AGREEMENT AND PLAN OF MERGER
Exhibit
10.4
Execution Copy
BY
AND AMONG
INVENTA
TECHNOLOGIES, INC.,
ANTS
HOLDINGS, INC.
AND
XXXXXX
X. XXXXXX AS STOCKHOLDERS’ REPRESENTATIVE
Dated
as of May 15, 2008
TABLE
OF CONTENTS
Page
| ARTICLE I THE MERGER; MERGER CONSIDERATION |
2
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| 1.1 |
The
Merger.
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2
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| 1.2 |
Effective
Time.
|
2
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| 1.3 |
Closing
of the Merger.
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2
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| 1.4 |
Effects
of the Merger.
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2
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| 1.5 |
Certificate
of Incorporation and Bylaws.
|
2
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| 1.6 |
Board
of Directors.
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3
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| 1.7 |
Officers.
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3
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| 1.8 | Conversion of Shares. |
3
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| 1.9 |
Merger
Consideration.
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4
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| 1.10 |
Other
Payments.
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4
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| 1.11 |
Surrender
and Distribution.
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5
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| 1.12 |
Appraisal
Rights.
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6
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| 1.13 | Withholding Rights |
6
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| ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY |
6
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| 2.1 |
Organization
of Company
|
6
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| 2.2 |
Company’s
Capital Structure
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6
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| 2.3 |
Authority
|
7
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| 2.4 |
No
Conflict
|
7
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| 2.5 |
Consents
|
8
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| 2.6 |
Ownership
of Assets.
|
8
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| 2.7 | Company’s Financial Statements |
9
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| 2.8 |
No
Undisclosed Liabilities.
|
10
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| 2.9 |
No
Changes.
|
11
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| 2.10 |
Tax
Matters.
|
13
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| 2.11 |
Restrictions
on Business Activities
|
14
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| 2.12 |
Title
to Properties; Absence of Liens and Encumbrances; Condition of
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| Equipment |
14
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| 2.13 |
Company
Intellectual Property.
|
15
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| 2.14 |
Agreements,
Contracts and Commitments.
|
17
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| 2.15 |
Interested
Party Transactions
|
18
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| 2.16 |
Governmental
Authorization.
|
19
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| 2.17 |
Litigation.
|
19
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| 2.18 |
Accounts
Receivable
|
19
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| 2.19 |
Minute
Books
|
19
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2.20 |
Environmental
Matters
|
19
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| 2.21 |
Brokers’
and Finders’ Fees
|
20
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| 2.22 |
Employee
Benefit Plans.
|
20
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| 2.23 |
Insurance.
|
21
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2.24
|
Compliance
with Laws
|
21
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| 2.25 |
Warranties;
Indemnities
|
22
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2.26 |
Complete
Copies of Materials and Documents
|
22
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2.27 |
Company
Employee Work Permit Status
|
22
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2.28 |
Representations
Complete
|
22
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2.29 |
Limitation
to United States Laws.
|
22
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2.30 |
No
Other Representations or Warranties; Disclosure
Schedules.
|
23
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2.31 |
No
Knowledge of Misrepresentations or Omissions.
|
23
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ARTICLE
III REPRESENTATIONS AND WARRANTIES OF BUYER
|
23
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| 3.1 |
Organization,
Standing and Corporate Power.
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23
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| 3.2 |
Authority
|
24
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| 3.3 | Capitalization. |
24
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| 3.4 |
Buyer
Intellectual Property
|
25
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| 3.5 |
SEC
Filings; Financial Statements.
|
26
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3.6 |
Absence
of Certain Changes or Events
|
27
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| 3.7 |
Litigation
|
27
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3.8 |
Representations
Complete
|
27
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3.9 |
Matters
Regarding the Buyer’s Stock.
|
28
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3.10 |
No
Knowledge of Misrepresentations or
Omissions.
|
28
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3.11 |
Brokers’
and Finders’ Fees.
|
28
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| 3.12 |
No
Other Representations or Warranties; Disclosure
Schedules.
|
28
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| ARTICLE IV CONDUCT PRIOR TO THE CLOSING |
29
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| 4.1 |
Conduct
of Business
|
29
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| 4.2 |
No
Solicitation.
|
31
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| ARTICLE V ADDITIONAL AGREEMENTS |
32
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| 5.1 |
Access
to Information
|
32
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| 5.2 |
Confidentiality
|
32
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| 5.3 |
Expenses
|
33
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| 5.4 |
Public
Disclosure
|
33
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| 5.5 |
Consents
|
33
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| 5.6 |
Taking
of Necessary Action; Further Action
|
33
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| 5.7 |
Notification
of Certain Matters
|
33
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| 5.8 |
Additional
Documents and Further Assurances
|
33
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| 5.9 |
New
Employment Arrangements
|
34
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| 5.10 |
Post-Closing
Audit
|
34
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| ARTICLE VI CONDITIONS TO THE MERGER |
34
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| 6.1 | Conditions to Obligations of Each Party to Effect the Merger |
34
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| 6.2 |
Additional
Conditions to Obligations of Company
|
34
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| 6.3 |
Additional
Conditions to the Obligations of Buyer and Acquisition
Sub
|
35
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| ARTICLE VII SURVIVAL; LIMITATION OF LIABILITY; INDEMNIFICATION |
37
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| 7.1 |
Survival
of Representations and Warranties
|
37
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| 7.2 |
Company
Indemnification
|
38
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| 7.3 |
Buyer’s
Indemnification.
|
39
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| 7.4 |
Stockholder’s
Indemnification.
|
39
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| 7.5 |
Limitations;
Maximum Payments; Remedies
|
39
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| 7.6 |
Payment;
Procedure for Indemnification.
|
40
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| 7.7 |
Payment
|
42
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7.8 |
Sole
Remedy.
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43
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7.9 |
Termination
Upon Change of Control
|
43
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| ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER |
43
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| 8.1 |
Termination
|
43
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| 8.2 |
Effect
of Termination
|
44
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| 8.3 |
Amendment
|
44
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| 8.4 |
Extension;
Waiver
|
44
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| ARTICLE IX CLOSING |
44
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| 9.1 |
Deliveries
of the Buyer and Acquisition Sub.
|
44
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| 9.2 |
Deliveries
of the Company.
|
45
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| ARTICLE X POST CLOSING COVENANTS |
46
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| 10.1 |
Further
Cooperation.
|
46
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| 10.2 |
Confidentiality.
|
46
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| 10.3 |
Maintenance
of Books and Records.
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46
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| ARTICLE XI TAX MATTERS |
46
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| 11.1 |
Tax
Returns.
|
46
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| 11.2 |
Cooperation
on Tax Matters.
|
47
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| 11.3 |
Certain
Taxes.
|
47
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| ARTICLE XII GENERAL PROVISIONS |
48
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| 12.1 |
The
Stockholders’ Representative.
|
48
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| 12.2 |
Notices
|
51
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| 12.3 |
Interpretation
|
52
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| 12.4 |
Counterparts
|
52
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| 12.5 |
Entire
Agreement; Assignment
|
52
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| 12.6 |
Severability
|
52
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| 12.7 |
Other
Remedies
|
53
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| 12.8 |
Governing
Law
|
53
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| 12.9 |
Forum
and Venue
|
53
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| 12.10 | Rules of Construction |
53
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| 12.11 | No Waiver of Rights. |
53
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| 12.12 | Section and Paragraph Titles. |
53
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| 12.13 | Legal Fees. |
53
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| ARTICLE XIII DEFINITIONS |
54
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| 13.1 |
Certain
Definitions.
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54
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- iii
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Schedules
Schedule
1.6 – Acquisition Subsidiary Directors
Schedule
1.7 – Acquisition Subsidiary Officers
Schedule
1.10 – Company Note Holders
Schedule
2.1 – Jurisdictions in which Qualified to do Business
Schedule
2.4 – No Conflict
Schedule
2.5 – Consents
Schedule
2.6 – Permitted Encumbrances
Schedule
2.7 – Company’s Unaudited Financial Statements
Schedule
2.8 – Undisclosed Liabilities
Schedule
2.9 – Changes since Latest Balance Sheet
Schedule
2.9(k) – Increases in Compensation
Schedule
2.10 – Tax Matters
Schedule
2.12(a) – Real Property
Schedule
2.12(c) – Equipment
Schedule
2.13(a) – Company Registered Intellectual Property Rights
Schedule
2.13(b) – Intellectual Property Rights with Encumbrances
Schedule
2.13(f) – Company Intellectual Property Agreements
Schedule
2.13(g) – Intellectual Property Indemnification Agreements
Schedule
2.13(i) – Defects in Company Registered Intellectual Property
Schedule
2.13(p) – Company Subsidies
Schedule
2.14(a) – Agreements
Schedule
2.17 – Litigation
Schedule
2.22(a) – Employee Benefits
Schedule
2.22(e) – Parachute Payments
Schedule
2.23 – Insurance
Schedule
3.3(a) – Buyer Capitalization
Schedule
3.7 – Buyer Litigation
Schedule
5.5 – Required Consents
Schedule
5.9 – Employment Offers
Schedule
6.3(e) – Key Employees
Exhibits
Exhibit A
– Shareholders; Ownership
Exhibit B
– Certificate of Merger
Exhibit C
– Form of Note
Exhibit D
– Form of Letter of Transmittal
Exhibit E
– Form of Pledge Agreement
Exhibit F
– Indebtedness Modification
Exhibit G
– Stockholders’ Representative Agreement
- iv
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This
AGREEMENT AND PLAN OF MERGER (the “Agreement”)
is made and entered into as of May 15, 2008 among ANTs software, inc., a
Delaware corporation (“Buyer”),
ANTs Holdings, Inc., a Delaware corporation and wholly owned direct subsidiary
of Buyer (“Acquisition
Sub”), Inventa Technologies, Inc., a Delaware corporation (“Inventa”
or “Company”),
and Xxxxxx X. Xxxxxx, solely in his capacity as Stockholders’ Representative
(“Stockholders’
Representative”).
RECITALS
A. WHEREAS,
Buyer has formed Acquisition Sub for the sole purpose of merging it with and
into the Company and acquiring the Company as a wholly-owned
Subsidiary.
B. WHEREAS,
The board of directors of the Company has determined that the transactions
contemplated hereby are in the best interests of the Company, and has adopted
this Agreement and approved the Merger (as defined below), upon the terms and
subject to the conditions set forth in this Agreement.
C. WHEREAS,
the board of directors of Buyer (on its own behalf and as the sole stockholder
of Acquisition Sub) and the board of directors of Acquisition Sub have
determined that the transactions contemplated hereby are in the respective best
interests of Buyer and Acquisition Sub, and have adopted this Agreement and
approved the Merger (as defined below), upon the terms and subject to the
conditions set forth in this Agreement.
D. WHEREAS,
the respective boards of directors of Buyer, Acquisition Sub and the Company
have each (a) approved and declared advisable the Merger, upon the terms and
subject to the conditions set forth herein, whereby each issued and outstanding
share of Common Stock, par value $0.001 per share, of the Company (other than
Dissenting Shares (as defined in Section 1.12 hereof)) will be converted into
the Common Merger Consideration (as defined in Section 1.8(a) hereof) and (b)
approved this Agreement upon the terms and subject to the conditions set forth
herein.
E. WHEREAS,
for U.S. federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the “Code”),
and that this Agreement is intended to be, and by being signed by Buyer, Company
and Acquisition Sub is, adopted as a plan of reorganization within the meaning
of Section 368(a) of the Code.
NOW,
THEREFORE, in consideration of the covenants, promises and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
- 1-
ARTICLE
I
THE
MERGER; MERGER CONSIDERATION
1.1 The
Merger. At
the Effective Time and upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware, as amended and supplemented from time to time (the “DGCL”),
Acquisition Sub shall be merged with and into the Company (the “Merger”). Following
the Merger, the Company shall continue as the surviving corporation (the “Surviving
Corporation”) and the separate corporate existence of Acquisition Sub
shall cease. The existence of the Company shall continue unaffected
and unimpaired by the Merger, and, as the Surviving Corporation, it shall be
governed by the DGCL.
1.2 Effective
Time.
Subject to the terms and conditions set forth in this Agreement, a certificate
of merger substantially in the form attached hereto as Exhibit B (the “Certificate
of Merger”) shall be duly executed by the Company and Acquisition Sub and
thereafter delivered to the Secretary of State of the State of Delaware for
filing pursuant to the DGCL on the Closing Date (as defined
below). The Merger shall become effective at such time as a properly
executed and certified copy of the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware in accordance with the DGCL or such
later time as Buyer and the Company may agree upon and set forth in the
Certificate of Merger (such time as the Merger becomes effective, the “Effective
Time”).
1.3 Closing of the
Merger. The
closing of the Merger (the “Closing”)
will take place in person or by telecopier at the offices of Xxxxxx Xxxxxxxx,
LLP, 899 Cassatt Road,
000 Xxxxxx Xxxx, Xxxxxx, Xxxxxxxxxxxx 00000, or such other place as the
parties may agree, on a date that shall be no later than the fifth (5th)
Business Day after the satisfaction or waiver of each condition to the Closing
set forth in ARTICLE VI (other than conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of such
conditions), unless another time or date, or both, are agreed to in writing by
Buyer and the Company (the “Closing
Date”).
1.4 Effects of the
Merger. At
the Effective Time, the Merger shall have the effects set forth in the
DGCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all of the properties, rights, privileges,
powers and franchises of the Company and Acquisition Sub shall vest in the
Surviving Corporation and all debts, Liabilities and duties of the Company and
Acquisition Sub shall become the debts, Liabilities and duties of the Surviving
Corporation; provided, however, that this acknowledgement of the statutory
effects of the Merger shall in no manner be construed to modify the
representations of the Company and its stockholders (the “Stockholders”)
set forth herein.
1.5 Certificate of Incorporation
and Bylaws.
- 2-
1.6 Board of
Directors. The
directors of Acquisition Sub at the Effective Time, which are listed on Schedule 1.6 hereto, shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Survivor’s Constituent Documents from and after the
Effective Time.
1.7 Officers. The
officers of Acquisition Sub at the Effective Time, which are listed on Schedule 1.7 hereto, shall be
the initial officers of the Surviving Corporation, each to hold office in
accordance with the Survivor’s Constituent Documents from and after the
Effective Time.
1.8 Conversion of
Shares.
(a) At the
Effective Time, each share of the Company’s outstanding capital stock consisting
of voting and non-voting common stock, each with a par value of $0.0001 per
share (the “Common
Stock”) issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares) shall, by virtue of the Merger and without any
action on the part of Acquisition Sub, the Company or the holder thereof, be
cancelled and converted into and become, subject to the provisions of
Section 1.9, the right to receive a pro rata portion of 20,000,000 shares
of Buyer common stock (the “Buyer’s
Stock”) (such pro rata portion of the Buyer’s Stock may be, for purposes
of this Agreement referred to as the “Common
Stock Per Share
Merger Consideration”). Notwithstanding the foregoing, if,
between the date of this Agreement and the Effective Time, the Common Stock
shall have been changed into a different number of shares or a different class
by reason of any dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, then the Common Stock Per Share Merger
Consideration contemplated by the Merger shall be correspondingly adjusted to
reflect such dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of Shares. “Common
Merger Consideration” means the aggregate consideration to which the
holders of Common Stock become entitled to pursuant to this
Section 1.8(a).
(b) At the
Effective Time, each outstanding share of common stock, par value $0.00001 per
share, of Acquisition Sub that is issued and outstanding immediately prior to
the Effective Time shall be converted into one (1) share of common stock, par
value $.0001 per share, of the Surviving Corporation and the shares of the
Surviving Corporation into which the shares of Acquisition Sub are so converted
shall be the only shares of the Surviving Corporation that are issued and
outstanding immediately after the Effective Time.
- 3
-
(c) At the
Effective Time, all shares of Common Stock held in the treasury of the Company
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Acquisition Sub, the Company or the holder
thereof, be cancelled and retired and cease to exist and no payment shall be
made with respect thereto.
1.9 Merger
Consideration.
(a) Conversion
of Company Common Stock. At the Effective Time, by operation of law
and by virtue of the Merger and without any action on the part of Buyer or
Company, the shares of Company Common Stock issued and outstanding as of the
Effective Time shall be converted into the Common Merger Consideration (or
6,666.66667 shares of Buyer’s Stock per share of Company Common
Stock). Buyer hereby represents and warrants to the Company and the
Stockholders that the Common Merger Consideration will be, when issued in
accordance with the terms of this Agreement, duly authorized, validly issued,
fully-paid, non-assessable and not subject to preemptive rights.
(b) After the
Effective Time, each outstanding stock certificate which theretofore represented
shares of Company Common Stock shall, until surrendered for exchange, be deemed
for all purposes to evidence ownership of the right to receive the Common Stock
Per Share Merger Consideration distributable to the holder thereof with respect
to such shares of Company Common Stock as provided in Section
1.11(a). After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock.
(c) In lieu of
issuing any fractional shares, the number of shares of Buyer’s Stock issuable
upon surrender of shares of Company Common Stock shall be rounded to the nearest
whole share without compensation to the Stockholders or the Buyer for such
fractional share.
1.10 Other
Payments.
At the
Effective Time, the Buyer shall pay or cause to be paid the
following:
(a) Nine
Hundred Twenty-Five Thousand Dollars ($925,000.00), plus interest accrued
thereon through the Closing Date, in cash payable to the International Maritime
Insurance Company (“IMICO”),
in full satisfaction of the Company’s outstanding indebtedness to IMICO;
and
(b) Two
Million Seventy-Five Thousand Dollars ($2,075,000), less the amount of accrued
interest paid to IMICO pursuant to Section 1.10(a) above, in cash and Two
Million Dollars ($2,000,000) in the form a note (the “Note”),
substantially in the form of Exhibit C, payable to
those persons and in the amounts identified on Schedule 1.10 (the
“Company
Note Holders”), in full satisfaction of the Company’s outstanding debt
obligations to the Company Note Holders.
- 4
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1.11 Surrender and
Distribution.
(a) Buyer
shall instruct its transfer agent to act as payment agent (the “Payment
Agent”) for the purpose of exchanging certificates representing shares of
Common Stock outstanding immediately prior to the Effective Time (the “Company
Stock Certificates”).
(b) At
Closing, the Stockholders’ Representative shall deliver to Buyer all Company
Stock Certificates along with duly executed stock powers and duly executed
letters of transmittal in the form attached hereto as Exhibit D (each a
“Letter of
Transmittal”). Buyer will deliver as soon as practicable after
the Effective Time to the Stockholders’ Representative for distribution to each
Stockholder the appropriate Common Stock Per Share Merger Consideration (it
being understood and agreed that any Stockholder that surrenders his or her
Company Stock Certificates at the Closing, shall receive its Common Stock Per
Share Merger Consideration on the Closing Date). Until so
surrendered, each such Company Stock Certificate shall represent after the
Effective Time for all purposes only the right to receive the appropriate Common
Stock Per Share Merger Consideration as provided in Section 1.9(a).
(c) If any
portion of the Common Merger Consideration is to be distributed to a Person
other than the Person in whose name the surrendered Company Stock Certificate is
registered, it shall be a condition to such distribution that the Company Stock
Certificate so surrendered shall be accompanied by an executed stock power by
the holder of such Company Stock Certificate and otherwise be in proper form for
transfer, and that the Buyer shall have received advice of its counsel that such
transfer is permissible, and that the Person requesting such payment shall pay
to Buyer any transfer or other Taxes required as a result of such distribution
to a Person other than the registered holder of such certificate or establish to
the satisfaction of Buyer that such Tax has been paid or is not
payable.
(d) If, after
the Effective Time, Company Stock Certificates are presented to the Surviving
Corporation or Payment Agent such Company Stock Certificates shall be canceled
and exchanged for the applicable Common Stock Per Share Merger
Consideration.
1.12 Appraisal
Rights.
Notwithstanding anything in this Agreement to the contrary, each share of Common
Stock that is issued and outstanding immediately prior to the Effective Time and
that is held by a Stockholder who has not voted in favor of the Merger and has
properly exercised, and otherwise perfected, their appraisal rights pursuant to
Section 262 of the DGCL and does not withdraw or lose the right to
appraisal and payment made under the DGCL (each, a “Dissenting
Share”) shall not be converted into or exchangeable for the right to
receive any portion of the Common Merger Consideration, but shall be entitled to
receive such consideration as shall be determined pursuant to Section 262
of the DGCL; provided,
however, that if such
Stockholder fails to perfect or effectively withdraws or loses the right to
appraisal and payment under the DGCL, each share of Common Stock held by such
Stockholder shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
applicable Common Stock Per Share Merger Consideration, and each such share of
Common Stock shall no longer be a Dissenting Share. The Company shall
give prompt notice to Buyer of any demands received by the Company for
appraisals of Common Stock. The Company shall not, except with the
prior written consent of Buyer, make any payment with respect to, or settle or
offer to settle, any such demands.
- 5
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1.13 Withholding
Rights.
Each of the Surviving Corporation, Buyer and the Payment Agent shall be entitled
to deduct and withhold from the consideration otherwise payable to any Person
pursuant to this ARTICLE I such amounts as it is required to deduct and withhold
with respect to the making of such payment under any provision of Applicable Law
with respect to Taxes. If the Surviving Corporation, Buyer or the
Payment Agent, as the case may be, so withholds any such amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
applicable Stockholder in respect of which the Surviving Corporation, Buyer or
the Payment Agent, as the case may be, made such deduction and
withholding.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Company
hereby represents and warrants to Buyer and Acquisition Sub, subject to the
exceptions specifically disclosed in the attached schedules supplied by Company
to Buyer and Acquisition Sub (the “Disclosure
Schedules”) and dated as of the date hereof and attached hereto, that on
the date hereof and as of the Closing Date as though made (subject to the
notification rights of Section 5.7) at the Closing Date, as
follows:
2.1 Organization of Company.
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Company has the corporate
power to own its properties and to carry on its businesses as currently
conducted and as currently contemplated to be conducted. Company is
duly qualified or licensed to do business and in good standing as a foreign
corporation in each jurisdiction set forth in Schedule
2.1. Company has delivered true and correct copies of its
organizational documents, each as amended to date and in full force and effect
on the date hereof, to Buyer. Schedule 2.1
lists the directors and officers of Company. The operations now being
conducted by Company are not now and have never been conducted by Company under
any other name.
2.2 Company’s Capital
Structure
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(a) The issued
share capital of Company consists of 150 shares of Voting common stock and 2,850
shares of non-voting common stock (collectively, the “Company
Common Stock”). All of the outstanding Company Common Stock is
duly authorized, validly issued and fully paid and not subject to preemptive
rights created by statute, the constitutional or organizational documents of
Company, or any agreement to which Company is a party or by which it is bound,
and have been issued in compliance with applicable securities
laws. There are no declared or accrued but unpaid dividends or
distributions with respect to any shares of Company Common
Stock. Company has no other share in its capital issued or
outstanding except as set forth hereinabove.
(b) Company
has never adopted or maintained any stock option plan, phantom stock plan, stock
purchase plan, or any other plan providing for equity compensation of any person
which remains in effect. There are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to which
Company is a party or by which it is bound obligating Company to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares in the capital or of the capital stock of Company or
otherwise obligating Company to grant, extend, accelerate the vesting of, change
the price of, otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or other
similar rights with respect to Company. There are no voting trusts,
proxies, voting agreements, or other agreements or understandings with respect
to the voting shares of Company.
(c) Company
does not now have and has not, since January 1, 2003, had any subsidiaries and
does not otherwise own and has never otherwise owned any shares of capital stock
or any interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity.
2.3 Authority. Company
has all requisite power and authority to enter into this Agreement and any
related agreement to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by its board of directors and no
other corporate proceedings on the part of the Company, other than obtaining
stockholder approval pursuant to the provisions of the DGCL, are necessary to
authorize this Agreement or the transactions contemplated
hereby. Subject to the foregoing, this Agreement has been duly and
validly executed and delivered by the Company and (assuming this Agreement
constitutes a valid and binding obligation of Buyer and Acquisition Sub)
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
subject to the laws of general application relating to bankruptcy, insolvency,
and the relief of debtors and rules of law governing specific performance,
injunctive relief, or other equitable remedies.
2.4 No
Conflict
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2.5 Consents
Except as set forth on Schedule 2.5, no
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency or commission (each, a “Governmental
Entity”) or any third party, including a party to any agreement with
Company (so as not to trigger any Conflict), are required by or with respect to
Company in connection with the execution and delivery of this Agreement and any
related agreement to which Company is a party or the consummation of the
transactions contemplated hereby and thereby, except for such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws.
2.6 Ownership of
Assets.
Except as set forth on Schedule 2.6, The
Company (a) has good and marketable title to, or a valid leasehold interest in,
or a valid license or right to use all of its properties, assets and other
rights, free and clear of any encumbrance, except for any (i) liens for
Taxes, assessments and other charges by a Government Entity not yet due and
payable or being contested in good faith, (ii) statutory, landlord’s,
mechanics’, laborers’, materialmen’s or similar liens arising in the ordinary
course of business of the Company, conducted through the Company, or (iii) liens
of any secured creditor, which secured creditor liens are also listed on Schedule 2.6, (the
“Permitted
Encumbrances”), and (b) to its Knowledge owns, has valid leasehold
interests in or valid contractual rights to use, all of the assets, tangible and
intangible, necessary for the conduct of its business, except where the failure
to own such assets or have such valid leasehold interests or such valid
contractual rights would not, individually or in the aggregate, have or be
reasonably likely to result in a Material Adverse Effect.
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2.7 Company’s Financial
Statements
(a) In
accordance with Section 2.7(b) below, Schedule 2.7
sets forth (i) Company’s reviewed or internally prepared unaudited
financial statements as of December 31, 2006 and the related reviewed or
internally prepared statements of income, cash flow and stockholders’ equity for
the twelve (12) month period ended December 31, 2006, (ii) Company’s
internally prepared unaudited financial statements as of
December 31, 2007 and the related internally prepared statements of
income, cash flow and stockholders’ equity for the twelve (12) month period
ended December 31, 2007, and (iii) Company’s internally prepared
unaudited balance sheet as of March 31, 2008 (collectively, the “Financial
Statements”). The Financial Statements are correct in all
material respects and, except as set forth in Section 2.7(b) below, have been
prepared in accordance with GAAP, consistently applied on a basis consistent
throughout the periods indicated and consistent with each other. The
Financial Statements present fairly the financial condition, operating results
and cash flows of Company as of the dates and during the periods indicated
therein. Company’s balance sheet as of March 31, 2008 is referred to
hereinafter as the “Latest
Balance Sheet.”
(b) The
following accounting practices characterize the Financial
Statements:
The
preparation of these financial statements in conformity with accounting
principles generally accepted in the United States of America (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
In that
regard, management has made the following estimates regarding useful life for
straight-line depreciation and amortization of certain assets, as
follows:
|
|
#
Years
|
|
|
Furniture
& Fixtures
|
5
|
|
|
Computer
Equipment0
|
3
|
|
|
Software
& Development
|
3
|
|
|
Office
Equipment
|
3
|
|
|
Leasehold
Improvements
|
5
|
|
|
Capitalized
Software Costs
|
8
|
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In
addition, management has estimated an allowance for bad debts of zero, in
accordance with Company history for the collectability of accounts
receivable.
General
& Administrative expenses have not been allocated to Cost of Sales due to
the estimated immateriality, and the assumption that primarily all costs of the
Company are incurred to generate the corresponding revenue.
The
Company has booked certain revenues based upon either a verbal authorization or
a written authorization to proceed. Such amounts are recorded as
unbilled revenue since the Company’s policy has been to not invoice until an
executed contract or purchase order is received from the customer;
notwithstanding such policy, it is assumed such practice is consistent with past
history that has resulted in no bad debts, and the assumption that such verbal
authorization or written authorization is a legally enforceable
contract. Such amounts booked were $83,000 & $50,000 for the
years ended December 31, 2007 and 2006, respectively.
At
December 31, 2007, no accrual was made for vacation allowance as a change in
Company policy resulted in the requirement that the subsequent year’s usage be
taken in the form of time-off. In the event an employee terminates
employment, no cash payment is to be made. It is estimated that when
an employee takes vacation that the impact of the down time is immaterial to the
financial statements as a whole.
The March
31, 2008 financial statements are not presented in accordance with
GAAP. They are solely a printout of an unadjusted trial balance from
the Company’s accounting software.
Financial
Statement footnote disclosures have not been presented. Generally
accepted accounting principles require such disclosures because they may
influence the users’ conclusions about the Company’s financial position and
results of operations.
2.8 No Undisclosed
Liabilities.
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2.9 No Changes. Except
as set forth on Schedule 2.9, since
the date of the Latest Balance Sheet there has not been, occurred or arisen
any:
(a) transaction
by Company except in the ordinary course of business as conducted on that date
and consistent with past practices;
(b) amendments
or changes to the organizational documents of Company;
(c) capital
expenditure or commitment by Company exceeding $10,000 individually or $25,000
in the aggregate;
(d) payment,
discharge or satisfaction, in any amount in excess of $10,000 individually, or
$25,000 in the aggregate, of any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Balance Sheet;
(e) destruction
of, damage to, or loss of any material assets, material business or material
customer of Company (whether or not covered by insurance);
(f) strike,
work stoppage, organizational activities, labor trouble or claim of wrongful
discharge or other unlawful labor practice or action;
(g) change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates) by Company other than as required by
GAAP;
(h) change in
any material election in respect of Taxes, adoption or change in any accounting
method in respect of Taxes, agreement or settlement of any claim or assessment
in respect of Taxes, or extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes;
(i) revaluation
by Company of any of its assets;
(j) declaration,
setting aside or payment of a dividend or other distribution (whether in cash,
shares, stock or property) in respect of any Company Common Stock, or any split,
combination or reclassification in respect of any shares of Company Common
Stock, or any issuance or authorization of any issuance of any other securities
in respect of, in lieu of or in substitution for shares of Company Common Stock,
or any direct or indirect repurchase, redemption, or other acquisition by
Company of any shares of Company Common Stock (or options, warrants or other
rights convertible into, exercisable or exchangeable therefore);
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(k) increase
in the salary or other compensation payable or to become payable by Company to
any of their officers, directors, employees or advisors, or the declaration,
payment or commitment or obligation of any kind for the payment by Company of a
severance payment, termination payment, parachute or employment continuation
payment, bonus or other additional salary or compensation to any such person,
except (i) as required by law, (ii) pursuant to requirements of pre-existing
Contracts, all of which are set forth on Schedule 2.9(k), or
(iii) in the ordinary course;
(l) except for
grants of non-exclusive licenses to Company Intellectual Property or other
licenses granted in the ordinary course of business, all consistent with past
practices, granted any licenses;
(m) except as
set forth herein, sale, lease, license or other disposition of any of the
material assets or material properties of Company or any creation of any
security interest in such material assets or material properties;
(n) loan by
Company to any Person, incurring by Company of any indebtedness, guaranteeing by
Company of any indebtedness, issuance or sale of any debt securities of Company
or guaranteeing of any debt securities of others, except for advances to
employees for travel and business expenses in the ordinary course of business
consistent with past practices;
(o) waiver or
release of any right or claim of Company with respect to the Company’s assets,
including any write-off or other compromise of any account receivable of
Company;
(p) the
commencement, settlement, notice or, to the Knowledge of Company threat of any
lawsuit or proceeding or other investigation against Company (with respect to
the Assets) or their affairs, or any reasonable basis for any of the
foregoing;
(q) receipt of
written notice of, or Knowledge of, any claim or potential claim of ownership by
any person other than Company of Company Intellectual Property owned
by or developed or created by Company, or of infringement by Company of any
other person’s or entity’s Intellectual Property;
(r) issuance
or sale, or contract to issue or sell, by Company of any shares of Company
Common Stock or securities convertible into, or exercisable or exchangeable for,
shares of Company Common Stock, or any securities, warrants, options or rights
to purchase any of the foregoing;
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(s) except for
rights granted to the Company’s customers to use and/or modify deliverables ,
entered into any agreement or modification to agreement pursuant to which any
other party was granted marketing, distribution, development or similar rights
of any type or scope with respect to any products or technology of
Company;
(t) a Material
Adverse Effect occurs; or
(u) agreement
by Company, or any officer or employees on behalf of Company to do any of the
things described in the preceding clauses (a) through (t) of this Section
2.9 (other than negotiations with Buyer and its representatives regarding the
transactions contemplated by this Agreement.
2.10 Tax Matters.
.
Tax Returns and Audits. Except as set forth on Schedule
2.10:
(a) As of the
Closing Date, Company will have prepared and timely filed all material federal,
state, local and foreign returns, estimates, information statements and reports
(“Returns”)
relating to any and all Taxes of the Company that are required to have been
filed and Company will have paid all Taxes shown to be due on such
Returns.
(b) As of the
Closing Date, Company will have paid all Taxes that have become due and payable
and will have withheld with respect to its employees all federal, state, local
and foreign income taxes, withholding taxes, Federal Insurance Contribution Act
(“FICA”),
Federal Unemployment Tax Act (“FUTA”)
and other Taxes, to its Knowledge are required to be withheld.
(c) To the
Company’s Knowledge, there is no Tax deficiency outstanding, assessed or
proposed against it, nor has it executed any waiver of any statute of
limitations on or extended the period for the assessment or collection of any
Tax.
(d) No audit
or other examination of any Return of Company is presently in progress, nor has
Company been notified in writing of any request for such an audit or other
examination.
(e) Company
has made available to Buyer or its legal counsel, copies of all foreign,
federal, state and local income and all state and local sales and use Returns
for Company for all periods since December 31, 2002.
(f) There are
no liens, pledges, charges, claims, restrictions on transfer, mortgages,
security interests or other encumbrances of any sort (collectively, “Liens”)
on the assets of the Company relating to or attributable to Taxes, other than
Liens for Taxes not yet due and payable or being contested in good
faith.
(g) None of
the assets of Company is treated as “tax-exempt use property,” within the
meaning of Section 168(h) of the Code.
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(h) Company is
not a party to any tax sharing, indemnification or allocation agreement, nor
does it owe any amount under any such agreement.
(i) No
adjustment relating to any Return filed by Company has been proposed in writing
or, to the Knowledge of Company, otherwise, by any tax authority to
Company.
2.11 Restrictions on Business
Activities.
There is no agreement (non-competition or otherwise), commitment, judgment,
injunction, order or decree to which Company is a party or otherwise binding
upon Company, its assets or the business which has or may reasonably be expected
to have the effect of (i) prohibiting or impairing any business practice of
Company, or (ii) following the Closing, limiting or impairing Buyer’s conduct of
the Business or use of or rights to the Assets, or (iii) prohibiting or
impairing any acquisition of property (tangible or intangible) by Company, or
otherwise limiting the freedom of Company to engage in any line of business or
to compete with any person. Without limiting the generality of the
foregoing, Company has not entered into any agreement under which it is
restricted from selling, licensing or otherwise distributing its products or
from providing services to customers or potential customers or any class of
their customers, in any geographic area, during any period of time, or in any
segment of the market.
2.12 Title to Properties; Absence
of Liens and Encumbrances; Condition of Equipment
(a) Company
does not own any real property, nor has it ever owned any real
property. Schedule 2.12(a)
sets forth a list of all real property currently leased by Company, the name of
the lessor, the date of the lease and each amendment thereto and, with respect
to any current lease, the aggregate annual rental payable under any such
lease. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a
default).
(b) Company
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens, except (i) as reflected in the Balance Sheet, (ii) Liens for
Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, which do not detract from the value or interfere with the
present use of the property subject thereto or affected thereby.
(c) Schedule 2.12(c)
lists all material items of equipment (the “Equipment”)
owned or leased by Company. The Equipment is adequate for the
operation of the Company and is in good operating condition, and properly
maintained, subject to normal wear and tear.
(d) Company
has sole and exclusive ownership, free and clear of any Liens, of all customer
lists, customer contact information, customer correspondence and customer
licensing and purchasing histories relating to its current and former
customers.
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(e) All of the
assets, properties and rights of every type and description, real, personal
tangible and intangible used by Company or any of its subsidiaries in the
conduct of the Business as currently conducted are owned by Company free and
clear of any Liens or are leased or licensed to Company, and pursuant to this
Agreement and the transactions contemplated hereby will be transferred to Buyer
as of the Closing Date. All such leases and licenses have been
provided to the Buyer or its counsel.
2.13 Company Intellectual
Property.
(a) Schedule 2.13(a)
lists all Registered Intellectual Property Rights owned by Company or filed in
the name of Company (the “Company
Registered Intellectual Property Rights”) and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the “PTO”)
or equivalent authority anywhere in the world) related to any of the Company
Registered Intellectual Property Rights.
(b) Each item
of Company Intellectual Property, including all Company Registered Intellectual
Property listed in Schedule 2.13(a)
is free and clear of any Liens except as set forth on Schedule
2.13(b). Company is the exclusive owner or a licensee of all
Company Intellectual Property.
(c) To the
extent that any Intellectual Property has been developed or created
independently or jointly by any person other than Company for which Company has,
directly or indirectly, paid, Company has a written agreement with such person
with respect thereto, and Company thereby has obtained either (i) ownership of,
and is the exclusive owner of, all such Intellectual Property therein and
associated Intellectual Property Rights by operation of law or by valid
assignment, or (ii) a license to such Intellectual Property and the associated
Intellectual Property Rights.
(d) Company
has not transferred ownership of, or granted any exclusive license of or
exclusive right to use, or authorized the retention of any exclusive rights to
use or joint ownership of, any Intellectual Property or Intellectual Property
Rights that is or was Company Intellectual Property, to any other
person.
(e) Other than
Intellectual Property and Intellectual Property Rights licensed to Company on a
non-exclusive basis, Company Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in the conduct of
the business by Company as it currently is conducted.
(f) Other than
non-exclusive licenses, Schedule 2.13(f)
lists all contracts, licenses and agreements to which Company is a party with
respect to any Intellectual Property and Intellectual Property Rights including
all reseller or distribution agreements. No third party who has
licensed Intellectual Property or Intellectual Property Rights to Company has
ownership rights or license rights to improvements made by Company in such
Intellectual Property which has been licensed to Company.
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(g) Except for
agreements entered into in the ordinary course, Schedule 2.13(g)
lists all contracts, licenses and agreements between Company and any other
person wherein or whereby Company has agreed to, or assumed, any obligation or
duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise
assume or incur any obligation or liability or provide a right of rescission
with respect to the infringement or misappropriation by Company or such other
person of the Intellectual Property Rights of any person other than
Company.
(h) To the
Knowledge of the Company the operation of the business by Company as it is
currently conducted including but not limited to the design, development, use,
import, manufacture and sale of the products, technology or
services of Company, has not, and does not infringe or misappropriate
the Intellectual Property Rights of any person, violate the rights of any person
(including rights to privacy or publicity), or constitute unfair competition or
trade practices under the laws of any jurisdiction. Company has not
received any written notice from, or have any Knowledge concerning, any person
claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of
Company infringes or misappropriates the Intellectual Property Rights of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction.
(i) Except as
set forth on Schedule
2.13(i), each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Company Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Company
Registered Intellectual Property 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 Company
Registered Intellectual Property. Except as set forth on Schedule 2.13(i),
there are no actions that must be taken by Company within sixty (60) days
following the Closing Date, including the payment of any registration,
maintenance or renewal fees or the filing of any documents, applications or
certificates for the purposes of maintaining, perfecting or preserving or
renewing any Company Registered Intellectual Property Rights. In each
case in which Company has acquired sole ownership of any Intellectual Property
Rights from any person, Company has obtained an assignment that transfers all
rights in such Intellectual Property and the associated Intellectual Property
Rights (including the right to seek past and future damages with respect
thereto) to Company, and, to the extent required by, and in accordance with,
Applicable Law and regulations, Company has recorded each such assignment with
the relevant governmental authorities, including the PTO, the U.S. Copyright
Office, or their respective equivalents in any relevant foreign jurisdiction, as
the case may be.
(j) There are
no contracts, licenses or agreements between Company and any other person with
respect to Company Intellectual Property under which there is any dispute
regarding the scope of such agreement, or performance under such agreement
including with respect to any payments to be made or received by Company
thereunder.
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(k) Neither
this Agreement nor the transactions contemplated by this Agreement, including
the assignment to Buyer by operation of law or otherwise of any contracts or
agreements to which Company is a party, will result in: (i) Buyer
granting to any third party any right to or with respect to any Company
Intellectual Property, (ii) Buyer being bound by, or subject to, any non-compete
or other material restriction on the operation or scope or its business, or
(iii) Buyer being obligated to pay any royalties or other material amounts to
any third party in excess of those payable by Company in the absence of this
Agreement or the transactions contemplated hereby.
(l) To the
Knowledge of Company, no person is infringing or misappropriating any Company
Intellectual Property.
(m) Company
has taken what it believes are reasonable steps that are required to protect
Company’s rights in confidential information and trade secrets of
Company. Without limiting the foregoing, Company has, and enforces, a
policy requiring each employee, consultant and contractor to execute proprietary
information, confidentiality agreements substantially in Company’s standard
form(s), and since January 1, 2003, all current and former employees,
consultants and contractors of Company have, executed such an agreement in
substantially Company’s standard form.
(n) No Company
Intellectual Property, or service of Company is subject to any proceeding or
outstanding decree, order, judgment or settlement agreement or stipulation
binding on the Company that restricts in any manner the use, transfer or
licensing thereof by Company or may affect the validity, use or enforceability
of such Company Intellectual Property.
(o) No
(i) product, technology, service or publication of Company,
(ii) material published or distributed by Company, or (iii) conduct or
statement of Company constitutes obscene material, a defamatory statement or
material, an invasion of privacy or false advertising.
(p) Except as
set forth on Schedule
2.13(p), none of the Company Intellectual Property was developed by or on
behalf of or using grants or any other subsidies of any governmental
entity.
2.14 Agreements, Contracts and
Commitments.
(a) Except as
set forth in or excepted from (by virtue of the specific exclusions contained in
Schedule
2.13(f) or 2.13(g)) Schedule 2.13(f)
and 2.13(g), or
as set forth in Schedule 2.14(a),
Company is not a party to nor is it bound by:
(i) any
employment or consulting agreement, contract or commitment with an employee or
individual consultant or salesperson, or consulting or sales agreement,
contract, or commitment with a firm or other organization;
- 17
-
(ii) any
agreement or plan, including, without limitation, any stock or share option
plan, stock or share appreciation rights plan or stock or share purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement;
(iii) any
fidelity or surety bond or completion bond;
(iv) any lease
of personal property having a value in excess of $10,000 individually or $25,000
in the aggregate;
(v) any
agreement, contract or commitment relating to capital expenditures and involving
future payments in excess of $10,000 individually or $25,000 in the
aggregate;
(vi) any
agreement, contract or commitment relating to the disposition or acquisition of
assets or any interest in any business enterprise;
(vii) any
mortgages, indentures, guarantees, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(viii) any
purchase order or contract for the purchase of materials involving in excess of
$10,000 individually or $25,000 in the aggregate;
(ix) any
construction contracts;
(x) any
dealer, distribution, joint marketing or development agreement;
(xi) any sales
representative, original equipment manufacturer, value added, remarketer,
reseller, or independent software vendor, or other agreement for use or
distribution of any product, technology or service of Company; or
(xii) any other
agreement, contract or commitment that involves $10,000 individually or $25,000
in the aggregate or more or is not cancelable without penalty within thirty
(30) days.
2.15 Interested Party
Transactions No
officer, director, or stockholder of Company (nor any ancestor, sibling,
descendant or spouse of any of such person, or any trust, partnership or
corporation in which any of such person has or has had an interest), has or has
had, directly or indirectly, (i) an interest in any entity which furnished
or sold, or furnishes or sells, services, products or technology that Company
sells, or proposes to furnish or sell, or (ii) any interest in any entity
that purchases from or sells or furnishes to Company any goods or services, or
(iii) a beneficial interest in any Contract to which Company is a party;
provided, however, that
ownership of no more than five percent (5%) of the outstanding voting stock
of a publicly traded corporation shall not be deemed to be an “interest in any
entity” for purposes of this Section 2.15.
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2.16 Governmental
Authorization.
Each consent, license, permit, grant or other authorization (i) pursuant to
which Company currently operates or holds any interest in any of its properties,
or (ii) which is required for the operation of the business conducted
by Company using the Assets as currently conducted or currently contemplated to
be conducted or the holding of any such interest (collectively, “Company
Authorizations”) has been issued or granted to Company. Except
for those Company Authorizations, which the failure of the Company to obtain and
hold will not have a Material Adverse Effect, Company Authorizations are in full
force and effect and constitute all Company Authorizations required to permit
Company to operate or conduct its business or hold any interest in its
properties or assets as presently conducted.
2.17 Litigation.
Except as set forth on Schedule 2.17, there
is no action, suit, claim or proceeding of any nature pending, or threatened,
against Company, its properties (tangible or intangible), nor to its Knowledge
is there any reasonable basis therefore. There is no investigation or
other proceeding pending or to its Knowledge threatened against Company or any
of its properties (tangible or intangible) by or before any Governmental Entity,
nor to its Knowledge is there any reasonable basis therefore. No
Governmental Entity has at any time challenged or questioned the legal right of
Company to conduct its operations as presently or previously conducted or as
presently contemplated to be conducted.
2.18 Accounts
Receivable
(a) Company
has made available to Buyer a list of all accounts receivable of Company as of
March 31, 2008, together with a range of days elapsed since
invoice.
(b) All
Company’s accounts receivable arose in the ordinary course of business, are
carried at values determined in accordance with GAAP consistently applied, and,
to the best of Company’s Knowledge, are collectible except to the extent of
reserves therefore set forth in the Balance Sheet or, for receivables arising
subsequent to March 31, 2008, as reflected on the books and records of Company
(which are prepared in accordance with GAAP). No person has any Lien
on any of Company’s accounts receivable and no request or agreement for
deduction or discount has been made with respect to any of Company’s accounts
receivable.
2.19 Minute
Books The
minutes of Company made available to counsel for Buyer are the only minutes of
Company and contain accurate summaries of all meetings or actions by written
consent of the board of directors (or committees thereof) of Company and all
actions of stockholders by written consent since the time of incorporation or
organization of Company.
2.20 Environmental
Matters
(a) Hazardous
Material. Company has not: (i) operated any
underground storage tanks at any property that Company has at any time owned,
operated, occupied or leased, or (ii) illegally released any amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, and urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
“Hazardous
Material”), but excluding office and janitorial supplies properly and
safely maintained. No Hazardous Materials are present in, on or under
any property, including the land and the improvements, ground water and surface
water thereof, that Company has at any time owned, operated, occupied or
leased.
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(b) Hazardous Materials
Activities. Company has not transported, stored, used,
manufactured, disposed of, released or exposed their employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, nor has Company disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (any or all of the foregoing being
collectively referred to herein as “Hazardous
Materials Activities”) in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. Company
currently holds all environmental approvals, permits, licenses, clearances and
consents (the “Environmental
Permits”) necessary for the conduct of Company’s Hazardous Material
Activities, and other businesses of Company as such activities and businesses
are currently being conducted and as currently contemplated to be
conducted.
(d) Environmental
Liabilities. No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to the Knowledge
of Company, threatened, concerning any Environmental Permit, Hazardous Material
or any Hazardous Materials Activity of Company. Company has no
Knowledge of any fact or circumstance which could involve Company, in any
environmental litigation or impose upon Company any environmental
liability.
2.21 Brokers’ and Finders’
Fees.
Company has not incurred, nor will incur, directly or indirectly, any liability
for brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with the Agreement or any transaction contemplated
hereby.
2.22 Employee Benefit
Plans.
(a) Schedule 2.22(a) sets
forth a complete and accurate list of each Employee Benefit
Plan. With respect to each Employee Benefit Plan, the Company has
delivered, or caused to be delivered, to the Buyer true and complete copies of
(i) the plan document, trust agreement and any other document (including
amendments thereto) governing such Employee Benefit Plan, (ii) the summary plan
description, (iii) all Form 5500 annual reports and attachments filed
within the past two (2) years, and (iv) the most recent IRS determination
letter, if any, for such Employee Benefit Plan.
(b) To the
Knowledge of the Company, all the Employee Benefit Plans conform in all material
respects to, and are being administered in and operated in material compliance
with their respective terms, the requirements of ERISA, the Code and all other
applicable laws. No audit or investigation of an Employee Benefit
Plan by a Governmental Entity has occurred in the last three years and there are
no actions, suits or claims (other than routine claims for benefits) pending,
or, to the Knowledge of the Company, threatened with respect to any Employee
Benefit Plan.
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(c) The form
and operation of each Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code
has been determined by the Internal Revenue Service to be so qualified and
exempt. any such Internal Revenue Service determination remains in
effect and has not been revoked.
(d) The
Company does not sponsor, maintain or contribute to, and has never sponsored,
maintained or contributed to (i) a plan subject to Title IV of ERISA (including,
without limitation, a “multiemployer plan”) (within the meaning of
Section 3(37) of ERISA)); (ii) a “multiple employer plan” (within the
meaning of section 413 of the Code); (iii) a “multiple employer welfare
arrangement” (within the meaning of Section 3(40) of ERISA); or (iv)
post-employment medical or death benefits, except as required under
COBRA.
(e) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions provided for herein will (either alone or in conjunction with any
other event result in: (i) any payment to or acceleration, vesting or increase
in the rights of any current or former service provider of the Company, or (ii)
any “excess parachute payment” as defined in Section 280G of the Code to any
current or former service provider of the Company.
(f) This
Section 2.22 represents the sole and exclusive representations and warranties of
the Company regarding employee benefit matters.
2.23 Insurance. Schedule 2.23 lists
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers, directors, members and
managers of Company. There is no claim by Company pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid, and Company is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance
coverage). Company does not have any Knowledge of threatened
termination of, or premium increase with respect to, any of such policies or
bonds.
2.24 Compliance with
Laws
Company has complied with, is not in violation of, and has not received any
notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation.
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2.25 Warranties;
Indemnities
Except for the warranties and indemnities contained in those contracts and
agreements set forth in Schedules 2.13(f),
2.13(g) or
2.14(a) and
warranties implied by law, Company has not given any warranties or indemnities
relating to products or technology sold or services rendered by
Company.
2.26 Complete Copies of
Materials and
Documents.
Company has delivered or made available true and complete copies of each
document (or summaries of same) that has been requested by Buyer or its
counsel.
2.27 Company Employee Work Permit
Status. Company
has complied with all United States visa requirements, all employees are
retained by Company in compliance with such laws, and the Merger and transfer of
the Company employees as contemplated by this Agreements will not result in the
loss or impairment of any employee’s qualification to work in the U.S. as an
employee of Buyer following the Closing. Company has provided Buyer
or its counsel with all social security no match letters and notices, and all
similar notifications, received by Company within the two years prior to the
Closing.
2.28 Representations
Complete None of
the representations or warranties made by Company or Stockholder’s
Representative (as modified by the Disclosure Schedules) in this Agreement, and
none of the statements made in any exhibit, schedule or certificate furnished by
Company or Stockholder’s Representative pursuant to this Agreement contains, or
will contain at the Closing Date, any untrue statement of a material
fact.
2.29 Limitation to United States
Laws. Notwithstanding
anything to the contrary contained in this Agreement, including without
limitation, this ARTICLE II, the representations and warranties made by the
Company with respect to the Company shall be limited, in both scope and
applicability, to the laws of the United States.
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2.30 No Other Representations or
Warranties; Disclosure Schedules.
Except for
the representations and warranties contained in this ARTICLE II (as modified by
the Disclosure Schedules hereto as supplemented or amended in accordance with
the terms hereof), neither the Company nor any other Person makes any other
express or implied representation or warranty with respect to the Company or the
transactions contemplated by this Agreement, and the Company disclaims any other
representations or warranties, whether made by the Company, its officers,
directors, employees, agents or representatives. Except for the
representations and warranties contained in ARTICLE II hereof (as modified by
the Disclosure Schedules hereto as supplemented or amended in accordance with
the terms hereof), the Company hereby disclaims all liability and responsibility
for any representation, warranty, projection, forecast, statement, or
information made, communicated, or furnished (orally or in writing) to Buyer or
Acquisition Sub or their directors, managers, officers, employees, agents or
representatives (including any opinion, information, projection, or advice that
may have been or may be provided to Buyer or Acquisition Sub by the Company or
any director, officer, stockholder, employee, agent, consultant, or
representative of the Company).
2.31 No Knowledge of
Misrepresentations or Omissions.
Neither
the Company nor any of its Affiliates has actual Knowledge that the
representations and warranties of the Buyer or Acquisition Sub contained in this
Agreement are not true and correct in all material respects.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer and
Acquisition Sub hereby, jointly and severally, represent and warrant to Company
subject to the exceptions specifically disclosed in the Disclosure Schedules
supplied by Buyer and Acquisition Sub to Company and dated as of the date hereof
and attached hereto, that on the date hereof and as of the Closing Date as
though made at the Closing Date, as follows:
3.1 Organization, Standing and
Corporate Power.
(a) Each of
Buyer and Acquisition Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted except where the failure to have such governmental approvals would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each of Buyer and Acquisition Sub is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature or conduct of its business or the ownership, leasing or operation of
its properties requires it to be so qualified, licensed or in good standing,
except for such jurisdictions where the failure to be so qualified, licensed or
to be in good standing would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
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(b) Buyer has
furnished or made available to the Company true and complete copies of the
Restated Certificate of Incorporation of Buyer, as amended through the date of
this Agreement (as so amended, the “Buyer
Certificate of Incorporation”); the Bylaws of Buyer, as amended through
the date of this Agreement (as so amended, the “Buyer
Bylaws” and together with the Buyer Certificate of Incorporation, the
“Buyer
Organizational Documents”); and the comparable charter and organizational
documents of Acquisition Sub as amended through the date of this
Agreement. The Buyer Certificate of Incorporation and the Buyer
Bylaws are in full force and effect and have not been amended or otherwise
modified. Buyer is not in material violation of any provision of the
Buyer Certificate of Incorporation or the Buyer Bylaws, and Acquisition Sub is
not in material violation of any provision of its certificate of incorporation,
bylaws or equivalent organizational documents. Buyer has made
available to the Company complete and correct copies of the minutes (or, in the
case of minutes that have not yet been finalized, drafts thereof) of all
meetings of the stockholders of the Buyer, the Buyer Board of Directors (the
“Buyer
Board”) and the committees of the Buyer Board, in each case held since
January 1, 2005 and prior to the date hereof.
3.2 Authority.
Buyer and Acquisition Sub have all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Buyer and Acquisition
Sub. This Agreement has been duly executed and delivered by Buyer and
Acquisition Sub and constitutes the valid and binding obligation of Buyer and
Acquisition Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable
remedies. The execution and delivery by Buyer of this Agreement does
not, and the performance and consummation of the transactions contemplated by
this Agreement will not result in any conflict with, breach of, violation of, or
default, termination or forfeiture under any terms or provisions of its
certificate of incorporation, bylaws or other organizational documents or any
contract or agreement filed as an exhibit to the Filed Buyer SEC Reports,
the breach, violation, default, termination or forfeiture of which would result
in a Material Adverse Effect upon the ability of Buyer to consummate the
transactions contemplated hereby. No consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Buyer in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws.
3.3 Capitalization.
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(a) Schedule 3.3(a)
attached hereto accurately and completely reflects (i) the authorized capital
stock of Buyer and (ii) the total capitalization of Buyer, including any
outstanding securities convertible, exchangeable or exercisable for shares of
Buyer’s common stock and any amounts required to be paid in connection with such
conversion, exchange or exercise of such securities, in each case as of the date
hereof. Except as provided on Schedule 3.3(a), and
except as set forth herein, no equity securities of Buyer are or may become
required to be issued by reason of any options, warrants, rights to subscribe
for, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into or exchangeable or exercisable for, shares of any
capital stock of Buyer, and there are no contracts, commitments, understandings
or arrangements by which Buyer is or may be bound to issue or sell additional
shares of Buyer common stock or securities convertible into or exchangeable or
exercisable for any Buyer common stock.
(b) The
authorized capital stock of Acquisition Sub consists of ten million (10,000,000)
shares of common stock, each with par value of $0.00001 per share (“Acquisition
Sub Common Stock”), one million of which are issued and
outstanding. Buyer is the legal and beneficial owner of all of the
issued and outstanding Acquisition Sub Common Stock. Acquisition Sub
was formed at the direction of Buyer solely for the purposes of effecting the
Merger and the other transactions contemplated hereby. Except as
required by or provided for in this Agreement, Acquisition Sub (i) does not
hold, nor has it held, any assets, (ii) does not have, nor has it incurred, any
liabilities and (iii) has not carried on any business activities other than in
connection with the Merger and the transactions contemplated
hereby. Except for the transactions anticipated by this Agreement,
Acquisition Sub does not have issued or outstanding any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Acquisition Sub to issue, transfer or sell any
Acquisition Sub Common Stock to any Person, other than Buyer.
3.4 Buyer Intellectual
Property
(a) Buyer owns
or has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary for Buyer to engage in its
business as now conducted.
(b) Buyer’s
ADS and ACS software (“Buyer’s
Software”) does not interfere with and has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any intellectual
property rights of third parties, and Buyer has not ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation based on or related to Buyer’s
Software (including any claim that Buyer must license or refrain from using any
intellectual property rights of any third party). With respect to
Buyer’s Software, (a) it is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge and (b) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or is threatened
which challenges the legality, validity, enforceability, use or ownership of
Buyer’s Software. There is no proceeding pending or threatened, nor
has any claim or demand been made that challenges the legality, validity,
enforceability or ownership of any item of Intellectual Property related to
Buyer’s Software or alleges a claim of infringement of any patents, copyrights
or violation of any trade secret or other proprietary right of any third
party. To the Knowledge of Buyer, no third party has disclosed,
interfered with, infringed upon, made unauthorized use, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of Buyer with
respect to Buyer’s Software. Buyer has not brought a proceeding
alleging infringement of any of Buyer’s Intellectual Property related to Buyer’s
Software or breach of any license or agreement involving Buyer’s Intellectual
Property related to Buyer’s Software against any third party.
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3.5 SEC Filings; Financial
Statements.
(a) None of
the Acquisition Sub or Buyer has failed to file all forms, reports, statements
and documents required to be filed with the SEC since December 31, 2007 (the
“Buyer SEC
Reports”), and has complied in all material respects with the applicable
requirements of the Securities Act and the rules and regulations promulgated
thereunder, the Exchange Act and the rules and regulations promulgated
thereunder, and the Xxxxxxxx-Xxxxx Act and the rules and regulations thereunder,
each as in effect on the date so filed, except to the extent updated, amended,
restated or corrected by a subsequent Buyer SEC Report filed or furnished to the
SEC by Buyer, and in either case, publicly available prior to the date hereof
(each, a “Buyer
Filed SEC Report”). None of the Buyer SEC Reports (including
any financial statements or schedules included or incorporated by reference
therein) contained when filed or currently contains, and any Buyer SEC Reports
filed with the SEC subsequent to the date hereof will not contain, any untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
updated, amended, restated or corrected by a subsequent Buyer Filed SEC
Report.
(b) Except to
the extent updated, amended, restated or corrected by a subsequent Buyer Filed
SEC Report, all of the financial statements included in the Buyer SEC Reports,
in each case, including any related notes thereto, as filed with the SEC (those
filed with the SEC are collectively referred to as the “Buyer
Financial Statements”), comply as to form in all material respects with
applicable accounting requirements and the published rules of the SEC with
respect thereto and have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as may be
permitted by Form 10-Q of the SEC and subject, in the case of the unaudited
statements, to normal, year-end audit adjustments which are not reasonably
expected to have, individually or in the aggregate, a Material Adverse
Effect). The consolidated balance sheets (including the related
notes) included in such Buyer Financial Statements (if applicable, as updated,
amended, restated or corrected in a subsequent Buyer Filed SEC Report) fairly
present, in all material respects, the consolidated financial position of Buyer
and any Buyer subsidiaries at the respective dates thereof, and the consolidated
statements of operations, stockholders' equity and cash flows (in each case,
including the related notes) included in such Buyer Financial Statements (if
applicable, as updated, amended, restated or corrected in a subsequent Buyer
Filed SEC Report) fairly present, in all material respects, the consolidated
statements of operations, stockholders' equity and cash flows of Buyer and any
Buyer subsidiaries for the periods indicated, subject, in the case of the
unaudited statements, to normal, year-end audit adjustments which are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.
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(c) Each of
the principal executive officer of Buyer and the principal financial officer of
Buyer (or each former principal executive officer of Buyer and each former
principal financial officer of Buyer, as applicable) has made all applicable
certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and
Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act with respect to the Buyer SEC
Reports, and the statements contained in such certifications are true and
accurate, and Buyer is in full compliance with all requirements of the
Xxxxxxxx-Xxxxx Act.
3.6 Absence of Certain Changes
or Events. Except
as contemplated by this Agreement, and except as set forth in the Buyer SEC
Reports, since the date of the most recent audited financial statements included
in the Buyer SEC Reports and through the date hereof, Buyer has conducted its
business only in the ordinary course in all material respects and in a manner
consistent with prior practice in all material respects and there has not been
any event or occurrence of any condition that has had or is reasonably expected
to have, individually or in the aggregate, a Buyer Material Adverse
Effect. Except as contemplated by this Agreement, and except as set
forth in the Buyer SEC Reports, since the date of the most recent audited
financial statements included in the Buyer SEC Reports and through the date
hereof, there has not been any material change in accounting methods, principles
or practices employed by Buyer.
3.7 Litigation.
Except as set forth on Schedule 3.7, there
is no action, suit, claim or proceeding of any nature pending or, to their
Knowledge, threatened, against Buyer or Acquisition Sub, their properties
(tangible or intangible) or any of its officers or directors, nor is there any
reasonable basis therefore. Except as set forth on Schedule 3.7, there
is no investigation or other proceeding pending or, to their Knowledge,
threatened against Buyer or Acquisition Sub or any of their properties (tangible
or intangible) or any of their officers or directors by or before any
Governmental Entity nor, to their Knowledge, is there any reasonable basis
therefore. No Governmental Entity has at any time challenged or
questioned the legal right of Buyer or Acquisition Sub to conduct their
operations as presently or previously conducted or as presently contemplated to
be conducted.
3.8 Representations
Complete.
None of the representations or warranties made by Buyer or Acquisition Sub (as
modified by the Disclosure Schedules) in this Agreement, and none of the
statements made in any exhibit, schedule or certificate furnished by Buyer or
Acquisition Sub pursuant to this Agreement contains, or will contain at the
Closing Date, any untrue statement of a material fact.
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3.9 Matters Regarding the
Buyer’s Stock.
Upon the issuance and delivery of the Buyer Stock in accordance with the terms
of this Agreement, the Buyer Stock will be validly issued and outstanding Buyer
Stock.
3.10 No Knowledge of
Misrepresentations or Omissions.
None of Buyer, Acquisition Sub or any of their respective Affiliates has actual
Knowledge that the representations and warranties of the Company contained in
this Agreement are not true and correct in all material respects.
3.11 Brokers’ and Finders’
Fees.
Neither Buyer nor Acquisition Sub has incurred, and will not incur, directly or
indirectly, any liability for brokerage or finders’ fees or agents’ commissions
or any similar charges in connection with this Agreement or the transactions
contemplated hereby.
3.12 No Other Representations or
Warranties; Disclosure Schedules.
Except for the representations and warranties contained in this ARTICLE III (as
modified by the Disclosure Schedules hereto as supplemented or amended in
accordance with the terms hereof), neither Buyer, nor the Acquisition Sub, nor
any other Person makes any other express or implied representation or warranty
with respect to the Buyer or the Acquisition Sub or the transactions
contemplated by this Agreement, and the Buyer and the Acquisition Sub disclaim
any other representations or warranties, whether made by the Buyer or the
Acquisition Sub, or their officers, directors, employees, agents or
representatives. Except for the representations and warranties
contained in ARTICLE III hereof (as modified by the Disclosure Schedules hereto
as supplemented or amended in accordance with the terms hereof), the Buyer and
the Acquisition Sub hereby disclaim all liability and responsibility for any
representation, warranty, projection, forecast, statement, or information made,
communicated, or furnished (orally or in writing) to Company or its directors,
managers, Stockholders, officers, employees, agents or representatives
(including any opinion, information, projection, or advice that may have been or
may be provided to Company by Buyer or Acquisition Sub or any director, officer,
employee, agent, consultant, or representative of the Buyer or the Acquisition
Sub).
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ARTICLE
IV
CONDUCT
PRIOR TO THE CLOSING
4.1 Conduct of
Business.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing, Company agrees to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, and, to the extent consistent with such
business, use commercially reasonable efforts consistent with past practice and
policies to preserve intact Company’s present business organization, keep
available the services of their present officers and employees and preserve
their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with Company, all with the goal
of preserving Company’s goodwill and ongoing business at the
Closing. Except as expressly contemplated or required by this
Agreement, Company shall not, without the prior written consent of
Buyer:
(a) make or
enter into any commitment to make any capital expenditure exceeding $10,000
individually or $25,000 in the aggregate;
(b) (i) except
for the granting of non-exclusive licenses of object code relating to any
products of Company shipping on the date hereof entered into in the ordinary
course of business, consistent with past practices, sell, license or transfer to
any person or entity any rights to any Company Intellectual Property or enter
into any agreement with respect to any Company Intellectual Property with any
person or entity or with respect to any Intellectual Property of any person or
entity, (ii) buy or license any Intellectual Property or enter into any
agreement with respect to the Intellectual Property of any person or entity,
(iii) enter into any agreement with respect to the development of any
Intellectual Property with a third party, (iv) or change pricing or royalties
charged by Company to their customers or licensees, or the pricing or royalties
set or charged by persons who have licensed Intellectual Property to
Company;
(c) enter into
or amend any Contract pursuant to which any other party is granted marketing,
distribution, development or similar rights of any type or scope with respect to
any products or technology of Company;
(d) amend or
otherwise modify (or agree to do so), or violate the terms of, any of the
Contracts set forth or described in the Disclosure Schedules;
(e) commence
or settle any litigation;
(f) declare,
set aside or pay any dividend on or make any other distribution (whether in
cash, shares, stock or property) on account of, or split, combine or reclassify
or otherwise alter any of the shares of the capital stock of
Company;
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(g) issue,
grant, deliver or sell or authorize or propose the issuance, grant, delivery or
sale of, or purchase or propose the purchase of, any shares of the capital stock
of Company, or any securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue or purchase any such shares of the capital
stock of Company;
(h) acquire or
agree to acquire by merging or consolidating with, or by purchasing or selling
any assets or equity securities of, or by any other manner, Company or any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets or split-up or split-off any entity;
(i) sell,
lease, license or otherwise dispose of any of Company’s properties or assets,
except properties or assets which do not include Company Intellectual Property
and only in the ordinary course of business and consistent with past
practices;
(j) grant any
severance or termination pay (i) to any director, stockholder, manager or
officer or (ii) to any other employee, other than payments made pursuant to
written agreements disclosed in the Disclosure Schedules;
(k) adopt or
amend any employee stock or benefit plan, or enter into any employment contract,
pay or agree to pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or other compensation of their
employees, other than (i) as required by applicable law or (ii) pursuant to
written agreements disclosed in the Disclosure Schedules;
(l) except for
payments made pursuant to written agreements disclosed in the Disclosure
Schedules, and salary payments made in the ordinary course of business, pay,
discharge or satisfy, in an amount in excess of $10,000 (in any one case) or
$25,000 (in the aggregate), any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Balance Sheet (or the notes
thereto) or constituting a trade payable or operating expense incurred in the
ordinary course of business consistent with past practices since the Balance
Sheet;
(m) make or
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, enter into any closing agreement or settle any claim
or assessment in respect of material Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or assessment in respect
of material Taxes;
(n) enter into
any strategic alliance or joint marketing arrangement or agreement;
(o) amend the
constitutional or organizational documents of Company;
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(p) incur or
guarantee any indebtedness or incur any other liabilities outside the ordinary
course of business;
(q) grant any
loan to others or purchase debt securities of others or amend the terms of any
outstanding loan agreement;
(r) hire any
employees;
(s) terminate
any Key Employee (as defined in Section 6.3(e));
(t) take any
other actions outside the ordinary course of business; or
(u) take, or
agree in writing or otherwise to take, any of the actions described in
Section 4.1(a) through Section 4.1(t) hereof, inclusive, or any other
action that would (i) prevent Company or Stockholders’ Representative from
performing or cause Company or Stockholders’’ Representative not to perform
their respective covenants hereunder, or (ii) cause or result in any of their
respective representations and warranties contained herein being untrue or
incorrect.
4.2 No
Solicitation.
Until the earlier of the Closing or the date of termination of this Agreement
pursuant to the provisions of Section 8.1, Company will not (nor will Company
cause any of Company’s officers, directors, agents, representatives,
subsidiaries, or affiliates to) directly or indirectly, take any of the
following actions with any party other than Buyer and its
designees: (a) solicit, encourage, initiate or participate in any
inquiry, negotiations or discussions, or enter into any agreement, with respect
to any offer or proposal to acquire all or any material part of Company’s
properties, assets or technologies, or shares in the capital of Company (whether
or not outstanding), whether by merger, purchase of assets, takeover offer,
tender offer or otherwise, or effect any such transaction, (b) disclose any
information not customarily disclosed to any person or entity concerning their
business, technologies or properties, or afford to any person or entity access
to their properties, technologies, books or records, not customarily afforded
such access, or (c) assist or cooperate with any person or entity to make any
proposal to purchase all or any portion of the Assets or shares in the capital
of Company, or (d) enter into any agreement with any person or entity providing
for the acquisition of Company or any of the Assets, whether by merger, purchase
of assets, tender offer or otherwise. In the event that Company or
any of its Affiliates shall receive, prior to the Closing or the termination of
this Agreement, any offer, proposal, or request, directly or indirectly, of the
type referenced in clause, as applicable, (a) or (c) above, or any request for
disclosure or access pursuant to clause (b) above, Company shall immediately
notify Buyer thereof, including information as to the identity of the offeror or
the party making any such offer or proposal and the specific terms of such offer
or proposal, as the case may be, and such other information related thereto as
Buyer may reasonably request. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this Section
4.2 are not performed in accordance with their specific terms or are otherwise
breached and that it would be impossible or inadequate to measure and calculate
Buyer’s damages from any breach of the covenants set forth in this
Section 4.2. Accordingly, Company agrees that if it breaches any
provision of this Section 4.2, Buyer will have available, in addition to any
other right or remedy otherwise available, the right to seek an injunction from
a court of competent jurisdiction restraining such breach or threatened breach
and to specific performance of any such provision of this
Agreement. Company further agrees that no bond or other security
shall be required in obtaining such equitable relief, nor will proof of actual
damages be required for such equitable relief. Company hereby
expressly consents to the issuance of such injunctive relief, whether in the
form of a temporary restraining order or otherwise, and to the ordering of such
specific performance.
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ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Access to
Information.
Company shall afford Buyer and its accountants, counsel and other
representatives reasonable access during normal business hours during the period
prior to the earlier of the Closing and termination of this Agreement to
(i) all of Company’s properties, books, contracts, commitments and records,
and (ii) all other information concerning the business, properties and
personnel (subject to restrictions imposed by Applicable Law) of Company as
Buyer may reasonably request. Company agrees to provide to Buyer and its
accountants, counsel and other representatives copies of Company’s internal
financial statements (including tax returns and supporting documentation)
promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 5.1 shall effect, limit or modify any of
the representations and warranties of Company, contained herein, or the right of
Buyer to rely thereon, or the obligations of the parties to consummate the
Merger in accordance with the terms and provisions hereof.
5.2 Confidentiality.
All information or knowledge obtained in any investigation pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, shall be governed by the terms of that certain
Confidentiality Agreement dated October 19, 2007, previously executed by Company
and Buyer, which agreement shall continue in effect in accordance with its
terms.
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5.3 Expenses.
Whether or not the Merger is consummated, all fees and expenses, including,
without limitation, all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties, incurred by a party in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, shall be the obligation of
the respective party incurring such fees and expenses.
5.4 Public
Disclosure.
Without the consent of Buyer, no party shall issue any statement or
communication to any third party (other than their respective agents and
advisors) regarding the subject matter of this Agreement or the transactions
contemplated hereby, including, if applicable, the termination of this Agreement
and the reasons therefore, except as required under Applicable Law.
5.5 Consents.
Company shall obtain the consents, waivers and approvals required to be obtained
under any of the Contracts to which Company is a party in connection with the
Merger, including those consents, waivers and approvals set forth in Schedule
5.5.
5.6 Taking of Necessary Action;
Further Action. At
any time, and from time to time on or after the Closing, at the reasonable
request of the other party and without further consideration, Buyer, Company or
Stockholders’ Representative will execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation and take such action as
such other party may reasonably determine is necessary to consummate the
transactions described herein and to assist such party in exercising all of its
rights with respect to this Agreement and to otherwise carry out the purposes of
this Agreement. If, at any time after the Closing, any such further
action is necessary or desirable, the managers, stockholders, officers and
directors, as applicable, of each of Company and Buyer are fully authorized in
the name of their respective companies or otherwise to take, and will take, all
such lawful and necessary action, so long as such action is consistent with this
Agreement.
5.7 Notification of Certain
Matters.
Prior to the Closing, each party hereto shall deliver to the other parties
hereto written notice of any event or development that occurs after the date
hereof which, if it had occurred prior to the date hereof, would have caused or
constituted a breach of any of the representations or warranties of such party
contained in this Agreement (including such party’s disclosures contained in its
respective Disclosure Schedules). It is agreed that the furnishing of
such corrected and supplemental information shall be deemed to amend such
party’s disclosures contained in its respective Disclosure Schedules for all
purposes hereunder, and such amended disclosures contained in its respective
Disclosure Schedules shall be the definitive disclosures contained in its
respective Disclosure Schedules for such party for all purposes hereunder,
excluding, however, the satisfaction of the conditions to the obligations of
each party hereto set forth in ARTICLE VI hereof.
5.8 Additional Documents and
Further Assurances.
Each party hereto, at the request and expense of another party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby;
provided that such transaction is performed in compliance with all Applicable
Law.
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5.9 New Employment
Arrangements.
Each person listed on Schedule 5.9 shall be
offered “at-will” employment by Buyer, to be effective as of the Closing Date,
upon proof of citizenship or appropriate employment authorization from the U.S.
Bureau of Citizenship and Immigration Services or the U.S. Department of State
evidencing a right to work in the United States. Such “at-will”
employment arrangements will (i) be set forth in offer letters based on Buyer’s
standard form (each, an “Offer
Letter”), (ii) be subject to and in compliance with Buyer’s standard
human resources policies and procedures, (iii) have terms, including the
position, salary and responsibilities of such employee, which will be determined
by Buyer after consultation with Company’s management, and (iv) supersede any
prior employment agreements and other arrangements with such employee in effect
prior to the Closing Date (each such employee, a “Continuing
Employee”). Each Key Employee (as defined in
Section 6.3(e)) shall execute an Offer Letter at the same time as the
execution of this Agreement, which Offer Letters shall be effective as of the
Closing Date. In furtherance of the foregoing, Company shall
terminate all employment agreements and other arrangements with such employees
effective as of the Closing Date.
5.10 Post-Closing
Audit. Following
the Closing, Stockholders’ Representative shall take such action as is necessary
to cause the Company’s financial statements to be audited by auditors of his
choosing, and at Stockholders’ sole expense, for the periods at December 31,
2006 and December 31, 2007, and for the 12 months each then ended and to be
reviewed by such auditors for the period at March 31, 2008, and for
the three months then ended (the “Post-Closing
Audit”).
ARTICLE
VI
CONDITIONS
TO THE MERGER
6.1 Conditions to Obligations of
Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Injunctions or
Restraints; Illegality. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.
(b) Governmental
Approvals. All approvals from Governmental Authorities (if
any), and all consents from third parties deemed appropriate or necessary by any
party to this Agreement shall have been timely obtained.
6.2 Additional Conditions to
Obligations of Company.
The obligations of Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by Company:
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(a) Representations, Warranties
and Covenants. The representations and warranties of Buyer and
Acquisition Sub in this Agreement shall be true and correct in all respects on
the date they were made and shall be true and correct in all material respects
(except where the representations and warranties were qualified by materiality,
in which case, they shall be true in all respects) on and as of the Closing Date
as though such representations and warranties were made on and as of that date,
and Buyer and Acquisition Sub shall have performed and complied in all material
respects with all covenants and obligations of this Agreement required to be
performed and complied with by it as of the Closing.
(b) Certificates of Buyer and
Acquisition Sub. Company shall have been provided with
certificates executed on behalf of each of Buyer and Acquisition Sub by their
respective Secretary to the effect that, as of the Closing Date:
(i) all
representations and warranties made by Buyer and Acquisition Sub in this
Agreement (other than the representations and warranties as of a specified date,
which will be true and correct as of such date) were true and correct on the
date they were made and are true and correct in all material respects on and as
of the Closing Date as though such representations and warranties were made on
and as of such time; and
(ii) all
covenants and obligations under this Agreement to be performed by Buyer and
Acquisition Sub on or before the Closing have been so performed in all material
respects.
(c) Existing Convertible Debt of
Buyer and Acquisition Sub. Company shall have been provided
with evidence that the terms of Buyer’s outstanding convertible promissory debt
has been amended to provide that the maturity of such outstanding convertible
promissory debt shall be no earlier than January 31, 2011, that the payment
terms for the interest thereon are amended and such other changes to the terms
and conditions to such indebtedness are made as set forth on Exhibit
F.
6.3 Additional Conditions to the
Obligations of Buyer and Acquisition Sub
.
The obligations of Buyer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by Buyer and Acquisition Sub:
(a) Representations,
Warranties. The representations and warranties of Company in
this Agreement (other than the representations and warranties of Company as of a
specified date, which will be true and correct as of such date) shall be true
and correct on the date they were made and, after giving effect to any changes
to the Disclosure Schedules permitted by Section 5.7, shall be true and correct
in all material respects (except where the representations and warranties were
qualified by materiality, in which case, they shall be true in all respects) on
and as of the Closing Date as though such representations and warranties were
made on and as of such time, provided, however,
that if the changes to the Company Disclosure Schedules permitted by Section 5.7
correct an inaccuracy of any representation or warranty made by the Company on
the date of this Agreement, disclose a breach of covenant on the part of the
Company or disclose information that is reasonably likely to cause a Material
Adverse Effect on the Company, then this condition shall only be deemed to have
been satisfied if Buyer and Acquisition Sub proceed to consummate the
transactions contemplated by this Agreement, in which case the amended Company
Disclosure Schedules shall be the definitive Company Disclosure Schedules for
all purposes hereunder.
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(b) Covenants. The
Company shall have performed and complied in all material respects with all
covenants and obligations under this Agreement required to be performed and
complied with as of the Closing.
(c) Officer’s
Certificate. Each of Buyer and Acquisition Sub shall have been
provided with a certificate executed on behalf of Company by an officer to the
effect that, as of the Closing:
(i) all
representations and warranties made by Company in this Agreement (other than the
representations and warranties as of a specified date, which will be true and
correct as of such date) were true and correct on the date they were made and
are true and correct in all material respects on and as of the Closing Date as
though such representations and warranties were made on and as of such
time;
(ii) all
covenants and obligations under this Agreement to be performed by Company on or
before the Closing have been so performed in all material respects;
and
(iii) the
conditions to the obligations of Buyer and Acquisition Sub set forth in this
Section 6.3 have been satisfied (unless otherwise waived in accordance with the
terms hereof).
(d) Third Party
Consents. Any and all consents, waivers, approvals and
assignments listed on the Disclosure Schedules shall have been obtained,
including but not limited to, each assignment and consent listed on Schedule 5.5 and each
consent necessary to effectuate the transactions contemplated by this
Agreement.
(e) Employment
Arrangements. As of the Closing, the Key Employees listed on
Schedule 6.3(e)
(the “Key
Employees”),
shall have accepted and entered into “at-will” employment arrangements with
Buyer or Acquisition Sub and shall be employees of Buyer or Acquisition Sub at
the Closing, subject to, and in compliance with, Buyer’s or Acquisition Sub’s
standard human resources policies and procedures. Such employment
arrangements will supersede any prior employment agreements and other
arrangements between Company and their employees.
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(f) Instruments of
Transfer. All actions to be taken by Company or Stockholders’
Representative in connection with the Merger and all certificates, opinions,
instruments, and other documents required to effect the Merger will be
reasonably satisfactory in form and substance to Buyer and shall have been
completed or delivered to Buyer, as applicable, prior to the
Closing.
(g) Secretary’s
Certificate. Buyer and Acquisition Sub shall have received a
certificate, validly executed by the Secretary of Company, certifying (i) a true
and complete copy of each of the Company’s certificate of incorporation or
equivalent document as in effect on the Closing Date is attached thereto, (ii) a
true and correct copy of each of the Company bylaws or equivalent document as in
effect on the Closing Date is attached thereto, (iii) a true and correct copy of
the resolutions adopted by Company’s board of directors authorizing the
execution and performance of this Agreement and the transactions contemplated
hereby is attached thereto, (iv) a true and correct copy of the resolutions
adopted by Company’s stockholders approving the transactions contemplated hereby
is attached thereto, and (v) Company’s incumbent officers and their respective
specimen signatures set forth on such certificate are their respective genuine
signatures.
(h) Line of Credit
Assignment. Wachovia Bank, N.A. shall have consented to
continue the Company’s line of credit in the aggregate amount of $250,000
pursuant to its terms (except for any undertakings by Stockholders) after the
Effective Time.
(i) Proprietary Information
Agreements. Each Key Employee shall have entered into a
proprietary information and invention assignment agreement in a form acceptable
to Buyer or Acquisition Sub and their counsel.
ARTICLE
VII
SURVIVAL;
LIMITATION OF LIABILITY; INDEMNIFICATION
7.1 Survival of Representations
and Warranties.
All claims for breach or inaccuracy of any of the representations and warranties
of the Company, Buyer and Acquisition Sub contained in this Agreement shall
survive the execution and delivery hereof and, except for (i) claims for breach
of Company’s representations and warranties with respect to Taxes in Section
2.10, which shall survive the Merger and continue in full force and effect until
the date that is the ninetieth (90) day after the date on which the statute of
limitations applicable to the subject matter addressed thereunder expires and
(ii) claims for breach of Company’s representations and warranties with respect
to its capitalization in Section 2.2 which shall be unlimited in duration, shall
survive the Merger until 5:00 p.m., Philadelphia, Pennsylvania time, on the date
that is eighteen (18) months following the Effective Time, (the “Survival
Date”). Without limiting the generality of the foregoing, with
respect to a breach or inaccuracy of any representation or warranty for which
notice is given prior to 5:00 p.m., Philadelphia, Pennsylvania time, on the
Survival Date (each, a “Noticed
Claim”), the indemnification obligation set forth in Sections 7.2 and 7.3
below shall survive the Survival Date until each such Noticed Claim is
resolved.
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7.2 Company
Indemnification.
Subject to the limitations set forth in this Agreement, from and after the
Effective Time, Buyer and Surviving Corporation and each of their respective
successors and assigns (the “Buyer
Indemnified Parties”) shall have the right to recover solely from and
set-off against either (i) the principal amount of the Note or, (ii) in the
event the Note has been converted into Conversion Shares, the redemption price
payable for any Conversion Shares redeemed pursuant to the terms of the Pledge
Agreement, up to an aggregate amount not to exceed $2,000,000, in each case in
accordance with Section 7.7 of this Agreement, after the Effective Time the
amount of any and all claims, losses, liabilities, damages, deficiencies, costs
and expenses, including reasonable attorneys’ and other professional’s fees and
expenses of investigation and defense (hereinafter individually a “Loss”
and collectively “Losses”),
incurred or sustained by the Buyer Indemnified Parties directly or indirectly as
a result of (i) any inaccuracy or breach of a representation or warranty of
Company or Stockholder’s Representative contained in this Agreement;
(ii) any failure by Company or Stockholder’s Representative to perform or
comply with any covenant contained herein; (iii) any inaccuracy contained in any
certificate or other instrument delivered by Company or Stockholder’s
Representative pursuant to this Agreement, or (iv) any material difference
between the Latest Balance Sheet and the Post-Closing
Audit. Notwithstanding the foregoing, there shall be no right to
indemnification pursuant to this ARTICLE VII unless and until aggregate Losses
in excess of $100,000 (the “Threshold
Amount”) have been finally adjudicated, in which event Buyer Indemnified
Parties shall be entitled to set-off against the Note all such Losses in excess
of the Threshold Amount.
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7.3 Buyer’s
Indemnification.
Subject to the limitations set forth in this Agreement, from and after the
Effective Time, Buyer shall indemnify and hold harmless the Stockholders, in
their respective ownership percentages set forth on Exhibit A, by and
through the Stockholders’ Representative, and each of their respective heirs,
assigns and personal representatives (the “Company Indemnified Parties”),
from and against all Losses incurred or sustained by the Company Indemnified
Parties directly or indirectly as a result of (i) any inaccuracy or breach
of a representation or warranty of Buyer or Acquisition Sub contained in this
Agreement; (ii) any failure by Buyer or Acquisition Sub to perform or
comply with any covenant contained herein; or (iii) any inaccuracy contained in
any certificate or other instrument delivered by either Buyer or Acquisition Sub
pursuant to this Agreement. Notwithstanding the foregoing, there
shall be no right to indemnification pursuant to this ARTICLE VII unless and
until aggregate Losses in excess of $100,000 (the “Threshold Amount”) have been
finally adjudicated against either Buyer or Acquisition Sub, in which event
Company Indemnified Party shall be entitled to recover all such Losses in excess
of the Threshold Amount.
7.4 Stockholder’s
Indemnification.
Subject to the limitations set forth in this Agreement, from and after the
Effective Time, Stockholders in their respective ownership percentages set forth
on Exhibit A
shall indemnify and hold harmless the Buyer Indemnified Parties from and against
all Losses incurred or sustained by the Buyer Indemnified Parties directly or
indirectly as a result of (i) claims for breach of Company’s representations and
warranties with respect to Taxes in Section 2.10, and (ii) claims for breach of
Company’s representations and warranties with respect to its capitalization in
Section 2.2. Notwithstanding the foregoing, there shall be no right
to indemnification pursuant to this ARTICLE VII unless and until aggregate
Losses in excess of $100,000 (the “Threshold Amount”) have been
finally adjudicated, in which event Buyer Indemnified Parties shall be entitled
to recover all such Losses in excess of the Threshold Amount.
7.5 Limitations; Maximum
Payments; Remedies
(a) The
maximum liability of
(i) Company
for its indemnification obligations pursuant to this ARTICLE VII if the Closing
occurs shall be limited to (i) the principal amount of the Note or, (ii) in the
event the Note has been converted into Conversion Shares, the redemption price
payable for any Conversion Shares redeemed pursuant to the terms of the Pledge
Agreement, up to an aggregate amount not to exceed $2,000,000 (such applicable
amount, the “Indemnity
Cap”) and such liabilities shall be satisfied solely by setoff against
such principal amount or redemption price, as applicable; and
(ii) Buyer or
Acquisition Sub for their respective indemnification obligations pursuant to
this ARTICLE VII if the Closing occurs shall be limited in the aggregate to Two
Million Dollars ($2,000,000).
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(b) No party
shall be liable for any punitive, indirect or consequential damages, lost
profits or diminution in value arising out of, based upon or resulting from the
transactions contemplated by this Agreement, or any breach of any representation
or warranty in this Agreement (other than as may be payable to a third
party).
(c) Notwithstanding
the limitation on the maximum liability of Company and Stockholders as set forth
in paragraph (a) of this Section 7.5, the maximum liability for claims based on
(i) breaches of Company’s representations and warranties with respect to
Taxes in Section 2.10, and (ii) breaches of Company’s representations and
warranties with respect to its capitalization in Section 2.2 shall be limited in
the aggregate to the fair market value on the Closing Date of the Common Merger
Consideration and the Notes.
7.6 Payment; Procedure for
Indemnification.
(a) In the
event that a Person shall suffer an Indemnifiable Loss and seek indemnification
under this ARTICLE VII (the “Indemnified
Party”) he, she or it shall give prompt written notice upon discovering
or becoming aware of any claim to (i) the Buyer and Acquisition Sub in the case
of indemnity sought under Section 7.3, or (ii) Stockholders’ Representative
in the case of indemnity sought under Section 7.2 (the party receiving such
notice, and the party(ies) from whom indemnification under this Article is
sought, the “Indemnifying
Party”) of the amount of the Loss, together with reasonably sufficient
information in reasonable detail to enable the Indemnifying Party to determine
the accuracy, amount and nature of the claimed Loss (the “Indemnity
Notice”). The failure of any Indemnified Party to give the
Indemnifying Party the Indemnity Notice promptly after actual notice of the Loss
shall not release the Indemnifying Party of liability under this ARTICLE VII;
provided, however that the Indemnifying Party shall not be liable for Losses
incurred by the Indemnified Party that would not have been incurred but for the
delay in the delivery of, or the failure to deliver, the Indemnity
Notice. In the event of a dispute concerning the foregoing
provisions, the burden of proving that Losses incurred by the Indemnified Party
that would not have been incurred but for the delay in the delivery of, or the
failure to deliver, the Indemnity Notice shall be on the Indemnifying
Party. Within sixty (60) days after the receipt by the Indemnifying
Party of the Indemnity Notice, the Indemnifying Party shall do one of the
following and decide whether or not to raise any objection: (i) pay to the
Indemnified Party an amount equal to the Loss or (ii) object to such claim, in
which case the Indemnifying Party shall give written notice to the Indemnified
Party of such objection together with the reasons therefore, it being understood
that the failure of the Indemnifying Party to so object shall preclude the
Indemnifying Party from asserting any claim, defense or counterclaim relating to
the Indemnifying Party’s failure to pay any Loss that was the subject of such
Notice; provided any such objection by the Indemnifying Party (not otherwise
resolved) shall be subject to the arbitration provisions set forth in Section
12.11. The Indemnifying Party’s objection shall not relieve the
Indemnifying Party from its obligations under this ARTICLE VII.
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(b) In the
event the facts giving rise to the claim for indemnification under this ARTICLE
VII shall involve any action or threatened claim or demand by any third party
against the Indemnified Party, the Indemnified Party, within the earlier of, as
applicable, ten (10) days after receiving a written notice of the filing of a
lawsuit or sixty (60) days after receiving notice of the existence of a claim or
demand giving rise to the claim for indemnification, shall send written notice
of such claim to the Indemnifying Party (the “Claim
Notice”). The failure of the Indemnified Party to give the
Indemnifying Party the Claim Notice shall not release the Indemnifying Party of
liability under this Article; provided, however, that the Indemnifying Party
shall not be liable for Losses incurred by the Indemnified Party that would not
have been incurred but for the delay in the delivery of, or the failure to
deliver, the Claim Notice. In the event of a dispute concerning the
foregoing provisions, the burden of proving that Losses incurred by the
Indemnified Party that would not have been incurred but for the delay in the
delivery of, or the failure to deliver, the Claim Notice shall be on the
Indemnifying Party. The Indemnifying Party shall be entitled to
defend such claim in the name of the Indemnified Party at the Indemnifying
Party’s own expense and through counsel of the Indemnifying Party’s own
choosing; provided, that if the applicable claim or demand is against, or if the
defendants in any such Legal Proceeding shall include, both the Indemnified
Party and the Indemnifying Party and the Indemnified Party reasonably concludes
that there are defenses available to it that are different or additional to
those available to the Indemnifying Party or if the interests of the Indemnified
Party may be reasonably deemed to conflict with those of the Indemnifying Party,
then the Indemnified Party shall have the right to select separate counsel and
to participate, at its cost, the defense of such claim, demand or Legal
Proceeding. The Indemnifying Party shall give the Indemnified Party
notice in writing within thirty (30) days after receiving the Claim Notice from
the Indemnified Party in the event of litigation, or otherwise within sixty (60)
days, of its intent to defend such claim. Whenever the Indemnifying
Party is entitled to defend any claim under this Section, the Indemnified Party
may elect, by notice in writing to the Indemnifying Party, to continue to
participate through its own counsel, at the Indemnified Party’s expense, but the
Indemnifying Party shall have the right to control the defense of the claim or
the litigation.
(c) Notwithstanding
any other provision contained in this Agreement, the party controlling the
defense of the claim or the litigation shall not settle any such claim or
litigation without the prior written consent of the Indemnifying Party for the
other party, which consent shall not be unreasonably withheld. In the
event that the Indemnifying Party is controlling the defense of the claim or the
litigation and shall have negotiated a settlement thereof, which proposed
settlement is substantively final and unconditional as to the parties thereto
(other than the consent of the Indemnifying Party for the Indemnified Party
required under this Section 7.6(c)) and contains an unconditional release of the
Indemnified Party and does not include the taking of any actions by, or the
imposition of any restrictions on the part of the Indemnified Party, the
Indemnified Party shall not unreasonably refuse to consent to such
settlement. The liability of the Indemnifying Party under this
ARTICLE VII, upon the ultimate disposition of such litigation or claim, shall be
limited to the amount of the proposed settlement; provided, however, that in the
event the proposed settlement shall require that the Indemnified Party make an
admission of liability, a confession of judgment, or shall contain any other
non-financial obligation which, in the reasonable judgment of the Indemnified
Party, renders such settlement unacceptable, then the Indemnified Party’s
failure to consent shall not give rise to the foregoing limitation of the
Indemnifying Party’s liability as provided for in this Section, and the
Indemnifying Party shall continue to be liable to the full extent of such
litigation or claim.
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(d) The party
controlling the defense of the claim or the litigation shall provide to the
non-controlling party a report as to the status of each claim for
indemnification pursuant to this ARTICLE VII no less frequently than once every
three months so long as such claim is outstanding, and whenever reasonably
requested by the Indemnified Party.
(e) The
non-controlling party in the defense of the claim or the litigation shall have
the right to consult with the controlling party and the controlling party shall
facilitate such consultation with respect to the conduct and results of the
proceeding and the strategy of the controlling party for addressing the matters
that are the basis of such claim. Upon reasonable request by the
non-controlling party, the controlling party shall provide the notice, copies,
access and right of consultation provided for herein with respect to any claim
for indemnification pursuant to this Agreement.
7.7 Payment
. Subject
to the provisions of Section 7.9 below:
(a) Upon final
determination of the amount of an Indemnifying Party’s liability for an
Indemnifiable Loss under this ARTICLE VII, the Indemnifying Party shall pay such
amount to the Indemnified Party no later than the date that is ten (10) Business
Days after such determination (“Indemnity
Payment Date”). In the event that the Buyer is the Indemnified
Party and is not paid such amount in full on or before the Indemnity Payment
Date, the Buyer must setoff and apply all or a portion of the full amount of any
Losses to which it is entitled pursuant to this ARTICLE VII against either (i)
the principal amount of the Note or, (ii) in the event the Note has been
converted into Conversion Shares, the redemption price payable for any
Conversion Shares redeemed pursuant to the terms of the Pledge Agreement, up to
an aggregate amount not to exceed $2,000,000, in each case, pursuant to the
terms of that certain Note Pledge Agreement (the “Pledge
Agreement”), substantially in the form of Exhibit E attached
hereto. In no event shall Buyer’s setoff pursuant to this Section
7.7(a) and the Pledge Agreement exceed
the Indemnity Cap.
(b) Buyer’s
right to setoff against (i) the principal amount of the Note or, (ii) in the
event the Note has been converted into Conversion Shares, the redemption price
payable for any Conversion Shares redeemed pursuant to the terms of the Pledge
Agreement, up to an aggregate amount not to exceed $2,000,000, shall survive
until the Survival Date, unless Buyer shall have properly given notice of its
exercise of its right to setoff on or prior to the Survival Date, in which event
the right of setoff shall continue until all outstanding indemnification claims
have been conclusively determined and been paid.
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7.8 Sole
Remedy.
From and after the Effective Time, the rights set forth in this ARTICLE VII
shall be the Indemnified Parties’ sole and exclusive remedies with respect to
any and all claims relating to this Agreement, the parties hereto, the events
giving rise to this Agreement and the transactions provided for herein or
contemplated hereby, except in the case of intentional misrepresentation, fraud
and criminal acts as well as, from and after the effective time, remedies of
specific performance, injunction and other equitable relief.
7.9 Termination Upon Change of
Control. Notwithstanding
anything herein to the contrary, the rights and obligations of the Parties set
forth in this ARTICLE VII shall terminate immediately upon a Change of Control
and any claim for indemnification hereunder, including any Noticed Claim,
Indemnity Notice, or Claim Notice, shall be deemed withdrawn and released by the
Party making such claim or providing such notice.
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
8.1 Termination.
Except as provided in Section 8.2 below, this Agreement may be terminated
and the Merger abandoned at any time prior to the Closing:
(a) by mutual
consent of Company on the one hand, and Buyer and Acquisition Sub on the other
hand;
(b) by Company
on the one hand or Buyer and Acquisition Sub on the other hand
if: (i) there shall be a final nonappealable order of a federal,
state or other court in effect preventing consummation of the Merger; or
(ii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Entity that would make consummation of the Merger illegal, or (iii) the Closing
has not occurred by June 1, 2008 (the “Outside
Date”); provided that no
party may terminate this Agreement pursuant to this clause if such failure to
timely Close on or before the Outside Date is due to the failure of such
terminating party to fulfill its obligations hereunder;
(c) by Buyer
and Acquisition Sub if they are not in material breach of their respective
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Company and such breach has not been cured within ten (10) calendar
days after written notice to Company (provided that, no cure period shall be
required for a breach which by its nature cannot be cured); or
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(d) by Company
if not in material breach of its obligations under this Agreement and there has
been a material breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Buyer or Acquisition Sub and such
breach has not been cured within ten (10) calendar days after written notice to
Buyer and Acquisition Sub (provided that, no cure period shall be required for a
breach which by its nature cannot be cured).
Where
action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the board of
directors of the party taking such action.
8.2 Effect of
Termination. In
the event of termination of this Agreement as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Buyer or Company, or their respective officers,
directors or stockholders, provided that each party shall remain liable for any
breaches of this Agreement prior to its termination; provided further that, the
provisions of Sections 5.2, 5.3, 5.4, this Section 8.2, and Section 10.2 of
this Agreement shall remain in full force and effect and survive any termination
of this Agreement.
8.3 Amendment.
Except as is otherwise required by Applicable Law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto.
8.4 Extension;
Waiver. At
any time prior to the Closing, Company, Buyer and Acquisition Sub may, to the
extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in
the representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE
IX
CLOSING
9.1 Deliveries of the Buyer and
Acquisition Sub. At
the Closing, the Buyer and Acquisition Sub, as applicable, shall deliver to the
Company the following items and documents:
(a) the Common
Merger Consideration;
(b) a
certificate from the Secretary or Assistant Secretary of each of the Buyer and
Acquisition Sub dated the Closing Date, certifying (i) a true and complete copy
of the Buyer’s Organizational Documents (ii) a true and correct copy of the
resolutions adopted by each of the Buyer’s and Acquisition Sub’s directors
authorizing the execution and performance of this Agreement and the transactions
contemplated hereby is attached thereto, and (iii) each of the Buyer’s and
Acquisition Sub’s incumbent officers and their respective specimen signatures
set forth on such certificate are their respective genuine
signatures;
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(c) the Offer
Letters, duly executed by the Buyer or Acquisition Sub;
(d) each of
the Pledge Agreements duly executed by the Buyer or Acquisition
Sub;
(e) evidence
that the terms of Buyer's outstanding convertible promissory debt has been
amended as provided in Section 6.2(c).
(f) a
certificate issued by the Secretary of State of Delaware as to the good standing
of the Buyer and Acquisition Sub in such jurisdiction, dated within fifteen (15)
days of the Closing Date; and
(g) the
certificates required by Section 6.2(b).
9.2 Deliveries of the
Company. On
the Closing Date, the Company and the Stockholders’ Representative, as
applicable, shall deliver to the Buyer, the following items and
documents:
(a) the
Company Stock certificates;
(b) the Pledge
Agreements;
(c) a
certificate issued by the Secretary of State or other appropriate officials of
the State of Delaware as to the subsistence or good standing of each of the
Company and any Company subsidiaries in such state; all dated within fifteen
(15) days of the Closing Date;
(d) all
consents and approvals referenced in Schedule 6.3(d)
hereof;
(e) the
certificates required by Section 6.3(c) and Section 6.3(g) hereof;
and
(f) any
documents, instruments, agreements and certificates as may be reasonably
necessary to carry out the transactions contemplated by this Agreement,
including such documents, instruments, agreements and certificates as the Buyer
may reasonably request in connection therewith.
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ARTICLE
X
POST
CLOSING COVENANTS
10.1 Further
Cooperation.
From and after the Closing Date, at the Buyer’s or Acquisition Sub’s request
from time to time, the Stockholders’ Representative shall execute and deliver to
the Buyer such further endorsements, assignments and instruments of transfer and
conveyance and take such other actions as the Buyer or Acquisition Sub
reasonably requests to consummate the transactions contemplated by this
Agreement.
10.2 Confidentiality. The
Stockholders’ Representative shall maintain confidential and not disclose, and
shall cause to be maintained confidential and not disclosed, all information and
material regarding the business carried on by the Company.
10.3 Maintenance of Books and
Records. For
a period not to exceed five (5) years after the Closing Date, the Buyer shall
maintain the Books and Records maintained by the Company on or before the
Closing Date and shall permit the Stockholders’ Representative and its
respective representatives and agents access, at the Company’s offices where
such books and records are maintained, at the Stockholders’ Representative sole
cost and expense, to such pre-Closing Books and Records (upon reasonable prior
written notice by the Stockholders’ Representative, as applicable, subject to
reasonable confidentiality restrictions, and on terms not disruptive to the
business, operation or employees of the Company, the Buyer or any of the Buyer’s
affiliates) solely to the extent necessary to assist the Stockholders’
Representative in (a) completing any tax or regulatory filings or financial
statements required or appropriate to be made by any of the Stockholders’
Representative after the Closing Date, (b) prosecuting or defending on behalf of
any of the Stockholders’ Representative any litigation controlled by any of the
Stockholders’ Representative under Section 7.6(c) of this Agreement; or (c)
complying with requests made of any of the Stockholders’ Representative by any
Taxing authority or any Governmental Entity conducting an audit, investigation
or inquiry relating to the Company’s activities during periods prior to the
Closing Date. The Stockholders’ Representative shall, and shall cause
its respective representatives and agents to, hold all information provided to
them pursuant to this Section 10.3 (and any information derived therefrom)
in confidence.
ARTICLE
XI
TAX
MATTERS
11.1 Tax
Returns.
(a) The
Stockholders’ Representative shall prepare or cause to be prepared all Returns
of the Company with respect to taxable periods ending on or prior to the Closing
date (the “Pre-Closing
Returns”). Such Pre-Closing Returns shall be prepared
consistent with past practices. Stockholders’ Representative shall
permit Buyer to review and comment on such Pre-Closing Returns. Buyer
shall file or cause to be filed such Pre-Closing Returns as so prepared and
shall pay or cause to be paid all Taxes with respect to thereto.
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(b) Buyer
shall prepare or cause to be prepared and file or cause to be filed all Returns
of the Company for taxable periods which begin before the Closing Date and end
after the Closing Date (“Straddle
Returns”). Buyer shall prepare such Returns consistent with
past practices. Buyer shall allow Stockholders’ Representative to
review and comment on such Straddle Returns prior to their filing and shall not
file or cause to be filed such Straddle Returns without Stockholders’
Representative’s consent, which consent shall not be unreasonably
withheld. Buyer shall pay or cause to be paid all Taxes with respect
to such Straddle Returns.
(c) None of
Buyer or its Affiliates (including the Surviving Corporation), shall amend,
refile or otherwise modify any Return relating to the Company with respect to
any Tax period beginning on or before the Closing Date, or make or revoke any
Tax elections with respect to such Returns without the prior written consent of
the Stockholders’ Representative, which consent shall not be unreasonably
withheld.
11.2 Cooperation on Tax
Matters.
Buyer, Surviving Corporation, the Stockholders’ Representative and their
Affiliates shall cooperate, as and to the extent reasonably requested, in
connection with the filing of any Return and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such Return, audit, litigation
or other proceeding and making employees of the Surviving Corporation or Buyer
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Stockholders’
Representative, Surviving Corporation and Buyer agree (i) to retain all books,
records and returns with respect to Tax matters pertinent to the Company
relating to any taxable period beginning on or before the Closing Date until the
later of six years after the Closing Date or the expiration of the statute of
limitations (and any extensions thereof) of the respective Tax periods, and to
abide by all record retention agreements entered into with any Tax authority,
and (ii) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books, records and Returns and,
if the other so requests, Buyer, Surviving Corporation or Stockholders’
Representative, as the case may be, shall allow the other to take possession of
such books, records and Returns.
11.3 Certain
Taxes. All
transfer, documentary, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection with the
transactions contemplated by this Agreement shall be paid by the Buyer when due,
and Buyer will file all necessary Returns and other documentation with respect
to all such transfer, documentary, use, stamp, registration and other such Taxes
and fees.
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ARTICLE
XII
GENERAL
PROVISIONS
12.1 The Stockholders’ Representative.
(a) In order
to efficiently administer the transactions contemplated hereby, including the
defense or settlement of any Claims for which Company may be required to
indemnify Buyer pursuant to ARTICLE VII hereof, Stockholders shall have
designated Xxxxxx X. Xxxxxx, as the Stockholders’ Representative pursuant to
that certain Stockholders’ Representative Agreement by and between the
Stockholders’ Representative and the Stockholders party thereto dated of even
date herewith (the “Stockholders’
Representative Agreement”), a copy of which is attached as hereto as
Exhibit
G.
(b) Each of
the Stockholders pursuant to the Stockholders’ Representative Agreement, thereby
irrevocably appoints the Stockholders’ Representative as the agent, proxy and
attorney-in-fact for such Stockholders for all purposes of this Stockholders’
Representative Agreement (including the full power and authority on such
Stockholders’ behalf (i) to consummate the transactions contemplated herein;
(ii) to pay such Stockholders’ expenses incurred in connection with the
negotiation and performance of this Agreement (whether incurred on or after the
date hereof); (iii) to disburse any funds or securities received hereunder to
such Stockholders and each other Stockholders; (iv) to endorse and deliver any
certificates or instruments representing the Common Stock and execute such
further instruments of assignment as Buyer shall reasonably request; (v) to
execute and deliver on behalf of such Stockholders any amendment or waiver
hereto; (vi) to take all other actions to be taken by or on behalf of such
Stockholders in connection herewith; (vii) to negotiate, settle, compromise and
otherwise handle any and all claims for indemnification made by Buyer; and
(viii) to do each and every act and exercise any and all rights which such
Stockholders collectively are permitted or required to do or exercise under this
Agreement). Each of the Stockholders agrees that such agency and
proxy are coupled with an interest, are therefore irrevocable without the
consent of the Stockholders’ Representative and shall survive the death,
incapacity, bankruptcy, dissolution or liquidation of any
Stockholders. All decisions and actions by the Stockholders’
Representative (to the extent authorized by the Stockholders’ Representative
Agreement) shall be binding upon each of the Stockholders, and no Stockholders
shall have the right to object, dissent, protest or otherwise contest the
same.
(c) Each of
the Stockholders pursuant to the Stockholders’ Representative Agreement,
represents and warrants that (i) they are residents of the United States, (ii)
they are each an accredited investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act, (iii) they are receiving the Common Stock
Per Share Merger Consideration for investment for their own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and have no present intention of selling, granting any participation
in, or otherwise distributing the same, (iv) they have carefully
reviewed the representations concerning the Buyer contained in this Agreement,
the periodic reports and other filings with the Securities and Exchange
Commission of Buyer, and other due diligence material requested by, or provided
to, the Company, and have made detailed inquiry concerning the Buyer, its
business and its personnel, (v) they understand that the Common Stock Per Share
Merger Consideration has not been, and will not be, registered under the
Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of their
representations as expressed therein, and (vi) they understand that the Common
Stock Per Share Merger Consideration will bear one or more restrictive
legends.
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(d) The
Stockholders, pursuant to the Stockholders’ Representative Agreement, will agree
not to collectively sell, each trading day, that number of shares of Buyer’s
Stock which is more than ten percent (10%) of the average daily volume for the
preceding fifteen (15) trading days as reported by the NASDAQ bulletin board
system, of the Buyer common stock, until that date which is eighteen months
following the Effective Time. Notwithstanding the foregoing, in the
event that the Buyer has applied to trade Buyer common stock on any national
securities exchange (a “Market”)
the Stockholders, pursuant to the Stockholders’ Representative Agreement, will
agree, upon the written request of Buyer, not to sell any shares of Buyer’s
Stock for a period of up to ninety (90) days. Notwithstanding the
foregoing, the provisions of this Section 12.1(d) shall terminate immediately
upon the listing of Buyer common stock on a Market.
(e) Each
Stockholder pursuant to the Stockholders’ Representative Agreement, agrees that
Buyer shall be entitled to rely on any action taken by the Stockholders’
Representative, on behalf of such Stockholders, pursuant to Section 12.1(b)
above (an “Authorized
Action”), and that each Authorized Action shall be binding on each
Stockholders as fully as if such Stockholders had taken such Authorized
Action. Buyer agrees that the Stockholders’ Representative, as the
Stockholders’ Representative, shall have no liability to Buyer for any
Authorized Action, except to the extent that such Authorized Action is found by
a final order of a court of competent jurisdiction to have constituted fraud or
willful misconduct. Each Stockholders shall, pursuant to the
Stockholders’ Representative Agreement severally, for itself only and not
jointly and severally, agrees to indemnify and hold harmless the Stockholders’
Representative against all expenses (including reasonable attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Stockholders’ Representative in connection with any action, suit or
proceeding to which the Stockholders’ Representative is made a party by reason
of the fact it is or was acting as the Stockholders’ Representative pursuant to
the terms of this Agreement.
(f) Notwithstanding
anything to the contrary herein, Stockholders’ Representative shall not in any
manner exercise, or seek to exercise, any voting power whatsoever with respect
to any Common Stock now or hereafter owned of record or beneficially by any
Stockholders unless Stockholders’ Representative is expressly authorized to do
so in a writing signed by such Stockholders.
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(g) In the
event that Stockholders’ Representative dies, winds up operations, becomes
unable to perform his, her or its responsibilities hereunder or resigns from
such position, Stockholders receiving or having the right to receive a majority
of the Common Merger Consideration are authorized to and shall select another
representative to fill such vacancy and such substituted representative shall be
deemed to be Stockholders’ Representative for all purposes of this Agreement and
the documents delivered pursuant hereto.
(h) Stockholders
shall be bound by all actions taken by Stockholders’ Representative in its
capacity thereof, except for any action that conflicts with the limitation set
forth in Section 12.1(c).
(i) Stockholders’
Representative shall promptly, and in any event within five (5) Business Days,
provide notice to Stockholders of any action taken on behalf of them by
Stockholders’ Representative pursuant to the authority delegated to
Stockholders’ Representative under this
Section 12.1. Stockholders’ Representative shall at all times
act in its capacity as Stockholders’ Representative in a manner that
Stockholders’ Representative believes to be in the best interest of
Stockholders. Neither Stockholders’ Representative nor any of its
directors, officers, agents, partners, members or employees, if any, shall be
liable to any person for any error of judgment, or any action taken, suffered or
omitted to be taken, under this Agreement, except in the case of its gross
negligence, fraud, bad faith or willful misconduct. Stockholders’
Representative may consult with legal counsel, independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. Stockholders’ Representative shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants or conditions of this Agreement. Each
Stockholders severally shall indemnify and hold harmless and reimburse
Stockholders’ Representative from and against such Stockholders’ ratable share
of any and all liabilities, losses, damages, claims, costs or expenses suffered
or incurred by Stockholders’ Representative arising out of or resulting from any
action taken or omitted to be taken by Stockholders’ Representative under this
Agreement, other than such liabilities, losses, damages, claims, costs or
expenses arising out of or resulting from Stockholders’ Representative’s bad
faith or willful misconduct.
(j) Buyer
shall be entitled to rely conclusively on the instructions and decisions of
Stockholders’ Representative regarding the settlement of any claims for
indemnification by any of the Indemnified Parties pursuant to ARTICLE VII
hereof, or any other actions required or permitted to be taken by Stockholders’
Representative hereunder, and no party hereunder shall have any cause of action
against Buyer or the Company for any action taken by Buyer or the Company in
reliance upon the instructions or decisions of Stockholders’
Representative.
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(k) Each
Stockholders agrees, in addition to the foregoing, that: (i) the provisions of
this Section 12.1 are independent and severable, are irrevocable and
coupled with an interest and shall be enforceable notwithstanding any rights or
remedies that any Stockholders may have in connection with the transactions
contemplated by this Agreement; and (ii) the provisions of this
Section 12.1(k) shall be binding upon the executors, heirs, legal
representatives, personal representatives, successor trustees and successors of
each of the Stockholders, and any references in this Agreement to a Stockholders
shall mean and include the successors to Stockholders’ rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
12.2 Notices.
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or
mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice), provided, however, that notices sent by mail and certified mail
will not be deemed given until received:
(a) if to
Buyer, Surviving Corporation, or Acquisition Sub to:
000
Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Fax: (000)
000-0000
Attention: Xxxxxxx
Xxxxxxx
with a
copy to:
The
Corporate Law Group
Xxxxxxxxxx
Xxxxx, Xxxxx 000
000
Xxxxxxx Xxxxxxxxx
Xxxxxxxxxx,
XX 00000
Attention: Xxxx
Xxxxxxx
xxxx@xxxx.xxx
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
(b) if to
Company or Stockholders, to:
Gleneayre
Farms, Inc.
000
Xxxxxxxxxx Xxxx
Xx. Xxxxx,
XX 00000
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Attention: Xxxxxx
X. Xxxxxx,
Stockholder
Representative
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
with a
copy to:
Xxxxxx
Xxxxxxxx LLP
000 Xxxxxx
Xxxx
000
Xxxxxxx Xxxx
Xxxxxx,
Xxxxxxxxxxxx 00000-0000
Attention:
Xxxxxxx X. Xxxxx, Xx., Esquire
12.3 Interpretation. The
words “include,” “includes” and “including” when used herein shall be deemed in
each case to be followed by the words “without
limitation.” References to an “Article” or a “Section” when used
herein without further attribution shall refer to the particular
Articles or Sections of this Agreement. References to “dollars”
when used herein without further attribution shall refer to the currency of the
United States of America. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
12.4 Counterparts.
This Agreement may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that not all parties need sign the same
counterpart.
12.5 Entire Agreement;
Assignment.
This Agreement, the schedules and Exhibits hereto, and the documents and
instruments and other agreements among the parties hereto referenced
herein: (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings (including any Memorandum of Terms, Letter to Intent, Term Sheet,
and Memorandum of Understanding or similar document), both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
12.6 Severability. In
the event that any provision of this Agreement or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal, void
or unenforceable, the remainder of this Agreement will continue in full force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
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12.7 Other
Remedies.
Any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
12.8 Governing
Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction and venue of
any court within New Castle County, Delaware, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of California for such persons and waives and covenants not to
assert or plead any objection which they might otherwise have to such
jurisdiction, venue and such process.
12.9 Forum and
Venue.
Any judicial action or proceeding arising hereunder or relating hereto shall be
brought in, and the Parties hereby consent to the exclusive, personal
jurisdiction of, the state and federal courts located in Wilmington,
Delaware. Buyer, Acquisition Sub and Company hereby consent to the
jurisdiction of such courts and hereby appoints its counsel identified in
Section 12.2 as its agent for service of process.
12.10 Rules of
Construction.
The parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
12.11 No Waiver of
Rights. No
waiver of any rights of the Company, on the one hand, or the Buyer and
Acquisition Sub, on the other hand, under this Agreement shall be effective
unless it is in writing and executed by a duly authorized representative of the
party against whom enforcement of any such waiver is sought. No
failure or delay on the part of any party in the exercise of any power or right
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right. The waiver by any party
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any other or subsequent breach under this Agreement.
12.12 Section and Paragraph
Titles. The
Section and paragraph titles used in this Agreement are for convenience
only and are not intended to define or limit the contents or substance of any
such Section or paragraph.
12.13 Legal
Fees. The
Buyer and the Acquisition Sub on the one hand and the Company and the
Stockholders on the other hand shall each bear their respective expenses
incurred in connection with this transaction, including the legal fees and
expenses incurred by them, whether this transaction closes or not.
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ARTICLE
XIII
DEFINITIONS
13.1 Certain
Definitions.
As used in
this Agreement, the following terms shall have the meanings herein specified,
unless the context otherwise requires:
“Affiliate” shall mean
any other person or entity under common control with Company within the meaning
of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, of the United States, and the regulations issued
thereunder.
“Applicable Law” shall
mean any federal, state, local or foreign statute, law, ordinance, regulation,
rule, code, order, other requirement or rule of law.
“Authorized Action”
shall have the meaning set forth in Section 12.1(d).
“Balance Sheet” shall
have the meaning set forth in 2.7.
“Business Day” means
any day of the year on which national banking institutions in New York are open
to the public for conducting business and are not required or authorized to
close.
“Buyer Board” shall
have the meaning set forth in Section 3.1.
“Buyer Bylaws” shall
have the meaning set forth in Section 3.1.
“Buyer Certificate of
Incorporation” shall have the meaning set forth in Section
3.1.
“Buyer Filed SEC
Report” shall have the meaning set forth in Section 3.5(a).
“Buyer Financial
Statements” shall have the meaning set forth in Section
3.5(b).
“Buyer Indemnified
Parties” shall have the meaning set forth in Section 7.2.
“Buyer Intellectual
Property” shall mean any Intellectual Property and Intellectual Property
Rights that are owned by or exclusively licensed to Buyer.
“Buyer Organizational
Documents” shall have the meaning set forth in Section 3.1.
“Buyer SEC Reports”
shall have the meaning set forth in Section 3.5(a).
“Buyer’s Stock” shall
have the meaning set forth in Section 1.8.
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“Cal-COBRA” shall mean
the California Continuation Benefits Replacement Act.
“Certificate of
Merger” shall have the meaning set forth in Section 1.2.
“Change in Control”
shall mean any merger, share exchange, consolidation, purchase or sale of
securities, or other business combination or transaction of, or involving, Buyer
if immediately after such transaction Persons who hold a majority of the then
outstanding voting securities entitled to vote generally in the election of
directors or managers of the surviving entity in such transaction (or the entity
owning 100% of such surviving entity) are not persons, entities or groups who
held a majority of the combined voting power of the then outstanding securities
of Buyer and/or Surviving Corporation entitled to vote generally in the election
of directors immediately following the Closing.
“Claim Notice” shall
have the meaning set forth in Section 7.6(b).
“Closing” shall have
the meaning set forth in Section 1.3.
“Closing Date” shall
have the meaning set forth in Section 1.3.
“COBRA” shall mean the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Common Stock” shall
have the meaning set forth in Section 1.8.
“Common Stock Per Share
Merger Consideration” shall have the meaning set forth in Section
1.8.
“Common Merger
Consideration” shall have the meaning set forth in Section
1.8.
“Company Common Stock”
shall have the meaning set forth in Section 2.2(a).
“Company
Authorizations” shall have the meaning set forth in Section
2.16.
“Company Employee
Plan” shall mean any plan, program, policy, practice, contract, agreement
or other material arrangement providing for compensation, severance, termination
pay, deferred compensation, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
written, unwritten or otherwise, funded or unfunded, including without
limitation, each “employee benefit plan,” within the meaning of
Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by Company or any Affiliate for the benefit of
any Employee, or with respect to which Company or any Affiliate has or may have
any liability or obligation.
“Company Intellectual
Property” shall mean any Intellectual Property and Intellectual Property
Rights that are owned by or exclusively licensed to Company.
“Company Registered
Intellectual Property Rights” shall have the meaning set forth in Section
2.13(a).
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“Company Stock
Certificates” shall have the meaning set forth in Section
1.11(a).
“Conflict” shall have
the meaning set forth in Section 2.4.
“Continuing Employee”
shall have the meaning set forth in Section 5.9.
“Contract” or “Contracts” shall have
the meaning set forth in Section 2.4.
“Conversion Shares”
shall mean any shares of Buyer’s common stock issuable upon conversion of the
Note.
“Disclosure Schedules”
shall have the meaning set forth in ARTICLE II.
“DGCL” shall have the
meaning set forth in Section 1.1.
“Dissenting Shares”
shall have the meaning set forth in Section 1.12.
“Effective Time” shall
have the meaning set forth in Section 1.2.
“Employee” shall mean
any current or former employee, consultant, member, manager or director of
Company or any Affiliate.
“Employee Agreement”
shall mean each management, employment, severance, consulting, relocation,
repatriation, expatriation, visas, work permit or other agreement, or contract
between Company or any Affiliate and any Employee.
“Employee Benefit
Plan” shall mean any deferred compensation, pension, profit sharing,
stock bonus, restricted stock, stock option, stock purchase, savings, group
insurance or retirement plan, and all vacation pay, severance pay, life, health,
disability, premium conversion, flexible spending, incentive compensation,
consulting, bonus and other employee benefit or fringe benefit plans or
arrangements (whether written or unwritten) maintained by the Company or any of
its respective ERISA Affiliates (including, without limitation, any benefit plan
or arrangement maintained for retirees) within the previous three plan years or
with respect to which contributions are or were (within such three year period)
made or required to be made by the Company or any of its respective ERISA
Affiliates or with respect to which the Company or any of its respective ERISA
Affiliates has any liability.
“Environmental
Permits” shall have the meaning set forth in Section
2.20(c).
“Equipment” shall have
the meaning set forth in Section 2.12(c).
“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended.
“Financial Statements”
shall have the meaning set forth in 2.7.
“FMLA” shall mean the
Family Medical Leave Act of 1993, as amended.
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“FUTA” shall have the
meaning set forth in Section 2.10(b).
“FICA” shall have the
meaning set forth in Section 2.10(b).
“GAAP” shall mean
generally accepted accounting principles in the United States, applied on a
basis consistent with the Company’s past practice.
“Governmental Entity”
shall have the meaning set forth in Section 2.5.
“Hazardous Material”
shall have the meaning set forth in Section 2.20(a).
“Hazardous Material
Activity” shall have the meaning set forth in Section
2.20(b).
“Indemnified Party”
shall have the meaning set forth in Section 7.6(a).
“Indemnifying Party”
shall have the meaning set forth in Section 7.6(a).
“Indemnity Cap” shall
have the meaning set forth in Section 7.45.
“Indemnity Date” shall
have the meaning set forth in Section 7.7(a).
“Indemnity Notice”
shall have the meaning set forth in Section 7.6(a).
“Indemnity Payment
Date” shall have the meaning set forth in Section 7.7(a).
“Intellectual
Property” shall mean any or all of the following (i) works of authorship
including, without limitation, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, documentation,
designs, files, records, data and mask works, (ii) inventions (whether or not
patentable), discoveries, improvements, and technology, (iii) proprietary and
confidential information, trade secrets and, know how, and show how, (iv)
databases, data compilations and collections and technical data, (v) logos,
trade names, indicia of origin, trade dress, trademarks and service marks, (vi)
domain names, web addresses and sites, (vii) tools, methods and processes, and
(viii) all instantiations of the foregoing in any form and embodied in any
media.
“Intellectual Property
Rights” shall mean worldwide common law and statutory legal rights
arising from or associated with (i) patents and patent applications and
divisions, continuations, continuations-in-part, renewals, reissuances and
extensions of the foregoing (as applicable), (ii) works of authorship including
copyrights, copyright registrations and copyright applications and “moral”
rights, (iii) the protection of trade and industrial secrets and confidential
information, and (iv) trademarks, trade names and service marks.
“IRS” shall mean the
United States Internal Revenue Service.
“Key Employees” shall
have the meaning set forth in Section 6.3(e).
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“Knowledge” shall mean
with respect to any representation, warranty or statement of any party in this
Agreement that is qualified by such party’s “knowledge,” the knowledge of such
party, and, in the case of the Company or the Buyer, the actual knowledge of its
officers and directors and that knowledge which could have been acquired by such
officers and directors after making due inquiry and exercising such due
diligence as a prudent businessperson would have made or exercised in light of
all the circumstances applicable thereto.
“Legal Proceeding”
shall mean any action, suit, arbitration, claim or investigation by or before
any Governmental Entity, any arbitration or alternative dispute resolution
panel, or any other legal, administrative or other proceeding.
“Letter of
Transmittal” shall have the meaning set forth in Section
1.11(b).
“Loss” or “Losses” shall have
the meaning set forth in Section 7.2.
“Material Adverse
Effect” shall mean any event or condition of any character that has had
or is reasonably likely to result in a change, event or effect that is
materially adverse to the business or the assets (including intangible assets),
condition (financial or otherwise), results of operations or capitalization of a
party to this Agreement.
“Market” shall have
the meaning set forth in Section 12.1(d).
“Merger” shall have
the meaning set forth in Section 1.1.
“Offer Letter” shall
have the meaning set forth in Section 5.9.
“Note” shall have the
meaning set forth in Section 1.10.
“Order” shall mean any
judgment, order, writ, decree, injunction or other determination whatsoever of
any Governmental Entity or any other entity or body whose finding, ruling or
holding is legally binding or is enforceable as a matter of right (in any case,
whether preliminary or final).
“Payment Agent” shall
have the meaning set forth in Section 1.11(a).
“Permitted
Encumbrances” shall have the meaning set forth in 2.6.
“Person” shall mean
any natural person, corporation, general partnership, limited partnership,
limited liability company, proprietorship, joint venture, trust, association,
union, entity, or other form of business organization or any Governmental or
Regulatory Authority whatsoever.
“Pledge Agreement”
shall have the meaning set forth in Section 7.7(a).
“Post-Closing Audit”
shall have the meaning set forth in Section 5.10.
“PTO” shall have the
meaning set forth in Section 2.13(a).
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“Registered Intellectual
Property Rights” shall mean Intellectual Property Rights that have been
registered, filed, certified or otherwise perfected by recordation with any
state, government or other public legal authority.
“Requirement of Law”
shall mean, with respect to any Person, any provision of law, statute, treaty,
rule, regulation, ordinance, executive order or pronouncement having the effect
of law, whether domestic or foreign, or any Order, whether domestic or foreign,
to which, in each case, such Person or any of such Person’s properties,
operations, business or assets is bound or subject.
“Returns” shall have
the meaning set forth in 2.10(a).
“SEC Documents” shall
have the meaning set forth in Section 3.2.
“Stockholders” shall
have the meaning set forth in Section 1.4.
“Stockholders” Representative
Agreement” shall have the meaning set forth in Section
12.1(a).
“Surviving
Corporation” shall have the meaning set forth in Section
1.1.
“Survivor’s bylaws”
shall have the meaning set forth in Section 1.5.
“Survivor’s Certificate of
Incorporation” shall have the meaning set forth in Section
1.5.
“Survivor’s Constituent
Documents” shall have the meaning set forth in Section 1.5.
“Tax” or,
collectively, “Taxes” shall mean any
and all federal, state, local and foreign taxes or similar governmental
assessments, charges duties and impositions, including taxes based upon or
measured by gross receipts, income, profits, sales, goods and services, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts.
“Threshold Amount”
shall have the meaning set forth in Section 7.2.
[Remainder
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IN WITNESS WHEREOF, the Buyer,
Company and Stockholders’ Representative, intending to be legally bound hereby,
have executed this Agreement by their duly authorized officers.
| ANTS SOFTWARE INC., | |||
| A Delaware corporation | |||
| By: |
/s/
|
||
| Name: | Xxxxxx X. Xxxxx | ||
| Title: | Chairman, Chief Executive Officer and President | ||
| ANTS HOLDINGS, INC., | |||
| A Delaware corporation | |||
| By: |
/s/
|
||
| Name: | Xxxxxx X. Xxxxx | ||
| Title: | Chairman, Chief Executive Officer and President | ||
| INVENTA TECHNOLOGIES, INC., | |||
| A Delaware corporation | |||
| By: |
/s/
|
||
| Name: | Xxxxxx X. Xxxxxx | ||
| Title: | Chairman | ||
| STOCKHOLDERS’ REPRESENTATIVE | |||
|
/s/
|
|||
| Xxxxxx X. Xxxxxx, solely in his representative | |||
| capacity as Stockholders’ Representative | |||
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