AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER
Dated August 28,
2008
The
parties to this Agreement and Plan of Merger are Park City Group, Inc. (the
“Parent”), a Nevada corporation, PAII Transitory Sub, Inc. (the “Sub”), a
Delaware corporation and wholly owned subsidiary of Parent, Prescient Applied
Intelligence, Inc. (the “Company”), a Delaware corporation, and Xxxxx Xxxxxx, an
individual who serves as the Chairman and CEO of Parent (“Fields”).
The board of directors of each of the
Parent, the Sub, and the Company have approved, and deem it advisable and in the
best interests of its respective shareholders, to consummate the acquisition of
the Company by the Parent by way of the merger (the "Merger") of the Sub with
and into the Company in accordance with the General Corporation Law of the State
of Delaware (the “DGCL”) and this Agreement.
Concurrent with the execution of this
Agreement, Parent has purchased an aggregate of 715.96 shares, and intends to
purchase in a separate transaction 382.536 shares (collectively, the “Privately
Purchased Shares”) of the Company’s Series E Convertible Preferred Stock, par
value $.001 per share, pursuant to separate securities purchase agreements
between and among the Parent and the holders of such shares.
Accordingly,
the parties agree as follows:
ARTICLE
I
THE
MERGER
Section 1.1 The
Merger. At the Effective Time (as defined in Section 1.2), the
Sub shall be merged with and into the Company, in accordance with the DGCL, at
which time the separate existence of the Sub shall cease, and the name of the
Company, as the surviving corporation in the Merger (the "Surviving
Corporation"), shall remain “Prescient Applied Intelligence, Inc.” The Merger will have the
effects set forth in the DGCL.
Section 1.2 Effective Time of the
Merger. The Merger will become effective upon the later of (a)
the filing of a properly executed certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware (the "Department
of State") in accordance with the DGCL, or (b) such later date and time as may
be set forth in the Certificate of Merger (the "Effective Time").
ARTICLE
II
THE SURVIVING
CORPORATION
Section 2.1 Certificate of
Incorporation. The certificate of incorporation of the Sub in
effect at the Effective Time will be the certificate of incorporation of
the Surviving Corporation, until thereafter amended in accordance with its terms
and as provided in the DGCL.
Section 2.2 Bylaws. The
by-laws of the Sub in effect at the Effective Time will be the by-laws of the
Surviving Corporation, until thereafter amended in accordance with its terms and
as provided in the certificate of incorporation and the DGCL.
Section 2.3 Directors and Officers of
Surviving Corporation
(a) The
directors of the Sub at the Effective Time will be the initial directors of the
Surviving Corporation and will hold office from the Effective Time until their
respective successors are duly elected or appointed and qualify in the manner
provided in the certificate of incorporation and by-laws of the Surviving
Corporation or as otherwise provided by law.
(b) The
officers of the Company at the Effective Time will be the initial officers of
the Surviving Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the certificate of incorporation and by-laws of the Surviving
Corporation or as otherwise provided by law.
ARTICLE
III
CONVERSION OF
SHARES
Section 3.1 Conversion of
Shares
(a) Subject
to Sections 3.2 and 3.3, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder of shares of common stock, par
value $.001 per share, of the Company (collectively, the "Common Shares"), each
Common Share issued and outstanding immediately prior to the
Effective Time (other than any Dissenting Shares (as defined in Section 3.3) and
other than Common Shares owned by the Parent or the Sub) (the “Outstanding
Common Shares”) will be converted into the right to receive $.055 (the “Merger
Consideration Per Common Share”) in cash and without interest upon surrender of
the certificate formerly evidencing such Common Shares. From and
after the Effective Time, all Outstanding Common Shares shall no longer be
outstanding and shall be deemed to be cancelled and retired and shall cease to
exist, and each holder of a certificate evidencing Outstanding Common Shares
shall cease to have any rights with respect to such Shares, except the right to
receive the Merger Consideration Per Common Share in respect of those Shares,
without interest, upon the surrender of such certificate in accordance with
Section 3.2 or as otherwise provided by law.
(b)
Subject to Sections 3.2 and 3.3, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder of shares of Series E
Convertible Preferred Stock, par value $.001 per share, of the Company
(collectively, the "Series E Shares"), each Series E Share issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares (as defined in Section 3.3) and other than any Series E Shares owned by
the Parent or the Sub) (the “Outstanding Series E Shares”) will be converted
into the right to receive $4,098.00 (the “Merger Consideration Per Series E
Share”) in cash and without interest upon surrender of the certificate formerly
evidencing such Series E Shares. From and after the Effective
Time, all converted Series E Shares shall no longer be outstanding and shall be
deemed to be cancelled and retired and shall cease to exist, and each holder of
a certificate evidencing converted Series E Shares shall cease to have any
rights with respect to such Series E Shares, except the right to receive the
Merger Consideration Per Series E Share in respect of those Series E Shares,
without interest, upon the surrender of such certificate in accordance with
Section 3.2 or as otherwise provided by law. In connection with the
Merger, the Certificate of Designation of the Relative Rights and Preferences of
the Series E Convertible Preferred Stock shall be amended to provide that the
Merger Agreement shall govern the powers, designation and preferences of the
Series E Convertible Preferred Stock in the event the Merger is
consummated.
(c) Subject
to Sections 3.2 and 3.3, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder of shares of Series G Convertible
Preferred Stock, par value $.001 per share, of the Company (collectively, the
"Series G Shares"), each Series G Share issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares (as
defined in Section 3.3) and any Series G Shares owned by the Parent
or the Sub) (the “Outstanding Series G Shares”) will be converted
into the right to receive $1,136.36 (the “Merger Consideration Per Series G
Share” and together with the Merger Consideration Per Common Share and the
Merger Consideration Per Series E Share, the “Merger Consideration”) in cash and
without interest upon surrender of the certificate formerly evidencing such
Series G Shares. From and after the Effective Time, all converted
Series G Shares shall no longer be outstanding and shall be deemed to be
cancelled and retired and shall cease to exist, and each holder of a certificate
evidencing converted Series G Shares shall cease to have any rights with respect
to such Series G Shares, except the right to receive the Merger Consideration
Per Series G Share in respect of those Series G Shares, without interest, upon
the surrender of such certificate in accordance with Section 3.2 or as otherwise
provided by law. In connection with the Merger, the Certificate of
Designation of the Relative Rights and Preferences of the Series G Convertible
Preferred Stock shall be amended to provide that the Merger Agreement shall
govern the powers, designation and preferences of the Series G Convertible
Preferred Stock in the event the Merger is consummated
(d)
Each share of capital stock owned by the Company (or held in the treasury of the
Company) or by the Parent or Sub immediately prior to the Effective Time will be
cancelled and retired.
(e) Each
share of common stock, par value $0.01 per share, of the Sub issued and
outstanding immediately prior to the Effective Time will be converted into one
share of common stock of the Surviving Corporation.
Section 3.2 Exchange of
Certificates The procedures for exchanging Outstanding
Common Shares for the Merger Consideration Per Common Share, Outstanding Series
E Shares for the Merger Consideration Per Series E Share, and Outstanding Series
G Shares for the Merger Consideration Per Series G Share pursuant to the Merger
are as follows:
(a) Exchange
Agent. At or prior to the Effective Time, the Parent shall
deposit or cause to be deposited $4,787,833 (or such greater amount as shall be
necessary to consummate the Merger and pay the full amount of the Merger
Consideration) in immediately available funds with Computershare Trust or
another bank or trust company selected by the Buyer and reasonably acceptable to
the Company (the “Exchange Agent”), for
the benefit of the holders of Common Shares, the Series E Shares and the Series
G Shares outstanding immediately prior to the Effective Time, for payment
through the Exchange Agent in accordance with this Section 3.2, which
amount will be sufficient to make payment of the Merger Consideration Per Common
Share, the Merger Consideration Per Series E Share, and the Merger Consideration
Per Series G Share pursuant to Section 3.1 in exchange for all of the
Outstanding Common Shares, Outstanding Series E Shares, and Outstanding Series G
Shares (the “Exchange
Fund”).
(b) Exchange
Procedures. As soon as reasonably practicable, the Parent
shall cause the Exchange Agent to mail to each holder of record of a certificate
which immediately prior to the Effective Time represented outstanding Common
Shares, Series E Shares, and Series G Shares (each, a “Certificate”)
(i) a letter of transmittal in customary form and (ii) instructions
for effecting the surrender of the Certificates in exchange for the Merger
Consideration Per Common Share, the Merger Consideration Per Series E Share, and
the Merger Consideration Per Series G Share (as the case may be)
payable with respect thereto. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be paid promptly in exchange
therefor cash in an amount equal to the Merger Consideration Per Common Share,
the Merger Consideration Per Series E Share, and the Merger Consideration Per
Series G Share that such holder has the right to receive pursuant to the
provisions of this Article III, and the Certificate so surrendered shall
immediately be cancelled. In the event of a transfer of ownership of
Common Shares, Series E Shares and Series G Shares which is not registered in
the transfer records of the Company, the Merger Consideration Per Common Share,
the Merger Consideration Per Series E Share, or the Merger Consideration Per
Series G Share may be paid to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 3.2,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
Per Common Share, the Merger Consideration Per Series E Share, or the Merger
Consideration Per Series G Share, as the case may be, as contemplated by this
Section 3.2.
(b) Transfer Books; No Further
Ownership Rights in the Outstanding Shares. At the Effective
Time, the stock transfer books of the Company will be closed, and thereafter
there will be no further registration of transfers of the Outstanding Common
Shares, Outstanding Series E Shares or Outstanding Series G Shares
(collectively, the “Outstanding Shares”) on the records of the
Company. From and after the Effective Time, the holders of
Certificates evidencing Outstanding Common Shares, Outstanding Series E Shares
or Outstanding Series G Shares ease to have any rights with respect to such
Outstanding Shares, except as otherwise provided in this Agreement or by
applicable law.
(c) Withholding. The
Parent may deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of any Outstanding Shares such amounts
as the Parent is required to deduct and withhold under applicable law with
respect to the making of such payment. To the extent that amounts are
so withheld by the Parent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of Outstanding
Shares in respect of whom such deduction and withholding was made by the
Parent.
Section 3.3 Dissenting
Shares. Notwithstanding anything in this Agreement to the
contrary, no Outstanding Shares the holder of which has complied with the
applicable provisions of the DGCL as to dissenter's rights ("Dissenting Shares")
shall be deemed converted into and to represent the right to receive the Merger
Consideration, and the holders of Dissenting Shares, if any, will be entitled to
payment, solely from the Surviving Corporation, of the appraised value of such
Dissenting Shares, to the extent permitted by and in accordance with the
applicable provisions of the DGCL; provided, however, that (a)
if any holder of Dissenting Shares shall, under the circumstances permitted by
the DGCL, subsequently deliver a written withdrawal of that holder’s demand for
appraisal of such Dissenting Shares, or (b) if any holder fails to establish
that holder’s entitlement to rights to payment as provided in the applicable
provisions of the DGCL, or (c) if neither any holder of Dissenting Shares nor
the Surviving Corporation has filed a petition demanding a determination of the
value of all Dissenting Shares within the time provided in the applicable
provisions of the DGCL, such holder or holders shall forfeit such right to
payment for such Dissenting Shares pursuant to the DGCL, and each
such Outstanding Share will not be considered a Dissenting Share but will
thereupon be converted into the right to receive the Merger
Consideration.
Section
3.4 Options. Immediately
prior to the Effective Time, each outstanding option to acquire Common
Shares held by any Company employee or by any other person (each, an
“Option”)
granted or assumed under the 1999 Stock Option/Stock Issuance Plan or the 2007
Equity Incentive Plan (collectively, as amended, the “Stock Plans”),
whether or not then exercisable, shall be cancelled by the Company, and the
holder thereof shall be entitled to receive as soon as practicable after the
Effective Time from the Parent following the Merger in consideration for such
cancellation an amount in cash equal to the product of (a) the number of Common
Shares previously subject to each such Option and (b) the excess, if any, of the
Merger Consideration Per Common Share over the exercise price per Common Share
previously subject to such Option (collectively, the “Option
Consideration”) (it being understood that if any such exercise price
exceeds the Merger Consideration Per Common Share, the amount payable in respect
of such Option shall be zero), reduced by the amount of any withholding or other
Taxes required by Law to be withheld; it being understood that with respect to
an Option held by a person whose employment by the Company was terminated prior
to the Effective Time, consideration shall only be paid with respect to the
portion of such Option that was outstanding immediately prior to the Effective
Time and was vested as of the time such person’s employment relationship with
the Company terminated. The Company shall use such procedures as it deems
necessary and consistent with the terms of the respective Stock Plan to
implement the provisions contemplated herein. Immediately prior to
the Effective Time, the Company shall deposit in a bank account an amount of
cash, if any, equal to the Option Consideration for the payment of any options
that are eligible for Option Consideration (subject to any applicable
withholding Tax), together with instructions that such cash be promptly
distributed following the Effective Time to the holders of such options that are
eligible for Option Consideration in accordance with this Section
3.4.
Section
3.5 Warrants. Each
warrant to purchase Common Shares that is outstanding as of the Effective Time
(each, a “Warrant”) shall be converted at the Effective Time into the right to
receive a cash amount, if any, equal to the Warrant Consideration (as defined
below) for each Common Share then subject to such Warrant. Prior to
the Effective Time, the Company shall take all necessary action and timely
provide all notices to effect the conversion of such Warrants as contemplated by
this Section 3.5. Promptly following the Effective Time, the Company
shall deposit in a bank account an amount of cash, if any, equal to the sum of
the aggregate Warrant Consideration for each such Warrant then outstanding
(subject to any applicable withholding Tax), together with instructions that
such cash be promptly distributed following the Effective Time to the holders of
such Warrants in accordance with this Section 3.5. For purposes of
this Agreement, “Warrant Consideration” means, with respect to Common Share
issuable under a particular Warrant, an amount equal to the excess, if any, of:
(i) the Merger Consideration per Common Share, over (ii) the exercise price
payable in respect of such Common Share issuable under such Warrant (it being
understood that if the exercise price payable in respect of such Common Share
issuable under such Warrant exceeds the Merger Consideration per share, the
Warrant Consideration in respect of such Warrants shall be zero).
Section 3.5 Closing. The
Closing of the transactions contemplated by this Agreement (the "Closing") will
take place at the office of the Parent at 0000 Xxxxxxxxx Xxxx, Xxxx
Xxxx, Xxxx 00000, at 10:00 a.m., local time, on the later of (a) the
date of the shareholders' meeting or written consent referred to in
Section 6.3 or (b) the day on which the conditions set forth in
Article VII are satisfied or waived, or at such other date, time, and place as
the Parent and the Company agree. At the Closing, the parties shall
take all action and execute and deliver all documents and instruments
(including, without limitation, the Certificate of Merger) required to effect
the Merger as promptly as possible.
ARTICLE
IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND SUB
The
Parent and Sub, jointly and severally represent and warrant to the Company as
follows:
Section 4.1
Existence
and Corporate Power of the Parent and Sub. The Parent is a
corporation validly existing and in good standing under the law of state of
Nevada, and has the corporate power to execute, deliver, and perform its
obligations under this Agreement. The Sub is a corporation validly
existing and in good standing under the law of the state of Delaware, and has
the corporate power to execute, deliver, and perform its obligations under this
Agreement.
Section 4.2 Authority. The
execution, delivery, and performance of its obligations under this Agreement by
each of the Parent and the Sub have been duly authorized by its board of
directors, and by the Parent as the sole shareholder of the Sub, and no other
corporate proceedings on the part of the Parent or the Sub are necessary to
authorize the execution, delivery, or performance of this
Agreement. This Agreement has been duly and validly executed and
delivered by each of the Parent and the Sub and constitutes a valid and binding
agreement of each of the Parent and the Sub, enforceable against each in
accordance with its terms, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditors' rights generally, or principles governing the availability
of equitable remedies.
Section 4.3 Consents and Approvals; No
Violations. Except for the filing and recordation of a
certificate of merger under the DGCL and any filings under applicable securities
laws, no filing with, and no permit, authorization, consent, or approval of, any
public body or authority is necessary for the consummation by the Parent and the
Sub of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement by the Parent or the Sub nor the
performance by the Parent or the Sub of its obligations under this
Agreement will (a) conflict with or result in any breach of any provisions of
its certificate of incorporation or bylaws, (b) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default under, any agreement or other instrument to which it is a party or by
which it or any of its assets may be bound, or (c) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to it or its
assets.
Section
4.4 Brokers. No
broker, finder, or financial advisor is entitled to any brokerage, finders, or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Parent or the Sub.
Section
4.5 Available
Funds. The Parent shall, when and as required under this
Agreement, have access to all the funds necessary to consummate the Merger, pay
all Merger Consideration and pay all fees and expenses payable by the Parent or
the Sub related to the transactions contemplated by this Agreement.
ARTICLE
V
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The
Company represents and warrants as of the date of this Agreement to the Parent
and the Sub as follows:
Section 5.1 Existence and Corporate
Power of the Company. The Company is a corporation validly
existing and in good standing under the law of the state of Delaware, and has
the corporate power to execute, deliver, and perform its obligations under this
Agreement.
Section 5.2 Authority. The
execution, delivery, and performance of its obligations under this Agreement by
the Company have been duly authorized by its board of directors, and, subject to
approval by the Company’s shareholders at the meeting referred to in Section
6.3, no other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery, or performance of this
Agreement. This Agreement has been duly and validly executed and
delivered by Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally, or principles governing the availability of equitable
remedies.
Section 5.3 Consents and Approvals; No
Violations. Except for the filing and recordation of a
certificate of merger under the DGCL and any filings under applicable securities
laws, no filing with, and no permit, authorization, consent, or approval of, any
public body or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by the Company nor the performance by
the Company of its obligations under this Agreement will (a) conflict with or
result in any breach of any provisions of its certificate of incorporation or
bylaws, (b) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default under, any agreement or other
instrument to which it or any of its subsidiaries is a party or by which it or
any of its subsidiaries or any of their assets may be bound, or (c) violate any
order, writ, injunction, decree, statute, rule, or regulation applicable to it
or its assets.
Section
5.4 Capitalization. The
authorized and outstanding capital stock of the Company is comprised of (a)
400,000,000 authorized Common Shares, of which 33,200,822 are outstanding, (b)
1,250 authorized Series D Convertible Preferred Stock, par value $0.001 per
share (“Series D Preferred Stock”), none of which are outstanding, (c) 1,660
authorized Series E Shares, of which 1,657 are outstanding, and (d) 480
authorized Series G Shares, of which 479.9 are outstanding. Schedule
5.4 lists each of the Company’s outstanding Options and Warrants,
including the number of shares issuable upon exercise of each Option and Warrant
and the exercise price of each Option and Warrant. All the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid, and nonassessable. Except for the Series E
Shares, the Series G Shares, and as set forth in Schedule 5.4, there are no
outstanding options, warrants, agreements, convertible securities, or other
commitments pursuant to which the Company is or may become obligated to issue
any shares of capital stock or other securities.
Section
5.5 No
Subsidiaries. Other than as set forth on Schedule 5.5, the
Company does not own any shares or other interests of any kind in any other
business or entity. All subsidiaries are wholly owned by the Company
and there are no outstanding rights or options to purchase any equity interest
in any subsidiary.
Section 5.6
Fairness. Prior
to the Effective Time, the Company expects to receive an opinion of Updata
Advisors to the effect that, as of the date of this Agreement, the total
consideration to be received for the Outstanding Shares pursuant to this
Agreement is fair from a financial point of view.
Section
5.7 Board
Recommendation. At a meeting duly called and held on August
28, 2008, at which a quorum was present and acting throughout, the board of
directors of the Company determined that this Agreement and the transactions
contemplated by this Agreement, including the Merger, are fair to and in the
best interests of the stockholders, and resolved to recommend that such holders
adopt this Agreement and approve the Merger.
Section
5.8 No Material
Change. Except as set forth in Schedule 5.8, there has been no
material adverse change in the business of the Company or its subsidiaries since
June 30, 2008, including any material adverse change in the Company’s or its
subsidiaries’ relationships with customers or vendors or in the Company’s and
its subsidiaries consolidated balance sheet. As of the date of this
Agreement, the Company has not received written or verbal notice from any
current customer who accounted for a material amount of the Company’s revenue
during the past 12 months regarding the termination or intention to
terminate any contract with the Company.
Section
5.9 Brokers. No
broker, finder, or financial advisor is entitled to any brokerage, finder's, or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement, other than the sum of $575,000 due and owing
Updata Advisers upon consummation of the Merger.
ARTICLE
VI
COVENANTS
Section
6.1 Appointment of Chief
Executive Officer.
(a) Concurrent
with the execution of this Agreement, the Company shall appoint Fields to serve
as the Chief Executive Officer of the Company. In connection
therewith, Fields shall provide to the Company any and all information
reasonably requested by the Company in order for the Company to comply with its
filing obligations under applicable securities laws, including, but not limited
to, completing and executing a directors and officers
questionnaire. Without the express prior approval of the Board of
Directors of the Company, prior to the Effective Time, Fields shall have no
authority to, and shall not, engage in any of the following actions: (i) execute
any checks (except as a co-xxxxxx) or authorize any transfer of any funds of the
Company; (ii) cause the Company to make, offer or agree to make any loan to any
person; (iii) cause the Company to incur or agree to incur any debt except for
trade debt in the ordinary course of business consistent with past practice;
(iv) sell, offer or agree to sell any assets of the Company except in the
ordinary course of business consistent with past practice; or (v) cause the
Company to enter into any agreement with Parent or Fields.
(b) subject
to Section 6.1(a) and the other provisions of this Agreement: (i) Fields and
other representatives of Parent as authorized by Fields, shall have full access
to all the Company’s facilities and personnel, and (ii) the Company shall
promptly furnish Fields and other representatives of Parent as authorized by
Fields, all information requested from time to time that is reasonably available
to the Company.
Section 6.2 Prohibitions on Voting of
Capital Stock. Except as contemplated by Section 6.3(b)(i) of
this Agreement, prior to the Effective Time, Parent shall not vote any Common
Shares, Series E Shares or Series G Shares (or act by written consent in lieu
thereof) beneficially owned by it or initiate any Company shareholder action
to:
(a) amend
the certificate of incorporation or by-laws of the Company;
(b) split,
combine, or reclassify any shares of its outstanding capital stock;
(c) issue
any shares of its capital stock or any options or other rights to acquire any
shares of capital stock;
(d) amend
or waive any provision of the Certificate of Designation of the Series G
Shares;
(e) amend
or waive any provision the Certificate of Designation of the Series E
Shares;
(f) designate
or authorize the issuance of any new class or series of capital;
(g) adopt
a plan or agreement of liquidation, dissolution, restructuring,
recapitalization, merger, consolidation or other reorganization;
(h) remove
any director of the Company or increase or decrease the size of the Company’s
Board of Director;
(i) take
any action that could reasonably be expected to, directly or indirectly prevent
or materially impair or delay the consummation of the transactions contemplated
hereby;
(j) authorize
any of, or commit or agree, in writing or otherwise, to take any of, the
foregoing actions; or
(k)
authorize the payment of any dividend or distribution to
stockholders.
Section
6.3 Shareholder
Approval
(a) Subject
to Section 6.9 of this Agreement, the Board of Directors of the Company, as soon
as practicable in accordance with applicable law and its certificate of
incorporation and by-laws shall:
(i) submit
for approval and adoption by the Company’s shareholders at a meeting of its
shareholders held for such purpose (or by written consent in lieu thereof) this
Agreement and the Merger and shall use its best efforts to obtain such approval;
and
(ii) recommend
approval and adoption of this Agreement and the Merger by the Company’s
shareholders and take all lawful action to solicit such approval.
(b) Until
such time as the Board of Directors withdraws its recommendation to approve the
Merger, the Parent shall, and shall cause its controlled affiliates to (i) vote
all Common Shares, Series E Shares or Series G Shares beneficially owned by them
in favor of this Agreement and the Merger at the meeting or by written consent
contemplated by clause (a)(i) above, vote against any proposal inconsistent with
the foregoing, and take all other action reasonably effect the purposes of this
Section 6.3, and (ii) not sell, transfer, or otherwise dispose of, or grant or
issue any option, warrant or other right to purchase, or hypothecate, pledge, or
give a proxy or right to vote with respect to, any Common Shares, Series E
Shares or Series G Shares.
Section
6.4 SEC
Filings. As promptly as practicable after the execution of
this Agreement, the Company, in cooperation with the Parent, shall prepare and
file with the SEC a Proxy Statement and if required a Schedule
13E-3. Parent and Sub, as the case may be, shall furnish all
information concerning Parent and Sub (and their respective Affiliates, if
applicable), as is required to be included in the Proxy Statement or Schedule
13E-3 that is customarily included in such filings in connection with the
preparation and filing with the SEC of such filings. The Company or
the Parent shall notify the other party promptly upon the receipt of any
comments or requests from the SEC or its staff or any other government officials
and of any request by the SEC or its staff or any other government officials for
amendments or supplements to the Proxy Statement, Schedule 13E-3 or any other
filing with the SEC related to the Merger or Parent’s purchase of the Privately
Purchased Shares and shall supply the other party with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to such filings. The parties shall reasonably
cooperate with and assist each other in responding to any comments and providing
any additional or revised disclosure. The Parent shall cause all
documents that it is responsible for filing with the SEC or other regulatory
authorities under this Section 6.4 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement or any other filings
with the SEC, the Parent or the Company, as the case may be, shall promptly
inform the other of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to stockholders of the
Company, such amendment or supplement. If Parent or Sub or any of
their respective affiliates is required to file any report, schedule, form or
other document with the SEC in connection with the transactions contemplate by
this Agreement, including its purchase of certain Common Shares, Series G Shares
and Series E Shares, Parent, Sub and their respective affiliates, if applicable,
such person shall promptly prepare and file with the SEC such required report,
schedule, form or other document, including any and all required exhibits or
amendments, within the time period required by, and in accordance with,
applicable law and the rules of the SEC.
Section 6.5 Expenses. Whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including, without
limitation, fees and disbursements of counsel, financial advisors, and
accountants, will be paid by the party incurring such costs and
expenses.
Section
6.6 Severance
Agreements. The Parent agrees and acknowledges the existence
of certain severance agreements by and between the Company and certain of its
officers, as set forth in Schedule 6.6 attached hereto, which agreements may
require certain payments by the Company upon consummation of the
Merger.
Section 6.7 Additional
Agreements. Each party agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers,
consents, and approvals and to effect all necessary registrations and
filings.
Section
6.8 Availability of
Funds. Prior to the execution of this Agreement, Parent has
delivered to the Company a comfort letter to the effect that, when and as
required under this Agreement, it shall have available or have access to funds
sufficient to perform its obligations under this Agreement, including the
consummation of the Merger. On or before the date that the definitive
proxy statement to approve the Merger is mailed to the Company’s shareholders
(the “Escrow Funding Date”), Parent shall place $2,500,000 (which shall not be
funded by or collateralized with, in whole or in part, any assets of the
Company) (the “Escrow Amount”) into an escrow account at the Silicon Valley Bank
(the “Escrow Account”) pursuant to an escrow agreement with terms that are
standard and customary for transactions of this kind, which funds shall be used
to partially fund the Exchange Fund or satisfy the Parent’s obligations under
Section 8.2(a) or (b). On or before two (2) business days prior to
the Escrow Funding Date, the Company shall provide written notice to Parent
setting forth the Escrow Funding Date. The
balance of the funds required to complete the Merger and pay the Merger
Consideration shall be deposited by Parent into the Escrow Account at least one
(1) business day prior to the date of the Company’s shareholders’ meeting and
shall not be funded by or collateralized with, in whole or in part, any assets
of the Company.
Section
6.9 Fiduciary
Out. Nothing in this Agreement shall prohibit the Company
(either directly or indirectly through advisors, agents or intermediaries) from
(i) furnishing information pursuant to an appropriate confidentiality letter
concerning the Company and its businesses, properties or assets to a third party
who has made a bona fide Alternative Transaction Proposal, (ii) engaging in
discussions or negotiations with any such third party who has made a bona fide
Alternative Transaction Proposal, (iii) following receipt of a bona fide
Alternative Transaction Proposal, taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or Rule 14e-2(a) under the Securities
Exchange Act of 1934, as amended, or otherwise making a disclosure to
stockholders, and/or (iv) following receipt of a bona fide Alternative
Transaction Proposal, failing to make or withdrawing or modifying its
recommendation that the stockholders of the Company approve the Merger, in each
case referred to in the foregoing clauses (i)-(iv), to the extent the Board of
Directors of the Company shall have concluded that such action or actions are
required to satisfy its fiduciary duties to the Company and its stockholders
under applicable Delaware Law. For the purpose of this
Agreement, “Alternative Transaction Proposal” means any offer or
proposal for any transaction or series of related transactions other than the
transactions contemplated by this Agreement involving: (i) (A) any merger,
arrangement, consolidation, share exchange, business combination,
recapitalization, tender offer, exchange offer or other similar transaction
involving any of the Company or its Subsidiaries, (B) any transaction in which a
person or group of persons directly or indirectly acquires beneficial ownership
of securities representing more than 20% of the outstanding voting securities of
any of the Company or its Subsidiaries, or (C) any transaction in which any of
the Company or its Subsidiaries issues securities representing more than 20% of
the outstanding voting securities of any of the Company or its Subsidiaries;
(ii) any sale, lease, exchange, transfer, license, or disposition of any
business or businesses or assets that constitute or account for 10% or more of
the consolidated net revenues, net income or assets of any of the Company or its
Subsidiaries; or (iii) any liquidation or dissolution of any of the Company or
its Subsidiaries. Notwithstanding anything to the contrary in this
Agreement (i) the Company shall not, and shall not authorize any person or
entity acting on its behalf, to solicit an Alternative Transaction Proposal,
(ii) if the Company receives an Alternative Transaction Proposal, the Company
shall promptly notify the Parent in writing of that fact and furnish the Parent
copies of all written documents including or incidental to the
Alternative Transaction Proposal subject to any confidentiality restrictions in
such proposal, (iii) the Company shall afford the Parent not fewer than five (5)
business days to respond to the Alternative Transaction Proposal, and (iv) if
the Company terminates this Agreement pursuant to Section 8.1(e), the Company
shall immediately pay the Parent $250,000 and notwithstanding anything to the
contrary contained herein, such amount shall be the Parent’s sole and exclusive
remedy. The parties further agree that the forgoing payment shall be
as liquidated damages and not as a penalty, that actual damages resulting to
Parent from Company’s termination of this Agreement would be difficult or
impossible to measure, and that the forgoing payment is a reasonable estimate of
what those damages would be.
Section
6.10 Confidentiality. Each
party shall hold, and shall cause its respective affiliates and representatives
to hold, all Confidential Information made available to it in connection with
the Merger in strict confidence, shall not use such information except for the
sole purpose of completing the transaction contemplated hereby or serving as the
CEO of the Company, and shall not disseminate or disclose any of such
information other than to its directors, officers, managers, employees,
shareholders, interest holders, affiliates, agents and representatives, as
applicable, who need to know such information for the sole purpose of completing
the transaction contemplated hereby (each of whom shall be informed in writing
by the disclosing party of the confidential nature of such information and
directed by such party in writing to treat such information
confidentially). If this Agreement is terminated, each party shall
immediately return to the other party all such information, all copies thereof
and all information prepared by the receiving party based upon the same. The
above limitations on use, dissemination and disclosure shall not apply to
Confidential Information that (i) is learned by the disclosing party from a
third party entitled to disclose it; (ii) becomes known publicly other than
through the disclosing party or any third party who received the same from the
disclosing party, provided that the disclosing party had no knowledge that the
disclosing party was subject to an obligation of confidentiality; (iii) is
required by law or court order to be disclosed by the parties; or (iv) is
disclosed with the express prior written consent thereto of the other
party. The parties shall undertake all necessary steps to ensure that
the secrecy and confidentiality of such information will be maintained in
accordance with the provisions of this subsection
(a). Notwithstanding anything contained herein to the contrary, in
the event a party is required by court order or subpoena to disclose information
which is otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party
shall: (i) promptly notify the non-disclosing party and, if having
received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only that amount of
information as the disclosing party is advised by its counsel is necessary to
strictly comply with such court order or subpoena. For the purposes
of this Agreement, the term “Confidential Information” shall mean the existence
and contents of this Agreement and the schedules and exhibits hereto, and all
proprietary technical, economic, operational, financial and/or business
information or material of one party that, prior to or following the Closing
Date, has been disclosed by the Parent, Sub or Fields, on the one hand, or the
Company, on the other hand, in written, oral (including by recording),
electronic, or visual form to, or otherwise has come into the possession of, the
other.
ARTICLE
VII
CONDITIONS TO
CLOSING
(a) The
respective obligations of each party to effect the Closing will be subject to
the satisfaction at or prior to the Closing of the following
conditions:
(i) this
Agreement, the Merger, and the transactions contemplated by this Agreement shall
have been approved and adopted by the requisite vote of the shareholders of the
Company in accordance with applicable law;
(ii) no
preliminary or permanent injunction or other order by any federal or state court
in the United States that prohibits the consummation of the Merger shall have
been issued and remains in effect; and
(b) The
obligation of the Company to effect the Closing will be subject to the
satisfaction at or prior to the Closing of the following
condition: each of the Parent, Sub and Fields has performed in all
material respects all obligations required to be performed by them under this
Agreement on or prior to the Effective Time; and the Company shall have received
a certificate signed by Fields and on behalf of the Parent and Sub by an
authorized executive officer to the effect that it has complied with all
covenants and agreements on the part of the Parent, Sub or Fields set forth in
this Agreement.
ARTICLE
VIII
TERMINATION
Section 8.1 Termination. This
Agreement may be terminated at any time prior to the Closing, whether before or
after approval by the shareholders of the Company:
(a) by
mutual consent of the Parent and the Company;
(b) by
the Parent or the Company, if the Closing shall not have been consummated on or
before March 31, 2009 (the “Termination Date”); provided, however, if the
definitive proxy statement has not been mailed to the Company’s shareholders by
February 14, 2009, the Termination Date shall be extended until the date that is
forty five (45) days after the date the definitive proxy statement is
mailed;
(c) by
the Company or the Parent, if either of the conditions specified in Article VII
Section (a) has not been fulfilled or waived by the other party on or before the
Termination Date;
(d) by
the Company, if there has been a breach of Xxxxxxx 0.0, Xxxxxxx 0.0(x)(xx),
(xxx), (xx) or (v), or a material breach of or failure to perform any other
material representation, warranty, covenant or agreement on the part of the
Parent, Sub or Fields set forth in this Agreement, and such breach is not cured
promptly after notice thereof to the Parent by the Company. For the
avoidance of doubt, there shall be no cure period for any breach of Sections
6.8, Section 6.1(a)(ii), (iii), (iv) or (v); or
(e) by
the Company, if the Board of Directors of the Company concludes in
good faith that in order to satisfy its fiduciary duties under applicable
Delaware Law, such Board of Directors must not make or must withdraw its
recommendation that the stockholders of the Company approve the
Merger.
Section
8.2 Effect of
Termination.
(a) In
the event of a termination of this Agreement under Section 8.1(d) as a result of
a breach of this Agreement by Parent, Sub or Fields (each a “Parent Breach”) and
such breach occurs before the Escrow Funding Date or at a time when the full
amount of the Escrow Amount has not been deposited into the Escrow Account: (i)
all funds in the Escrow Account shall be delivered to and become the property of
the Company, and (ii) the Company shall have the right to purchase from the
Parent, and the Parent shall have the obligation to sell to the Company (the
“Option”), the Privately Purchased Shares at a purchase per price of $.001 per
share (the “Exercise Price”) which shall be exercised as follows: In
the event of a Parent Breach, the Company shall deliver to Parent a written
notice of exercise (“Option Notice”), together with the full payment of the
Exercise Price in cash or immediately available funds and the Company shall
immediately cancel and retire the Privately Purchased Shares subject to the
Option. Within ten (10) days from the date of the Option Notice, Parent shall
deliver to the Company certificates duly endorsed in blank evidencing the
Privately Purchased Shares subject to the Option free of all liens and
encumbrances of every nature and the Company. The Parent shall not
assign, sell, hypothecate or otherwise transfer the Privately Purchased Shares
until such time as the Merger is consummated under this Agreement.
(b) In
the event of a termination of this Agreement under Section 8.1(d) as a result of
a Parent Breach and such breach occurs after a time when the full amount of the
Escrow Amount has been deposited into the Escrow Account: (i) the Escrow Amount
shall be delivered to and become the property of the Company, and (ii) the
Company shall have the right to purchase from the Parent, and the Parent shall
have the obligation to sell to the Company, fifty percent (50%) of the Privately
Purchased Shares at the Exercise Price which shall be exercised as
follows: In the event of a Parent Breach, the Company shall deliver
to Parent an Option Notice, together with the full payment of the Exercise Price
in cash or immediately available funds and the Company shall immediately cancel
and retire the Privately Purchased Shares subject to the Option. Within ten (10)
days from the date of the Option Notice, Parent shall deliver to the Company
certificates duly endorsed in blank evidencing the Privately Purchased Shares
subject to the Option free of all liens and encumbrances of every
nature.
(c)
The parties further agree that payment of the Escrow Fund, or such lesser amount
as may be in the Escrow Account, to Company and exercise of the Option by
Company under Section 8.2(a) or (b) shall be as liquidated damages and not as a
penalty, that actual damages resulting to Company from Parent's breach of this
Agreement would be difficult or impossible to measure, and that the Escrow Fund
(or such lesser amount as may be in the Escrow Account) and Option are a
reasonable estimate of what those damages would be. Parent shall
deliver the Escrow Fund (or such lesser amount as may be in the Escrow Account)
and the Privately Purchased Shares to Company promptly upon receiving written
notice from Company that Parent is in default beyond the applicable cure period,
if any, that the provisions of Section 8.2(a) or (b) apply, and that Company has
elected to receive the Escrow Fund (or such lesser amount as may be in the
Escrow Account) and the Privately Purchase Shares hereunder.
(d)
The parties agree and acknowledge that the terms and conditions set forth
in this Section 8.2 are in addition to any other remedies available to the
Company, at law or in equity, in the event of a termination of this Agreement
caused by a Parent Breach.
ARTICLE
IX
INDEMNIFICATION
Section
9.1 Commencing at the Effective Time
and ending six (6) years after the Effective Time, the Certificate of
Incorporation and By-laws of the Surviving Corporation shall contain provisions
no less favorable with respect to indemnification, advancement of expenses and
exculpation of present and former directors, officers, employees and agents of
the Company than are presently set forth in the Certificate of Incorporation and
By-laws of the Company.
Section
9.2 Subject to the next sentence, the
Surviving Corporation shall provide at no expense to the beneficiaries, and
maintain in effect for six (6) years from the Effective Time directors’ and
officers’ liability insurance with respect to matters existing or occurring at
or prior to the Effective Time (including the transactions contemplated by this
Agreement) covering the directors and officers of the Company (the “Indemnified Parties”)
currently covered by the Company’s directors’ and officers’ liability insurance
policy on terms and conditions reasonably agreed to by the Continuing Directors,
so long as the annual premium therefor would not be in excess of 100%
of the last aggregate annual premium paid prior to the Effective Time (such
100%, the “Maximum
Premium”). If the annual premium for such new insurance
coverage exceeds the Maximum Premium, the Surviving Corporation shall obtain as
much directors’ and officers’ liability insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the Maximum
Premium, on terms and conditions no less advantageous to the Indemnified Parties
than the Company’s existing directors’ and officers’ liability
insurance.
Section
9.3 The provisions of this
Article IX are intended to be in addition to the rights otherwise available to
the current officers and directors of the Company by law, charter, statute,
by-law or agreement, and shall operate for the benefit of, and shall be
enforceable by, each of the former and current officers and directors of the
Company, their heirs and their representatives.
Section
9.4 The Parent and the Surviving
Corporation shall jointly and severally indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, a director or an officer of the Company
(the “Indemnified
Parties”) to the fullest extent permitted by the DGCL from and against
all liabilities, costs, expenses and claims (including without limitation
reasonable legal fees and disbursements, which shall be paid, reimbursed or
advanced by the Parent or Surviving Corporation in a manner consistent with
applicable provisions of the Company’s certificate of incorporation as in effect
on the date hereof) arising out of the actions taken in performance of their
duties as directors or officers of the Company whether asserted or claimed prior
to, at or after the Effective Time; provided, however, neither the Parent nor
the Surviving Corporation shall have any obligation hereunder to any Indemnified
Party if the indemnification of such Indemnified Party in the manner
contemplated hereby is determined pursuant to a final non-appealable judgment
rendered by a court of competent jurisdiction to be prohibited by applicable
law.
Section
9.5 The Parent shall pay all
expenses, including reasonable attorneys’ fees, that may be incurred by the
persons referred to in this Article IX in connection with the enforcement of
their rights provided in this Article IX.
ARTICLE
X
GENERAL
PROVISIONS
Section
10.1 Notices. All
notices, requests, consents, and other communications provided for in this
Agreement shall be in writing and shall be (a) delivered in person,
(b) transmitted by telecopy, (c) sent by first-class, registered or
certified mail, postage prepaid, or (d) sent by reputable overnight courier
service, fees prepaid, to the recipient at the address or telecopy number set
forth below, or such other address or telecopy number as may hereafter be
designated in writing by such recipient. Notices shall be deemed
given upon personal delivery, seven days following deposit in the mail as set
forth above, upon acknowledgment by the receiving telecopier or one day
following deposit with an overnight courier service.
If to the
Company, to it at:
Prescient
Applied Intelligence, Inc.
0000 Xxxx
Xxxxxx
Xxxx
Xxxxxxx, Xxxxxxxxxxxx, 00000
Attn: Xxxxxx
X. Xxxxxx
Telecopy:
000-000-0000
with a
copy to:
Fox
Rothschild LLP
000 Xxxxx
Xxxxx, 0xx Xxxxx
Xxxxxxxxxxxxx,
Xxx Xxxxxx 00000
Attn:
Xxxxxxx X. Xxxxxx
Telecopy: (000)
000-0000
If to the
Fields, Parent or the Sub, to each at:
Park City
Group, Inc.
0000
Xxxxxxxxx Xxxx
Xxxx
Xxxx, Xxxx 00000
Facsimile: (000)
000-0000
with a
copy to:
Xxxxxx X.
Xxxxxx, Esq.
00 Xxxxxxxxxx Xxxxx
Xxxxx
Xxxxx
Xxx Xxxx,
XX 00000
Facsimile: (000)
000-0000
Section 10.2 Amendment and
Waiver. No amendment of any provision of this Agreement shall
be effective, unless it is in writing and signed by the party to be
charged. Any failure of a party to comply with any provision of this
Agreement may only be waived in writing by the parties affected. No
such waiver shall operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. No failure by any party to take any
action against any breach of this Agreement or default by any other party shall
constitute a waiver of that party's right to enforce any provision of this
Agreement or to take any such action.
Section
10.3 Counterparts. This
Agreement may be executed in counterparts and delivered by facsimile, each of
which shall be deemed an original, but all of which together shall constitute
one Agreement.
Section
10.4 Headings. The
headings of the various Sections of this Agreement have been inserted for
reference only and shall not be deemed part of this Agreement.
Section 10.5
Governing
Law. This Agreement shall be governed by and construed in
accordance with the law of the state of Delaware applicable to agreements made
and to be performed wholly in Delaware. Each of the parties to this
Agreement (a) consents to submit itself to the personal jurisdiction of any
state or federal court sitting in Wilmington, Delaware in any action or
proceeding arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it shall not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (c) agrees not to bring any action or
proceeding arising out of or relating to this Agreement or any of the
transaction contemplated by this Agreement in any other court. Each
of the parties hereto waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other party with respect
thereto.
Section
10.7 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. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section
10.8 Entire
Agreement. This Agreement constitutes the entire Agreement
among the parties with respect to their subject matter and supersedes all prior
arrangements or understandings among them.
[Remainder
of Page Intentionally Left Blank]
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PARK
CITY GROUP, INC.
|
||
|
By:
|
/s/Xxxxx
Fields___________________
|
|
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Name: Xxxxx
Xxxxxx
|
||
|
Title: President
and CEO
|
||
|
PAAI
TRANSITORY SUB, INC.
|
||
|
By:
|
/s/ Xxxxx
Fields__________________
|
|
|
Name: Xxxxx
Xxxxxx
|
||
|
Title: President
and CEO
|
||
|
PRESCIENT
APPLIED INTELLIGENCE, INC.
|
||
|
By:
|
/s/ Xxxxxx X.
Rumsey_____________
|
|
|
Name: Xxxxxx
X. Xxxxxx
|
||
|
Title: Chairman
of the Board
|
||
|
XXXXX
XXXXXX
|
||
|
/s/ Xxxxx
Fields____________________
|
||
