Exhibit A
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INKSURE TECHNOLOGIES INC.,
LIL MARC, INC.
AND
LILM ACQUISITION CORP.
DATED AS OF JULY 5, 2002
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TABLE OF CONTENTS
Page
ARTICLE I MERGER...........................................................2
1.1 Merger ..............................................................2
1.2 Effects of the Merger ...............................................2
1.3 Effective Time ......................................................2
1.4 Directors of the Surviving Corporation ..............................3
1.5 Officers of the Surviving Corporation ...............................3
1.6 Conversion of Stock .................................................3
1.7 Dissenting Shares ...................................................4
1.8 Exchange of Certificates ............................................4
1.9 No Further Rights or Transfers ......................................5
1.10 Registration Rights .................................................5
1.11 Closing 5
1.12 ITI Preferred Stock .................................................5
1.13 Stock Options and SARs ..............................................6
1.14 Subsequent Actions ..................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ITI ...........................7
2.1 Organization and Qualification ......................................7
2.2 Subsidiaries ........................................................7
2.3 Capitalization ......................................................8
2.4 Authority; Non-Contravention; Statutory Approvals; Compliance .......8
2.5 Reports and Financial Statements ...................................10
2.6 Absence of Certain Changes or Events ...............................11
2.7 Litigation .........................................................12
2.8 Information Statement ..............................................12
2.9 Tax Matters ........................................................12
2.10 Employee Matters; ERISA ............................................15
2.11 Environmental Protection ...........................................19
2.12 Board Approval .....................................................20
2.13 ITI Stockholders' Approval .........................................21
2.14 Ownership of Lil Marc Common Stock .................................21
2.15 Takeover Provisions ................................................21
2.16 Intellectual Property ..............................................21
2.17 Certain Contracts ..................................................23
2.18 Property and Assets ................................................25
2.19 Agreements Not to Compete ..........................................25
2.20 Foreign Corrupt Practices ..........................................25
2.21 Financial Advisor ..................................................26
2.22 Representations and Warranties .....................................26
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF LIL MARC AND NEWCO ...........26
3.1 Organization and Qualification .....................................26
3.2 Subsidiaries .......................................................26
3.3 Authority; Non-Contravention; Statutory Approvals; Compliance ......26
3.4 Capitalization .....................................................28
3.5 Operations of Lil Marc and Newco ...................................28
3.6 Consents and Approvals .............................................29
3.7 Reports and Financial Statements ...................................29
3.8 Absence of Certain Changes or Events ...............................30
3.9 Litigation .........................................................31
3.10 Information Statement ..............................................32
3.11 Board Approval .....................................................32
3.12 Ownership of ITI Common Stock ......................................32
3.13 Lil Marc Stockholders' Consent .....................................32
3.14 Financial Advisor ..................................................32
3.15 Representations and Warranties .....................................32
ARTICLE IV CERTAIN COVENANTS OF ITI, LIL MARC AND NEWCO ...................33
4.1 Conduct of Business of ITI .........................................33
4.2 Conduct of Business of Lil Marc ....................................34
ARTICLE V ADDITIONAL AGREEMENTS ..........................................35
5.1 Access to Information ..............................................35
5.2 Consents and Approvals .............................................36
5.3 Information for Information Statement ..............................36
5.4 Commercially Reasonable Efforts, Etc. ..............................36
5.5 Public Announcements ...............................................36
5.6 Consents, Approvals and Filings ....................................37
5.7 Current Information ................................................37
5.8 Merger Consideration ...............................................37
5.9 Indemnification of Officers and Directors ..........................37
5.10 Directors and Officers of Lil Marc and the Surviving Corporation ...39
5.11 Certain Employee Agreements ........................................39
5.12 Available Cash .....................................................40
5.13 Further Assurances .................................................40
5.14 Conveyance Taxes ...................................................40
5.15 Lil Marc Common Stock ..............................................40
5.16 Private Placement ..................................................40
5.17 ComVest Capitalization Adjustment ..................................40
ARTICLE VI CONDITIONS TO OBLIGATIONS ......................................41
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6.1 Conditions to Each Party's Obligation to Effect the Merger .........41
6.2 Conditions to Obligations of Lil Marc and Newco ....................41
6.3 Conditions to the Obligations of ITI ...............................43
ARTICLE VII TERMINATION ....................................................46
7.1 Termination ........................................................46
7.2 Effect of Termination ..............................................47
ARTICLE VIII MISCELLANEOUS ..................................................47
8.1 Survival of Representations, Warranties, Covenants and Agreements ..47
8.2 Amendment and Modification .........................................47
8.3 Waiver of Compliance; Consents .....................................47
8.4 Enforceability .....................................................48
8.5 Parties in Interest ................................................48
8.6 Successors and Assigns .............................................48
8.9 Specific Performance ...............................................48
8.8 Notices ............................................................48
8.9 Governing Law ......................................................49
8.10 Counterparts .......................................................50
8.11 Headings ...........................................................50
8.12 Entire Agreement ...................................................50
EXHIBITS
Exhibit 1.4 Directors of the Surviving Corporation
Exhibit 1.5 Officers of the Surviving Corporation
Exhibit 5.10 Directors and Officers of Lil Marc
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INDEX OF DEFINED TERMS
Agreement .....................................................................1
Audited Financial Statements .................................................10
Balance Sheet Date ...........................................................11
Blue Sky Laws .................................................................9
Certificate of Merger .........................................................2
Certificates ..................................................................4
Closing .......................................................................5
Closing Agreement ............................................................14
Closing Date ..................................................................5
Code ..........................................................................2
Commonwealth ..................................................................1
ComVest ......................................................................40
Continuing Employee ..........................................................40
DGCL ..........................................................................1
Dissenting Shares .............................................................4
Effective Time ................................................................3
Environmental Claim ..........................................................20
Environmental Laws ...........................................................20
ERISA ........................................................................15
ERISA Affiliate ..............................................................16
Exchange Act ..................................................................9
Exchange Agent ................................................................4
Exchange Ratio ................................................................3
Final Order ..................................................................42
GAAP .........................................................................10
Governmental Authority ........................................................9
Hazardous Materials ..........................................................20
Indemnified Parties ..........................................................39
Indemnified Party ............................................................39
Information Statement ........................................................12
Intellectual Property ........................................................23
IRS ..........................................................................16
ITI ...........................................................................1
ITI Board Approval ...........................................................21
ITI Common Stock ..............................................................2
ITI Continuing Employees .....................................................41
ITI Disclosure Schedule .......................................................7
ITI Employee Benefit Plans ...................................................15
ITI Intellectual Property ....................................................22
ITI Material Adverse Effect ...................................................7
ITI Material Contract ........................................................24
ITI Preferred Stock ...........................................................5
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XXX Required Consents .........................................................9
ITI Required Statutory Approvals .............................................10
ITI Stockholders' Approval ...................................................21
Lil Marc ......................................................................1
Lil Marc Board Approval ......................................................33
Lil Marc Common Stock .........................................................1
Lil Marc Financial Statements ................................................30
Lil Marc Material Adverse Effect .............................................28
Lil Marc Preferred Stock ......................................................1
Lil Marc Required Statutory Approvals ........................................28
Lil Marc SEC Reports .........................................................30
Lil Marc Stockholders' Consent ................................................1
Lil Marc Stock Option Plan ....................................................1
joint venture .................................................................8
Liens .........................................................................8
Merger ........................................................................1
Merger Consideration ..........................................................3
Newco .........................................................................1
Newco Common Stock ............................................................3
New Plans ....................................................................40
NRS ..........................................................................33
Officer's Certificate ........................................................46
Old Plans ....................................................................40
Over-Allotment Option .........................................................8
Owned Software ...............................................................22
PBGC .........................................................................17
PCBs .........................................................................20
Placement Agency Agreement ....................................................1
Permits ......................................................................10
Permitted Liens ..............................................................25
Private Placement .............................................................2
Release ......................................................................21
Representatives ..............................................................36
Reverse Stock Split ...........................................................1
SAR ...........................................................................6
SEC ..........................................................................10
Securities Act ................................................................5
Series A Preferred Stock ......................................................8
Stock Option ..................................................................6
Stock Plans ...................................................................6
subsidiary ....................................................................7
Surviving Corporation .........................................................2
Takeover Laws ................................................................21
Taxes ........................................................................13
Tax Returns ..................................................................13
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Tax Ruling ...................................................................14
Termination Date .............................................................49
Units .........................................................................2
Violation .....................................................................9
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of July 5, 2002 ("Agreement"),
by and among InkSure Technologies Inc., a Delaware corporation ("ITI"), Lil
Marc, Inc., a Nevada corporation ("Lil Marc"), and LILM Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Lil Marc ("Newco").
RECITALS
WHEREAS, Lil Marc, Newco and ITI intend to effect a merger (the
"Merger") of Newco with and into ITI in accordance with this Agreement and the
Delaware General Corporation Law (the "DGCL"), upon the consummation of which,
Newco will cease to exist, and ITI will become a wholly owned subsidiary of Lil
Marc;
WHEREAS, the respective Boards of Directors of Lil Marc, Newco and ITI
have each (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable and in the best interests of their
respective stockholders and (ii) adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, the stockholders of Newco have approved this Agreement and the
transactions contemplated hereby;
WHEREAS, a majority of stockholders of Lil Marc have approved by
written consent (the "Lil Marc Stockholders' Consent") (i) this Agreement and
the transactions contemplated hereby, (ii) an amendment to the articles of
incorporation of Lil Marc (a) increasing its authorized shares of common stock,
par value $.01 per share ("Lil Marc Common Stock"), from 5,000,000 shares to
35,000,000 shares, (b) amending its corporate purpose, (c) changing its
corporate name, (d) authorizing the issuance of up to 10,000,000 shares of
"blank check" preferred stock, par value $.01 per share ("Lil Marc Preferred
Stock") and (e) increasing Lil Marc's Board of Directors to eight (8) members
from seven (7), (iii) the adoption of a stock option plan (the "Lil Marc Stock
Option Plan"), (iv) the appointment of new accountants for the fiscal year ended
December 31, 2002, and (v) appointment of certain directors to the Lil Marc
Board of Directors as set forth on Exhibit 5.10 attached hereto;
WHEREAS, the Board of Directors of Lil Marc has approved a reverse
stock split of Lil Marc Common Stock which would result in the stockholders of
Lil Marc and ITI immediately prior to the Effective Time (as defined in Section
1.3) owning ten percent (10%) and ninety percent (90%), respectively, of Lil
Marc (excluding any Merger Consideration (as defined in Section 1.6(a) below),
options or warrants issued pursuant to the Over-Allotment Option (as defined in
Section 2.3 below) and to Xxxxxx Xxxx Associates, Ltd.) immediately after the
Effective Time (the "Reverse Stock Split") to be consummated immediately prior
to the Effective Time;
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WHEREAS, ITI has entered into a placement agency agreement, dated as of
May 17, 2002 (the "Placement Agency Agreement") with Commonwealth Associates,
L.P. ("Commonwealth"), providing for, among other things, the retention of
Commonwealth as placement agent in connection with the proposed private
placement (the "Private Placement") of units ("Units") consisting of shares of
common stock, par value $.01 per share, of ITI ("ITI Common Stock") and warrants
to purchase shares of ITI Common Stock;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a "reorganization" under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, ITI, Lil Marc and Newco desire to make certain
representations, warranties, covenants and agreements in respect of the Merger
and to prescribe various conditions thereto, all as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations and warranties contained herein, and subject
to the terms and conditions set forth herein, the parties hereby agree as
follows:
ARTICLE I
MERGER
1.1 Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), Newco shall be
merged with and into ITI in accordance with the DGCL. The separate corporate
existence of Newco shall thereupon cease, and ITI shall be the surviving
corporation in the Merger and continue its corporate existence under the DGCL.
Throughout this Agreement, the term "Newco" shall refer to Newco immediately
prior to the Merger and the term "Surviving Corporation" shall refer ITI in its
capacity as the surviving corporation in the Merger.
1.2 Effects of the Merger. At the Effective Time, (i) the articles of
incorporation of ITI, as in effect immediately prior to the Effective Time,
shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by law and such articles of incorporation and
(ii) the by-laws of ITI, as in effect immediately prior to the Effective Time,
shall be the by-laws of the Surviving Corporation until thereafter amended as
provided by law, the articles of incorporation of the Surviving Corporation and
such by-laws. Subject to the foregoing, the Merger shall have the additional
effects set forth in the DGCL, including but not limited to, Section 259 of the
DGCL. As promptly as practicable after the Effective Time, the Surviving
Corporation shall change its name to "IST Operating, Inc." and Lil Marc shall
change its name to "InkSure Technologies Inc."
1.3 Effective Time. As soon as practicable following the satisfaction
(or, to the extent permitted by law, waived by the applicable party) of all of
the conditions to the Merger, and provided that this Agreement has not been
terminated pursuant to Article VII hereof, the parties hereto shall
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effect the Merger by filing with the Secretary of State of the State of Delaware
a certificate of merger (the "Certificate of Merger") in such form as is
required by, and executed in accordance with, the relevant provisions of the
DGCL (the time of such filing being herein referred to as the "Effective Time").
1.4 Directors of the Surviving Corporation. The directors of ITI
immediately prior to the Effective Time shall resign, effective as of the
Effective Time, and shall be replaced, at the Effective Time, by the individuals
listed in Exhibit 1.4 hereto, who shall serve as the directors of the Surviving
Corporation, each of such directors to hold office, subject to the applicable
provisions of the articles of incorporation and by-laws of the Surviving
Corporation, until their respective successors are duly elected or appointed and
qualified.
1.5 Officers of the Surviving Corporation. The officers of ITI
immediately prior to the Effective Time shall resign, effective as of the
Effective Time, and shall be replaced, at the Effective Time, by the individuals
listed in Exhibit 1.5 hereto, who shall serve as officers of the Surviving
Corporation, subject to the applicable provisions of the articles of
incorporation and by-laws of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified.
1.6 Conversion of Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof:
(a) Each share of ITI Common Stock that shall be issued and
outstanding at the Effective Time (other than (i) shares of ITI Common Stock as
to which appraisal has been properly demanded in accordance with Section 262 of
the DGCL, to the extent applicable, and Section 1.7 below, (ii) shares of ITI
Common Stock, if any, that are held by Lil Marc, Newco, or any other wholly
owned subsidiary of Lil Marc, and (iii) shares of ITI Common Stock held in the
treasury of ITI) shall be converted into the right to receive one (1) (the
"Exchange Ratio") share of Lil Marc Common Stock, subject to adjustment as
provided in paragraphs (d) and (e) of this Section 1.6 (such shares of Lil Marc
Common Stock to be issued hereunder being termed the "Merger Consideration").
(b) Each share of common stock, par value $0.01 per share ("Newco
Common Stock"), of Newco that is issued and outstanding immediately prior to the
Effective Time shall be converted into and represent one fully paid and
non-assessable share of common stock of the Surviving Corporation.
(c) Each share of ITI Common Stock owned by Lil Marc, Newco or
any other wholly owned subsidiary of Lil Marc or held in the treasury of ITI
shall be canceled and cease to exist at the Effective Time, and no consideration
shall be paid with respect thereto.
(d) No fractional shares of Lil Marc Common Stock shall be
issued.
(e) If, between the date of this Agreement and the Effective
Time, the outstanding shares of ITI Common Stock or Lil Marc Common Stock are
changed (other than with respect to the Reverse Stock Split) into a different
number or class or series of shares by reason of any stock split, stock
dividend, reverse stock split, reclassification, recapitalization exchange,
extraordinary
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distribution, redemption or other similar transaction, then, if the effect of
the same is not already accommodated in the calculation of the Exchange Ratio,
the Exchange Ratio shall be appropriately and correspondingly adjusted downward
or upward (as the case may be) to the extent the record date for any such event
is prior to the Effective Time.
1.7 Dissenting Shares. To the extent applicable, shares of ITI Common
Stock outstanding immediately prior to the Effective Time and held by a holder
who is entitled to demand and who properly demands appraisal for such shares of
ITI Common Stock in accordance with the DGCL (the "Dissenting Shares") shall not
be converted into the right to receive the Merger Consideration, unless such
holder fails to perfect or withdraws or otherwise loses his or her right to
appraisal. If after the Effective Time such holder fails to perfect or withdraws
or loses his or her right to appraisal, each such share of ITI Common Stock
shall be treated as if it had been converted as of the Effective Time into the
right to receive the Merger Consideration without any interest thereon. ITI
shall give Lil Marc prompt notice of any demands received by ITI for appraisal
of shares of ITI Common Stock, and Lil Marc shall have the right to participate
in all negotiations and proceedings with respect to such demands. ITI shall not,
without the prior written consent of Lil Marc, make any payment with respect to,
or settle or offer to settle, any such demands.
1.8 Exchange of Certificates.
(a) Prior to the Effective Date, ITI and Lil Marc shall appoint
Pacific Stock Transfer Company to act as exchange agent in the Merger (the
"Exchange Agent"). At the Effective Time, Lil Marc shall deposit with the
Exchange Agent, for the benefit of the holders of shares of ITI Common Stock,
certificates representing the shares of Lil Marc Common Stock issuable pursuant
to this Section 1.8.
(b) After the Effective Time, each holder of a certificate or
certificates that immediately prior to the Effective Time represented issued and
outstanding shares of ITI Common Stock (other than Dissenting Shares, if any,
and other than shares of ITI Common Stock that are held by Lil Marc, Newco or
any other wholly owned subsidiary of Lil Marc or are held in the treasury of
ITI) (the "Certificates") shall surrender the same to the Exchange Agent. After
the Effective Time, upon receipt by the Exchange Agent of (i) the Certificates
duly endorsed in proper form for transfer and (ii) the federal taxpayer
identification number of each holder of Certificates, the Exchange Agent shall
issue, to each former holder of ITI Common Stock (other than Dissenting Shares,
if any, and other than shares of ITI Common Stock that are held by Lil Marc,
Newco or any other wholly owned subsidiary of Lil Marc or are held in the
treasury of ITI), a certificate representing the number of shares of Lil Marc
Common Stock that such holder is entitled to receive pursuant to Section 1.6
hereof. Pending such surrender and exchange, each Certificate shall be deemed
for all corporate purposes to evidence the number of whole shares of Lil Marc
Common Stock into which such shares of ITI Common Stock evidenced by such
Certificate shall have been so converted by the Merger. All certificates for
shares of Lil Marc Common Stock to be issued in the Merger shall be issued in
the same name in which the Certificate surrendered in exchange therefore is
registered.
(c) No holder of a Certificate shall be entitled to receive any
dividend or other distribution from Lil Marc in respect of the Lil Marc Common
Stock to be issued in respect thereof
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until the surrender of such Certificate. Upon such surrender, there shall be
paid to the holder the amount of dividends or other distributions (without
interest) that theretofore became payable but that were not paid by reason of
the foregoing, with respect to the number of shares of Lil Marc Common Stock
represented by the certificates issued upon such surrender.
(d) At any time following one (1) year after the Effective Time,
the Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to the Surviving Corporation any shares of Lil Marc Common Stock that
had been deposited with the Exchange Agent by or on behalf of Lil Marc, Newco or
the Surviving Corporation and have not been disbursed to holders of
Certificates. Any holders of Certificates who have not theretofore complied with
Section 1.8(b) hereof shall thereafter look (subject to applicable escheat and
other similar laws) only to the Surviving Corporation for payment of their claim
for the Merger Consideration, without any interest thereon, and shall have no
greater rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under Delaware law.
1.9 No Further Rights or Transfers. At and after the Effective Time,
holders of Certificates shall cease to have any rights as stockholders of the
Surviving Corporation, except for the right to surrender such Certificates in
exchange for the Merger Consideration pursuant to Sections 1.6 and 1.8 hereof or
to perfect their right to receive payment for their shares of ITI Common Stock
pursuant to Section 262 of the DGCL and Section 1.9 hereof. No transfer of
shares of ITI Common Stock outstanding immediately prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation after the
Effective Time. If, after the Effective Time, Certificates formerly representing
shares of ITI Common Stock are presented to the Surviving Corporation, they
shall be canceled and exchanged for the Merger Consideration.
1.10 Registration Rights. Lil Marc shall honor the registration rights
granted to purchasers of Units in the Private Placement agreeing to register for
resale such shares under the Securities Act of 1933, as amended (the "Securities
Act"), as more expressly set forth in the subscription documents executed in
connection with the Private Placement.
1.11 Closing. The closing (the "Closing") of the Merger shall take
place at the offices of Xxxxxxxxx Xxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (or at such place as may be mutually agreed upon by the parties
hereto) at 10:00 A.M., New York City time, on the second business day
immediately following the date on which the last of the conditions set forth in
Article VI is fulfilled or waived (other than conditions that by their nature
are required to be performed on the Closing Date, but subject to satisfaction of
such conditions), or at such other time and date as ITI and Lil Marc shall
mutually agree (the "Closing Date").
1.12 ITI Preferred Stock. On or before the initial closing of the
Private Placement, the outstanding shares of ITI Preferred Stock, par value $.01
per share ("ITI Preferred Stock"), shall be automatically converted into the
number of shares of ITI Common Stock for which such shares of ITI Preferred
Stock are exercisable, convertible or exchangeable, and such shares of ITI
Common Stock shall be deemed to be issued and outstanding at the Effective Time
for purposes of Section 1.8 hereof.
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1.13 Stock Options, SARs and Warrants.
(a) ITI and Lil Marc will take all necessary actions to cause
each option to purchase shares of ITI Common Stock (a "Stock Option") and each
stock appreciation right linked to the price of ITI Common Stock (a "SAR")
granted under any stock option plan, program, agreement or arrangement of ITI or
any of its subsidiaries (collectively, the "Stock Plans") which is outstanding
and unexercised immediately prior to the Effective Time, whether vested or
unvested, to be cancelled as of the Effective Time and to be converted at the
Effective Time into rights to receive Lil Marc Common Stock under the Lil Marc
Stock Option Plan in accordance with their terms and conditions (as in effect as
of the date of this Agreement) of the Stock Plan under which it was issued and
the terms and conditions of the stock option agreement by which it is evidenced.
From and after the Effective Time, (i) each Stock Option or SAR exchanged
hereunder may be exercised solely for shares of Lil Marc Common Stock, (ii) the
number of shares of Lil Marc Common Stock subject to each such Stock Option or
SAR shall be equal to the number of shares of ITI Common Stock subject to such
Stock Option or SAR immediately prior to the Effective Time multiplied by the
Exchange Ratio, (iii) the per share exercise price under each such Stock Option
or SAR shall be adjusted by dividing the per share exercise price under such
Stock Option or SAR by the Exchange Ratio, and (iv) any restriction on the
exercise of any such Stock Option or SAR shall continue in full force and effect
and the term, exercisability, vesting schedule and other provisions of such
Stock Option or SAR shall otherwise remain unchanged.
(b) ITI and Lil Marc will take all necessary actions to cause
each warrant to purchase shares of ITI Common Stock which is outstanding and
unexercised immediately prior to the Effective Time, whether vested or unvested,
to be cancelled as of the Effective Time and to be converted at the Effective
Time into rights to receive Lil Marc Common Stock in accordance with their terms
and conditions (as in effect as of the date of this Agreement). From and after
the Effective Time, (i) each warrant exchanged hereunder may be exercised solely
for shares of Lil Marc Common Stock, (ii) the number of shares of Lil Marc
Common Stock subject to each warrant shall be equal to the number of shares of
ITI Common Stock subject to such warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, (iii) the per share exercise price under each
such warrant shall be adjusted by dividing the per share exercise price under
such warrant by the Exchange Ratio, and (iv) any restriction on the exercise of
any such warrant shall continue in full force and effect and the term,
exercisability, vesting schedule and other provisions of such warrant shall
otherwise remain unchanged.
(c) Prior to the Effective Time, ITI shall take all actions that
may be necessary to effectuate the provisions of this Section 1.13 and to ensure
that, from and after the Effective Time, holders of Stock Options, SARs and
warrants have no rights with respect thereto other than those specifically
provided in this Section 1.13.
1.14 Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of, and assume the liabilities of, either of ITI or Newco
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this
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Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either ITI or
Newco, all such deeds, bills of sale, assignments and assurances and to take and
do, in the name and on behalf of each of such corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in, and the assumption of the liabilities of, the Surviving
Corporation or otherwise to carry out this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ITI
Except as set forth in the corresponding sections or subsections of the
ITI Disclosure Schedule, dated as of the date hereof, delivered by ITI to Lil
Marc (the "ITI Disclosure Schedule"), ITI represents and warrants to Lil Marc
and Newco as follows:
2.1 Organization and Qualification. ITI and each of its subsidiaries
(as defined below) is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
existence, has all requisite corporate power and authority to own, lease and
operate its assets and properties to the extent owned, leased and operated and
to carry on its business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified and in good standing would not, when taken together with all
other such failures, reasonably be expected to have a material adverse effect on
the business, properties, condition (financial or otherwise), prospects or
results of operations of ITI and its subsidiaries taken as a whole or on the
consummation of this Agreement (any such material adverse effect being hereafter
referred to as an "ITI Material Adverse Effect"). As used in this Agreement, the
term "subsidiary" of a person shall mean any corporation or other entity
(including partnerships and other business associations) of which a majority of
the outstanding capital stock or other voting securities having voting power
under ordinary circumstances to elect directors or similar members of the
governing body of such corporation or entity shall at the time be held, directly
or indirectly, by such person. True, accurate and complete copies of the
articles of incorporation, as amended and in effect on the date hereof, by-laws,
as in effect on the date hereof, and minute books of ITI have been delivered to
Lil Marc.
2.2 Subsidiaries. Section 2.2 of the ITI Disclosure Schedule sets
forth a description, as of the date hereof, of all material subsidiaries and
joint ventures of ITI, including the name of each such entity, the state or
jurisdiction of its incorporation or organization, ITI's interest therein and a
brief description of the principal line or lines of business conducted by each
such entity. All of the issued and outstanding shares of capital stock of, or
other equity interests in, each subsidiary of ITI are validly issued, fully
paid, nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by ITI free and clear of any pledges, liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever
(collectively, "Liens"). There are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies, rights, warrants or SARs, including any right
of conversion or exchange under any outstanding security, instrument or other
agreement, obligating any subsidiary of ITI to issue, deliver or sell, or cause
to be issued, delivered
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or sold, additional shares of its capital stock or obligating ITI or any of any
of its subsidiaries to grant, extend or enter into any such agreement or
commitment, except for any of the foregoing that could not reasonably be
expected to have an ITI Material Adverse Effect. As used in this Agreement, the
term "joint venture" of a person shall mean any corporation or other entity
(including partnerships and other business associations) that is not a
subsidiary of such person, in which such person or one or more of its
subsidiaries owns an equity interest, other than equity interests held for
passive investment purposes which are less than ten percent (10%) of any class
of the outstanding voting securities or equity of any such entity.
2.3 Capitalization.
(a) The authorized capital stock of ITI consists of 13,000,000
shares of ITI Common Stock and 2,000,000 shares of ITI Preferred Stock, of which
1,312,785 shares were designated as Series A Convertible Preferred Stock (the
"Series A Preferred Stock"). As of the date hereof, there were issued and
outstanding 5,066,796 shares of ITI Common Stock and 1,312,785 shares of Series
A Preferred Stock. All of the issued and outstanding shares of capital stock of
ITI are validly issued, fully paid, nonassessable and free of preemptive rights.
Except as disclosed on Section 2.3(a) of the ITI Disclosure Schedule or as
contemplated in Section 2.3(b) below), there are no outstanding subscriptions,
options, registration rights, calls, contracts, voting trusts, proxies, rights,
warrants or SARs, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating ITI or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of ITI, or obligating ITI to grant,
extend or enter into any such agreement or commitment.
(b) Prior to the Effective Time, all shares of ITI Preferred
Stock shall have been converted into shares of ITI Common Stock.
(c) ITI has arranged a Private Placement of up to sixty (60)
Units (subject to an increase of up to fifteen (15) Units, at the discretion of
Commonwealth, to cover over-allotments (the "Over-Allotment Option"), but in no
event less than forty (40) Units) at a price of One Hundred Thousand Dollars
($100,000) per Unit for a maximum aggregate amount of up to Six Million Dollars
($6,000,000). The Units will be sold prior to Closing and each Unit will consist
of (i) 62,112 shares of ITI Common Stock, and (ii) warrants to purchase 21,739
shares of Common Stock.
2.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. ITI has all requisite corporate power and
authority to enter into this Agreement and, subject to any ITI Required
Statutory Approvals (as defined in Section 2.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by ITI of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of ITI, subject to
any ITI Required Statutory Approvals, which shall be obtained prior to the
Effective Time. This Agreement has been duly and validly executed, subject to
any ITI Required Statutory Approvals, which shall be obtained prior to the
Effective Time, and delivered by ITI and, assuming the due authorization,
execution and delivery by the other signatories hereto, constitutes a legal,
valid and binding obligation of ITI enforceable
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against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether such enforceability is considered in a proceeding
in equity or at law).
(b) Non-Contravention. The execution and delivery of this
Agreement by ITI do not, and the consummation of the transactions contemplated
hereby will not, violate, conflict with, or result in a breach of any provision
of, or constitute a default (with or without notice or lapse of time or both)
under, or result in a right of termination, cancellation, or acceleration of any
obligation under, result in the creation of any Lien, charge, "put" or "call"
right or other encumbrance on, or the loss of, any of the properties or assets,
including ITI Intellectual Property (as defined in Section 2.16), of ITI or any
of its subsidiaries (any such violation, conflict, breach, default, right of
termination, cancellation or acceleration, loss or creation, a "Violation" with
respect to ITI (such term when used in Article III having a correlative meaning
with respect to Lil Marc)) or any of its subsidiaries or, to the knowledge of
ITI, any of its joint ventures pursuant to any provisions of (i) the articles of
incorporation or by-laws of ITI or any of its subsidiaries, (ii) subject to
obtaining ITI Required Statutory Approvals (as defined below), any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority (as defined in Section 2.4(c))
applicable to ITI or any of its subsidiaries or, to the knowledge of ITI, any of
its joint ventures, or any of their respective properties or assets, or (iii)
subject to obtaining the third-party consents or other approvals set forth in
Section 2.4(b) of the ITI Disclosure Schedule (the "ITI Required Consents"), any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which ITI or any of its subsidiaries is a party or by which ITI or any
of its subsidiaries or any of their respective properties or assets may be bound
or affected, excluding from the foregoing clauses (ii) and (iii) such Violations
as would not reasonably be expected to have, in the aggregate, an ITI Material
Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration
with, or notice to or authorization, consent or approval of, any federal, state,
local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority or regulatory body
(including a stock exchange or other self-regulatory body) or any other
authority (each, a "Governmental Authority") is necessary for the execution and
delivery of this Agreement by ITI or the consummation by ITI of the transactions
contemplated hereby, except for those required under or in relation to (A) state
securities or "blue sky" laws (the "Blue Sky Laws"), (B) the Securities Act, (C)
the Exchange Act of 1934, as amended (the "Exchange Act"), (D) the DGCL with
respect to the filing of the Certificate of Merger, (E) the ITI Stockholders'
Consent, and (F) such consents, approvals, order, authorizations, registrations,
declarations and filings the failure to obtain, make or give which would
reasonably be expected to have, in the aggregate, an ITI Material Adverse Effect
(the "ITI Required Statutory Approvals"), it being understood that references in
this Agreement to "obtaining" such ITI Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such notice;
obtaining such consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law.
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(d) Compliance. Neither ITI nor any of its subsidiaries or, to
the knowledge of ITI, any of its joint ventures is in violation of, or under
investigation with respect thereto, or has been given notice of any purported
violation of, any law, statute, order, rule, regulation or judgment (including,
without limitation, any applicable Environmental Law, as defined in Section
2.11) of any Governmental Authority except for violations that, in the
aggregate, are not reasonably expected to have an ITI Material Adverse Effect.
ITI and its subsidiaries and, to the knowledge of ITI, its joint ventures have
all permits, licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct their respective businesses as
currently conducted in all respects (collectively, "Permits"), except those
which the failure to obtain would, in the aggregate, not reasonably be expected
to have an ITI Material Adverse Effect. ITI and each of its subsidiaries and, to
the knowledge of ITI, each of its joint ventures are not in breach or violation
of or in default in the performance or observance of any term or provision of,
and no event has occurred which, with lapse of time or action by a third party,
could result in a default under, (i) its articles of incorporation or by-laws or
(ii) any material contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to which it
is a party or by which it is bound or to which any of its property is subject,
except for breaches, violations or defaults that, in the aggregate, are not
reasonably expected to have an ITI Material Adverse Effect.
(e) There is no "non-competition" or other similar consensual
contract or agreement that restricts the ability of ITI or any of its
subsidiaries to conduct business in any geographic area or that would restrict
ITI or any of its affiliates from conducting business in any geographic area.
2.5 Reports and Financial Statements.
(a) Prior to the Effective Time, ITI will furnish Lil Marc with
the audited ITI balance sheets as at December 31, 2000 and December 31, 2001,
and the related statements of income and retained earnings, statements of cash
flows and statements of stockholders equity of ITI for each of the two fiscal
years ended December 31, 2001 (the "Audited Financial Statements"). Such Audited
Financial Statements shall have been reviewed by an independent auditor
experienced in Securities and Exchange Commission ("SEC") accounting, shall be
prepared in accordance with United States generally accepted accounting
principals ("GAAP") and shall be in compliance with Regulation S-X, as
promulgated under the Securities Act.
(b) In each case, except for the absence of full footnote
disclosures and schedules required in accordance with GAAP, and year end audit
adjustments which are not individually or in the aggregate material (i) the
Audited Financial Statements shall be prepared by management of ITI, (ii) the
Audited Financial Statements shall present fairly as of their respective dates
the assets, liabilities, stockholders' equity and the financial condition of
ITI, (iii) as of the date of such balance sheets, except as and to the extent
reflected or reserved against therein, ITI did not have any liabilities or
obligations (absolute or contingent) which should be reflected in a balance
sheet or the notes thereto, prepared in accordance with GAAP, and all assets
reflected therein are properly reported and present fairly the value of the
assets of ITI in accordance with GAAP, and (iv) the statements of income,
stockholders' equity, and changes in financial condition shall reflect fairly
the
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information required to be set forth therein by GAAP.
(c) Except as set forth in the Audited Financial Statements and
to the knowledge of ITI, ITI and its subsidiaries have no material liabilities
or obligations of any nature (whether asserted, unasserted, accrued, unaccrued,
absolute, fixed, contingent, liquidated, unliquidated, due, to become due, or
otherwise), and there is no fact, condition or circumstance which could
reasonably be expected to result in such liabilities or obligations.
2.6 Absence of Certain Changes or Events. Since March 31, 2002 (the
"Balance Sheet Date") ITI has not:
(a) incurred any debts, obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business and consistent
with past practices, having individually or in the aggregate an ITI Material
Adverse Effect;
(b) made or suffered any changes in its contingent obligations by
way of guaranty, endorsement (other than the endorsement of checks for deposit
in the usual and ordinary course of business), indemnity, warranty or otherwise;
(c) discharged or satisfied any Liens other than those securing,
or paid any obligation or liability other than, current liabilities shown as of
the Balance Sheet Date, and current liabilities incurred since the Balance Sheet
Date, in each case in the usual and ordinary course of business and consistent
with past practices;
(d) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible;
(e) sold, transferred or leased any of its assets except in the
usual and ordinary course of business and consistent with past practices;
(f) cancelled or compromised any debt or claim, or waived or
released any right, of material value;
(g) suffered any physical damage, destruction or loss (whether or
not covered by insurance) adversely affecting the properties, business or
prospects of ITI;
(h) entered into any transaction other than in the usual and
ordinary course of business except for this Agreement and the related agreements
contemplated hereby;
(i) encountered any labor difficulties or labor union organizing
activities;
(j) made or granted any wage or salary increase or entered into
any employment agreement;
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(k) issued or sold any shares of capital stock or other
securities or granted any options with respect thereto, or modified any equity
security of ITI;
(l) declared or paid any dividends on or made any other
distributions with respect to, or purchased or redeemed, any of its outstanding
equity securities;
(m) suffered or experienced any change in, or condition
affecting, its condition (financial or otherwise), properties, assets,
liabilities, business operations, results of operations or prospects other than
changes, events or conditions in the usual and ordinary course of its business
and consistent with past practices, having (either by itself or in conjunction
with all such other changes, events and conditions) an ITI Material Adverse
Effect;
(n) made any change in the accounting principles, methods or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted; or
(o) entered into any agreement, or otherwise obligated itself, to
do any of the foregoing.
2.7 Litigation. Except as disclosed in Section 2.7 of the ITI
Disclosure Schedule, there is no material action, suit, investigation, customer
complaint, claim or proceeding at law or in equity by or before any arbitrator,
court, governmental instrumentality or agency, self-regulatory organization or
body or public board now pending or, to the knowledge of ITI, threatened against
ITI or any of its subsidiaries or any of ITI's officers or directors in their
capacities as such (or basis therefor known to ITI), the adverse outcome of
which would have an ITI Material Adverse Effect. Neither ITI nor any of its
subsidiaries is subject to any judgment, order, writ, injunction or decree of
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which have an ITI
Material Adverse Effect.
2.8 Information Statement. None of the information supplied or to be
supplied by or on behalf of ITI for inclusion or incorporation by reference in
the information statement in definitive form to be sent to stockholders of Lil
Marc in connection with the Lil Marc Stockholders' Consent (the "Information
Statement") will, at the date such Information Statement is mailed to such
stockholders, and, as the same may be amended or supplemented, at the times of
such meetings, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided that no
representation or warranty is made by ITI with respect to statements made or
incorporated by reference in the Information Statement based on information
supplied by Lil Marc and Newco for inclusion or incorporation by reference
therein.
2.9 Tax Matters. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipts, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties (civil or
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criminal) on or additions to any such taxes. "Tax Return," as used in this
Agreement, means a report, return or other written information required to be
supplied to a governmental entity with respect to Taxes.
Except as set forth on Section 2.9 of the ITI Disclosure
Schedule:
(a) Filing of Timely Tax Returns. ITI and each of its
subsidiaries have duly filed (or there has been filed on its behalf) within the
time prescribed by law all material Tax Returns required to be filed by each of
them under applicable law. All such Tax Returns were and are in all material
respects complete and, to the knowledge of ITI, correct.
(b) Payment of Taxes. ITI and each of its subsidiaries have,
within the time and in the manner prescribed by law, paid all material Taxes
that are currently due and payable except for those contested in good faith and
for which adequate reserves have been taken.
(c) Tax Reserves. ITI and each of its subsidiaries have
established on their books and records adequate reserves for all Taxes and for
any liability for deferred income taxes in accordance with GAAP.
(d) Extensions of Time for Filing Tax Returns. Neither ITI nor
any of its subsidiaries have requested any extension of time within which to
file any material Tax Return, which Tax Return has not since been filed.
(e) Waivers of Statute of Limitations. Neither ITI nor any of its
subsidiaries has in effect any extension, outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect to
any material Taxes or material Tax Returns.
(f) Audit, Administrative and Court Proceedings. No material
audits or other administrative proceedings are presently pending or threatened
with regard to any Taxes or Tax Returns of ITI or any of its subsidiaries (other
than those being contested in good faith and for which adequate reserves have
been established) and no issues have been raised in writing by any taxing
authority in connection with any Tax or Tax Return.
(g) Tax Liens. There are no Tax liens upon any asset of ITI or
any of its subsidiaries except liens for Taxes --------- not yet due.
(h) Tax Rulings. Neither ITI nor any of its subsidiaries has
received a Tax Ruling (as defined below) or entered into a Closing Agreement (as
defined below) with any taxing authority that would have a continuing adverse
effect after the Closing Date. "Tax Ruling," as used in this Agreement, shall
mean a written ruling of a taxing authority relating to Taxes. "Closing
Agreement," as used in this Agreement, shall mean a written and legally binding
agreement with a taxing authority relating to Taxes.
(i) Availability of Tax Returns. ITI has provided or made
available to Lil Marc complete and accurate copies of (i) all Tax Returns, and
any amendments thereto, filed by ITI or any
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of its subsidiaries covering all years ending on or after December 31, 2000,
(ii) all audit reports received from any taxing authority relating to any Tax
Return filed by ITI or any of its subsidiaries covering all years ending on or
after December 31, 2000 and (iii) all powers of attorney currently in force
granted by ITI or any of its subsidiaries concerning any material Tax matter.
(j) Tax Sharing Agreements. Neither ITI nor any of its
subsidiaries is a party to any agreement relating to allocating or sharing of
Taxes.
(k) Liability for Others. Neither ITI nor any of its subsidiaries
has any liability for any material Taxes of any person other than ITI and its
subsidiaries (i) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract or (iv) otherwise.
(l) Code Sections 368(a). ITI has no knowledge of any fact, nor
has ITI taken any action that would, or would reasonably be likely to adversely
affect the qualification of the Merger as a reorganization described in Section
368(a) of the Code.
(m) Code Section 355(e). Neither ITI nor any of its subsidiaries
has constituted a "distributing corporation" in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) in the past
24-month period or (ii) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with this transaction.
(n) Code Section 897. Neither ITI nor any of its subsidiaries is
or has been a United States real property holding company (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.
(o) Intercompany Transactions. Neither ITI nor any of its
subsidiaries has engaged in any intercompany transactions within the meaning of
Treasury Regulations Section 1.1502-13 (or any predecessor provision) for which
any income or gain will remain unrecognized as of the close of the last taxable
year prior to the Closing.
(p) Excess Loss Accounts. ITI has no excess loss account within
the meaning of Treasury Regulation Section 1.1502-19 with respect to any of its
subsidiaries.
(q) Code Section 338 Elections. No election under Section 338 of
the Code (or any predecessor provisions) has been made by or with respect to ITI
or any of its subsidiaries or any of their respective assets or properties.
(r) Code Section 481 Adjustments. Neither ITI nor any of its
subsidiaries is required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of a voluntary change in accounting method
initiated by ITI or any of its subsidiaries and ITI has no knowledge that the
Internal Revenue Service has proposed any such adjustment or change in
accounting method.
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(s) Code Section 6662. All transactions that could give rise to
an understatement of federal income tax within the meaning of Section 6662 of
the Code have been adequately disclosed (or, with respect to Tax Returns of ITI
or any of its subsidiaries filed following the Closing will be adequately
disclosed) on the Tax Returns of ITI or any of its subsidiaries in accordance
with Section 6662(d)(2)(B) of the Code.
(t) NOLs and Credits. ITI does not have any net operating loss
carryovers available to offset future income or any unused credits with respect
to Taxes.
(u) Filing Jurisdictions. No jurisdiction in which ITI or any of
its subsidiaries does not file a Tax Return has made a claim that ITI or any of
its subsidiaries is responsible to file a Tax Return in such jurisdiction.
(v) Section 341(f). Neither ITI nor any of its subsidiaries has
filed a consent to the application of Section 341(f) of the Code.
(w) Section 168(h). No property of ITI or any of its subsidiaries
is "tax-exempt use property" within the meaning of Section 168(h) of the Code or
property that ITI or any of its subsidiaries will be required to treat as being
owned by another person pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended, in effect immediately prior to the enactment of the
Tax Reform Act of 1986.
2.10 Employee Matters; ERISA. Except as set forth on Section 2.10 of
the ITI Disclosure Schedule:
(a) Each "employee benefit plan" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
bonus, deferred compensation, severance, change of control, share option or
other plan, policy, arrangement or agreement relating to employment,
compensation or fringe benefits for employees, former employees, officers,
trustees or directors of ITI or any of its subsidiaries effective as of the date
hereof or providing benefits as of the date hereof to current employees, former
employees, officers, trustees or directors of ITI or pursuant to which ITI or
any of its subsidiaries has or could reasonably be expected to have any
liability (collectively, the "ITI Employee Benefit Plans") is listed in Section
2.10(a) of the ITI Disclosure Schedule, is in material compliance with
applicable law, including without limitation ERISA and the Code, and has been
administered and operated in all material respects in accordance with its terms
and all applicable statutes, orders or governmental rules or regulations
currently in effect, including but not limited to, ERISA and the Code. Each ITI
Employee Benefit Plan which is intended to be qualified within the meaning of
Sections 401(a) and 501(a) of the Code has received a favorable determination
letter from the Internal Revenue Service (the "IRS") as to such qualification
and, to the knowledge of ITI, no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of, or have any
adverse effect on, any such determination.
(b) Complete and correct copies of the following documents have
been made available to Lil Marc as of the date of this Agreement: (i) all ITI
Employee Benefit Plans and any related trust agreements or insurance contracts,
all plan amendments, service provider contracts, investment management and
investment advisory agreements, (ii) the most current summary
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descriptions and summaries of material modifications and all other employee
communications relating to each ITI Employee Benefit Plan subject to ERISA,
(iii) the three most recent Form 5500s and Schedules thereto for each ITI
Employee Benefit Plan subject to such reporting, (iv) the most recent
determination of the IRS and the most recent application for determination filed
with the IRS with respect to the qualified status of each ITI Employee Benefit
Plan that is intended to qualify under Sections 401(a) and 501(a) of the Code,
(v) the most recent accountings with respect to each ITI Employee Benefit Plan
funded through a trust, (vi) the most recent actuarial report of the qualified
actuary of each ITI Employee Benefit Plan with respect to which actuarial
valuations are conducted (vii) all closing agreements under the Employee Plans
Closing Agreement Program issued by the IRS and compliance statements under the
Voluntary Compliance Resolution program issued by the IRS, and (viii) in the
case of stock options or stock appreciation rights issued under any ITI Employee
Benefit Plans, a list of holders, date of grant, number of shares, exercise
price per share and dates exercisable.
(c) Each ITI Employee Benefit Plan subject to the requirements of
Section 601 of ERISA has been operated in material compliance therewith. ITI has
not contributed to a nonconforming group health plan (as defined in Code Section
5000(c)) and no person under common control with ITI within the meaning of
Section 414 of the Code ("ERISA Affiliate") has incurred a tax liability under
Code Section 5000(a) that is or could reasonably be expected to be a liability
of ITI.
(d) Each ITI Employee Benefit Plan covers only employees who are
employed by ITI or a subsidiary (or former employees or beneficiaries with
respect to service with ITI or a subsidiary).
(e) Neither ITI, any subsidiary, any ERISA Affiliate nor any
other corporation or organization controlled by or under common control with any
of the foregoing within the meaning of Section 4001 of ERISA has, within the
five-year period preceding the date of this Agreement, at any time contributed
to or had an obligation to contribute to any "multiemployer plan," as that term
is defined in Section 4001 of ERISA. Neither ITI, any subsidiary , any ERISA
Affiliate nor any other corporation or organization controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of
ERISA has, at any time during the last five-year period preceding the date
hereof, withdrawn from any Multiemployer Plan or Multiple Employer Plan or
incurred any withdrawal liability that has not been satisfied in full.
(f) No event has occurred, and there exists no condition or set
of circumstances in connection with any ITI Employee Benefit Plan, under which
ITI or any subsidiary, directly or indirectly (through any indemnification
agreement or otherwise), could be subject to any liability under Section 409 of
ERISA, Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code
except for instances of non-compliance which, individually or in the aggregate,
could not reasonably be expected to have an ITI Material Adverse Effect.
(g) No proceeding by the Pension Benefit Guaranty Corporation
(the "PBGC") to terminate any ITI Employee Benefit Plans pursuant to Title IV of
ERISA has been instituted or threatened, there is no pending or threatened legal
action or investigation against or involving any ITI
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Employee Benefit Plans and there is no basis for any such legal action,
proceeding or investigation. No amendment has been adopted which would require
ITI, any subsidiary or ERISA Affiliate to provide security pursuant to Section
307 of ERISA or Section 401(a)(29) of the Code.
(h) Neither ITI nor any ERISA Affiliate has incurred any
liability to the PBGC under Section 302(c)(ii), 4062, 4063, 4064 or 4069 of
ERISA, or otherwise that has not been satisfied in full and no event or
condition exists or has existed which could reasonably be expected to result in
any such material liability. As of the date of this Agreement, no "reportable
event" within the meaning of Section 4043 of ERISA has occurred with respect to
any ITI Employee Benefit Plan that is a defined benefit plan under Section 3(35)
of ERISA.
(i) No employer securities, employer real property or other
employer property is included in the assets of any ITI Employee Benefit Plan.
(j) All required contributions for all periods ending on or prior
to the Effective Time (excluding any amounts not yet due) have been made in
full. Subject only to normal retrospective adjustments in the ordinary course,
all insurance premiums, including, but not limited to, premiums to the PBGC have
been paid in full with respect to each applicable ITI Employee Benefit Plan for
all periods ending on or prior to the Effective Time. As of the Effective Time,
none of ITI Employee Benefit Plans has underfunded benefit liabilities as
defined in Section 4001 of ERISA. Neither ITI nor any ERISA Affiliate has an
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, or any liability under Section 4971 of the Code. No
waivers of the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA have been requested or obtained by ITI or any ERISA
Affiliate.
(k) No amounts payable under any ITI Employee Benefit Plan or
other agreement, contract, or arrangement will fail to be deductible for federal
income tax purposes by virtue of Section 280G or Section 162(m) of the Code.
(l) There are no actions, suits or claims pending or, to the
knowledge of ITI, threatened with respect to any ITI Employee Benefit Plan.
(m) Participants' rights in all terminated ITI Employee Benefit
Plans qualified under the Code have been fully satisfied.
(n) No action, suit, grievance, arbitration or other manner of
litigation or claim with respect to the assets of any ITI Employee Benefit Plan
(other than routine claims for benefits made in the ordinary course of plan
administration for which plan administrative review procedures have not been
exhausted) is pending, threatened or imminent against or with respect to any ITI
Employee Benefit Plan, ITI, any ERISA Affiliate or any fiduciary as such term is
defined in Section 3(21) of ERISA, including but not limited to, any action,
suit, grievance, arbitration or other manner of litigation or claim regarding
conduct that allegedly interferes with the attainment of rights under ITI
Employee Benefit Plans and none of the stockholders, owners, ITI or any
fiduciary has knowledge of any facts which would give rise or could give rise to
any such actions, suits, grievances, arbitration or other manner of litigation
or claims with respect to any ITI Employee
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Benefit Plan. To the best of its knowledge, ITI, its directors, officers,
employees, or any fiduciary do not have any liability for the failure to comply
with ERISA or the Code for any action or failure to act in connection with the
administration or investment of such plans.
(o) ITI and its subsidiaries are parties to the collective
bargaining agreements described in Section 2.10(o) of the ITI Disclosure
Schedule.
(i) No labor organization or group of employees of ITI or
any of its subsidiaries has made a pending demand for
recognition or certification, and there are no
representation or certification proceedings or
petitions seeking a representation proceeding
presently pending or, to the knowledge of ITI,
threatened to be brought or filed, with the National
Labor Relations Board or any other labor relations
tribunal or authority.
(ii) There are no organizing activities, strikes, work
stoppages, slowdowns, lockouts or other labor
disputes pending or, to the knowledge of ITI,
threatened against or involving ITI or any of its
subsidiaries. There are no grievances pending or, to
the knowledge of ITI, threatened, which could
reasonably be expected to have an ITI Material
Adverse Effect.
(iii) Each of ITI and its subsidiaries is in material
compliance with all applicable laws and collective
bargaining agreements respecting employment and
employment practices, terms and conditions of
employment, wages and hours and occupational safety
and health, except where the failure to be in
compliance could not reasonably be expected to have
an ITI Material Adverse Effect.
(iv) There are no arbitration proceedings arising out of
or under any collective bargaining agreement pending
or, to the knowledge of ITI, threatened, against ITI
or any of its subsidiaries, and there are no
administrative charges or court complaints against
ITI or any of its subsidiaries concerning alleged
employment discrimination or other employment related
matters pending or, to the knowledge of ITI,
threatened before the U.S. Equal Employment
Opportunity Commission or any other Governmental
Authority. Neither ITI nor any of its subsidiaries
are in violation of the Federal Worker Adjustment and
Retraining Notification Act of 1988.
(p) No ITI Employee Benefit Plan currently covers, or has ever
covered, former or current non-U.S. Employees, independent contractors or
consultants (or any of their beneficiaries). The consummation of the
transactions contemplated by this Agreement will not cause, in itself, or result
in an increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits or compensation payable in respect
of any former or current foreign
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employee, independent contractor or consultant (or any of their beneficiaries.
(q) ITI and each of its subsidiaries are in compliance with all
federal, state, local and foreign requirements regarding employment including,
but not limited to, any foreign national's visa or resident status, except where
the failure to obtain or to be in such compliance would not, in the aggregate,
reasonably be expected to have an ITI Material Adverse Effect.
2.11 Environmental Protection.
(a) Each of ITI and its subsidiaries is in compliance in all
respects with all applicable Environmental Laws, which compliance includes the
possession by each of ITI and its subsidiaries of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, except for such failures to
comply that would not reasonably be expected to have a Company Material Adverse
Effect on ITI and its subsidiaries (taken as a whole). Neither ITI nor its
subsidiaries has received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that any of ITI or its subsidiaries is not in compliance
with any Environmental Law, and, there are no circumstances that may prevent or
interfere with the compliance by any of ITI or its subsidiaries with any
Environmental Law in the future. To ITI's knowledge, no current or prior owner
of any property leased or controlled by any of ITI or its subsidiaries has
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that such current or prior owner or any of ITI or its subsidiaries is not in
compliance with any Environmental Law. All property that is or has been leased
to, controlled by or used by ITI and its subsidiaries, and all surface water,
groundwater and soil associated with or adjacent to such property is in clean
and healthful condition and is free of any material environmental contamination
of any nature and none of ITI nor its subsidiaries has any liability for any
clean-up or remediation under any Environmental Law. All property that is leased
to, controlled by or used by any of ITI or its subsidiaries is free of any
friable asbestos or asbestos-containing material.
(b) As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions,
suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity
(including any Governmental Authority) alleging
potential liability (including, without limitation,
potential responsibility for or liability for
enforcement costs, investigatory costs, cleanup
costs, governmental response costs, removal costs,
remedial costs, natural-resources damages, property
damages, personal injuries, fines or penalties)
arising out of, based on or resulting from (A) the
presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any
location, whether or not owned, operated, leased or
managed by ITI or any of its subsidiaries or, to the
knowledge of ITI, any of its joint ventures; or (B)
circumstances forming the basis of any violation, or
alleged
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violation, of any Environmental Law; or (C) any and
all claims by any third party seeking damages,
contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state, local
laws, rules, ordinances and regulations, relating to
pollution, the environment (including, without
limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of
natural resources or human health as it relates to
the environment including, without limitation, laws
and regulations relating to Releases or threatened
Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing,
distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos
in any form that is or could become friable, urea
formaldehyde foam insulation, coal tar residue, and
transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls
("PCBs") in regulated concentrations; and (B) any
chemicals, materials or substances which are now
defined as or included in the definition of
"hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "hazardous constituents" or words
of similar import, under any Environmental Law; and
(C) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or
regulated under any Environmental Law in a
jurisdiction in which ITI or any of its subsidiaries
or, to the knowledge of ITI, any of its joint
ventures operates or has stored, treated or disposed
of Hazardous Materials.
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the atmosphere,
soil, surface water, groundwater or property.
2.12 Board Approval. The Board of Directors of ITI, by resolutions (or
corporate action by written consent) duly adopted by unanimous vote of those
voting at a meeting duly called and held and not subsequently rescinded or
modified in any way (the "ITI Board Approval"), has duly (i) determined that
this Agreement and the Merger are fair to and in the best interests of ITI and
its stockholders and declared the Merger to be advisable, (ii) approved this
Agreement and the Merger and (iii) recommended that ITI's stockholders adopt
this Agreement and directed that such matter be submitted for consideration by
ITI's stockholders at the ITI stockholders' meeting. The ITI Board Approval
constitutes approval of this Agreement and the Merger for purposes of Section
203 of the DGCL. Except for Section 203 of the DGCL (which has been rendered
inapplicable), no state
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takeover statute is applicable to this Agreement or the Merger or the other
transactions contemplated hereby or thereby.
2.13 ITI Stockholders' Approval. On or prior to the initial closing of
the Private Placement, ITI shall (i) obtain irrevocable proxies voting to
approve this Agreement and the transactions contemplated hereby from all of its
current executive officers and directors and beneficial holders of five percent
(5%) or more of its capital stock in accordance with the provisions of its
articles of incorporation and the DGCL and (ii) shall obtain proxies from all of
the then-current purchasers of Units in the Private Placement as set forth in
the subscription documents therefor voting to approve this Agreement and the
transactions contemplated hereby in accordance with the provisions of its
articles of incorporation and the DGCL (both (i) and (ii) above collectively,
the "ITI Stockholders' Approval").
2.14 Ownership of Lil Marc Common Stock. Neither ITI nor any of its
subsidiaries "beneficially owns" (as such term is defined for purposes of
Section 13(d) of the Exchange Act) any shares of the capital stock of Lil Marc.
2.15 Takeover Provisions. ITI has taken all necessary action, if any,
in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the articles of incorporation or
the laws of the state of Delaware which is or could become applicable as a
result of the transactions contemplated by this Agreement, including without
limitation, Lil Marc's issuance of the Merger Consideration (collectively,
"Takeover Laws"). ITI has not adopted a shareholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of ITI Common
Stock or a change in control of ITI.
2.16 Intellectual Property.
(a) ITI or its subsidiaries owns or possesses sufficient
legal rights to all patents, patent applications, trademarks, service marks,
trade names, copyrights, trade secrets, inventions and technology (whether or
not patentable), confidential and proprietary information, domain names,
licenses, know-how, concepts, computer programs, software, databases and other
collections and compilations of data, other technical data, proprietary rights,
proprietary processes, and other information and/or intellectual property
necessary for their businesses as now conducted and as proposed to be conducted
(each such item "ITI Intellectual Property") without any conflict with or
infringement of the rights of others, and has the right to bring actions for the
infringement, dilution, misappropriation or other violation of such ITI
Intellectual Property, except to the extent that any such conflict or
infringement, or the absence of any such right, would not individually or in the
aggregate, have an ITI Material Adverse Effect.
(b) Section 2.16(b) of the ITI Disclosure Schedule contains a
complete list of patents, patent applications, trademarks, service marks, trade
names, copyrights and domain names used or held for use by ITI and its
subsidiaries throughout the world and pending applications therefor and
registrations, renewals, extensions and the like thereof, specifying as to each
such item, as applicable: (i) the owner of the item, (ii) the jurisdictions in
which the item is issued or registered or in which any application for issuance
or registration has been filed, (iii) the respective issuance,
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registration, or application number of the item and (iv) the date of application
and issuance or registration of the item. Except for agreements with their own
employees or consultants regarding confidentiality and proprietary information,
and with the exception of standard end-user license agreements, there are no
outstanding options, licenses or agreements of any kind relating to ITI
Intellectual Property, nor is ITI or any of its subsidiaries bound by or a party
to any options, licenses or agreements of any kind with respect to the patents,
patent applications, trademarks, service marks, trade names, copyrights, trade
secrets, inventions and technology (whether or not patentable), confidential and
proprietary information, domain names, licenses, know-how, concepts, computer
programs, software, databases and other collections and compilations of data,
other technical data, proprietary rights, proprietary processes and other
information and/or intellectual property of any other person or entity.
(c) Section 2.16(c) of the ITI Disclosure Schedule hereto
contains a complete and accurate list of all software owned by ITI and/or any of
its subsidiaries as of the date hereof or at any time within the 36-month period
prior to the date hereof (the "Owned Software"). ITI and/or the applicable
subsidiaries own(s) exclusively all right, title and interest in and to the
Owned Software and any and all enhancements, modifications, and other additions
and/or improvements of or to the Owned Software, free and clear of all liens,
including claims or rights of any joint owners or employees, agents, consultants
or other persons involved in the development, creation, marketing, maintenance
or enhancement of such computer software. All software used by ITI and/or any of
its subsidiaries is either Owned Software or licensed software and is not
otherwise owned by any other person (except the ownership by the named licensors
of the licensed software).
(d) Except as set forth on Section 2.16(d) of the ITI Disclosure
Schedule, neither ITI nor any of its subsidiaries has received any
communications alleging infringement, dilution, misappropriation, breach or
other violation of, nor does ITI or any of its subsidiaries have reason to
believe that ITI or any of its subsidiaries has infringed, diluted,
misappropriated, breached or otherwise violated or, by conducting their
businesses as proposed, would infringe, dilute, misappropriate, breach or
otherwise violate, any of the patents, patent applications, trademarks, service
marks, trade names, copyrights, trade secrets, inventions and technology
(whether or not patentable), confidential and proprietary information, domain
names, licenses, know-how, concepts, computer programs, software, databases and
other collections and compilations of data, technical data, proprietary rights,
proprietary processes and other information and/or intellectual property
("Intellectual Property") of any other person or entity; neither ITI nor any of
its subsidiaries is aware of any reasonable basis therefor or threat thereof.
(e) To the extent that any works of authorship, materials,
products, technology or software have been developed or created independently or
jointly by any person other than ITI or any of its subsidiaries for which ITI or
any of its subsidiaries has, directly or indirectly, paid, ITI or the applicable
subsidiary has a written agreement with such person with respect thereto, and
ITI or the applicable subsidiary thereby has obtained ownership of, and is the
exclusive owner of, all Intellectual Property therein or thereto by operation of
law or by valid assignment. In each case in which either ITI or any of its
subsidiaries has acquired any Intellectual Property from any person, ITI or the
applicable subsidiary has obtained a valid and enforceable assignment sufficient
to irrevocably transfer all rights in such Intellectual Property (including the
right to seek past and future damages with respect thereto) to ITI or the
applicable subsidiary and, to the maximum extent provided for by,
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and in accordance with, any applicable laws and regulations, ITI has recorded
each such assignment with the relevant governmental authorities, including the
U.S. Patent and Trademark Office, the U.S. Copyright Office or their respective
equivalents in any relevant foreign jurisdiction.
(f) Neither ITI nor any of its subsidiaries is aware that any of
its respective employees, agents, consultants or contractors is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such person's or
entity's best efforts to promote the interests of ITI and its subsidiaries, or
that would conflict with ITI's or any of its subsidiaries' business as proposed
to be conducted. Neither ITI nor any of its subsidiaries is aware of any current
or past infringement, dilution, misappropriation, breach or other violation by a
third party of any of ITI Intellectual Property. Neither ITI nor any of its
subsidiaries has a plan to utilize, and does not believe it is or will be
necessary to utilize, any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment or engagement by ITI
or any of its subsidiaries. Except as set forth in Section 2.16(f) of the ITI
Disclosure Schedule, the source code for the Owned Software has not been
disclosed to any third party and none of the source code for the Owned Software
has been placed in escrow or is otherwise not in the full and exclusive control
of ITI and/or the applicable subsidiaries of ITI.
(g) No ITI Intellectual Property owned or used by ITI or any of
its subsidiaries is subject to any outstanding decree, order, judgment,
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by ITI or any of its subsidiaries. All of the
patents, trademark and service xxxx registrations, copyright registrations and
domain name registrations indicated in Section 2.16(g) of the ITI Disclosure
Schedule are valid and in full force, are held of record in the name of ITI or
the applicable subsidiary free and clear of all liens, encumbrances and other
claims, are not the subject of any cancellation or reexamination proceeding or
any other proceeding challenging their extent or validity, and all necessary
registration, maintenance and renewal fees in connection with such patents and
registrations have been paid and all necessary documents and certificates in
connection with such patents and registrations have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
patents and registrations. ITI and/or the applicable subsidiary is the applicant
of record in all patent applications, and applications for trademark, service
xxxx, and copyright registration indicated in Section 2.16(g) of the ITI
Disclosure Schedule, and no opposition, extension of time to oppose,
interference, final rejection, or final refusal to register has been received in
connection with any such application. ITI and each of its subsidiaries has taken
all reasonable steps that are required to protect ITI's rights in material trade
secrets, know-how or other confidential or proprietary information (including,
without limitation, source code) of ITI and any of its subsidiaries or provided
by any other person to ITI or any applicable subsidiary.
2.17 Certain Contracts.
(a) For purposes of this Agreement, each of the following shall
be deemed to constitute an "ITI Material Contract":
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(i) any contract that would be required by the rules
and regulations of the SEC to be filed as an exhibit to any SEC filing;
(ii) any contract relating to the employment of any
employee, and any contract pursuant to which any of ITI or any of its
subsidiaries is or may become obligated to make any severance, termination,
bonus or relocation payment or any other payment (other than payments in respect
of salary) in excess of $50,000, or an annual salary in excess of $50,000, to
any current or former employee or director;
(iii) any contract relating to the acquisition, transfer,
development, sharing or license of any material ITI Intellectual Property
(except for any contract pursuant to which (A) any material ITI Intellectual
Property is licensed to ITI or any of its subsidiaries under any third party
software license generally available for sale to the public, or (B) any material
ITI Intellectual Property is licensed by ITI or any of its subsidiaries to any
person on a non-exclusive basis);
(iv) any contract which provides for indemnification of
any officer, director or employee;
(v) any contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(vi) any contract that involves the payment or
expenditure of $50,000 or more in any 12-month period or more than $100,000 in
the aggregate that may not be terminated by ITI or any of its subsidiaries
(without penalty) within sixty (60) days after the delivery of a termination
notice by ITI or any of its subsidiaries;
(vii) any contract contemplating or involving (A) the
payment or delivery of cash or other consideration in an amount or having a
value in excess of $50,000 in the aggregate, or (B) the performance of services
having a value in excess of $50,000 in the aggregate;
(viii) any contract imposing any restriction on the right
or ability of ITI or any of its subsidiaries to (A) compete with any other
person, (B) acquire any material product or other material asset or any services
from any other person, sell any material product or other material asset to or
perform any services for any other person or transact business or deal in any
other manner with any other person, or (C) develop or distribute any material
technology; and
(ix) any other contract, if a breach of such contract
could reasonably be expected to have an ITI Material Adverse Effect on ITI or
any of its subsidiaries (taken as a whole).
(b) Each ITI Material Contract is valid and in full force and
effect, and is enforceable in accordance with its terms.
(c) None of ITI or any of its subsidiaries has violated or
breached, or committed any material default under, any ITI Material Contract. No
other person has violated or breached, or committed any material default under,
any ITI Material Contract.
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(d) No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) could reasonably be
expected to (i) result in a material violation or breach of any provision of any
ITI Material Contract by any of ITI or any of its subsidiaries; (ii) give any
person the right to declare a material default or exercise any material remedy
under any ITI Material Contract; (iii) give any person the right to receive or
require a material rebate, chargeback, penalty or change in delivery schedule
under any ITI Material Contract; (iv) give any person the right to accelerate
the maturity or performance of any ITI Material Contract; or (v) give any person
the right to cancel or terminate, or modify in any material respect, any ITI
Material Contract.
(e) None of ITI or any of its subsidiaries is a guarantor or
otherwise liable for any liability or obligation (including indebtedness) of any
other person other than any of ITI or any of its subsidiaries.
(f) Section 2.17(f) of the ITI Disclosure Schedule provides a
list of all ITI Material Contracts (including all amendments thereto). ITI has
provided or made available to Lil Marc a copy of each ITI Material Contract
(including all amendments thereto) listed in Section 2.17(f) of the ITI
Disclosure Schedule.
2.18 Property and Assets. ITI and its subsidiaries have good and
marketable title to all properties and assets owned by them, free and clear of
all Liens, except such as are not significant or important in relation to ITI's
business taken as a whole ("Permitted Liens"); all of the material leases and
subleases under which ITI or any of its subsidiaries is the lessor or sublessor
of properties or assets or under which ITI or any of its subsidiaries holds
properties or assets as lessee or sublessee are in full force and effect, and
ITI or any of its subsidiaries is not in default in any material respect with
respect to any of the terms or provisions of any of such leases or subleases,
and no material claim has been asserted by anyone adverse to rights of ITI or
any of its subsidiaries as lessor, sublessor, lessee or sublessee under any of
the leases or subleases mentioned above, or affecting or questioning the right
of ITI or any of its subsidiaries to continued possession of the leased or
subleased premises or assets under any such lease or sublease. ITI or any of its
subsidiaries owns or leases all such properties as are necessary to its
operations.
2.19 Agreements Not to Compete. ITI has delivered to Lil Marc true,
complete and accurate copies of all contracts in full force and effect as of the
date hereof between ITI and its subsidiaries and its respective directors,
officers, employees, agents (including sales agents), dealers or distributors
which prevent or restrict any such person from competing with ITI and its
subsidiaries in any manner.
2.20 Foreign Corrupt Practices. Neither ITI nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of ITI or any of its subsidiaries has, in the course of its actions
for, or on behalf of, ITI or any of its subsidiaries, (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds, (ii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
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2.21 Financial Advisor. Neither ITI nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agency Agreement.
2.22 Representations and Warranties. The representations and
warranties of ITI contained in this Agreement in the aggregate, disregarding all
qualifications and exceptions contained therein relating to materiality or ITI
Material Adverse Effect, are true and correct with only such exceptions which in
the aggregate are not reasonably likely to have an ITI Material Adverse Effect.
In the event a representation and warranty is qualified by an ITI Material
Adverse Effect exception and there occurs an ITI Material Adverse Effect with
respect thereto, such representation and warranty shall be conclusively deemed
breached without regard to whether an ITI Material Adverse Effect was or was not
reasonably likely.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LIL MARC AND NEWCO
Lil Marc and Newco jointly and severally represent and warrant to ITI
as follows:
3.1 Organization and Qualification. Lil Marc and each of its
subsidiaries is a corporation or other legal entity organized, validly existing
and in good standing under the laws of its jurisdiction of existence, has all
requisite corporate power and authority to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary. True, accurate and complete copies of the articles of incorporation,
as amended and in effect on the date hereof, and by-laws, as in effect on the
date hereof, and minute books of Lil Marc and Newco have been made available to
ITI.
3.2 Subsidiaries. Newco is the only subsidiary of Lil Marc. As of the
date hereof, Lil Marc does not have any joint ventures. All of the issued and
outstanding shares of capital stock of, or other equity interests in, each
subsidiary of Lil Marc are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned, directly or indirectly, by Lil Marc free and
clear of any Liens. There are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies, rights, warrants or stock appreciation
rights, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any subsidiary of Lil Marc
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating Lil Marc or any of any of its
subsidiaries to grant, extend or enter into any such agreement or commitment.
3.3 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. Each of Lil Marc and Newco have all requisite
corporate power and authority to enter into this Agreement and Lil Marc Required
Statutory Approvals (as defined in
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Xxxxxxx 3.3(c)), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Lil Marc and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Lil Marc with respect to approval of the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Lil Marc and, assuming the due
authorization, execution and delivery by the other signatories hereto,
constitutes a legal, valid and binding obligation of Lil Marc enforceable
against Lil Marc in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (whether such enforceability is considered in a proceeding
in equity or at law).
(b) Non-Contravention. The execution and delivery of this
Agreement by Lil Marc and Newco does not, and the consummation of the
transactions contemplated hereby will not result in a Violation by Lil Marc or
any of its subsidiaries or, to the knowledge of Lil Marc, any of its joint
ventures pursuant to any provisions of (i) the Articles of Incorporation or
by-laws of Lil Marc or any of its subsidiaries, (ii) subject to obtaining the
Lil Marc Required Statutory Approvals (as defined below), any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority) applicable to Lil Marc or any of its
subsidiaries or, to the knowledge of Lil Marc, any of its joint ventures, or any
of their respective properties or assets, or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Lil Marc
or any of its subsidiaries is a party or by which Lil Marc or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected.
(c) Statutory Approvals. No declaration, filing or registration
with, or notice to or authorization, consent or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement by Lil
Marc and Newco or the consummation by Lil Marc and Newco of the transactions
contemplated hereby, except for those required under or in relation to (A) Blue
Sky Laws, (B) the Securities Act, (C) the Exchange Act, (D) the Over-the-Counter
Bulletin Board, and (E) the DGCL with respect to the filing of the Certificate
of Merger (collectively, the "Lil Marc Required Statutory Approvals"), it being
understood that references in this Agreement to "obtaining" such Lil Marc
Required Statutory Approvals shall mean making such declarations, filings or
registrations; giving such notice; obtaining such consents or approvals; and
having such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Neither Lil Marc nor any of its subsidiaries is
in violation of, or under investigation with respect thereto, or has been given
notice of any purported violation of, any law, statute, order, rule, regulation
or judgment (including, without limitation, any applicable Environmental Law) of
any Governmental Authority. Lil Marc and its subsidiaries have all Permits
necessary to conduct their respective businesses as currently conducted in all
respects, except those which the failure to obtain would, in the aggregate, not
reasonably be expected to have a material adverse effect on the business,
properties, condition (financial or otherwise), prospects or results of
operations of Lil Marc and its subsidiaries taken as a whole or on the
consummation of this Agreement (any such material adverse effect being hereafter
referred to as a "Lil Marc Material Adverse Effect"). Lil Marc and each of its
subsidiaries are not in breach or violation of or in default in the performance
or observance of any term or provision of, and no event has occurred which, with
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lapse of time or action by a third party, could result in a default under, (i)
its articles of incorporation or by-laws or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which it is a party or by which it is bound or
to which any of its property is subject.
(e) There is no "non-competition" or other similar consensual
contract or agreement that restricts the ability of Lil Marc or any of its
subsidiaries to conduct business in any geographic area or that would restrict
Lil Marc or any of its affiliates from conducting business in any geographic
area.
3.4 Capitalization.
(a) The authorized capital stock of Lil Marc consists solely of
5,000,000 shares of Lil Marc Common Stock. As of the date hereof, there were
issued and outstanding 2,668,666 shares of Lil Marc Common Stock. All of the
issued and outstanding shares of capital stock of Lil Marc are, and upon
issuance of the shares comprising the Merger Consideration will be, validly
issued, fully paid, nonassessable and free of preemptive rights. There are no
outstanding subscriptions, options, calls, contracts, voting trusts,
registration rights, proxies, rights, warrants or stock appreciation rights,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating Lil Marc or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Lil Marc, or obligating Lil Marc to grant, extend or
enter into any such agreement or commitment.
(b) At the Effective Time, the authorized capital stock of Lil
Marc shall consist of 35,000,000 shares of Lil Marc Common Stock and 10,000,000
shares of Lil Marc Preferred Stock, of which between 1,340,131 and 1,442,616 (as
a result of the Reverse Stock Split) shares of Lil Marc Common Stock and no
shares of Lil Marc Preferred Stock shall be issued and outstanding.
(c) The authorized capital stock of Newco consists of 100 shares
of Newco Common Stock. As of the date of this Agreement, five (5) shares of
Newco Common Stock was issued and outstanding, all of which is owned by Lil
Marc.
(d) All offers and sales of capital stock of Lil Marc prior to
the date of this Agreement were, at all relevant times, duly registered or
exempt from the registration requirements of the Securities Act and were duly
registered or subject to an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws, as the case
may be. The shares of Lil Marc Common Stock comprising the Merger Consideration
(excluding, without limitation, any shares issuable pursuant to Stock Options
and warrants pursuant to Section 1.13 of this Agreement) will be issued in
material compliance (assuming each recipient of Lil Marc Common Stock is an
"accredited investor" and has otherwise complied in all material respects with
the applicable state and federal securities laws) with (A) the registration
requirements of the Securities Act and (B) the registration and qualification
requirements of all applicable state securities laws.
3.5 Operations of Lil Marc and Newco.
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(a) Since May 25, 2000, Lil Marc and its subsidiaries (i) have
not engaged in any business activities of any type whatsoever, except with
respect to their maintenance as a public reporting company under the Exchange
Act and except as in furtherance of this Agreement and the transactions
contemplated hereby, (ii) do not own any properties or other assets, (iii) has
not less than Two Hundred Thousand Dollars ($200,000) of cash (or cash
equivalents) and has no material liabilities, whether fixed, accrued or
contingent, and (iv) are not a party to or bound by any contract, commitment,
agreement or understanding (whether written or oral), except for this Agreement,
any subscription or other documents in connection with the Private Placement.
Lil Marc has no employees nor has Lil Marc had any employees since May 25, 2000.
At the Effective Time, Lil Marc shall have not more than Fifty Thousand Dollars
($50,000), in the aggregate, in fees, expenses or disbursements incurred in
connection with the consummation of the transactions contemplated by this
Agreement.
(b) Newco was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
3.6 Consents and Approvals. Except as required with respect to the
Lil Marc Statutory Approvals, and except for any other filings under federal or
state securities laws in connection with the Merger, no filing or registration
with, no notice to and no permit, authorization, consent or approval of any
public or governmental body or authority is necessary for the consummation by
Lil Marc or Newco of the transactions contemplated by this Agreement or to
enable Lil Marc to continue to conduct its business after the Effective Time in
a manner that is in all material respects consistent with that in which such
business is currently conducted.
3.7 Reports and Financial Statements.
(a) Lil Marc became subject to the reporting requirements of the
Exchange Act on June 10, 1998 and the filings required to be made by Lil Marc or
any of its subsidiaries since such date under the Exchange Act, and applicable
state laws and regulations have been filed with the SEC and the Secretary of
State of the State of Nevada, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, including, but not limited to,
all franchises, services agreements, material agreements and related documents,
and all such filings complied, as of their respective dates, in all material
respects with all applicable requirements of the appropriate statutes and the
rules and regulations thereunder. Lil Marc has made available to ITI a true and
complete copy of each form, report, schedule, registration statement,
registration exemption, if applicable, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed by
Lil Marc or any of its subsidiaries with the SEC since June 10, 1998 (as such
documents have since the time of their filing been amended, the "Lil Marc SEC
Reports"), which are all the documents (other than preliminary materials) that
Lil Marc and its subsidiaries were required to file with the SEC under the
Exchange Act since such date. As of their respective dates, the Lil Marc SEC
Reports, including, without limitation, any financial statements or schedules
included therein, at the time filed (i) complied as to form in all material
respects with the requirements of the Exchange
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Act, and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the audited
consolidated financial statements and unaudited interim financial statements
(including, in each case, the notes, if any, thereto) included in the Lil Marc
SEC Reports (collectively, the "Lil Marc Financial Statements") complied as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto and except with respect to unaudited statements as
permitted by Form 10-QSB of the SEC) and fairly present (subject, in the case of
the unaudited interim financial statements, to normal, recurring year-end audit
adjustments (which are not expected to be, individually or in the aggregate,
materially adverse to Lil Marc and its subsidiaries, taken as a whole)) the
consolidated financial position of Lil Marc as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended.
Each subsidiary of Lil Marc is treated as a consolidated subsidiary of Lil Marc
in Lil Marc Financial Statements for all periods covered thereby.
(b) As of the date hereof and except as set forth in the Lil Marc
Financial Statements, and to the knowledge of Lil Marc, Lil Marc and its
subsidiaries have no liabilities or obligations of any nature (whether asserted,
unasserted, accrued, unaccrued, absolute, fixed, contingent, liquidated,
unliquidated, due, to become due, or otherwise), and there is no fact, condition
or circumstance which could reasonably be expected to result in such liabilities
or obligations. Lil Marc and its subsidiaries have filed all necessary federal,
state and foreign income and franchise Tax Returns due prior to the date of this
Agreement and have paid all Taxes shown as due thereon. There are no unpaid
Taxes claimed to be due by the taxing authority of any jurisdiction, and the
officers of Lil Marc know of no basis for such claim. The properties and assets
of Lil Marc and its subsidiaries are owned by Lil Marc free and clear of all
Liens.
3.8 Absence of Certain Changes or Events. Except as disclosed in the
Lil Marc SEC Reports filed prior to the date hereof, since the Balance Sheet
Date, Lil Marc and each of its subsidiaries ITI has not:
(a) incurred any debts, obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business and consistent
with past practices, having individually or in the aggregate a Lil Marc Material
Adverse Effect;
(b) made or suffered any changes in its contingent obligations by
way of guaranty, endorsement (other than the endorsement of checks for deposit
in the usual and ordinary course of business), indemnity, warranty or otherwise;
(c) discharged or satisfied any Liens other than those securing,
or paid any obligation or liability other than, current liabilities shown in the
Lil Marc SEC Reports, and current liabilities incurred since the Balance Sheet
Date, in each case in the usual and ordinary course of business and consistent
with past practices;
(d) mortgaged, pledged or subjected to lien any of its assets,
tangible or
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intangible;
(e) sold, transferred or leased any of its assets except in the
usual and ordinary course of business and consistent with past practices;
(f) cancelled or compromised any debt or claim, or waived or
released any right, of material value;
(g) suffered any physical damage, destruction or loss (whether or
not covered by insurance) adversely affecting the properties, business or
prospects of Lil Marc;
(h) entered into any transaction other than in the usual and
ordinary course of business except for this Agreement and the related agreements
contemplated hereby;
(i) encountered any labor difficulties or labor union organizing
activities;
(j) made or granted any wage or salary increase or entered into
any employment agreement;
(k) issued or sold any shares of capital stock or other
securities or granted any options with respect thereto, or modified any equity
security of Lil Marc;
(l) declared or paid any dividends on or made any other
distributions with respect to, or purchased or redeemed, any of its outstanding
equity securities;
(m) suffered or experienced any change in, or condition
affecting, its condition (financial or otherwise), properties, assets,
liabilities, business operations, results of operations or prospects other than
changes, events or conditions in the usual and ordinary course of its business
and consistent with past practices, having (either by itself or in conjunction
with all such other changes, events and conditions) a Lil Marc Material Adverse
Effect;
(n) made any change in the accounting principles, methods or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted; or
(o) entered into any agreement, or otherwise obligated itself, to
do any of the foregoing.
3.9 Litigation. There is no action, suit, investigation, customer
complaint, claim or proceeding at law or in equity by or before any arbitrator,
court, governmental instrumentality or agency, self-regulatory organization or
body or public board now pending or, to the knowledge of Lil Marc, threatened
against Lil Marc or any of its subsidiaries or any of Lil Marc's officers or
directors in their capacities as such (or basis therefor known to Lil Marc).
Neither Lil Marc nor any of its subsidiaries is subject to any judgment, order,
writ, injunction or decree of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
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3.10 Information Statement. None of the information supplied or to be
supplied by or on behalf of each of Lil Marc and Newco for inclusion or
incorporation by reference in the Information Statement will, at the date such
Information Statement is mailed to the holders of Lil Marc Common Stock, and, as
the same may be amended or supplemented, at the times of such meetings, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided that no representation or
warranty is made by each of Lil Marc and Newco with respect to statements made
or incorporated by reference in the Information Statement based on information
by ITI for inclusion or incorporation by reference therein. The Information
Statement and any other documents to be filed with the SEC or any other
Governmental Authority in connection with the Merger and other transactions
contemplated hereby will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
3.11 Board Approval. The Board of Directors of Lil Marc, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way (the "Lil
Marc Board Approval"), has duly authorized (a) an amendment to the articles of
incorporation of Lil Marc (i) this Agreement and the transactions contemplated
hereby, (ii) increasing its authorized shares of Lil Marc Common Stock from
5,000,000 shares to 35,000,000 shares, (iii) amending its corporate purpose,
(iv) authorizing the Reverse Stock Split, (v) changing its corporate name and
(vi) authorizing the issuance of up to 10,000,000 shares of Lil Marc Preferred
Stock, (b) the adoption of the Lil Marc Stock Option Plan, (c) the appointment
of certain directors to the Lil Marc Board of Directors as set forth on Exhibit
5.10 attached hereto and (d) the appointment of auditors for the fiscal year
ended December 31, 2002. The Lil Marc Board Approval constitutes approval of
this Agreement and the Merger for purposes of Sections 92A.380 and 92A.390 of
the Nevada Revised Statutes ("NRS"), Section 203 of the DGCL and Article III of
the by-laws of Lil Marc. Except for Sections 92A.380 and 92A.390 of the NRS and
Section 203 of the DGCL (which have been rendered inapplicable), no state
takeover statute is applicable to this Agreement or the Merger or the other
transactions contemplated hereby or thereby.
3.12 Ownership of ITI Common Stock. Neither Lil Marc nor any of its
subsidiaries "beneficially owns" (as such term is defined for purposes of
Section 13(d) of the Exchange Act) any shares of the capital stock of ITI.
3.13 Lil Marc Stockholders' Consent. Lil Marc has obtained the Lil
Marc Stockholders' Consent.
3.14 Financial Advisor. Neither Lil Marc nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agency Agreement.
3.15 Representations and Warranties. The representations and warranties
of Lil Marc contained in this Agreement in the aggregate, disregarding all
qualifications and exceptions contained therein relating to materiality or Lil
Marc Material Adverse Effect, are true and correct with only such exceptions
which in the aggregate are not reasonably likely to have a Lil Marc Material
Adverse Effect. In the event a representation and warranty is qualified by a Lil
Marc
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Material Adverse Effect exception and there occurs a Lil Marc Material Adverse
Effect with respect thereto, such representation and warranty shall be
conclusively deemed breached without regard to whether a Lil Marc Material
Adverse Effect was or was not reasonably likely.
ARTICLE IV
CERTAIN COVENANTS OF ITI, LIL MARC AND NEWCO
4.1 Conduct of Business of ITI. At all times from and after the date
hereof until the Effective Time, ITI covenants and agrees as to itself and its
subsidiaries (except as expressly contemplated or permitted by this Agreement or
as set forth in Section 4.1 of the ITI Disclosure Schedule, or to the extent
that Lil Marc shall otherwise previously consent in writing):
(a) Ordinary Course of Business. ITI shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course and
in substantially the same manner as heretofore conducted. Without limiting the
generality of the foregoing, each party hereto shall, and shall cause its
subsidiaries to, use all commercially reasonable efforts to (i) preserve intact
their present business organizations and goodwill and preserve the goodwill and
relationships with customers, suppliers and others having significant business
dealings with them, (ii) subject to prudent management of workforce needs and
ongoing programs currently in force, keep available the services of their
present officers and employees as a group (provided that voluntary terminations
of employment by officers or employees shall not be deemed a violation of this
subsection), (iii) maintain and keep material properties and assets in as good
repair and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past practice,
and (iv) comply in all material respects with all laws and orders of all
Governmental Authorities applicable to them.
(b) Dividends; Changes in Stock. ITI shall not, nor shall it
permit any of its subsidiaries to: (i) declare or pay any dividends on, or make
other distributions in respect of, any capital stock other than dividends by a
direct or indirect subsidiary to ITI, (ii) split, combine or reclassify any
capital stock or the capital stock of any subsidiary or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of capital stock or the capital stock of any
subsidiary, or (iii) redeem, repurchase or otherwise acquire any shares of
capital stock or the capital stock of any subsidiary other than redemptions,
repurchases and other acquisitions of shares of capital stock in connection with
the administration of employee benefit and dividend reinvestment plans as in
effect on the date hereof in the ordinary course of the operation of such plans
consistent with past practice.
(c) Issuance of Securities. Except as contemplated in Section
2.3(b), ITI shall not, nor shall it permit any of its subsidiaries to, issue,
agree to issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of their capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or convertible or exchangeable securities, other than (i) pursuant to
outstanding stock options granted under any employee benefit plans, or (ii) in
the case of subsidiaries, for issuances of capital stock to ITI or any of its
subsidiaries.
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(d) Charter Documents; Other Actions. Except to the extent
required to comply with its obligations hereunder or with applicable law, ITI
shall, nor shall ITI permit any of its subsidiaries to, amend its articles of
incorporation, by-laws, or similar organic documents or to take or fail to take
any other action, which in any such case would reasonably be expected to prevent
or materially impede or interfere with the Merger.
(e) Tax-Free Qualification. ITI shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of
its respective subsidiaries to, take any action (including any action otherwise
permitted by this Article IV) that would prevent or impede the Merger from
qualifying as a reorganization under Section 368 of the Code.
(f) Satisfaction of Closing Conditions. Except as required by
applicable law, ITI shall not, and shall not permit any of its subsidiaries to,
take any action that would, or would reasonably be expected to, result in (i)
any of the conditions to the Merger set forth in Article VI not being satisfied
or (ii) a material delay in the satisfaction of such conditions; provided,
however, that ITI is not required by this Agreement to consummate the Private
Placement.
4.2 Conduct of Business of Lil Marc. At all times from and after the
date hereof until the Effective Time, Lil Marc covenants and agrees as to itself
and its subsidiaries (except as expressly contemplated or permitted by this
Agreement, the Lil Marc Stockholders' Consent, or to the extent that ITI shall
otherwise previously consent in writing):
(a) Ordinary Course of Business. Lil Marc shall, and shall cause
its subsidiaries to, carry on their respective businesses in the ordinary course
and in substantially the same manner as heretofore conducted. Without limiting
the generality of the foregoing, each party hereto shall, and shall cause its
subsidiaries to, use all commercially reasonable efforts to (i) preserve intact
their present business organizations and goodwill and preserve the goodwill and
relationships with customers, suppliers and others having significant business
dealings with them, (ii) subject to prudent management of workforce needs and
ongoing programs currently in force, keep available the services of their
present officers and employees as a group (provided that voluntary terminations
of employment by officers or employees shall not be deemed a violation of this
subsection), (iii) maintain and keep material properties and assets in as good
repair and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past practice,
and (iv) comply in all material respects with all laws and orders of all
Governmental Authorities applicable to them.
(b) Dividends; Changes in Stock. Lil Marc shall not, nor shall it
permit any of its subsidiaries to: (i) declare or pay any dividends on, or make
other distributions in respect of, any capital stock other than dividends by a
direct or indirect subsidiary to Lil Marc, (ii) other than with respect to the
Reverse Stock Split, split, combine or reclassify any capital stock or the
capital stock of any subsidiary or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of, or in substitution for, shares
of capital stock or the capital stock of any subsidiary, or (iii) redeem,
repurchase or otherwise acquire any shares of capital stock or the capital stock
of any subsidiary other than redemptions, repurchases and other acquisitions of
shares of capital stock in
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connection with the administration of employee benefit and dividend reinvestment
plans as in effect on the date hereof in the ordinary course of the operation of
such plans consistent with past practice.
(c) Issuance of Securities. Lil Marc shall not, nor shall it
permit any of its subsidiaries to, issue, agree to issue, deliver, sell, pledge,
dispose of or otherwise encumber any shares of their capital stock of any class
or any securities convertible into or exchangeable for, or any rights, warrants
or options to acquire, any such shares or convertible or exchangeable
securities, other than in the case of subsidiaries, for issuances of capital
stock to Lil Marc or any of its subsidiaries.
(d) Charter Documents; Other Actions. Except as required as a
result of the Lil Marc Stockholders' Consent and to the extent required to
comply with its obligations hereunder or with applicable law, Lil Marc shall,
nor shall Lil Marc permit any of its subsidiaries to, amend its articles of
incorporation, by-laws, or similar organic documents or to take or fail to take
any other action, which in any such case would reasonably be expected to prevent
or materially impede or interfere with the Merger.
(e) Tax-Free Qualification. Lil Marc shall use its reasonable
best efforts not to, and shall use its reasonable best efforts not to permit any
of its respective subsidiaries to, take any action (including any action
otherwise permitted by this Article IV) that would prevent or impede the Merger
from qualifying as a reorganization under Section 368 of the Code.
(f) Satisfaction of Closing Conditions. Except as required by
applicable law, Lil Marc shall not, and shall not permit any of its subsidiaries
to, take any action that would, or would reasonably be expected to, result in
(i) any of the conditions to the Merger set forth in Article VI not being
satisfied or (ii) a material delay in the satisfaction of such conditions.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. Upon reasonable notice, each party shall,
and shall cause its subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment banker, financial advisor and other
representatives of the other (collectively, "Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of its properties, operating facilities, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
to the extent that such party or any of its subsidiaries is not under a legal
obligation not to provide access or to the extent that such access would not
constitute a waiver of the attorney-client privilege and does not unreasonably
interfere with the business and operations of such party; provided that such
right of access shall include reasonable environmental assessment with respect
to any properties of the parties or their respective subsidiaries. During such
period, each party shall, and shall cause its subsidiaries to, furnish promptly
to the other (a) access to each reasonably available report, schedule and other
document filed or received by it or any of its subsidiaries pursuant to the
requirements of federal or state securities laws or filed with the SEC, the
Department of Justice, the Federal Trade Commission, any state authority with
jurisdiction over public utilities or
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any other federal or any state regulatory agency or commission, and (b) all
information concerning themselves, their subsidiaries, directors, officers and
stockholders and such matters as may be reasonably requested by the other party
in connection with any filings, applications or approvals required or
contemplated by this Agreement. The party requesting copies of any documents
from any other party hereto shall be responsible for all out-of-pocket expenses
incurred by the party to whom such request is made in complying with such
request, including any cost of reproducing and delivering any required
information.
5.2 Consents and Approvals. Lil Marc, Newco and ITI shall cooperate
in using their commercially reasonable efforts to obtain as promptly as
practicable all ITI Required Consents and ITI and Lil Marc Required Statutory
Approvals required in connection with, and waivers of any violations, breaches
and defaults that may be caused by, the consummation of the transactions
contemplated by this Agreement.
5.3 Information for Information Statement. As promptly as reasonably
practicable after the date hereof, Lil Marc shall prepare and file with the SEC
the Information Statement. Each of the parties shall furnish all information
concerning itself that is required or customary for inclusion in the Information
Statement. No representation, covenant or agreement contained in this Agreement
is made by any party hereto with respect to information supplied by any other
party hereto for inclusion in the Information Statement. The Information
Statement shall comply as to form in all material respects with the Securities
Act and the rules and regulations thereunder. No filing of, or amendment or
supplement to, the Information Statement will be made without the approval of
all parties hereto. Each party will advise the other parties, promptly after it
receives notice thereof, of any request by the SEC for amendment of the
Information Statement or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective Time
any information relating to Lil Marc or ITI, or any of their respective
affiliates, trustees, directors or officers, is discovered that should be set
forth in an amendment or supplement to any of the Information Statement, so that
any of such documents would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
that discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by applicable law,
disseminated to the holders of capital stock of Lil Marc.
5.4 Commercially Reasonable Efforts, Etc. Subject to the terms and
conditions of this Agreement, each of the parties agrees to use all commercially
reasonable efforts to take or cause to be taken all such action as may be
necessary, proper or advisable under applicable law in order to effectuate the
Merger simultaneously with or as promptly as possible after the closing of the
Private Placement. If at any time after the Closing any further action is
necessary or desirable to carry out the purposes hereof, including without
limitation the execution of additional instruments in order to comply with the
DGCL or NRS, the officers, directors and partners of each party to this
Agreement are fully authorized to take, and shall take, all such action.
5.5 Public Announcements. Lil Marc and ITI shall cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with
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respect to this Agreement, or any of the transactions contemplated hereby and,
subject to each party's disclosure obligations imposed by law or any applicable
national securities exchange, shall not issue any public announcement or
statement relating thereto prior to consultation with the other party.
5.6 Consents, Approvals and Filings. The parties hereto will make all
necessary filings, as soon as reasonably practicable, in order to facilitate the
prompt consummation of the Merger and the other transactions contemplated by
this Agreement. The parties hereto will use reasonable efforts and cooperate
fully with each other to (a) comply with all governmental requirements
applicable to the Merger and (b) obtain as promptly as practicable all necessary
permits, consents and approvals of governmental entities and consents of all
third parties necessary for the consummation of the Merger and the other
transactions contemplated hereby.
5.7 Current Information. During the period from the date of this
Agreement to the Effective Time, ITI and Lil Marc will cause one or more of
their designated representatives to confer on a regular and frequent basis (not
less than weekly) with each other and to report the general status of the
ongoing operations of each of Lil Marc, Newco, and ITI. ITI will promptly notify
Lil Marc and Newco of any material change in the normal course of business or in
the operation of the properties of ITI and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of significant litigation
involving ITI and will keep Lil Marc and Newco fully informed of such events.
Lil Marc and Newco will promptly notify ITI of any material change in the normal
course of business or in the operation of the properties of Lil Marc and Newco
and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving Lil Marc or Newco and will
keep ITI fully informed of such events.
5.8 Merger Consideration. The parties hereto acknowledge and agree
that the shares of Lil Marc Common Stock issuable to the holders of ITI Common
Stock pursuant to Sections 1.6 and 1.8 herein shall constitute "restricted
securities" with the meaning of the Securities Act. Such shares shall bear
appropriate legends to identify such shares as being restricted under the
Securities Act, to comply with applicable state securities laws and, if
applicable, to notice the restrictions of transfer of such shares. It is
understood and agreed by the parties that not later than six (6) months after
the Effective Time, Lil Marc shall file a registration statement with the SEC
registering for resale shares purchased in the Private Placement under the
Securities Act, as more expressly set forth in the subscription documents
relating to the Private Placement.
5.9 Indemnification of Officers and Directors.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, Lil Marc and the Surviving Corporation shall, to the fullest
extent not prohibited by applicable law, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, director or management employee
of ITI and Lil Marc and their respective subsidiaries (each an "Indemnified
Party" and, collectively, the "Indemnified Parties") against (i) all losses,
expenses (including reasonable attorneys' fees and
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expenses), claims, damages, costs, liabilities, judgments or (subject to the
proviso of the next succeeding sentence) amounts that are paid in settlement of
or in connection with any claim, action, suit, proceeding or investigation based
in whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or management employee of such party or any
subsidiary thereof, whether pertaining to any matter existing or occurring at or
prior to or after the Effective Time and whether asserted or claimed prior to,
at or after the Effective Time and (ii) all liabilities based in whole or in
part on, or arising in whole or in part out of, or pertaining to this Agreement,
or the transactions contemplated hereby. In the event of any such loss, expense,
claim, damage, cost, liability, judgment or settlement (whether or not arising
before the Effective Time), (A) Lil Marc shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to Lil Marc, promptly after statements therefor are
received, and otherwise advance to the Indemnified Parties upon request
reimbursement of documented expenses reasonably incurred, (B) Lil Marc shall
cooperate in the defense of any such matter and (C) any determination required
to be made with respect to whether an Indemnified Party's conduct complies with
the standards under applicable law or as set forth in Lil Marc's certificate of
incorporation or bylaws shall be made by independent counsel mutually acceptable
to Lil Marc and the Indemnified Party; provided, however, that Lil Marc shall
not be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld or delayed). The Indemnified Parties
as a group may retain only one law firm (other than local counsel) with respect
to each related matter except to the extent there is, in the sole opinion of
counsel to an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of any two or
more Indemnified Parties, in which case each Indemnified Party with a
conflicting position on a significant issue shall be entitled to separate
counsel.
(b) Insurance. Lil Marc and ITI shall honor the provisions and
levels with respect to the maintenance of insurance policies relating to
directors' and officers' liability insurance set forth in the Placement Agency
Agreement.
(c) Successors. In the event Lil Marc or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in either such case, proper provision shall be made so
that the successors and assigns of Lil Marc shall assume the obligations set
forth in this Section 5.9.
(d) Survival of Indemnification. To the fullest extent not
prohibited by law, from and after the Effective Time, all rights to
indemnification now existing in favor of the employees, agents, directors or
officers of Lil Marc and ITI and their respective subsidiaries with respect to
their activities as such prior to or at the Effective Time, as provided in their
respective articles of incorporation or bylaws or indemnification agreements in
effect on the date of such activities or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 5.9 are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Party, his
or her heirs and his or her representatives.
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5.10 Directors and Officers of Lil Marc and the Surviving Corporation.
(a) Lil Marc and ITI shall take, or cause to be taken, all action
necessary so that at the Effective Time, the directors and officers of Lil Marc
shall be as set forth on Exhibit 5.10, provided, however, that Lil Marc shall
nominate its directors prior to the filing of the Information Statement with the
SEC.
(b) Lil Marc, Newco and ITI shall take, or cause to be taken, all
action necessary so that at or immediately after the Effective Time, the
Directors and Officers of the Surviving Corporation shall be as set forth on
Exhibits 1.4 and 1.5 hereto, respectively.
5.11 Certain Employee Agreements
(a) Subject to Section 5.11(d), Lil Marc and its subsidiaries
shall honor, without modification, all contracts, agreements, collective
bargaining agreements and commitments of ITI and its subsidiaries that apply to
any current or former employees or current or former directors of ITI and its
subsidiaries; provided, however, that this undertaking is not intended to
prevent Lil Marc from enforcing such contracts, agreements, collective
bargaining agreements and commitments in accordance with their terms, or from
enforcing any right to amend, modify, suspend, revoke or terminate any such
contract, agreement, collective bargaining agreement or commitment.
(b) For all purposes under the employee benefit plans providing
benefits after the Effective Time to any individuals who are employed by ITI or
any of its subsidiaries, as the case may be, immediately prior to the Effective
Time and who continue in the employment of Lil Marc or any of its subsidiaries
after the Effective Time (a "Continuing Employee"), such employee shall be
credited in accordance with the terms of the applicable plan with his or her
years of service before the Effective Time, to the same extent as such employee
was entitled, before the Effective Time, to credit for such service under any
similar ITI Employee Benefit Plan, except to the extent such credit would result
in a duplication of benefits. In addition, and without limiting the generality
of the foregoing: (i) each Continuing Employee shall be immediately eligible to
participate, without any waiting time, in any and all ITI Employee Benefit Plans
or any other employee benefit plans sponsored by Lil Marc and its subsidiaries
after the Effective Time (such plans, collectively the "New Plans") to the
extent coverage under such plan replaces coverage under a comparable ITI
Employee Benefit Plan, in which such employee participates immediately before or
at any time following the Effective Time (such plans, collectively, the "Old
Plans"); and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Continuing Employee, Lil Marc shall
cause all pre-existing condition exclusions and actively-at-work requirements of
such New Plan to be waived for such employee and his or her covered dependents,
except to the extent such exclusions and/or requirements were applicable to such
employee and/or his or her dependents under the applicable Old Plan and Lil Marc
shall cause any eligible expenses incurred by such employee and his or her
covered dependents during the portion of the plan year of the Old Plan ending on
the date such employee's participation in the corresponding New Plan begins to
be taken into account under such New Plan for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan.
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5.12 Available Cash. Immediately prior to the Effective Time, Lil Marc
shall have not less than Two Hundred Thousand Dollars ($200,000) of cash (or
cash equivalents) and shall have no material liabilities, whether fixed, accrued
or contingent. At the Effective Time, Lil Marc shall have not more than Fifty
Thousand Dollars ($50,000), in the aggregate, in fees, expenses or disbursements
incurred in connection with the consummation of the transactions contemplated by
this Agreement.
5.13 Further Assurances. Each of ITI and Lil Marc shall, and shall
cause its subsidiaries to, execute such further documents and instruments and
take such further actions as may reasonably be requested by the other in order
to consummate the Merger and other transactions contemplated by this Agreement
and to use its reasonable best efforts to take or cause to be taken all actions,
and to do or cause to be done all things, necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger and
the other transactions contemplated hereby, including fully cooperating with the
other in obtaining ITI Required Statutory Approvals, the Lil Marc Required
Statutory Approvals and all other approvals and authorizations of any
Governmental Authorities necessary or advisable to consummate the transactions
contemplated hereby.
5.14 Conveyance Taxes. Lil Marc and ITI shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be paid on or before the Effective Time.
5.15 Lil Marc Common Stock. Lil Marc shall take all corporate action
necessary to reserve for issuance and shall reserve for issuance a sufficient
number of shares of Lil Marc Common Stock for delivery upon exercise of the
Stock Options, SARs and warrants to be exchanged pursuant to Section 1.13 of
this Agreement.
5.16 Private Placement. At any time after the Initial Closing (as
defined in Section 3(a)(i) of the Placement Agency Agreement) of the Private
Placement, ITI shall not terminate this Agreement pursuant to Section 7.1(g)
unless such termination has been approved by a majority of the Commonwealth
Board Designees (as defined in Section 3(b)(xi) of the Placement Agency
Agreement).
5.17 ComVest Capitalization Adjustment. ComVest Capital Partners, LLC,
the majority stockholder of Lil Marc ("ComVest"), solely as it relates to Lil
Marc's representations and warranties contained in Section 3.4(a) and (b)
"Capitalization" of this Agreement, shall tender to Lil Marc for cancellation
such number of shares of Lil Marc Common Stock that is beneficially owned by
ComVest representing any inaccuracy with respect to the capitalization of Lil
Marc set forth in Section 3.4(a) and (b) herein; provided, however, that ComVest
shall not be obligated to tender shares for any inaccuracies, in the aggregate,
of less than five percent (5%) of Lil Marc Common Stock issued and outstanding
immediately prior to the Effective Time; provided, further, that ComVest's
obligations under this Section 5.17 shall terminate twenty-four (24) months
after the Effective Time.
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ARTICLE VI
CONDITIONS TO OBLIGATIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of Lil Marc, Newco and ITI to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver (to the
extent permitted by applicable law), at or prior to the Effective Time, of each
of the following conditions:
(a) No Injunction. As of the Effective Time, no statute, rule,
regulation, order, judgment, injunction, writ or preliminary restraining order
or decree of any nature shall have been issued, enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority, which
prohibits or restricts the consummation of the Merger or makes such consummation
illegal.
(b) Statutory Approvals. The Lil Marc Required Statutory
Approvals and the ITI Required Statutory Approvals shall have been obtained at
or prior to the Effective Time, such approvals shall have become Final Orders
(as hereinafter defined), and no Final Order shall impose terms or conditions
that would have, or would be reasonably likely to have, a Lil Marc Material
Adverse Effect or an ITI Material Adverse Effect. A "Final Order" means action
(including the approval of transfer, assignment or modification of Environmental
Permits) by the relevant regulatory authority that has not been reversed,
stayed, enjoined, set aside, annulled or suspended, with respect to which any
waiting period prescribed by law before the transactions contemplated hereby may
be consummated has expired, and as to which all conditions to the consummation
of such transactions prescribed by law, regulation or order have been satisfied.
(c) Private Placement. The Private Placement shall have been
consummated, raising gross proceeds from the sale of Units of not less than Five
Million Dollars ($5,000,000).
6.2 Conditions to Obligations of Lil Marc and Newco. The obligations
of each of Lil Marc and Newco to consummate the transactions contemplated by
this Agreement are also subject to the satisfaction of each of the following
additional conditions, any one or all of which may be waived in whole or in part
by Lil Marc and Newco to the extent permitted by applicable law:
(a) Representations and Warranties. All representations and
warranties of ITI contained in this Agreement shall be true and correct in all
material respects (other than representations and warranties that contain
materiality qualifications which shall be true and correct in all respects) as
of the date when made and at and as of the Effective Time, with the same force
and effect as though made as of the Effective Time, except for changes expressly
permitted by this Agreement or where such representations or warranties are
expressly limited by their terms to a prior date.
(b) Performance of Agreement. ITI shall have duly performed in
all material respects (and in the case of Section 4.1, in all respects) all
obligations and agreements, and complied
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in all material respects with all covenants and conditions contained in this
Agreement to be performed or complied with by it prior to or at the Effective
Time. None of the events permitting Lil Marc and Newco to terminate this
Agreement under Article VII hereof shall have occurred and be continuing.
(c) Officer's Certificate. ITI shall have delivered to Lil Marc
and Newco a certificate, dated the Effective Time, of an officer of ITI
certifying that the conditions specified in Section 6.1 (as they relate to ITI)
and Section 6.2(a), (b), (g) and (i) hereof have been fulfilled .
(d) No ITI Material Adverse Effect. No ITI Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance that
would have, or would be reasonably likely to have, an ITI Material Adverse
Effect.
(f) ITI Required Consents. The ITI Required Consents, the failure
of which to be obtained would have an ITI Material Adverse Effect, shall have
been obtained.
(g) ITI Preferred Stock. Immediately prior to or at the Effective
Time, all issued and outstanding shares of ITI Preferred Stock shall have
converted into shares of ITI Common Stock.
(h) Directors and Officers of the Surviving Corporation. All of
the directors and officers of ITI immediately prior to the Effective Time shall
have submitted their written resignations effective as of the Effective Time.
Prior to or at the Effective Time, ITI shall have taken, or caused to be taken,
all necessary corporate action so that, at or immediately after the Effective
Time, the directors and officers of the Surviving Corporation shall be as set
forth on Exhibits 1.4 and 1.5 hereto, respectively.
(i) ITI Stockholders' Consent.ITI shall have obtained the ITI
Stockholders' Consent.
(j) Opinion of Counsel. Lil Marc and Newco shall have received an
opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC, counsel to ITI,
dated the Closing Date, in a form reasonably satisfactory to Lil Marc and Newco
and addressed to Lil Marc and Newco, with such knowledge qualifiers and
assumptions with respect to certain state laws as is customary and reasonable,
substantially to the effect that:
(i) ITI has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this
Agreement by ITI and the consummation by ITI of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action on the part of ITI;
(ii) This Agreement has been duly and validly executed and
delivered by ITI (assuming the due authorization, execution and
delivery thereof by Lil Marc and Newco) constitutes the legal,
valid and binding obligation of ITI, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
insolvency,
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fraudulent conveyance, reorganization, conservatorship,
moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (irrespective of
whether enforcement is sought in a proceeding at law or in
equity) and except that rights to indemnification and
contribution hereunder may be limited by federal or state
securities laws or public policy relating hereto;
(iii) No consent, approval, waiver, license or authorization
or other action by or filing or registration with any state
corporate or United States federal public or governmental
authority is required in connection with the execution and
delivery by the Company of this Agreement or the consummation by
ITI of the transactions contemplated hereby, except for the
filing with the appropriate authorities of the Certificate of
Merger, filings, registrations and other actions required
pursuant to the 1933 Act, the Exchange Act, filings with the
Over-the-Counter Bulletin Board, and state securities or Blue Sky
Laws, in each case as to which we express no opinion in this
paragraph (iii) and those which already have been obtained by
ITI; and
(iv) The execution and delivery by ITI of this Agreement, and
the performance by ITI of its obligations hereunder do not
constitute a default under or violate (A) any provisions of the
articles of incorporation or by-laws of ITI or any of its
subsidiaries presently in effect, (B) any of the terms or
provisions of any material document, agreement or other
instrument to which ITI or any of its subsidiaries is a party or
by which they are bound, of which we are aware, (C) any
applicable state corporate or United States federal law or
regulation (other than federal and state securities or "blue sky"
laws, as to which we express no opinion in this paragraph (x)),
or (D) any judgment, writ, injunction, decree, order or ruling of
any state corporate or United States federal court or public or
governmental authority binding on of ITI or any of its
subsidiaries, of which we are aware; and
(v) There is no litigation, proceeding or public or
governmental investigation pending or threatened in writing
against ITI or any of its subsidiaries that relates to the
transactions contemplated by this Agreement or which, if
determined adversely to ITI or any of its subsidiaries, would
have an ITI Material Adverse Effect.
6.3 Conditions to the Obligations of ITI. The obligation of ITI to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver (to the extent permitted by applicable law), at or prior
to the Effective Time, of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Lil Marc and Newco contained in this Agreement shall be true and
correct in all material respects (other than representations and warranties that
contain materiality qualifications, which shall be true and correct in all
respects) as of the date when made and at and as of the Effective Time, with the
same force and effect as though made as of the Effective Time, except for
changes expressly permitted by
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this Agreement or where such representations or warranties are expressly limited
by their terms to a prior date.
(b) Performance of Agreement. Lil Marc and Newco shall have duly
performed in all material respects all obligations and agreements and complied
in all material respects (and in the case of Section 4.2, in all respects) with
all covenants and conditions contained in this Agreement to be performed or
complied with by them prior to or at the Effective Time. None of the events
permitting ITI to terminate this Agreement under Article VII hereof shall have
occurred and be continuing.
(c) Officer's Certificate. Lil Marc and Newco shall have
delivered to ITI a certificate, dated the Effective Time, of a officers of Lil
Marc and Newco certifying that the conditions specified in Section 6.1 (as they
relate to Lil Marc and Newco) and Section 6.3(a), (b) (i) and (k) hereof have
been fulfilled.
(d) No Lil Marc Material Adverse Effect. No Lil Marc Material
Adverse Effect shall have occurred and there shall exist no fact or circumstance
that would have, or would be reasonably likely to have, a Lil Marc Material
Adverse Effect.
(e) Directors and Officers of Lil Marc and the Surviving
Corporation. All of the directors and officers of Lil Marc and Newco immediately
prior to the Effective Time shall have submitted their written resignations
effective as of the Effective Time. Prior to or at the Effective Time, Lil Marc
and Newco shall have taken or caused to be taken all necessary corporate action
so that, at or immediately after the Effective Time, the directors and officers
of Lil Marc and the Surviving Corporation shall be as set forth in Exhibits
5.11, 1.4 and 1.5, respectively.
(f) ITI Agreements. Lil Marc shall have assumed the obligations
of ITI under the ITI Employment Agreements on terms reasonably satisfactory to
ITI.
(g) ITI Options and Warrants. Prior to or at the Effective Time,
Lil Marc shall have taken or caused to be taken, all necessary corporate action
so that, at or immediately after the Effective Time, the Stock Options, SARs and
warrants shall be converted in accordance with Section 1.13 hereof.
(h) Lil Xxxx Xxxx. Immediately prior to the Effective Time, Lil
Marc shall have not less than Two Hundred Thousand Dollars ($200,000) of cash
(or cash equivalents) and shall have no material liabilities, whether fixed,
accrued or contingent. At the Effective Time, Lil Marc shall have not more than
Fifty Thousand Dollars ($50,000), in the aggregate, in fees, expenses or
disbursements incurred in connection with the consummation of the transactions
contemplated by this Agreement.
(i) Lil Marc Stockholders' Consent. The matters set forth in the
Lil Marc Stockholders' Consent shall have been effectuated.
(j) Reverse Stock Split. The Reverse Stock Split shall have been
effectuated.
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(k) Opinion of Counsel. ITI shall have received an opinion of
Xxxxxxxxx Xxxxxxx, LLP, special counsel to Lil Marc, dated the Closing Date, in
a form reasonably satisfactory to ITI and addressed to ITI, with such knowledge
qualifiers and assumptions with respect to certain state laws as is customary
and reasonable, substantially to the effect that:
(i) Each of Lil Marc and Newco is a corporation validly
existing and in good standing under the laws of its respective
state of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to conduct
its business as presently being conducted. Lil Marc and Newco are
not qualified to transact business as a foreign corporation in
any foreign jurisdiction;
(ii) Lil Marc and Newco have all requisite corporate power
and authority to execute and deliver this Agreement and to
perform their respective obligations hereunder. The execution,
delivery and performance of this Agreement by Lil Marc and Newco
and the consummation by Lil Marc and Newco of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action on the part of Lil Marc and Newco;
(iii) This Agreement has been duly and validly executed and
delivered by Lil Marc and Newco (assuming the due authorization,
execution and delivery thereof by ITI) constitutes the legal,
valid and binding obligation of Lil Marc and Newco, enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
conservatorship, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing
(irrespective of whether enforcement is sought in a proceeding at
law or in equity) and except that rights to indemnification and
contribution hereunder may be limited by federal or state
securities laws or public policy relating hereto;
(iv) The shares of Lil Marc Common Stock to be issued by Lil
Marc pursuant to this Agreement have been duly authorized and,
when issued and delivered in the manner contemplated by this
Agreement, will be validly issued, fully paid and nonassessable,
and free of preemptive rights arising under law or pursuant to
Lil Marc's articles of incorporation;
(v) No consent, approval, waiver, license or authorization or
other action by or filing or registration with any state
corporate or United States federal public or governmental
authority is required in connection with the execution and
delivery by the Company of this Agreement or the consummation by
Lil Marc and Newco of the transactions contemplated thereby,
except for the filing with the appropriate authorities of the
Certificate of Merger, filings, registrations and other actions
required pursuant to the 1933 Act, the Exchange Act, filings with
the Over-the-Counter Bulletin Board, and state securities or Blue
Sky Laws, in each case as to
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which we express no opinion in this paragraph (v) and those which
already have been obtained by Lil Marc or Newco; and
(vi) There is no litigation, proceeding or public or
governmental investigation pending or threatened in writing
against Lil Marc or Newco that relates to the transactions
contemplated by this Agreement or which, if determined adversely
to Lil Marc or Newco, would have a Lil Marc Material Adverse
Effect.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time, notwithstanding approval
thereof by the stockholders of Lil Marc and ITI, prior to the Effective Time:
(a) By mutual written consent of ITI, Lil Marc and Newco;
(b) by either Lil Marc or ITI if (i) the Merger shall not have
been consummated by the date which is one hundred twenty (120) days after the
date of this Agreement (the "Termination Date") (unless the failure to
consummate the Merger is attributable to a failure on the part of the party
seeking to terminate this Agreement to perform any material obligation required
to be performed by such party at or prior to the Termination Date);
(c) By ITI or by Lil Marc and Newco, in either case, if a court
of competent jurisdiction or other Governmental Body shall have issued a final
and non-appealable Order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger;
(d) By Lil Marc and Newco, if ITI shall have failed to comply in
any material respect with any of its material covenants or agreements contained
in this Agreement or if any representation or warranty of ITI made herein fails
to be true and complete in any material respect when given and at any time
thereafter, except for (i) changes permitted by this Agreement and (ii) those
representations and warranties that address matters only as of a particular date
(which shall remain true and complete when given and at any time thereafter as
of such date), provided, however, that if any such failure is curable, notice of
such failure shall have been given to ITI by Lil Marc and Newco and ITI shall
not have cured such failure within thirty (30) days of notice thereof and,
provided, further, that Lil Marc shall not be in material breach of any of its
covenants, agreements or representations and warranties in this Agreement;
(e) By Lil Marc and Newco, if ITI shall have failed to obtain the
ITI Stockholders' Approval;
(f) By ITI, if (i) the Lil Marc Stockholders' Approval shall have
been withdrawn or modified without ITI's written consent or (ii) the Reverse
Stock Split is not effectuated;
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(g) By ITI, if any representation or warranty of Lil Marc or
Newco made herein fails to be true and complete in any material respect when
given and at any time thereafter, except for (i) changes permitted by this
Agreement and (ii) those representations and warranties that address matters
only as of a particular date (which shall remain true and complete when given
and at any time thereafter as of such date, provided, however, that if any such
failure is curable, notice of such failure shall have been given to Lil Marc and
Newco by ITI and Lil Marc and/or Newco shall not have cured such failure within
thirty (30) days of notice thereof, and provided, further, that ITI shall not be
in material breach of any of its covenants, agreements or representations and
warranties in this Agreement; or
(h) By ITI, if Lil Marc or Newco shall have failed to comply in
any material respect with any of its material covenants or agreements contained
in this Agreement, except for changes permitted by this Agreement, provided,
however, that if any such failure is curable, notice of such failure shall have
been given to Lil Marc and Newco by ITI and Lil Marc and/or Newco shall not have
cured such failure within thirty (30) days of notice thereof, and provided,
further, that ITI shall not be in material breach of any of its covenants,
agreements or representations and warranties in this Agreement.
7.2 Effect of Termination. In the event of termination of this
Agreement pursuant to this Article VII, prompt written notice shall be given by
the terminating party to the other parties hereto, and, unless the party seeking
to terminate this Agreement shall have no right to do so, no party to this
Agreement shall have any further liability to any other parties hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations, Warranties, Covenants and Agreements.
The respective representations, warranties, covenants and agreements of the
parties hereto shall not survive the Effective Time. Notwithstanding the
foregoing, this Section 8.1 shall not limit any covenant or agreement of the
parties hereto that by its terms contemplates performance after the Effective
Time, including without limitation, Sections 1.7, 1.8, 1.9, 5.9, 5.11 and 5.17
hereof.
8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Lil Marc, Newco and ITI at any time prior to the Effective Time with respect to
any of the terms herein, provided that, after approval of the Merger by the
stockholders of Lil Marc, no amendment shall be made after approval of the
Merger by the stockholder of Lil Marc that increases or changes the form of the
Merger Consideration or otherwise adversely affects the stockholders of Lil Marc
without further stockholder approval.
8.3 Waiver of Compliance; Consents. Except insofar as any provision
of this Agreement is non-waivable by its terms or as a matter of law, any
failure of Lil Marc or Newco, on the one hand, or ITI, on the other hand, to
comply with any obligation, covenant, agreement, or condition herein
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may be waived by a writing signed by ITI or Lil Marc, respectively, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 8.3.
8.4 Enforceability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remaining terms and provisions of this Agreement
or the application thereof to other persons and circumstances shall not be
invalidated thereby, and such remaining terms and provisions hereof shall remain
in full force and effect and shall be construed to effect the intent of the
parties hereto to the fullest extent permitted by law.
8.5 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied shall confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement, except that the
provisions of Sections 5.9 and 5.11 hereof shall inure to the benefit of those
persons covered by such Sections.
8.6 Successors and Assigns. Neither this Agreement nor the rights,
interests and obligations of the parties hereto shall be assigned by any of such
parties, by operation of law or otherwise, nor shall any such purported
assignment have any effect for purposes of this Agreement.
8.7 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is agreed accordingly that the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity, and each party
acknowledges that neither party shall be required to allege or to prove the
inadequacy of money damages as a remedy to seek any appropriate form of
equitable relief or remedy.
8.8 Notices. Except as otherwise specifically provided in this
Agreement, all communication hereunder shall be in writing (including
telegraphic communication) and shall be sent by first-class mail, telegraph,
facsimile or overnight courier or delivered in person:
to:
InkSure Technologies Inc.
0 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
48
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with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxx, Esq.
and to Lil Marc and Newco at:
Lil Marc, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxx
with copies to:
Commonwealth Associates, L.P.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Xxxxxxxxx Traurig, LLP
The Met Life Building
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Annex, Esq.
or to such other addresses as ITI, Lil Marc or Newco may designate by notice in
writing. Notices shall be deemed to have been given when received.
8.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflict of laws rules thereof.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall constitute an
original but all of which shall constitute one and the same agreement.
8.11 Headings. The article and section headings in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties, and shall not effect in any way the meaning or interpretation of this
Agreement.
8.12 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the documents and instruments referred to herein, embodies
the entire agreement between the parties hereto in respect of the subject matter
hereof. There are no agreements, restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
49
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered on its behalf by one of its duly
authorized officers, all as of the day and year first above written.
INKSURE TECHNOLOGIES INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
LIL MARC, INC.
By: /s/ Xxxxxx Xxxxx
----------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer
LILM ACQUISITION CORP.
By: /s/ Xxxx Xxxxxxxx
----------------------------------
Name: Xxxx Xxxxxxxx
Title: President
COMVEST CAPITAL PARTNERS, LLC
(solely with respect to Section
5.17 of this Agreement)
By: /s/ Xxxxx Xxxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Manager
50
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Exhibit 1.4
SURVIVING CORPORATION
DIRECTORS
Xxx Xxxxxx - Commonwealth Designee
Xxxxx X. Xxxxxxxxxx - Commonwealth Designee
Xxxxxx X. Xxxxx - Commonwealth Designee
Xxxx Xxxxxxx
Xxxxx Xxxxxxxx
Xxxxxx Xxxxxx
Xxx Xxxxx
Avi Xxxxxxxxx
A-58
Exhibit 1.5
SURVIVING CORPORATION
OFFICERS
Xxxx Xxxxxxx, Chairman of the Board
Xxxxx Xxxxxxxx, Chief Executive Officer
Xxxxxx Xxxxxx, Vice President, Research & Development
and Chief Technology Officer
Xxxx Xxxxx, Vice President, Chief Financial Officer, Secretary and Treasurer
Xxxx Xxxxxx, Vice President, Marketing & Business Development
A-59
Exhibit 5.10
LIL MARC, INC.
DIRECTORS
(After the Effective Time)
Xxx Xxxxxx
Xxxxx X. Xxxxxxxxxx
Xxxxxx X. Xxxxx
Xxxx Xxxxxxx
Xxxxx Xxxxxxxx
Xxxxxx Xxxxxx
Xxx Xxxxx
Avi Xxxxxxxxx
OFFICERS
(After the Effective Time)
Xxxx Xxxxxxx, Chairman of the Board
Xxxxx Xxxxxxxx, Chief Executive Officer
Xxxxxx Xxxxxx, Vice President, Research & Development
and Chief Technology Officer
Xxxx Xxxxx, Vice President, Chief Financial Officer, Secretary and Treasurer
Xxxx Xxxxxx, Vice President, Marketing & Business Development
A-60
