statute,
regulation or other judicial or governmental restriction to which such Selling
Stockholder is subject or by which the shares of Target Common Stock owned
by
such Selling Stockholder are subject; (b) require the consent of, or any
filing with or notice to, any governmental authority or other third party;
or
(c) cause the creation or imposition of any lien, encumbrance or other
adverse claim on the shares of Target Common Stock owned by such Selling
Stockholder or on any material assets of the Target. This Agreement has been
duly and validly executed and delivered by each Selling Stockholder and
constitutes the legal, valid and binding obligation of such Selling Stockholder,
enforceable against such Selling Stockholder in accordance with its
terms.
Section
2.3 No
Litigation.
There
is not pending or threatened against such Selling Stockholder any action, suit
or proceeding before any court, arbitrator or governmental or regulatory
authority which challenges or calls into question the authority of such Selling
Stockholder to enter into this Agreement or perform his obligations hereunder
or
in which an adverse decision could materially and adversely affect the
transaction contemplated hereby.
Section
2.4 Access
to Information.
Each
Selling Stockholder acknowledges that on December 19, 2006, such Selling
Stockholder was provided with the following written information relating to
the
Parent: (a) Parent’s Annual Report to Stockholders for the fiscal year ended
December 31, 2005, (b) Parent’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2005, as amended (the “Form
10-K”),
(c)
Parent’s Definitive Proxy Statement for Parent’s 2006 Annual Meeting of
Stockholders, (d) Parent’s Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2006, June 30, 2006 and September 30, 2006, (e) each of Parent’s
Current Reports on Form 8-K filed with the Securities and Exchange Commission
(the “SEC”)
since
December 31, 2005 and (f) a description of the Parent Common Stock to be issued
to such Selling Stockholder as Merger Consideration hereunder (the written
information referenced in (a) through (f), the “Rule
502 Information”).
Each
Selling Stockholder acknowledges that either he or, if applicable, his Purchaser
Representative (as defined in Section
8.6
hereof)
has carefully reviewed and understands the Rule 502 Information (including,
without limitation, the information disclosed in the section of the Form 10-K
entitled “Risk Factors”) and that either he or, if applicable, his Purchaser
Representative has had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of Parent concerning the
business, financial condition, results of operations and prospects of Parent
and
that all such questions have been answered to the full satisfaction of such
Selling Stockholder.
Section
2.5 Knowledge
and Experience.
Each
Selling Stockholder or, if applicable, his Purchaser Representative, has such
knowledge and experience in financial and business matters so as to enable
such
Selling Stockholder or, if applicable, his Purchaser Representative, to utilize
the Rule 502 Information to evaluate the merits and risks of an investment
in
the Parent Common Stock and to make an informed investment decision with respect
thereto. Each Selling Stockholder acknowledges that he is not relying on Parent
or any of Parent’s employees or agents with respect to the legal, tax, economic
and related considerations as to an investment in the Parent Common Stock,
and
that such Selling Stockholder has relied on the advice of, or has consulted
with, only his own advisors.
Section
2.6 Investment
Purpose.
Each
Selling Stockholder hereby confirms that the shares of Parent Common Stock
that
will be acquired by such Selling Stockholder as Merger Consideration hereunder
will be acquired for investment for such Selling Stockholder’s own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that such Selling Stockholder has no present intention of
selling, granting any participation in, or otherwise distributing the
same.
Section
2.7 Restricted
Securities.
Each
Selling Stockholder understands that the shares of Parent Common Stock that
such
Selling Stockholder will acquire as Merger Consideration hereunder have not
been, and will not be, registered under the Securities Act of 1933, as amended
(the “Securities
Act”)
by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature
of
the investment intent and the accuracy of such Selling Stockholder’s
representations as expressed herein. Each Selling Stockholder understands that
the shares of Parent Common Stock that such Selling Stockholder will acquire
as
Merger Consideration hereunder will be “restricted securities” under applicable
United States federal and state securities laws and that, pursuant to these
laws, such Selling Stockholder must hold such shares of Parent Common Stock
indefinitely unless they are registered with the SEC and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Each Selling Stockholder acknowledges that the Parent
has no obligation to register or qualify for resale the shares of Parent Common
Stock to be issued to such Selling Stockholder as Merger Consideration hereunder
and that if an exemption from such registration is available, it will be subject
to various requirements and limitations including, but not limited to, the
time
and manner of sale, the holding period, and on requirements relating to the
Parent which are outside of the control of such Selling Stockholder, and which
the Parent is under no obligation and may not be able to satisfy. For the
avoidance of doubt, each Selling Stockholder acknowledges that the foregoing
restrictions and limitations relating to resale exemptions from registration
under the Securities Act are in addition to and not in limitation of the
covenant contained in Section
5.2
of this
Agreement.
2.8 Legends.
Each
Selling Stockholder understands that the certificates representing the shares
of
Parent Common Stock to be issued to such Selling Stockholder as Merger
Consideration will be endorsed with the following restrictive
legends:
(a) “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT
TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, TO THE EXTENT
REQUIRED, ANY APPLICABLE STATE SECURITIES LAWS OR (B) UPON DELIVERY OF AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER THAT AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS
IS AVAILABLE.”
(b) “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY
MANNER, DIRECTLY OR INDIRECTLY, AT ANY TIME PRIOR TO DECEMBER 29, 2007 WITHOUT
THE PRIOR WRITTEN CONSENT OF THE ISSUER.”
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE TARGET
AND
THE SELLING STOCKHOLDERS AS TO THE TARGET
To
induce
Parent and Merger Sub to enter into this Agreement, the Target and the Selling
Stockholders, jointly and severally, hereby represent and warrant
that:
Section
3.1 Corporate
Organization; Authorization and Capitalization.
(a) Organization,
Good Standing, Corporate Power and Qualification.
The
Target is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as presently conducted and as proposed
to
be conducted. The Target has the requisite corporate power and authority to
own
and operate its properties and assets. The Target is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure
to so
qualify would have a Material Adverse Effect (as defined in Section
8.6
hereof).
(b) Corporate
Power and Authorization.
The
Target has all requisite legal and corporate power and authority to enter into
this Agreement and each other Transaction Agreement to which it is a party
and
to carry out and perform its obligations in accordance with the terms hereof
and
thereof. The execution and delivery by Target of this Agreement and each other
Transaction Agreement to which Target is a party and the consummation by the
Target of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Target (including all
stockholder approvals) and no further action is required by the Target. This
Agreement and each other Transaction Agreement to which Target is a party have
been duly executed and delivered by the Target and constitute valid and binding
obligations of the Target in accordance with their respective terms, except
(i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (b) as limited by
laws relating to the availability of specific performance, injunctive relief,
or
other equitable remedies.
(c) Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock of the Target (including any treasury shares) is set forth in Schedule
3.1(c).
Except
as disclosed in Schedule
3.1(c),
no
securities of the Target are entitled to any preemptive right, right of
participation, right of first refusal, or similar right. Except as disclosed
in
Schedule
3.1(c),
there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exchangeable for, or giving any person or entity
(other than Parent) any right to subscribe for or acquire, any shares of Target
Common Stock, or agreements, commitments, understandings or arrangements by
which the Target is or may become bound to issue additional shares of Target
Common Stock, or securities or rights convertible or exchangeable into shares
of
Target Common Stock.
(d) No
Agreements.
There
are no contracts or agreements to which the Target or any Selling Stockholder
is
a party or otherwise bound that govern or restrict the voting of the shares
of
Target Common Stock owned by any Selling Stockholder, that grant to any person
or entity other than a Selling Stockholder, in his capacity as a selling
stockholder, any voting rights with respect to the Target, or that govern or
restrict the transfer of the shares of Target Common Stock owned by any Selling
Stockholder (other than the Stockholders Agreement).
(e) No
Corporate Proceedings.
There
are no pending corporate proceedings of the Target for any dissolution or
liquidation of the Target, or for any merger or consolidation to which the
Target would be party other than as provided by this Agreement.
Section
3.2 Subsidiaries.
The
Target does not currently own or control, and has never owned or controlled,
directly or indirectly, any interest in any other corporation, partnership,
trust, joint venture, limited liability company, association, or other business
entity. Except as contemplated by the JDA, the Target is not a participant
in
any joint venture, teaming, partnership or similar arrangement.
Section
3.3 No
Conflicts.
The
execution and delivery of this Agreement and the other Transaction Agreements
to
which the Target is a party and the performance by the Target of its obligations
hereunder and thereunder do not and will not (a) conflict with or violate
the Target’s Certificate of Incorporation or Bylaws, in each case as amended to
date, (b) conflict with, violate or result in any default under, or give
rise to any right of termination, cancellation, suspension, revocation,
amendment or acceleration of, any permit, license, mortgage, indenture,
agreement, instrument or other contract to which the Target is a party or by
which the Target or its property is bound, (c) violate any judgment, order,
decree, law, statute, regulation or other judicial or governmental restriction
to which the Target is subject or by which any of the Target’s assets are bound,
or (d) require the consent of, permit or license from, or any filing with
or notice to, any governmental authority or other third party.
Section
3.4 Financial
Statements.
Except
as set forth in Schedule
3.4,
the
financial statements of the Target provided to Parent have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis (“GAAP”)
during
the periods involved, except as may be otherwise specified in such financial
statements or in the notes thereto, and such financial statements, and the
information contained therein fairly present the financial position of the
Target and its consolidated subsidiaries, if any, as of and for the dates
thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited financial statements of the Target, to normal,
immaterial, year-end audit adjustments and the absence of footnotes.
Section
3.5 Material
Changes.
Since
the date of the last financial statements of Target provided to Parent, except
as specifically disclosed in Schedule
3.5:
(i)
there has been no event, occurrence or development that has had or could
reasonably be expected to result in a Material Adverse Effect, (ii) the Target
has not incurred any liabilities (contingent or otherwise) other than: (A)
trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice, (B) liabilities not required to be reflected
in
the Target’s financial statements pursuant to GAAP and (C) expenses in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement, (iii) the Target has not altered its method
of
accounting or the identity of its auditors, if any, (iv) the Target has not
declared, paid or issued any dividend or distributed any cash or other property
to its stockholders or purchased, redeemed or made any agreements to purchase
or
redeem any shares of its capital stock and (v) the Target has not issued any
equity securities to any officers, directors or any Affiliate (as defined in
Section
8.6
hereof)
of Target.
Section
3.6 Intellectual
Property.
To the
Target’s knowledge, the Target has, or has rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights (collectively, the “Intellectual
Property”)
that
are necessary or material for use in connection with the Target’s business and
which the failure to so have could have, or could reasonably be expected to
result in, a Material Adverse Effect. The Target has not received a written
notice that the Intellectual Property used by the Target violates or infringes
upon the rights of any person or entity which if determined adversely to the
Target would, individually or in the aggregate, have a Material Adverse Effect.
All such Intellectual Property is enforceable and, to the Target’s knowledge,
there is no existing infringement by another person or entity of any of the
Intellectual Property. Target hereby agrees to execute and deliver the IP
Assignment Agreement (as defined in Section
6.2(j))
no later
than the Effective Time to assign Target’s entire right, title, and interest in
the Intellectual Property to Merger Sub.
Section
3.7 Taxes.
There
are no federal, state, county, local or foreign taxes due and payable by the
Target which have not been timely paid, whether or not assessed or disputed.
There have been no examinations or audits of any tax returns or reports of
Target by any applicable governmental authority. The Target has duly and timely
filed all federal, state, county, local and foreign tax returns required to
have
been filed by it, all such tax returns or reports are true, correct and complete
in all material respects and there are in effect no waivers of applicable
statutes of limitations with respect to taxes of Target for any year. The
provisions for taxes in the most recent balance sheet contained in the financial
statements of Target are sufficient as of such date for the payment of any
accrued and unpaid taxes of Target of any nature and, since such date Target
has
not incurred any taxes other than in the ordinary course of business. The Target
has not been a United States real property holding corporation as defined in
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. There are no liens for taxes (other than taxes
not
yet due) upon any of the assets of Target and Target is not responsible for
the
taxes of any other person or entity under Treasury Regulation 1.1502-6 (or
any
similar provision of state, local or foreign law), as transferee, by contract,
or otherwise. Target has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third
party.
Section
3.8 Litigation.
There
is no claim, action, suit, proceeding, arbitration, complaint, charge or
investigation pending or, to the Target’s knowledge, any threat thereof (a)
against the Target or any officer or director of the Target or (b) that
questions the validity of the transactions contemplated by this Agreement.
There
is no action, suit, proceeding or investigation by the Target pending or which
the Target intends to initiate.
Section
3.9 Compliance.
The
Target (i) is not in default under or in violation of (and no event has occurred
that, with notice or lapse of time or both, would result in a default by the
Target under), nor has the Target received written notice of a claim that it
is
in default under or that it is in violation of, in any material respect, any
indenture, instrument, loan or credit agreement or any other agreement to which
it is a party or by which it or any of its properties is bound (whether or
not
such default or violation has been waived), (ii) is not in violation of any
order of any court, arbitrator or governmental body applicable to the Target,
and (iii) is not and has never been in violation of any statute, rule or
regulation of any governmental authority applicable to the Target, including,
without limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters.
Section
3.10 Insurance.
The
Target maintains insurance for the business and assets of Target against all
risks normally insured against, and in amounts normally carried by, corporations
of similar size to Target and engaged in similar lines of business as Target
and
such coverage is sufficient. Schedule
3.10
sets
forth a complete list of all of the Target’s insurance policies currently in
effect, specifying the insurer, amount of and nature of coverage, the risk
insured against and the date through which coverage will continue by virtue
of
premiums already paid. All such insurance policies are in full force and effect
and will continue to be in full force and effect after the Effective Time.
Section
3.11 Employee
Matters.
(a) List
of Agreements.
Schedule
3.11(a)
sets
forth all agreements between the Target and any of its employees, consultants,
officers and directors, and all other persons performing services for the
Target.
(b) Other
Information as to Employee Benefits.
Schedule
3.11(b)
sets
forth:
(i) the
names,
dates
of hire, and title
of all
employees of the Target, and the
rate of
compensation (including wages, salaries and actual or anticipated
bonuses)
and
amount of such other benefits for each such employee; and
(ii) all
bonus, pension, profit sharing, deferred compensation, stock options, stock
appreciation rights, stock purchases or other equity or incentive compensation,
retirement, hospitalization, medical or dental reimbursement, severance pay,
vacation pay, disability, death benefits, insurance, and other similar plans,
programs or arrangements of the Target providing benefits to its employees
(including, without limitation, all “employee welfare benefit plans” within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”),
and
all “employee pension benefit plans” within the meaning of Section 3(2) of
ERISA) currently, or at any time within the 5-year period preceding the date
of
this Agreement, sponsored, maintained or contributed to by the Target or by
any
entity which is considered one employer with the Target under Section 4001
of ERISA or Section 414 of the Code.
(c) Employees.
(i) To
the
Target’s knowledge, no employee of the Target is in violation of any term of any
employment contract, confidentiality or other proprietary information disclosure
agreement or any other agreement relating to the right of any such employee
to
be employed by the Target, and the Target has complied in all material respects
with all applicable laws, regulations and requirements respecting employment
and
employment practices, terms and conditions of employment, wages and hours and
other laws, regulations and requirements related to employment, and there are
no
arrears in the payments of wages, withholding or social security taxes,
unemployment insurance premiums or other similar obligations.
(ii) All
of
the employees of the Target are either United States citizens or are legally
entitled to work in the United States under the Immigration Reform and Control
Act of 1986, as amended, other United States immigration laws and regulations
and the laws and regulations related to the employment of non-United States
citizens applicable in the state in which the employees are
employed.
(d) Labor
Organizations.
The
Target is not, and has never been, a party to any collective bargaining
agreement with any labor union or similar organization, nor does the Target
know
of any such organization which represents or claims to represent any of the
Target’s employees or intends to organize any of the Target’s
employees.
(e) Restrictions
on Employees.
Except
as set forth in Schedule
3.11(e),
to the
Selling Stockholders’ knowledge, no officer or employee of the Target is subject
to any agreement with any other person or entity which requires such officer
or
employee to assign any interest in inventions or other intellectual property
or
keep confidential any trade secrets, proprietary data, customer lists or other
business information or which restricts such officer or employee from engaging
in competitive activities or solicitation of customers.
Section
3.12 Certain
Contracts and Transactions.
(a) Contracts.
Except
as set forth in Schedule
3.12(a),
the
Target is not party to any contract or agreement (including an
option):
(i) requiring
performance by any party for a term of more than 90 days from the date of this
Agreement and not terminable prior to such time by the Target without cost,
liability or penalty;
(ii) providing
for payments to or by the Target in the aggregate amount of $25,000 or
more;
(iii) evidencing,
creating, guaranteeing or securing indebtedness of the Target for borrowed
money
or for the deferred purchase price of property;
(iv) pursuant
to which any person or entity acts as agent, salesman, broker or in a similar
representative capacity for the Target;
(v) establishing
or providing for any joint venture, partnership or similar arrangement between
the Target and any other person or entity;
(vi) granting
to any other person or entity a power of attorney or similar authority to act
for the Target;
(vii) under
which the cost of the Target’s performance is or is likely to be materially in
excess of the benefit derived or expected to be derived by the Target
thereunder;
(viii) guaranteeing
or endorsing the obligations of any other person or entity; or
(ix) which
is
otherwise material to the Target’s business or materially affects the Target’s
assets, operations, profitability or prospects.
(b) Interested
Transactions.
Except
as set forth in Schedule
3.12(b),
the
Target is not, and has not in the past five years been, party to any contract,
agreement or transaction with any of the following persons, or in which any
of
the following persons have any direct or indirect interest (other than as a
stockholder or employee of the Target):
(i) any
director, officer or stockholder of the Target;
(ii) any
spouse, parent, sibling or child of any of the persons described in clause
(i);
or
(iii) any
corporation, trust, partnership or other entity in which any of the persons
described in clauses (i) and (ii) have a beneficial interest (other than a
corporation whose shares are publicly traded and in which such persons own
beneficially in the aggregate no more than 2% of the equity
interests).
Section
3.13 Bank
Accounts and Depositories.
Schedule
3.13
lists
all bank accounts, lock boxes, safe deposit boxes and other depositories of
the
Target and the names of all persons authorized to draw thereon or to have access
thereto.
Section
3.14 Investment
Company.
The
Target is not, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
Section
3.15 No
Broker’s or Finder’s Fee.
No
agent, broker, investment banker, person, entity or firm acting on behalf of
the
Target, or under the authority of the Target, is or will be entitled to any
broker’s or finder’s fee or any other commission or similar fee directly or
indirectly from any party in connection with the transactions contemplated
by
this Agreement.
Section
3.16 Disclosure.
The
Target and the Selling Stockholders understand and confirm that Parent and
Merger Sub will rely on the representations and warranties contained in Article
II and Article III in effecting the transactions contemplated by this Agreement.
No representation or warranty by the Target or the Selling Stockholders
contained in this Agreement, and no statement contained in the Schedules hereto
or in any certificate furnished to Parent or Merger Sub pursuant to Section
6.2
hereof,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein not misleading.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
To
induce
the Target and the Selling Stockholders to enter into this Agreement, Parent
and
Merger Sub each hereby represents and warrants, jointly and severally,
that:
Section
4.1 Corporate
Organization and Authority.
Parent
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware and Merger Sub is a limited liability company
duly
organized and validly existing in good standing under the laws of the State
of
Delaware. Merger Sub is wholly-owned by Parent and has not elected to be treated
as a corporation for federal income tax purposes. Each of Parent and Merger
Sub
has all requisite corporate power and authority to enter into this Agreement
and
each Transaction Document to which it is a party and to consummate the
transactions contemplated hereby and thereby and to otherwise carry out is
obligations hereunder and thereunder. Each of Parent and Merger Sub is duly
qualified to transact business and is in good standing in each jurisdiction
in
which the failure to so qualify would have a Material Adverse Effect. Each
of
Parent and Merger Sub has the requisite corporate power and authority to own
and
operate its properties and assets.
Section
4.2 Corporate
Power and Authorization.
Each of
Parent and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and each Transaction Agreement to which it is a party and
to
carry out and perform its obligations in accordance with the terms hereof and
thereof. The execution and delivery by each of Parent and Merger Sub of this
Agreement and each other Transaction Agreement to which it is a party and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of
Parent and Merger Sub and no further action is required by Parent or Merger
Sub.
This Agreement and each Transaction Agreement to which Parent and Merger Sub
is
a party has been duly executed and delivered by each of Parent and Merger Sub
and constitutes the valid and binding obligation of Parent and Merger Sub
enforceable against Parent and Merger Sub in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (b) as limited by
laws relating to the availability of specific performance, injunctive relief,
or
other equitable remedies.
Section
4.3 Valid
Issuance of Parent Common Stock.
The
shares of Parent Common Stock to be issued as Merger Consideration hereunder,
when issued in exchange for the shares of Target Common Stock in accordance
with
terms of this Agreement, will be validly issued, fully paid and nonassessable.
Section
4.4 Private
Placement.
Assuming the accuracy of the representations of each Selling Stockholder
contained in Article II of this Agreement, no registration under the Securities
Act is required for the offer, issuance and sale of the shares of Parent Common
Stock as Merger Consideration hereunder. Parent and Merger Sub acknowledge
that
the Selling Stockholders and, if applicable, their Purchaser Representatives,
will rely on the Rule 502 Information and on the representations and warranties
contained in Article IV in effecting the transactions contemplated by this
Agreement. No representation or warranty made by Parent or Merger Sub contained
in this Agreement, and no statement contained in the Rule 502 Information or in
any certificate furnished to the Target or to the Selling Stockholders pursuant
to Section 6.2 hereof, contains any untrue statement of a material fact or
omits
to state a material fact necessary in order to make the statements herein or
therein, under the circumstances under which they were made, not misleading.
ARTICLE
V
CERTAIN
COVENANTS AND AGREEMENTS
Section
5.1 Further
Assurances.
If, at
any time any further action is necessary to carry out the purposes of this
Agreement, each party shall take such further action and execute and deliver
such further instruments and documents as any other party may reasonably
request. Without limiting the generality of the foregoing, each Selling
Stockholder shall use its best efforts to (i) assist Parent and the Surviving
Entity in obtaining any authorization, consent or approval that is necessary
or
desirable to be obtained by Parent or the Surviving Entity or its employees
or
Affiliates in order to operate the business of the Surviving Entity after the
Closing and (ii) obtain the consent of any required person, entity or
governmental authority for the continuation of an agreement disclosed in
Schedule
3.12(a)
after
the Closing, in each case as promptly as practicable after the date
hereof.
Section
5.2 Transfer
Restriction on Parent Common Stock.
In
addition to the restrictions on resale imposed by applicable securities laws,
each Selling Stockholder hereby agrees that he will not directly or indirectly
sell, assign, pledge, encumber, transfer or otherwise hypothecate or dispose
of
(any of the foregoing, a “Transfer”)
any
shares of Parent Common Stock received by such Selling Stockholder pursuant
to
this Agreement until after the first anniversary of this Agreement. No such
Transfer or attempted Transfer in violation of this Section 5.2 shall be made
or
recorded on the books and records of Parent and any such Transfer or attempted
Transfer shall be void ab
initio
and of
no force or effect.
Section
5.3 Tax
Reimbursement.
If and
to the extent that a Selling Stockholder, as a result of an audit by the
Internal Revenue Service or other taxing authority, incurs state, local or
federal income tax as a result of his acquisition of shares of Parent Common
Stock as Merger Consideration under this Agreement (a “Tax
Payment Liability”),
Parent shall pay to such Selling Stockholder, no later than three (3) business
days prior to the due date of such tax but only after only after such Selling
Stockholder’s delivery to Parent of a written notice of such Tax Payment which
shall be accompanied by any and all tax returns, filings and other evidence
associated with such Tax Payment Liability (a “Tax
Payment Notice”),
cash
in an amount equal to such Tax Payment Liability, fully grossed-up for any
income taxes incurred by the Selling Stockholders with respect to such payment
from Parent (a “Tax
Reimbursement”),
plus
any interest and penalties due thereon; provided,
however,
that
if, subsequent to Parent’s payment of a Tax Reimbursement pursuant to this
Section 5.3, a Selling Stockholder sells or exchanges any of such shares of
Parent Common Stock during his lifetime in a taxable transaction and the Selling
Stockholder derives a tax benefit in the transaction as a result of a having
a
“stepped-up” tax basis in the shares sold or exchanged (a “Tax
Benefit”),
then
such Selling Stockholder shall, as promptly as practicable after the realization
and use of such Tax Benefit, (i) deliver to Parent a written notice of such
Tax
Benefit which shall be accompanied by any and all tax returns, filings and
other
evidence of such Tax Benefit, and (ii) pay to Parent cash in an amount equal
to
the lesser of the Tax Benefit and the Tax Reimbursement.
Section
5.4 2006
Tax Returns.
The
parties agree that the preparation and filing of the federal and state income
tax returns for the Target for the period beginning January 1, 2006 and ending
on the Closing Date shall be the responsibility of Parent. Each Selling
Stockholder agrees that it will cooperate with Parent and the Surviving Entity
in accomplishing such filings.
Section
5.5 Termination
of JDA.
The
parties agree that the JDA will be terminated as of the Effective Time in
accordance with the terms of the Target Termination Agreement (as defined in
Section 6.2).
Section
5.6 Employment
Agreements.
The
parties agree that effective as of the Effective Time, (i) the Employment
Agreements (as defined in Section 6(f)) shall supersede the Target Employment
Agreements (as defined in Section 8.6), and (ii) the Target Employment
Agreements shall be terminated and of no further force or effect.
Section
5.7 Removal
of Restrictive Legends.
Parent
agrees that after the first anniversary of the Closing, upon delivery to Parent
of an opinion of counsel on behalf of a Selling Stockholder (which shall be
reasonably acceptable to Parent) that a proposed transfer of such Selling
Stockholder’s shares of Parent Common Stock may be transferred without
registration under the Securities Act, Parent shall, within five (5) business
days of such request, cause its counsel to deliver a legal opinion to Parent’s
transfer agent to the effect that the certificate representing the shares of
Parent Common Stock to be issued to the transferee in such transfer may be
issued without any restrictive legends.
ARTICLE
VI
CLOSING
Section
6.1 The
Closing.
The
closing of transactions contemplated hereby (the “Closing”)
shall
occur immediately after the execution and delivery of this Agreement at the
offices of Xxxxxxxxx Xxxxxxx LLP, located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, XX 00000.
Section
6.2 Deliveries
at the Closing.
At the
Closing:
(a) Parent
shall deliver to Target and the Selling Stockholders certified resolutions
of
the Executive Committee of its board of directors authorizing and approving
(i)
the transactions contemplated by this Agreement and the other Transaction
Agreements, including the Merger (which shall include Parent’s approval in its
capacity as the sole member of Merger Sub) and (ii) Parent and Merger Sub’s
execution and delivery of this Agreement and each other Transaction Agreement
to
which Parent or Merger Sub is a party;
(b) Target
shall deliver to Parent a certificate of the Secretary of Target, dated as
of
the date of this Agreement, attaching (i) a copy of the Certificate of
Incorporation of the Target, as amended to date, certified by the Secretary
of
State of the State of Delaware as of a date that is not earlier than three
(3)
business days prior to the date of this Agreement, (ii) a copy of the Bylaws
of
the Target, as amended to date, (iii) a certificate of good standing of the
Target, issued by the Secretary of State of the State of Delaware as of a date
that is not more than three (3) business days prior to the date of this
Agreement, (iv) resolutions duly adopted by Target’s board of directors (x)
authorizing and approving the transactions contemplated by this Agreement and
the Transaction Agreements, including the Merger, (y) authorizing and approving
the Target’s execution and delivery of the Merger Agreement and the other
Transaction Agreements to which the Target is a party and (z) recommending
that
the Target’s stockholders authorize and approve the transactions contemplated by
this Agreement and the Transaction Agreements, including the Merger, and adopt
the Merger Agreement, and (v) a unanimous written consent of the stockholders
of
Target authorizing and approving the transactions contemplated by this Agreement
and the Transaction Agreements, including the Merger, and adopting the Merger
Agreement;
(c) each
Selling Stockholder shall surrender to Parent for cancellation all certificates
representing shares of Target Common Stock beneficially owned by such Selling
Stockholder, together with any tax forms or instruments of transfer or
assignment reasonably requested by Parent;
(d) Parent
shall execute and deliver the Transfer Agent Instructions, instructing its
transfer agent to deliver to each Selling Stockholder a certificate representing
the number of shares of Parent Common Stock that such Selling Stockholder is
entitled to receive under Section 1.7(b) hereof, registered in the name of
such
Selling Stockholder and endorsed with the restrictive legends referenced in
Section
2.8
hereof;
(e) Parent
shall have received the opinion of Xxxxxx X’Xxxxxxx, Target’s legal counsel,
substantially in the form attached hereto as Exhibit
6.2(e);
(f) Each
Selling Stockholder shall have entered into an employment agreement with Merger
Sub, substantially in the form attached hereby as Exhibit
6.2(f)
(together, the “Employment
Agreements”),
whereby, effective as of the Effective Time, Xxxxxx X. Xxxxxx will be employed
as the president of the Surviving Entity and Xxxxxx X. Xxxxx will be employed
as
the chief operating of the Surviving Entity;
(g) Target
and Parent shall have executed and delivered an agreement, substantially in
the
form attached hereto as Exhibit
6.2(g)
terminating each of the JDA, the SPA and the Stockholders Agreement (the
“Target
Termination Agreement”);
(h) each
Selling Stockholder and Parent shall have executed and delivered an agreement,
substantially in the form attached hereto as Exhibit
6.2(h)
terminating such Selling Stockholder’s Consulting Agreement with Parent (the
“Consulting
Termination Agreement”);
(i) each
director and officer of Target shall have executed and delivered a letter of
resignation to Parent, effective as of the Effective Time and substantially
in
the form attached hereto as Exhibit
6.2(i);
(j) Target
and each Selling Stockholder shall have executed and delivered such instruments
of assignment and transfer which Parent may reasonably request to vest in Merger
Sub all right, title and interest in and to the Intellectual Property (the
“IP
Assignment Agreement”);
(k) Target
and each Selling Stockholder shall have delivered to Parent a non-foreign
affidavit dated as of the date hereof, in form and substance required under
Treasury Regulations issued pursuant to Section 1445 of the Code stating that
it
is not a “foreign person” as defined in Code Section 1445; and
(l) the
Selling Stockholders and Target shall have delivered to Parent such other and
further certificates, assurances and documents as Parent may reasonably request
in order to evidence the accuracy of the Selling Stockholders’ and Target’s
representations, warranties and the performance of the Selling Stockholders’ and
Target’s covenants and agreements to be performed at or prior to the Effective
Time.
ARTICLE
VII
INDEMNIFICATION
Section
7.1 Indemnification.
(a) Several
Indemnification by Selling Stockholders.
Each
Selling Stockholder hereby severally agrees that he will indemnify, defend
and
hold harmless each of Parent, Merger Sub, the Surviving Entity and each of
their
Affiliates and their respective successors and assigns (any of the foregoing,
an
“Parent
Indemnitee”)
from
and against any and all Losses (as defined in Section 8.6), arising out of
(i)
any breach of any representation or warranty made by such Selling Stockholder
in
Article II of this Agreement, (ii) such Selling Stockholder’s failure to perform
any covenant or agreement to be performed by him under this Agreement, any
Transaction Agreement to which such Selling Stockholder is a party or under
any
instrument or document delivered by such Selling Stockholder to Parent or Merger
Sub pursuant to Section
6.2
hereof,
or (iii) the enforcement of this Section
7.1(a).
(b) Joint
and Several Indemnification by Selling Stockholders.
The
Selling Stockholders, jointly and severally, hereby agree that they will
indemnify, defend and hold harmless each of the Parent Indemnitees from and
against any and all Losses arising out of (i) the breach of any representation
or warranty made in Article III of this Agreement, (ii) Target’s failure to
perform any covenant or agreement to be performed by Target under this
Agreement, any Transaction Agreement to which Target is a party or under any
instrument or document delivered by Target to Parent or Merger Sub pursuant
to
Section
6.2
hereof,
or (iii) the enforcement of this Section
7.1(b).
(c) Joint
and Several Indemnification by Parent and Merger Sub.
Parent
and Merger Sub, jointly and severally, hereby agree that they will indemnify,
defend and hold harmless each of the Selling Stockholders and their respective
successors and assigns (a “Selling
Stockholder Indemnitee”)
from
and against any and all Losses arising out of (i) any breach of any
representation or warranty made in Article IV hereof, (ii) Parent’s or Merger
Sub’s failure to perform any covenant or agreement to be performed by it under
this Agreement, any Transaction Agreement to which Parent or Merger Sub is
a
party or under any instrument or document delivered by Parent or Merger Sub
to
the Selling Stockholders pursuant to Section 6.2 hereof, or (iii) the
enforcement of this Section 7.1(c).
Section
7.2 Indemnity
Claims.
(a) Notice
of Claim.
If any
matter shall arise which, in the opinion of a Parent Indemnitee or a Selling
Stockholder Indemnitee (as applicable, an “Indemnitee”)
constitutes or may give rise to a Loss that is subject to indemnification by
one
or more of the Selling Stockholders or by Parent or Merger Sub (as applicable,
an “Indemnitor”)
as
provided herein (an “Indemnity
Claim”),
the
applicable Indemnitee shall give prompt written notice (a “Notice
of Claim”)
of
such Indemnity Claim to each Indemnitor from whom such indemnity may be sought,
setting forth the relevant facts and circumstances of such Indemnity Claim
in
reasonable detail and, if determinable, the amount of indemnity sought from
such
Indemnitor with respect thereto, and shall give continuing notice promptly
thereafter as to developments coming to Indemnitee’s attention materially
affecting any matter relating to such Indemnity Claim; provided,
however,
that
failure of the Indemnitee to give the Indemnitor prompt notice as provided
herein shall not relieve the Indemnitor of any of its obligations hereunder,
except to the extent that the Indemnitor is materially prejudiced by such
failure.
(b) Third
Party Claims.
If any
Indemnity Claim is based upon any claim, demand, suit or action of any third
party against an Indemnitee (a “Third
Party Claim”),
then
Indemnitee, at the time it gives an Indemnitor the Notice of Claim with respect
to such Third Party Claim, shall either (at Indemnitee’s option):
(i) offer
to
the Indemnitor the option to have the Indemnitor assume the defense of such
Third Party Claim, which option shall be exercised by the Indemnitor (if
exercise is elected) by written notice to Indemnitee within fifteen (15) days
after Indemnitee gives written notice to the Indemnitor thereof. If Indemnitee
so offers such option and the Indemnitor so exercises such option, then the
Indemnitor shall, at its own expense, assume the defense of such Third Party
Claim, shall upon the final determination thereof fully discharge at his own
expense all liability of Indemnitee with respect to such Third Party Claim,
and
shall be entitled, in his sole discretion and at his sole expense but without
any liability of Indemnitee therefor, to compromise or settle such Third Party
Claim upon terms acceptable to the Indemnitor; provided,
however,
that
the Indemnitor may not compromise or settle a Third Party Claim without the
Indemnitee’s consent unless such compromise or settlement includes an
unconditional release of the Indemnitee, reasonably satisfactory to the
Indemnitee, from all Losses with respect to such Third Party Claim and such
settlement does not involve monetary obligations on behalf of the Indemnitee
or
non-monetary obligations that would have a direct effect upon the continuing
operations of Surviving Entity or the Indemnitee. From the time the Indemnitor
so assumes such defense and while such defense is pursued diligently and in
good
faith, the Indemnitor shall have no further liability for attorneys’ fees or
other costs of defense thereafter incurred by Indemnitee in connection with
such
Third Party Claim; or
(ii) undertake
its reasonable effort to defend such Third Party Claim himself. If an Indemnitee
so undertakes the defense of the Third Party Claim, it shall conduct such
defense as would a reasonable and prudent person to whom no indemnity were
available, shall permit each Indemnitor (at such Indemnitor’s sole expense) to
participate in (but not control) such defense, and shall not settle or
compromise such Third Party Claim without such Indemnitor’s consent, which
consent may not be unreasonable withheld or delayed. If Indemnitee fails to
offer to an Indemnitor the option to assume the defense as provided in clause
(i) above, or if Indemnitee so offers such option and such Indemnitor does
not
exercise such option within the time and in the amount therein provided, then
Indemnitee shall undertake such defense in accordance with this clause
(ii).
Section
7.3 Survival
of Representations and Warranties of Target and Selling
Stockholders.
The
representations and warranties of the Target and the Selling Stockholders in
this Agreement, in any Transaction Agreement or in any instrument or document
delivered by Target or any Selling Stockholder to Parent or Merger Sub pursuant
to Section
6.2
hereof
shall survive the Closing for a period of two years after Closing; provided,
however,
that
the representations and warranties contained in Section
2.1
(Ownership of Shares), Section
2.4
(Access
to Information) Section
2.5
(Knowledge and Experience), Section
2.6
(Investment Purpose), Section
3.1(a)
(Organization, Good Standing, Corporate Power and Qualification), Section
3.1(b)
(Corporate Power and Authority), Section
3.1(c)
(Capitalization), Section 3.7 (taxes) and Section
3.15
(No
Broker’s or Finder’s Fees) (the “Selling
Stockholder Fundamental Representations”)
shall
survive the Closing and shall expire at the end of the relevant statute of
limitations, after giving effect to any extensions or waivers, and for sixty
days thereafter.
Section
7.4 Survival
of Representations and Warranties of Parent and Merger Sub.
The
representations and warranties of Parent and Merger Sub in this Agreement,
in
any Transaction Agreement to which Parent and/or Merger Sub is a party or in
any
instrument or document delivered by Parent or Merger Sub to any Selling
Stockholder pursuant to Section
6.2
hereof
shall survive the Closing for a period of two years after the Closing;
provided,
however,
that
the representations and warranties contained in Section
4.1
(Corporate Organization and Authority), Section
4.2
(Corporate Power and Authorization), Section
4.3
(Valid
Issuance of Parent Common Stock) and Section
4.4
(Private
Placement) (the “Parent
Fundamental Representations”)
shall
survive the Closing and shall expire at the end of the relevant statute of
limitations, after giving effect to any extensions or waivers, and for sixty
days thereafter.
Section
7.5 Limitations
on Indemnification.
No
party
shall have any liability for indemnification with respect to a breach of
representation or warranty under Section 7.1 until the aggregate total of all
Losses with respect to such matters exceeds $25,000, in which event the
Indemnitees shall be entitled to indemnification for all such Losses from the
first dollar of such Loss irrespective of the $25,000 threshold, up to an
aggregate total of $300,000. However, in no event shall the personal liability
of an individual Selling Stockholder exceed $150,000 in the aggregate;
provided,
however,
that
the caps on liability in this sentence and in the previous sentence shall not
apply to any claim for a breach of a Selling Stockholder Fundamental
Representation, a Parent Fundamental Representation, any claim for breach of
a
covenant, any fraud claim or any payment made under Section
5.3
hereof.
Section
7.6 Adjustment
to Merger Consideration.
Any
indemnification payment made pursuant to this Agreement shall be treated as
an
adjustment to the aggregate Merger Consideration for tax purposes.
Section
7.7 Other
Indemnification Provisions.
(a) The
indemnification obligations set forth in this Article VII are made
notwithstanding any investigation made prior to Closing by or on behalf of
any
of the parties hereto or the results of any such investigation and
notwithstanding the participation of any party in the Closing.
(b) With
respect to any claim or demand brought against a Selling Stockholder (whether
such claim or demand is pursuant to this Agreement, applicable law or
otherwise), each Selling Stockholder hereby agrees that he will not make any
claim for (i) indemnification against the Surviving Entity by reason of the
fact that he was a director, officer, employee, or agent of the Target or was
serving at the request of the Target as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses,
or otherwise and whether such claim is pursuant to any statute, organizational
document agreement or otherwise), or (ii) contribution against Surviving Entity
by reason of the fact that the Target was a party to any action or inaction
that
forms the basis of such claim or demand; provided,
however,
that
the foregoing covenants shall not apply to Third Party Claims that do not exceed
$250,000 in the aggregate which are made prior to the second anniversary of
this
Agreement, and with respect to which the Selling Stockholder would have been
entitled to indemnification under the organizational documents of Target and
applicable law as in effect immediately prior to the Effective
Time.
Section
7.8 Parent
Services to Target.
Parent
acknowledges that pursuant to Section 2.02 of the JDA, from February 15, 2006
through the Effective Time Parent provided services and facilities to Target
with respect to certain finance and accounting matters relating to Target’s
accounts payable, accounts receivable and bookkeeping (the “Target
Accounting Services”).
Accordingly, Parent acknowledges and agrees that no Selling Stockholder shall
be
liable for any Loss resulting from a breach of the representations and
warranties contained in Section
3.4
hereof
or a breach of the representations and warranties relating to the accrual of
unpaid taxes contained Section
3.7
hereof,
if and to the extent that such breach was primarily attributable to Parent’s
provision of the Target Accounting Services.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 Entire
Agreement.
This
Agreement (including the Schedules and Exhibits attached hereto and the
Transaction Agreements) constitutes the entire agreement among the parties
and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, to the extent they related in any way to the
subject matter hereof.
Section
8.2 Amendments
and Waivers.
No
amendment hereof shall be effective unless in writing and executed by each
of
the parties hereto by their duly authorized officers. No waiver by any party
of
any default, misrepresentation, or breach of warranty or covenant or agreement
hereunder or in any Transaction Agreement shall be valid unless set forth in
a
written instrument signed on behalf of the party entitled to the benefit of
the
same and no such waiver shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty, covenant or agreement
hereunder or in any Transaction Agreement.
Section
8.3 Benefits
and Binding Effect.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
Section
8.4 Notices.
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by
a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and facsimile numbers set forth below (or
to
such other addresses and facsimile numbers as a party may designate by notice
to
the other parties):
To
Target
or the Selling Stockholders:
Gecko
Energy Technologies, Inc.
Xxx
Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxx
Facsimile:
(000) 000-0000
with
a
copy to:
Xxxxxx
X’Xxxxxxx
000
Xxxxx
Xxxxxx
Xxxxxxxxx,
XX 00000-0000
Attention:
Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
To
Parent
or Merger Sub:
Xxx
Xxxxxxxxxx Xxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxx Xxxxxx, President
Facsimile:
(000) 000-0000
with
a
copy to:
Xxxxxxxxx
Xxxxxxx LLP
1177
Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxx, Esq.
Facsimile:
(000) 000-0000
Any
party
may change the address(es) to which notices to it are to be sent by giving
notice of such change to the other parties in accordance with this
Section.
Section
8.5 Captions.
The
captions herein are for convenience of reference only and shall not be construed
as a part of this Agreement.
Section
8.6 Certain
Definitions.
For
purposes of this Agreement:
(a) “Affiliate”
means,
with respect to any specified person or entity, any other person or entity
which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified person or entity
(for purposes of this definition, “control”
and
the
correlative terms “controlling,”
“controlled
by”
and
“under
common control with”
as
used
with respect to any person or entity, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or
policies of such person or entity, whether through the ownership of voting
securities, by agreement or otherwise); provided,
however,
that
Parent shall not be deemed to be a Affiliate of the Target.
(b) “Losses”
means
any and all claims, losses, liabilities, damages (including diminution in
value), penalties, fines, costs or expenses (including reasonable attorneys’
fees).
(c) “Material
Adverse Effect”
means,
with respect to Target or Parent, as applicable, any change or effect that
(a)
does or is reasonably likely to materially adversely affect the ability of
the
Target or Parent (as applicable) to perform its obligations under this Agreement
or any Transaction Agreement to which it is a party or to consummate the
transactions contemplated hereby or thereby, or (b) does or is reasonably likely
to materially adversely affect the business, assets (including intangible
assets), liabilities, prospects, financial condition or results of operation
of
Target or Parent (as applicable).
(d) “Purchaser
Representative”
means
any purchaser representative retained by a Selling Stockholder in connection
with such Selling Stockholder’s acquisition of shares of Parent Common Stock as
Merger Consideration under this Agreement who satisfies the conditions set
forth
in Rule 501(h) under the Securities Act.
(e) “Target
Employment Agreements”
means,
together, (i) the Employment Agreement dated as of February 15, 2006 by and
between Target and Xxxxxx X. Xxxxxx, and (ii) the Employment Agreement dated
as
of February 15, 2006 by and between Target and Xxxxxx X. Xxxxx.
(f) “Transaction
Agreements”
means,
collectively, this Agreement, the Target Termination Agreement, the Consulting
Termination Agreement and the IP Assignment Agreement.
Section
8.7 Governing
Law and Venue.
This
Agreement shall be construed, interpreted, enforced and governed by and under
the laws of the State of Delaware. The parties hereto hereby irrevocably submit
exclusively to the jurisdiction of the courts of the State of Delaware and
the
federal courts of the United States of America located in the State of Delaware
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated hereby, and hereby waive, and agree
not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto
or
that such action, suit or proceeding may not be brought or is not maintainable
in or by such courts, and the parties hereto irrevocably agree that all claims
with respect to such action or proceeding shall be heard and determined in
such
a Delaware state or federal court. The parties hereto hereby consent to and
grant any such court jurisdiction over the person of such parties for purposes
of the foregoing.
Section
8.8 WAIVER
OF JURY TRIAL.
EACH
PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH
PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.8
Section
8.9 Schedules
and Exhibits.
All of
the Schedules and Exhibits referred to in this Agreement are hereby incorporated
herein by reference and shall be deemed and construed to be a part of this
Agreement for all purposes.
Section
8.10 Severability.
The
invalidity or unenforceability of any one or more phrases, sentences, clauses
or
provisions of this Agreement shall not affect the validity or enforceability
of
the remaining portions of this Agreement or any part thereof.
Section
8.11 Counterparts.
This
Agreement may be executed in two (2) or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed and delivered by facsimile
signature in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
instrument.
Section
8.12 Specific
Performance.
Each
of
the parties hereto acknowledges and agrees that the other parties hereto would
be irreparably damaged in the event any of the provisions of this Agreement
were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, each of the parties hereto agrees that, in addition
to
any other remedy to which such party may be entitled at law or in equity, they
each shall be entitled to an injunction or injunctions to prevent breaches
of
the provisions of this Agreement and to enforce specifically this Agreement
and
the terms and provisions hereof.
IN
WITNESS WHEREOF, Parent, Merger Sub, the Target and each of the Selling
Stockholders have each caused this Agreement to be duly executed as of the
day
and year first above written.
By: /s/
Xxxx Xxxxxx
Name: Xxxx
Xxxxxx
Title: President
M.C.E.
VENTURE, L.L.C.
By:
Millennium Cell Inc., its sole member
By: /s/
Xxxx Xxxxxx
Name: Xxxx
Xxxxxx
Title: President
GECKO
ENERGY TECHNOLOGIES, INC.
By: /s/
Xxxx X. Xxxxxx
Name: Xxxx
X.
Xxxxxx
Title: Chief
Financial Officer
SELLING
STOCKHOLDERS:
/s/
Xxxxxx X. Xxxxxx
Xxxxxx
X.
Xxxxxx
/s/
Xxxxxx X. Xxxxx
Xxxxxx
X.
Xxxxx
